IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE S.SIRI JAGAN FRIDAY, THE 20TH MARCH 2009 / 29TH PHALGUNA 1930 OP.No. 19927 of 1999(V) --------------------------------- PETITIONER(S): ---------------------- 1. ANANTHAPURI CHEMICALS & EXPORTS (P) LIMITED, RAJADHANI BUILDING, EAST FORT, THIRUVANANTHAPURAM, REPRESENTED BY ITS MNAGING DIRECTOR MR. S.SUBRAMONIAM. 2. DR. AJITH KUMAR, S/O.S.RAGHAVAN, “PUNNYA”, VAZHUTHAKKAD, ELANKAM NAGAR, THAIKAD, THIRUVANANTHAPURAM. BY ADV. MR.A.M. SHAFEEQUE RESPONDENT(S): ------------------------- 1. STATE OF KERALA, REPRESENTD BY THE CHIEF SECRETARY, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM. 2. THE SECRETARY (EXCISE), GOVERNMNT OF KERALA, THIRUVANANTHAPURAM. 3. PRINCIPAL SECRETARY TO GOVERNMENT, TAXES (G) DEPARTMENT, THIRUVANANTHAPURAM. 4. EXCISE COMMISSIONER, GOVERNMENT OF KERALA, THIRUVANANTHAPURAM. 5. UNION OF INDIA, REPRESENTED BY THE SECRETARY, MINISTRY OF INDUSTRIES, NEW DELHI. R1 TO R4 BY GOVERNMENT PLEADER SMT.SMITHA SUKUMARAN R5 BY ADV. SRI.B.N.SHIVSANKAR THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 20/03/2009,THE COURT ON THE SAM DAY DELIVERED THE FOLLOWING: OP.No. 19927 of 1999(V) APPENDIX PETITIONER'S EXHIBITS: EXT.P1: COPY OF THE ORDER (ACKNOWLEDGEMENT) DATED 03/11/1993 ISSUED BY THE GOVERNMENT OF INDIA. EXT.P2: COPY OF THE PRESS NOTE NO.2 DATED 14TH FEBERUARY 1992 ISSUED BY MINISTRY OF INDUSTRY, NEW DELHI. EXT.P3: COPY OF THE SSI REGISTRATION OBTAINED FROM THE DISTRICT INDUSTRIES CENTRE, THIRUVANANTHAPURAM. EXT.P4: COPY OF THE PROCEEDINGS DATED 07/02/1997 OF THE DIRECTOR OF INDUSTRIES AND COMMERCE, TRIVANDRUM. EXT.P5: COPY OF THE APPLICATION SUBMITTED BY THE 1ST PETITIONER ON 22/05/1997 WITHOUT THE ANNEXURES. EXT.P6: COPY OF THE ORDER DATED 14/08/1997 ISSUED BY THE SECRETRY BOARD OF REVENUE (EXISE). EXT.P7: COPY OF THE APPEL PETITION DATED 22/08/1997 FILED BEFORE THE COMMISSIONER OF EXCISE. EXT.P8: COPY OF THE REPRESENTATION DATED 04/11/1997 SUBMITTED TO THE HONOURABLE MINSTER FOR EXCISE. EXT.P9: COPY OF THE ORDER DATED 13/08/1998 ISSUED BY THE 3RD RESPONDENT. EXT.P10: COPY OF THE LETTER DATED 09/04/1999 ISSUED FROM THE DEPARTMENT OF CHEMICALS & PETROCHEMICALS, NEW DELHI. EXT.P11: COPY OF THE ORDER DATED 14/06/1999 ISSUED BY THE REVENUE (EXCISE) DEPARTMENT. EXT.P12: COPY OF THE LETTER ISSUED BY THE PETITIONER TO THE COMMISSIONER OF EXCISE DATED 24/04/1996. EXT.P13: COPY OF THE APPLICATION FILED BEFORE THE COMMISSIONER OF EXCISE DATED NIL. EXT.P14: COPY OF THE COMPLAINT MADE TO THE HONOURABLE CHIEF MINISTER DATED 27/07/1998. EXT.P15: COPY OF THE COMPLAINT MADE TO THE HONOURABLE FINANCE MINISTER DATED 02/11/1998. RESPONDENT'S EXHIBITS: EXT.R4): COPY OF THE LE TTER OF GOVT. OF INDIA NO.10(20)95/LP DATED 07/08/1995. //TRUE COPY// P.S. TO JUDGE Rs/ S.SIRI JAGAN, J. ================== O.P.No. 19927 of 1999 ================== Dated this the 20th day of March, 2009 J U D G M E N T The 1st petitioner is a company who wanted to start a factory for manufacture of ethyl acetate. The 2nd petitioner is a share holder of the 1st petitioner company. The 1st petitioner claims to have obtained appropriate permission from the Government of India as evidenced by Ext.P1 for starting the industry and registered themselves as an SSI unit as evidenced by Ext.P3. One of the raw-materials for manufacture of ethyl acetate is ethyl alcohol. Therefore, necessarily, the company would have to store ethyl alcohol in the premises of the factory. Ethyl alcohol cannot be stored without a licence issued by the Kerala Government under the Kerala Rectified Spirit Rules, 1972. Therefore, the 1st petitioner filed Ext.P5 application for licence under the Rules. The same was rejected by Ext.P6. The 1st petitioner filed an appeal, which was also rejected by Ext.P9. The 1st petitioner approached the Chief Minister, which also did not bear any fruit. The 1st petitioner approached the Central Government who directed the petitioners to seek other remedies. It is under the above circumstances, the petitioners have filed this original petition seeking the following reliefs: “i) to declare that Rule 15 of the Rectified