S. Ravindra Bhat JUDGMENT
S. Ravindra Bhat, J.
1. The State of Kerala, is aggrieved by the judgment of the Kerala High Court, which allowed the Respondent's -(hereafter called "the licensee") writ petition-whereby he claimed for an order quashing a demand in respect of a certain amount towards the balance sought to be recovered after a country liquor license was cancelled.
2. The licensee was the successful bidder for arrack shops in the state of Kerala for the year 1993-94; the bid amount it offered was `60 lakhs. A permit for import of 13,00,920 litres of rectified spirit was awarded. The excise duty payable for the designated quantity, monthly was `3,58,162/-. The licensee entered into an agreement with the State on 01-04-1993. Alleging that the licensee committed default in the payment of the bid amount, in not replenishing the security in a timely manner, the state issued a show cause notice on 23-07-1993 eliciting a response as to why action should not be taken. Later, alleging that the licensee failed to replenish the security amount, the license was cancelled by an order dated 19-08-1993, of the state. The licensed shops were put up for re-auction on seven different dates. However, the re-auction was unsuccessful as there were no bidders. As a consequence, the shops were managed by the Department of Excise in terms of the Abkari Shops Departmental Management Rules, 1972 (hereafter "the Management Rules"). A sum of ` 14,94,570 was collected as departmental management fee and ` 16,50,971/- was collected as duty on rectified spirit for the period 13-09-1993 to 31-03-1994. The state argued that had the licensee continued operating the shop, it would have gained revenues to the tune of ` 1,09,87,989/-. It accordingly demanded dues, from the licensee.
3. The licensee preferred a writ petition for a declaration that the cancellation of the licensee for sale of country liquor for the period 01-04-1993 to 31-03-1994 was illegal and void and that its liability with respect to Group-II arrack shops for the year 1993-94 ended upon the cancellation taking place. It sought to limit its liability for the period April 1993 to 19th August 1994. The petition was dismissed by the single judge. Aggrieved with this, the licensee preferred an appeal to the Division Bench. The Division Bench by a short order-impugned in the present appeal-followed its previous decision and held that since the contracts were entered into before the amendment of Rule 13, the licensee was liable to pay only the actual loss suffered by the government, in realisation of rentals and excise duty. The court directed the government to issue fresh demands in accordance with the Rules and agreements executed with the licensee covering only the actual loss.
4. It is argued on behalf of the state that there was no challenge to Rule 13 of the Management Rules, and as a result, the impugned order was not justified in holding that the licensee was liable only for a limited period. Pointing to the language of Rule 13, it is submitted that with effect from 23-12-1993 an amendment was made in terms of which the question of adjustment of any liability did not arise. Learned Counsel contrasted this with the pre-existing or old Rule 13, which pe........