Whether the Respondent is entitled to refund of the licence fee and the differential amount for the period during which the unit was sealed. ? Apex court held that when there is no prior adjudication in favour of the Respondent and the Respondent was given an opportunity to show cause as to why the premises should not be sealed – when after considering the explanation submitted by the Respondent, the penalty was imposed on the Respondent and due to the failure of the payment of the amount of penalty, the premises were sealed – the respondent is not entitled for any refund of licence fee and differentaial amount during which the unit was sealed

Non-Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
Civil Appeal No. 7951 of 2019
(Arising out of SLP (C) No.4647 of 2019)
THE STATE OF BIHAR & ORS.
…. Appellant(s)
Versus
M/S RIGA SUGAR CO. LTD.
…. Respondent (s)
With
Civil Appeal No. 7952 of 2019
(Arising out of SLP (C) No.4664 of 2019)
THE STATE OF BIHAR & ORS.
…. Appellant(s)
Versus
M/S WELCOME DISTILLERIES PRIVATE LIMITED.
…. Respondent (s)
Civil Appeal No. 7957 of 2019
(Arising out of SLP (C) No.3593 of 2019)
THE STATE OF BIHAR & ORS.
…. Appellant(s)
Versus
M/S SHIPRA BEVERAGE PRIVATE LIMITED.
…. Respondent (s)
Civil Appeal No. 7958 of 2019
(Arising out of SLP (C) No.3595 of 2019)
THE STATE OF BIHAR & ORS.
…. Appellant(s)
Versus
M/S K.M. SUGAR MILLS LIMITED. …. Respondent (s)
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J U D G M E N T
L. NAGESWARA RAO, J.

  1. These Appeals arise from a judgment of the High
    Court of Judicature at Patna in the Writ Petitions filed by
    the Respondents. The Writ Petitions were allowed by the
    High Court and the Appellant- State was directed to refund
    the licence fee and the differential amount recovered from
    the Respondents for the period during which their premises
    were unlawfully sealed/closed.
    As the facts of each case are different, we proceed to
    deal with the Appeals separately.
    Civil Appeal No. 7951 of 2019
    (Arising out of SLP (C) No.4647 of 2019)
    (M/S RIGA SUGAR CO. LTD.)
  2. A tender notice dated 31.01.2014 was issued by
    the Department of Excise and Prohibition, Government of
    Bihar, inviting applications for grant of Exclusive
    Privilege for manufacture and supply of country liquor in
    PET bottles. The State was divided into 17 zones and
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    the 17 lowest applicants in the financial bid would be
    eligible for grant of Exclusive Privilege in accordance
    with their preference to a particular zone. By an order
    dated 04.03.2014, Exclusive Privilege for manufacturing
    and supply of country liquor for zone 11 constituting the
    districts of Muzzafarpur, Sitamarhi and Sheohar for the
    period between 01.04.2014 to 31.03.2019 was awarded
    to M/s Riga Sugar Company Limited (hereinafter, ‘the
    Respondent’). The base rate fixed for supply of 200 ML
    PET bottle of country liquor was fixed at Rs.5.78/-. The
    difference between the base price and the bid price (in
    this case Rs.4.07/-) calculated on the Minimum
    Guaranteed Quantity (MGQ) was payable by the supplier
    to the Government in advance for a period of every
    three months i.e. on 15th March, 15th June, 15th
    September and 15th December. As per the tender
    conditions the supplier is required to obtain a licence in
    Form 27 for manufacture and supply of country liquor to
    Bihar State Beverages Corporation Limited (BSBCL) at
    the rate of Rs.1/- per litre calculated on the Minimum
    Guaranteed Quantity.
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  3. The Respondent was required to supply
    5,25,220.786 LPL country liquor of 60 degree strength
    per month. After issuance of a letter of grant on
    04.03.2014, a liquor licence was obtained by the
    Respondent. Pursuant thereto, the Respondent
    established a bottling plant at Muzzafarpur and
    commenced production and supply of country liquor to
    BSBCL on 01.02.2015. As the Respondent was not
    supplying the prescribed quantity of country liquor to
    BSBCL, a warning was issued to ensure that the
    prescribed quantity of country liquor was supplied. On
    09.12.2015, a penalty of Rs.1 lakh was levied on the
    Respondent for non-supply of minimum quantity of
    country liquor. Pursuant to the inspection report dated
    13.12.2015, the premises of the Respondent was sealed
    by the Superintendent of Excise, Muzzafarpur for nonsupply of minimum quantity of country liquor.
