Allowed

M.R.Kesavan v. State of Kerala and Another

Kerala HC8 Dec 2016WP(C)/17742/2010

Case brief

AI extract

What is this about?

This judgment addressed a writ petition challenging departmental demand notices for excise dues. The court held that prior judgments protecting contractors entitled them to credit for departmental management fees collected during default periods. The court quashed the impugned orders demanding full forfeiture of these fees and directed a recalculation of liability consistent with existing settled

What did the court decide?

Impugned demands quantified as Exhibit-P11 and Exhibit-P6 were quashed. The petitioner was entitled to the benefit of the departmental management fee and the amnesty scheme.

M.R.Kesavan Vs State of Kerala and Another — Writ and Judicial Review | Kerala HC (2016)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT:

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THE HONOURABLE MR. JUSTICE A.MUHAMED MUSTAQUE

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THURSDAY, THE 8TH DAY OF DECEMBER 2016/17TH AGRAHAYANA, 1938

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WP(C).No. 17742 of 2010 (P) ----------------------------

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PETITIONER:

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M.R.KESAVAN, METTUPURATH, THODUPUZHA.P.O, IDUKKI DISTRICT.

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BY ADVS.SRI.RAJU JOSEPH (SR.) SRI.J.JULIAN XAVIER SRI.K.T.POULOSE (KORATTY)

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RESPONDENT(S):

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1. STATE OF KERALA, REPRESENTED BY EXCISE SECRETARY, THIRUVANANTHAPURAM.

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2. THE DEPUTY COMMISSIONER OF EXCISE, THRISSUR.

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BY GOVERNMENT PLEADER SRI K.V.MANOJ KUMAR

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THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 08-12-2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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K.V.

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WPC 17742 OF 2010:

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APPENDIX

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PETITIONERS EXHIBITS:

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P1; COPY OF THE STATEMENT ISSUED BY THE DEPARTMENT.

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P2; COPY OF THE CHALAN DATED 30.11.2000.

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P3; COPY OF THE DCB STATEMENTS ON 31.10.2009.

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P4; COPY OF THE ORDER OF THE 2ND RESPONDENT DATED DATED 8.12.2009.

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P5; COPY OF THE JUDGMENT DATED 3.2.2010 IN WPC NO 37745 OF 2009(K).

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P6: COPY OF THE ORDER PASSED BY THE 2ND RESPONDENT DATED 9.4.2010.

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P7: COPY OF THE APPLICATION DATED 3.10.2011.

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P8: COPY OF THE CHALAN DATED 25.11.2011.

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P9: COPY OF THE CHALAN DATED 21.12.2011.

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P10: COPY OF THE JUDGMENT IN CIVIL APPEAL NOS 4976-4987 OF 2002 DATED 19.2.2008.

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P11; COPY OF THE JUDGMENT NOTICE ISSUED BY THE 2ND RESPONDENT DATED 5.10.2012.

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P12: COPY OF THE DEMAND NOTICE UNDER SECTION 7 OF THE REVENUE RECOVERY ACT DATED 14.10.2014.

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P13: COPY OF THE DEMAND NOTICE UNDER SECTION 34 OF THE REVENUE RECOVERY ACT DATED 14.10.2014.

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RESPONDENTS EXHIBITS :

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--------------------R1(A) COPY OF THE STATEMENT.

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R1(B) COPY OF THE DEMAND COLLECTION BALANCE STATEMENT. R2(A) COPY OF THE DEMAND COLLECTION BALANCE STATEMENT. R2(B) COPY OF THE LETTER NO 6010/A1/2010/TD DATED 4.3.2011. R2(C) COPY OF THE DEMAND COLLECTION BALANCE STATEMENT AS ON 31.8.2012 R2(D) COPY OF THE COMMUNICATION DATED 4.3.2011. R2(E) COPY OF THE DEMAND COLLECTION BALANCE STATEMENT.

/TRUE COPY/

P.A.TO JUDGE

K.V.

