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PETITIONER: STATE OF HARYANA AND ORS.

       Vs.

RESPONDENT: JAGE RAM AND ORS.

DATE OF JUDGMENT21/04/1980

BENCH: CHANDRACHUD, Y.V. ((CJ) BENCH: CHANDRACHUD, Y.V. ((CJ) SHINGAL, P.N. REDDY, O. CHINNAPPA (J)

CITATION:  1980 AIR 2018            1980 SCR  (3) 746  1980 SCC  (3) 599  CITATOR INFO :  APL        1983 SC1207  (2,14)  RF         1984 SC1326  (8)  R          1987 SC 933  (13,14,15)  R          1988 SC 771  (5)

ACT:      Writ Jurisdiction-Article  226 of  the Constitution  of India 1950  Petition under reciprocal rights and obligations arising out  of Contract  cannot  be  enforced-Excise  duty, Fees, and  Price for  parting with  the Privilege  by State, explained-Punjab Excise  Act (Act  1  of  1974)  and  Punjab Liquor Licence  Rules, 1956  as amended upto 22-3-68-Whether notice of reauction necessary under Rule 36(3) of the Liquor Licence Rules.

HEADNOTE:      In the  auction for  the financial year 1967-68 held on March 27,  1967 for  the retail  vend known as "Biswan Meel" Sonepat, the respondents offered the highest bid for a quota of Rs.  62,100 proof  liters for  which they  became  liable under condition  14(iii) of  the auction  to pay  an  amount calculated at  the rate  of Rs.  17.60 per  litre that is to say, Rs.  10,92,960-00. On  the bid  being knocked  in their favour, respondents  deposited a  sum of Rs. 45,527-50 being 1/24th of  the total  amount  payable  by  them  by  way  of security for  the  due  performance  of  the  terms  of  the auction, as  required by  condition No. 15(1) of the auction and Rule  36 (22A)  of the Punjab Liquor Licence Rules, 1956 as amended.  They started  operating the  vend from April 1, 1967.      The successful bidder who is granted licence for retail sale of  country liquor  is required by condition No. 15(ii) of the  auction read with rule 26(23)(2), to pay the licence fee in  22 equal  instalments, each instalment being payable before the 10th and 25th of every month, commencing on April 10. On the failure of the respondents to pay the instalments due for  the periods  ending with  April 10 and 25 1967, the Excise and Taxation Officer, Rohtak, gave them notices dated 15th and 25th April, 1967 calling upon them to make good the short-fall of  Rs. 33,827.20  and Rs. 5,898.80 respectively, before April  20 and  April 30,  1967. Since the respondents

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did not  pay the  amount, the  Deputy  Excise  and  Taxation Commissioner, Headquarters,  Haryana,  gave  them  a  notice calling upon  them to  show cause,  within two  days of  the receipt of  the notice,  why their  licence  should  not  be cancelled under  section 36(c) of the Punjab Excise Act, for their failure to comply with the terms of the auction in the matter of  payment of  the two  instalments. By  their reply dated May  12, 1967,  the respondents  stated that they were illiterate villagers,  that the  terms of  auction were  not explained to  them, that  the district  of Rohtak was in the grip of  severe drought  leading to  a fall  in the  sale of liquor, that  April being a summer month, the consumption of liquor was  less as  compared with  the  consumption  during winter months  and that,  there was  in fact  no default  on their part as alleged in the notice sent to them. On May 17, 1967,  the   Collector  and   Deputy   Excise   &   Taxation Commissioner, Haryana,  passed an  order, after  hearing the respondents, cancelling  their licence  under section  36(b) and (c)  of the  Punjab Excise Act with immediate effect and stating that  the vend  will be  resold on  May 23,  1967 at 10.00 A.M.  in the office of the Excise and Taxation Officer Rohtak, at the risk of the respondents. 747      On May  22, 1967 respondents filed a Writ Petition (No. 900 of 1967) which was dismissed by the High Court of Punjab and Haryana on May 26, on the ground that it was premature.      In pursuance  of the  order dated  May 17,  the "Biswan Meel" vend,  Sonepat, was  reauctioned on  May 23, 1967, the highest bid  received being  of 15000 litres, which in terms of money  comes to  Rs. 2,46,000.00.  The difference between the amount  which the  respondents were  liable to pay under their bid  and the amount realised in the reauction comes to Rs. 7,41,577.40.      On July  11, 1967 respondents were served with a notice dated July  7 by  which they  were called  upon to  pay  the aforesaid amount,  failing  which,  they  were  warned,  the amount was  able to be recovered as arrears of land revenue. On July  18, respondents  filed a  Writ Petition in the High Court challenging the legality of the aforesaid notice.      Following an earlier decision in Bhajan Lal Saran Singh JUDGMENT: Journal, p. 460, which was affirmed by this Court in CA 1042 and 1043/68  dt. 21-8-72,  the High  Court allowed  the writ petition and  quashed the  order cancelling the respondents’ licence and  calling upon them to pay the difference between the amount  payable by  them under  their bid and the amount realised in  the reauction  of the vend. It has given to the appellants a  certificate to  appeal  to  this  Court  under Article 133(1)  (a) of  the Constitution  since the  subject matter in  dispute was  of the value of more than Rs. 20,000 at the time when the Writ Petition was filed, as also on the date of the proposed appeal.      Allowing the appeal, the Court ^      HELD:: 1. The Writ jurisdiction of the High Court under Article  226   of  the   Constitution  is  not  intended  to facilitate avoidance  of contractual obligations voluntarily incurred by the petitioner. [755 D]      In the  instant case  the High  Court was  in error  in entertaining the writ petitions for the purpose of examining whether  the   respondents  could  avoid  their  contractual liability by  challenging the  Rules under  which  the  bids offered by  them were  accepted and  under which they became entitled to conduct their business. It cannot ever be that a licencee can  work out the licence if he finds it profitable

