M/S Wine Centre vs. State Th. Excise Deptt. And Ors.

Held

The Court held that the petitioner was not liable to pay licence fee for the period 1995-1998. The reasoning was that the petitioner's licence expired on 31.03.1995 and was not renewed, and Rule 20 of the J&K Liquor Licence and Sales Rules, 1984, stipulates that a licence, unless renewed, is determined at the end of the financial year. As the petitioner had no licence to run the business during those three financial years, they were not obligated to pay the licence fee. The Court found that the petitioner paid the licence fee under duress and in the hope of his application for shifting being considered. Since the licence fee was not payable, the demand for penal interest under Section 24-A of the Excise Act, which is predicated on the non-payment of licence fee, was unsustainable. The Court also noted that the petitioner's case had identical facts to M/S Kundal Brothers, where the Excise Commissioner's opinion, accepted by the Finance Department, supported non-liability for licence fee and interest in such circumstances. The Court quashed the impugned Demand Notice dated 17.03.2003. The ratio decidendi is that a licence holder who does not renew their licence and ceases business operations is not liable for licence fees or subsequent penal interest for the period of non-operation.

Facts

The petitioner, M/S Wine Centre, held a liquor licence (Vend No. 80-OFF) at Link Road, Jammu. Following an enhancement of licence fees in 1995, the petitioner found it unviable to operate and kept the shop closed from 1995 to 1997, not transacting any business. The petitioner applied to shift premises to Bus Stand, Jammu. While the application was pending, the petitioner was permitted to shift subject to clearing outstanding licence fees for 1995-96 to 1997-98. This led to a previous writ petition (OWP No. 298/1997) where an interim order directed the petitioner to deposit ₹6.00 lacs and execute an undertaking. The previous petition was disposed of on 26.02.2002, directing the petitioner to file a representation. Subsequently, the petitioner deposited ₹8.50 lacs, totalling ₹14.50 lacs paid as licence fee. The respondents then issued a communication dated 17.03.2003 demanding penal interest of ₹14,49,000/-.

Key Issues

1. Whether the petitioner is liable to pay licence fee for the period 1995-1998 when his licence was not renewed and the premises remained closed, and consequently, whether penal interest is leviable under Section 24-A of the Excise Act? Petitioner's arguments: The petitioner contended that since the licence expired on 31.03.1995 and was not renewed, and the premises remained closed, no licence fee was payable for the financial years 1995-96, 1996-97, and 1997-98. They argued that the demand for penal interest was arbitrary, passed without a hearing, and not discernable from the notice. They relied on the principle that interest is only incurred upon non-payment of tax after a demand notice, and no such notice was served until 17.03.2003. They also argued that the stay order granted by the court exempted them from interest until 31.03.1998. Respondents' arguments: The respondents argued that the petitioner did not surrender the licence and cannot claim the shop remained closed. They asserted that the petitioner did not avail the benefit of Government Order No. 124-F of 1998 (amnesty scheme) and therefore could not claim relief. They stated that the amount demanded was not interest but an "additional sum" under Section 24-A of the Excise Act, and that the petitioner admitted tax liability by paying the licence fee, thus attracting penal interest for late payment.