A.MUHAMED MUSTAQUE, J. =========================

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W.P.(C).No.17742/2010

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Dated this the 8^th day of December, 2016

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J U D G M E N T

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The petitioners are one among the contractors, who purchased the right to vend arrack from shop Nos.40 to 54 of Group No.1 of Chalakkudy Excise Range for the year 1993-94. The total rental payable for the year was Rs.51 lakhs, and excise duty payable on the designated quantum of arrack was Rs.14,82,048/-. The petitioner deposited a sum of Rs.22,33,312/towards kist and Rs.4,64,149/- towards excise duty in respect of the period from April 1993 to July 1993. The petitioner failed to continue the business, as a result of which, the contract was cancelled on 14/9/1993.

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The shops, thereafter, were under the departmental management in accordance with the Abkari Shops Departmental Management Rules, 1972 (hereinafter referred to as the “Departmental Management Rules”). As stood as per the law on the day of taking over by the departmental management, Rule 13 of the Departmental Management Rules which governed the field is reproduced hereunder:

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 WPC 17742/2010

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“13. Departmental management fee to be given credit of - The amount collected as departmental management fee may be given credit towards the dues from the original contractor provided he had completed the security and such credit shall be given only up to the date of confirmation of the resale, if any. In the case of resale purchasers, the departmental management fee collected from the date of confirmation of the resale may be given credit towards the dues form the resale purchaser, if he completes the security. The Departmental Management fee that may be given credit to the original contractor shall be forfeited if he had not completed the security. Similarly the departmental management fee that may be given credit to the resale purchaser shall be forfeited if he fails to complete the security.”

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This rule was substituted as follows on 22.12.1993 as follows:

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“13. Departmental Management fee to be given credit of - The departmental management fee collected from a shop while it was under departmental management due to default of payment of security, kist, excise duty etc., shall be liable to forfeiture.

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Provided that where the licensee dies during the currency of a licence, the amount collected as departmental management fee may be credited towards his kist amount.”

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There arose a dispute in respect of applicability of the amended

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Rule 13 of Departmental Management Rules in a batch of original petitions before this court as the Department proceeded against the defaulted contractors in the light of the amended Rules. Thus, O.P.No.2861/1994 along with connected matters was disposed of by this court on 11.8.2000

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 WPC 17742/2010

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holding that insofar as the contractors, who have defaulted payment of rental and excise duty prior to the substitution of the Rule, would be governed by the original Rule and the substituted Rule cannot be pressed into service to recover any loss sustained by the Government from the defaulted contractors. This was carried in appeal and, the Division Bench of this court dismissed the same. Thereafter, the State preferred a Special Leave Petition before the Hon’ble Supreme Court and, vide Exhibit-P 10 order the SLP was also dismissed with a rider “question of law, if any, is kept open”. The petitioner also filed writ petitions as O.P.Nos.5923/1994 and 8323/1994 challenging the demand based on the substituted Rule 13 of the Departmental Management Rules. In the light of the judgment of this court in O.P.No.2861 of 1994 and connected matters, the original petitions filed by the petitioner were allowed holding that the government can only recover actual loss suffered taking into account of the income received during the Abkari year from the contractors. This, in fact, is premised on Rule 13 before its amendment. Therefore, holding that the petitioner also is entitled to Rule 13 as stood prior to the substitution, those writ petitions were disposed of. The State filed an appeal. That appeal was also

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 WPC 17742/2010

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dismissed.