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to do so; and he can challenge the conditions under which he agreed to  take the  licence, if  he finds  it  commercially inexpedient to  conduct  his  business.  The  occurrence  of commercial difficulty,  inconvenience  or  hardship  in  the performance of  those conditions,  like the  sale of  liquor being  less  in  summer  than  in  winter,  can  provide  no justification for  not  complying  with  the  terms  of  the contract which they had accepted with open eyes. [755 F, 756 C-D]      Har Shanker  and Ors. v. The Deputy Excise and Taxation Commissioner and  Ors., [1975]  2 SCR 254 @ 266; Sham Lal v. State of Punjab, AIR 1976 SC 2045, followed.      Bhajan Lal Saran Singh & Co. v. State of Punjab, [1967] Current Law Journal, p. 460; overruled.      2. There  is no  doubt that  a distinction  does  exist between the  Rules which were impugned in Bhajan Lal, and in the instant case on one hand and the 748 Rules which  were impugned  in Har  Shanker’s  case  on  the other. In fact in Har Shanker’s case the impugned Rules were those as amended on 22-3-68 in order to meet the judgment of the High  Court under  appeal  in  the  instant  case.  Even assuming that  there is  a material  difference in the Rules which are  impugned in  the instant  case and  those in  Har Shanker’s, yet  the jurisdiction  of the High Court is a bar to the  respondents to  wriggle  out  of  their  contractual obligation. [756 E-H]      In Har  Shanker’s case,  this  Court  held  that  since rights in  regard to the manufacture and sale of intoxicants are vested in the state; it is open to it to part with these rights for consideration; that the amounts which are charged to the  licensees who  offer their  bids in auction sales of vends are  neither in  the nature of a tax nor in the nature of excise  duty; and  that, the  true nature  of the  charge which the  Government levies  in such  cases is  that it  is price which the State charges as a consideration for parting with its  privileges in favour of licensee. Such a charge is a normal incident of a trading or business transaction. What the State  could itself do in the exercise of its privilege, it authorises  another to do by charging a price for parting with its  privilege. A price can neither be a tax nor excise duty. Therefore, even if any concession was made in the High Court, the  true legal  position that  the amounts which the respondents became  liable to  pay under  the terms  of  the auction is  not excise  or still-head  duty but  is a  price which the Government charged for parting with its privilege, during the  current of  the period  covered by the contract. The amount  which the respondents agreed to pay to the State Government under  the terms  of the auction is neither a fee properly so  called which  would require  the existence on a quid pro  quo, nor  indeed is  the amount  in the  nature of excise  duty,   which  by   reason  of   the  constitutional constraints has  to be primarily a duty on the production or manufacture of  goods produced  or manufactured  within  the country. The requirement to multiply by a certain figure per proof-litre the  quota for  which the respondents gave their bid by  a certain  figure and  the facility  of  paying  the amount by  instalments while  lifting the quota from time to time, do not make such payment an excise or still-head duty. What  the   Government  is   trying  to   recover  from  the respondents is  not excise duty on undrawn liquor. [757 B-D, 758 A-C, E-F, 759 A]      Panna Lal  v. State  of Rajasthan,  [1976] 1  SCR  219; Bimal Chandra  Banerjee v. State of Madhya Pradesh, [1971] 1 SCR 844;  State of  Madhya Pradesh  v. Firm  Gappu Lal etc.,

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[1976] 2 SCR 1041 and Excise Commissioner U.P., Allahabad v. Ram Kumar, [1976] Suppl. SCR 532; distinguished.      [The Court  remanded the  case for  a  finding  on  the following  two  questions:  (1)  Whether  it  was  necessary according to the rules in force at the relevant time to give adequate publicity to the reauction and (2) if so, when such publicity was  in fact  given to  the reauction  on May  23, 1967]

