Shri. Dr.s.visakan v. The Deputy Commissioner Of Income Tax

W.P.Nos.19287 of 2023 & etc batch IN THE HIGH COURT OF JUDICATURE AT MADRAS RESERVED ON : 28.08.2023 PRONOUNCED ON : 22.12.2023 CORAM THE HONOURABLE MR.JUSTICE C.SARAVANAN W.P.Nos.19287, 19410, 19513, 19764,19765, 19777, 19783 & 20179 of 2023 andW.M.P.Nos.18539, 18685, 18774, 19050,19048, 19070, 19081 & 19516 of 2023 W.P.No.19287 of 2023: M/s.Tamil Nadu State Marketing Corporation Ltd., 4[th] Floor, CMDA Tower-II, Gandhi Irwin Bridge Road,Egmore, Chennai – 600 008.Represented by its Managing Director, Shri. Dr.S.Visakan .. Petitioner Vs. The Deputy Commissioner of Income Tax, TDS Circle – 3(1),Room No.114, BSNL Building, No.16, Greams Road, Chennai – 600 034. .. Respondent _____________ Page No. 1 of 71 Prayer W.P.Nos.19287 of 2023 & etc batch Prayer: Writ Petition filed under Article 226 of the Constitution of India, to issue a Writ of Certiorari, to call for the records on the file of the respondent in the impugned order dated 30.05.2023 in TAN:CHET07317C bearing DIN No: CHE/CT/153/1/30052023/00111 passed under Section 206C/206C(6A)/206C(7) of the Act for the Assessment Year 2016-17 and quash the same. For Petitioner : Mr.R.Vijayaraghavan for M/s.Subbaraya Aiyar Padmanabhan & Ramamani For Respondent : Dr.B.Ramaswamy Senior Standing Counsel C O M M O N O R D E R By this common order, impugned orders all dated 30.05.2023 passed by the respondent are being disposed of. These Writ Petitions have been filed for identical relief. _____________ W.P.Nos.19287 of 2023 & etc batch 2. In these Writ Petitions, the Petitioner has prayed that this Court may be pleased to issue a WRIT OF CERTIORARI to call for the records on the file of the Respondent in the Impugned Orders dated 30.05.2023 inTAN:CHET07317CbearingDINNo: CHE/CT/153/1/30052023/00111 passed under Section 206C/206C (6A)/206C (7) of the Act for the Assessment years between 2016-2017 and 2023-2024 and quash the same. 3. The petitioner has also prayed for interim stay of all further proceedings including recovery and penalty u/s.271CA of the Act pursuanttotheImpugnedOrdersinDINNo: CHE/CT/153/1/30052023/00111 passed under Section 206C/206C (6A)/206C (7) of the Act dated 30.05.2023 for these Assessment years. 4. The impugned orders have been passed by the respondent under Section 206C, Section 206C(6A) and under Section 206C(7) of the Income Tax Act, 1961 seeking to impose tax. _____________ https://www.mhc.tn.gov.in/judis W.P.Nos.19287 of 2023 & etc batch 5. By the impugned orders dated 30.05.2023, the respondent has treated the petitioner as an “assessee in default” for failure to collect tax at source under Section 206C of the Income Tax Act, 1961 and has thus demanded tax for the aforesaid period in dispute together with interest under Section 206C(7) of the Income Tax Act, 1961. As mentioned above, tax has also been imposed under Section 206CC and Section 206CCA of the Income Tax Act, 1961 and further interest under Section 206C(7) of the Income Tax Act, 1961. Details of the impugned orders are as under:- _____________ W.P.Nos.19287 of 2023 & etc batch 6. Operative portion of each of the impugned orders read identically. For the sake of clarity, the conclusion in the impugned orders dated 30.05.2023 are reproduced below : - _____________ W.P.Nos.19287 of 2023 & etc batch W.P.Nos.19287 of 2023 & etc batch _____________ W.P.Nos.19287 of 2023 & etc batch 7. Section 206C seeks to prevent evasion of taxes and therefore shifts the burden to pay tax on the seller. Section 206C was enacted in the year 1988 to ensure collection of taxes from persons carrying on particular trades in view of peculiar difficulties experienced by the Revenue in the past in collecting taxes from the buyer. It therefore needs to be construed strictly to achieve the purpose for which it was inserted in _____________ W.P.Nos.19287 of 2023 & etc batch 6. Operative portion of each of the impugned orders read identically. For the sake of clarity, the conclusion in the impugned orders dated 30.05.2023 are reproduced below : - _____________ W.P.Nos.19287 of 2023 & etc batch W.P.Nos.19287 of 2023 & etc batch _____________ W.P.Nos.19287 of 2023 & etc batch 7. Section 206C seeks to prevent evasion of taxes and therefore shifts the burden to pay tax on the seller. Section 206C was enacted in the year 1988 to ensure collection of taxes from persons carrying on particular trades in view of peculiar difficulties experienced by the Revenue in the past in collecting taxes from the buyer. It therefore needs to be construed strictly to achieve the purpose for which it was inserted in the year 1988 in the Income Tax Act, 1961. 8. The impugned orders have held that the petitioner, TASMAC, ought to have collected “Tax Collected at Source” (TCS) u/s 206C(1) of the Income Tax Act, 1961 on the amounts tendered by the successful bar licensee, inter alia, towards tax from sale of empty bottles by treating the sale of bottles as scrap. 9. The impugned orders precedes notices issued to the petitioner for the respective assessment years which called upon the petitioner to furnish the details of the bar licensees, including their PAN number, which were apparently not fully furnished by the petitioner. For the respective period, the petitioner was also issued with Show Cause Notices W.P.Nos.19287 of 2023 & etc batch dated 07.03.2023. 