GOVT OF NCT OF DELHI & ORS. vs BRINDCO SALES PVT LTD

$~7
* IN THE HIGH COURT OF DELHI AT NEW DELHI

% Decision delivered on: 05.07.2024
+ LPA 520/2023 & CM No.33120/2023

GOVT OF NCT OF DELHI & ORS. …..Appellants
Through: Mr Prashant Manchanda, ASC with Mr Mayank Kamra and Ms Nancy Shah, Advs.

versus

BRINDCO SALES PVT LTD …..Respondent
Through: Ms Simran Brar, Mr Vedanta Verma, Ms Kiran Devrani and Mr Swastik Dalai, Advs.

CORAM:
HON’BLE MR. JUSTICE RAJIV SHAKDHER
HON’BLE MR. JUSTICE AMIT BANSAL
[Physical Hearing/Hybrid Hearing (as per request)]
RAJIV SHAKDHER, J. (ORAL):
1. This appeal is directed against an interim order dated 02.05.2023 passed by the learned Single Judge in CM no.9260/2023 of WP (C) 15775/2022. The learned Single Judge has ruled in favour of the respondent/petitioner who had moved the aforementioned application. The operative directions issued by the learned Single Judge are captured in paragraphs 65 and 66 of the impugned order.
2. Briefly stated, the directions issued are the following:
(i) The appellants, in effect, the Government of NCT of Delhi [hereafter referred to as “GNCTD”] would consider the representation of the respondent, i.e., Brindco Sales Pvt. Ltd [hereafter referred to as “Brindco”] concerning the issue relating to excess excise duty levied in respect of leftover stocks. The timeframe fixed for disposal of the representation was six (6) weeks from the date the representation is lodged.
(ii) Rule 56 of the Delhi Excise Rules, 2010 [hereafter referred to as “2010 Rules”] would apply to the leftover stock of Brindco. Brindco would have permission to dispose of the leftover stock within two (2) weeks of receipt of the order.
3. Thus, GNCTD, which has lodged the above-captioned appeal and is represented by Mr Prashant Manchanda, learned Additional Standing Counsel, is aggrieved.
3.1 The thrust of Mr Manchanda’s submission is that since the tenure of the licensee has expired, Brindco would not only have to get the brands which are part of the leftover stock re-registered but will also have to pay fresh excise duty.
4. Insofar as the re-registration of brands is concerned, the argument advanced by Mr Manchanda is based on Rule 63 of the 2010 Rules. It is Mr Manchanda’s submission that Rule 63 has to be read along with Rules 32 and 56 of the 2010 Rules.
5. As far as excise duty is concerned, it is Mr Manchanda’s submission that the direction issued by the learned Single Judge via the impugned order has already been effectuated, i.e., the representation has been disposed of. Therefore, if Brindco is aggrieved, it could take recourse to an appropriate remedy as per law.
6. Quite clearly, what we are called upon to examine is only the following issue, which is, whether Brindco’s leftover stock can be disposed of in accordance with the provisions of Rule 56 of 2010 Rules.
6.1 In this context, we may note what is not in dispute is that Brindco had a liquor licence, concededly, in its possession for 2021-22.
6.2 It is also not in dispute that during that period, brands which are part of the leftover stock were registered with the excise department. It is also not in dispute that excise duty at the rate of 1% of the products’ wholesale price has already been paid.
7. Therefore, what we need to examine is the tenability of the argument advanced on behalf of GNCTD that since the tenure of the licence has expired, Brindco will have to, necessarily, get brands in the leftover stock re-registered in consonance with Rule 63 of the 2010 Rules.
8. Before we proceed further, we would like to cull out the relevant part of the rules on which reliance is placed by GNCTD. The rules are extracted hereafter:
“32. Class of licences and authorities to grant and renew licences. –(1) Subject to the provisions of sub-rule (2), the following classes of licences may be granted and renewed by authorities noted against each, on payment of prescribed fee:-

Sl No.
Form
Details of Licences
Authority empowered to grant
Authority empowered to renew
(1)
(2)
(3)
(4)
(5)
1
L-1
Wholesale vend of Indian liquor, Foreign Liquor, Draught Beer
Deputy Commissioner
Not renewable
2
L-3
Wholesale vend of Country Liquor
Deputy Commissioner
Not renewable
3
L-4
Wholesale vend of Rectified Spirit.
Deputy Commissioner
Deputy Commissioner

xxx xxx xxx

33. Class of permits and authorities to grant and renew permit.-
xxx xxx xxx
(2) In cases where the yearly fee of a licence is determined by auction or tender, a licence shall be granted only to a person, who’s tender or bid is accepted by the Government.
xxx xxx xxx