&      CIVIL  APPELLATE   JURISDICTION  :   Civil  Appeal  No. 1507/1969.      From the  Judgment and  Order dated  12-3-1969  of  the Punjab and Haryana High Court in Civil Writ No. 1376/67.      S. N. Kacker Sol. Genl., Ravinder Rana and M. N. Shroff for the Appellants. 749      Tirath Singh  Munjral, H.  K. Puri  and V.  K. Bahl for Respondent No. 1      The Judgment of the Court was delivered by      CHANDRACHUD, C.J.-This  is  an  appeal  by  certificate granted by  the High  Court  of  Punjab  and  Haryana  under Article 133(1)(a)  of the  Constitution  in  regard  to  its judgment dated  March 12,  1968 in  Civil Writ  No. 1376  of 1967.      On March 16, 1967 the Excise and Taxation Commissioner, Haryana, appellant No. 2 herein, announced by publication of a notice that excise auctions for the financial year 1967-68 will be  held on March 27, 1967. The terms and conditions in regard to  the auction  of retail  vends of  country spirits were set  out in  a pamphlet  issued along  with the notice. Those terms  and conditions  did not  accord with  the rules then prevailing but were evidently announced so as to comply with the  requirement of  the new  rules  which  were  being brought into  force. The  amended rules issued by the Excise and  Taxation  Commissioner  (Financial  Commissioner)  were published in the Government Gazette dated March 31, 1967 and came into effect on April 1, 1967.      In the  auction held  on March  27, 1967 for the retail vend known  as "Biswan  Meel", Sonepat,  respondents offered the highest  bid for  a   quota of  62,100 proof  litres for which they  became liable,  under condition  14(iii) of  the auction, to  pay an  amount calculated  at the  rate of  Rs. 17,60 per  litre, that  is to  say, Rs. 10,92,960.00. On the bid being  knocked in  their favour, respondents deposited a sum of  Rs. 45,527.50,  being 1/24th  of  the  total  amount payable by  them, by way of security for the due performance of the  terms of  the auction,  as required by condition No. 15(1) of  the auction and Rule 36(22-A) of the Punjab Liquor Licence Rules,  1956 as  amended. They started operating the vend from April 1, 1967.      The successful bidder who is granted licence for retail sale of  country liquor  is required by condition No. 15(ii) of the  auction read with Rule 36(23)(2), to pay the licence fee in  22 equal  instalments, each instalment being payable before the 10th and 25th of every month, commencing on April 10. On the failure of the respondents to pay the instalments due for  the periods  ending with April 10 and 25, 1967, the Excise and Taxation Officer, Rohtak, gave them notices dated 15th and 25th April, 1967 calling upon them to make good the short-fall of  Rs. 33,827.20  and Rs. 5,898.80 respectively, before April  20 and  April 30,  1967. Since the respondents did not  pay the  amount, the  Deputy  Excise  and  Taxation

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Commissioner, Headquarters,  Haryana,  gave  them  a  notice calling upon them to show cause, within two days of the 750 receipt of  the notice,  why their  licence  should  not  be cancelled under  section 36(c) of the Punjab Excise Act, for their failure to comply with the terms of the auction in the matter of  payment of  the two  instalments. By  their reply dated May  12, 1967,  the respondents  stated that they were illiterate villagers,  that the  terms of  auction were  not explained to  them, that  the district  of Rohtak was in the grip of  a severe  drought leading  to a fall in the sale of liquor, that  April being a summer month, the consumption of liquor was  less as  compared with  the  consumption  during winter months  and that,  there was  in fact  no default  on their part as alleged in the notice sent to them. On May 17, 1967,  the   Collector  and   Deputy   Excise   &   Taxation Commissioner, Haryana,  passed an  order, after  hearing the respondents, cancelling  their licence  under section  36(b) and (c)  of the  Punjab Excise Act with immediate effect and stating that  the vend  will be  resold on  May 23,  1967 at 10.00 A.M. in the office of the Excise and Taxation Officer, Rohtak, at the risk of the respondents.      On May  22, 1967 respondents filed a Writ Petition (No. 900 of 1967) which was dismissed by the High Court of Punjab and Haryana on May 26, on the ground that it was premature.      In pursuance  of the  order dated  May 17,  the "Biswan Meel" vend,  Sonepat, was  reauctioned on  May 23, 1967, the highest bid  received being of 15,000 litres, which in terms of money comes to Rs. 2,46,000.00 The difference between the amount which  the respondents were liable to pay under their bid and  the amount  realised in  the reauction comes to Rs. 7,41,577.40.      On July  11, 1967 respondents were served with a notice dated July  7 by  which they  were called  upon to  pay  the aforesaid amount,  failing  which,  they  were  warned,  the amount was  liable  to  be  recovered  as  arrears  of  land revenue. On  July 18,  respondents filed  the  present  Writ Petition in  the High  Court challenging the legality of the aforesaid notice.  The High  Court allowed the Writ Petition and quashed  the order  cancelling the  respondents’ licence and calling  upon them  to pay  the difference  between  the amount payable  by them  under  their  bid  and  the  amount realised in  the reauction  of the vend. It has given to the appellants a  certificate to  appeal  to  this  Court  under Article 133(1)(a)  of the  Constitution  since  the  subject matter in  dispute was  of the value of more than Rs. 20,000 at the time when the Writ Petition was filed, as also on the date of the proposed appeal.      It is  no longer  in dispute  that the auction at which the respondents’  bid was accepted is governed by the Punjab Liquor Licence  Rules, 1956  as amended  by the notification dated March 31, 1967 issued by 751 the Excise  and Taxation  Commissioner, Haryana,  which came into force on April 1, 1967. The amended rules, in so for as they are relevant for our purpose, read thus:           36. (1)  Subject to  such changes as the Financial      Commissioner may  make  each  year  before  the  annual      auctions the  Collector shall,  on  the  basis  of  the      probable sales  during the next licence year determine,      in the  case of country liquor vends, the minimum quota      of  country  liquor  and  the  licence  fee  calculated      thereon ..........The minimum quota and the licence fee      calculated thereon........,  for  each  vend  shall  be      announced by  the Presiding  Officer  at  the  time  of

