CASE NO.: Appeal (civil) 1847 of 1994 PETITIONER: M/S. COOPERATIVE CO. LTD. Vs. RESPONDENT: STATE OF U.P. & ANR. DATE OF JUDGMENT: 10/04/2001 BENCH: CJI & N. Santosh Hegde JUDGMENT:
SANTOSH HEGDE, J.
L…I…T…….T…….T…….T…….T…….T…….T..J
The appellant herein, which is a limited company, was
running a distillery with a bottling plant at Nawabganj,
Saharanpur, since 1910. On 14.7.1980 it made an application
to the Commissioner of Excise, State of U.P., stating that
its distillery has been operating annual licences for
wholesale supply of country-liquor to Delhi Administration
for many years continuously. Therefore, it stated that it
wanted to establish a bottling warehouse in district
Ghaziabad to meet its requirement of supplying
country-liquor to Delhi conveniently and economically. It
pleaded that due to close proximity to Delhi if it is
permitted to start a bottling unit somewhere in the district
of Ghaziabad, it will have obvious advantages since bulk of
its production of country-liquor was being sold in Delhi.
It also stated in the said application that it would help
the company to bid competitively in the auctions and
consequently, the State would also stand to benefit from the
excise revenue. In the said letter, it is stated in clear
terms that the State Government would not stand to lose
anything by permitting the compnay to start the bottling
warehouse in district Ghaziabad because it would continue to
bottle both at Saharanpur as well as at Ghaziabad, hence,
the State excise duty from Saharanpur would not suffer. It
was also made specific in the said application that it was
seeking a licence for an additional bottling warehouse at
Ghaziabad.
Pursuant to the said application, the appellant was
informed on 29.7.1980 that it is permitted to bottle country
spirit under bond for exports in a bonded warehouse to be
licensed for suitable premises to be indicated by the
appellant at Ghaziabad along with various other conditions.
The said intimation also called upon the appellant to make
necessary arrangements after executing counterpart agreement
prescribed under the Excise Rules and that the amended CL-I
licence will be issued by the Office of the Excise
Commissioner as also F.L.-3 licence will be issued by the
Collector, Ghaziabad.
It is stated that for a considerable time the appellant
was unable to establish the bottling warehouse as permitted
under the letter of the Excise Commissioner, referred to
above. But it is an admitted fact that such a warehouse
with the permission of the authorities was established at
Sahibabad, district Ghaziabad, and has been functioning for
a number of years. In the meantime, it is noticed that the
appellant faced certain difficulties in running of its
distillery and bottling warehouse at Saharanpur because of
the dispute in regard to the property in which its
distillery plant was situated at Saharanpur as also because
of the provisions of the Water (Prevention & Control of
Pollution) Act, 1974. Therefore, sometime in the year 1987
the appellant wrote to the Commissioner of Excise in view of
the above-cited difficulty that it be permitted to shift its
distillery from Saharanpur to some other suitable place.
The Government as per its letter dated 20.7.1998 informed
the appellant that it had no objection to shifting the said
distillery from Saharanpur to some other place, other than
Sahibabad, district Ghaziabad. Subsequently, by another
letter of the Government dated 7.9.1988, the appellant was
informed that in supersession of its aforesaid letter dated
20.7.1988, the Government had decided to approve the
transfer of the distillery of the appellant to a place near
the existing site in Saharanpur and that it had no objection
to the working of the appellants bottling plant at a place
owned by the appellant in any other district provided this
did not result in reduction in the number of workers working
in the district of Saharanpur. Consequent to the above
order of the Government dated 7.9.1988, the Assistant
Commissioner of Excise informed the appellant the sanction
of the Government for shifting of the site of the distillery
of the appellant. This was done by its letter dated
27.9.1988. In the said letter it was made clear that the
permission to shift the distillery at Saharanpur was given
on a condition that the shifting shall be done to some place
near Saharanpur city with installation of necessary
pollution control devices. Based on this permission, the
appellant contends that it shifted its distillery and the
attached bottling plant from Nawabganj, Saharanpur to
Yusufpur, Tapari Road, Saharanpur. When this was the
position the appellant received a letter dated 9.7.1991
wherein, according to the appellant, for the first time the
appellant was informed that it was granted a licence to run
a bottling warehouse at Sahibabad only till such time as the
appellant shifted its distillery and bottling plant from the
existing site at Saharanpur and since that shifting has
taken place, the Government was not willing to continue with
the temporary permission given to it to do the bottling
process at Sahibabad, district Ghaziabad. By the said
letter, the appellant was called upon to show cause why the
sanction accorded to it to establish a bottling/filling
plant at Sahibabad be not revoked.