  4. The State of Bihar announced a New Excise Policy
    and imposed total ban on consumption of alcohol in the
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    State in a phased manner. The New Excise Policy which
    was announced on 21.12.2015 contemplated that no
    licence for manufacturing, trading and consumption of
    country liquor shall be granted from 01.04.2016. The
    respondent questioned the order dated 13.12.2015 by
    which its premises was sealed by filing a writ petition.
    Lack of opportunity to the Respondent before the order
    of sealing was passed prompted the High Court to allow
    the Writ Petition by its judgment dated 25.01.2016. In
    the meanwhile, the licence of the Respondent was
    suspended for a period of 90 days by an order dated
    20.01.2016 issued under Section 42 (3) of the Bihar and
    Orissa Excise Act, 1915 (for short “the Act”) as the
    liquor supplied by the Respondent was found to be of
    higher strength of 70.8 degrees UP instead of required
    strength of 60 degree UP. Another Writ Petition was filed
    by the Respondent questioning the order of suspension
    dated 20.01.2016 which was dismissed as withdrawn in
    view of the order of the Excise Commissioner, Bihar
    dated 04.02.2016 by which the earlier order of
    suspension dated 20.01.2016 was withdrawn. A
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    notification was issued on 04.02.2016 directing that
    production, sale and utilization of all country liquor shall
    be completely prohibited in the State of Bihar w.e.f.
    01.04.2016 and that the remaining stocks of all country
    liquor lying in the outlets as on 31.03.2016 shall be
    destroyed.
  5. The Respondent submitted a representation
    seeking refund of the licence fee and differential amount
    for the period between 13.12.2015 to 04.02.2016 during
    which its manufacturing unit was closed. The
    Respondent quantified the amount of refund at
    Rs.1,29,42,928/-. On 31.03.2016, a notification was
    issued implementing the New Excise Policy by imposing
    an absolute ban on manufacturing, bottling, distribution,
    sale, purchase, possession and consumption of country
    liquor w.e.f. 01.04.2016.
  6. The Respondent filed a Writ Petition in the High
    Court seeking a direction to the Appellants to refund the
    proportionate amount of licence fee calculated at the
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    rate of Rs.1/- per LPL on the Minimum Guaranteed
    Quantity of country liquor and the differential amount
    calculated on the Minimum Guaranteed Quantity of
    country liquor for the period between 13.12.2015 and
    04.02.2016.
  7. The High Court heard the Writ Petition filed by the
    Respondent along with three other Writ Petitions. It was
    held that there was an earlier adjudication that the
    sealing of the premises was wholly unjust and improper
    and hence, the Respondent and other writ petitioners
    were entitled for refund of the licence fee and the
    differential amount as prayed for. The Appellants,
    therefore, were directed to refund the amount of licence
    fee and the differential amount recovered from the
    Respondent for the period during which the
    manufacturing unit was sealed. Another reason for grant
    of relief by the High Court is that the manufacturers
    were not given an opportunity before orders of
    suspension and cancellation of licenses were passed.
    There was a further direction that the Appellant should
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    consider the claims of the Respondent and the other Writ
    Petitioners regarding compensation for the value of the
    furnished raw material which could not be liquidated by
    31.03.2016 due to the unlawful closure of the
    manufacturing premises.
