2017 (3) TMI 154 - HC - VAT and Sales Tax

Court rules amendment to liquor sale rules unconstitutional, citing violations of constitutional articles.

The court upheld the learned Single Judge's decision declaring the amendment to the Karnataka Excise (Sale of Indian and Foreign Liquors) Rules, 1968 as ... Infringement of rights of citizens - marks quota for backward classes - Annual fees for licences for the persons belonging to Scheduled Caste/Scheduled Tribe - Clause 7-D in Rule 3 of the Karnataka Excise (Sale of Indian and Foreign Liquors) Rules, 1968 and the amendment made in Rule 8 - Held that: - when there is violation of Article 19(1)(g) of the Constitution, the State has to justify by acceptable evidence inevitable consequences or sufficient material that the restriction as sought to be imposed is in the public interest and contains quality of reasonableness - the onus of proving that the restrictions are in the public interest or reasonable has to be amply discharged once class classification made is infringing the quality of the rights by a particular legislation. The Division Bench of this Court found that by addition of 10% marks to the Rural candidates, the urban backward classes, Scheduled Castes and Scheduled Tribes are deprived to get the appointment though they get similar marks and therefore it amounts to further classification or mini-classification and was held to be impermissible and violative of Article 14 of the Constitution. The original petitioners namely Federation through its Secretary cannot be said to be a third party to the impugned legislation when they are in the business of selling of liquor in the State of Karnataka. Further more when the constitutional validity of a subordinate legislation is challenged which infringes the rights of the citizen of trade in the sale of liquor, it is not possible for us to accept the contention that the petitioner cannot be said to have any locus standi to prefer the main writ petition and hence said contention fails. Appeal dismissed - decided against appellant. Issues Involved:1. Constitutional validity of the amendment to the Karnataka Excise (Sale of Indian and Foreign Liquors) Rules, 1968.2. Whether the amendment violates Articles 14, 15(4), and 19(1)(g) of the Constitution of India.3. The rationale behind the relaxation provided to Scheduled Castes and Scheduled Tribes in obtaining liquor licenses.4. The impact of the amendment on existing license holders and the legal standing of the petitioners.Issue-wise Detailed Analysis:1. Constitutional Validity of the Amendment:The amendment in question inserted Clause 7-D in Rule 3 of the Karnataka Excise (Sale of Indian and Foreign Liquors) Rules, 1968, providing for special provisions for licenses to hotels and boarding houses owned by persons belonging to Scheduled Castes and Scheduled Tribes. The learned Single Judge found this amendment unconstitutional, leading to the present appeals.2. Violation of Articles 14, 15(4), and 19(1)(g):- Article 14: The court emphasized that any classification must be founded on an intelligible differentia and have a rational nexus to the object sought to be achieved. The amendment failed this test as it did not provide a reasonable or substantial distinction justifying the different treatment for reserved categories.- Article 15(4): While the State can make special provisions for the advancement of socially and educationally backward classes, such provisions must be based on intelligible differentia and must achieve the intended objective. The court found that the amendment, which required ownership of the hotel or boarding house, necessitated more financial investment, thus not serving the intended upliftment of the reserved categories.- Article 19(1)(g): The amendment was found to violate the right to practice any profession or to carry on any occupation, trade, or business, as it imposed discriminatory restrictions not justified by public interest.3. Rationale Behind Relaxation:The State argued that the relaxation in the number of rooms required for obtaining a license was meant to uplift the reserved categories. However, the court noted that the requirement of ownership of the hotel or boarding house imposed a more stringent financial burden, contradicting the objective of providing relaxation. Moreover, the court found that the State failed to justify the necessity of such differential treatment.4. Impact on Existing License Holders and Legal Standing of Petitioners:- The court acknowledged the Federation of Wine Merchants Association's standing in challenging the amendment, as its members were directly affected by the changes.- The court held that the licenses already granted under the amended rule and where business had commenced before the interim stay would remain unaffected until the expiry of the license period.Conclusion:The court upheld the learned Single Judge's decision declaring the amendment unconstitutional. The decision was given prospective effect, ensuring that already granted licenses under the amended rule would remain valid until their expiration. All appeals were dismissed, and no costs were awarded.