K.V. Aravindan v. Deputy Excise Commissioner, Thrissur; Excise Commissioner, Commissionerate of Excise, Thiruvananthapuram; State of Kerala represented by the Principal Secretary to Government, Taxes Department, Thiruvananthapuram

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT :** **THE HONOURABLE MR. JUSTICE T.R.RAMACHANDRAN NAIR** **TUESDAY, THE 28TH SEPTEMBER 2010 / 6TH ASWINA 1932** **WP(C).No. 13181 of 2010(W)** **-----------------------------------------** **PETITIONER(S):** **------------------------** **K.V.ARAVINDAN, S/O.KOLLARA VELAYUDHAN, EDATHURUTHY, P.O.EDATHURUTHY, MANAGING PARTNER, VRINDARA TOURIST HOME, EDAMUTTAM.** **BY ADV. SRI.T.A.SHAJI** **RESPONDENT(S):** **--------------------------** **1. THE DEPUTY EXCISE COMMISSIONER, THRISSUR.** **2. THE EXCISE COMMISSIONER, COMMISSIONERATE OF EXCISE, THIRUVANANTHAPURAM.** **3. STATE OF KERALA REPRESENTED BY THE PRINCIPAL SECRETARY TO GOVERNMENT, TAXES DEPARTMENT, THIRUVANANTHAPURAM.** **R1 TO R3 BY GOVERNMENT PLEADER SRI. K.V. MANOJ** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 28/09/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **Kss** ## **WPC.NO.13181/2010 W** ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** - **P1: COPY OF THE FL3 LICENCE NO.TSR-22 OF M/S.VINDARA TOURIST HOME.** - **P2: COPY OF THE COMMUNICATION DTD. 31/03/2005 ISSUED BY THE 1ST RESPONDENT.** - **P3: COPY OF THE COMMUNICATION DTD. 30/03/2005 ISSUED BY THE 2ND RESPONDENT.** - **P4: COPY OF THE INTERIM ORDER DTD. 9/10/2009 OF THE HON'BLE SUPREME COURT.** - **P5: COPY OF THE JUDGMENT DTD. 27/11/2009 IN CIVIL APPEAL NO.7847/2009 OF THE HON'BLE SUPREME COURT.** - **P6: COPY OF THE COMMON JUDGMENT 5/3/2009 THE SUPREME COURT.** - **P7: COPY OF THE PETITION DTD. 17/12/2009 TO THE 1ST AND 2ND RESPONDENTS.** - **P8: COPY OF THE PETITION DTD. 17/12/2009 TO THE RESPONDENTS 1 AND 2.** - **P9: COPY OF THE STATEMENT OF ACCOUNT FURNISHED BY THE PETITIONER.** - **P10: COPY OF THE JUDGMENT DTD. 13/01/2010 IN WP(C) NO.1130/2010 OF THIS HON'BLE COURT.** - **P11: COPY OF THE ORDER NO.XC6-30981/09 DTD. 27/03/2010 ISSUED BY THE 2ND RESPONDENT.** - **P12: COPY OF THE ORDER NO.XM2-17007/2002 DTD. 25/03/2010 ISSUED BY THE 2ND RESPONDENT.** - **P13: COPY OF THE ORDER NO.R6-2544/1998 DTD. 12/01/2010 ISSUED BY THE 3RD RESPONDENT.** - **P14: COPY OF THE APPLICATION DTD. 24/03/2010 SUBMITTED BY THE PETITIONER.** ## **RESPONDENT'S EXHIBITS:** **N I L** **/TRUE COPY/** **P.A.TO JUDGE** ## **Kss** ## **T.R. RAMACHANDRAN NAIR, J. ----------------------------------W.P.(C). No.13181/2010-W ----------------------------------Dated this the 28[th] day of September, 2010** ## **J U D G M E N T** The petitioner herein is aggrieved by Ext.P12 proceedings issued by the Commissioner of Excise wherein the specific request made by the petitioner to adjust the security amount to the arrears while computing the liabilities was not accepted. 2. This case has a chequered history. In the light of the various disputes which had culminated in different Judgments of this Court in the Writ Petitions filed by the petitioner, Writ Appeal and the Special Leave Petition and the Civil Appeal before the Supreme Court, it is only proper to recapitulate the entire history since the arguments have turned round on the effect and contents of various orders which have been passed. 3. The petitioner was an individual licensee for the Abkari Year 1997-98 for vending toddy in Chavakkad Excise Range. He was granted license for Toddy Shop Nos.53 to 136 of Chavakkad Range for the years 1997-2000. The auction was confirmed by the Board of Revenue (Excise), Thiruvananthapuram and the W.P.(C). No.13181/2010 ## -:2:- privilege to vend toddy was given with effect from 01/04/1997. The licence was issued for one year from 01/04/1997. 4. Even though the licence was issued only for one year, a permanent agreement was executed for a period of three years. The petitioner, thereafter, commenced the business. It appears that there was default in paying the _kist_ amount during 1997-98 itself which resulted in the Department issuing demand notices, which prompted the petitioner to approach this Court by filing O.P.No.5470/1999. Therein, the demand was for an amount of Rs.1,44,41,281/- and it was mentioned that if the amount is not remitted within seven days, action will be initiated under Rule 6 (28) of the Abkari Shops (Disposal in Auction) Rules, 1974 (in short 'the Rules'). The Assistant Excise Commissioner, Thrissur passed an order dated 30/05/1998 cancelling the licence by invoking Sub Rule 28 of Rule 6 of the Rules. The security deposit of Rs.58,51,000/- furnished by the petitioner was also forfeited by the Government. The legality of the same was adjudicated in O.P.No.5470/1999. The Writ Petition was disposed of by Judgment dated 31/01/2002. The cancellation of licence was ## W.P.