56. Procedure dealing with left over stock.- If any person, who under these rules, has in his possession, on the expiry, or determination of his licence, any intoxicant, he shall take action for its disposal in the following manner-
(a) he shall submit to the Deputy Commissioner the list of such intoxicants within thirty days from the expiry of the licence indicating therein the sale price of each brand. The Deputy Commissioner may allow him time, not exceeding fifteen days, for the disposal of such stocks to the existing licensees:
Provided that if he fails to submit the stocks list within thirty days from the expiry of licence, the Deputy Commissioner may allow him further time of fifteen days on making additional payment of 10% of the Excise Duty:

Provided further that if he fails to dispose off the stock within said fifteen days, the Deputy Commissioner may allow him fifteen days additional time to dispose off the stock on payment of 10% of the additional Excise Duty:
Provided also that no refund of duty, if paid, shall be allowed on stocks of liquor which are destroyed.]

(b) in case the licensee is unable to dispose of such stocks, in part or in full, within the stipulated time, he shall immediately surrender the same to the Deputy Commissioner alongwith a list mentioning the quantity and brand of undisposed stock on the following day. It shall be open to the licensee to reduce subsequently the sale price earlier intimated by him. If no sale price is intimated to the Deputy Commissioner at the time of surrendering the stocks, it shall be lawful for the Deputy Commissioner to dispose of such stocks to the existing licensees on a price determined by him;

(c) the Deputy Commissioner shall arrange to dispose of the surrendered stock at the price intimated by the outgoing licensee or determined by him. Whenever such price is reduced by the out-going licensee, the Deputy Commissioner shall dispose of the remaining stocks at such reduced price, as may be intimated to him by the former licensee from time-to-time or as determined by him. In case the stocks remain unsold for a period of two months from the date of the determination of the licence, it shall be lawful for the Deputy Commissioner to destroy the stocks, after obtaining the approval of the Excise Commissioner. No compensation shall be payable for such destruction to the outgoing licensee. No refund of duty, if paid, shall be allowed on stocks of liquor which ultimately remained unsold and are destroyed:

Provided that if duty has not been paid on such stock, the Deputy Commissioner shall not order its destruction but may require in writing any person holding a licence to acquire the stock, or any part thereof, by purchase from the former licensee within six weeks of service of the requisition after payment of duty at the rates in force on the date of the requisition, at such price as may have been indicated by the former licensee or such price as the Excise Commissioner may fix after hearing the parties;

(d) in case the out-going licensee fails to surrender the stock of liquor as provided in clause (b) to the Deputy Commissioner it shall be lawful for the Deputy Commissioner to destroy the same
xxx xxx xxx

63. Sale of approved brands only.- The licensee shall not sell liquor of any brand, not approved by the Deputy Commissioner and the Deputy Commissioner shall be under no obligation to permit the sale of any brand of liquor.”

9. A perusal of sub-rule (1) of Rule 32 of the 2010 Rules would show that the licences, of the class specified therein, could be granted or renewed by the concerned authority on payment of the prescribed fee.
10. Sub-rule (2) of Rule 33 provides that where a yearly licence fee is determined via auction or tender, licence can be granted only to that person whose tender or bid is accepted by the government.
11. Insofar as Rule 56 is concerned, it provides a schematic procedure for dealing with leftover stock. Broadly, the scheme provided in Rule 56 is as follows:
(i) Once the licence expires or is determined, the intoxicant in possession of the licensee can be disposed of in the following manner:
(a) The person whose licence has expired, i.e., the outgoing licensee is required to submit a list of such intoxicants within thirty (30) days of expiry of the licence to the Deputy Commissioner. The list is also required to indicate the sale price of each brand.
(b) Thereafter, the Deputy Commissioner is given discretion to grant time for disposal of such stock to the “existing licensees”. The timeframe that the Deputy Commissioner may accord cannot exceed fifteen (15) days. Furthermore, if the outgoing licensee fails to dispose of the stock within the said fifteen (15) days, the Deputy Commissioner may allow him fifteen (15) additional days to dispose of the stock on payment of 10% of additional Excise Duty.
(c) In case, the outgoing licensee fails to submit the details of the stock of intoxicants within thirty (30) days of the expiry of the licence, the Deputy Commissioner is given liberty to grant further time not exceeding fifteen (15) days, albeit on making an additional payment of 10% of excise duty.
(d) However, if the outgoing licensee is unable to dispose of the stock in part or in full within the timeframe stipulated, he is obliged to surrender the same [along with a list mentioning quantity and brand] and convey to the Deputy Commissioner reductions, if any, in the sale price, at the time of surrender of the stock.
(e) If, however, no such intimation of reduction in price is made to the Deputy Commissioner at the time of surrender of the stock, the Deputy Commissioner is empowered to dispose of such stock to the existing licensees at the price determined by him.
(f) In such circumstances, the Deputy Commissioner is obliged to make arrangements for the disposal of the surrendered stock either at the price intimated to him by the outgoing licensee or, as indicated above, at the price determined by him.
(g) What is to be borne in mind is that whenever the outgoing licensee conveys to the Deputy Commissioner the reduced price concerning the stock available with him, the Deputy Commissioner may either dispose of the stock at the reduced price or at the price determined by him.
(h) Importantly, if the stock remains unsold for two (2) months from the date of determination of the licence, the Deputy Commissioner is empowered to destroy the stock after obtaining approval from the Excise Commissioner.
(i) If the destruction of the stock takes place, as indicated above, the outgoing licensee is not entitled to any compensation. Furthermore, the outgoing licensee is not entitled to refund of duty with respect to the unsold stock which is destroyed.
(j) In case the outgoing licensee has not paid duty on the stock available with him, the Deputy Commissioner cannot order its destruction but may require any person holding the licence to acquire the stock or any part thereof by purchasing the same from the outgoing licensee within six (6) weeks of service of requisition, albeit, after payment of duty at the rates in force on the date of requisition, at such price as may be indicated by the outgoing licensee or the price that the Excise Commissioner may fix after hearing the parties.
(k) Where the outgoing licensee fails to surrender the stock as provided in Clause (b) of Rule 56 of the 2010 Rules, it is lawful for the Deputy Commissioner to destroy the stock.
12. As far as Rule 63 is concerned, it simply says that the licensee shall not sell liquor of any brand which is not approved by the Deputy Commissioner and that he would be under no obligation to permit the sale of any brand of liquor.

