# Kuldeep Agarwal v. The State of U.P. & Ors

- **Citation:** (2023) 5 ILRA 1091
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2023-04-04
- **Case number:** Writ Tax No. 1039 of 2021
- **Bench:** Pankaj Bhatia
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/kuldeep-agarwal-v-the-state-of-u-p-ors-50148
- **Pages:** 16

## Headnote

A. Tax Law - Cancellation of license -
Search and Seizure - U.P. Excise Act:
Section
74
-
Uttar
Pradesh
Excise
Settlement of Licenses for Retail Sale of
Foreign
Liquor
(Excluding
Beer)
(Seventeenth Amendment) Rules, 2019-
Rule 18(1); The Uttar Pradesh Excise
(Settlement of Licenses for Retail Sale of
Beer) Rules, 2001 - It is well settled that
the show-cause notice is issued to put the
assessee/licensee on guard and to enable
him to file a reply to the allegations
contained in the show-cause notice and
infractions, which are alleged against the
licensee in the said show-cause notice.
(Para 28)
1092 INDIAN LAW REPORTS ALLAHABAD SERIES
A show-cause notice invoking a particular
provision must specifically allege in the
show-cause notice and in the absence of
such averments, the said show-cause
notice is not sustainable. (Para 31)

The show cause notice must put the
assessee to notice which of the various
omissions or commissions stated in the
proviso is committed to extend the period
from six months to five years. That unless
the assessee is put to notice the assessee
would have no opportunity to meet the
case of the Department. (Para 32)

The show-cause notice served upon the
petitioner, refers to the search carried out at the
licensed premises and the recovery of the liquor
from the said premises, and after recording the
summary of the search carried out at the
premises proceeds to allege against the
petitioner that the said averments were in
violation of Condition Nos. 5, 6 & 7 and has
caused a loss of special fees of excise duty; the
said grounds were alleged for proposing the
cancellation of the license and for confiscation
of the license fees. (Para 27)

The petitioner in the show-cause notice in
question, alleges infraction of Condition Nos. 5,
6 & 7. In the cancellation order, the appellate
order and the revisional order, there is no
finding to the effect that there was any violation
of Condition Nos. 5 & 6, the only finding is in
respect of Condition No. 7, thus, it could not be
presumed that while giving a reply to the showcause notice, the petitioner had to presume that
any infraction as contained in Rule 18(1)(a) to
(i) were also alleged against the petitioner. In
the event, respondents were of the view that
the action is proposed to be taken for violation
of conditions specified in Rule 18(1)(a) to (i), it
ought to have been specifically stated. (Para 34)

B. If the intent of the legislature while
framing the rules was to compound the
offences referred to in Rule 18(1)(a) to
(g), the same ought to have been
mentioned in the list as has been done in
respect of the infractions mentioned in the
table attached to Rule 18(5). Clearly the
infractions referred to in Rule 18(1)(a) to (i) are
not mentioned in the infractions which are said
to be specified in the table annexed to Rule
18(5) and the same are different. The argument
of petitioner in respect of infractions referred to
at Serial No. 15 in the li

## Text

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5 All. Kuldeep Agarwal Vs. The State of U.P. & Ors.
1091
interest on or before the first date of
hearing and in any case, as per the second
part of sub-rule(1) of Rule 5 of Order XV
CPC, he was under the specific obligation
to make regular deposit of the monthly
amount due, whether he was admitting any
such dues or not.
16.
In
the
totality
of
facts
and
circumstances, we are clearly of the view
that there was absolutely no reason for the
High Court to have interfered in the present
case, where the Trial Court had struck off
the defence after finding that there was no
evidence on record to show the payment or
deposit of rent in favour of the plaintiff by
the defendantrespondent. The Revisional
Court had also approved the order of the
Trial Court on relevant considerations.
Even the High Court did not find the pleas
taken by the defendant-respondent to be of
bonafide
character,
particularly
when
survey number of the shop let out to him
was clearly stated in the sale deed executed
in favour of the plaintiff. We find it rather
intriguing that, despite having not found
any cogent reason for which discretion
under Rule 5 of Order XV CPC could have
been exercised in favour of the defendantrespondent, the High Court, in the last line
of paragraph 45 of the order impugned,
abruptly stated its conclusion that: 'yet the
defendant/tenant
deserves
some
indulgence'.

12. Undisputedly, so far as the present
case is concerned, facts are again the same.
There is no dispute on the point that after
first hearing of the case, petitionerdefendant has not deposited any amount as
rent, required to be paid on month to month
basis. Once, it is undisputed that rent has
not been deposited before the court
concerned there is no provision in law to
grant any relief, but the only option is to
strike off the defence as provided in Order
XV Rule 5 of CPC.

13. In view of facts and law laid
down by the Court, I found no illegality
& infirmity in the impugned orders
dated
20.01.2023
&
25.01.2023.
Accordingly, revision lacks merit and is
dismissed.

14. No order as to costs.
----------
(2023) 5 ILRA 1091
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 04.04.2023

BEFORE

THE HON'BLE PANKAJ BHATIA, J.

