HON’BLE SRI JUSTICE A.GOPAL REDDY AND HON’BLE SRI JUSTICE NOUSHAD ALI DT. 17-2-2010 W.P.NOS.24674/2007, 24547/2007, and 24883, 25075, 25076, 25077, 25101,25103 and 25228 of 2009 WP No.24674/2007 1. Toddy Co-operative Society, Toddy Group of Khammam District at Khammam, represented by its G. Raghavaiah Goud. …Petitioner V. 1 The State of Andhra Pradesh, represented by its Secretary, Revenue (Excise) Department, Secretariat, Saifabad, Hyderabad and others. ..Respondents HON’BLE SRI JUSTICE A.GOPAL REDDY AND HON’BLE SRI JUSTICE NOUSHAD ALI W.P.NOS.24674/2007, 24547/2007, and 24883, 25075, 25076, 25077, 25101,25103 and 25228 of 2009 COMMON ORDER: (Per the Hon’ble Sri Justice A. Gopal Reddy) Toddy Co-operative Society, Toddy Group of Khammam District at Khammam and some of the individual members of the Society filed these writ petitions seeking writs of certiorari calling for records pertaining to show cause notice dt. 22-3-2007 as to why toddy shop of TCS,Khammam Nos.1,3,6,8,10,12,14 to 20 should not be cancelled under Section 31(2) of the A.P. Excise Act,1968 and orders of the Government dt. 9-11-2009 dismissing the revision petition filed by the Society upholding the orders Prohibition and Excise Superintendent, Khammam as confirmed by the Deputy Commissioner of Prohibition and Excise, Warangal and Commissioner of Prohibition and Excise, Andhra Pradesh, Hyderabad and to quash the same by issuing a necessary direction to the Prohibition and Excise Superintendent, Khammam District at Khammam to issue licenses to the Toddy Depot, Khammam and shop Nos.2, 4, 5, 7, 9, 11 and 13, whose licenses were cancelled earlier. Relevant facts shorn of details, which gave rise to filing these writ petitions, are as under: TTCS group of Khammam consisting of 20 toddy shops and one toddy depot were given licenses for the period from 9-5-2002 to 31- 3-2007. On 21-6-2006, the toddy depot and toddy shop Nos.2,4, 5, 7,9,11 and 13 were inspected by the officers and staff of the Prohibition and Excise Superintendent, Task Force, Khammam and Station House Officer, Khammam. They found the toddy was adulterated with Chloral Hydrate. On registering crimes, licenses were suspended. Later, show cause notices were issued as to why their licences should not be cancelled, while sending sample for chemical analysis. On receipt of the report from the Chemical Examiner on 29-6-2006 opining that the toddy is adulterated with Chloral Hydrate, WP No.13480/2006 was filed before this court seeking a direction to the Excise Officials to send second sample bottle to the independent laboratory ie., State Govt. Laboratory, Nacharam, Hyderabad. On disposal of the said writ petition on 11-7-2006, second sample was sent to the Chemical Examiner, who analyzed and reported, through his report dt. 5-12-2006, that the sample contains Chloral Hydrate and Alprozolam. As both the Chemical Examiners opined that the toddy was adulterated, licenses were cancelled by the Prohibition and Excise Superintendent, Khammam, vide orders dt. 1-2-2007. Apart from canceling the licenses, they laid charge sheets against the licensees before the Special Judicial Magistrate of First Class (Prohibition and Excise Court) at Khammam. Learned Magistrate acquitted all the accused by separate judgments holding that the prosecution failed to prove the seizure of contraband from the possession of the accused. On such acquittal, the President of TTCS, Khammam submitted a representation on 7-9-2007 to revive the licence of toddy shop Nos.2, 4, 7, 9, 11 and 13 to the Prohibition and Excise Superintendent, Khammam, who dismissed the same on 20-11-2007. Against the dismissal of the representation, the President, TTCS, Khammam and individual licensees whose licenses were cancelled, filed appeals before the Deputy Commissioner of Prohibition and Excise, Warangal, who dismissed the same on 27-10- 2007. Aggrieved by the same, the toddy depot as well as the licensees of the above shops filed second appeal before the Commissioner of Prohibition & Excise, Andhra Pradesh, Hyderabad. On dismissal of the second appeal by the Commissioner on 4-3-2008, revisions were filed before the Government. On the Government dismissing the revision, the present writ petitions ie., WP Nos.24883/2009, 25228/2009, 25103/2009, 25101/2009,25075/2009, 25076/2009 and 25077/2009. Whereas questioning the show cause notice dt. 22-3-2007 for cancellation of licenses in respect of toddy depot and shop Nos.1, 3,6,8,10,12 and 14 to 20 under Section 31(2) of the A.P. Excise Act, 1968 (for short “the Excise Act”), WP No.24674/2007 is filed. The Toddy Tappers Co-operative Society, Toddy Group of Khamma, at Khammam represented by its President Vaddeboina Krishna Rao claiming that he was elected as President of the Society filed WP No.24547/2007 complaining non-consideration of representation dt. 12-11-2007 whereunder it was requested to revive/review/renewal/grant