  8. It was contended by Mr. Maninder Singh, learned
    Senior Counsel appearing for the Respondent that the
    tender conditions were incorporated in the Exclusive
    Privilege and the licence was granted to the Respondent
    as per the scheme of the Act. The Exclusive Privilege in
    relation to the activities of the Respondent was under
    the supervision and control of the State. The employees
    of the Excise Department are deployed on the
    manufacturing plant to ensure that the tender conditions
    are complied with scrupulously. He submitted that the
    premises of the Respondent was sealed on 13.12.2015
    for non-supply of the prescribed quantity of country
    liquor for the month of December, 2015 despite the
    warning issued on 23.11.2015 and a penalty levied on
    09.12.2015. Another ground for sealing the premises
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    was violation of the condition to maintain required buffer
    stock. During the pendency of the Writ Petition filed
    against the order dated 13.12.2015 by the Respondent
    in the High Court, the licence of the Respondent was
    suspended on 20.01.2016 on the basis of an inspection
    report of the Excise Chemical Engineer in which it was
    found that the strength of the liquor was higher than the
    prescribed 60 degree UP. Though the sealing order was
    set aside by the High Court on 25.01.2016, the premises
    were de-sealed only on 04.02.2016, on which date the
    order of suspension was withdrawn. Mr. Singh
    submitted that the order of sealing dated 13.12.2015
    has no connection with the order of suspension dated
    20.01.2016 which was for a different violation of the
    conditions of licence. He relied upon Clause 22 of the
    licence to submit that the Respondent is not entitled for
    any compensation. In this regard, he also referred to
    Section 42 (4) of the Bihar Excise Act according to which
    the holder of a licence shall not be entitled for any
    compensation for its cancellation or its suspension. The
    said provision further contemplates that the licensee is
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    not entitled for any refund of any fee or deposit made. It
    was further submitted by Mr. Singh that the High Court
    committed an error in taking up all the four Writ Petition
    together, especially when the facts are different. He also
    questioned the finding of the High Court that the showcause notice is necessary before an order of suspension
    was passed.
  9. Mr. Navaniti Prasad Singh, learned Senior Counsel
    appearing for the Respondents submitted that the
    sealing order dated 13.12.2015 was set aside by the
    High Court by a judgment dated 25.01.2016 in CWJC
    No.1364 of 2016. The judgement has become final and
    necessarily the Respondent is entitled for refund of the
    licence fee and the deferential amount for the period
    between 13.12.2015 and 20.01.2016. The order dated
    20.01.2016 by which the licence of Respondent was
    suspended was not brought to the notice of the High
    Court by the Appellants when CWJC 1364 of 2016 was
    heard. He submitted that in this case no notice was
    given before the order of suspension was passed. The
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    Writ Petition filed assailing the validity of the suspension
    order had to be withdrawn in view of the revocation of
    the order suspending the licence. He argued that the
    Respondent is entitled for refund of the licence fee and
    the differential amount even for the period between
    20.01.2016 and 04.02.2016.
  10. The point that arises for our consideration in this
    case is whether the Respondent is entitled to refund of
    the licence fee and the differential amount for the period
    during which the unit was sealed. Admittedly, the
    closure for the period between 13.12.2015 and
    20.01.2016 was the subject matter of the judgement in
    CWJC No.1364 of 2016 which was allowed by the High
    Court and the judgment has become final. There cannot
    be any dispute that the Respondent is entitled for the
    refund of the licence fee and the differential amount in
    respect of the period between 20.01.2016 and
    04.02.2016 covered by sealing order. We are also of the
    opinion that the Respondent is entitled for refund of the
    licence fee and differential amount even for the period of
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    suspension i.e. 20.01.2016 to 04.02.2016 for the reason
    that no show-cause notice was given before the order
    was passed. Since orders of cancellation and suspension
    are punitive, the licensee should be given an opportunity
    before the licence is cancelled or suspended.1
    Therefore, the judgment of the High Court is affirmed.
    Appeal is dismissed.
    Civil Appeal No. 7952 of 2019
    (Arising out of SLP (C) No.4664 of 2019)
    (M/S Welcome Distilleries Private Limited).
  11. M/s Welcome Distilleries Private Limited, the
    Respondent herein was granted Exclusive Privilege for
    manufacture and supply of country liquor at the rate of
    Rs.4.32/- per 200 ml. PET bottle for Zone-4, constituting
    the districts of Rohtas and Kaimur for the period
    between 01.04.2014 to 31.03.2019. The Respondent
    established a bottling plant and commenced production
    and supply of country liquor to BSBCL on 01.02.2015.