Writ Tax No. 1039 of 2021

Kuldeep Agarwal ...Petitioner
Versus
The State of U.P. & Ors. ...Respondents

Counsel for the Petitioner:
Sri Abhishek Sharma, Sri Neeraj Sharma

Counsel for the Respondents:
C.S.C.

A. Tax Law - Cancellation of license -
Search and Seizure - U.P. Excise Act:
Section
74
-
Uttar
Pradesh
Excise
Settlement of Licenses for Retail Sale of
Foreign
Liquor
(Excluding
Beer)
(Seventeenth Amendment) Rules, 2019-
Rule 18(1); The Uttar Pradesh Excise
(Settlement of Licenses for Retail Sale of
Beer) Rules, 2001 - It is well settled that
the show-cause notice is issued to put the
assessee/licensee on guard and to enable
him to file a reply to the allegations
contained in the show-cause notice and
infractions, which are alleged against the
licensee in the said show-cause notice.
(Para 28)
1092 INDIAN LAW REPORTS ALLAHABAD SERIES
A show-cause notice invoking a particular
provision must specifically allege in the
show-cause notice and in the absence of
such averments, the said show-cause
notice is not sustainable. (Para 31)

The show cause notice must put the
assessee to notice which of the various
omissions or commissions stated in the
proviso is committed to extend the period
from six months to five years. That unless
the assessee is put to notice the assessee
would have no opportunity to meet the
case of the Department. (Para 32)

The show-cause notice served upon the
petitioner, refers to the search carried out at the
licensed premises and the recovery of the liquor
from the said premises, and after recording the
summary of the search carried out at the
premises proceeds to allege against the
petitioner that the said averments were in
violation of Condition Nos. 5, 6 & 7 and has
caused a loss of special fees of excise duty; the
said grounds were alleged for proposing the
cancellation of the license and for confiscation
of the license fees. (Para 27)

The petitioner in the show-cause notice in
question, alleges infraction of Condition Nos. 5,
6 & 7. In the cancellation order, the appellate
order and the revisional order, there is no
finding to the effect that there was any violation
of Condition Nos. 5 & 6, the only finding is in
respect of Condition No. 7, thus, it could not be
presumed that while giving a reply to the showcause notice, the petitioner had to presume that
any infraction as contained in Rule 18(1)(a) to
(i) were also alleged against the petitioner. In
the event, respondents were of the view that
the action is proposed to be taken for violation
of conditions specified in Rule 18(1)(a) to (i), it
ought to have been specifically stated. (Para 34)

B. If the intent of the legislature while
framing the rules was to compound the
offences referred to in Rule 18(1)(a) to
(g), the same ought to have been
mentioned in the list as has been done in
respect of the infractions mentioned in the
table attached to Rule 18(5). Clearly the
infractions referred to in Rule 18(1)(a) to (i) are
not mentioned in the infractions which are said
to be specified in the table annexed to Rule
18(5) and the same are different. The argument
of petitioner in respect of infractions referred to
at Serial No. 15 in the list attached to Rule 18(5)
cannot be accepted as the infractions mentioned
in Rule 18(1)(a) to (i) are in substance different
and appear to be more rigorous infractions
compared to infractions referred to in the table
in Rule 18(5). Therefore, the infractions referred
to in Rule 18(1)(a) to (i) are not compoundable.
(Para 36)

C. Allegations were levelled against the
petitioner w.r.t. opening of the shop on
the days which were prohibited and as
contained in Condition No. 7 to the
license. Although, in the seizure memo,
there is no averment that the liquor was
being sold on the day of prohibition,
however, while passing the cancellation order
and in the show-cause notice, it was alleged
and found that the petitioner was selling liquor
on the day of prohibition, however, the said
infraction clearly finds mentioned at Serial No.
10 in the list attached to Rule 18(5) and thus, in
terms of Rule 18(5), the said infraction falls
within the compoundable offence and thus, it
was incumbent upon the authorities to
have passed an order in respect of
compounding of the said offence as
prayed by the petitioner, which has not
been done in the present case. (Para 37)

D. It is essential to notice that the special
fees is chargeable for sale of liquor and
beer at the restaurants, however, the said
special fees or its loss can be caused only
if the sale is effected. Merely by recovery
of the liquor allegedly belonging to
another shop and there being no finding in
respect of the sale of such liquor, there is
no basis whatsoever to record that loss of
special fees was being caused and thus, to
that extent, the finding recorded is wholly
perverse. (Para 39)

This Court finds that the infractions in respect of
Condition Nos. 5 & 6 of the license which were
alleged in the show-cause notice are not
established and proved against the petitioner.
The infractions specified in Rule 18(1)(a) to (i)
were not alleged in the show-cause notice, as
such, the same are not established against the
5 All. Kuldeep Agarwal Vs. The State of U.P. & Ors.
1093
petitioner. The infractions w.r.t. violation of
Condition No. 7 of the license stands partially
justified, however, the same is compoundable at
the rate of Rs. 30,000/-in terms of the table
u/Rule 18(5). (Para 40, 41)

