Suraj Bhan vs The Deputy Excise and Taxation Commissioner, Patiala Division, Patiala and Another

R.S. Narula, J.—The facts, relevant for the decision of this case lie in a Very narrow compass. provision has been made under the Punjab Excise Act, 1914 (hereinafter referred to as the Act) for the grant of licenses for the vend of liquor by auction detailed procedure for such grant is laid down in Rule 36 of the Punjab Liquor License Rules, 1956 (hereinafter referred to as the Punjab Rules) framed u/s 59 of the Act. Licenses for the wholesale and retail-sale vend of country spirit or Bhatinda and some places for the remaining period of the financial year 1962-63 were re-auctioned the previous auction in favour of some other party having been set aside) on April 10, 1962. The bid of the petitioner for Rs. 6 lacs was the highest. It is the admitted case of both sides that under Rule 36.23 of the Punjab Rules 1/6 of the bid of the annual license fee i.e. 1/6 of Rs. 6 lacs in the instant case, had to be paid by the petitioner within 7 days of April 10, 1962 the date of auction. Nor is it disputed that the petitioner did not pay this amount within the aforesaid period of 7 days Learned counsel for the State has after reference to his records stated that the bid was accepted by the appropriate authority on the 7th May 1962. On 8th May, 1962, the Excise & Taxation Officer, Bhatinda, wrote to the petitioner to deposit the requisite advance license fee and to apply for the issue of license for the retail sale licences in the prescribed form (copy of that letter is Annexure ''C'' to the writ petition). It is unnecessary for me to go into the allegations made by the petitioner on which justification for the delay in making the requisite deposit is based. It is not for this Court to go into a thing of that kind. The fact remains that the requisite payment was not made by the petitioner on the receipt of the communication dated 8th May 1962. Then followed. a notice dated May 14, 1982 from the Excise & Taxation Officer Bhatinda to the petitioner in that notice copy of which is Annexure ''D'', to the petition it was stated that the petitioner had not made the requisite deposit on account of which has licenses had been cancelled and re-auction at the risk of the petitioner had been fixed for May 17, 1962. The petitioner was notified that if he did not make payment in question before the time fixed for the auction the re-auction would take place at the risk of the petitioner at 10 A.M. on 17th May, 1962. In fact no license had till then been granted to the petitioner and none could be granted according to the Rules unless the advance license fee was paid. The reference to cancellation of license of the petitioner in notice Annexure ''D'' appears to be intended to convey the cancellation of the bid of the petitioner. I asked Mr. L.D. Kaushal, learned counsel for the respondents to show me from his record if any license at all had been granted to the petitioner before the 14th May, 1962 or in fact at any time before he made the requisite deposit. The Senior Deputy Advocate General could not show any such thing.

It is not disputed that before the time of the threatened re-auction, the petitioner had paid up the sum of Rs. 1 lac on the 17th May, 1862 and that consequently the licenses in question in Forms L-13, L-14 and L-14A were granted to the petitioner on the 19th May, 1962. Thereafter, order dated 21st May, 1962 was passed by the Deputy Excise & Taxation Commissioner, Patiala (Annexure ''E'' to the petition) imposing a penalty of Rs. 10,000 on the petitioner u/s 80(2) of the Act. The Deputy Excise & Taxation Commissioner found that the petitioner by his failure to deposit the advance amount in question had infringed Rule 36.23 of the Punjab Rules and held that the licenses were, therefore, cancelled and were ordered to be resold, but the petitioner having represented and having deposited the two months'' advance before the re-auction, the orders of cancellation and consequential resale of the vends were revoked but on payment of the above said penalty. In petitioner''s appeal against the above said order to the Excise & Taxation Commissioner, Punjab, the order of imposition of penalty was upheld but the amount of penalty was reduced to Rs. 6,000 on 17th June, 1963 (copy of that order is Annexure ''F to the writ petition). It is the imposition of the above mentioned penalty that has been impugned in this case.

Though several points had been taken up by the petitioner in this case, I do not consider it necessary to hear him on those points as I think the impugned orders are wholly without jurisdiction and have to be set aside on that short ground. The time, date and place of the auction has to be fixed by the Collector under rule 36.3 of the Punjab Rules. Every person who is not disqualified for bidding and who has made the requisite deposit required by rule 36.8 can bid at such an auction. The officer presiding over the auction can refuse even the highest bid on certain grounds. Bids have to be received (Rule 36.16) for the whole annual license fee and not for the monthly installments in which it is payable. Rule 36.23 then provides as below:

A person to whom a shop has been sold shall pay one-sixth of the annual fee within seven days of the auction (any deposits already made shall be taken into account, and any excess shall be either returned to him or credited to future payments). By the 7th of the month in which he begins his business under his license and by the 7th of every subsequent month, the licensee shall pay one-twelfth of the annual fee till the whole fee is paid. But he may at any time pay the whole amount due if he wishes. If the total amount due is less than Rs. 100, it shall be payable in one sum unless the Collector for special reasons, allows payment to be made by installments. If any person whose bid has been accepted by the Presiding Officer at the auction fails to make the deposit of one-sixth of the annual fee or if he refuses to accept the license, the Collector may resell the license, either by public auction or by private contract, and any deficiency in price and all expenses for such resale or attempted resale shall be recoverable from the defaulting bidder in the manner laid down in section 69 of the Punjab Excise Act.

