2013 (1) TMI 560 - SC - VAT and Sales Tax

Supreme Court Upholds State's Power to Grant Exclusive Licenses

Ropan Sahoo & another Versus Ananda Kumar Sharma & others

The Supreme Court allowed the appeals, setting aside the High Court's order that quashed the grant of exclusive privilege and license. It clarified that ... Sanction of a beer parlour ‘ON’ shop licence - Quashing of grant of exclusive privilege and licence granted - there has been no order relaxing the restrictions on the minimum distance as mentioned in Clauses (d) and (e) relating to the proposed shops in exercise of powers of the said Rule by the State Government - the proposed site was violative of sub-rule 1(c) of Rule 34 of Orissa Excise Rules, 1965 - Held that:- The High Court has opined that there is no order by the State Government relaxing the restrictions enshrined in clauses (d) and (e) of Rule 34(1) of the Rules in relation to the minimum distance between the proposed shops and the Vishnu Temple, petrol pump and bus stand and at a latter part of the judgment has expressed the opinion that there has been infraction of statutory Rule, namely, Rule 34 which casts a statutory duty on the department to pass on order with reasons relaxing the restrictions. Thus disposed to think that the High Court, as far as the first part of the opinion is concerned, has been guided by the factum that the Commissioner-cum-Secretary in his recommendation to the Minister of Excise and Tourism had not specifically referred to clauses (d) and (e) of Rule 34(1) of the Rules. It is pertinent to state here that it is perceptible from the note sheet that the Secretary had referred to the proposal received from the Collector, endorsement made by the Excise Commissioner, the objections raised by the objectors and also expressed the view that the said objections were devoid of merit and, accordingly, recommended for approval. The cumulative effect of the note sheet goes a long way to show that every authority was aware of the distance and recommended for relaxation of clauses (d) and (e) of sub-rule (1) of Rule 34 and the concerned Minister had endorsed the same. Non-mentioning of the Rule or sub-rule, does not tantamount to non-passing of an order. The dominant test has to be the application of mind to the relevant facts. The second part of the order, if properly appreciated, conveys that no reasons have been ascribed. The proviso to Rule 34(1) lays a postulate that the distance as mentioned under clauses (d) and (e) may be relaxed by the State Government in special circumstances. The recommendations made by the Collector refers to the circumstances, namely, that there is a demand for consumption of liquor within the hotel premises, that illegal liquor cases have been booked in the nearby area, and that the proposal is in the interest of the Government revenue. The said recommendations, as is reflectible, have been concurred with by the higher authorities and, hence, there can be no trace of doubt that they constitute the special circumstances. In view of aforesaid analysis, the appeals are allowed and the order passed by the High Court is set aside. It is further clarified that if the Government, if so advised, can invoke the power under the proviso to Rule 34(1) of the Rules for the purpose of relaxation for grant of exclusive privilege and licence pertaining to the said shops in respect of current and subsequent financial years. In the facts and circumstances of the case, the parties shall bear their respective costs - in favour of assessee. Issues Involved:1. Legal acceptability of the High Court's order quashing the grant of exclusive privilege and licence.2. Compliance with Rule 34 of the Orissa Excise Rules, 1965.3. Proper exercise of the power of relaxation by the State Government.4. Application of mind and reasons for relaxation of restrictions.Issue-wise Detailed Analysis:1. Legal Acceptability of the High Court's Order Quashing the Grant of Exclusive Privilege and Licence:The High Court of Orissa at Cuttack quashed the grant of exclusive privilege and licence granted in favor of two respondents, based on the contention that the relaxation of restrictions was arbitrary and lacked proper justification. The High Court concluded that no order was passed relaxing the rules before granting exclusive privileges and licences. The Supreme Court, however, found that the High Court's conclusion was not supported by the evidence on record, as the necessary approvals and recommendations were indeed present in the note sheets and communications.2. Compliance with Rule 34 of the Orissa Excise Rules, 1965:Rule 34 prohibits the licensing of new liquor shops within certain distances from places such as bathing ghats, temples, petrol pumps, and bus stands. The proviso to Rule 34 allows the State Government to relax these restrictions under special circumstances. The High Court held that there was a violation of Rule 34 as no explicit order relaxing the restrictions was found. The Supreme Court, on the other hand, determined that the necessary recommendations and approvals were present, indicating compliance with Rule 34 through the proper channels.3. Proper Exercise of the Power of Relaxation by the State Government:The High Court found that the power of relaxation was not properly exercised as there was no explicit order from the State Government. The Supreme Court reviewed the note sheets and communications and found that the recommendations from the Collector and Excise Commissioner were endorsed by the Commissioner-cum-Secretary and approved by the Minister of Excise and Tourism. This chain of approvals indicated that the power of relaxation was properly exercised, and the necessary orders were indeed passed.4. Application of Mind and Reasons for Relaxation of Restrictions:The High Court opined that there were no reasons provided for relaxing the restrictions. The Supreme Court, however, found that the note sheets contained detailed recommendations and justifications such as the demand for liquor consumption within hotel premises, prevention of illegal liquor trade, and revenue interests for the government. These reasons were considered sufficient to constitute 'special circumstances' as required by the proviso to Rule 34.Conclusion:The Supreme Court allowed the appeals, setting aside the High Court's order. It clarified that the State Government could invoke the power under the proviso to Rule 34(1) of the Orissa Excise Rules for the purpose of relaxation for the grant of exclusive privilege and licence for the current and subsequent financial years. The Supreme Court emphasized that the recommendations and approvals in the note sheets demonstrated proper application of mind and compliance with the legal requirements.