It is directed that the respondents authorities
shall pass a fresh order for compounding of the
offence in respect of the infractions of Condition
No. 7 of the license at the rates specified in the
table to Rule 18(5) (Serial No. 10 of the list) by
passing a fresh order within a period of one
month from today. (Para 44)

Writ petition partly allowed. (E-4)

Precedent followed:

1. Nashirwar & ors. Vs State of Madhya Pradesh
& ors., (1975) 1 SCC2 9 (Para 22)

2. Kaur & Singh Vs Collector of Central Excise,
New Delhi, 1997 (94) E.L.T. 289 (Para 29)

3. Collector of Central Excise Vs H.M.M. Ltd.,
1995 (76) E.L.T. 497 (Para 29)

4. Raj Bahadur Narayan Singh Sugar Mills Ltd.
Vs U.O.I., 1996 (88) E.L.T. 24 (Para 29)

5. Oryx Fisheries Pvt. Ltd. Vs U.O.I., 2011 (266)
E.L.T. 422 (Para 30)

6. Aban Loyd Chiles Offshore Ltd. Vs Commr. Of Cus.,
Maharashtra, 2006 (200) E.L.T. 370 (Para 32)

7. Collector of Central Excise, Banglore Vs
Gammon Far Chems Ltd., (2003) 11 SCC 693
(Para 33)

Present petition challenges the order
dated
06.10.2021,
03.01.2020
and
27.10.2019 passed by the respondent
No.1 (State of U.P. through Special
Secretary (Excise), Govt. of U.P., at
Lucknow),
respondent
No.2
(Excise
Commissioner
U.P.,
Mumfordganj,
Prayagraj)
and
respondent
No.3
(Collector, Aligarh), respectively.

Kuldeep Agarwal Vs State of U.P. and Ors.
(04.04.2023 - ALLHC) : MANU/ UP/ 1317/
2023
(Delivered by Hon'ble Pankaj Bhatia, J.)

1. Heard Shri Neeraj Sharma, learned
counsel for the petitioner and Sri A.C.
Tripathi, counsel for the respondents.

2. Present petition has been filed
challenging the order dated 06.10.2021,
03.01.2020 and 27.10.2019 passed by the
respondent no.1, 2 and 3.

3. Facts, in brief, are that the
petitioner was granted a bar license of
Hotel Ganesh Garden & Restaurant at
Khaier, District Aligarh in the year 2012
under Rule 8(ii) of the Rules relating for
vending
foreign
liquor
read
with
Notification No.25535 and Notification
No.10759; license fees is said to have been
paid up to the year 2019 - 20.

4. It is alleged against the petitioner
that an inspection was carried out at the bar
of the petitioner on 02.10.2019 and in the
said inspection, certain irregularities were
found. From the inspection report it
transpires that certain bottles of liquor
which were of different shops were found
in the bar of the petitioner for which the
license was granted. It was also found that
the bar was running on the date of
prohibition through salesman. In terms of
the search and seizure carried out, spot
memo was prepared and an FIR was lodged
on 03.10.2019 against the licensee and the
salesman on the same allegations as
recorded in the search and seizure memo.

5. In terms of the said inspection,
several irregularities were found in the
licensed premises; the petitioner was served
with a show cause notice on 03.10.2019
(Annexure - 2). The infractions recorded in
the search and seizure memo were stated in
the show cause notice and it was stated that
1094 INDIAN LAW REPORTS ALLAHABAD SERIES
on the basis of the infractions, it transpires
that the petitioner had violated Condition
No.5, 6 and 7 of the license and further loss
of revenue was caused as there was a
provision for charging a special fees for
serving liquor at the bar.

6. In the light of the infractions and
on the allegations that prima-facie, the
licensee was breaching Condition Nos.5, 6
& 7 of the licensee and was evading the
payment of special fees, the petitioner was
called upon to show-cause as to why the
steps may not be taken for cancellation of
the license. The petitioner was required to
submit a reply within a period of seven
days. Simultaneously, alongwith the said
show-cause notice, a suspension order was
also passed against the petitioner.

7. The petitioner submitted a reply to
the said show-cause notice on 12.10.2019
before Respondent No.3 (Annexure - 3)
denying the allegations as levelled in the
show-cause notice on all grounds and in
addition to the said denial, made a request
that the case of the petitioner be considered
for compounding in terms of the mandate
of Section 74 of the U.P. Excise Act
(hereinafter referred to as 'the Act').

8. After considering the reply filed by
the petitioner, an order came to be passed
on 27.10.2019 (Annexure - 4) whereby in
exercise of powers conferred by virtue of
Rule 18(1) of The Uttar Pradesh Excise
Settlement of Licenses for Retail Sale of
Foreign
Liquor
(Excluding
Beer)
(Seventeenth Amendment) Rules, 2019 and
The Uttar Pradesh Excise (Settlement of
Licences for Retail Sale of Beer) Rules,
2001 as amended in the year 2019
(hereinafter referred to as ''the Rules,
2019'), license of the petitioner was
cancelled.