(C). No.13181/2010 -:3:- upheld and with regard to the forfeiture of the security, it was found that the Commissioner of Excise is the proper authority to pass the order and, therefore, the Excise Commissioner was directed to take a fresh decision. 5. Thereafter, the Excise Commissioner passed a fresh order dated 28/05/2002, a copy of which has been made available by the Government Pleader along with the memo dated 18/08/2010. It was held that the licence is liable to be cancelled and security is liable to be forfeited. This was under challenge in O.P.No.17686/2002 which was dismissed by the learned Single Judge along with connected Writ Petitions. It was also observed that the Government may consider the settlement of the matter by introducing an amnesty scheme. This was taken up before the Division Bench in W.A.No.641/2005 which was dismissed along with other connected Writ Appeals. Therein it was held that the petitioners are also not entitled to challenge the recovery proceedings since Rule 6(28) of the Rules provides for recovery of loss. The petitioner carried the matter before the Apex Court in SLP (Civil) Nos.9394-97/2005 which was dismissed as per W.P.(C). No.13181/2010 ## -:4:- order dated 06/05/2005 holding the view that no interference is called for and by recording the submission that he would again be approaching this Court to raise another ground. Thereafter, R.P.No.580/2005 was filed against the Judgment in W.A.No.641/2005. The Review Petition was dismissed as per order dated 12/09/2007. Again the petitioner approached the Apex Court by S.L.P. (Civil) No.2705/2008 where the leave was granted. The Apex Court passed Ext.P4 interim order to the effect that the petitioners will only be required to pay licence fee/rental for a period of one year unless it has already been paid. A batch of Civil Appeals were disposed of by Ext.P6 Judgment. The Civil Appeal filed by the petitioner was allowed as per Ext.P5, relying on Ext.P6. The impugned order passed by this Court was set aside and it was directed that the recovery of rent will be only for one year and not for three years. 6. According to the petitioner, he had paid during the pendency of these cases the entire amount towards admitted liability and had paid Rs.1,05,16,939/- in excess and, therefore, he sought for refund as per Ext.P7 representation. Apart from ## W.P.(C). No.13181/2010 -:5:- that the petitioner has been conducting a bar attached hotel as Managing Partner of Vrindara Tourist Home, Edamuttam. The respondents refused to renew the licence by Ext.P2 order herein for the reason that one of the partners, namely, the petitioner herein had to clear arrears in his individual business. The petitioner disputed this and then he filed an application to renew the FL.3 licence as per Ext.P8 and, Ext.P9 is the true copy of the statement of accounts. He later approached this Court by filing W.P.(C).No.1130/2010 wherein this Court directed the second respondent to consider Ext.P8 application for renewal of licence taking into account the Judgment of the Supreme Court as well. Ext.P10 is the copy of the said Judgment. Finally, Ext.P11 order has been passed. Ext.P11 Order reveals that an amount of Rs.1,18,36,472/- is remaining to be realised from the petitioner. The said order resulted in refusal to renew the bar licence. On implementation of Ext.P5 Order of the Apex Court, the Excise Commissioner passed Ext.P12 order. The authority therein directed to revise the Demand Collection of Balance Statement [D.C.B Statement] by limiting the balance to the year 1997-98 W.P.(C). No.13181/2010 ## -:6:- only and, directed that the security amount may not be adjusted to the arrears while computing the liabilities. This is how the petitioner has approached this Court by filing this Writ Petition. Ext.P13 is the order passed in respect of the parties covered by Ext.P6 Judgment of the Apex Court wherein the security amount has been adjusted towards the liability. The petitioner seeks for a similar treatment here. 7. The attack is against the refusal to renew the FL.3 licence on the plea that the petitioner is in arrears as well as the refusal to adjust the security amount to the arrears while computing the liabilities, which are evidenced by Ext.P12 order. 