Rule 36.24 provides that when a license has been cancelled, the Collector may resell it by public auction or by private contract and any deficiency in price and all expenses of such resale or attempted resale shall be recoverable from the defaulting licensee in the manner laid down in section 60 of the Act. Rule 37 contains the general conditions of all licenses issued under the Act and the Punjab Rules. The opening words of Rule 37 are-

Every license under these rules is granted subject to the conditions set forth in this rule" Section 80(2) of the Act is in the following terms:

The cancellation or suspension of any license, permit or pass u/s 36(a), (b) or (c) of this Act may be forgone or revoked by and at the sole discretion of the authority having power to cancel or suspend it on payment by the holder of such license, permit or pass of such penalty as such authority may fix.

Section 36(b) of the Act reads as follows:

Subject to such restrictions as the State Government may prescribe, the authority granting any license, permit or pass under this Act may be cancel or suspend it.

(a), or

(b) If any duty or fee payable by the holder thereof be not duly paid.

A glance at the above said relevant provisions of law shows that in case a successful bidder makes default in paying the first installment of the bid money within the time allowed by Rule 36.23 of the Punjab Rules, it is open to the excise authorities to treat his bid as cancelled and to re-auction the license for the vend of liquor at his risk and costs. Whether such re-auction takes place or only takes the shape of an attempted resale, the Government is entitled to recover from the original bidder the amount of short fall plus the expenses of resale or in case a resale is only attempted but not carried out even the expenses of the attempted resale. An attempted resale does appear to have occurred in this case and it would have been open to the Government to recover tie expenses, if any, incurred by it on proclaiming the sale fixed for 17th May, 1962, in exercise of its power under Rule 36.23 of the Punjab Rules, quoted above. But this has admittedly not been done in the instant case. What has been held by the impugned order is that a condition in the license granted to the petitioner on 19th May, 1962, is found to have been violated on certain dates between 17th April to 14th May, 1962. For violation of the conditions of a license which had not even been granted till then, the petitioner has been penalized. The petitioner admittedly did not hold and permit or pass at the relevant time and none was cancelled. S, 80(2) of the Act does confer jurisdiction on the appropriate excise authority to forego the cancellation of any license tinder section 36(b) of the Act on payment of such penalty as the authority may fix. But section 36(b) provides for cancellation of a license for non-payment of the license-fee or duty only after a license has been granted. There is no provision in the Act for the grant of a license before the payment of the license fee. Once a license is granted and subsequently the license fee payable by installments or some duty owed by a licensee is not paid, the Government may cancel or suspend the license. When this happens two courses are open to the excise authorities. They may proceed under Rule 36.24 of the Punjab Rules and resell by public auction or by private contract the license in question and recover the deficiency in price and all expenses of such resale or attempted'' resale from the defaulting licensee. In the alternative, the competent authority may after having cancelled the license forego the cancellation u/s 80(2) of the Act by imposing a penalty on the defaulting licensee. But all this applies to the violation of the conditions of license by a person who holds a license. It was only on the 19th May 1962, that the petitioner held a license. In the nature of things he could not be accused of having violated its conditions before the license was issued. The stage at which the proceedings in the instant case were, could not justify either a resale under Rule 36-24 of the Punjab Rules or a cancellation u/s 36(b) of the Act. There was only a binding agreement for the sale of the license to the petitioner. The license had to be granted to him if he paid Rupees one lac within time. The only course open to the authorities against the defaulting petitioner was the one provided by rule 36.23 of the Punjab Rules. In this view of the matter the imposition of penalty u/s 80(2) read with section 36(b) of the Excise Act by the respondents appears to be wholly without jurisdiction. The impugned orders of the respondents referred to above cannot, therefore, be sustained. This would not, however, stand in the way of the appropriate authorities to recover from the petitioner in due course of law the expenses of the attempted resale under Rule 36.23 of the Punjab Rules.

I, therefore, allow this writ petition with costs and quash the impugned orders of respondents 1 and 2 purporting to impose penalty on the petitioner.