IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.R.RAMAN & THE HONOURABLE MR. JUSTICE P.S.GOPINATHAN MONDAY, THE 30TH MARCH 2009 / 9TH CHAITHRA 1931 WA.No. 2151 of 2006(A) ---------------------- AGAINST THE JUDGEMENT IN WPC.36847/2004 .................... APPELLANT(S): -------------- 1. P.N.KRISHNADAS, FL-3 LICENSEE DAYA REGENCY PARAVATTANY, THRISSUR. 2. P.N.KRISHNALAL, FL-3 LICENSEE, POLAKULATHU TOURIST HOME, KODUNGALLOOR. 3. BENNY JOSEPH, FL-3 LICENSEE, HOTEL PEARLMOUNT, KENICHIRA, WAYANAD DIST. 4. KERALA BAR HOTELS ASSOCIATION (REGD.), REP.BY ITS PRESIDENT MR.M.D.JAIRAJ, 436, KRISHNA KRIPA, CLUB ROAD, COCHIN-682 020. BY ADV. SRI.K.RAMAKUMAR, SENIOR ADVOCATE SRI.JOE JOSEPH KOCHIKUNNEL RESPONDENT(S): --------------- 1. STATE OF KERALA, REP.BY THE SECRETARY TAXES (G) DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM. 2. THE COMMISSIONER OF EXCISE, COMMISSIONERATE OF EXCISE, THIRUVANANTHAPURAM. 3. THE ASST. EXCISE COMMISSONER, THRISSUR. 4. THE ASST.EXCISE COMMISSIONER, WAYANAD. R1 TO 4 BY GOVERNMENT PLEADER SRI LAKSHMI NRAYANAN THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 30/03/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: P.R. RAMAN & P.S. GOPINATHAN, JJ. ---------------------------------------------- W.A. No. 2151 of 2006 ---------------------------------------------- DATED:MARCH 30, 2009. JUDGMENT Raman, J. The appellants are the petitioners in the writ petition. This appeal is directed against the judgment of a learned Single Judge in WP(C) No.36847 of 2004 rendered on 30.8.2006. 2. Petitioners 1 to 3 are members of the 4th petitioner association. They sought for a declaration that the petitioners are not liable to pay interest on the enhanced licence fee/balance licence fee fixed as per Ext.P4 Government Order. They also sought for issuance of a writ of mandamus or any other writ, order or direction commanding the respondents to accept the enhanced licence fee/balance licence fee without any interest or to issue any other writ, order or direction as this court may deem fit in the circumstances. 3. The facts in brief are as follows:- FL3 licence was issued in each Abkari year after levying rental/licence fee in accordance with the provisions contained in WA 2151/2006 :2: Foreign Liquor Rules under the Abkari Act. The rental/licence fee as fixed for the year 2003-04 was Rs.15 lakhs. However, in the subsequent year 2004-05 the Government issued the abkari policy prescribing licence fee on a slab rate basis. The association representing the FL3 licence holders submitted a representation on 19.3.2004 to the Government pointing out certain anomalies in slab rate system levying fee for grant of FL3 licence. This representation was considered by the Government and decided to modify the policy dispensing with the slab rate system. Accordingly a circular was issued on 29.3.2004 directing the Assistant Excise Commissioners of the Division to grant renewal of the existing FL3 licences accepting the prescribed licence fee of Rs.15 lakhs which was in force prior to the introduction of the slab rate system. But the Government agains changed the policy, and they re-introduced the slab rate system which led to the filing of Writ Petition NO.11861/2004. Interim orders were obtained by the petitioners as per which they were enabled to remit Rs.15 lakhs provisionally and the balance amount as introduced by the slab WA 2151/2006 :3: rate system was stayed. Later, before the writ petition came up for final hearing, the representations made by the association were considered and again the Government decided to dispense with the slab rate system, as a result of which the relief sought for in the writ petition became infructuous. Later the Government enhanced the amount of licence fee from Rs.15 lakhs to Rs.18 lakhs and the rules in this behalf were also amended accordingly on 22.11.2004. Demand notices were issued claiming enhanced licence fee with interest from 1.4.2004. Replies were submitted objecting to the demand for interest. Since it is said that the difference in the amount viz. Rs.3 lakhs as introduced by the amendment of the rule was not accepted by the department without accompanying interest on the amount of Rs.3 lakhs with effect from 1.4.2004, the appellants, aggrieved by such circumstances, preferred WP(C) No.36847/2004. The learned Single Judge, by the judgment under appeal, dismissed the writ petition against which the present writ appeal is filed. 4. During the pendency of the appeal, however, direction to WA 2151/2006 :4: accept the difference in the amount without insisting for the payment of interest was issued by this Court. 5. The issue that arises for consideration in this appeal is as to whether the Government, in the factual situation as noticed above, is entitled to levy interest from 1.4.2004 on the difference in the amount of licence fee as amended on 22.11.2004. 