IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 22.12.2011 CORAM: THE HONOURABLE MR. JUSTICE V.DHANAPALAN W.P.No.2363 of 2008 Hotel Soorya International, rep. by its Partner S.Arumugam No.345-A, Ooty Main Road, Mettupalayam – 641 301 Coimbatore District. ... Petitioner vs. 1. The Secretary to Government, Home, Prohibition & Excise, Chennai 600 009. 2. The Commissioner, Prohibition & Excise, Chepauk, Chennai 600 005. 3. The Deputy Commissioner, Prohibition & Excise, Collectorate, Coimbatore. ... Respondents Writ Petition filed under Article 226 of the Constitution of India praying for the issuance of a writ of certiorarified mandamus to call for the records of the 2nd respondent bearing No.RC No.P&E 2 (1)/6887/2007 dated 18.01.2008 and quash the same and forbear the respondents from demanding the privilege fee @ Rs.1,50,000/- per annum on the basis of the two star category for the period 2000-2008. For Petitioner : Ms.P.T.Asha for M/s.Sarvabhauman Associates For Respondents 1 to 3 : Mr.S.V.Durai Solaimalai, Additional Government Pleader https://hcservices.ecourts.gov.in/hcservices/ O R D E R Heard Ms.P.T.Asha, learned counsel for the petitioner and Mr.S.V.Durai Solaimalai, learned Additional Government Pleader appearing for the respondents. 2. Praying to quash the proceedings of the 2nd respondent in Rc.No.P&E 2(1)/6887/2007, dated 18.01.2008 and forbear the respondents from demanding the privilege fee @ Rs.1,50,000/- per annum on the basis of the two star category for the period 2000-2008, the petitioner has come up with the present writ petition. 3. The petitioner would state that they are running a Hotel under the name and style of 'Hotel Soorya International' in Mettupalayam under Licence No.FL 3 6/96-97. In the year 1996, they applied for classification of their Hotel under two star category and the same was duly accorded to them on 08.07.1996 on the recommendations of the Hotel and Restaurant Approval and Classification Committee (HRACC). The above classification was accorded to them by the Convenor, HRACC, Regional Director for Southern Regional Office, India Tourism, Government of India. The petitioner was granted two star rating for a period of three years with effect from 30.04.1996 subject to the terms and conditions laid down under Circular No.22 HRACC (1/87 dated July 20th, 1987). The above classification expired on 30.04.1999 and from that date onwards, the petitioner continues to be an ordinary (non-star category) Hotel. 3.1. The Hotel has an attached Bar for which the necessary licence under the Tamil Nadu Prohibition Act, 1937 read with Tamil Nadu Liquor (Licence & Permit) Rules, 1981 (hereinafter referred to as 'Rules') has been duly procured. The Hotel had applied for the grant of a licence in Form FL 3 as prescribed under the Rules and in the year 1996, the licence was duly accorded. Thereafter, the licence has been renewed periodically under Rule 21. Rule 17-A deals with the kind of licences. Rule 17-B III pertains to licence for possession of liquor by star hotels. Under this Rule, the privilege fee payable by various star/non-star hotels has been specified. It is pertinent to mention that as per the Table provided under the Sub- Rule, the privilege fee payable by a two star hotel is Rs.1,50,000/- per annum while that payable by a "One Star and other Hotels is Rs.1,00,000/- per annum". Based on the above Rule, the petitioner Hotel paid the privilege fee on the basis of two star category for the period 1996-1999. As stated earlier, the Hotel ceased to be a star Hotel from 1999 and therefore, the privilege fee paid was on the basis of the non-star category. From the year 2000 till date, the petitioner has been regularly and diligently paying the privilege fee as prescribed under the Rule mentioned above. https://hcservices.ecourts.gov.in/hcservices/ 3.2. While so, the petitioner received a communication from the 2nd respondent herein under cover of letter No.P&E 2(1) 6887/2007 dated 23.08.2007 claiming a sum of Rs.4 lakhs @ Rs.50,000/- per year towards the difference in privilege fee from the year 2000 till date. In the said letter, it was alleged that the petitioner had failed to pay the privilege fee @ Rs.1,50,000/- from the year 2000 and hence, the demand of Rs.4 lakhs was being made towards the difference of privilege fee. The petitioner replied on 25.09.2007 clarifying to the 2nd respondent herein that their star category ceased to exist from 1999 and therefore, they are not liable to pay the sum of Rs.4 lakhs demanded by him. On 16.10.2007, the petitioner forwarded a letter from the Department of Tourism, Government of India stating that their star classification had expired on 30.04.1999. On 07.12.2007, the petitioner received a communication from the 3rd respondent under cover of letter in ROC No.53334/2007/Z4 reiterating the demand for Rs.4 lakhs. In the said letter, it was also stated that the non-renewal