STATE OF PUNJAB AND ORS. versus AJUDHIA NATH AND ANR.

Citation: [1981] 3 S.C.R. 686 · Decided: 07-05-1981 · Supreme Court of India · Bench: D.A. DESAI · Disposal: Appeal(s) allowed

Cited by 1 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

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686 
STATE OF PUNJAB AND ORS. 
v. 
AJUDHIA NATH AND ANR. 
May 7, 1981 
[ D.A. DESAI A.D. KOSHAL AND R.B. MISRA, JJ. ] 
Punjab Excise Act and Rules made thereunder-Principle of natural justice of 
giving opportunity to be heard does not come into play when the demand is merely 
for payment of a sum becoming d11e under the conditions of the licence. 
Constitution of India, 1950, Entry 51 of List IT of Schedule VII read with 
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section 31 of the Punjab Excise Act-Still-head duty is neither a duty of excise nor 
can be regarded as a tax of any kind whatsoever. 
Condition 8 of the licence to run liquor vends in various parts of Punjab 
during the financial year 1965-66 laid down: (i) the licencee shall lift each month 
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the proportionate qtiota for the month fixed for his vends or deposit still-head 
duty realisable thereof (ii) Any deficiency in the amount of still-head duty 
realisable from the lifting of the full proportionate quota due to the short lifting 
of the quota by the licencee or non-deposit of the still-head duty may be realised 
from the amount of security deposited by the licencee at the time of grant of 
licence; (iii) the resultant deficiency in the amount of security shall be made good 
by the licencee within seven days of such adjustment and (iv) if there is short lift-
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ing of proportionate quota or short deposit of still-head duty continues for two 
consecutive months or the licencee fails to make up the deficiency in the amount 
of security within the prescribed period of seven days. his licence may be cancel-
led in addition to the recovery of still-head duty. 
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Respondent Ajudhia Nath who was granted the necessary licences under the 
relevant provisions of the Punjab Excise Act and the Rules framed thereunder, 
was unable to lift the minimum quota of country liquor and also failed to deposit 
the still-head duty which became payable by him under condition No. 8. 
On an 
application made by him claiming relief in the matter of payment of sums which 
bad fallen due, such relief wae granted to him in part by the Excise and Taxation 
Commissioner, Punjab, on the ground that the liquor trade was badly affected by 
reason of the movement of population in the border area of Punjab on account 
of the hostilities which broke out between India and Pakistan in the month of 
September 1965. Not satisfied with the relief so granted Ajudhia Nath filed 
two petitions under Article 226 of the Constitution before the High Court of 
Punjab and Haryana claiming, inter alia, that still-head duty was an excise duty 
which could be levied only on manufacture of goods and which he was not 
liable to pay by reason of the admitted fact he was not a manufacturer of Liquor 
and that he was not given the opportunity of being heard in the matter covered 
by the applications claiming relief. The petitions were allowed and the Letters 
Patent Appeals preferred by the State wore dismissed. Hence the appeals by 
special leave. 
PUNJAB V. AJUDHIANATH 
687 
Allowing the appeals, the Court 
HELD : 1. The demand for the short-fall in still-head duty was based on 
the terms of a binding contract and it sought to enforce the liabilities arising 
out of mutually agreed conditions of auction. Such a demand could not be 
equated with a notice requiring the liquor vendor to show cause why his licence 
should not be cancelled. Although an opportunity of being heard has to be 
given to a liquor vendor when his licence is sought to be cancelled, the same 
principle of natural justice does not come into play when the demand is merely 
for payment of a· sum becoming due under the conditions subject to which the 
licence was granted. (691 G-H, 692A, E-F] 
Har Shankar and others v. The Dy. Excise & Taxation Commissioner and 
others [1973] 3 SCR 254; Shyam Lal v. State of Punjab, AIR 1976 SC 2045; State 
of Punjab v. Mu/kh Raj and Co., AIR 1977 SC 1550 and The State of Punjab v. 
Balbir Singh and others, AIR 1977 SC 1717, followed. 
2 : 1. A combined reading of Entry 51 of List II of Schedule VII to the 
Constitution of India and section 31 of the Punjab Excise Act no doubt makes 
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it clear that a duty of excise on alcohalic liquors meant for human consumption 
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cannot be recovered from a person unless any one of the three clauses of sec-
tion 31 covers his business activities. (693 C-D, 694A] 
2 : 2. Still-head duty is not a duty of excise in view of the dicta laid 
down by the Supreme Court to the effect that the s

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