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    auctions.           36. (16)  Bids in  respect of country liquor vends      shall be  received in  terms of quota of country spirit      in proof litres to be lifted during the whole year, and      the successful  bidder shall  be liable  to pay licence      fee calculated  by multiplying  the quota  bid  by  Rs.      17.6.           36. (22-A)  A person to whom a country spirit shop      has been  sold shall  deposit in  a Government Treasury      under head  "Licence fee on country spirit" subordinate      to Majo  ead "X-State Excise Duties" by way of security      an amount equivalent to one-twenty-fourth of the amount      of the  licence fee determined under clause (16) within      a period  of seven  days of the date of auction and the      aforesaid amount of security shall be refundable to him      at the  end of  the year,  unless the  same or any part      thereof is  forfeited or adjusted against any amount of      fee, duty  or penalty  due from  him in  respect of his      licence. In the event of the amount of security deposit      or any  part thereof  being forfeited  or  adjusted  as      aforesaid the  deficiency shall  be made  good  by  him      within seven  days of  the happening  of such  an event      failing  which   the  licence   shall  be   liable   to      cancellation by the Authority by which it was granted.           36. (23)  (2) A  person to  whom a  country spirit      shop is  sold shall  pay the  amount or  licence fee as      calculated under  clause (16)  in 22 equal instalments,      each instalment  being payable  on the 10th and 25th of      each month  starting from  the month  of April.  In the      event of failure to pay the instalment by the due date,      his licence may be cancelled.           36. (23) (3) Notwithstanding anything contained in      sub-clause (2)(a)  the licensee  shall be  entitled  to      deduct from the amount of the licence fee to be paid by      him such  amount of  still-head duty  as may  have been      actually paid by him on the 752      quota of  country spirit  actually lifted  by  him  not      exceeding the amount of such duty payable in respect of      the quota bid by him at the time of auction.           36. (24)  When a  licence has  been cancelled, the      Collector or  an Officer  not below  the rank of Excise      and Taxation  Officer authorised  by him in this behalf      may resell  it by public auction or by private contract      in accordance with the procedure laid down in this rule      and any  deficiency in the licence fee and all expenses      of such resale or attempted resale shall be recoverable      from the defaulting licensee in the manner laid down in      section 60 of the Punjab Excise Act, 1914........      The High  Court has  summarised correctly  the position      emerging out of these rules in these words:      "The auction  is on  the basis of the quota that has to      be lifted for each particular shop. In order to convert      it  in   terms  of  money,  each  proof  litre  bid  is      multiplied by  Rs. 17.60 and that is how, the fee for a      particular shop  is fixed.  The licensee is required to      deposit one-twenty-fourth  of the  amount so arrived at      as security. He is then to lift the quota specified for      each month  in the  Rules and if he fails to do so, the      amount shortlifted in terms of the licence-fee for that      month is  deducted from  his security  amount and he is      required to  make good  the deficiency in the security.      He may  not sell  even a  litre of liquor; but whatever      quota of liquor he has bid for, the money value of that      quota by  multiplying it  by Rs. 17.60 per litre has to