9. The petitioner approached this
Court by filing a writ petition challenging
the order of cancellation dated 27.10.2019.
The said petition was dismissed on the
ground of availability of alternative remedy
of appeal under Section 11(1) of the Act.
The petitioner preferred an appeal under
Section 11(1) of the Act, which too was
dismissed vide order dated 03.01.2020. The
petitioner once again filed a writ petition
challenging the appellate order. The said
writ petition was dismissed on the ground
of availability of remedy of revision before
the State Government. The petitioner
preferred a revision under Section 11(2) of
the Act before the State Government. The
revision also came to be dismissed on
06.10.2021. All the said three orders are
under challenge in the present writ petition.

10. Shri Neeraj Sharma, learned
counsel for the petitioner argues that the
grant of license is governed by the U.P.
Excise
Act
and
the
Rules
framed
thereunder. He draws my attention to the
specific Rules of 2019 framed with regard
to sale of beer as well as the sale of wine
and liquor other than beer.

11. He argues that in terms of the said
Rules, a specific power with regard to
cancellation of license is prescribed under
Rule 18. He argues that power to cancel
license under Rule 18 can be invoked by
the licensing authority in the event of any
of the conditions specified in Clause (a) to
(i) of Rule 18(1). He argues that Rule 18(5)
prescribes
for
compounding
breaches
pertaining to the retail licenses on terms
indicated in the table as contained in Rule
18(5). He further argues that in any event,
the power to compound the infractions is
contained in Section 74 of the Act, which
power has not been exercised by the
authorities despite there being a request in
5 All. Kuldeep Agarwal Vs. The State of U.P. & Ors.
1095
the objections filed in the show-cause
notice.

12. He further argues that the showcause
notice
had
alleged
infractions/violation of Condition Nos.5, 6
& 7 of the license granted to the petitioner
as well as the allegation that there was an
evasion of special fees by the petitioner,
thus, the petitioner could have been
expected to give reply only to the
allegations levelled against him. He argues
that there was no averment in the showcause
notice
with
regard
to
any
breach/conditions prescribed under Rule
18(1)(a) to (i) of the 2019 Rules and in that
regard, he submits that the authorities have
exceeded in passing the order in excess of
the allegations levelled in the show-cause
notice.

13. He further argues that the
allegations as levelled in the search and
seizure memo are that the liquor was meant
for the shop situate at Lodha and foreign
liquor shop Khaier Aada (of which the
petitioner and his wife are licensees) and
subsequently, in respect of the shop at
Lodha, the respondents have themselves
proceeded to compound the offences and
have regularized the license and, it was
incumbent upon the respondents to have
compounded the infractions.

14. In respect of the allegations
levelled against the petitioner in the showcause notice, he draws my attention to the
specific allegation that the bar was found
open on the date the sale is prohibited i.e.
2nd October and with regard to the said
allegation, he argues that Rule 18(5) and
the table annexed thereto specifically
provides for compounding of the said
infraction on payment of fees as prescribed.
He argues that in terms of the power
conferred under Section 34 of the Act and
the Rule, the word used is "may" and not
"shall", and thus, a wide discretion vests in
the licensing authority to cancel or not to
cancel the license, however, the said
discretion should be exercised in terms of
the mandate of the Rules and not in an
arbitrary manner. He, thus, argues that the
orders
impugned
passed
against
the
petitioner are liable to be quashed as being
arbitrary and in violation of the spirit of the
Act and the Rules framed thereunder.

15. Shri A.C. Tripathi, learned
counsel appearing for the respondents
vehemently opposed the writ petition and
argues that the infractions alleged in the
show-cause notice and found during the
search and seizure operation were serious
in nature and no error has been done in
cancelling the license through impugned
order.

16. Controverting the argument of
learned counsel for the petitioner, Shri A.C.
Tripathi argues that Rule 18 has been
framed in terms of the power conferred by
Section 41 of the Act. On a plain reading of
provisions of Rule 18(1), infractions
contained in Clause (a) to (i) provide for
grounds for suspension or cancellation. He
argues that argument of Shri Neeraj Sharma
that all the offenses are compoundable as
provided under Rule 18(5) is incorrect for
the simple reason that the infractions
contained in Rule 18(1) are not mentioned
in the table specified in Rule 18(5) and
thus, both the two Rules being Rule 18(1)
and Rule 18(5) operate in different spheres
and on that count, argument of counsel for
the petitioner is liable to be rejected.

17. He further argues that another
argument of counsel for the petitioner with
regard to Section 74 of the Act is also liable
1096 INDIAN LAW REPORTS ALLAHABAD SERIES
to be rejected as Section 74 is itself divided
into two parts; one pertaining to the
infractions and the power flowing from
Section 34, and the other in respect of
offences which are punishable under
Section 64 and Section 68. He argues that
both can be compounded separately in
terms of the powers conferred, however, in
the
present
case,
the
cancellation
proceedings have not emanated from
Section 34 and in fact, have emanated from
Rule 18(1) and thus, the powers of
compounding provided for under Section
74 cannot be availed of.

18. He, thus, argues that once that
power was not available, the licensing
authority has not made any error in not
considering the request for compounding as
prayed in the reply to the show-cause
notice.