10. The common issues that arise for consideration in these Writ Petitions is as to whether the petitioner was required to collect “Tax at Source” from the bar licensees,who have been licensed to run bars under the license issued to them under Tamil Nadu Liquor Retail Vending (in Shops and Bars) Rules, 2003, under Section 206C of the Income Tax Act, 1961. 11.The supplementary issue that arises for consideration is whether for the Assessment Years 2018-2019 to 2023-24, the petitioner was also liable to pay tax at 5% under 206CC of the Income Tax Act, 1961 and whether for the Assessment Years 2022-23 and 2023-24, the petitioner is also liable to pay tax under Section 206CCA of the Income Tax Act, 1961? 12.The petitioner is a company incorporated under the provisions of the Companies Act, 1956 in the year 1981. It is wholly owned by the Government of Tamil Nadu. It is a statutory body which under Section _____________ https://www.mhc.tn.gov.in/judis W.P.Nos.19287 of 2023 & etc batch 17-C (1-B) of the Tamil Nadu Prohibition Act, 1937 has been given an exclusive monopoly not only to control and effect wholesale, but also retail sale of Indian Made Foreign Spirits (IMFS) in the entire state of Tamil Nadu. 13. Wholesale and retail business is being carried out by the petitioner since 2003, pursuant to Tamil Nadu Prohibition Amendment Ordinance 08.01.2003 issued under Article 213 of the Constitution of India, pursuant to which Section 17-C (1-A) was inserted in the Tamil Nadu Prohibition Act, 1937. 14. The petitioner has been vested with the special and exclusive privilege of effecting wholesale supply of Indian Made Foreign Spirits in the entire state of Tamil Nadu under Section 17-C(1-A)(a) of the Tamil Nadu Prohibition Act, 1937. 15. Excerpt from S.Jagannathan vs. The Managing Director in https://www.mhc.tn.gov.in/judis W.P.Nos.19287 of 2023 & etc batch W.P. No. 27352 of 2021, vide order dated 31.01.2022, which sets out the history of prohibitive law in Tamil Nadu, is reproduced below to have a clear perspective of prohibitive law in Tamil Nadu: - 14. The petitioner has been vested with the special and exclusive privilege of effecting wholesale supply of Indian Made Foreign Spirits in the entire state of Tamil Nadu under Section 17-C(1-A)(a) of the Tamil Nadu Prohibition Act, 1937. 15. Excerpt from S.Jagannathan vs. The Managing Director in https://www.mhc.tn.gov.in/judis W.P.Nos.19287 of 2023 & etc batch W.P. No. 27352 of 2021, vide order dated 31.01.2022, which sets out the history of prohibitive law in Tamil Nadu, is reproduced below to have a clear perspective of prohibitive law in Tamil Nadu: - 84.In Tamil Nadu, law on Prohibition was enacted in 1937 with the enactment of the Madras Prohibition Act, 1937. It imposed a total prohibition. Late Shri C. Rajagopalachari (Rajaji), the then Chief Minister of Madras Presidency had introduced a total prohibition in the Salem District in the year 1937 under the Madras Prohibition Act of 1937. The name of Act was later renamed as The Tamil Nadu Prohibition Act, 1937 after reorganisation of the State in 1956. 85.The Tamil Nadu Prohibition Act, 1937 predates the Indian Constitution. It provides for complete prohibition. The Preamble to The Tamil Nadu Prohibition Act, 1937 (formerly The Madras Prohibition Act of 1937) as it stands even today clearly declares it as an Act to introduce and extend the prohibition of the manufacture, sale and consumption of intoxicating liquors and drugs.the Indian Constitution. It provides for complete prohibition. The Preamble to The Tamil Nadu Prohibition Act, 1937 (formerly The Madras Prohibition Act of 1937) as it stands even today clearly declares it as an Act to introduce and extend the prohibition of the manufacture, sale and consumption of intoxicating liquors and drugs. 86.The preamble itself makes it clear that it is expedient as early as possible to bring about the prohibition, except for medicinal, scientific, industrial or such like purpose, of the production, manufacture, possession, export, import, transport, purchase, sale and luncheon of intoxicating liquors and drugs in the State of Tamil Nadu. Ironically, practice and subsequent amendment to the Act is contrary to the preamble and Constitution of India.expedient as early as possible to bring about the prohibition, except for medicinal, scientific, industrial or such like purpose, of the production, manufacture, possession, export, import, transport, purchase, sale and luncheon of intoxicating liquors and drugs in the State of Tamil Nadu. Ironically, practice and subsequent amendment to the Act is contrary to the preamble and Constitution of India. _____________ https://www.mhc.tn.gov.in/judis 87.The only exception that is discernible from the preamble to the Act makes it clear that there can be no prohibition only for medicinal, scientific, industrial or such like purpose. Thus, consumption of liquor for intoxication is not falling under the exceptions.preamble to the Act makes it clear that there can be no prohibition only for medicinal, scientific, industrial or such like purpose. Thus, consumption of liquor for intoxication is not falling under the exceptions. 88.It was later extended through out the Madras Presidency in 1948. In 1949, an exception was given to members of armed force. A provision was also made to exempt British officials from the Prohibition restriction. A system to grant permits to individuals who consumed foreign liquor was given to allow the Britishers to consume liquor.Presidency in 1948. In 1949, an exception was given to members of armed force. A provision was also made to exempt British officials from the Prohibition restriction. A system to grant permits to individuals who consumed foreign liquor was given to allow the Britishers to consume liquor. 