toddy group, Khammam shop Nos.1 to 20 and Depot licence for the excise year from 1-10-2007 to 30-9-2012 in respect of Toddy Group, Khammam town of Khammam District as per the amended rules, namely, Andhra Pradesh Excise (Grant of Licence to sell toddy, conditions of Licence and tapping of excise trees) Rules,2007, issued in G.O.Ms.No.1228, Revenue (Ex.II) dt. 19-9-2007 and for a consequential direction to grant TTCS licence to toddy group of Khammam. Sri Vaddeboina Krishna Rao got himself impleaded as respondent No.7 in W.P.No.24674/2007 as per orders of this court dt.22-10-2009 passed in WPMP No.27837/2009. Whereas the President G. Raghavaiah representing the Toddy Tappers Co- operative Society, Toddy Group, Khammam filed W.P.M.P No.2026/2008 in WP No.24547/2007 to implead himself as party respondent, which was ordered on 2-2-2010. Sri S.Ramachandra Rao, learned Senior Counsel for the petitioners in all the writ petitions except WP No.24547/2007 contended that criminal cases registered against the toddy depot and some of the members of the society, as referred to above, were ended in acquittal after analyzing the evidence of panch witnesses P.Ws. 1 and 2 who have not supported the case of the prosecution for drawing samples from the toddy depot as well as the shop and the prosecution failed to prove the seizure of the case property from the possession of the accused, hence the report given by the Chemical Analyst basing upon the alleged seizure opining that the toddy is adulterated with chloral hydrate cannot be taken into consideration for cancellation of licences. In view of the same, rejection of the representation filed for renewal of licences by the Prohibition and Excise Superintendent is per se illegal and contrary to law. Further the Deputy Commissioner of Prohibition and Excise, Warangal as well as the Commissioner of Prohibition and Excise, Hyderabad have not taken into consideration the acquittal order passed by the criminal court. In support of the said contention, reliance is placed on the following judgments: 1. G.M. TANK V. STATE OF GUJARAT[1] 2. M. PAUL ANTHONY V. BHARAT GOLD MINES LTD[2] 3. A.D.S.SARMA V. DEPUTY REGISTRAR OF CO- OPERATIVE SOCIETY, AMALAPURAM, EAST GODAVARI DISTRICT[3] 4. R.YADAIAH V. PROHIBITION AND EXCISE SUPERINTENDENT, RANGAREDDY[4] He further submitted that Section 37 of the Excise Act deals with penalty for adulteration by licensed vendor or manufacture. In the counter- affidavit filed by the respondent No.5 in WP No.24674/2007, it is admitted that the licensees of toddy shop Nos.2,4,5,7,9,11 and 13 and toddy depot were cancelled for indulging in adulteration and other licensees of 13 shops of the society are liable for cancellation under Section 31(2) of the Excise Act. Clubbing of all the toddy licensees against whom there was no allegation of adulteration treating them on par with licensees of shops who are adulterated, in the absence of any contravention pointed out, cancellation of licenses amounts to violation of Art.14 of the Constitution of India. To buttress the said submission, reliance is placed on the judgment of the Supreme Court in ONKAR LAL BAJAJ V. UNION OF INDIA[5]. Sri Vaddeboina Krishna Rao, who filed implead petition (WPMP No.27837/2009) in WP No.24674/2007 cannot support the action of the officials and claim licenses for the members as claimed in WP No.24547/2007. He further contended that learned counsel Sri B. Sai Ram Goud who filed WP No.14998/2006 earlier before this court representing the Society by its President G.Raghavaiah cannot appear for the party, namely, Vaddeboina Krishna Rao, who filed WP No.24547/2007 for grant of licenses to the members, which is detrimental to the interest of the Society. In the absence of any material showing that he was elected as President, he cannot represent the Society. He further contended that counter part agreement entered by the petitioners will not dis-entitle them to challenge the constitutional validity of Section 31 as ultra vires. Sri B. Sai Ram Goud, learned counsel appearing for the petitioner in WP No.24547/2007 and the respondent No.7 in WP No.24674/2007, who has been impleaded as per orders passed in WPMP No.27837/2009 contended that earlier Toddy co-operative Society, Toddy Group of Khammam at Khammam represented by its President G. Raghavaiah filed WP No.14998/2006 questioning the orders suspending the licenses of toddy shop Nos.1,3,6,8,10,12,14 to 20 who were not indulged in adulteration and obtained orders from this court suspending the suspension order dt. 8-7-2006 on 25-7-2006, whereunder this court observed that the suspension of the suspension order shall not preclude the respondents to initiate enquiry in accordance with law. On cancellation of the licenses for toddy shop Nos.2,4,5,7,9,11 and 13 for indulging in adulteration, licenses of 13 toddy shops, which were not inspected and not found