8. The learned counsel for the petitioner Shri T.A.Shaji submitted that since the petitioner has been granted all the benefits granted to the parties in Ext.P6 Judgment going by the Order in Ext.P5, the security amount is liable to be adjusted towards arrears and, therefore, it can be seen that he is not a defaulter and excess amount has been paid which are liable to be refunded to the petitioner. The said stand is opposed by the learned Government Pleader appearing for the respondents for ## W.P.(C). No.13181/2010 ## -:7:- various reasons and particularly that there is no direction by the Apex Court in Ext.P5 to adjust the security amount. 9. Along with the memo dated 18/08/2010, the statements concerning the calculation of the arrears without adjusting the security deposit and its interest, and after adjusting the security deposit and its interest have been given. If the security amount is not adjusted, the balance as on 31/07/2010 will be Rs.1,26,06,026/- and if the amount is adjusted then the amount remitted by the petitioner in excess will be Rs.67,32,729/- enabling him to get a refund. 10. The arguments by the learned counsel for petitioner were mainly confined to Ext.P5 order passed by the Apex Court in Civil Appeal Nos.7844-46/2009. The said order is reproduced below for easy reference:- “The facts have been set out in the impugned order and hence we are not repeating the same here. In our opinion, the facts of the case are covered by a judgment of this Court rendered in Civil Appeal No.1541 of 2009 dated March 05, 2009, titled _V.A_ W.P.(C). No.13181/2010 -:8:- _Ashokan vs. Asstt. Excise Commissioner & Others_ . In paragraph 36 of the said judgment, it has been stated that if the licence is granted for one year, then there cannot be a recovery of rent for three years. Following the said judgment, these appeals are allowed and the impugned order of the High Court is set aside and it is directed that recovery of rent will be only for one year and not for three years.” The learned counsel for the petitioner Shri T.A.Shaji submitted that significance should be attached to the opening sentence in the second paragraph that “in our opinion, the facts of the case are covered by a judgment of this Court rendered in Civil Appeal No.1541 of 2009 dated March 05, 2009, titled _V.A.Ashokan vs. Asstt.Excise Commissioner & Others”_ . It is therefore submitted that all the benefits that have been granted to the parties to the said Judgment, are liable to be granted to the petitioner herein also since the facts of this case are similar. The learned counsel for the petitioner invited my attention to the discussions in Ext.P6 W.P.(C). No.13181/2010 -:9:- Judgment by the Apex Court especially, paragraphs (36) and (41). In paragraph (41), their Lordships have held as follows:- “41. .............In the peculiar facts and circumstances of this case, therefore, we are of the opinion that it was not a case where even Rule 6(28) could have also been resorted to. .........” The learned counsel therefore submitted that while implementing Ext.P6, by Ext.P13 order, the demand was recomputed by limiting the demand to the year 1997-98 and also by adjusting the security deposit and interest on security deposit to the liability of the defaulters in the respective dates of the forfeiture of the same to government account. Therefore, it is submitted that the refusal of the latter benefit as regards the petitioner is not supportable and is arbitrary and illegal. 11. The learned Government Pleader, Shri Manoj Kumar raised the following arguments. It is submitted that what was granted to the petitioner as per Ext.P5 Judgment of the Apex Court is a declaration that the recovery of the rent will only be for one year and not for 3 years. The said benefit has been W.P.(C). No.13181/2010 ## -:10:- specifically granted by the respondents by Ext.P12 order. With regard to the adjustment of security, it is argued that in the light of the earlier proceedings, the same have been forfeited as per competent orders passed by the Assistant Excise Commissioner and confirmed by the Excise Commissioner. The challenge against the said order was repelled by this Court and, ultimately, the SLP (Civil) Nos.9394-97/2005 were also dismissed. It is therefore, submitted that the said question which has attained a finality cannot be reopened by the petitioner as the same will be barred by the principles of _res judicata_ . Shri T..A.Shaji submitted that the adjustment of security only follows the directions in Ext.P5 and, therefore, the denial of the benefit on such technical pleas cannot be justified. 