88.It was later extended through out the Madras Presidency in 1948. In 1949, an exception was given to members of armed force. A provision was also made to exempt British officials from the Prohibition restriction. A system to grant permits to individuals who consumed foreign liquor was given to allow the Britishers to consume liquor.Presidency in 1948. In 1949, an exception was given to members of armed force. A provision was also made to exempt British officials from the Prohibition restriction. A system to grant permits to individuals who consumed foreign liquor was given to allow the Britishers to consume liquor. 89.The Governor had given an order that all Europeans who apply for liquor licence be granted one. Despite such restrictions, people could however travel to areas within the Presidency where the Prohibition was not in force for consumption of liquors.Europeans who apply for liquor licence be granted one. Despite such restrictions, people could however travel to areas within the Presidency where the Prohibition was not in force for consumption of liquors. 90.A system was also devised to regulate licensed clubs for sale and consumption of wine for religious purposes in Churches and brandy in Hospital for Medical purposes. Licenses were also given for toddy tapping as it was accepted then. clubs for sale and consumption of wine for religious purposes in Churches and brandy in Hospital for Medical purposes. Licenses were also given for toddy tapping as it was accepted then. 91.A reading of the pre-amble of the Tamil Nadu Prohibition Act, 1937 makes it clear that the Act is in consonance with the Directive Principle of State Policy under Article 47 of the Constitution of India which enjoins State to endeavour to take steps to bring about a prohibition of intoxicating drinks and drugs which are injurious to health.Prohibition Act, 1937 makes it clear that the Act is in consonance with the Directive Principle of State Policy under Article 47 of the Constitution of India which enjoins State to endeavour to take steps to bring about a prohibition of intoxicating drinks and drugs which are injurious to health. 92.In 1971-72, prohibition was briefly lifted for the _____________ https://www.mhc.tn.gov.in/judis W.P.Nos.19287 of 2023 & etc batch 1[st] time. The sale of liquor and toddy through shops were thrown open to the public with the enactment of Tamil Nadu Prohibition (Suspension of Operation) Act, 1971. 93.The operation of the provisions of the Tamil Nadu Prohibition Act, 1937 was suspended with the enactment of Tamil Nadu Prohibition (Suspension of Operation) Act, 1971. The prohibition imposed was however short lived. Nadu Prohibition Act, 1937 was suspended with the enactment of Tamil Nadu Prohibition (Suspension of Operation) Act, 1971. The prohibition imposed was however short lived. 94.Within three years, the Tamil Nadu Prohibition Act, 1937 was revived with the enactment of Tamil Nadu Prohibition (Revival of Operation and Amendment) Act, 1974 with effect from 20.08.1974. Act, 1937 was revived with the enactment of Tamil Nadu Prohibition (Revival of Operation and Amendment) Act, 1974 with effect from 20.08.1974. 95.In 1976, prohibition was once again briefly introduced. In 1981, Prohibition was again lifted and thus the public was once again allowed to purchase liquor from wine shops.introduced. In 1981, Prohibition was again lifted and thus the public was once again allowed to purchase liquor from wine shops. 94.Within three years, the Tamil Nadu Prohibition Act, 1937 was revived with the enactment of Tamil Nadu Prohibition (Revival of Operation and Amendment) Act, 1974 with effect from 20.08.1974. Act, 1937 was revived with the enactment of Tamil Nadu Prohibition (Revival of Operation and Amendment) Act, 1974 with effect from 20.08.1974. 95.In 1976, prohibition was once again briefly introduced. In 1981, Prohibition was again lifted and thus the public was once again allowed to purchase liquor from wine shops.introduced. In 1981, Prohibition was again lifted and thus the public was once again allowed to purchase liquor from wine shops. 96.However, successive Governments appears to have reserved the power to grant exemption from the Act by permitting the manufacture, sale and consumption of liquor in order to generate and augment its finance. Number of bottling units and distilleries which have sprouted in the last two decades shows a demand and steady increase in the number of consumers and a business opportunity.have reserved the power to grant exemption from the Act by permitting the manufacture, sale and consumption of liquor in order to generate and augment its finance. Number of bottling units and distilleries which have sprouted in the last two decades shows a demand and steady increase in the number of consumers and a business opportunity. 97.The Government is not only seen actively promoting the sale of liquor and intoxicating drinks but is actively encouraging the consuming public to consume the same in the confines of the so called “Bar” for which the impugned Notifications have been issued.promoting the sale of liquor and intoxicating drinks but is actively encouraging the consuming public to consume the same in the confines of the so called “Bar” for which the impugned Notifications have been issued. 