To the aforesaid letter of the Government, the appellant
replied on 7.8.1991 stating that the licence granted to it
to run a bottling warehouse at Sahibabad, district
Ghaziabad, was totally unconnected with its distillery and
bottling plant at Saharanpur and was independent of the
same. They stated that they sought permission and the same
was granted to establish a bottling plant at Sahibabad
because of its proximity to the State of Delhi and because
of the contract it had with the Government of Delhi to
supply huge quantity of country-liquor and it had no
connection whatsoever with the shifting of the distillery
and the bottling plant attached to that distillery at
Saharanpur. The Government, however, did not agree to this
stand of the appellant and by a letter of 6.11.1992 directed
the appellant to take necessary steps to stop the bottling
plant at Sahibabad and mandated that all further bottling of
the arrack manufactured by the appellant should be done only
at the relocated site of its distillery at Saharanpur within
3 months from the date of the said order.
The appellant challenged the said cancellation of its
licence to run the bottling plant at Sahibabad, district
Ghaziabad, by way of a writ petition before the High Court
of Judiciature at Allahabad in Civil Misc. W.P. No.172/93.
In the said writ petition, the appellant sought for quashing
of the order of the State of U.P. dated 6.11.1992 along
with certain other reliefs.
A Division Bench of the High Court came to the
conclusion that the permission to start the bottling plant
at Sahibabad was not in addition to the bottling plant run
by the appellant at Saharanpur but was as a temporary
measure to facilitate the appellant to shift its distillery
and bottling plant from the existing site at Saharanpur to
another site at Nawabganj, Saharanpur, the High Court
further held now that a new distillery and bottling plant
have been set up at an appropriate place at Saharanpur, the
appellant cannot be permitted to use the bottling plant at
Sahibabad. On that premise the writ petition came to be
dismissed, giving 3 months time to the appellant to shift
its bottling plant from Sahibabad to the new distillery
situated at Yusufpur, Tapari Road.
Before us, Mr. Shanti Bhushan, learned senior counsel
has contended that the application of the appellant which
was made as far back as on 14.7.1980 was based on certain
special facts inasmuch as the appellant had obtained major
contracts for the supply of country-liquor to the State of
Delhi and in executing the said contract, the appellant was
finding difficulty in transporting such huge quantity of
arrack bottled from Saharanpur to different places at Delhi.
Therefore, with an intention of making supply of
country-liquor to Delhi easier and economical, the appellant
approached the Government with permission to establish only
a bottling plant so that it could bring the permissible
raw-liquor from its distillery and other permissible places
and convert the same to potable arrack and bottle them at
its bottling plant closer to Delhi whereby apart from
preventing wastage of liquor in transit, the appellant would
also save considerable amount of money in transportation.
This, according to the appellant, is clear from the contents
of its application made to the Government. Mr. Shanti
Bhushan also contended that the permission granted to the
appellant pursuant to its application dated 29.7.1980 also
indicates in clear terms that it is a permission for
starting an independent bottling unit at the place to be
notified by the appellant in the district of Ghaziabad. He
says that a perusal of this permission shows that it was
meant for bottling arrack to be supplied at Delhi. He
pointed out that the licence given to establish and run the
bottling plant at Sahibabad was an independent licence and
was not in substitution of the bottling plant which was
being run at that point of time at Nawabganj, Saharanpur.
He contends that the belated stand of the Government that
the bottling unit at Sahibabad was only a temporary
arrangement and was meant to be in existence only till the
shifting of the bottling plant at Saharanpur is not
supported by any material on record and is contrary to
facts. It is urged that the appellant has spent huge sums
of money in establishing a modern bottling plant at
Sahibabad, district Ghaziabad, because of the volume of its
business with the State of Delhi, and it would be futile to
contend that such huge amount for a permanent bottling unit
would have been expended by the appellant if the licence
granted to it was not a permanent one. He contends that
this stand of the Government that the licence to run the
bottling plant at Sahibabad is only transitory in nature, is
a lame excuse.