adulteration (covered by WP No.14998/2006) were extended up to 30-9-2007 subject to the orders to be passed pursuant to the show cause notice dt. 22-3-2007. As per Section 29 of the A.P. Excise Act, counter-part agreement has to be executed by the President and its members in whose favour licenses were granted and are to abide by the conditions of the license and the Excise Act and the Rules which govern the said grant of license and they cannot question the Act now. Questioning the show cause notice issued on the report of the Chemical Examiner who analyzed the first sample bottle, writ petitions were filed before this court for sending the second samples of 7 toddy shops and toddy depot. In view of the cancellation of licenses of 7 toddy shops and toddy depot and issuing show cause notice to the remaining toddy shop licensees, it necessitated to file WP No.24547/2007 to consider and issue licenses as per the amended rules issued in G.O.Ms. No.1228 Revenue (Ex.II) Department dt. 19-9- 2007. Rule 11 of A.P. Excise (Tapping of trees and toddy slops— special conditions of licence) Rules, 1969 provides issuance of tapping licenses. In view of the same, members who are not involved in adulteration are entitled to grant licenses and necessary direction should be issued to grant licenses as per the amended rules issued in G.O.Ms.No.1228 dt. 19-9-2007 by allowing WP No.24547/2007 contending that the petitioners in other writ petitions cannot claim privilege or licenses to do business, having been contravened the conditions of the licenses earlier in the year 2000, which was challenged by the Society before this court in TODDY TAPPERS CO- OP.SOCIETY GROUP V. PROHIBITION AND EXCISE SUPERINENDENT[6]. Learned Government Pleader for Excise contended that the petitioner-Society in WP No.24547/2007 claimed that members who are no way connected with adulteration of toddy passed a resolution removing G. Raghavaiah and other managing committee members on 23-9-2007 and elected a new body with Vaddeboina Krishna Rao as President is not known to the Department and in the counter-affidavit filed by respondents in WP No.24547/2007, the respondents have denied about Vaddeboina Krishna Rao filing any resolution electing him as President of TCS, Khammam Group. When he filed a representation on 12-11-2007 he was called upon to submit the record in support of his claim and he replied that records were submitted to the High Court in WP No.24547/2007 and requested for time to submit the same, but no such records were available evidencing that he was elected as President. He further contended that the finding of the criminal court cannot be taken into consideration for setting aside the orders passed canceling the toddy licenses. When the Society itself volunteered to send the second sample bottle to independent laboratory, it cannot take advantage of the acquittal order and it cannot contend that no seizure was effected by the excise officials by drawing samples on the relevant date. He further contended that action taken under Section 31 of the A.P. Excise Act is independent of proceedings under Section 37. Under sub-section (1) of Section 31, the authority may cancel or suspend for any of the contraventions laid down in Clauses (a) to (e), whereas under sub-section (2) of Section 31, licence or permit held by any person is cancelled under clause (a) (b) (c) and (d) of sub- section (1), the authorities may cancel any other licence granted or permit issued. Section 37 deals with penalty for adulteration by a licensed vendor or manufacturer and it is a criminal liability and both are independent and disjunctive proceedings. In support of the said contention, reliance is placed on the following judgments. 1. TODDY TAPPERS CO-OPERATIVE SOCIETY, KOTHAKOTA V. THE EXCISE SUPERINTENDENT, MAHABOOBNAGAR & OTHERS[7] 2. STATE OF A.P. V. B.V.NARAYANA[8] 3. K.P.REDDY V. SPECIAL CHIEF SECRETARY TO GOVT., REVENUE (EXCISE-III) DEPARTMENT[9] 4. J. VISWANATHA REDDY V. GOVERNMENT OF A.P.[10] He further contended that when the petitioners entered into a counter- part agreement agreeing to abide by the Excise Act and rules made thereunder cannot challenge the rules or the license conditions by placing reliance on the judgment of the Supreme Court in C.M. JOSEPH V. STATE OF KERALA[11] In view of the rival submissions of the learned counsel for the respective parties, the points that arise for consideration are: 1. Whether cancellation of licenses for shop Nos.2,4,5,7,9,11 and 13 and toddy depot following the departmental proceedings under the provisions of the Excise Act and Rules are liable to be set- aside or licenses to be restored as claimed in view of the acquittal order passed by the criminal court in CC Nos.316, 296, 298, 294, 315,295 and 297 & 298 of 2007 respectively? 