19. He further argues that although in
the show-cause notice, there is a reference
to violation of Condition Nos.5, 6 & 7 of
the license, however, on the composite
reading of the show-cause notice, various
allegations
which
are
traceable
to
infractions contained in Rule 18(1)(a) to (i)
can be traced and thus, the submission of
counsel for the petitioner on that count that
the show-cause notice was vague is liable
to the rejected.

20. In the light of the submissions
made by the parties, following questions
emerge for determination:

i. Whether the show-cause notice,
which alleges violation of Condition
Nos.5, 6 & 7 of the license is enough to
take action for cancellation by taking
recourse to Rule 18(1)(a) to (i) of the
Rules, 2019 ?

ii. Whether the offences under Rule
18(1)(a) to (i) of the Rules, 2019 are
compoundable under Rule 18(5) ?

iii.
Whether
the
allegation
of
opening of the shop/restaurant on the day
of prohibition is a compoundable offence
in terms of the mandate of Rule 18(5) ?

21. To decide the said issues as
framed above, it is essential to see the
scheme of the Act and the Rules framed
therein.

22. It is well settled that there is no
right of license and it is only a privilege
granted by the State Government as held
by the Hon'ble Supreme Court in the case
of Nashirwar & Ors. v. State of Madhya
Pradesh & Ors.; (1975) 1 SCC 29.

23. The U.P. Excise Act makes a
special provision empowering the State
Government to grant license for the sale
of liquor and the other intoxicant and for
charging excise duty on the same. The
said Act also empowers the licensing
authority to take action for cancellation
or suspension of the license so granted in
terms of the powers under Section 34 of
the Act. Section 34 reads as under:

"34. Power to cancel or suspend
licenses,
etc.-
(1)
Subject
to
such
restrictions as the State Government may
prescribe, the authority granting any
license, permit or pass under this Act may
cancel or suspend it --

(a) if any duty or fee payable by the
holder thereof be not duly paid; or

(b) in the event of any breach by the
holder of such license, permit or pass or by
his servants, or by any one acting on his
behalf
with
his
express
or
implied
permission of any of the terms or
5 All. Kuldeep Agarwal Vs. The State of U.P. & Ors.
1097
conditions of such license, permit or pass;
or

(c) if the holder thereof is convicted of
any offence punishable under this Act or
any other law for the time being in force
relating to revenue, or of any cognizable
and non-bailable offence, or of any offence
punishable under the Dangerous Drugs
Act, 1930, or under the Merchandise Marks
Act, 1889, or of any offence punishable
under sections 482 to 489 (both inclusive)
of the Indian Penal Code; or

(d) where a license, permit or pass has
been granted on the application of the
grantee of an exclusive privilege under this
Act, on the requisition in writing of such
grantee; or

(e) if the conditions of the license or
permit provide for such cancellations or
suspension at will.

(2) When a license, permit or pass
held by any person is cancelled under
clause (a), (b) or (c) of sub-section (1), the
authority aforesaid may cancel any other
license, permit or pass granted to such
person by, or by the authority of the State
Government under this Act or under any
other law for the time being in force
relating to excise revenue or under the
Opium Act, 1878.

(3) No Compensation or refund
claimable for cancellation or suspension of
license, etc. under this section.- The holder
shall not be entitled to any compensation
for the cancellation or suspension of his
license, permit or pass under this section
nor to refund of any fee paid or deposit
made in respect thereof."

24. In addition to the powers
conferred under Section 34 of the Act,
further powers have been conferred under
Section 35 of the Act.

25. It is interesting that Section 40
and Section 41 of the Act empowers the
State
Government
and
Excise
Commissioner to make rules for enforcing
and regulating the provisions of the Act.
Section 40 and Section 41 are quoted
herein below:

"40. Power of State government to
make Rules.- (1) The State Government
may make rules for the purpose of carrying
out the provisions of this Act or other law
for the time being in force relating to excise
revenue:

Provided that the Uttar Pradesh
Licensing under the Surcharge Fee System
Rules,
1968
made
by
the
Excise
Commissioner, Uttar Pradesh, with the
previous sanction of the State Government,
as amended by the Excise Commissioner,
Uttar Pradesh, from time to time, before the
commencement of this Act, shall until
altered
or
repealed
by
the
State
Government rules made under this section
be deemed to be and always to have as
valid and effective as if the said rules were
duly made by the State Government under
this section.