On behalf of the State it is contended by Mr. Subodh
Markandeya, learned senior counsel contended that in fact
the permission accorded vide letter dated 29.7.1980 was only
temporary and for the limited period during which the
appellant had to shift his distillery and the bottling plant
at Saharanpur from Nawabganj, Saharanpur to some other place
and now that it has re-established its distillery and the
bottling plant at another place in Saharanpur, it has no
right to operate the bottling plant at Sahibabad.
Having heard learned counsel for the parties in extenso
and perused the records, the only question that arises for
our consideration is whether the appellant was given
sanction to start an independent and additional bottling
warehouse at Sahibabad, district Ghaziabad by the competent
authorities or was it only a temporary permission to
facilitate the appellant to continue with the process of
bottling during shifting of its distillery and the bottling
plant from one place to another at Saharanpur.
We have already referred to the application made by the
appellant for grant of permission to start a bottling plant
in district Ghaziabad on 14.7.1980 so also the permission
accorded by the authorities on 29.7.1980. Basically, the
necessary material to decide the above questions is found in
these two documents. Though we have referred to the said
document in some detail earlier, we think it appropriate to
refer to it at the cost of repetition once again while
deciding these question.
As per the letter dated 14.7.1980, the appellant sought
for licence for establishment of bottling warehouse in
Ghaziabad. In the said letter/application, the appellant
stated that the company has been awarded annual licence for
wholesale supply of country-liquor to Delhi Administration
for the last 7 years continuously. It also stated for the
current year (referable to the date of the letter) that the
Delhi Administration had granted licences for two brands of
liquor, namely, country-liquor and Rum 50 degree strength.
It also stated that the State of U.P. earns substantial
revenue in the form of export duty on the supplies of liquor
made by the appellant to the Delhi Administration which
according to the appellant was to the tune of crores of
rupees. The letter further stated that in view of the
bitter competition from distillers in other neighbouring
States like Punjab, Haryana and Himachal Pradesh, the
appellant was finding it economically difficult to compete
with other suppliers because of the fact that it had to
transport bottled liquor from Saharanpur all the way to
Delhi. In the process, it is stated that a large quantity
of liquor also gets wasted and the cost of transportation
was also becoming uneconomical. They had pointed out that
if it lost the contract with the Delhi Administration then
the State of U.P. also stood to lose crores of rupees in
excise revenue. Therefore, the letter specifically stated
that it is in the interest of both the appellant and the
U.P. Government to permit the appellant to establish its
additional bottling warehouse at Ghaziabad. They further
stated that they will be investing on the establishment of
the said warehouse with a long term perspective. So it is
in these circumstances that the appellant sought permission
from the respondents to establish a new bottling warehouse
at district Ghaziabad. The respondent vide its letter dated
29.7.1980 informed the appellant that they are allowed to
bottle country spirit under a bond for exports in a bonded
warehouse to be licensed at Ghaziabad in suitable premises
provided by the appellant on the conditions mentioned in the
said letter. One of the conditions enumerated therein
stated that the appellant was permitted to reduce the plain
country spirit into spiced country spirit in the said
bottling warehouse at Ghaziabad, and that it should provide
office facilities for the excise officials who will be
incharge of the bonded warehouse attached to the bottling
premises, and that the appellant should make necessary
arrangements to execute counterpart agreement to receive the
necessary CL-I and FL-III licences from the Commissioner of
Excise and the Collector, Ghaziabad, respectively. In the
background of what is urged on behalf of the State, it
should be noticed from this letter that there is absolutely
no indication whatsoever to show that this permission to
start the bottling unit at district Ghaziabad was either
temporary or was in lieu of the bottling unit at Saharanpur.
Neither the application of the appellant dated 14.7.1980 nor
the sanction of the respondents dated 29.7.1980 has made any
reference whatsoever to the bottling plant attached to the
distillery of the appellant at Saharanpur. From the reasons
given by the appellant for starting the bottling plant at
Ghaziabad and the conditions attached to the approval of
such sanction to start the bottling plant at Ghaziabad, we
cannot even remotely come to the conclusion that this
permission was either temporary or was in lieu of the
bottling plant at Saharanpur. However, the respondents
strongly relied upon letter dated 9.7.1991 wherein it had
informed the appellant that the permission to establish a
bottling plant was granted vide its letter dated 7.9.1988
and was meant as a temporary measure till the construction
of a distillery plant at Sahibabad, district Ghaziabad, by
the appellant. It was also mentioned in the said letter
that CL-I licence was issued to the appellant for its unit
at Ghaziabad on the condition that the distillery will shift
the work from Saharanpur to Sahibabad, district Ghaziabad.