of star category would not affect the payment of privilege fee. On 22.12.2007, the petitioner once again clarified the issue raised by the 3rd respondent and marked a copy of the letter to the other respondents as well. 3.3. Notwithstanding this and in complete violation of the Tamil Nadu Prohibition Act, 1937 and the Rules, the petitioner received an order vide RC No.P&E 2 (1)/68887/2007 dated 18.01.2008 from the 2nd respondent reiterating the demand for Rs.4 lakhs towards the difference in privilege fee. In the said order, it has also been stated that if the above amount is not remitted within the time mentioned, the FL 3 licence would not be renewed for the period 2007- 2008 and orders would be passed accordingly. The petitioner would further state that the privilege fee for the renewal of the licence for 2007-2008 has been paid by them as early as on 02.03.2007 along with a challan for Rs.1 lakh and the respondents are yet to act upon it, although the said sum of Rs.1 lakh has been duly received by them. 3.4. According to the petitioner, the impugned order is in direct violation of Rule 22, which clearly envisages the issuance of a show cause notice followed by an opportunity to put forth their case before any drastic step such as cancellation/non-renewal of licence can be taken by the authorities. Being aggrieved by the impugned order, the petitioner is before this court. 4. Respondents have filed a counter affidavit. Details of the amount due to be paid by the petitioner Hotel, as stated by the respondents, are as under: https://hcservices.ecourts.gov.in/hcservices/ Period Amount of Privilege fee due to be paid by the petitioner Hotel Amount of Privilege fee paid by the petitioner Hotel Difference of amount to be paid by the petitioner Hotel Rs. Rs. Rs. 2000-2001 1,50,000/- 1,00,000/- 50,000/- 2001-2002 1,50,000/- 1,00,000/- 50,000/- 2002-2003 1,50,000/- 1,00,000/- 50,000/- 2003-2004 1,50,000/- 1,00,000/- 50,000/- 2004-2005 1,50,000/- 1,00,000/- 50,000/- 2005-2006 1,50,000/- 1,00,000/- 50,000/- 2006-2007 1,50,000/- 1,00,000/- 50,000/- 2007-2008 1,50,000/- 1,00,000/- 50,000/- Total 4,00,000/- 4.1. The respondents would state that this court called upon them to explain the reasons for not taking steps from 1999 to 2008. On perusal of the available records, it is ascertained that the respondents have collected the privilege fee at the rate of Rs.1.5 lakhs for the period 1999-2000, but, it was wrongly noted as Rs.1 lakh with difference of Rs.50,000/- vide additional counter filed by the 1st respondent. 4.2. Further, the respondents have ascertained from the current file that the petitioner has paid the full privilege fee of Rs.1.5 lakhs for the year 1999-2000. On perusal of the licence issue register, it is ascertained that for the periods from 2000-2001 to 2007-2008, privilege fee was remitted by the petitioner at the rate of Rs.1 lakh and the same was accepted by the respondents without verifying the Star Status/Classification. The respondents were under the impression that the petitioner would remit the difference amounts immediately on renewal of Star Classification Certificate by the India Tourism. 4.3. According to the respondents, they are thoroughly deceived by the petitioner herein, in as much as they have determined not to renew the Star Classification Certificate with ulterior motives. The malafide intention of the petitioner was realized only at a later stage. Hence, to save loss of revenue to the Government, the respondents took concrete steps to claim the difference amount of Rs.4 lakhs from 2000-2001 to 2007-2008, though belatedly. There is no deliberate inaction on the part of the respondents in not taking steps from time to time. On account of the false promises made by the petitioner, the respondents have renewed the licence subject to the condition "that the licencee should pay the difference in the privilege fee, if any, demanded in future". Since the petitioner did https://hcservices.ecourts.gov.in/hcservices/ not keep up their promise, the respondents ultimately directed the District Collector, Coimbatore, to collect the difference of privilege fee of Rs.4 lakhs for the periods from 2000-2001, 2001- 2002, 2002-2003, 2003-2004, 2004-2005, 2005-2006, 2006-2007 and 2007- 2008. The respondents have neither shown any favour to the petitioner nor intentionally failed/neglected to claim the difference of privilege amount from time to time. All this havoc took place due to confusion and false impression made by the petitioner. Hence, they pray for dismissal of the writ petition. 