(2) In particular and without prejudice
to the generality of the foregoing provision,
the State Government may make rules --

(a) regulating the delegation of any
powers by the Excise Commissioner or
Collector under section 10 (2) (h);

(b) prescribing the powers and duties
of officers of the Excise Department;

(c) prescribing the manner in which
appeals or revisions shall be presented and
the procedure for dealing with such appeals
and revisions;

(d) regulating the import, export,
transport or possession of any intoxicant;

(e)
regulating
the
periods
and
localities for which and the persons to
1098 INDIAN LAW REPORTS ALLAHABAD SERIES
whom licenses for the vend by wholesale or
by retail of any intoxicant may be granted;

(f) prescribing the procedure to be
followed and the matters to be ascertained
before, any license for such vend is granted
for any locality ;

(g) for the prohibition of the sale of
any intoxicant to any person or class of
persons;

(h) for the grant of expenses to
witnesses and compensation for loss of time
to persons released under section 49 on the
ground that they have been improperly
arrested and to persons charged before a
Magistrate with offences punishable under
the Act but acquitted;

(i) regulating the power of Excise
Officers to summon witnesses from a
distance under the provisions of section 49;

(j) for declaring the Excise Officers to
whom,
and
the
manners
in
which,
information or aid should be given under
section 56;

(k)
for
the
prohibition
of
the
employment by the license-holder of any
person or class of persons to assist in his
business in any capacity whatsoever;
(l) for the prevention of drunkenness,
gambling or disorderly conduct in or near
any licensed premises and the meeting or
remaining of persons of bad character in
such premises.
(m) for the grant of rewards to officials,
officers or informers by the Collector out of
and up to fifty per cent of composition fee
and by the Magistrate trying the case, out
of and up to fifty per cent of fine recovered
under the Act.

(3) * * *"

"41. Power to Excise Commissioner to
make Rules.- (1) The Excise Commissioner
subject to the previous sanction of the State
Government may make rules ;

(a) regulating the manufacture, supply,
storage or sale of any intoxicant including -
-

(i) the erection, alteration, repair,
inspection, supervision, management and
control of any place for the manufacture,
supply, storage or sale of such article and
the fittings implements and apparatus to be
maintained therein ;

(ii) the cultivation of the hemp plant
(cannabis sativa;

(iii) the collection of portions of the
hemp plant (cannabis sativa) from which
any intoxicating drug can be manufactured
and the manufacture of any intoxicating
drug therefrom ;

(b) regulating the deposit of any
intoxicant in a warehouse and the removal
of any intoxicant from any such warehouse
or
from
any
distillery
brewery
or
manufactory;

(c) prescribing the scale of fees or the
manner of fixing the fees payable for any
licence, permit or pass including any
consideration for the grant of any exclusive
or other privilege granted under section 24
or section 24-A or for sorting of any
intoxicant:

Provided that nothing contained in
this clause shall be construed to prevent the
State
Government
from
levying
by
notification made from time to time, any
fee, including vend fee, as part of
consideration for the granting of any such
privilege.

Explanation--
(1)
Fees
may
be
prescribed
under
this
sub-clause
at
different rates for different classes of
licences, permits, passes or storage and for
different areas ;

(2) The manner of fixing such fee or
consideration includes any one or more of
the following manners, namely :--
5 All. Kuldeep Agarwal Vs. The State of U.P. & Ors.
1099

(i) auction,

(ii) invitation of tenders,

(iii) assessment on the basis of sales
made or quota lifted under the license,
permit or pass.

(d) regulating the time, place and
manner of payment of any duty or fee ;

(e) prescribing the restrictions under
and the conditions on which any license,
permit or pass may be granted, including
provision for the following matters -

(i) the prohibition of the admixture
with any intoxicant of any substance
deemed to be noxious or objectionable;

(ii) the regulation or prohibition of the
reduction
of
liquor
by
a
licensed
manufacturer or licensed vendor from a
higher to a lower strength;

(iii) the fixing of the strength price or
quantity in excess of or below which any
intoxicant shall not be sold or supplied,
and of the quantity in excess of which
denatured spirit shall not be possessed, and
the prescription of a standard of quality for
any intoxicant;

(iv) the prohibition of sale except for
cash;

(v) the fixing of the days and hours
during which any licensed premises may or
may not be kept open, and the closure of
such premises on special occasions ;

(vi) the specification of the nature of
the premises to which any intoxicant may
be sold and the notices to be exposed at
such premises ;

(vii) the form of the accounts to be
maintained and the returns to be submitted
by license-holders; and

(viii) the regulation of the transfer of
licenses ;

(f) (i) declaring the process by which
spirit manufactured in India shall be
denatured ;

(ii) for causing such spirit to be
denatured through the agency or under the
supervision of its own officers;

(iii) for ascertaining whether such
spirit has been denatured ;

(g) providing for the destruction or
other disposal of any intoxicant deemed to
be unfit for use ;

(h)
regulating
the
disposal
of
confiscated articles."

26. In terms of the rule making power
conferred under Section 41 of the Act, the
State Government has made Rules known
as "Uttar Pradesh Excise Settlement of
Licenses for Retail Sale of Foreign Liquor
(Excluding
Beer)
(Seventeenth
Amendment) Rules, 2019. Rule 18(1) to (5)
thereof provide for suspension/cancellation
and compounding of the license and
penalties, which are quoted herein below:

"18. Suspension and cancellation of
the license and penalties. - (1) Licensing
authority may suspend or cancel the
license:-

(a) if any bottle is found in the
licensed premises on which duty has not
been paid and which does not carry the
security Code affixed duly approved by the
Excise Department as proof of payment of
duty.

(b) if any other kind of liquor or
intoxicating drug (for which license is not
granted) is found in the licensed premises.