Spirit Rules in so far as it provides that any person or Institution desirous of possessing and using for a bonafide industrial purpose duty paid rectified spirit, shall take out a licence in Form R.S.1 as unconstitutional and void. ii) to issue a writ of certiorari or any other appropriate writ, order or o.p.19927/99 2 direction calling for the records leading to Exts.P6, P9 and P11 and quash the same; iii) Alternatively to issue a writ of mandamus or any other appropriate writ, order or direction, directing the respondents to grant licence and permit the 1st Petitioner to possess and use duty paid rectified spirit for industrial purpose of manufacturing Ethyl Acetate and Thinners in the 1st Petitioner's Factory; iv) to stay the operation of Rule 15(1) of the Rectified Spirit Rules in so far as it provides for licence for possessing and using rectified spirit for industrial purposes, pending disposal of the Original Petition.” 2. The petitioners point out that in Ext.P6, which is the order issued by the Secretary (Excise), Board of Revenue, no reason whatsoever is stated for rejecting the 1st petitioner' application for licence. That itself is violative of the principles of natural justice. The petitioners submit that the Government has in Ext.P9 appellate order stated two reasons. First is that there is possibility of privilege being misused by the petitioners, as there is good demand for ethyl alcohol in Kerala and the second is that the 1st petitioner is not financially sound to run a large scale company. According to the petitioners, both of the grounds are totally unsustainable. They further submit that Ext.P9 order has been passed relying upon two letters from the Secretary, Board of Revenue, copies of which have not been made available to the petitioners, which also amounts to violation principles of natural justice. The petitioners further submit that when respondents enter a finding that there is possibility of the privilege being misused, the same can only be based on some material on o.p.19927/99 3 record. If there is any such material, the same has not been disclosed to the petitioner. Further, no reason is being mentioned as to why the petitioners are not financially sound. The petitioners point out that as stated in Ext.P7 appeal memorandum, the factory is situated in 3.72 acres of land, in which plant and machinery worth lakhs of rupees have been installed, which belong to the company and as such, the finding is totally without any basis whatsoever. The petitioners, therefore, submit that the impugned orders are violative of principles of nature justice and that even otherwise the reasons stated are not supported by any material on record. The petitioners also submit that the petitioners understand that the application of the 1st petitioner has been recommended by all lower authorities, who inspected the petitioners' factory after satisfying themselves as to the eligibility of the 1st petitioner for a licence. 3. The learned Government Pleader, with the help of a counter affidavit filed in this case, supports the impugned orders. It is submitted by the learned Government Pleader that in Kerala, consumption of liquor is increasing every year and as a result, there is tremendous demand for supply of ethyl alcohol and, therefore, the finding that there is possibility of misuse of the privilege, if granted to the 1st petitioner by diverting the alcohol for human consumption, is supported by adequate material. It is further submitted that going by o.p.19927/99 4 the memorandum of association of the company, authorised share capital of the company is only Rs.10 lakhs and therefore, it is clear that the company is not financially sound. It is also pointed out that subsequent inspection of the premises of the petitioners revealed that the premises are being used for manufacturing items required for bar hotels and therefore, it is celar that if privilege is granted to the petitioners, there is likelihood of the petitioners misusing the same for such bar hotels, with whom the petitioners have connections. 4. I have considered rival contentions in detail. 