P.R.S. Rice Mill vs The State of Karnataka and Others

Anand Byrareddy, J.—Heard the learned Senior Advocate Shri C.V. Nagesh appearing for the learned Counsel for the petitioner and the learned Additional Advocate General Shri A.G. Shivanna, appearing for the State.

The facts of the case are as follows:

"The petitioner is a registered partnership firm dealing in rice, paddy, broken rice and food grains. It is registered under the provisions of the Karnataka Value Added Tax. The petitioner was served with the impugned order dated 5.10.2015, on 8.10.2015, without any prior notice nor an opportunity of hearing relating to the purported raid conducted by the officials of the second respondent on 14.9.2015 at Railway Yard of Bangarpet Railway Station, where the petitioner was said to be unloading the rice, which he had purchased from Venkateshwara Global Trading Private Limited (VGTPL), Chennai. The petitioner had paid the required cost to VGTPL, as per invoice dated 12.9.2015, a copy of which is annexured to the writ petition.

The petitioner''s case is that the source from which VGTPL had procured the rice is of no concern to the petitioner. However, on the basis of the information purportedly collected by the officials of the second respondent that VGTPL had purchased the rice sold to the petitioner under 13 different bills, an inquiry is said to have been conducted, which the petitioner has learnt in retrospect, by constituting a so-called Special Task Force, which is said to have visited the villages at Chhattisgarh, to find out the genuineness of 13 such bills. And on the basis of the inquiry conducted by the Task Force, there is an assumption that 5 bills out of the 13 bills contained fictitious addresses and it is on that basis that the second respondent, in the impugned order, has claimed that a total quantity of 18,676 Quintals of rice was supplied under five defective bills, which was contrary to the provisions of the Essential Commodities Act, 1955 (Hereinafter referred to as the ''EC Act'', for brevity) and therefore, the impugned order is passed confiscating the said quantity of rice. As regards another extent of 12,259.10 Quintals of rice, which the petitioner had already unloaded and received from the Railway Goods Wagons at Bangarpet, the second respondent has assumed that even the said extent so unloaded was also traceable to the very same five defective bills. The petitioner has been called upon to pay a penalty of Rs. 2,86,12,739/- It is in this background that the present petition is filed."

The learned Senior Advocate would question the very jurisdiction of the authorities in their impugned action and particularly, draws reference to a notification issued by the Ministry of Consumer Affairs, Food and Public Distribution, (Department of Consumer Affairs), Government of India dated 30.9.2014, whereby with the coming into effect of the order, any dealer may freely buy, stock, sell, transport, distribute, dispose, acquire, use or consume any quantity of wheat, paddy or rice, coarse grains, sugar, edible oil seeds and edible oils, pulses, gur, wheat products (namely, maida, rava, suji, atta, resultant atta and bran) and hydrogenated vegetable oil or vanaspati and shall not require a permit or license under any order issued under the Essential Commodities Act, 1955. It is further pointed out that issue of any order by the State Governments under powers delegated by the Government of India in the then Ministry of Agriculture and Irrigation (Department of Food), for regulating by license, permit or otherwise, the storage, transport, distribution, disposal, acquisition, use or consumption of any of the commodity specified in clause 3 shall require the prior concurrence of the Central Government.

Insofar as the action of the respondents being traced to the provisions of the Karnataka Essential Commodities (Maintenance of Accounts, Display of Prices and Stocks) Order, 1981 (Hereinafter referred to as the ''1981 Order'', for brevity), which is issued under powers delegated by the Government of India as aforesaid, would be redundant. And in view of the above Notification requiring prior concurrence of the Central Government, the same would not be relevant unless there was a prior concurrence of the Central Government. There is no indication that there is prior concurrence of the Central Government in the said provisions being attracted and imposed on the petitioners. It is this primary objection which is urged as to the very jurisdiction of the authorities is concerned.

Whereas the learned Additional Advocate General, Shri A.G. Shivanna, would insist that the 1981 Order as regards maintenance of accounts, display of prices and stocks is concerned, is not effaced from the statute book by virtue of the Notification of the year 2002 as pointed out and it is not open for the petitioner to assume that prior concurrence of the Central Government is required insofar as the order that was in existence right from the year 1981.

The learned Additional Advocate General while seeking to justify the action of the respondents, would submit that there is concrete evidence of the source from which rice has been purchased, which is on the basis of defective and bogus bills and therefore, the action taken by the respondents is justified. While the Additional Advocate General would concede that there was no opportunity of hearing to the petitioner and therefore, would submit that the impugned order can be treated as a show-cause notice and the petitioner may file his objections to the same and the matter could be heard and disposed of giving full opportunity to the petitioner to defend his case.

The learned Senior Advocate Shri Nagesh however, would point out that a huge quantity of rice is in the custody of the respondents and it is likely that the entire consignment would get damaged as it would be exposed to elements and there is no confidence reposed in the respondents of safeguarding the said food grains. The learned Senior Advocate would submit that no matter the result of the proceedings and adjudication, the petitioner should be able to protect his property and he is ready to be placed such terms as this court may impose in ensuring proper custody of the consignment.

The learned Additional Advocate General however, would seriously oppose any such measure being taken in favour of the petitioner insofar as the seized consignment is concerned and would point out that there is a strong suspicion of illegal acquisition and transportation of the food grains and would insist that the State would be the best custodian of the food grains in the current situation and he would assure the court that the proceedings would be expedited and order would be passed one way or the other, after hearing the petitioner if the matter is referred to the Civil Court for further adjudication.

Insofar as the penalty sought to be recovered from the petitioner is concerned, the learned Additional Advocate General would fairly concede that the same will not be implemented and would be kept in abeyance pending further adjudication.

Therefore, without entering upon the question of jurisdiction, since the State has fairly conceded that the petitioner would be given full opportunity of hearing before any final order is passed, the impugned order is construed as a show-cause notice, to which the petitioner shall forthwith reply, raising all contentions that may be available to it, including the question of jurisdiction. The respondents shall afford full opportunity of hearing to the petitioner and thereafter, orders shall be passed and the entire exercise shall be completed. The respondents shall endeavour to do so within one week from the date of filing of objections, which the petitioner may do at the earliest. The impugned order stands diluted in terms as expressed above.

The petition stands disposed of.