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    be paid by him. There is no escape from this."      One of the contentions raised before the High Court was that the licence fee charged to the respondents, for failure to pay  which their  licence  was  cancelled,  was  not  fee properly so  called but was ’stillhead’ duty or excise duty; and the  rule requiring  the payment of such duty, even when no quota  of liquor was actually lifted by the licensee, was unconstitutional  for  the  reason  that  there  can  be  no liability to  pay still-head  duty or excise duty unless the licensee takes  or lifts the liquor. The High Court compared the Punjab  Liquor Licence  Rules of 1956 as they existed in 1966 and  the Rules  as amended  in 1967  and  came  to  the conclusion that,  in substance,  there was  no difference in the nature  of payment which the licensee was liable to make under the  two sets  of rules: what he has to pay under both is still-head duty or excise duty.      In M/s.  Bhajan Lal  Saran Singh  & Co. v. The State of Punjab and  others, (Civil Writs Nos. 538 and 1991 of 1966), the High Court had 753 struck down  the relevant  Rules of 1966 by holding that the levy, charge or recovery of any amount of still-head duty in respect of  liquor which had not been actually lifted by the licensee was  not justified  and that  the  demand  to  that extent was  liable to be quashed. In the instant case, since the liability  under the  1967 rules was of a similar nature as the  liability under  the  1966  Rules,  the  High  Court followed the  Judgment in  Bhajan Lal,  (supra) quashed  the levy and  set  aside  the  order  whereby  the  respondents’ licence was  cancelled and  they were called upon to pay the difference between  the amount  which they had agreed to pay under the  terms of their auction and the amount realised in the re-auction of the vend.      The sheet-anchor of the respondents’ argument before us is that  the decision  of the  High Court  in Bhajan Lal was affirmed by  this Court  in Civil  Appeals 1042  and 1043 of 1968 (decided  on August 21, 1972) and since, in the instant case, the  High Court  has merely  followed the  decision in Bhajan Lal, the State’s appeal must fail. If the matter were to rest  there, as  assumed by the respondents’ counsel Shri Tirath Singh  Munjral, the  contention would be unassailable because  the   position  would   then  approximate   to  the application  of  a  mathematical  formula:  Bhajan  Lal  was affirmed by  this Court;  the judgment  of the High Court in the instant  case follows  Bhajan Lal;  the  judgment  under appeal must  therefore be  upheld. But after the decision of the High  Court in  Bhajan Lal  (supra) was affirmed by this Court on  August 21,  1972,  the  legal  position  has  been further examined  by a  Constitution Bench  of this Court in Har Shankar & Ors. v. The Dy. Excise & Taxation Commissioner & Ors.  The learned Solicitor General places strong reliance on that  decision and contends that the judgment of the High Court must, in the light of that decision, be over-ruled. We must  proceed  to  consider  the  decision  in  Har  Shankar straightaway.      Har Shankar  was a  case from  Punjab  and  though  the instant case  is from  Haryana, the  liquor auctions in both the cases  are governed by the Punjab Excise Act, 1 of 1914, and the  Punjab Liquor  Licence Rules, 1956, as amended from time  to   time.  Har  Shankar’s  case  has  an  interesting relationship with  the present proceedings because it was as a result  of the  decision of  the Punjab  and Haryana  High Court in  the instant  case, which was rendered on March 12, 1968 that  the Punjab  Liquor  Licence  Rules  were  further amended on  March 22 and the auction impugned in Har Shankar

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was held  on March 23, 1968. The liability arising under the auction in Har Shankar was upheld by the High Court and this Court, not under the Rules which are relevant in the instant case, but under the Rules which were amended in order 754 to meet  the judgment of the High Court in the instant case. This, from  the respondents’ point of view, would apparently furnish an  important consideration  for distinguishing  the decision in Har Shankar But, as we will presently point out, the Solicitor General relies upon that decision on an aspect which is altogether different and of fundamental importance.      In Har  Shankar, the appellants’ bid was accepted in an auction held on March 23, 1968 for the right to sell country liquor at  two vends  in Ludhiana.  The appellants  paid the security deposit  but were  unable to  meet their obligation under the  conditions of  auction and  fell in arrears. When the State  demanded the  payment, threatened  to cancel  the licences  granted   to  the   appellants  and  declared  its intention to  resale the  vends, the  appellants filed  writ petitions in  the High  Court of  Punjab and  Haryana asking that  the   auction  be   quashed  and  the  respondents  be restrained from  enforcing the  obligation arising under its terms and  conditions. The  High Court  having dismissed the writ petitions,  the licensees filed an appeal to this Court by certificate.      What is  important for  our purpose  in this  appeal is that the State of Punjab, which was respondent to the appeal in Har  Shankar, (supra)  raised a  preliminary objection to the maintainability  of the  writ  petitions  filed  by  the appellants and  that objection was upheld by this Court. The preliminary objection  was that  such of  the appellants who offered their  bids in  the auctions  did  so  with  a  full knowledge of  the terms  and  conditions  attaching  to  the auctions and that they could not be permitted to wriggle out of the contractual obligations arising out of the acceptance of their  bids. Holding  that the  preliminary objection was well-founded, this Court observed:      "Those interested  in running  the country liquor vends      offered their bids voluntarily in the auctions held for      granting licences  for the  sale of country liquor. The      terms and  conditions of auctions were announced before      the auctions  were held and the bidders participated in      the auctions without a demur and with full knowledge of      the  commitments   which   the   bids   involved.   The      announcement of  conditions governing the auctions were      in the nature of an invitation to an offer to those who      were interested in the sale of country liquor. The bids      given in  the auctions  were offers made by prospective      vendors to  the Government. The Government’s acceptance      of those bids was the acceptance of willing offers made      to it.  On such  acceptance, the  contract between  the      bidders and  the  Government  became  concluded  and  a      binding agreement came into existence between them. The      successful bidders were then granted licences 755      evidencing the  terms of  contract between them and the      Government, under  which they  became entitled  to sell      liquor. The licensees exploited the respective licences      for  a   portion  of  the  period  of  their  currency,      presumably  in  expectation  of  a  profit.  Commercial      considerations may  have revealed  an error of judgment      in the  initial  assessment  of  profitability  of  the      adventure but  that is  a normal  incident  of  trading      transactions. Those  who contract  with open  eyes must      accept the  burdens of  the  contract  along  with  its

