Article 14 and excise rule interpretation: discrimination against private limited companies was unconstitutional, with the provision read up.

Clause (d) of the proviso to Rule 5(1) of the West Bengal Excise (Change in Management) Rules, 2009 was held to offend Article 14 because it denied the usual-course-of-business exemption to private limited companies while extending a similar benefit to public limited companies, creating an arbitrary intra-class distinction without intelligible differentia or rational nexus. The 2020 substitution defining "change in management" was treated as a new provision, not a merely clarificatory amendment, and was therefore not retrospective. Applying constitutional avoidance, the provision was read up to preserve validity and extend the exemption consistently, rather than being struck down in full.

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Issues: (i) whether Clause (d) of the proviso to Rule 5(1) of the West Bengal Excise (Change in Management) Rules, 2009 was constitutionally valid insofar as it denied exemption in the usual course of business to private limited companies while granting a similar benefit to public limited companies; (ii) whether the 2020 amendment defining "change in management" was clarificatory and retrospective; and (iii) whether the provision should be read up rather than struck down.

Issue (i): whether Clause (d) of the proviso to Rule 5(1) of the West Bengal Excise (Change in Management) Rules, 2009 was constitutionally valid insofar as it denied exemption in the usual course of business to private limited companies while granting a similar benefit to public limited companies.

Analysis: The exemption structure in the 2009 Rules was examined as a whole. The charging and regulatory provisions treated changes in management of private and public limited companies on broadly similar terms, and the distinction introduced in the exemption clause alone created an intra-class classification among limited companies. The distinction was held to have no intelligible differentia or rational nexus with the object of the Rules, particularly because changes in the usual course of business are involuntary and outside managerial control. The Court held that the State's latitude in liquor regulation does not permit arbitrary discrimination within the same class.

Conclusion: The exclusion of private limited companies from the usual-course-of-business exemption was unconstitutional and unsustainable.

Issue (ii): whether the 2020 amendment defining "change in management" was clarificatory and retrospective.

Analysis: The amendment introduced a new definition by substitution and was stated to operate with immediate effect. Since the earlier Rules contained no definition of the expression, the amendment could not be treated as merely clarificatory. The Court therefore rejected the contention that it operated retrospectively.

Conclusion: The 2020 amendment was not retrospective and did not govern the controversy as a clarificatory measure.

Issue (iii): whether the provision should be read up rather than struck down.

Analysis: The Court held that constitutional avoidance required the provision to be preserved by reading it up so that it aligned with the parallel exemption given to public limited companies. Striking it down in full would have removed even the benefit already intended for private limited companies in cases of death of directors and would defeat the scheme of the Rules. The proper construction was therefore to retain the provision with the words necessary to include change in management in the usual course of business.

Conclusion: Clause (d) was to be read up to include change in management in the usual course of business, and not struck down in entirety.

Final Conclusion: The appeal failed in substance, the impugned judgment was modified only to the extent of substituting reading up for invalidation, and the setting aside of the demand and related directions was maintained.

Ratio Decidendi: A subordinate fiscal rule that discriminates within the same class of regulated entities without intelligible differentia or rational nexus to the object of the rule offends Article 14 and must be construed to preserve validity if the scheme permits such construction.

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