5. Learned counsel for the petitioner would contend that the respondents herein have failed to take into consideration the letter dated 08.07.1996 issued by the Department of Tourism, Government of India, which grants the petitioner a two-star status for a period of three years from 1996 and also the letter dated 15.10.2007 which states that such status ceased to exist from 30.04.1999. It is her further contention that the impugned order is in clear violation of the principles of natural justice and in violation of Rule 22, as there was no show cause notice followed by an opportunity of putting forth the petitioner's case before any drastic step such as cancellation or non-renewal of licence is taken, which violates their right to livelihood. 5a. In support of her contentions, learned counsel for the petitioner has relied on an unreported decision of this court dated 04.01.2001 made in W.P.No.1744 of 2008, wherein, it is held as follows : "9. Since the petitioner in this case falls under non-star category on and from 2001-2002 onwards and that fact is not in dispute and since the show cause notice proceedings has not been finalised in accordance with law, the impugned demand seeking differential amount for the periods 2001-2002 to 2007-2008 in a sum of Rs.7,00,000/- has no basis and accordingly, the same is set aside. The writ petition is allowed. Consequently, connected miscellaneous petitions are closed. No costs." 6. Per contra, learned Additional Government Pleader would submit that for the periods from 2000-2001 to 2007-2008, privilege fee was remitted by the petitioner at the rate of Rs.1 lakh per annum and the same was accepted by the respondents without verifying the Star Classification and that the respondents were under the impression that the petitioner would remit the difference amount immediately on renewal of Star Classification Certificate by the India Tourism. To substantiate his case, he has relied on an unreported judgment of this court, dated 29.04.2008 made in W.P.(MD) Nos.1080 and 1487 of 2008, wherein, it is held as follows: "14. As rightly pointed out by the learned Additional Advocate General for classification of the https://hcservices.ecourts.gov.in/hcservices/ hotel, the competent authority is the Department of Tourism, Government of India. The petitioners have obtained classification status from the said Department. So far as FL3 licence for sale of liquors in hotels is concerned, the licence has to be granted by the second and third respondents. It is governed by the Tamil Nadu Liquor (Licence and Permit) Rules, 1981. When once classification has been obtained and FL3 licence has been obtained for sale of liquor in hotels, the petitioner hotel is liable to pay the privilege fee to the respondents for renewal of the licence. After obtaining the classification from the Department of Tourism, Government of India and after obtaining FL 3 licence from the respondents herein, if for any reason, the petitioner did not renew their classification but however renewed FL 3 licence, the petitioners are bound to pay the privilege fee and they cannot be heard to say since the classification of the star status has not been renewed they need not pay the privilege fees. If such view is possible then the petitioners after obtaining star status for a particular period without renewing the classification will merrily enjoy the same status and they will be selling liquors in hotels by renewing only FL 3 licence and they can refuse to pay the privilege fees. In that event, the Government should suffer revenue loss due to intentional failure on the part of licensee in renewing their star classification." 7. A panoramic view of the case would reveal that the petitioner 'Hotel Soorya International' in Mettupalayam, Coimbatore District had applied for classification of their Hotel under two star category and the same was duly accorded to them on 08.07.1996 by the Convenor, HRACC, Regional Director for Southern Regional Office, India Tourism, Government of India on the recommendations of the Hotel and Restaurant Approval and Classification Committee (HRACC). The petitioner was granted two star rating for a period of three years with effect from 30.04.1996 subject to the terms and conditions laid down under Circular No.22 HRACC (1/87 dated 20.07.1987) and the same continued till 30.04.1999 and from then onwards, the petitioner claims that they were treated as ordinary (non-star category) Hotel. 7a. It is seen that the petitioner Hotel has an attached Bar with necessary licence under the Tamil Nadu Prohibition Act, 1937 and Rules with FL 3 licence obtained under the Rules. The said licence was renewed periodically under Rule 21. The privilege fee payable by a two star Hotel as per the Rule is Rs.1,50,000/- per annum and for one star and other Hotels, it is Rs.1,00,000/- per annum. The https://hcservices.ecourts.gov.in/hcservices/ petitioner Hotel claims that they paid the privilege fee on the basis of two star category for the period 1996 to 1999. Thereafter, they claim that they have to be treated as ordinary non-star category and they paid the required privilege fee from 2000 onwards till date under the category of 'non-star and other Hotels'. While so, the 2nd respondent in the impugned order dated 23.08.2000 claimed a sum of Rs.4,00,000/-, which is the difference in the payment of privilege fee from the year 2000-2001 to 2007-2008, alleging that the petitioner failed to pay the privilege fee of Rs.1,50,000/- per annum. The petitioner, by a letter dated 25.09.2007 replied to the 2nd respondent clarifying that their two star category ceased to exist from 1999 and therefore, they are not liable to pay the difference of Rs.4,00,000/- as demanded. 