(c) if any liquor of intoxicating drug is
found in the possession of the licensee
against the provisions of the Act of rules.

(d) if the affidavit submitted by the
licensee at the time of application is found
incorrect and assertions made therein are
found to be false.

(e) if the licensee is convicted of an
offence punishable under the Act or any
other law for the time being in force
1100 INDIAN LAW REPORTS ALLAHABAD SERIES
relating to revenue, or of any cognizable
and non-bailable offence, or any offence
punishable under the Narcotics Drugs and
Psychotropic Substances Act, 1985 or of
any offence punishable under Sections 482
to 489 of the Indian Penal Code, 1860.

(f) if any bottle/container is found in
the licenced premises on which maximum
retail price is not printed and

(g) if it is found that the licence has
been obtained in a false name and the
licensee is holding the licence on behalf of
some other person.

(h) If any caramel, colour, essence,
hologram/ shrink sleeve or barcode,lebel,
capsule,seal or other illegal material found
in licence premises.

(i) If any Adulteration with water or
any other substance/dilution of liquor
mixing of low category liquor with high
category liquor is found in licence
premises. Action under other relevant
provisions of law shall also be taken

(2) The licensing Authority shall
immediately- suspend the license and issue
a show cause notice for cancellation of
license and forfeiture of security deposit.
The licensee shall submit his explanation
within 7 days of the receipt of notice.
Thereafter, the licensing authority shall
pass suitable orders after giving due
opportunity of hearing to the licensee, if he
so desires.

(3) The licensee shall not be entitled to
claim any compensation or refund for
suspension or cancellation of licence under
this rule.

(4) In case the licence is cancelled the
licensee may also be blacklisted and
debarred from holding any other excise
licence.
(5) Matter of compoundable breaches
pertaining or retail licenses such as below,
shall
be
imposed
with
minimum
compounding fee-
SI.
No.
Type of
violatio
n
For
first
time
(in
Rs)
For
seco
nd
time
(in
Rs)
For third
time
(in
Rs)
1
Shop
found
opened
before or
after the
stipulate
d time.
2500
3000 5000
2
Unautho
rised
sales
man
found to
be
making
sale.
5000 7000 10,000
3
Stock
register
not
produce
d
when
asked
for.
10,00
0
15,0
00
20,000
4
Stock
register
found
incompl
ete.
10,00
0
15,0
00
20,000
5
Temperi
ng with
bottles
and
quarters
or
their
labels or
bar code,
pilfer
10,00
0
15,0
00
20,000
5 All. Kuldeep Agarwal Vs. The State of U.P. & Ors.
1101
proof
cap
or
seals.
6
Found
having
recourse
to
inducem
ent
to
the
customer
with
a
view to
increasin
g
sales
such
as
dancing
or
gamblin
g.
5000
7000 10,000
7
To store
duty
paid
stock in
unauthor
ised
premises
/
warehou
se.
20,00
0
25,0
00
30,000
8
Duty
paid
stock
being
found in
excess of
account.
25,00
0
30,0
00
50,000
9
Found
selling
of loose
liquor.
5000
10,0
00
15,000
10
Found
30,00
40,0
50,000
making
sale
of
liquor
during
days
of
prohibiti
on
and
closure.
0
00
11
Any
alteratio
n in the
premises
without
permissi
on.
20,00
0
25,0
00
30,000
12
Found
selling
of liquor
above
the
prescribe
d MRP.
75,00
0
1500
00
Proceeding
of
cancellatio
n of license
13
Nondisplayin
g
of
essential
informat
ion
accordin
g to rule
or
displayin
g faulty
informat
ion
on
the
signboar
d
installed
outside
the
premises
.
5000
10,0
00
20,000
1102 INDIAN LAW REPORTS ALLAHABAD SERIES
14
On being
found no
proper
arrange
ment of
cleanline
ss in the
shop.
2000
5000 10,000
15
Any
other
irregular
ity
which is
not
mention
ed under
serial
-
01 to 14
2,000 5,00
0
10,000

27. To decide the first issue as
recorded above, the show-cause notice
served upon the petitioner and as contained
in Annexure - 2, refers to the search carried
out at the licensed premises and the
recovery of the liquor from the said
premises, and after recording the summary
of the search carried out at the premises
proceeds to allege against the petitioner
that the said averments were in violation of
Condition Nos.5, 6 & 7 and has caused a
loss of special fees of excise duty; the said
grounds were alleged for proposing the
cancellation
of
the
license
and
for
confiscation of the license fees. Condition
Nos.5, 6 & 7 of the license granted to the
petitioner are as under:

"5- शिाब केवल पैगों (पैग बिाबि 50 जम0ली0 में)
बेिा जायेगा। कोई जबकी मुहि बन्द बोतलों में नहीं की जायेगी।

6- लाइसेंस धािी एल0एल0 - 2 से केवल 750
जम०ली० क्वाटसश में सम्भािण प्राप्त किने के हकदाि होंगे। उन्हें
अपने स्टॉक में जनपस औि जपन्टस िखने की अनुज्ञा नहीं होगी।

7- बाि का 14 अप्रैल (अम्बेडकि जयन्ती), 15
अगस्त (स्वतन्त्रता जदवस), 02 अक्टूबि (गॉधी जयन्ती), 26
जनविी (गणतन्त्र जदवस) को अवकाश िहेगा। "

28. It is well settled that the showcause
notice
is
issued
to
put
the
assessee/licensee on guard and to enable
him to file a reply to the allegations
contained in the show-cause notice and
infractions, which are alleged against the
licensee in the said show-cause notice.