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Even though the writ petition substantially refers to Exhibits P6

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and P11, in fact, it is triggered out of the proceedings initiated by the Secretary to Government dated 4.3.2011 produced as Exhibit R2(d). The above communication was issued to all the subordinates to initiate action in the light of the observation of the Hon’ble Supreme Court while dismissing the SLP. The communication reads as follows:

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“Since the Civil Appeal No.4976-4987/02 filed before the Supreme Court against the Judgement in O.P.No.8271 of 1994 and connected cases are dismissed by the Hon'ble Supreme Court as per Order dated, 19.02.2008 and the review petition 8563/10 filed against the said Order is also dismissed by the Hon'ble Supreme Court, the Judgment in O.P.No.8271/1994 and connected cases are final and hence it is necessary to implement the Judgment in accordance with the spirit intended by the Hon'ble court. In this connection, as per the unamended rule 13 stated in the judgment, the Departmental Management fee that may be given credit to the original contractor shall be forfeited if he had not completed the security. Similarly the departmental management fee that may be given credit to the resale purchaser shall be forfeited if he fails to complete the security. Hence if the security is not completed the Departmental Management fee can be forfeited as per the unamended Rule.”

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It is to be noted that the petitioner had initially filed this writ

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petition challenging Exhibit-P6. Thereafter, pending writ petition, the

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 WPC 17742/2010

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petitioner was served with Exhibit-P11. Exhibit-P11 covers the amount as referred in Exhibit-P6. According to the learned Government Pleader, the entire calculation as referred in Exhibits-P6 and P11 are referred in R2(e). In such a situation, this Court’s view is that the writ petition is to be allowed quashing Exhibit-P11. Further, it is the case of the Department that ExhibitP6, as well as Exhibit-P11, were issued on the premise that the petitioner had not completed the period of security and therefore, he is not entitled to the benefit of the unamended Rule 13. As per the unamended Rule 13, the Departmental Management fee may be given credit, and the same will be forfeited if he commits default in the payment of security, kist, excise duty, etc. The case of the Department is that if he fails to replenish security, the Department management fee will have to be forfeited. Accordingly, the Department reached a conclusion that the petitioner is not entitled to the benefit of Rule 13 as he failed to replenish security and accordingly, the Department management fee has been forfeited. Though, this question has to be examined after considering whether this was a case where the parties were agitating on the first occasion; in the given situation where the parties are agitating the benefits centred around the amended and pre-amended

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 WPC 17742/2010

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Rule 13; this case has to be examined in the light of the common judgment of a Single Bench of court in O.P.Nos.5923 of 1994, 8323 of 1994 and

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connected cases, dated 18.10.2000. It is appropriate to refer the above judgment in this context. The judgment is reproduced as follows:

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“In all these Original Petitions the prayer is for a direction restraining the respondents from taking recovery steps against the petitioners to realise excise duty in respect of arrack shops in various ranges. These shops were under the Departmental Management. A Division Bench of this Court in O.P.No.9263 of 1994 had occasion to consider this aspects and it is found that only the actual loss suffered by the Government taking into account the income received during the abkari year alone can be collected from the contractors. In view of the said decision, the Original Petitions are allowed and the respondents are directed to realise only the actual loss suffered by the Government in respect of the shops for which there was Departmental Management.”

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There is a clear direction in the above judgment that the respondents are entitled to realise only actual loss suffered by the Government in respect of the shops for which there was Departmental Management, which meant that the contractors are entitled to the departmental fee during the period of which it was under the management of the Department. Had it been a case where the petitioner was not entitled to

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the benefit, this court would not have ordered that the Department would be

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 WPC 17742/2010

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entitled to the actual loss after giving credit to the Department management fee. The Department failed to bring to the notice of this court at the time of disposal of the above original petitions that it was on account of the failure on the part of the contractor replenishing security he was not entitled to the Departmental Management fee as referred in the unamended Rule 13. Though the petitioner has a different case in regard to the interpretation of the unamended Rule 13, I am not entering into those aspects in the light of the fact that the Department has now proceeded against the petitioner as though the petitioner is not entitled to the benefit of the unamended Rule 13 for the reason that the petitioner failed to replenish security. Therefore, even going by the stand of the Department, I am of the view that the writ petition has to be allowed without adverting to the notion of the writ petitioner of his own interpretation of the unamended Rule 13. If this court allows the Department's stand, it will amount to re-opening or reviewing the judgment in O.P.Nos.5923/1994, 8323/1994 and connected cases. Therefore, I am of the view that the impugned orders will have to be quashed. It is to be noted that in the impugned order Exhibit-P11, there is no mention about the basis on which quantification has been arrived at. However, the impugned order

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 WPC 17742/2010

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has been clarified by Exhibit-R2(e). As seen from Exhibit-R2(e) the calculation has been made as though the petitioner is not entitled to the credit of Departmental Management fee. In such a situation, this court is of the view that the petitioner is entitled to the benefit of Ext.R2(e) after quashing Ext.P11.