    During an inspection conducted on 08.05.2015, it was
    1 Thakko Choudhary vs. The State of Bihar, 1971 PLJR 199; Ramnath
    Prasad
    vs. The Collector of Darbhanga and Ors., AIR 1955 Pat 345
    12 | P a g e
    found that the Respondent was not manufacturing
    country liquor as per the Minimum Guaranteed Quantity.
    A notice was issued to the Respondent on 15.07.2015 to
    deposit the advance of the differential amount upto that
    date as the Respondent failed to deposit earlier
    instalments of the differential amount. Consequently,
    the licence of the Respondent was suspended on
    17.07.2015. The suspension was revoked on 20.07.2015.
    During the inspection conducted on 07.10.2015, it was
    discovered that the alcohol was substandard as the
    strength was higher than the prescribed strength of 60
    degrees UP. The premises was sealed on 19.12.2015
    and the Respondent received a show-cause notice dated
    24.10.2015 to which he replied on 04.01.2016. After
    considering the response of the Respondent, an order
    was passed on 17.01.2016 suspending the licence which
    was challenged before the Board of Revenue. The Board
    of Revenue stayed the order of suspension on
    01.02.2016. Thereafter, the premises were un-sealed on
    09.02.2016. The unit was closed for five days between
    29.02.2016 to 04.03.2016 and for 15 days between
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    17.03.2016 to 31.03.2016 for non-payment of the
    outstanding amount and for short supply of country
    liquor. The New Excise Policy was implemented by a
    total ban on manufacturing of country liquor w.e.f.
    31.03.2016.
  12. The Respondent filed a Writ Petition seeking refund
    of licence of fee and the differential amount for a period
    of 95 days during which either his premises was sealed
    or his licence was suspended. It was contended on
    behalf of the Respondent that the repeated sealing of
    the premises and the suspension of the licence was
    illegal.
  13. The High Court allowed the Writ Petition filed by the
    Respondent and directed refund as claimed for. The
    main reason given by the High Court for allowing the
    Writ Petitions was there was a prior adjudication that the
    sealing orders were illegal, is not applicable to the
    Respondent. According to the learned Senior Counsel for
    the State, the orders of sealing of the premises and the
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    suspension of the licence were not the subject matter of
    any earlier adjudication by the High Court. On behalf of
    the Respondent, it was submitted that the repeated
    orders of sealing of the premises and the suspension of
    the licence would show the mala fide intention of the
    State. He brought to our notice that the order passed by
    the Board of Revenue on 01.02.2016, staying the
    suspension order dated 17.01.2016, in spite of which the
    premises continued to be sealed thereafter.
  14. The sealing of the premises and suspension of
    licence of the Respondent was due to the non-payment
    of the required instalment of the differential amount and
    manufacturing of substandard country liquor. The order
    of suspension of the licence dated 17.01.2016 was
    stayed by the Board of Revenue on 01.02.2016. The
    State filed a Review Application before the Board of
    Revenue which was dismissed on 17.02.2016.
    Immediately thereafter, the premises were un-sealed on
    19.02.2016. The closure of the premises, according to
    the Appellant, for five days between 29.02.2016 and
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    04.03.2016 was due to the non-deposit of the
    outstanding differential amount and from 17.03.2016 to
    31.03.2016 was due to short supply of country liquor are
    justified.
  15. As the closure of the premises of Respondent was
    due to the violation of the tender conditions and the
    conditions of licence, the High Court committed an error
    in allowing the Writ Petitions filed by the Respondent.
    Admittedly, there was no prior adjudication in respect of
    the sealing of the premises or suspension of the licence
    in favour of the respondent. Therefore, the reason given
    by the High Court for holding that the Respondent is
    entitled for refund i.e., on the ground of prior
    adjudication is not correct. The High Court erred in
    holding that no show-cause notices were issued before
    the orders of suspension and sealing of the premises
    were passed. The notices given on 15.07.2015,
    24.12.2015, 25.02.2016 and 26.03.2016 would indicate
    that the Respondent was given sufficient opportunity.
