TaxTMI 
TaxTMI 
2013 (10) TMI 529
X X X X Extracts X X X X
X X X X Extracts X X X X
....ompounding, blending and bottling unit in the Palakkad District. Few others had also filed similar applications for licence for setting up distillery units in the State of Kerala. All of them were directed to first obtain the approval of the Government of India for the setting up of new blending and bottling units and, thereafter, to approach the State Government. This Court, however, vide its judgment dated 29.1.1997 in Writ Petition No. 322 of 1996 (Bihar Distillery and Another v. Union of India and Others) took the view that the power to permit the establishment of any industry engaged in the manufacture of portable liquors, including Indian Made Foreign Liquors (IMFLs), beer, country liquor and other intoxicating drinks is exclusively vested in the respective State Governments. Further, it was also held that the power to prohibit and/or regulate the manufacture, production, sale, transport of consumption of such intoxicating liquors is equally that of the States. 4. We notice, during the year 1998 and prior to that, the Commissioner of Excise and the State Government had received large number of applications for setting up of distillery units in various parts of the State. The....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....O. (Rt.)/689/99/TD dated 29.9.1999, took a policy decision not to grant any more licences for setting up the distillery units in any part of the State. The order was communicated to the respondent by the Joint Excise Commissioner vide his letter dated 11.11.1999. 7. Respondent then preferred O.P. No. 7727 of 2000 before the High Court to quash the above mentioned Government order dated 11.11.1999 contending that its application also should have been considered along with the applications submitted by M/s Amrut Distilleries, Bangalore, M/s. Empee Distilleries, Madras, M/s. K. S. Distillery, Kannur and M/s. Elite Group of Companies, Thrissur, in the year 1998. Respondent, however, did not challenge the licences granted for establishing the units in the Palakkad District, the very same district where it had applied for a licence. Learned single Judge quashed the letter dated 11.11.1999 issued by the Joint Excise Commissioner and directed the State Government to consider the application submitted by the respondent in the light of the conditions prevailing in the year 1998 vide his judgment dated 23.6.2004. 8. The Excise Commissioner heard the respondent's representative on 18.10.200....
X X X X Extracts X X X X
X X X X Extracts X X X X
....applications from Kandath Distillery, S.R. Distillery, Sree Chakra Distillery, Rajadhani Distilleries etc. were rejected. Government cannot grant the privilege to all those who had applied for such licence, for a host of reasons. Restrictions have to be imposed, which is permissible under the Constitution. The Government has with effect from 29/9/99 issued Government Order deciding not to grant fresh licenses for Distillery and Compounding (Blending & bolting) unit. The granting of licence for the Distillery & Compounding (blending & bottling) units is a prerogative of the Government and not the right of the petitioner. The directions and the communications from the offices to the petitioner are only the statutory requirements for processing the application and do not cast any right or claim on the petitioner. In the above circumstances, Government finds no reasons to reconsider the request of the petitioner under section 14 of the Abkari Act. Request of the petitioner is settled accordingly, keeping in abeyance of the judgment of the Hon'ble High Court read 5th paper. The Excise Commissioner will pass fresh orders on Ext.P1 within the time limit prescribed by the Hon'ble High ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....per letter No. XC3-15555/98 dated 25.11.1998 reported that there was an unprecedented flow of application and the Government constituted a scrutiny committee as per GO (Rt) No. 157/99/TD dated 3.3.1999 to shortlist the application. As on 21.11.1998 the date on which the petitioner made the application for compounding blending and bottling licence there were other 52 applications and Government have not considered any one of them. Moreover, the application put in by the partnership firm byname M/s. Kandath Distilleries on 12.1.1987 cannot be treated as an application put in by the firm based on a partnership deed which came into existence on 10.4.1991 as per Clause 3 of the Partnership Deed. In the above circumstances the application put in by M/s Kandath Distilleries on 21.11.1998 does not merit consideration for approval by Government based on the factual conditions available as on 21.11.1998." 14. M/s Kandath Distilleries then challenged the above mentioned order by filing Writ Petition No. 2708 of 2007. Learned single Judge took the view that no reason other than the constitution of the firm and the date of its effect, was noticed in the impugned order dated 11.10.2006 for re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....been stated by the Government vide its order dated 11.10.2006 rejecting the application submitted by the respondent and the High Court was not right in issuing a Writ of Mandamus directing the State Government to grant the licence applied for. 17. Shri Giri, learned senior counsel and Shri George Ponthottam, learned counsel appearing for the respondent, traced the entire history of the case starting from 1987 till the Government passed the order dated 11.10.2006. Learned counsel submitted that there was a concerted effort on the part of the State not to consider the application of the respondent for licence for starting the distillery unit in the Palakkad District. At the same time, on the basis of Policy which was in force in the year 1998, four licences were granted and the respondent was discriminated. Learned counsel submitted that, on non-compliance of the various directions given by the High Court, the High Court found that the Secretary to Government had committed contempt and the order dated 11.10.2006 was nothing but a repetition of earlier orders and it is under those circumstances, the High Court gave a positive direction to grant distillery