12. When the factual matrix is examined, the following will be evident:- In Judgment in O.P.No.5470/1999, this Court had directed the Excise Commissioner to consider whether the security deposit is to be forfeited and whether any amount is payable for the year 1998-99 and 1999-2000 towards loss sustained by Government W.P.(C). No.13181/2010 -:11:- due to default by the petitioners. It is accordingly, the Excise Commissioner passed the order dated 28/05/2002 against the petitioner holding the view that the licence is liable to be cancelled and security is liable to be forfeited. The challenge against the same in O.P.No.17686/2002 resulted in dismissal, which was challenged in W.A.No.641/2005. The Division Bench in paragraph (4) of the Judgment in W.A.No.641/2005 and connected cases held that “petitioners are also not entitled to challenge the recovery proceedings since Rule 6(28) provides for recovery of loss. They are bound by the agreements executed by them and the various provisions of the Rules. We therefore fully endorse the view of the learned Single Judge and dismiss the Appeals.” In the S.L.P (Civil) Nos.9394-97/2005 leave was not granted and it was dismissed recording the submission that the petitioner could again approach this Court to raise an additional ground namely that the amount realised from the subsequent vendees by the licensee for the period should have been adjusted against the loss claimed by the respondent authorities. W.P.(C). No.13181/2010 -:12:- Accordingly, the petitioner filed R.P.No.580/2005. The Division Bench passed the following order in the said Review Petition:- “2. We find no reason to entertain these review petitions. Learned counsel appearing for the review petitioners referred to Annexure-A order of the Supreme Court and submitted that the amount realised from the subsequent vendees by the licensees for the period should have been adjusted against the loss claimed by the respondent authorities. Supreme Court has noticed that the said contention was never raised before this Court. We also reiterate that such a contention was never raised before this Court and hence cannot be raised through these review petitions. If the petitioners have got any further grievance they may approach the Government about which we express no opinion. So far as these review petitions are concerned, no grounds have been made out to review our judgment. Review Petitions lack merit and they are dismissed.” W.P.(C). No.13181/2010 -:13:- Therefore, what was sought for before the Division Bench in the Review Petition is the adjustment of the amount realised from the subsequent vendees by the licensees against the loss claimed by the respondents. It was repelled on the finding that such a contention was never raised before this Court and hence cannot be raised in those Review Petitions and if the petitioners had got any further grievance they may approach the Government, about which the Bench expressed no opinion. 13. The learned Government Pleader is therefore right in submitting that as far as the point concerning the forfeiture of security is concerned, the matter became final and concluded by the dismissal of the Writ Petition, Writ Appeal and the Order in Special Leave Petition (Civil) Nos.9394-97/2005 and the order passed by the Division Bench in R.P.No.580/2005. 14. But, still the learned counsel for the petitioner Shri T.A.Shaji submitted that in the light of Ext.P5 Order of the Apex Court, the matter is open for consideration by the respondents as to whatever all the benefits granted in Ext.P6 Judgment are liable to be granted to the petitioners who are parties in Ext.P5 Order W.P.(C). No.13181/2010 -:14:- also. Herein, it is true that in paragraph (2) Their Lordships were of the opinion that the facts of the case are covered by Judgment Ext.P6. Specific reference was made to paragraph (36) of the Judgment in C.A.No.1541 of 2009 wherein it has been stated that if the licence is granted for one year, then there cannot be recovery of rent for three years. Accordingly, in the operative portion of the Order Ext.P5, it was directed that the recovery of rent will only be only for one year and not for three years. Even though, Shri T.A.Shaji wanted me to read into the Order the benefit of adjustment of security forfeited along with the interest, the said plea cannot be accepted in the light of the fact that no such benefits have been granted by the Apex Court in Ext.P5. 