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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.

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   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

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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

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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

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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

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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.

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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.