7b. Also, on 16.10.2007, the petitioner forwarded a letter from the Department of Tourism, Government of India stating that their two star classification had expired on 30.04.1999. However, they received a communication from the 3rd respondent reiterating the demand for Rs.4 lakhs, stating that the non-renewal of star category would not affect the payment of privilege fee. In this regard, the petitioner again clarified to the 3rd respondent on 22.12.2007 that their Hotel comes under the non-star category. Finally, the 2nd respondent vide impugned order dated 18.01.2008 reiterated the demand of Rs.4,00,000/- towards the difference in privilege fee, in and by which, it was made clear that if the said amount is not remitted within the time prescribed, the FL 3 licence would not be renewed for the period 2007-2008 and orders would be passed accordingly. The above order is assailed by the petitioner on the ground that it is in clear violation of the principles of natural justice and in violation of Rule 22 as there was no show cause notice followed by an opportunity of putting forth their case before any drastic step such as cancellation or non-renewal of licence is taken, which violates their right to livelihood, since the respondents failed to take into account the letter issued by the Department of Tourism, Government of India, dated 08.07.1996, which grants the petitioner two star status for a period of three years from 1996 and the letter of the Regional Director of Tourism dated 15.10.2007, which states that the petitioner's classification expired on 30.04.1999. 8. Before examining the legality of the impugned proceedings, it would be necessary to deal with the relevant rules in this regard. 17(a) (A) Licences for Liquor used for Consumption : The Licences issued under this class are for privilege of sale of Indian Made Foreign Spirits in retail under Section 17-C of the Act or for sale of foreign liquor. https://hcservices.ecourts.gov.in/hcservices/ F.L.1. Licence for the grant of privilege of retail sale of bottled Indian-made foreign spirits or sale of foreign liquor. F.L.2. Licence for possession of liquor by a non-proprietary club for supply to members. F.L.3. Licence for possession of liquor by the Star Hotels for supply to foreign tourists and foreigners resident in India holding personal permits and also citizens of India holding personal permits for consumption within the licensed room of the Hotel or for renewal to their private rooms in the same hotel in which they stay for consumption there. Clause III to Rule 17(B) reads as under : Licence for possession of liquor by Star Hotels for supply of foreign tourists, foreigners resident in India holding personal permits and also citizens of India holding personal permits for consumption within the licensed room of the hotel or for removal to their private rooms in the same hotel in which they stay for consumption there - F.L.3 [The privilege and the licence in this form shall be issued by the Commissioner on payment of the following annual fees on an application made in Form A. 1.3 by the Manager of the hotel concerned, subject to the provision of these Rules and the conditions of the licence. Gradation of the Hotels Application fee Licence fee Privilege fee 1 2 3 4 Rs. Rs. Rs. Five Star Hotels 400 1000 4,00,000 Four Star Hotels 400 1000 3,00,000 Three Star Hotels 400 1000 2,00,000 Two Star Hotels 400 1000 1,50,000 One Star and other Hotels 400 1000 1,00,000 The Commissioner shall also issue privilege and licence in the same form for opening of an additional permit room, in the same hotel on additional payment of following annual fees on an additional application made in Form A.F.1.3 by the Manager of the hotel concerned, subject to the provisions of these Rules and the conditions of the licence. https://hcservices.ecourts.gov.in/hcservices/ Gradation of the Hotels Application fee Licence fee Privilege fee 1 2 3 4 Rs. Rs. Rs. Five Star Hotels 600 1500 4,00,000 Four Star Hotels 600 1500 3,00,000 Three Star Hotels 600 1500 2,00,000 Two Star Hotels 600 1500 1,50,000 One Star and other Hotels 600 1500 1,00,000 The licencee shall obtain his supplies from a wholesale depot licensee in the State or from such other source as the Commissioner may appoint or approve subject to such conditions as he may stipulate. The issue of liquor may be made not only to foreign tourists or foreigners resident in India holding personal permits