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    benefits. The  powers of  the Financial Commissioner to      grant liquor licences by auction and to collect licence      fees through  the medium  of auctions  cannot  by  writ      petitions be questioned by those who, had their venture      succeeded, would  have relied upon those very powers to      found a  legal claim. Reciprocal rights and obligations      arising  out  of  contract  do  not  depend  for  their      enforceability upon  whether a  contracting party finds      it prudent  to abide  by the  terms of the contract. By      such a  test no  contract could  ever  have  a  binding      force." (page 263) At page  266 of  the Report, the Court further observed that the writ  jurisdiction of  High Courts under Article 226 was not  intended   to  facilitate   avoidance  of   obligations voluntarily incurred.      The Writ Petitions filed by the respondents in the High Court in  the instant  case are  open precisely  to the same objection which  was upheld  by this  Court in  Har  Shankar (supra).  They  entered  into  a  contract  with  the  State authorities with the full knowledge of conditions which they had to  carry out in the conduct of their business, on which they had  willingly and voluntarily embarked. The occurrence of a  commercial difficulty inconvenience or hardship in the performance of  those conditions,  like the  sale of  liquor being  less  in  summer  than  in  winter,  can  provide  no justification for  not  complying  with  the  terms  of  the contract  which  they  had  accepted  with  open  eyes.  The respondents could not therefore invoke the writ jurisdiction of the  High  Court  to  avoid  the  contractual  obligation incurred by  them voluntarily.  On this  ground  alone,  the State is entitled to succeed in this appeal.      The judgment in Har Shankar was followed in Sham Lal v. State of Punjab wherein, appellants were the highest bidders in an  auction for  the sale  of  country  liquor  vends  at various places  in the  State of Punjab. The appellants were called upon  by the State to pay the amounts which they were liable to pay under the terms of the auction, 756 whereupon they  filed writ  petitions in  the High  Court to challenge the  demand. Relying  upon the  passage  from  Har Shankar (supra)  extracted above,  the Court  held that  the licensees could  not be  permitted to  avoid the contractual obligations voluntarily  incurred by them and that therefore the High  Court  was  right  in  refusing  to  exercise  its jurisdiction under  Article 226 of the Constitution in their favour.      In view  of these  decisions, the preliminary objection raised   by   the   learned   Solicitor   General   to   the maintainability  of   the  writ   petitions  filed   by  the respondents has  to be  upheld. We hold accordingly that the High Court  was in  error in entertaining the writ petitions for the  purpose of  examining whether the respondents could avoid their  contractual liability  by challenging the Rules under which the bids offered by them were accepted and under which they  became entitled  to conduct  their business.  It cannot ever  be that  a licensee can work out the licence if he finds  it profitable  to do  so; and he can challenge the conditions under  which he agreed to take the licence, if he finds it commercially inexpedient to conduct his business.      Learned counsel  for the  respondents  has  called  our attention to  the distinction,  which this Court drew in Har Shankar, (supra)  between the  Rules which  were impugned in Har Shankar  on one  hand, and  those which were impugned in Bhajan Lal,  (supra) and  in the  instant case on the other. There is  no doubt  that such a distinction exists. In fact,

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the judgment  of the  Punjab and Haryana High Court which is impugned before  us was specifically referred to at page 282 of the  Report in  Har Shankar  but was distinguished on the ground that  the  rules  in  the  two  sets  of  cases  were different. As  we have  already pointed  out, the  licensing rules were amended on March 22, 1968 because of the judgment which the High Court gave in this case on March 12, 1968 and the auction  in Har  Shankar was  held in  pursuance of  the amended rules on March 23, 1968. But that, to our mind, is a separate matter altogether. Even if it be true that there is difference between  the rules  involved in  the present case and those  which came up for examination in Har Shankar, the preliminary objection  rests on  an entirely different basis which would  remain unaffected  by the difference in the two sets of  Rules. We must therefore affirm that, even assuming that there  is a  material difference in the Rules which are relevant for  our purpose  and the Rules which were impugned in Har  Shankar, (supra)  the writ  petitions filed  by  the respondents are liable to fail on the narrow ground on which the preliminary  objection of  the State  was upheld  in Har Shankar. 757      Apart  from   the  fact   that  the  respondents’  writ petitions are liable to fail on the ground stated above, the State’s appeal  must succeed  on another ground canvassed by the learned  Solicitor General  which  was  also  urged  and accepted in Har Shankar. It was observed in Har Shankar that the main  focus of  controversy on  the merits of the matter related to  the power  of the Government to levy and realise large licence  fees either through the medium of auctions or on scales fixed under the rules. After referring to the long history  of  liquor  licensing  and  after  considering  the various provisions  of the  Punjab Excise  Act 1914  and the Rules framed  thereunder, this  Court held that since rights in regard  to the  manufacture and  sale of  intoxicants are vested in  the State,  it is  open to  it to part with those rights for consideration; that the amounts which are charged to the  licensees who  offer their  bids in auction sales of vends are  neither in  the nature of a tax nor in the nature of excise  duty; and  that, the  true nature  of the  charge which the  Government levies  in such  cases is that it is a price which the State charges as a consideration for parting with its privileges in favour of the licensee. Such a charge is a  normal incident  of a trading or business transaction. What the  State could  itself do  in  the  exercise  of  its privilege, it  authorizes another  to do by charging a price for parting with its privilege. A price can neither be a tax nor excise duty.      The  High   Court  has   recorded  in  its  judgment  a concession said  to have  been made  by the learned Advocate General on behalf of the State of Haryana that "Rupees 17.60 is the  still-head duty per proof litre". In the application dated May  2, 1968 filed by the State Government in the High Court for certificate to appeal to this Court, it was stated that in  the interest  of justice  it was necessary that the points involved  in the  writ petition  be  decided  by  the Supreme Court  since they affected "lacs of rupees as excise duty". This makes it plausible that the concession was made. But considering  the tenor  of  the  arguments  advanced  on behalf of  the State  Government in  the High Court, it does not appear  likely that  any  concession  was  made  by  the Advocate General  regarding the  nature of the charge. It is disputed before  us that  the Advocate General made any such concession and indeed even in the Memorandum of Appeal which was filed in this Court, it was stated specifically that the