98.In 1981, few fundamental changes which were brought to the Act and slew of Rules were brought to the Act and slew of Rules were _____________ https://www.mhc.tn.gov.in/judis W.P.Nos.19287 of 2023 & etc batch framed. TASMAC which was incorporated in 1981 was confined with the whole sale operations alone. Thus, the sale of liquor was permitted in bars and hotels. By Tamil Nadu Act 23, of 1981, Section 17-B and Section 17-C were introduced. 99.TASMAC was given the monopoly/exclusive privilege for effecting whole sale of Indian made Foreign Liquor and Foreign Liquor and that no other person other than TASMAC was entitled to any privilege of supplying and effecting whole sale of liquor in the whole or any part of the State. 100.TASMAC became a wholesale dealer and was thus given licence by the Commissioner of Prohibition and Excise subject to Such Rules to be framed by the State Government. Between the period from 1989 to 2003, private Bars were allowed to operate like in other States. 101. Sale of liquor in Bars attached to the shops was first introduced in the year 1989 under the Tamil Nadu Liquor (Retail Vending) Rules, 1989. It was allowed to facilitate consumption of liquor in the bars attached to private “wine shops”. These bars were run by private persons under a license by the Commissioner of Prohibition and Excise. 102.On 21.04.1992, by G.O.Ms.90, the Government ordered the auction of retail vending shops throughout the State. In 1992-93, the Government of Tamil Nadu decided as a policy to give Bar licence to the retail shops in order to augment revenue from auctions of retail shops. 103.The then existing Tamil Nadu Liquor (Licence and Permit) Rules, 1981 was later repealed to facilitate the retail vending of IMFL and Beer in Bar. This _____________ https://www.mhc.tn.gov.in/judis change in policy was notified before the auction for the year 1992-93 stating only retail vendors will be eligible for Bar licences. 102.On 21.04.1992, by G.O.Ms.90, the Government ordered the auction of retail vending shops throughout the State. In 1992-93, the Government of Tamil Nadu decided as a policy to give Bar licence to the retail shops in order to augment revenue from auctions of retail shops. 103.The then existing Tamil Nadu Liquor (Licence and Permit) Rules, 1981 was later repealed to facilitate the retail vending of IMFL and Beer in Bar. This _____________ https://www.mhc.tn.gov.in/judis change in policy was notified before the auction for the year 1992-93 stating only retail vendors will be eligible for Bar licences. 104.By G.O.Ms.No.99, Prohibition and Excise Department, dated 26th May, 1992, the Government of Tamil Nadu introduced the Tamil Nadu Liquor (Retail Vending in Bar) Rules, 1992 for regulating the issue of licence and the privilege of retail vending of liquor in the Bar. The Rules came into force on 1st June, 1992. 105.Under rule 4(a) of the aforesaid Rules, a person holding a licence granted under Rules 13 of Retail Vending Rules, 1989 was allowed to file an application for grant of privilege and licence for retail vending of liquor in the Bar. These bars are different from the bars attached to the hotels to whom licences are issued under the provisions of the Tamil Nadu Liquor (License & Permit) Rules,1981.holding a licence granted under Rules 13 of Retail Vending Rules, 1989 was allowed to file an application for grant of privilege and licence for retail vending of liquor in the Bar. These bars are different from the bars attached to the hotels to whom licences are issued under the provisions of the Tamil Nadu Liquor (License & Permit) Rules,1981. 106.In 1993, G.O.Ms.No.44, Prohibition and Excise Department, dated 03.03.1993 was issued. The then Government decided to dis-continue the grant/renewal of licences for bars attached to the Indian Made Liquor Retail Vending Shops under the Tamil Nadu Liquor (Retail Vending in Bar) Rules, 1992 with effect from the excise year commencing from the 1st June, 1993.Department, dated 03.03.1993 was issued. The then Government decided to dis-continue the grant/renewal of licences for bars attached to the Indian Made Liquor Retail Vending Shops under the Tamil Nadu Liquor (Retail Vending in Bar) Rules, 1992 with effect from the excise year commencing from the 1st June, 1993. 107. Thus, Tamil Nadu Liquor (Retail Vending in Bar) Rules, 1992 came to be rescinded with effect from 1st June, 1993. This was challenged both before the Madras High Court and the Hon'ble Supreme Court.Rules, 1992 came to be rescinded with effect from 1st June, 1993. This was challenged both before the Madras High Court and the Hon'ble Supreme Court. 108.As per Rule 3 of the Tamil Nadu Liquor (Retail Vending) Rules, 1989, the privilege or selling liquor in licence shops was available only to a person by auction. The privilege amount was Vending) Rules, 1989, the privilege or selling liquor in licence shops was available only to a person by auction. The privilege amount was _____________ https://www.mhc.tn.gov.in/judis W.P.Nos.19287 of 2023 & etc batch determined in that auction. Rule 4(1) enabled to fix the maximum number of shops to be established in the State. 