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It is to be noted that the demands were raised against the petitioner demanding Departmental Management fee as though the petitioner was not entitled. Recovery proceedings were initiated. This was challenged in the W.P.(C).No.37745/2009. This court disposed of the writ petition with a direction to the respondents to quantify the amount after giving the benefit of the judgment in O.P.No.5923, 8323/94 and connected cases. It was further ordered that the Departmental Management fee and excise duty realised for the period from 15.9.1993 to 31.3.1993 has to be deducted and the petitioner’s case was also directed to be considered in the light of the Amnesty Scheme, 2000. The above writ petition was filed when a demand was raised after settling the liability as per the Amnesty Scheme, 2000. According to the petitioner, the second demand was raised as per Exhibit-P4 order dated 8.4.2012 after the settlement of liability as per the

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 WPC 17742/2010

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Amnesty Scheme, 2000. As per Exhibit-P4, the petitioner was directed to remit Rs.7,11,131/-. This was challenged in Exhibit-P5 judgment. In Exhibit P5 judgment, this court directed the Department to rework the liability after giving credit to the amount already paid under the Amnesty Scheme as well as the Departmental Management fee and also directed to extend the benefit of Amnesty Scheme, 2000. Exhibit-P6 order is passed in purported compliance of Exhibit P5 judgment.

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While pending Exhibit P6, the Department raised Exhibit-P11 demand. This appears to be done on the notion that the Supreme Court had given a green signal to reopen the entire proceedings by observing that “question of law, if any, is left open”. It is to be noted that the decision as to the question of law regarding the applicability of Rule 13 has become final in the sense that those contractors similar to the petitioner are only to be governed by the unamended Rule 13. Though it is not possible to interpret what the Hon’ble Supreme Court intended by observing the question of law, nevertheless, by judicial practice it must be concluded that the Supreme Court never intended to re-open the proceedings already concluded inter parte. Further, the dismissal at the threshold would not give an arm to the

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 WPC 17742/2010

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Department to reopen any proceedings which have been concluded. Though it was contended in this case by the learned Senior Counsel for the petitioner that, there was no challenge against the Division Bench judgment in which the petitioner was a party, the learned Government Pleader submitted that similar observations as referred in Exhibit-P10 were also made in the SLP filed against the appeal, in which the petitioner was a party. In view of the fact that the concluded inter parte judgment has given credit to the Departmental Management fee to which the petitioner is entitled, this court is of the view that the proceedings cannot be reopened as against the petitioner on the ground that petitioner is not entitled to the benefit of the unamended Rule 13.

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However, the question arises in this case incidentally is as to the calculation of the benefit as per the Amnesty Scheme. It appears that while calculating the amount to be paid by the petitioner under the amnesty scheme, the Department has not given credit to the management fee. It is to be noted that the actual liability of the petitioner has not been re-worked and has to be reworked as above to find the actual amount payable by the petitioner as per the Amnesty Scheme 2000 as ordered in Exhibit-P5

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WPC 17742/2010

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judgment. The petitioner does have a case that he is entitled to refund based on the actual amount due but to put a quietus to the issue he is not proposing for such a prayer. In the light of the above, the writ petition is disposed of quashing the impugned demands.

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Sd/-

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A.MUHAMED MUSTAQUE, JUDGE

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M.R.Kesavan v. State of Kerala and Another

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M.R.Kesavan v. State of Kerala and Another

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