15. In the judgment of the Apex Court, produced as Exhibit P6, the relevant facts show that criminal cases were registered against the appellants therein, as the samples collected for chemical analysis stated that ”Diazepam” had been detected at varying rates of 1.8 mg to 2.2 mg per litre of toddy sample, and criminal cases were registered. Thereafter proceedings were issued cancelling the licences in terms of the W.P.(C). No.13181/2010 -:15:- provisions of Rule 6(30) and Rule 6(28) by the Assistant Excise Commissioner. So far as the orders directing cancellation of licence in terms of Rule 6(28) are concerned, they were referred to the Excise Commissioner for confirmation. At that stage, the Board purported to have come to the conclusion that in cases where licenses were cancelled in terms of the provisions of Rule 6(30) of the Rules, Rule 6(28) would also be automatically attracted and accordingly, the decision of the Assistant Commissioner was upheld. The criminal cases ended in acquittal. The points urged in the appeal are referred to elaborately in paragraph No.19 of the judgment. As far as recourse to Rule 6 (28) is concerned, the point raised was that as there was no failure to pay kist and in any event having regard to the fact that the amount of security furnished would cover the entire kist amount, such proceedings need not have been initiated. In paragraph No.26 of the judgment, the validity of the proceedings under Rule 6(30) was considered and it was held that violation of rules will attract Rule 6(30) leading to cancellation of licence. It was further held in paragraphs 27 and 30 that the consequences ## W.P.(C). No.13181/2010 -:16:- of forfeiture under Rule 6(28) of the Rules is not automatic, consequent upon the cancellation of licence in terms of Rule 6 (30). After elaborately considering the scope of Rule 6(28), the principles underlying under Section 74 of the Contract have also been considered. Finally in paragraph 41, after noticing that all the appellants have been acquitted, it was held as follows: “In the peculiar facts and circumstances of this case, therefore, we are of the opinion that it was not a case where even Rule 6(28) could have also been resorted to.” Herein, in this case, as rightly pointed out by the learned Government Pleader, the facts are different. The petitioner was not involved in any criminal case, which has led to the cancellation of the licence. The payment of kist was defaulted during the currency of the licence. The learned Government Pleader made available a copy of the notice issued to him which was produced as Exhibit P3 in O.P.No.5470/99 by the petitioner, pointing out that in respect of Toddy Shop Nos.53 to 136 for the period from 9/97 to 1/98 and for the months of 4[th] and 5[th] of 1998, the monthly instalments along with interest have been W.P.(C). No.13181/2010 -:17:- defaulted. The defaulted amount in respect of each month has been mentioned and the total amount shown is Rs.1,36,52,776/-. Adding interest portion, the total amount of instalments was Rs.1,36,52,776/- and adding interest to the tune of 7,88,498/the amount has been finally arrived at 1,44,41,281/-. It was informed to him that the amount if not paid within one week proceedings under Rule 6(28) will be taken against the petitioner. 16. This and other subsequent proceedings were under challenge in O.P.No.5470/99, wherein this Court ultimately directed the Commissioner of Excise to examine the matter. Incidentally, the final order forfeiting the cancellation of licence and forfeiture of the deposit produced as Exhibit P4 in the said O.P. was interfered with, only with regard to the portion forfeiting the deposit, since the Assistant Commissioner was not the authority to pass an order in that regard. The portion of the order cancelling the licence was upheld and with regard to the forfeiture of the licence, the matter was directed to be considered by the Commissioner. The Writ Petition challenging the order passed by the Commissioner was dismissed as per judgment in W.P.(C). No.13181/2010 -:18:- O.P.No.17686/2002 dated 14.1.2005. In paragraph No.3 of the said judgment, a copy of which was made available by the learned Government Pleader,it was observed as follows: “The petitioners have no case that licence cannot be cancelled for non-payment of kist arrears and none of them have a case that they paid the kist for the year 1997-98 on the due dates or were even willing to pay the arrears of kist with delay even after receipt of notice proposing cancellation of licence on account of default and so much so, the licences issued were rightly cancelled.” The orders of the Commissioner of Excise, challenged in all the O.Ps. were upheld. This was affirmed by the Division Bench in W.A.No.641/2005 and the Special Leave Petition Nos.939497/2005 was also dismissed and the order in full is extracted below: ## ORDER “ The only ground raised by the petitioners before the High Court was whether the recovery could be made from the petitioners who had ceased to be licensees. The same ground has W.P.