109.Under Section 17-B of the Act, a licence for manufacture, etc., of potable liquor for human consumption was introduced. Under Section 17-C, exclusive privileges for manufacture and sale of Indian made foreign spirits and selling of India made foreign liquor spirit was introduced.manufacture, etc., of potable liquor for human consumption was introduced. Under Section 17-C, exclusive privileges for manufacture and sale of Indian made foreign spirits and selling of India made foreign liquor spirit was introduced. _____________ https://www.mhc.tn.gov.in/judis W.P.Nos.19287 of 2023 & etc batch determined in that auction. Rule 4(1) enabled to fix the maximum number of shops to be established in the State. 109.Under Section 17-B of the Act, a licence for manufacture, etc., of potable liquor for human consumption was introduced. Under Section 17-C, exclusive privileges for manufacture and sale of Indian made foreign spirits and selling of India made foreign liquor spirit was introduced.manufacture, etc., of potable liquor for human consumption was introduced. Under Section 17-C, exclusive privileges for manufacture and sale of Indian made foreign spirits and selling of India made foreign liquor spirit was introduced. 110.The respondents TASMAC enjoys a State monopoly in wholesale and retail market in Tamil Nadu as far as sale of alcoholic beverages liquor are concerned. It enjoys an absolute monopoly in the State under the provisions of the Tamil Nadu Prohibition Act, 1937.monopoly in wholesale and retail market in Tamil Nadu as far as sale of alcoholic beverages liquor are concerned. It enjoys an absolute monopoly in the State under the provisions of the Tamil Nadu Prohibition Act, 1937. 111.Though these amendments and new Rules were made to facilitate the sale of liquor by TASMAC both in wholesale and retail market, it should be noted that by Tamil Nadu Act 9 of 1979, Section 4(1)(j) and Section 4A were inserted to the Tamil Nadu Prohibition Act, 1937. They still remain in force.made to facilitate the sale of liquor by TASMAC both in wholesale and retail market, it should be noted that by Tamil Nadu Act 9 of 1979, Section 4(1)(j) and Section 4A were inserted to the Tamil Nadu Prohibition Act, 1937. They still remain in force. 125.The Government later framed the Tamil Nadu Liquor (Retail Vending in Bar, Renewal of Licence, Fixation of Privilege Amount and Refund) Rules, 1994 vide G.O.Ms.No.155 Prohibition and Excise (VI), dated 30.9.1994.Liquor (Retail Vending in Bar, Renewal of Licence, Fixation of Privilege Amount and Refund) Rules, 1994 vide G.O.Ms.No.155 Prohibition and Excise (VI), dated 30.9.1994. 126. Under the aforesaid Rules, Bar Licence issued under Tamil Nadu Liquor (Retail Vending in Bar) Rules, 1992 was deemed to have been renewed and privilege was granted for the period from 1st June, 1993 to 30th June, 1993. Where any licensee had paid an amount in excess of the privilege amount specified in Rule 4, such amount was to be refunded under Tamil Nadu Liquor (Retail Vending in Bar) Rules, 1992 was deemed to have been renewed and privilege was granted for the period from 1st June, 1993 to 30th June, 1993. Where any licensee had paid an amount in excess of the privilege amount specified in Rule 4, such amount was to be refunded _____________ https://www.mhc.tn.gov.in/judis by the licensing authority to the licensee, after deducting the Government used if any, under the rescinded Rules. This was at the time when license and privileges were given to private persons to run wine shops & bars… 128.. In 2003, when Section 17-C (1-B) was introduced from the Tamil Nadu Prohibition Act, 1937 along and Section 22-D to the Tamil Nadu Prohibition Act, 1937, Section 4A was however not amended. As a result of above amendment, retail sale of liquor was also exclusively given to the respondents TASMAC. from the Tamil Nadu Prohibition Act, 1937 along and Section 22-D to the Tamil Nadu Prohibition Act, 1937, Section 4A was however not amended. As a result of above amendment, retail sale of liquor was also exclusively given to the respondents TASMAC. by the licensing authority to the licensee, after deducting the Government used if any, under the rescinded Rules. This was at the time when license and privileges were given to private persons to run wine shops & bars… 128.. In 2003, when Section 17-C (1-B) was introduced from the Tamil Nadu Prohibition Act, 1937 along and Section 22-D to the Tamil Nadu Prohibition Act, 1937, Section 4A was however not amended. As a result of above amendment, retail sale of liquor was also exclusively given to the respondents TASMAC. from the Tamil Nadu Prohibition Act, 1937 along and Section 22-D to the Tamil Nadu Prohibition Act, 1937, Section 4A was however not amended. As a result of above amendment, retail sale of liquor was also exclusively given to the respondents TASMAC. 129. In 2003, when Respondents TASMAC thus took over the business of retail business in the sale of liquor in the State with the insertion of Section 17-C (1-B), TASMAC became State monopoly. The then existing Tamil Nadu Liquor (Retail Vending) Rules, 1989 and Tamil Nadu Liquor (Retail Vending in Bar) Rules, 2000, were repealed. over the business of retail business in the sale of liquor in the State with the insertion of Section 17-C (1-B), TASMAC became State monopoly. The then existing Tamil Nadu Liquor (Retail Vending) Rules, 1989 and Tamil Nadu Liquor (Retail Vending in Bar) Rules, 2000, were repealed. 