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High Court  was in error in saying that the Advocate General had made  the particular concession and that, as a matter of fact, "it was vehemently argued by the Advocate General that the auction  was  only  in  terms  of  money  which  was  to represent the  amount of  fee for  the privilege  of selling country liquor  at a  particular shop;  only the  amount  of money was  to be  calculated by  multiplying the  number  of proof litres bid by Rs. 17.60 p.". We might add that the 758 concession, if any, made by the Advocate General in the High Court cannot  affect the true legal position that the amount which the  respondents became  liable to pay under the terms of the  auction is  not excise  or still-head  duty but is a price which  the Government  charged for  parting  with  its privilege, during  the currency of the period covered by the contract.      On this  consideration also, apart from the validity of the preliminary objection, the respondents’ writ petition is liable to  fail. The  amount which the respondents agreed to pay to  the State  Government under the terms of the auction is neither  a fee properly so called which would require the existence of a quid pro quo, nor indeed is the amount in the nature of excise duty, which by reason of the constitutional constraints has  to be primarily a duty on the production or manufacture of  goods produced  or manufactured  within  the country. The respondents cannot therefore complain that they are being asked to pay "excise duty" or "still-head duty" on quota of  liquor not taken, lifted or purchased by them. The respondents agreed  to pay  a certain sum under the terms of the auction  and the  Rules only prescribe a convenient mode where by  their liability was spread over the entire year by splitting it  up into  fortnightly  instalments.  The  Rules might as  well have  provided for  payment of a lump sum and the very  issuance of  the licence  could have  been made to depend on the payment of such sum. If it could not be argued in that  event that  the lump sum payment represented excise duty, it  cannot be  so argued  in the  present event merely because the  quota for  which the respondents gave their bid is required  to be  multiplied by a certain figure per proof litre and  further because  the respondents  were given  the facility of  paying the  amount by instalments while lifting the quota  from time to time. What the respondents agreed to pay was the price of a privilege which the State parted with in their favour. They cannot therefore avoid their liability by contending  that the  payment which they were called upon to make  is truly  in the  nature of excise duty and that no such duty  can be  imposed on liquor not lifted or purchased by them.      In Panna  Lal v. State of Rajasthan it was held by this Court that  the licence  fee stipulated  to be  paid by  the licensees was the price or consideration or rental which the Government charged  them for  parting with its privilege and that it  was  a  normal  incident  of  trading  or  business transaction. It  is true  that the  Court also  said that no excise duty could be collected on undrawn liquor but it held that while  enforcing the  payment of  the guaranteed sum or the stipulated sum mentioned in the licences, the Government was not seeking to levy or recover excise 759 duty on  undrawn liquor.  In the  instant case too, what the Government is  trying to  recover from the respondents is in essence the  price of the privilege with which it has parted in their favour and not excise duty on undrawn liquor.      Strong reliance  was placed  by the  respondents on the decisions of  this Court  in Bimal Chandra Banerjee v. State