but also to citizens of India holding personal permits under Chapter III of these Rules for consumption within the licensed room of the hotel or removal to their private rooms in the same hotel in which they stay for consumption there or in the lawns and apurtenants of such hotel or for consumption within the Tourism Resort apartment. The licensee shall maintain accounts of daily transaction in Form F.Ac.3 and F.Ac.3(a):] [Provided that for the sale of draught beer in the licensed premises of the five star (four star) and three star hotels, a special additional privilege fee at 10 per cent on the existing privilege fee, subject to a minimum of Rs.10,000 (Rupees Ten thousand only) shall be collected:] [Provided further that the Anna International Airport at Meenambakkam shall be deemed to have been situated within the limit of Chennai City, as a special case, in so far, as the sale of draught beer is concerned.] Rules 21 and 22 read as follows: 21. Renewal of licence : A licence holder desiring to renew the licence shall make an application in the prescribed form (the same as for the original grant of the licence) atleast one month before the date of expiry of the licence. The application may be sent to the licensing authority direct. The provisions of Rules 18 to 20 shall, as far as may be, apply to an application for renewal of licence as if it were an application for the original grant of a licence, where an application for renewal of the licence has not been https://hcservices.ecourts.gov.in/hcservices/ made within a period of one month before the expiry as specified herein, but in no case after the expiry of the licensing authority may admit such application, provided there are good and sufficient reasons for the delay on payment of an additional fee of twenty-five per cent of the prescribed licence fee. 22. Cancellation or suspension of licences : (1) The licensing authority may, after giving in writing to the licence holder an opportunity to show cause within a reasonable time not exceeding fourteen days against the action proposed to be taken or order proposed to be issued, stating the reasons therefor, by an order in writing specifying the reasons, cancel the licence under these Rules or suspend it for such period as it thinks fit, if in its opinion, the licence or of any of the provisions of the Act or the Rules made thereunder. 9. A comprehensive and conjoint reading of the above provisions makes it clear that FL 3 licence is issued for possession of liquor by Star Hotels for supply to foreign tourists and foreigners resident in India holding personal permits and also citizens of India holding personal permits for consumption within the licenced room of the Hotel or for removal to their private rooms in the same Hotel in which they stay for consumption there. Under Rule 17(B) clause III, the Commissioner shall issue privilege and licence in F.L.3 Form on payment of annual fees on an application made in Form A. 1.3 by the Manager of the Hotel concerned, subject to the provision of the Rules and conditions of the licence and for opening of an additional permit room in the same Hotel, he shall also issue privilege and licence in the same form on additional payment of annual fees on an additional application made in Form A.F.1.3 by the Manager of the Hotel concerned, subject to the provisions of the Rules and conditions of the licence. It is seen that for Two Star Hotels, the application fee is Rs.400/-, licence fee is Rs.1000/- and the privilege fee is Rs.1,50,000/- per annum and for opening of an additional permit room in the same Hotel, application fee is Rs.600/-, licence fee is Rs.1500/- and the privilege fee is Rs.1,50,000/- per annum. It is also provided that the issue of liquor may be made not only to foreign tourists or foreigners resident in India holding personal permits but also to citizens of India holding personal permits for consumption within the licensed room of the hotel or removal to their private rooms in the same hotel in which they stay for consumption there or in the lawns and apurtenants of such hotel or for consumption within the Tourism Resort apartment. The licence shall maintain accounts of daily transaction in Form F.Ac.3 and F.Ac.3(a). 10. Rule 21 deals with renewal of licence which inter alia provides that the licence holder desiring to renew the licence shall make an application in the prescribed form (the same as for the original grant of the licence), atleast one month before the date of https://hcservices.ecourts.gov.in/hcservices/ expiry of the licence. The application may be sent to the licensing authority directly, but, in no case after the expiry, the licensing authority may admit such application, provided there are good and sufficient reasons for the delay on payment of an additional fee of twenty-five per cent of the prescribed licence fee. 11. Rule 22 provides for cancellation or suspension of