16. It was further observed in S. Jagannathan,supra, as follows:- 133. Sub Clause (1-A) and Section 17-C (1-B) of the Tamil Nadu Prohibition Act, 1937 which were inserted in the Act, merely allows TASMAC to do “wholesale” and “retail business”, does not permit respondents TASMAC a right to confer privilege to a 3rd parties to render allied business of selling short eats and/ or support service to collect used bottle from premises used as a bar. If the Act does not permit a person to be in a state of intoxication in public place, TASMAC cannot be seen permitting consumption by consumers of liquor in pubic place. Even if bar is not a public place, person after consuming liquor in the so called bar will have to necessarily pass through _____________ https://www.mhc.tn.gov.in/judis W.P.Nos.19287 of 2023 & etc batch pubic place to return home. Therefore, what TASMAC cannot do directly, it cannot do indirectly… 137. The 2003 amendments to the Tamil Nadu Prohibition Act, 1937 which paved way for the Tamil Nadu Liquor Retail Vending (In Shops and Bars), Rule 2003 merely contemplates grant of an exclusive license to TASMAC for retail sale under Rule 4 of the aforesaid Rules under Section 17-C of the Tamil Nadu Prohibition Act, 1937.Prohibition Act, 1937 which paved way for the Tamil Nadu Liquor Retail Vending (In Shops and Bars), Rule 2003 merely contemplates grant of an exclusive license to TASMAC for retail sale under Rule 4 of the aforesaid Rules under Section 17-C of the Tamil Nadu Prohibition Act, 1937. 138. Under Rule 4 of the Tamil Nadu Liquor Retail Vending (In Shops and Bars), Rule 2003, TASMAC has been licensed to sell liquor in retail market. Rule 4 reads as under:- Vending (In Shops and Bars), Rule 2003, TASMAC has been licensed to sell liquor in retail market. Rule 4 reads as under:- 138. Under Rule 4 of the Tamil Nadu Liquor Retail Vending (In Shops and Bars), Rule 2003, TASMAC has been licensed to sell liquor in retail market. Rule 4 reads as under:- Vending (In Shops and Bars), Rule 2003, TASMAC has been licensed to sell liquor in retail market. Rule 4 reads as under:- 4. Grant of licence.— (1) On application, Commissioner of Prohibition and Excise shall grant licence in Form-I for the retail vending of liquor in shops and bars in the whole State. The licence shall be issued in the name of the Corporation. (2) The licence granted under this rule shall be subject to the provisions of the Act and Rules made thereunder. (3) The Corporation shall issue an authorisation in Form-I in respect of each shop where the business of retail vending of IMFS is to be carried on either directly by the Corporation or through the Co-operative Societies as agents of the Corporation. (4) The Corporation shall furnish the list of authorized retail vending shops located within each district to the Collector indicating the details of such shops run directly by the Corporation and the shops run by the Co-operative Societies as its agents. List of such shops shall be furnished by the Corporation to Commissioner of Prohibition and Excise shall grant licence in Form-I for the retail vending of liquor in shops and bars in the whole State. The licence shall be issued in the name of the Corporation. (2) The licence granted under this rule shall be subject to the provisions of the Act and Rules made thereunder. (3) The Corporation shall issue an authorisation in Form-I in respect of each shop where the business of retail vending of IMFS is to be carried on either directly by the Corporation or through the Co-operative Societies as agents of the Corporation. (4) The Corporation shall furnish the list of authorized retail vending shops located within each district to the Collector indicating the details of such shops run directly by the Corporation and the shops run by the Co-operative Societies as its agents. List of such shops shall be furnished by the Corporation to _____________ https://www.mhc.tn.gov.in/judis W.P.Nos.19287 of 2023 & etc batch the Collector concerned within 10 days of the commencement of business”. 139. The reality shows that respondent TASMAC merely leases a small portion of a building premisesfor its retail shops. In the retail shops, its staffs are stationed along with the stock of liquor/ alcohol for sale to the consumers and buyers. This activity falls within the four corners of law under the provisions of the Tamil Nadu Prohibition Act, 1937.leases a small portion of a building premisesfor its retail shops. In the retail shops, its staffs are stationed along with the stock of liquor/ alcohol for sale to the consumers and buyers. This activity falls within the four corners of law under the provisions of the Tamil Nadu Prohibition Act, 1937. 140. The respondents TASMAC has not entered into any separate lease agreements with the owners of premises for the balance area which arebeing used as “Bar” for the consumers to consume the liquor/alcohol purchased from the TASMAC Shops.separate lease agreements with the owners of premises for the balance area which arebeing used as “Bar” for the consumers to consume the liquor/alcohol purchased from the TASMAC Shops. 140. The respondents TASMAC has not entered into any separate lease agreements with the owners of premises for the balance area which arebeing used as “Bar” for the consumers to consume the liquor/alcohol purchased from the TASMAC Shops.separate lease agreements with the owners of premises for the balance area which arebeing used as “Bar” for the consumers to consume the liquor/alcohol purchased from the TASMAC Shops. 