Case title: Pernod Ricard India (P) Ltd. v. The State of Madhya Pradesh & Ors.
Case no.: Civil Appeal Nos. 5062-5099 of 2024 Arising out of SLP (C) Nos. 26571-26608 of 2017
Dated on: 19th April 2024
Quorum: Justice Pamidighantam Sri Narasimha and Justice Aravind Kumar
FACTS OF THE CASE
The appellant is a sub-licensee under the M.P. Excise Act, 1915 for manufacture, import and sale of Foreign Liquor, regulated under the Madhya Pradesh Foreign Liquor Rules, 1996. Sub-licensees importing Foreign Liquor are granted transit permits in which the origin, quality, quantity and point of delivery of the imported liquor are recorded. At the point of destination, the consignment is verified for quality and quantity, and a certificate under Rule 13 is granted. Rule 16 prescribes the permissible limits of loss of liquor in transit due to leakage, evaporation, wastage etc. The purpose and object of this Rule is to prevent illegal diversion of liquor for unlawful sale and also to prevent evasion of excise duty. If the permissible limits of loss of liquor are exceeded, the 1996 Rules prescribe imposition of penalty. Rule 19 providing for penalty that could be imposed during the relevant license period of 2009-2010 was about four times the maximum duty payable on foreign liquor. Facts reveal that no action was initiated during the license year of 2009-2010. On 29.03.2011, Rule 19 was substituted by an amendment.
Despite this amendment, a demand notice dated 22.11.2011 was issued, directing payment of penalty for violations that occurred during the license year of 2009-2010, under the old, more stringent rule. The appellant contested this, arguing that the substituted rule should apply as it was in force when the demand notice was issued.
CONTENTIONS OF THE APPELLANT
Mr. Pratap Venugopal, Ld. Senior Advocate, appearing on behalf of the appellant argued that the effect of substitution is to repeal the existing provision from the statute book in its entirety and to enforce the newly substituted provision. He would further submit that even for incidents which took place when the old Rule was in force, it is the substituted Rule that would be applicable, and therefore, the demand notice dated 22.11.2011 seeking payment of penalties under old Rule is illegal.
In Koteswar Vittal Kamath v. K. Rangappa Baliga & Co., this Court brought out the distinction between supersession of a rule and substitution of a rule, and held that the process of substitution consists of two steps – first, the old rule is repealed, and next, a new rule is brought into existence in its place.
In Zile Singh v. State of Haryana, Court referred to the legislative practice of an amendment by substitution and held that substitution would have the effect of amending the operation of law during the period in which it was in force.
CONTENTIONS OF THE RESPONDENTS
The state authorities argued that the penalty should be imposed according to the rule in force during the license year in question, i.e., the old rule that existed when the violation occurred.
Mr. Saurabh Mishra, learned A.A.G. for the State, came up with an attractive argument that the State of M.P. can continue to apply the repealed Rule for the transaction of 2009-2010 by virtue of specific provisions under the Madhya Pradesh General Clauses Act, 1957.
He brought to our notice Section 10 of the Act which is as follows – Effect of Repeal. Where any Madhya Pradesh Act repeals any enactment then, unless a different intention appears, the repeal shall not – (c) affect any right, privilege, obligation or liability, acquired, accrued or incurred under any enactment so repealed;
LEGAL PROVISIONS
The M.P. Excise Act, 1915, Rule 16. Permissible limits of losses – An allowance shall be made for the actual loss of spirit by leakage, evaporation etc., and of bottled foreign liquor by breakage caused by loading, unloading, handling etc. in transit, at the rate mentioned hereinafter. The total quantity of bottled foreign liquor transported or exported shall be the basis for computation of permissible losses.
The M.P. Excise Act, 1915, Rule 19 providing for Penalty that could be imposed during the relevant license period of 2009-2010 was about four times the maximum duty payable on foreign liquor.
licensee shall be liable to pay penalty at a rate exceeding three times but not exceeding four times the maximum duty payable on foreign liquor at that time.
Rule 19 was substituted by an amendment. The relevant portion of substituted provision is as follows: Licensee shall be liable to pay penalty at a rate not exceeding the duty payable on foreign liquor at that time.
ISSUE –
- Applicability of the relevant rule for imposition of penalty: Whether it is the rule that existed when the violation occurred during the license period of 2009-10 or the rule that was substituted in 2011 when proceedings for penalty were initiated.
- Whether the substituted rule can be given retrospective effect.
- Interpretation of statutory provisions regarding repeal and substitution.
COURT’S ANALYSIS AND JUDGEMENT
The Supreme Court accepted the appellant’s contention that the substituted rule should apply to pending proceedings. It determined that the purpose of the amendment was to achieve a proper balance between the offense and penalty. Therefore, the Court directed that the substituted rule alone would apply to pending proceedings.
The Court rejected the arguments of both the single judge and the Division Bench of the High Court. It clarified that the substituted penalty only mitigated the severity of the law by reducing the penalty, and therefore, the bar of imposing a penalty greater than the one in force at the time of the offense did not apply. The Court emphasized the importance of a plain and simple understanding of laws and their processes, in line with their purpose and objectives.
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Judgement Reviewed by – Chiraag K A