29. It is gainful to note the judgment
of the Hon'ble Supreme Court in the case of
Kaur & Singh v. Collector of Central
Excise, New Delhi; 1997 (94) E.L.T. 289
wherein the Supreme Court following the
earlier two judgments in the case of
Collector v. H.M.M. Ltd.; 1995 (76) E.L.T.
497 and Raj Bahadur Narayan Singh
Sugar Mills Ltd. v. U.O.I.; 1996 (88)
E.L.T. 24 recorded in Para - 3 as under:

"3. This Court has held that the party
to whom a show cause notice of this kind is
issued must be made aware of the
allegation against it. This is a requirement
of natural justice. Unless the assessee is
put to such notice, he has no opportunity to
meet the case against him. This is all the
more so when a larger period of limitation
can be invoked on a variety of grounds.
Which ground is alleged against the
assessee must be made known to him, and
there is no scope for assuming that the
ground is implicit in the issuance of the
show cause notice. [See Collector of
Central Excise v. H.M.M. Limited, 1995
(76) E.LT. 497 and Raj Bahadur Narayan
Singh Sugar Mills Limited v. Union of
India, 1996 (88) E.L.T. 24]."

30. The Hon'ble Supreme Court
further had the occasion to consider the
5 All. Kuldeep Agarwal Vs. The State of U.P. & Ors.
1103
need for issuance of a show-cause notice
and the requirements in the show-cause
notice to satisfy the test of fairness in the
case of Oryx Fisheries Private Limited v.
Union of India; 2011 (266) E.L.T. 422
wherein the Supreme Court recorded as
under:

"24. It is well settled that a quasijudicial authority, while acting in exercise
of its statutory power must act fairly and
must act with an open mind while initiating
a show cause proceeding. A show cause
proceeding is meant to give the person
proceeded
against
a
reasonable
opportunity of making his objection against
the proposed charges indicated in the
notice.

25. Expressions like "a reasonable
opportunity of making objection" or "a
reasonable opportunity of defence" have
come up for consideration before this Court
in the context of several statutes.

26. A Constitution Bench of this Court
in Khem Chand v. Union of India and
Others, reported in AIR 1958 SC 300, of
course
in
the
context
of
service
jurisprudence, reiterated certain principles
which are applicable in the present case
also.

27. Chief Justice S.R. Das speaking
for the unanimous Constitution Bench in
Khem Chand (supra) held that the concept
of
"reasonable
opportunity'
includes
various safeguards and one of them, in the
words of the learned Chief Justice, is:

"(a) An opportunity to deny his guilt
and establish his innocence, which he can
only do if he is told what the charges
leveled against him are and the allegations
on which such charges are based,"

28. It is no doubt true that at the stage
of show cause, the person proceeded
against must be told the charges against
him so that he can take his defence and
prove his innocence. It is obvious that at
that stage the authority issuing the chargesheet, cannot, instead of telling him the
charges,
confront
him
with
definite
conclusions of his alleged guilt. If that is
done, as has been done in this instant case,
the entire proceeding initiated by the show
cause notice gets vitiated by unfairness and
bias and the subsequent proceeding become
an idle ceremony."

31. The Hon'ble Supreme Court
further had the occasion to consider the
scope of a show-cause notice and its intent
in the case of Collector of Central Excise
v. H.M.M. Limited; 1995 (76) E.L.T. 497
and held that a show-cause notice invoking
a particular provision must specifically
allege in the show-cause notice and in the
absence of such averments, the said showcause notice is not sustainable.

32. The Hon'ble Supreme Court once
again had the occasion to consider the
scope of show-cause notice issued under
the Customs Act in the case of Aban Loyd
Chiles Offshore Ltd. v. Commr. Of Cus.,
Maharashtra; 2006 (200) E.L.t. 370,
wherein the Supreme Court recorded as
under:

"20. The proviso to Section 28 can be
invoked where the payment of duty has
escaped by reason of collusion or any
willful misstatement or suppression of facts.
So far as 'misstatement or suppression of
facts' are concerned, they are qualified by
the word "willful". The word "willful"
preceding the words "misstatement or
suppression of facts" clearly spells out that
there has to be an intention on the part of
the assessee to evade the duty.

21. This Court while interpreting
Section 11A of the Customs Act in Collector
of Central Excise v. H.M.M. Ltd. (supra)
1104 INDIAN LAW REPORTS ALLAHABAD SERIES
has observed that in order to attract the
proviso to Section 11A(1) it must be shown
that the excise duty escaped by reason of
fraud, collusion or willful mis-statement of
suppression of fact with intent to evade the
payment of duty. It has been observed:

"...