141. Instead, the respondents TASMAC has over a period of time encouraged the owners of the leased premises (which some times happens to be the Local and Municipal Authority) to develop the area adjacent to the leased retail shop as “a Bar” for being leased to the licencee's facilitate the buyers of liquor to consume the liquor/Alcohol purchased from the TASMAC Shops. period of time encouraged the owners of the leased premises (which some times happens to be the Local and Municipal Authority) to develop the area adjacent to the leased retail shop as “a Bar” for being leased to the licencee's facilitate the buyers of liquor to consume the liquor/Alcohol purchased from the TASMAC Shops. 142. The purported exercise of auctioning rights under the impugned Tender Notifications as explained as having been issued under Rule 9A of the Tamil Nadu Liquor Retail Vending (In Shops and Bars), Rule 2003 cannot be countenanced under Rule 9A.the impugned Tender Notifications as explained as having been issued under Rule 9A of the Tamil Nadu Liquor Retail Vending (In Shops and Bars), Rule 2003 cannot be countenanced under Rule 9A. 143. Rule 9A which was inserted to the Rules only in the year 2013 vide G.O.Ms.No.20, Home P & E dated 29.3.2013 reads as under:year 2013 vide G.O.Ms.No.20, Home P & E dated 29.3.2013 reads as under: “Rule 9-A.Grant of Privilege to run the bar:The privilege of running bars may be granted to private parties by bar:The privilege of running bars may be granted to private parties by _____________ https://www.mhc.tn.gov.in/judis W.P.Nos.19287 of 2023 & etc batch tender. The Board of the Corporation may decide the upset price and other terms and conditions of tender, from time to time, with the prior approval of the Commissioner of Probation and Excise. The Corporation, as agency shall collect the tender amount from the successful tenderers and remit the same to the Government on or before the 25th of the following month and the Corporation may retain 1% of the amount so collected as agency commission.” 144. The respondents TASMAC has however continued to auction such right to sell short eats to private parties and to collect used bottles ostensibly in line with the powers granted under Rule 9A of the aforesaid Rules in terms of the proceedings dated 27.09.2019 bearingreferenceProceedings No.P&E.9(1)/17936/2012 of the Commissioner of Prohibition and Excise Department though even prior to insertion of Rule 9A in 2013 also such auction appears to have been conducted and granted permission to sell eatables (short eats) and to collect bottle”.auction such right to sell short eats to private parties and to collect used bottles ostensibly in line with the powers granted under Rule 9A of the aforesaid Rules in terms of the proceedings dated 27.09.2019 bearingreferenceProceedings No.P&E.9(1)/17936/2012 of the Commissioner of Prohibition and Excise Department though even prior to insertion of Rule 9A in 2013 also such auction appears to have been conducted and granted permission to sell eatables (short eats) and to collect bottle”. 17. The petitioner runs a number of retail vending liquor shops across the State and as a policy decision it did not want to also get into the business of running bars. The petitioner has taken the responsibility of ensuring bars are located adjacent to its shop so that liquor sold in its shops are consumed in the licensed bars. It is intended to provide a safe heaven to tipplers to consumer liquor away from the gaze of the public _____________ https://www.mhc.tn.gov.in/judis W.P.Nos.19287 of 2023 & etc batch and their family members and to prevent any law and order problems by consumers. It indirectly promotes the consumption of liquor and is breaking the social fabric and taboo associated with the consumption of liquor and has thus habituated the youth to consume liquor. 18. The petitioner’s Board of Directors consist of Senior Government Officials including Principal Secretaries to the Government of Tamil Nadu. The petitioner found it more practical to have the bars run by third-parties selected under an apparently transparent tender process without any involvement of middlemen. Thus, from 2005, the petitioner has been floating tenders to select third-party bar contractors (licensees) to sell eatables and collect empty bottles from bars situated adjacent to/within the petitioner’s retail shops. 19. The petitioner sells liquor in its retail shops as per the Tamil Nadu Liquor Retail Vending (in Shops and Bars) Rules, 2003. The bar contractors have to establish the bar adjacent to the retail shop wherein the liquor bought from the petitioner’s retail shop is permitted to be https://www.mhc.tn.gov.in/judis W.P.Nos.19287 of 2023 & etc batch consumed by consumers. Eatables and water are permitted to be sold to these consumers by bar licensees for their safety and convenience. Bar licenses are auctioned by the petitioner under the provisions of Tamil Nadu Liquor Retail Vending (in Shops and Bars) Rules, 2003. 