IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL Writ Petition No. 694 of 2010 (M/S) M/s Doon Valley Distillery ….. Petitioner Versus State and another ..… Respondents Mr. R.K. Raizada, Advocate assisted by Mr. Ramji Srivastava, Advocate for the petitioner. Mrs. Beena Pandey, Standing Counsel for the U.P. Govt. and the Excise Commissioner, U.P., Allahabad. Hon’ble Tarun Agarwala, J. Heard Shri R.K. Raizada, the learned counsel assisted by Mr. Ramji Srivastava, the learned counsel for the petitioner and Mrs. Beena Pandey, the learned Standing Counsel for the Govt. of U.P. and the Excise Commissioner, Allahabad. The petitioner has a distillery in the State of Uttarakhand at Dehradun for the manufacture of country liquor and had also been allotted a warehouse in Jhansi (now in the State of U.P.) under a CL-1 licence. Under this licence, the petitioner was granted the exclusive privilege of wholesale supply of country liquor for sale at the warehouse in Jhansi district. It is alleged that during the months of November and December, 1980, the petitioner failed to supply country liquor to the retail licensees within a reasonable time. On account of failure to supply the liquor at the Jhansi bonded warehouse, the petitioner was issued a show cause notice dated 28th April, 1981 to show cause as to why a penalty of Rs.3,21,562.50 paise should not be imposed for failure to supply 18,375 alcohol litres of country liquor. The petitioner submitted a reply and gave various reasons for the non supply of the country liquor within a reasonable period. The alleged delay was from 2 days to 30 days and some of the reasons given by the petitioner was that molasses from the sugar factory was not being made available and that the excise 2 authorities were not cooperating in getting the molasses released from the sugar factory which was the raw material for the manufacturing of country liquor and, consequently, it was beyond their control to supply country liquor. Another ground was that the Deputy Excise Commissioner did not allow the petitioner to remove the country liquor from its bonded warehouse at Jhansi to the retail licensee on the ground that the petitioner was required to maintain the minimum stock of country liquor at the bonded warehouse. The Excise Commissioner, upon consideration of the reply, passed the impugned order dated 30th July, 1983 imposing a penalty of Rs.3,21,562.50 paise holding that the reasons given by the petitioner does not fall within the four corners of the exception contained in Clause 10 of the C.L.-1 licence granted to the petitioner and, therefore, imposition of penalty was justified. The petitioner, being aggrieved by the aforesaid order, has filed the present writ petition which was entertained and an interim order was passed staying the recovery. Upon the creation of the State of Uttarakhand, this matter was transferred to this Court. Heard the learned counsel for the parties. In order to appreciate the controversy, it would be relevant to extract Clause 9 and 10 of the conditions indicated in CL-1 licence which is extracted hereunder:- “9. Licence vendors shall be entitled to have spirit issued to them with all reasonable expedition in such quantities subjects to a reasonable limit, and at any of the prescribed strengths as they require on proof of payment into a Government treasury of the excise duty at the rate from time tot time prescribed and of the supply price, at the rate agreed to in this contract and in the case of country spirit shops under direct State management on the production of a permit in the required form granted by the 3 District Excise Officer or an Excise Inspector authorised in this behalf. 10. Failure to supply spirit as specified in condition 9 supra within what the Collector considers a reasonable time shall entail a penalty, at the discretion of the Excise Commissioner, not exceeding Rs. 17.50 per alcohol litre of spirit demanded but not supplied. In such case the spirit may be purchased by the Collector elsewhere at his discretion and at the risk of the contractor. The penalty, the cost of the spirit purchased and any loss to Government that may result may be result may be deducted from the amount, if any, due to the contractor of from his deposit, or of the price received under condition 2 above, provided that if failure to supply is proved to the satisfaction of the Excise Commissioner to be due to (1) damage to or in the factory of the contractor form causes beyond the contractor’s control, or (2) strikes, pestilences, riot, violence of the mob or other irresistible force, or (3) to failure on the part of the Railway authorities to supply sufficient wagons for transport of essential raw materials to and finished products from the contractor’s factory, and if immediate notice of the said cause or occurrence has been given to the Excise Commissioner and Collector, the penalty of the Rs. 17.50 per alcohol litre of spirit in this condition will not be exacted from the contractor.” A perusal of the aforesaid provision indicates that a penalty could be imposed upon the failure of the contractor to supply the liquor within a reasonable period. The delay in the present case ranges from two days to 30 days. The petitioner gave the reasons, some of which have been indicated in the previous paragraph. The Commissioner without considering the reasons has passed the 4 order holding that it does not come within the exceptions given in Clause 10 of the licence. A perusal of condition No.10 indicates that penalty cannot be imposed in a routine matter but can only be imposed when a loss is suffered by the State Govt. Condition No. 10 clearly indicates that where the liquor has not been supplied within a reasonable period and the Collector is forced to purchase the liquor from other sources, in which case, the loss incurred by the Government as well as the cost of the spirit purchased alongwith penalty, may be imposed but such penalty could be waived if the Excise Commissioner was satisfied that the failure to supply country liquor was on account of certain factors as mentioned in Clause 10 of the licence agreement. Upon a reading of Clause 10, the Court finds that the factors mentioned therein are only illustrative and the exceptions are not confined to those matters contained therein. There could be other factors which could come in the way in the supply of country liquor. Consequently, the Excise Commissioner was bound to consider the reasons given by the petitioner for the non supply of the country liquor within a reasonable period. The Excise Commissioner, consequently, committed a manifest error in holding that since the explanation given by the petitioner did not come within the four corners of the exceptions provided under Clause 10 of the agreement, the explanation could not be considered. Further, the Court finds that the impugned order does not indicate that any loss had been incurred by the State exchequer for the non supply of country liquor. The Court also finds that nothing has been indicated in the impugned order as to whether the supply of the country liquor made by the petitioner was not made within a reasonable period. There has to be satisfaction of the Excise Commissioner on the question of non supply of country liquor within a reasonable period. This has not been done. 5 The Court further finds that one of the objection raised by the petitioner was that a maximum penalty could be imposed as per Section 74-A of the U.P. Excise Act which fact has also not been considered. In the light of the aforesaid, the Court finds that the impugned order cannot be sustained and is quashed. The writ petition is allowed. It would be open to the Excise Commissioner to pass a fresh order in accordance with law after giving due opportunity. (Tarun Agarwala, J.) Dated 17th June, 2011 Shiv 6