Case: State of Punjab and Others Vs. Ajudhia Nath and Another

the appellants laid stress was rendered by the High Court of Punjab and Haryana in Jage Ram v. State of Haryana (C.W. No. 1376 of 1961 decided on March 12, 1968). The argument is that this decision is based on the earlier decision of the High Court in Bhajan Lal v. State of Punjab (C.W. No. 538 of 1966 decided on February 6, 1967), that the decision in Bhajan Lals case was confirmed in appeal by this Court (C.A. Nos. 1042 and 1043 of 1968 decided on August 21, 1972), that there is no material difference between the rules and the procedure adopted in the instant cases and those which were struck down in Bhajan Lals case and therefore, the rules and the procedure followed herein must also be struck down for the same reasons. This argument overlooks the significant difference between the rules struck down in Bhajan Lals case and in Jage Rams case and the amended Rules now in force. Under the old Rule 36 (23- A) still-head duty which was admittedly in the nature of excise-duty was payable by the licencee even on quota not lifted by him. The Rule and Condition No. 8 founded on it were therefore struck down in Bhajan Lals case as being beyond the scope of entry 51 of List II, the taxable event under the impugned Rule being the sale and not the manufacturer of liquor. Rule 36 was amended on March 31, 1967 in order to meet the Judgment in Bhajan Lals case but the High Court found in Jage Rams case that even under the amended Rule, still-head duty which was in the nature of excise duty was payable on unlifted quota of liquor. The position obtaining under the Rules as amended on March 22, 1968 which are relevant for our purposes is in principle different as the still-head duty is now only 0. 64 paise as against Rs. 17.60 per litre which was in force under the old Rules and excise duty as such is no longer payable on unlifted quota. The principle governing the decisions in Bhajan Lals case and Jage Rams case cannot, therefore, apply any longer". (Emphasis supplied)Special stress has been laid by Shri Munjral on the underlined portion of the passage above extracted and it is contended by him that the judgments in the cases of Jage Ram and Bhajan Lal were neither disapproved nor dissented from but were merely distinguished in Har Shankars ca se, that while pointing out the distinction this Court took it for granted that in those earlier cases the charge of still-head duty amounted to an excise duty and that condition No. 8 as obtaining in the present case being identical with the corresponding condition in those cases, it must be held that Har Shankars case is an authority for the proposition that the said condition No. 8 seeks to levy nothing but excise duty in the form of still-head duty. A careful perusal of the passage cited (which appears at first sight to lend colour to the contention) leaves no room for doubt, however, that in deciding Har Shankars case this Court was not called upon to adjudicate on the Constitutional propriety of condition No. 8 above extra cted, nor with the question as to the nature of the levy covered by that condition. All that the Court said was that the corresponding condition in Har Shankars case was a very different condition which could in no manner be construed to levy an exc ise duty. Besides, it was pointed out in the passage above quoted that the still- head duty mentioned in the relevant condition in the earlier cases (which was indentical with condition No. 8) was admittedly a duty of excise-a fact to which we hav e already adverted while holding that condition No. 8 does not involve the imposition of a duty of exercise but makes provision only for recovery of sums becoming due under a contract. We may also point out that the respondents are not connected in an y manner whatsoever with the manufacture of alcoholic liquor and there was, therefore, no question at all of levying a duty of excise on their operations which were confined merely to the sale of liquor manufactured by others and which, therefore, commenced only after the process of manufacture was completely over. For all these reasons, we repel the contention under examination.8. Contention (b) is also without substance and need not detain us long. For one thing, it was never raised at any earlier stage and its consideration is bound to work prejudice to the cause of the appellants. Secondly, as already pointed out above, there is no impediment in the way of the demand being regarded as the enforcement of an obligation arising under the contracts which the respondents had entered into and exploited so long as the same worked to their advantage and which were fully permissible under sub-section (3) of section 34 of the Punjab Excise Act. That sub-section states:-"(3) Every licence, permit or pass granted under this Act shall be granted-(a) on payment of such fees, if any,(b) subject to such restrictions and on such conditions,(c) in such form and containing such particulars, (d) for such period,as the Financial Commissioner may direct".9. According to Shri Munjral the payment of licence fees is provided for in the conditions of auction apart from condition No. 8 and, therefore, the latter cannot be regarded as providing for anything but the levy of a duty of excise or of some other kind. The argument is fallacious in view of the language of clause (b) of the sub-section just above reproduce d. That clause allows the imposition of conditions on the grant of a licence, in addition to the payment of the licence fees which is a matter covered by clause (a). Condition No. 8 is, therefore, fully enforceable and there is no reason why still-head duty should be regarded as a tax of any kind whatsoever.9.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]The contention is correct. As pointed out in Balbir Singhs case (supra) the judgment of Gurdev Singh, J., in Civil Writ Petition No. 2021 of 1966 had proceeded merely on the ground that the petitioner-firm therein had not been given an opportunity of being heard in relation to the demand notice issued to it for payment of the still-head duty on the entire minimum quantity of liquor which that firm was required to lift under the licence. In differing with the view expressed by Gurdev Singh, J., this Court made a reference to the following observations of Chandrachud, J., (as he then was) in Har Shanker and Others v. The Dy. Excise &Taxation Commissioner and Others which was followed in Shyam Lal v. State ofannouncement of conditions governing the auctions was in the nature of an invitation to an offer to those who were interested in the sale of country liquor. The bids given in the auctions were offers made by prospective vendors to the Government. The Governments acceptance of those bids was the acceptance of willing offers made to it. On such acceptance, the contract between the bidders and the Government became concluded and a binding agreement came into existence between them. The successful bidders were then granted licences evidencing