20. For instance, the Board of petitioner vide Circular Resolution No.40/2019 dated 13.09.2019 resolved to approve the following proposals to call for tender under new a formula with effect from 01.10.2019. It reads as follows:- “All the District Managers may be directed to call fresh tender during the month of September 2019 for granting permission to sell eatables and to collect empty bottles in the bars attached to the Retail Vending shops, as per below mentioned terms and conditions. a) The upset prices should be fixed at the rate of 1.80% of average monthly sales of last financial year (2018-19) for the bars attached to the concerned Retail Vending shops locatedinCorporation& Municipality areas.the rate of 1.80% of average monthly sales of last financial year (2018-19) for the bars attached to the concerned Retail Vending shops locatedinCorporation& Municipality areas. b) The upset prices should be fixed at the rate of 1.60% of average monthly sales of last financial year (2018-190 for the bars attached to the concerned Retail Vending shops the rate of 1.60% of average monthly sales of last financial year (2018-190 for the bars attached to the concerned Retail Vending shops _____________ https://www.mhc.tn.gov.in/judis _____________ https://www.mhc.tn.gov.in/judis W.P.Nos.19287 of 2023 & etc batch located in Town Panchayat areas.c) The upset prices should be fixed at the rate of 1.40% of average monthly sales of last financial year (2018-190 for the bars attached to the concerned Retail Vending shops located in village Panchayat areas.the rate of 1.40% of average monthly sales of last financial year (2018-190 for the bars attached to the concerned Retail Vending shops located in village Panchayat areas. _____________ https://www.mhc.tn.gov.in/judis _____________ https://www.mhc.tn.gov.in/judis W.P.Nos.19287 of 2023 & etc batch located in Town Panchayat areas.c) The upset prices should be fixed at the rate of 1.40% of average monthly sales of last financial year (2018-190 for the bars attached to the concerned Retail Vending shops located in village Panchayat areas.the rate of 1.40% of average monthly sales of last financial year (2018-190 for the bars attached to the concerned Retail Vending shops located in village Panchayat areas. d) In respect of The Nilgiris District, the upset prices should be fixed at the rate of 1.50% of average monthly sales of last financial year (2018-19) for the bars attached to the concerned Retail Vending shops located in Municipality areas, 1.25% of average monthly sales of last financial year (2018-19) for the bars attached to the concerned Retail Vending shops located in Town Panchayat areas and 0.75% of average monthly sales of last financial year (2018-19) for the bars attached to the concerned Retail Vending shops located in Rural areas of The Nilgiris District.the upset prices should be fixed at the rate of 1.50% of average monthly sales of last financial year (2018-19) for the bars attached to the concerned Retail Vending shops located in Municipality areas, 1.25% of average monthly sales of last financial year (2018-19) for the bars attached to the concerned Retail Vending shops located in Town Panchayat areas and 0.75% of average monthly sales of last financial year (2018-19) for the bars attached to the concerned Retail Vending shops located in Rural areas of The Nilgiris District. e) In case of retail vending shops which are opened during the financial year 2018-19 ( i.e., after 01.04.2018 but before 31.03.2019), the average sales should be calculated by totaling the cumulative sales value and divided by the number of working days which the shop was run in the financial year 2018-19 this average sales per day should be multiplied by 30 to arrive at the average monthly sales.are opened during the financial year 2018-19 ( i.e., after 01.04.2018 but before 31.03.2019), the average sales should be calculated by totaling the cumulative sales value and divided by the number of working days which the shop was run in the financial year 2018-19 this average sales per day should be multiplied by 30 to arrive at the average monthly sales. ii) In case of retail vending shops which have been W.P.Nos.19287 of 2023 & etc batch opened after the financial year 2018- 19 (i.e. On or after 1[st] April 2019) the average sales should be calculated by totaling the cumulative sales value and divided by the number of working days which the shop was run and this average sales per day should be multiplied by 30 to arrive at the average monthly sales.year 2018- 19 (i.e. On or after 1[st] April 2019) the average sales should be calculated by totaling the cumulative sales value and divided by the number of working days which the shop was run and this average sales per day should be multiplied by 30 to arrive at the average monthly sales. ii) In case of retail vending shops which have been W.P.Nos.19287 of 2023 & etc batch opened after the financial year 2018- 19 (i.e. On or after 1[st] April 2019) the average sales should be calculated by totaling the cumulative sales value and divided by the number of working days which the shop was run and this average sales per day should be multiplied by 30 to arrive at the average monthly sales.year 2018- 19 (i.e. On or after 1[st] April 2019) the average sales should be calculated by totaling the cumulative sales value and divided by the number of working days which the shop was run and this average sales per day should be multiplied by 30 to arrive at the average monthly sales. iii)In case of retail vending shops which are functioning less than one month or new shops which would be opened in future, the average sales should be calculated by totaling the sales value for the total number of days during which the shop is working (this should be minimum of fifteen days) and divided by the number of days shop was run and multiply with 30 days ( to convert it