6. Admittedly, the demand for interest is not based on ay rule or statutory provision. It was contended that since the slab rate system was substituted by the new rate as introduced on 22.11.2004, thus enhancing the amount from the fixed licence fee of Rs.15 lakhs to Rs.18 lakhs, the enhancement must relate back to the beginning of the Abkari Year 2004-05 and since the amounts were paid or offered only when demanded subsequent to the amendment of the Rule, they shall be deemed to be defaulters and hence they are liable to pay interest from 1.4.2004. It is also contended that a licence would have been granted if only the entire amount as prescribed by the Rule was remitted by the applicant. Since they were issued with the licence after remitting the amount of Rs.15 lakhs, whatever WA 2151/2006 :5: enhancement made thereafter is liable to be paid with interest and they cannot take advantage of the interim order passed on which they obtained a licence and it is settled law that no order of the court shall prejudice the right of either party, the parties must be placed in the same position as they would have been had not the interim order been passed, in which event there was every right for the Government to refuse to grant licence unless the entire amount as prescribed is remitted. It is also the case of the State that the maximum amount as per the slab rate was Rs.30 lakhs and, at any rate, by virtue of the amendment made to the Rule, Rs.15 lakhs was enhanced to Rs.18 lakhs, it cannot be said that the petitioners in the writ petition earlier filed, got absolute relief by virtue of the amendment. Per contra, the appellants would contend that what was challenged in the earlier writ petition was the very basis on which the licence fee was levied as per the amended rule introduced in the beginning of 2004-05. Since the licence fee was based on a slab rate system which was challenged as arbitrary, ultra vires and unreasonable, the Government having been convinced, later they themselves WA 2151/2006 :6: dispensed with the slab rate system and restored the earlier rule prescribing licence fee at fixed rate. Whether the amount of Rs.15 lakhs which was the rate prevalent during the previous year prior to 2004-05 should have been continued, reduced or enhanced was not a matter which could be considered as a reason for levying interest. The question as to whether interest could be levied or not does not depend upon the ultimate relief based on the quantum of the amount they had to remit based on the amended rule. Unless the applicants are treated as defaulters, the question of levying any interest on the difference in the amounts from 1.4.2004 did not arise. According to them the Rules were amended only on 22.11.2004, the moment demand was made on 10.12.2004, they offered the difference in the amount of Rs.3 lakhs, but was not accepted unless it is accompanied by the interest payable from 1.4.2004. In other words, according to them, they met with the demand the moment the Rules were amended and demands were raised. Therefore, they cannot be treated as defaulters. There is no question of they being treated as 'deemed defaulters' in the WA 2151/2006 :7: absence of any statutory rule to that effect. While it is only when the Rules were amended, they knew that the rate was enhanced to Rs.18 lakhs. Therefore, even if they wanted to pay the licence fee at the fixed rate, unless they know what the amount of the licence fee would be, they cannot be deemed to be defaulters merely because the rule was amended later in the year which may perhaps be taken into effect as the rate for the whole Abkari Year. They also placed reliance on the decision in Department of Telecommunication and another v. Cellular Operators Association of India and others - (2003) 4 SCC 477 and Food Corporation of India v. State of Haryana and another - 2000(3) SCC 495. 7. We have considered the rival submissions of the parties. Admittedly, the slab rate system introduced was dispensed with during the pendency of the earlier writ petition as a result of which there was no necessity to continue the proceedings. Had the Rule been not amended dispensing the slab rate system, the writ petitioners would have continued with the writ petition. Once the basis of the licence fee from the slab rate system was WA 2151/2006 :8: dispensed with by the Government itself and restored the earlier rule, though enhanced the rate from Rs.15 lakhs to Rs.18 lakhs, the enhanced amount became liable to be paid only when the new rule came into force and demands raised. Unless there are any statutory rule, enabling the Government to levy