the terms of contract between them and the Government, under which they became entitled to sell liquor. The licensees exploited the respective licences for a portion of the period of their currency, presumably in expectation of a profit. Commercial considerations may have revealed an error of judgment in the initial assessment of profitability of the adventure but that is a normal incident of the trading transactions. Those who contract with open eyes must accept the burdens of the contract along with its benefits. The powers of the Financial Commissioner to grant liquor licences by auction and to collect licence fees through the medium of auctions cannot by writ petitions be questioned by those who, had their venture succeeded, would have relied upon those very powers to found a legal claim. Reciprocal rights and obligations arising out of contract do not depend for t heir enforceability upon whether a contracting party finds it prudent to abide by the terms of the contract. By such a test no contract could ever have a bindingconcluded that the demand for the short-fall in still- head duty was based on the term of a binding contract and that it sought to enforce the liabilities arising out of mutually agreed conditions of auction. Such a demand, in the opinion of this Court, could not be equated with a notice requiring the liquor vendor to show cause why his licence should not be cancelled. In making this distinction this Court further relied upon State of Punjab v. Mulkh Raj and Co. wherein it waswas also held there that a cancellation of the licence under section 36 ofthe Punjab Excise Act, 1914, had to take place quasi-judicially after due service of the notice on the licensee to show cause why it should not be cancelled. Although, the merits of the last mentioned proposition need not be examined by us as it rests on a sound footing, yet, we find it difficult to uphold the order that the demand for a sum of Rs. 36, 636. On account of short-fall should also be quashed on account of non-compliance with rules of natural justice in cancelling the licence in proceedings under section 36 of the Act. We think that the two liabilities were erroneously considered by the High Court t o be inextricably linked up.....................................We do not think that, even if the respondent ought to have been given a hearing before cancelling the licence, this would dispense with his liability to deposit the amount of balance of the licence fee or invalidate the notice of demand forthe proposition is by now well-settled that although an opportunity of being heard has to be given to a liquor vendor when his licence is sought to be cancelled, the same principle of natural justice does not come into play when the demand is merely for payment of a sum becoming due under the conditions subject to which the licence was granted, and this proposition fully covers these appeals. The demands for payment of the amount of the still head duty which had become due under the contracts accepted by the respondents and had remained unpaid were demands arising under condition No. 8 above extracted a nd had, therefore, resulted from the terms of those contracts. No question of affording to the respondents any opportunity of being heard thus arises and the impugned judgment, is, therefore, liable to bethe proposition is by now well-settled that although an opportunity of being heard has to be given to a liquor vendor when his licence is sought to be cancelled, the same principle of natural justice does not come into play when the demand is merely for payment of a sum becoming due under the conditions subject to which the licence was granted, and this proposition fully covers these appeals. The demands for payment of the amount of the still head duty which had become due under the contracts accepted by the respondents and had remained unpaid were demands arising under condition No. 8 above extracted a nd had, therefore, resulted from the terms of those contracts. No question of affording to the respondents any opportunity of being heard thus arises and the impugned judgment, is, therefore, liable to beprinciple governing the decisions in Bhajan Lals case and Jage Rams case cannot, therefore, apply any longer". (Emphasisstress has been laid by Shri Munjral on the underlined portion of the passage above extracted and it is contended by him that the judgments in the cases of Jage Ram and Bhajan Lal were neither disapproved nor dissented from but were merely distinguished in Har Shankars ca se, that while pointing out the distinction this Court took it for granted that in those earlier cases the charge of still-head duty amounted to an excise duty and that condition No. 8 as obtaining in the present case being identical with the corresponding condition in those cases, it must be held that Har Shankars case is an authority for the proposition that the said condition No. 8 seeks to levy nothing but excise duty in the form of still-head duty. A careful perusal of the passage cited (which appears at first sight to lend colour to the contention) leaves no room for doubt, however, that in deciding Har Shankars case this Court was not called upon to adjudicate on the Constitutional propriety of condition No. 8 above extra cted, nor with the question as to the nature of the levy covered by that condition. All that the Court said was that the corresponding condition in Har Shankars case was a very different condition which could in no manner be construed to levy an exc ise duty. Besides, it was pointed out in the passage above quoted that the still- head duty mentioned in the relevant condition in the earlier cases (which was indentical with condition No. 8) was admittedly a duty of excise-a fact to which we hav e already adverted while holding that condition No. 8 does not involve the imposition of a duty of exercise but makes provision only for recovery of sums becoming due under a contract. We may also point out that the respondents are not connected in an y manner whatsoever with the manufacture of alcoholic liquor and there was, therefore, no question at all of levying a duty of excise on their operations which were confined merely to the sale of liquor manufactured by others and which, therefore, commenced only after the process of manufacture was completely over. For all these reasons, we repel the contention underto Shri Munjral the payment of licence fees is provided for in the conditions of auction apart from condition No. 8 and, therefore, the latter cannot be regarded as providing for anything but the levy of a duty of excise or of some other kind. The argument is fallacious in view of the language of clause (b) of the sub-section just above reproduce d. That clause allows the imposition of conditions on the grant of a licence, in addition to the payment of the licence fees which is a matter covered by clause (a). Condition No. 8 is, therefore, fully enforceable and there is no reason why still-head duty should be regarded as a tax of any kind whatsoever.