Writ Petition No. 28491 of 2024 · The High Court
Case Details
- 1 - NC: 2025:KHC:10523 WP No. 28491 of 2024 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 12TH DAY OF MARCH, 2025 BEFORE THE HON'BLE MR JUSTICE B M SHYAM PRASAD WRIT PETITION NO. 28491 OF 2024 (EXCISE) BETWEEN: M/S BEERWORKS RESTAURANTS AND MICROBREWERY PVT LTD SITUATED AT NO. 18, VICTORIA ROAD. VIVEK NAGAR, BENGALURU 560047 REPRESENTED BY ITS DIRECTOR MR. NARAYAN MANEPALLY REP. BY COMPANIES ACT 1956. (BY SRI. PAVANA CHANDRA SHETTY H., ADVOCATE) AND: …PETITIONER 1. THE STATE OF KARNATAKA DEPARTMENT OF EXCISE VIDHANA SOUDHA, BENGALURU 560001 BY ITS SECRETARY. 2. THE EXCISE COMMISSIONER OF KARNATAKA 2ND FLOOR, TTMC BUILDING. A BLOCK, BMTC, SHANTINAGAR, BENGALURU 560027. 3. DEPUTY COMMISSIONER OF EXCISE BANGALORE URBAN DISTRICT PRESENTLY BENGALURU URBAN DISTRICT (BUD-2). Digitally signed by VANAMALA N Location: High Court of Karnataka - 2 - NC: 2025:KHC:10523 WP No. 28491 of 2024 4. PRINCIPAL ACCOUNTANT GENERAL (AUDIT-1) KARNATAKA PARK HOUSE ROAD, BENGALURU - 560 001. …RESPONDENTS
Legal Reasoning
(BY SRI.RUBEN JACOB., AAG FOR SRI. MANJUNATH B., AGA) THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE RESULT OF THE AUDIT CARRIED OUT BY R-4 VIDE LETTER DATED 06.06.2024 BEARING REFERENCE NO. DO.NO.PR.AG/AU-I(AMG-III_/VS- II/A/2024-25 121 WHEREIN OUT OF 24 CASES, INSOFAR AS THE PETITIONER IS CONCERNED, THE PETITIONER WAS IDENTIFIED AS A DEFAULTER FOR "SHORT PRODUCTION OF BEER DURING 2017-18-NON- LEVY OF ED AND AED AS PENALTY" FOR AN AMOUNT OF INR 62,10,472/- COPY OF WHICH IS PRODUCED AS ANNX-A AND RESULTANTLY SET ASIDE (i) THE LETTER DATED 08.07.2024 BEARING REFERENCE NO. ECA/CAG-AUDIT/69/2024-25 THROUGH WHICH INTIMATION OF THE AUDIT REPORT WAS PROVIDED WITH DIRECTIONS TO VERIFY THE DETAILS / INFORMATION PROVIDED IN THE ATTACHED ANNEXURES AND TAKE NECESSARY STEPS TO RECOVER THE AMOUNTS PROVIDED THEREIN, PRODUCED AS ANNX-B ISSUED BY R-2 (ii) THE REMINDER LETTER DATED 24.07.2024 BEARING REFERENCE NO. EXCISE/BEMNAJI-1/AUDIT/22/2018- - 3 - NC: 2025:KHC:10523 WP No. 28491 of 2024 19 ADDRESSED BY THE OFFICE OF THE DEPUTY EXCISE COMMISSIONER/R-3 PRODUCED AS ANNX-C AND (iii) DIRECTIONS ADDRESSED BY THE R-1 DEPARTMENT DATED 31.07.2024 BEARING REFERENCE NO. EXCISE/BREWERY/AUDIT/06/2023- 04 THROUGH WHICH IT HAS BEEN DIRECTED THAT A SUM OF RS. 62,10.472/- BE RECOVERED FROM THE PETITIONER PRODUCED AS ANNX-D. THIS PETITION, COMING ON FOR PRELIMINARY HEARING IN 'B' GROUP, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR JUSTICE B M SHYAM PRASAD ORAL ORDER The petitioner, a Company incorporated under the Companies Act, 2013 and engaged inter alia in the business of manufacture and sale of beer with its own brewing facility at Nimbekaipura village, Bidarahalli Hobli, Bengaluru, has impugned the demand raised by the fourth respondent vide the impugned Demand dated 06.06.2024 [Annexure – A] while seeking certain declarations and writ of prohibition. - 4 - NC: 2025:KHC:10523 WP No. 28491 of 2024 2. Sri. Pavana Chandra Shetty, the learned counsel for the petitioner, submits that the power to raise the demand could indeed be traced to the provisions of the Karnataka Excise (Regulation of Yield, Production and Wastage of Spirit, Beer, Wine or Liquors) Rules, 1998 [for short, 'the Yield Rules 1998'] and the Karnataka Excise (Excise Duties and Fees) Rules, 1968 ['the Karnataka Excise Rules 1968'] but the demand could not have been raised without the petitioner being extended an opportunity and adjudication on the cause that the petitioner could have shown against the proposed demand. 3. Sri. Pavana Chandra Shetty canvasses that the opportunity to be heard insofar as the provisions of the Yield Rules 1998 is in Rule 7 thereof, and insofar as the demand under the Karnataka Excise Rules 1968, though there is no provision, the opportunity of hearing cannot be denied. The learned counsel further submits that the - 5 - NC: 2025:KHC:10523 WP No. 28491 of 2024 demand is a consequence of certain observations by the office of the Principal Accountant General, Karnataka and the Apex Court in State of Bihar and Others Vs. Industrial Corporation (P) Ltd. and Others1 has exposited that when the Authority relies upon an Audit Report, they are required to apply their independent mind to find out whether the respondents were indeed in breach of any requirement. 4. Sri. Reuben Jacob, the learned Additional Advocate General, submits that if the present writ petition is to be disposed of on the short question of reasonable opportunity leaving open all grounds to be considered, he would not oppose such disposal in the light of the peculiarities of the case. This Court must observe that it is not disputed that the demand stems from the Audit Report, and the assertion that the 1 (2003) 11 SCC 465 - 6 - NC: 2025:KHC:10523 WP No. 28491 of 2024 petitioner has not been given an opportunity to show cause against the demand is also not disputed. 5. The Rule 7 of the Yield Rules 1998 indisputably confers a right to be heard and this right is also inherent, given the consequences of demand [including a penalty] when proceedings are under the Karnataka Excise Rules 1968. This would be especially so when the demand is because of certain Audit Report/observations. The Supreme Court in State of Bihar and Others Vs. Industrial Corporation (P) Ltd. and Others [supra] has exposited the above proposition. In the circumstances, this Court is inclined to dispose of the petition on the short question of lack of opportunity reading down the impugned demand as notice and with liberty to the petitioner to show cause against the demand and directing the respondents to consider any cause that may be shown and - 7 - NC: 2025:KHC:10523 WP No. 28491 of 2024 adjudicate on the cause shown leaving open all questions. In the light of the afore, the following:
Decision
ORDER a. The petition is disposed of reading down the impugned demand dated 06.06.2024 issued by the fourth respondent to be a Show Cause Notice with liberty to the petitioner to file further response, if any, within a period of four [4] weeks from the date of receipt of a certified copy of this order. b. The third respondent [the Admitted Authority] who will have to adjudicate in the cause shown, is called upon to decide on the cause before raising a demand. c. It is needless to observe that all questions on the merits of the demand are left open. Sd/- (B M SHYAM PRASAD) JUDGE NV