the interest, such interest will be levyable only if a person commits any default by non-payment of the amount as prescribed by the Rules. Admittedly, the new Rule enhancing the licence fee from Rs.15 lakhs to Rs.18 lakhs was introduced only on 22.11.2004 and as such the petitioners could not be said to be defaulters from 1.4.2004. Only if the amount subsequent to the prescription as introduced by the new rule when they commit any default, certainly they will become defaulters from the date on which the new rule came into force. Whether or not there was any default for payment of the dues after 22.11.2004 is not a matter arising for consideration in these proceedings. The demand as raised by the Government was for interest from 1.4.2004 and not from 22.11.2004. When rules were amended only on 22.11.2004, the petitioners could be treated as defaulters WA 2151/2006 :9: only if the enhanced amount is not paid after the date 22.11.2004. We may in this connection refer to the decision of the Apex Court in (2003) 4 SCC 477 (supra). Therein also the question arose for consideration was as to whether interest was payable on the licence fee after the effective date. It was held that the licence fee became due and payable from the effective date. When the effective date is postponed by a period of six months, then it is the date from which licence fee will have to be reckoned and appropriate calculation is made both for the purpose of licence fee and interest. Unless the licence fee itself is not due, the question of payment of interest does not arise. Payment of interest depends upon the date on which the licence fee becomes due. Interest is not independent of licence fee and licence fee has to be paid from a particular date. Interest would not accrue to be due prior to the licence fee becoming due for payment. In 2000(3) SCC 495 which was another case on the question of interest on tax due. There was a challenge to the imposition of sales tax by the State of Haryana. The High Court held that the imposition of sales tax on levy of transaction as WA 2151/2006 :10: unconstitutional and consequently demands were quashed. There was no challenge by the State. The dispute as to the validity of similar demand in respect of the years 1982 and 1986 came up before the Supreme Court and it was decided in favour of the State. Thereafter demand notices were issued for the assessment years 1975-76 etc. and the assessee made the payment within time. But the State subsequently demanded interest on the belated payment of tax for the year 1975-76. It was held that in view of the law declared by the High Court, the demand notice initially issued for 1975-76 was without authority of law and as the valid demand made after the Supreme Court decision was satisfied by the assessee within time, the demand for interest in the factual situation was held unsustainable. The facts in this case are very near to the facts as discussed in the above Supreme Court decision. Here also the assessee's writ petition happened to be closed as infructuous for the reason that the challenge made to the slab rate system was done away with by the Government itself before the matter came up for final consideration. The Government re-introduced the rule WA 2151/2006 :11: prescribing fixed rate as levying licence fee, but that was enhanced from Rs.15 lakhs to Rs.18 lakhs only on 22.11.2004. The initial amount of Rs.15 lakhs was paid long back even during the beginning of the year. The difference is only Rs.3 lakhs which was offered when the rule was amended and demand made. Therefore it cannot be said that in the factual situation there is any liability for them to pay interest by treating them as defaulters for payment of the difference in the amount. In the factual situation the demand for interest unjustified. 8. The learned Government Pleader, however, submitted that since the 4th petitioner is a registered association and it is stated that there are about 400 members in that association, the cause of action for each individual has to be treated as a separate cause and court fee has to be paid. No challenge regarding the court fee was raised at the stage of writ petition. We are at the appellate stage. Still we consider this question. The appellants neither claimed any relief individually nor are we granting any relief individually. We are only declaring the law that levy of interest on the difference of the amount as a result of WA 2151/2006 :12: the enhancement made by amending the Rule on 22.11.2004 is unjustified and they cannot be treated as defaulters from 1.4.2004. The appeal is allowed. The judgment of the learned Single Judge is set aside and the writ petition is allowed as above. P.R. RAMAN, JUDGE. P.S. GOPINATHAN, JUDGE. mt/-