2. Whether show cause notice dt.22-3-2007 issued for cancellation of licenses under Section 31(2) of the Excise Act in respect of toddy shop Nos.1,3,6,8,10,12 and 14 to 20 is liable to be set- aside by declaring Sec. 31(2) of the Excise Act as un-constitutional? 3. Whether members of the Society who are no way connected with adulteration of toddy are entitled to grant of licenses in pursuance of Andhra Pradesh Excise (Grant of Licence to sell toddy, conditions of Licence and tapping of excise trees) Rules, 2007, issued in G.O.Ms.No.1228, Revenue (Ex.II) dt. 19-9-2007? Before adverting to the rival submissions, it is convenient to consider the submissions in the context of the statutory provisions and the law laid down by the Supreme Court as well as this court about the right of a citizen to carry on business in intoxicants, which is considered as a pernicious trade. Section 13 of the Excise Act prohibits the manufacture, sale etc. , of excisable articles (alcohol, liquor for human consumption or any intoxicating drug) except under the authority and subject to the terms and conditions of a licence granted by such officer as may be prescribed. Under sub-section (2) of Section 13, a licence granted shall extend and cover servants and other persons employed by the licensee and acting on his behalf. Section 15 prohibits sale or buying of intoxicant except under the authority and in accordance with the terms and conditions of a licence granted in that behalf, provided that person having a licence to draw toddy from an excise tree, may sell such toddy to a person licensed to buy toddy under the Excise Act without obtaining a licence for such sale but subject to such restrictions and conditions as the Commissioner may specify. Section 28 of the Excise Act provides for grant of a licence in the prescribed proforma. License shall be issued on payment of such fee or for such period, subject to the restrictions and conditions as may be prescribed. Section 31 deals with power of the authority to cancel or suspend licence, which reads as under: 31 Power to cancel or suspend licence etc. (1) Subject to such restrictions as may be prescribed, the authority granting any licence or permit under this Act may cancel or suspend it irrespective of the period to which the licence or permit relates. (a) x x x x x; or (b) in the event of any breach by the holder thereof, or by any of his servants or by any one acting on his behalf with his express or implied permission, of any of the terms and conditions thereof; or (c) if the holder thereof or any of his servants or any one acting on his behalf with his express or implied permission, is convicted of any offence under this Act, or (d) x x x x: Provided that no licence or permit shall be cancelled or suspended unless the holder thereof is given an opportunity of making his representation against the action proposed. (2) Where a licence or permit held by any person is cancelled under clause (a), clause (b), clause (c) or clause (d) of sub-section (1), the authority aforesaid may cancel any other licence granted or permit issued to such persons under this Act, or under the Opium Act, 1878. (3) x x x x Section 37 prescribes penalties for adulteration of intoxicants by the licensed vendor or manufacturer. It reads as under: 37 Penalty for adulteration, etc. by licensed vendor or manufacturer: Whoever being the holder of a licence for the sale or manufacture of any intoxicant under this Act, or a person in the employ of such holder,_ (a) mixes or permits to be mixed with intoxicant sold or manufactured by him any noxious drug or any foreign ingredient likely to add to its actual or apparent intoxicating quality or strength, or any article prohibited by any rule made under this Act when such admixture does not amount to the offence of adulteration under Section 272 of the Indian Penal Code; or (b) to (e) x x x; shall on conviction, be punished with imprisonment,_ (i) in the case of first offence for a term which shall not be less than one year but which may extend upto three years and with fine which shall not be less than rupees ten thousand but which may extend upto rupees thirty thousand; (ii) in the case of a second or subsequent offence for a term which shall not be less than two years but which may extend upto three years and with fine which shall not be less than rupees fifty thousand but which may extend upto rupees one lakh. Andhra Pradesh Excise (Tapping of Trees and Toddy Shops— Special Conditions of Licence) Rules, 1969 (for short “the tapping rules”) were made by the Government of Andhra Pradesh in exercise of powers conferred by various provisions of the Excise Act. Rule 4 obliges the licensee to sell toddy drawn from the marked trees alone. It reads as follows: 4 Toddy drawn from marked trees alone to be sold:- (1) The licensee shall possess or sell toddy drawn from the excise trees marked for the shop after payment of tree-tax and tree owners' rent thereof. In case of group of shops the licensee