13. Mr Manchanda’s contends that if Rule 63 is read with Rules 32 and 56 of the 2010 Rules, it would emerge that the sale of leftover stock is prohibited once the tenure of the licensee has expired.
13.1 In other words, Mr Manchanda’s submission is that while the licence was alive, the liquor brands which were registered could be sold, however, once the licence expired the brands would require re-registration before disposal of such liquor stock.
14. According to us, this submission is untenable since we have not been shown any provision either in the 2010 Rules or in the concerned statute, i.e., The Delhi Excise Act, 2009, which would have us conclude that a brand which is registered during the subsistence of the licence requires re-registration after the licence has expired.
15. We may also note that in this context, Mr Manchanda had drawn our attention to Clause 2.2 of the ‘Terms and Conditions for Grant of L-1 License (Wholesale Vend of Indian Liquor and Foreign Liquor) for 2021-22’. Based on the said clause, Mr Manchanda argued that the brands would have to be re-registered once the license has expired.
15.1. To appreciate this submission, the relevant clause is extracted hereafter:
“2.2 The registration of brands shall be open throughout the licensing year 2021-22 on payment of brand registration fee of Rs.1 lakh per brand and Label Registration fee of Rs.5,000/- (Rs. Five thousand) per label.”

16. A careful perusal of Clause 2.2 would show that it provides that registration of brands shall be open throughout the licensing year i.e., 2021 to 2022. The plain language of the Clause suggests that it would be open to a person who has acquired a licence for a given year, i.e., say 2021-22 to seek registration of brands during the period the licence is operable. The language does not suggest, as contended by Mr Manchanda, that once the brand is registered, it would require re-registration after the expiration of the licence.
17. Rule 32 on which reliance was also placed by Mr Manchanda, as noted above, only speaks about licence being granted and renewed by the authorities mentioned therein upon payment of the prescribed fee.
18. Rule 32 does not, contrary to the contention of Mr Manchanda, speak about re-registration of brands upon expiry of the licence. Similarly, as adverted to above, Rule 63 merely stipulates that the licensee shall carry out a sale of only appropriate brands of liquor. There is nothing in the language of Rule 63 which would have us conclude that the brands that were registered during the licence period would require re-registration.
19. As indicated hereinabove, there is no dispute that the leftover stock available with Brindco were brands registered during 2021-22. Therefore, as rightly held by the learned Single Judge, the only rule which would apply if the leftover stock is to be disposed of is Rule 56 of the 2010 Rules.
20 We have, broadly, adverted to above the procedure for disposal of leftover stock. The finer details are embedded in Rule 56, which appears to be a complete code for the disposal of leftover stock.
21. Therefore, we see no reason to interfere with the impugned order.
22. Needless to add, since the timeframe stipulated in the impugned order has already expired, GNCTD will act with due expedition.
23. GNCTD will ensure that leftover stock is disposed of not later than four (4) weeks from the date of receipt of a copy of the judgment.

24. The appeal is, accordingly, dismissed. Consequently, the pending application shall stand closed.
25. Parties will act based on the digitally signed copy of the judgment.

RAJIV SHAKDHER, J

AMIT BANSAL, J
JULY 5, 2024/aj

LPA No.520/2023 Page 10 of 10