5. Ext.P6 is the order of the Secretary (Excise) rejecting the application for licence submitted by the 1st petitioner, which reads thus: “The application presented by you under rule 15 of the Rectified Spirit Rules for licence for possession and use of rectified spirit has been examined by the Board in detail. As the request is not in conformity with the Rules, the same is rejected under rule 18(2) of the Rules.” It does not need elaborate discussion to hold that this order is violative of all principles of natural justice. It contains absolutely no reason whatsoever for rejecting the application except referring to Rule 18(2) of the Rules. When Rule 18(2) is quoted, the licensing authority had a duty to state as to why the 1st petitioner is disqualified for licence under Section 18(2), which is conspicuously absent in Ext.P6. Ext.P9 is also violative of the principles of natural justice, since the same has been passed relying on two letters issued by the Secretary, Taxes, o.p.19927/99 5 received by the Government subsequent to issue of Ext.P6 order. The respondents have no case that copies of those letters were made available to the petitioners before relying on the same to dismiss the appeal filed by the 1st petitioner. Two reasons are mentioned in Ext.P9, which are contained in paragraph 2, which read thus: “2. In his letter read as second paper above the Secretary, Board of Revenue has reported that the request of M/s.Ananthapuri Chemicals and Exports (P) Ltd. was rejected under sub rule (2) of Rule 18 of the Rectified Spirit Rules, 1972 on the findings that there is possibility of the privilege being misused by them as there is good demand for Ethyl Alcohol in Kerala and also the applicant is not financially sound to run a large scale company.” There is absolutely no mention whatsoever in Ext.P9 as to on what basis the Government have come to the conclusion that there is possibility of the privilege being misused by the petitioners. It is also not stated in Ext.P9 as to why the petitioners are not financially sound to run a large scale company. Therefore, the reasons mentioned in Ext.P9 are also not supported by any material whatsoever on record. Rule 18(2) certainly authorises the licensing authority to reject the application for licence, if the authority considers that there is likelihood of the privilege being misused and the applicant is not capable of discharging their responsibility in respect of the licence. But the conclusion arrived at based on the same, shall be certainly supported by adequate material on record, which shall be put to the applicant. In this case, no material whatsoever is forthcoming in support of the o.p.19927/99 6 conclusion arrived at. If there are such materials, the same have not been put to the petitioners. That being so, I have no doubt in my mind that the impugned orders are totally violative of the principles of natural justice and non-application of mind. Accordingly, the impugned orders are quashed. The 2nd respondent is directed to reconsider the application for licence submitted by the 1st petitioner in accordance with the materials available such as, report of the Assistant Excise Commissioner referred to in Rule 16 of the Rules, after affording an opportunity of being heard to the 1st petitioner. If there are any materials, on the basis of which, the respondents propose to reject the application, those materials shall be put to the petitioners with an opportunity to controvert or explain the same. Orders to be passed shall contain valid reasons and the same shall discuss the materials based on which conclusions are to be arrived at. Fresh orders as directed above shall be passed after affording an opportunity of being heard to the petitioners, as expeditiously as possible, at any rate, within two months from the date of receipt of a certified copy of this judgment. The original petition is disposed of as above. Sd/- sdk+ S.SIRI JAGAN, JUDGE ///True copy/// P.A. to Judge S.SIRI JAGAN, J. ================== O.P.No. 19927 of 1999-V ================== J U D G M E N T 20th March, 2009