    Moreover, in its response to show-cause notice dated
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    24.12.2015, the Respondent submitted his explanation
    in which there was an admission of production of substandard country liquor. The judgment of the High Court
    cannot be sustained and is set aside.
    Civil Appeal No. 7957 of 2019
    (Arising out of SLP (C) No.3593 of 2019)
    (M/S Shipra Beverage Private Limited).
  16. M/s Shipra Beverage Private Limited, the Respondent
    herein was granted Exclusive Privilege for manufacture
    and supply of country liquor in zone-5 constituting Gaya
    and Aurangabad districts. An inspection was conducted on
    04.01.2016 during which it was found that there is a deficit
    stock and there was violation of Clauses 2(d) (iii) and
    Clause 2(d) (ii) (f) of the letter of grant and Clause 9(f) of
    the Licence. A show-cause notice was issued to the
    Respondent on 27.01.2016. In view of the aforesaid
    irregularities, the licence of the Respondent was
    suspended under Section 42 of the Bihar Excise Act on
    02.02.2016. Thereafter, the licence was cancelled on
    13.02.2016. The Respondent filed CWJC No.2704 of 2016.
    The High Court set aside the order dated 13.02.2016 by its
    judgment dated 20.04.2016.
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  17. The complaint of the Respondent is that the
    manufacturing unit stood closed between 02.02.2016 and
    31.03.2016 due to suspension and cancellation of the
    licence. The orders were challenged successfully in the
    High Court. The Respondent filed a Writ Petition seeking
    refund of the licence fee and the differential amounts for
    the period of closure between 02.02.2016 and 31.03.2016.
  18. As the suspension of the licence of the Respondent
    and cancellation of the licence have been declared illegal
    by the High Court by its judgment dated 20.04.2016 in
    CWJC No.2704 of 2016, the Respondent is entitled for the
    relief granted by the High Court. The Appeal is dismissed.
    Civil Appeal No. 7958 of 2019
    (Arising out of SLP (C) No.3595 of 2019)
    (M/S K.M. SUGAR MILLS LIMITED).
  19. M/s K.M. Sugar Mills Limited, the Respondent-herein
    was a successful bidder for manufacturing and supply of
    country liquor for Zone-10, constituting districts of East
    Champaran and West Champaran for the period from
    01.04.2014 to 31.03.2019. An inspection was conducted on
    27.05.2015 during which it was found that the strength of the
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    manufactured liquor was below the required strength of 60
    degree UP. A notice was issued on 27.05.2015 by which the
    Respondent was directed to show cause as to why his licence
    should not be terminated for causing huge loss to the
    Government. The Respondent was also directed to explain
    as to why a fine of Rs.4,51,08,493/- should not be imposed
    on him for not maintaining the prescribed strength of 60
    degree UP and for illegally manufacturing excess liquor. The
    Respondent submitted its explanation on 11.06.2015 and
    01.07.2015. After considering the explanation submitted by
    the Respondent, the Excise Commissioner imposed a penalty
    of Rs.4,51,08,493/- under Section 42 (g) (i) of the Act. As the
    Respondent failed to pay the penalty amount, the premises
    were sealed on 22.02.2016. As stated above, the New Excise
    Policy came into force on 31.03.2016, and the grievance of
    the Respondent in the Writ Petition was that the sealing of
    the premises for the period between 02.02.2016 to
    31.03.2016 is illegal. Therefore, the Respondent is entitled
    for refund of licence fee and the differential amount. The
    High Court failed to notice that there is no prior adjudication
    in favour of the Respondent and the Respondent was given
    an opportunity to show cause as to why the premises should
    not be sealed. After considering the explanation submitted
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    by the Respondent, the penalty was imposed on the
    Respondent and due to the failure of the payment of the
    amount of penalty, the premises were sealed.
  20. In view of the above, the Civil Appeal No. 7958 of 2019
    arising out of SLP (C) No. 3595 of 2019 is allowed.
    All the Appeals are disposed of accordingly.
    ..……………………………..J.
    [L. NAGESWARA RAO]
    ..……………………………..J.
    [HEMANT GUPTA]
    New Delhi,
    October 18, 2019.
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