shall be entitled to transfer the surplus toddy of one shop to another shop within the same group and to sell it but toddy to be transferred shall be covered by a permit issued in Form TS.2 in respect of a licensee holding more than one group of shops in the cities of Hyderabad and Secunderabad or such towns as the Excise Commissioner may specify, and, the shops within all such groups shall be deemed to be included in one group only for the purposes of these rules. (2) Where a licensee of the group of shops in any such city or town or a licensee who has obtained several shops contiguous to each other desires to pool toddy of all shops at one place and distribute it to constituent shops in separate receptacles, instead of transporting direct to all the individual shops, he shall do so after obtaining the prior permission of the Excise Superintendent, if all shops are located in one and the same district of the Deputy Commissioner, if all the shops are located in one excise division and of the Commissioner, if the shops are located in more than one excise division. In such a case, the licensee shall obtain a licence in Form TS 3 for establishing a depot on payment of a fee of rupees one hundred only from the Excise Superintendent concerned and shall maintain accounts in Form TS 3(A). The depot shall ordinarily be established within the area of the group of shops. Transport of toddy from depot to constituent shops shall be under Form TS 3(B). Rule 5 prohibits adulteration of toddy, which reads as under: 5. Adulteration of toddy Prohibited: - The licensee shall not mix in toddy Chloral Hydrate or any other article in the shop or depot or outside, except sugar, nor shall he sell or offer for sale adulterated toddy in any shop. The licensee shall not keep within the premises of the shop Chloral Hydrate or any other article injurious to health, which may be used for adulteration of toddy. Rule 22 obligates the licensee to observe rules and orders issued from time to time by the authorities. It reads as under: 22 Licensee bound to observe rules and orders: Every licensee shall be bound by the rules and orders for the time being in force regarding the safeguarding, marking and tapping of excise trees and rules relating to permits and any other rules or regulations which may be made from time to time in this behalf. Condition No.6 appended to Form TS 5(A)-Licence for tapping of Excise trees issued by the Excise Inspector of the A.P. Excise (Tapping of trees and toddy slops—special conditions of licence) Rules, 1969 reads as under: “The licensee shall not manufacture liquor from toddy and shall not adulterate toddy.” Thus, a reading of the above provisions of the Excise Act together with the tapping rules, the picture which emerges is that the privilege for selling liquor which includes the lease of the shop for an area and licence to sell toddy therein may be granted under the Excise Act and the Rules. The Supreme Court in COVERJEE V. EXCISE COMMISSIONER[12]; STATE OF ASSAM V. SRISTIKAR[13]; NAGENDRANATH BORA V. COMMISSIONER OF HILLS DIVISION[14]; HAR SHANKAR V. DY.EXCISE COMMISSIONER[15] and KHODAY DISTILLERIES LIMITED V. STATE OF KARNATAKA[16] held that a citizen has no fundamental right to carry on business in intoxicants, which is considered as a pernicious trade. I n HAR SHANKER (15 supra) the Supreme Court held that “writ jurisdiction of High Courts under Art.226 of the Constitution is not intended to facilitate avoidance of obligations voluntarily incurred”. At the same time, it was observed that the licensees are not precluded from seeking to enforce the statutory provisions govern the contact. POINT No.1 In G.M. Tank (1 supra), the appellant, G.M. Tank, was charged for offence of acquisition of movable and immovable properties disproportionate to his known sources of income. After holding departmental enquiry, he was dismissed from service. A criminal complaint was also lodged against the appellant under Section 5(1)(e) r/w 5(2) of the Prevention of Corruption Act, 1947, based on same set of facts, charges, evidence and witnesses. The criminal court acquitted the appellant of the said offence by holding that the prosecution failed to prove the charges levelled against the appellant. The said order has not been challenged by the State and has become final. The appellant (charged employee) unsuccessfully challenged the dismissal order before the single Judge of High Court of Gujarat and also before the Division Bench. On further appeal, the Supreme Court held that the investigating officer and other departmental witnesses were the only witnesses examined by the enquiry officer who by relying upon their statement came to the conclusion that the charges were established against the appellant. The same witnesses were examined in the criminal case and the criminal court on the examination came to the conclusion that the prosecution has