(C). No.13181/2010 ## -:19:- been raised before us in the special leave petitions. We do not see any reason to interfere with the decision of the High Court on this issue. However, it is submitted by the learned counsel appearing on behalf of the petitioners that they had an additional ground, namely, that the amount realised from the subsequent vendees by the licensee for the period should have been adjusted against the loss claimed by the respondent authorities. It does not appear from the judgment of the High Court that this argument had been raised before the High Court. Learned counsel stated that his client will approach the High Court. The SLPs are accordingly dismissed.” 17. The learned Government Pleader is therefore justified in submitting that the issue regarding the validity of the order forfeiting the security under Rule 6(28) has become final and the petitioner cannot re-agitate the same at this distance of time. Evidently, in Exhibit P5 order passed by the Apex Court, direction is confined to the recovery of rent and it has been directed that recovery will be only for one year and not for three years. The said benefit has been granted as per Exhibit P12 W.P.(C). No.13181/2010 -:20:- order by limiting the demand for the year 1997-98 only. 18. If the security amount is not adjustable, the contention of the petitioner that he has no liability to pay the balance amount, and even excess amount has been remitted cannot be accepted. In that view of the matter, the refusal to renew FL.III licence cannot be faulted, as he is still in arrears, in his individual business. 19. The learned Government Pleader further submitted that the validity of Rule 6(28) has been upheld by a decision of the Division Bench of this Court in **State of Kerala v. Biju Thomas (2007(4) KHC 552(DB))** . The entire scheme under the Abkari Act and the relevant Rules have been examined by the Division Bench. With regard to the adjustment of security deposit, it was held in paragraph No.24 as follows: “ Under sub-rule (28) of Rule 6 of the Rules, if a licensee fails to pay the kist, tree tax, duty, etc., for any month together with interest under sub-rule (25), the Assistant Commissioner, subject to confirmation by the Board of Revenue, can cancel the licence, order re-sale at the risk of the licensee or direct management of the business of contract by W.P.(C). No.13181/2010 ## -:21:- departmental agency or otherwise dispose of the same. The loss incurred by the government on account of such cancellation and re-sale or departmental management or other disposal of the privilege will be borne by the defaulting licensee. If for any reason, in such re-auction, if there is any gain to the State, the same will not accrue to the licensee. The said sub-rule also provides for forfeiture of the whole of deposit made by the licensee at the commencement of the lease period.” and finally in paragraph No.36, it was held that: “...........In our opinion, in view of the discussion we have made earlier, it may not be possible to hold that the legislature has not provided any provision in the Abkari Act to frame a rule providing for forfeiture of the whole or any portion of the kists deposited by persons who purchase the right to sell toddy, arrack, etc.” Therefore, evidently, if a re-auction is conducted and loss is assessed, the forfeited deposit shall be deducted from the loss arising from the resale. It is not the case herein, as for the failure to pay the kist amount, the licence was cancelled and security deposit has been forfeited, which is permissible going by W.P.(C). No.13181/2010 -:22:- Rule 6(28). The learned counsel for the petitioner Shri T.A.Shaji further submitted that prior to 31.3.1998 as no cancellation of licence was issued, the forfeiture of the security deposit is not correct. It is true that the initial order was passed only in May, 1998. But that will not show that the forfeiture ordered is incorrect as all the circumstances which were required to invoke the Rule were evident and available. Therefore, I am unable to agree with the pleas raised by the learned counsel for the petitioner. In that view of the matter, the challenge against Exhibit P12 fails and the Writ Petition is dismissed. No costs. ## T.R.RAMACHANDRAN NAIR, JUDGE. dsn