K V AMARNATH Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) ALLEGING corruption, favouritism, nepotism and mala fides against respondents 3 and 4, the petitioner herein has prayed for the issuance of appropriate writ or direction striking down the Karnataka excise (sale of Indian and foreign liquor) (Amendment) rules, 1997 as being illegal and unconstitutional and for a direction to the respondent-state to enforce the 1989 amendment rules. It is further prayed that a direction be issued for appointing an authority such as c. b. i. , to probe in detail to find out the total loss caused to the respondent-state by way of evasion of payment of excise duties, cesses, sales tax on the sale of "seconds" in imfl which were allegedly sold without payment of excise duty cesses and sales tax during the period from December 1985 when the supreme court is stated to have affirmed the 1989 amended rules, till date by non-implementation of the 1989 rules. It is contended that the difference be directed to be recovered personally from respondents 3 and 4. the petitioner has also sought for the prosecution of respondents 3 and 4 and other persons found to be responsible for alleged losses of revenue by way of evasion of excise duty and sales tax on the sale of imfl including those of the distilleries. This petition has been initiated in public interest by a former minister of the state of karnataka. respondents 3 and 4 are the former and present chief ministers of the state. the petitioner and respondents 3 and 4 are admittedly political rivals belonging to different political parties in the state of karnataka.

(2.) THE business of imfl is stated to be conducted by distilleries in the private sector owned by allegedly influential liquor lobby. The process of manufacture, distribution and sale of imfl is under the control of the state government. To effectively collect excise duties, the central duty, health cess, educational cess and the sales tax, the state government has posted the staff of excise department in several distilleries to ensure that each bottle of liquor manufactured in such distilleries does not go out without payment of the requisite duty and tax. Depending upon the manui'acturing capacities of distilleries, the raw material in the form of rectified spirit is fixed and issued by the state government to different distilleries. It is alleged that despite apparent control exercised by the respondent-state government, the distilleries used to despatch lorry loads of imfl bottles to different wholesalers of the state either by hood-winking the staff of the excise department or in complicity and collusion with them by illegal and corrupt means, without payment of the requisite excise duty and other cesses. The permits are also required to be issued to prevent the sale of "seconds". Having taken into consideration the nature of the trade, the way in which payment of excise duty, sales tax etc. , was being evaded by the distilleries and wholesale dealers, the respondent-state is stated to have deemed fit to amend the relevant state excise rules in the year 1989. Respondent state appointed respondent 2-company, a public undertaking, as the sole distributor of imfl with the declared object of having effective control over the whole trade in the imfl in order to ensure that nonduty paid liquor did not enter the market. Consequently, the 2nd respondent arranged for infrastructure in the state of karnataka and outside, adequate staff and mobilised various other resources to discharge its obligation as sole distributor. Feeling aggrieved of the 1989 amendment rules, several distilleries who were allegedly indulging in corrupt practices generating non-duty paid liquor challenged the validity of the said amendment rules in W. P. nos. 16876 and 16877 of 1989. 16878 to 16882 of 1989, 16967 to 16971 of 1989, 16894 to 16988 of 1989, 17000 to 17004 of 1989, 17005 to 17009 of 1989, 17103 to 17107 of 1989 and 17632 of 1989 in this court which were vehemently and effectively resisted by respondents 1 and 2. Copy of the statement of objections filed by respondent 1 has been annexed with this petition as annexure-b. The aforesaid writ petitions were dismissed by this court vide a judgment in the case of M/s. Jagadale and sons v state of Karnataka and others , by the division bench of this court. Some of the writ petitioners filed special leave petitions in the Supreme Court. Special leave was granted on 20th november, 1989 and a conditional order of stay was passed by the apex court. The civil appeals were ultimately dismissed by the Supreme Court on 15-12-1985 vide its judgment in the case of M/s. khoday distilleries limited v state of Karnataka and others , it is contended that after the judgment of the apex court, the rules of 1989 were not given effect to by the then government headed by respondent 3. similarly, respondent 4 also did not take any step for implementation of the rules upheld by the Hon'ble Supreme Court. It is submitted that respondents 3 and 4 allegedly colluded with the various distilleries and the liquor manufacturers by collecting huge amount from them with the result that huge losses to the state exchequer were caused. The losses are assessed at one crore of rupees per day. It is alleged that with the illegal amounts recovered from the distilleries and manufacturers of the liquor, respondent 3 fought the election and ultimately succeeded in becoming the prime minister of india.

(3.) ONE Sri d. Nemirajaiah is stated to have filed a writ petition No. 25827 of 1996 by way of 'public interest litigation' praying for the issuance of a direction to the state government, and its officers to enforce the 1989 amended rules. During the pendency of the said writ petition, the excise commissioner is stated to have issued a letter dated 9-12-1996 and a memo of even date to all concerned to give effect to the aforesaid amended rules. However, in the statement of objections filed by the respondent - state, it was submitted that his excellency the governor of Karnataka in his address to the joint session of the state legislature on 19-2-1996 announced that the state has been seriously considering the desirability of re-introducing the prohibition in the state in view of the Provisions of article 47 enshrined in para iv of the Constitution of India dealing with the directive principles of the state policy. The 1989 amended rules were thereafter decided to be amended to restore the position prevailing prior to the amended rules. Draft rules, called "the Karnataka excise (sale of Indian and foreign liquor) (Amendment) rules, 1996 were published inviting objections. The 2nd respondent is stated to have filed detailed objections annexed with the petition as Annexure-L. It is contended that after complying with the empty formalities, the respondent-state vide its notification in No. Fd 325 edc 95, dated 12-2-1997 published in the Karnataka gazette dated 13-2-1997 has enforced the Karnataka excise (sale of Indian and foreign liquor) (Amendment) rules, 1997 (hereinafter mentioned as 'impugned rules') giving effect to the same at once.