Brief of the Case
Supreme Court held In the case of Modern Hotels v CCE that the amount paid for the renewal of licence under Foreign Liquor Rules under the Amnesty scheme will be treated as an adjustment toward interest.
Facts of the Case
The appellant was having a FL-3 licence to run a bar attached to a hotel. The partnership firm was re-constituted on 01.10.1995. On 11.05.2001 the request of the appellant firm for renewal of its FL-3 licence was rejected by the Excise Commissioner on the ground that one of the partners had conducted abkari business in the year 1981-1982 and had incurred dues to the Government of Rs. 70 Lacs which had further grown on account of interest and until 50% of the abkari arrears pending at the time of renewal of the licence was cleared, the licence of the appellant could not be renewed.
Judgment of High Court (Single Bench)
Appellant preferred writ petition in the High Court where the Revenue was directed to grant renewal for the year 2001-2002 on the condition of payment of Rs.20 Lacs towards the arrears in addition to the licence fee. On such payment the licence was renewed for that year. But the writ petition came to be dismissed on 02.04.2002 on a finding that a partnership firm could not claim a separate juristic identity as it is only a totality of every partner and so long one or more partner suffers from liability or disqualification, the licence could not be renewed till the statutory requirement of the relevant rule was satisfied.
Judgment of High Court (Division Bench)
By the interim orders from 2002-2008, the licence was renewed on the strength of additional deposits of Rs. 50 lacs in total. The writ appeal was dismissed following earlier Division Bench judgment dated 24.06.2005.
Contention of the Assessee
The ld. Counsel for the Assessee contended that the Government of Kerala declared an Amnesty Scheme (One Time Settlement Scheme) according to which if the other conditions were satisfied, a lump sum payment of 75% of the principal dues could be sufficient to waive the remaining principal as well as all the penalty and interest. Taking advantage of that scheme the defaulting partner along with his partners of the other partnership paid 75% of the principal amount, i.e., Rs.53,09,440/- and as a result the Excise Department on 10.11.2008 issued a certificate that no amount was now outstanding. The, certificate also mentions that the defaulters got amnesty from paying not only the remaining 25% of the principal amount but also from liability to pay Rs.2,73,47,650/- towards interest upto 31.05.2008.
Also, he contended for the discharge of security furnished by him to the Commissioner of Excise.
Contention of the Revenue
The ld. Counsel for the Revenue have relied upon Rule 6(25) of Abkari Shops (Disposal in Auction) Rules, 1974 where the whole of Rs.50 Lacs had to be and was appropriated towards interest existing at the time the remittance was made and only the remaining dues of interest along with permissible 25% of the principal amount was subsequently written off as per Amnesty Scheme of 2008.
Judgement of Hon’ble Supreme Court
The Hon’ble Supreme Court agreed with the submission on behalf of the respondents that appellant is not entitled to receive refund of Rs.50 Lacs The amnesty earned in 2008 must be confined to the arrears of interest outstanding at the relevant time in 2008. There is no dispute regarding the actual outstanding amounts of principal and interest. The Hon’ble Supreme Court further held that according to Section 5 of the Indian Partnership Act, 1932 the relation of partnership arises from contract and not from status. Such contracts clearly cannot override provisions in a statute or statutory rules. Then further it was held that the factum of excise dues of one of the partners of the appellant and its subsequent payment under the Amnesty Scheme is not in dispute or controversy. Though large part of the interest amounting to several crores could not be recovered but that was on account of grace shown by the Government itself by formulating the Amnesty Scheme of 2008. In such circumstances exercise of writ jurisdiction to help the defaulter would be inappropriate. It would be unjust to direct for refund of Rs.50 Lacs on the premise that its recovery in the manner made is being questioned by the appellant.
Accordingly, the appeals were dismissed.