licence to the respondent, w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arry on operations of compounding, blending and bottling of foreign liquor shall apply in writing to the Commissioner. Every application for a lilcence shall give details of the operation desires to perform and shall be accompanied by - (i) description and plan of the building in which the operations are to be carried out in triplicate, drawn on scale in tracing cloth; (ii) statement specifying the number, size and descriptions of the permanent apparatus, if any, which are proposed to be used; (iii) details regarding the maximum quantity in proof litres of spirits expected to be in the store or in the process of compounding, blending or bottling; and (iv) a treasury receipt for the deposit of an earnest money of one hundred rupees." Rule 4 deals with the grant and renewal of licence, which empowers the Commissioner to issue the licence applied for. Rule 4 reads as under: "4. Grant and renewal of licence.- (1) The Commissioner may, if he is satisfied after making such enquiries as he may consider necessary that the applicant is a person to whom licence may be issued, grant to the applicant.- (i) a compounding and blending licence in Form 1 on payment of a fee of Rs.2,0....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r business in liquor as a beverage, which restrictions are in nature different from those imposed on trade or business in legitimate activities and goods and articles which are res commercium. Reference may be made to the judgments of this Court in Vithal Dattatraya Kulkarni and Others v. Shamrao Tukaram Power SMT and Others (1979) 3 SCC 212, P. N. Kaushal & Others v. Union of India & Others (1978) 3 SCC 558, Krishna Kumar Narula etc. v. State of Jammu & Kashmir & Others AIR 1967 SC 1368, Nashirwar and Others v. State of Madhya Pradesh & Others (1975) 1 SCC 29, State of A. P. & Others v. McDowell & Co and Others (1996) 3 SCC 709 and Khoday Distilleries Ltd. & Others v. State of Karnataka & Others (1995) 1 SCC 574. 22. Legislature, in its wisdom, has given considerable amount of freedom to the decision makers, the Commissioner and the State Government since they are conferred with the power to deal with an article which is inherently injurious to human health. 23. Section 14 of the Act indicates that the Commissioner can exercise his powers to grant licence only with the approval of the State Government because the State has the exclusive privilege in dealing with liquor. The powe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ons "Commissioner may", "if he is satisfied" after making such enquiries as he may consider necessary "licence may be issued". All those expressions used in Section 14 and Rule 4 confer discretionary powers on the Commissioner as well as the State Government, not a discretionary power coupled with duty. The powers, conferred on the Commissioner as well as the Government, have to be understood in the light of the Constitutional scheme bearing in mind the fact that the trade or business which is inherently harmful can always be restricted, curtailed or prohibited by the State, since it is the exclusive privilege of the State. No duty is, therefore, cast on the Commissioner to grant a licence for establishing a distillery unit and no right is conferred on any citizen to claim it as a matter of right. State can always adopt a "restrictive policy", e.g., reducing the number of licences in a particular district or a particular area, or not to grant any licence at all in a particular district, even in cases where the applicants have satisfied all the conditions stipulated in the rules and the policy permits granting of licences. In other words, the satisfaction of the conditions laid -dow....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Discretionary power leaves the donee of the power free to use or not to use it at his discretion. (refer Rani Drig Raj Kuer v. Raja Sri Amar Krishna Narain Singh AIR 1960 SC 444). Law is well settled that the exercise of statutory discretion must be based on reasonable grounds and cannot lapse into the arbitrariness or caprice anathema to the rule of law envisaged in Article 14 of the Constitution. It is trite law that, though, no citizen has a legal right to claim a distillery licence as a matter of right and the Commissioner or the State Government is entitled to either not to entertain or reject the application, they cannot enter into a relationship by arbitrarily choosing any person they like or discriminate between persons similarly circumscribed. The State Government, when decides to grant the right or privilege to others, of course, cannot escape of the rigor of Article 14, in the sense that it can act arbitrarily. In such a situation, it is for the party who complains to establish that a discriminatory treatment has been meted out to him as against similarly placed persons but cannot demand a licence for establishing a distillery unit, as a matter of right. 30. In State ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ry on business in the properties or rights belonging to the State nor can there be any infringement of Article 14, if the State prefers other applicants for the grant of licence, during the pendency of some other applications, unless an applicant establishes a better claim over others. 33. We have gone through the Government Order dated 11.10.2006 in extenso and we are not prepared to say that the application of the respondent was rejected solely on the ground that the application dated 12.1.1987 could not be treated as an application put forward by a firm based on a partnership deed, which came into existence on 10.4.1991, as per Clause 3 of the Partnership Deed but on various other grounds as well. The State Government, in our view, has considered the respondent's application dated 12.1.1987 with regard to the conditions that existed in the year 1998. The Government letter dated 28.6.1994 would indicate that, apart from the respondent, few other applications were also pending prior to the year 1994. Over and above, the State Government during the year 1998, from 3.2.1998 to 21.11.1998, had received 52 applications for establishing compounding, blending and bottling units in IMFL....