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of Madhya  Pradesh, State of Madhya Pradesh v. Firm Gappulal etc. and  Excise Commissioner,  U.P., Allahabad v. Ram Kumar in support  of their  contention that  what they  are called upon to  pay by  the Government  is excise  duty.  In  Bimal Chandra Banerjee, it was held by this Court that the levy of excise duty  on undrawn  liquor was  beyond the power of the State Government  and that  therefore the  rule imposing the condition to  that effect  was invalid.  That  decision  was followed  in   the  Madhya  Pradesh  case  where  also,  the licensees  were  required  to  pay  what  was  described  as "Pratikar", which  was nothing  but excise  duty on  undrawn liquor.  The  same  situation  obtained  in  the  U.P.  case because, the  real nature of the payment which the licensees were required  to make  there was  excise  duty  on  undrawn liquor.      These decisions cannot help the respondents because the true position,  as stated  earlier, is that the amount which the respondents are called upon to pay is not excise duty on undrawn liquor  but is  the price  of a  privilege for which they offered their bid at the auction of the vend which they wanted to conduct.      Thus the respondents must fail in their contention both on account  of the objection to the maintainability of their writ petition  and on  merits concerning  the nature  of the payment which they are liable to make.      There is  however  one  other  point  which  cannot  be overlooked and  on which the respondents may possibly have a plausible case. It is urged by Shri Tirath Singh Munjral for the respondents  that the  re-auction which  was held on May 23, 1967 was not in accordance with the Rules and therefore, the respondents  cannot be called upon to pay the difference between the  amount which  they had  agreed to  pay and  the amount which  was fetched  in the  reauction of the vend. In paragraph 14  of the  writ petition,  it is averred that the respondents were never informed as to where and at what time the resale  of the  vend would  be held  on May  23, that no notice of  the intended resale was given as required by Rule 36(3) of the Punjab Liquor Licence Rules 760 1956, that  in fact no other notice was published or affixed at any  conspicuous  public  place  notifying  the  proposed resale nor  indeed was the resale announced even by the beat of drum. According to the respondents, no wide publicity was given to  the  reauction  and  even  the  residents  of  the adjoining  villages   who  would  have  been  interested  in offering bids  were not  aware of  the reauction.  All  that happened on  May 23,  according to the respondents, was that one Lal  Chand, a  leading licensee  of Haryana, went to the office of the Excise & Taxation Officer, Rohtak, and managed to  have  his  bid  accepted.  These  irregularities  it  is contended,  resulted   in  the  startling  consequence  that whereas in  the auction  held on  March 27, 1967 the highest bid, namely,  of the  respondents was  for a quota of 62,100 litres equivalent to Rs. 10,92,960.00. in the reauction held on May  23, 1967  the highest  bid was  only for  a quota of 15,000 proof litres equivalent to Rs. 2,46,400.00.      In the counter-affidavit dated August 16, 1967 filed by Shri Pritam  Singh, Deputy  Excise &  Taxation Commissioner, the allegations  made in  paragraph 14  of the writ petition are denied by saying that the reauction held on May 23, 1967 "was duly published in accordance with rules".      The High  Court has  rejected  the  contention  of  the respondents in  this behalf.  But it  seems to  us that  its judgment on this aspect of the matter suffers, with respect, from a misunderstanding of the grievance of the respondents.

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Their main grievance that due publicity was not given to the reauction, as  a  result  of  which  proper  bids  were  not received, has  been overlooked  by the  High  Court  and  it merely dealt  with  the  question  whether  the  respondents themselves had  notice of the reauction and whether the date of the  reauction ought  to have been fixed by the Financial Commissioner himself  and by no other person. The High Court is right  that  the  respondents  did  have  notice  of  the reauction, as  is clear  from the  order dated  May 17, 1967 passed  by   the  Deputy  Excise  &  Taxation  Commissioner, Headquarters, Haryana,  while  cancelling  the  respondents’ licence.  It  also  appears  clear  that  the  date  of  the reauction need  not be  fixed by  the Financial Commissioner himself. But  there  is  no  discussion  whatsoever  in  the judgment of  the High  Court, on  the question as to whether due publicity  was given to the reauction as required by the Rules. In paragraph 14 of their rejoinder-affidavit filed in the High Court on September 14, 1967, respondents had stated that it  was incorrect that the reauction was duly published in accordance  with the  Rules. Alongwith  their  rejoinder, respondents filed  affidavits  of  three  Sarpanchas,  three members of  the Panchayats  and a  Lamberdar to show that no notice whatsoever was given of 761 the reauction  to the  people in the vicinity of Biswan Meel village. The  High Court  has not  even made  a reference to these affidavits,  while dealing  with the  particular point (namely, contention  No. 2  before the  High  Court),  which bears  out   what  we  have  stated  above  that  it  really misdirected itself’ while examining the contention raised by the respondents  in regard  to the  absence of due publicity for the reauction.      This makes  it necessary  to remand  the matter  to the High Court  in order  to enable it to record its findings on two outstanding  questions: (1)  whether  it  was  necessary according to  the Rules  which were in force at the relevant time to give adequate publicity to the reauction and, (2) if so,  whether  such  publicity  was  in  fact  given  to  the reauction. If  the officers  of the  State have defaulted in carrying out  their obligation,  if any,  in the  matter  of giving due publicity to the reauction, the consequence could be that  the respondents  may  not  be  liable  to  pay  the difference between  the amount which they were liable to pay and the amount realised in the reauction.      In the  result, except  for the contention in regard to the two  questions mentioned in the preceding paragraph, the State must  succeed. We  shall, however,  have to  await the findings of the High Court on the two points mentioned above before passing the final order, which can only be done after the findings  of the  High Court are received. We direct the High Court to decide the aforesaid questions on the material as it  stands on  the record and on such further material as the parties may desire to adduce. The State, especially, may like to  file a  further affidavit in reply to the rejoinder affidavit of the respondents along with which the affidavits of three Sarpanchas, three members of certain Panchayats and of a  Lamberdar were  filed. The High Court will certify its findings to this Court within three months from to-day. S.R.                                 Appeal allowed in part. 762