HAR SHANKAR & ORS. ETC. ETC. vs. THE DY. EXCISE & TAXATION COMMR. & ORS.

CIVIL APPEAL No. 365/1969Supreme Court[1975] 3 S.C.R. 25421 January 1975Bench: 5 JudgesAuthor: A.N. RAY, KUTTYIL KURIEN MATHEW, Y.V. CHANDRACHUD, A. ALAGIRISWAMI, A.C. GUPTA30 pages
AI SummaryDismissed

What did the Supreme Court hold?

The Supreme Court dismissed the appeals. Regarding the preliminary objection, the Court held that the bids submitted by the appellants constituted offers, and their acceptance by the Government created a binding agreement. The conditions of auction became the terms of the contract under which licenses were granted. The licensees exploited their licenses, and commercial considerations revealing an error in assessing profitability are normal incidents of trading. Those who contract with open eyes must accept contractual burdens along with benefits. The powers of the Financial Commissioner to grant licenses by auction and collect fees through auctions cannot be questioned by those who would have relied on these powers to found a legal claim had their ventures succeeded. Reciprocal rights and obligations arising from contracts are enforceable. The Court also noted that the principles governing previous judgments in Bhajan Lal's and Jagc Ram's cases were not applicable to the amended rules in force. The amounts payable by licensees through auction bids or fixed/assessed fees were considered the price of a privilege, not a fee in the technical sense or a tax. The Financial Commissioner had the power under Section 34 read with Rule 59(d) to direct that licenses be granted on payment of such consideration as prescribed by rules, including fees fixed by auction. The demands for fixed fees on foreign liquor vendors were upheld as lawful excise revenue, as the amendments came into force before the licenses became effective from April 1, 1968, and operated on all licenses thereafter.

What were the facts?

The appellants were retail vendors of country liquor and foreign liquor, holding licenses granted after accepting bids in auctions conducted by the Excise Department of the Government of Punjab. In one instance, after a High Court judgment rendered previous auctions ineffective, a fresh auction was held for country liquor vends. The appellants submitted bids, which were accepted, and licenses were granted. They deposited a portion of the license fee as security but fell into arrears. The State Government demanded payment, threatened license cancellation, and intended to resell the vends at the appellants' risk. Consequently, the appellants filed a writ petition seeking to quash the auction and restrain the enforcement of auction terms. The High Court upheld the State Legislature's competence to regulate liquor vending and found the impugned auctions valid, differing from previous judgments.

What were the issues?

1. Whether the Financial Commissioner has the power to frame rules authorizing the grant of liquor licenses through auctions, and if Section 34 of the Punjab Excise Act, 1914, permits the levy of amounts that are not strictly fees, with auction bids for 'fees' being a contradiction in terms. - Assessee's contention: The Financial Commissioner lacks the power to authorize auctions for license fees, and auction bids for fees are contradictory. The license fee bears no relation to services rendered and is not a true fee or excise duty. It is a tax, which the Financial Commissioner and State Government lack the power to impose. The Government cannot impose a levy by contract that it cannot impose by law. New auction terms are similar to those previously struck down. Demands on foreign liquor licensees are arbitrary and illegal. - Revenue's contention: The appellants, having participated in auctions with full knowledge of the terms and conditions, cannot use writ petitions to escape contractual obligations. Reciprocal rights and obligations arising from contracts are enforceable irrespective of a party's perceived prudence in abiding by them.

Which sections of the Income-tax Act were involved?

Section 34,Section 59(d),Section 60(1)(a),Section 60(1)(c),Section 3(9)

AI-generated summary — verify with the full judgment below

254 HAR SHANKAR & ORS. ETC. ETC. A v. THE DY. EXCISE & TAXATION COMMR. & ORS.

January 21, 1975 [A. N. RAY, c.:r., K. K. MArnEw, Y. v. CHANDRAcHuo, A. ALAGIRISWAMl AND A. C. GUPTA, JJ.] B Constitution of India, 1950, Art. 226-Petition under reciprocal righrs and obligatiol!S arising out of contract, if could be enforced.

Constitution of India, 1950, Art. 226 and P1111jab Excise Act, 1914 and Punjab Liquor Licence Rules, 1956-Appellants applying for and accepting licences to vend foreign. liquor Appella11ts, if co11ld question tlze validity of Rules while a11empti111? to exploit lice11ces, Constit11tio11 of India, 1950, Art. 19(1) (g)·-Business i11 i11toxicants-~·Cirize11, C if has a fundamental right to trade i11 i11toxicants-State, if has power to prohi· bit absolutely el'ery form of activity relating to intoxicants.

The Pu11jab Acr. 1 of 1914, Sections 27 and 34-Levy of 'licc11ce fe.~' and ·'fixed fee' 011 traders in liquor-'fee', if fee in technical sense of the expressio11, Pu11jab Excise Act, 1 of 1914, S. 34 and Punjab Liquor Licence Rules, 1956, Rules 35 and 59(d)-Grant of licence to the sale of liquor-Fee, if can be fixed by auction. D Punjab Excise

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