It is true that the letter of 9.7.1991 does state so but
then that letter relies upon an earlier letter dated
7.9.1988. A perusal of that letter of 7.9.1988 clearly
shows that it had nothing to do with the establishment of
the bottling plant at district Ghaziabad. While
appreciating the contents of that letter, we will have to
bear in mind certain additional facts such as after the
permission was granted to the appellant to establish the
bottling plant in district Ghaziabad, the appellant seems to
have run into certain difficulties while running its
distillery at Saharanpur. Therefore, they corresponded with
the Government to shift its distillery along with the
existing bottling plant from Saharanpur to some other place.
It is in that context that the Government wrote letter dated
7.9.1988 which was nearly 8 years after the sanction granted
to start the bottling warehouse at district Ghaziabad. This
letter conveying approval of the Government to transfer the
site of the appellants distillery from Saharanpur to a
place near the existing site in Saharanpur and to install
the required pollution control devices at the new site, made
a reference to the existing bottling plant attached to that
distillery and stated that the Deptt. would have no
objection to the work of bottling in the godown by the
producer in other district (i.e. Ghaziabad) provided there
shall not be lay off in the number of the workers working in
distt. Saharanpur. In our opinion, this reference to the
bottling plant in the letter of 7.9.1988 or the place
Ghaziabad cannot be in any manner connected with the
bottling plant already permitted to be established at
district Ghaziabad in the year 1980 by the Government. Per
contra, it is clear that this is with reference to the
bottling plant which was attached to the distillery at
Saharanpur. Therefore, we find that reference to letter
dated 7.9.1988 in the letter of the Government dated
9.7.1991 is wholly misplaced and the respondents in our
opinion cannot make that as the basis for contending that
the licence issued to the appellant for establishing a
bottling plant at Ghaziabad was in lieu of the bottling
plant at Saharanpur or was in fact a temporary one. In this
regard we are supported by certain notings found in the
notes and orders of the Excise Commissioner’s office, U.P.,
Allahabad, in File No. II Techincal D-19 pages 33, 24, 39 &
40 which was exhibited as Annexure A-17 before the High
Court. The notings in clear terms show that what was
intended to be granted to the appellant by the letter of the
respondent dated 29.7.1980 was a permission to start a new
bottling plant and grant of a new bottling licence.
In this background if we have to consider the impugned
order of the respondents dated 6.11.1992 it is seen that an
entirely new stand has been taken on behalf of the State.
This letter the original of which is in Hindi and a fresh
translation thereof was provided to us on behalf of the
State inter-alia states : “It is also made clear that
during this period you must stop the Bottling plant at
Sahibabad and further bottling must only be done at your
relocated site of your distillery at Saharanpur. After the
expiry of these 3 months you will not be allotted any
alcohol from other distilleries for your bottling plant at
Sahibabad. Actually, this was a letter in reply to the
complaint of the appellant on insufficient electric supply
to its distillery at the relocated plant. In this letter
the State took the opportunity of informing the appellant of
closing its bottling plant at Sahibabad. By this letter it
is clear that the respondents treated the earlier permission
granted to the appellant as a temporary permission to last
till the appellant shifted its distillery and the bottling
plant attached to it. We have already noticed that from the
original application and the sanction granted thereof, it is
clear that the permission to start the bottling plant at
district Ghaziabad which was ultimatley established at
Sahibabad, district Ghaziabad, was not temporary or stand-by
permission. It was given for a specific purpose of
facilitating the appellant to bottle bulk country-liquor at
Sahibabad so that the appellant could compete with the other
bidders for supply of country liquor to the State of Delhi.
That permission cannot be treated as a permission having
been granted as a stand-by permission till the appellant
shifted its distillery and the bottling unit at Saharanpur.
We are satisfied that the High Court has erred in coming to
the conclusion that the licence granted to the appellant to
establish and run a bottling unit at Sahibabad, district
Ghaziabad is a temporary one.
We however make it clear that if the appellant has not
complied with any of the provisions of the said Excise Act
and Rules or has contravened any of the provisions of the
Act or any of the terms of the licence, it is open to the
State to take such action as is legally permissible but this
licence to run a bottling warehouse at Sahibabad, district
Ghaziabad, shall not be cancelled on the ground that the
same was granted as a temporary measure.
In the result, the appeal succeeds and is allowed. The
order dated 16.11.1992 is hereby set aside. No costs.