- 1 - NC: 2025:KHC:10472 WP No. 14889 of 2024 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 12TH DAY OF MARCH, 2025 BEFORE THE HON'BLE MR JUSTICE B M SHYAM PRASAD WRIT PETITION NO. 14889 OF 2024 (EXCISE) BETWEEN: CARLSBERG INDIA PRIVATE LIMITED 3RD FLOOR, IREO GRAND VIEW TOWER, SECTOR 58, GURUGRAM-122001, HARYANA …PETITIONER (BY SRI. SANDEEP CHILANA, ADVOCATE FOR SRI. J. R. RAAGHUL PAIRAANESH, ADVOCATE) AND: 1. THE STATE OF KARNATAKA ACTING THROUGH THE MINISTRY OF EXCISE, VIDHAN SOUDHA, BENGALURU-560001 2. THE PRINCIPAL ACCOUNTANT GENERAL, KARNATAKA AMBEDKAR ROAD, SAMPANGI RAMA NAGARA, BENGALURU-560001, KARNATAKA 3. THE COMMISSIONER OF EXCISE 2ND FLOOR, TTMC BUILDING, A BLOCK, BMTC, SHANTINAGAR, BENGALURU-560002, KARNATAKA 4. THE DEPUTY COMMISSIONER OF EXCISE, MYSURU RURAL DISTRICT, Digitally signed by VANAMALA N Location: High Court of Karnataka - 2 - NC: 2025:KHC:10472 WP No. 14889 of 2024 BUILDING NO. 1/SMT., JCST, NEXT TO SAMRAT CONVENTION HALL, UDAYARAVI ROAD, KUVEMPUR NAGAR, I BLOCK MYSURU -570023 5. THE SUPERINTENDENT OF EXCISE, CARLSBERG INDIA PRIVATE LIMITED, NANJANGUDU, MYSORE, KARNATAKA …RESPONDENTS (BY SRI. REUBEN JACOB, AAG A/W SRI. B. MANJUNATHA, AGA) THIS WP IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE IMPUGNED NOTICE, AND FORBEAR THE RESPONDENTS, THEIR AGENTS, SERVANTS AND OFFICERS, ETC., FROM ACTING PURSUANT THERETO, AND PASS SUCH FURTHER ORDERS AS THIS HONBLE COURT MAY DEEM FIT AND PROPER IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE; DIRECTION TO DECLARE THE DEMAND PROCEEDINGS AS BEING IN CONTRAVENTION OF RULE 3 AND SCHEDULE - A OF THE YIELD RULES ALONG WITH IN CONTRAVENTION OF RULE 2, RULE 2-AE AND RULE 2- AF OF THE EXCISE RULES AND PASS SUCH OTHER OR FURTHER ORDERS AS THIS HONBLE COURT MAY DEEM FIT AND PROPER IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE.C) ISSUE A WRIT OF PROHIBITION OR A WRIT IN THE NATURE OF PROHIBITION, OR ANY OTHER APPROPRIATE WRIT, TO FORBEAR THE RESPONDENTS, THEIR AGENTS, SERVANTS AND OFFICERS, ETC., FROM ACTING PURSUANT TO THE IMPUGNED DEMAND NO. DCE/MYS(R)/AG AUDIT/1/2021-22 DATED 12/12/2023 (ANNEXURE-E) ISSUED BY R-4 AND PASS SUCH FURTHER ORDERS AS THIS HONBLE COURT MAY DEEM FIT AND PROPER IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. - 3 - NC: 2025:KHC:10472 WP No. 14889 of 2024 THIS PETITION, COMING ON FOR PRELIMINARY HEARING, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR JUSTICE B M SHYAM PRASAD ORAL ORDER The petitioner, a Company incorporated under the Companies Act, 2013 and engaged inter alia in the business of manufacture and sale of beer with its own brewing facility at Nanjangudu, Mysuru, Karnataka, has impugned the demand raised by the fourth respondent vide the impugned Demand dated 12.12.2023 [Annexure – E] while seeking certain declarations and writ of prohibition. 2. Sri. Sandeep Chilana, the learned counsel for the petitioner, submits that the power to raise the demand could indeed be traced to the provisions of the Karnataka Excise (Regulation of Yield, Production and Wastage of Spirit, Beer, Wine or Liquors) Rules, 1998 [for short, 'the Yield Rules 1998'] and the Karnataka Excise (Excise Duties and Fees) Rules, - 4 - NC: 2025:KHC:10472 WP No. 14889 of 2024 1968 ['the Karnataka Excise Rules 1968'] but the demand could not have been raised without the petitioner being extended an opportunity and adjudication on the cause that the petitioner could have shown against the proposed demand. 3. Sri. Sandeep Chilana canvasses that the opportunity to be heard insofar as the provisions of the Yield Rules 1998 is in Rule 7 thereof, and insofar as the demand under the Karnataka Excise Rules 1968, though there is no provision, the opportunity of hearing cannot be denied. The learned counsel further submits that the demand is a consequence of certain observations by the office of the Principal Accountant General, Karnataka and the Apex Court in State of Bihar and Others Vs. Industrial Corporation (P) Ltd. and Others1 has exposited that when the Authority rely upon an Audit Report, they are required to apply their independent mind to find 1 (2003) 11 SCC 465 - 5 - NC: 2025:KHC:10472 WP No. 14889 of 2024 out whether the respondents were indeed in breach of any requirement. 4. Sri. Reuben Jacob, the learned Additional Advocate General, submits that if the present writ petition is to be disposed of on the short question of reasonable opportunity leaving open all grounds to be considered, he would not oppose such disposal in the light of the peculiarities of the case. This Court must observe that it is not disputed that the demand stems from the Audit Report, and the assertion that the petitioner has not been given an opportunity to show cause against the demand is also not disputed. 5. The Rule 7 of the Yield Rules 1998 indisputably confers a right to be heard and this right would is also inherent, given the consequences of demand [including a penalty] when proceedings are under the Karnataka Excise Rules 1968. This would be especially so when the demand is because of certain Audit Report/observations. The Supreme - 6 - NC: 2025:KHC:10472 WP No. 14889 of 2024 Court in State of Bihar and Others Vs. Industrial Corporation (P) Ltd. and Others [supra] has exposited the above proposition. In the circumstances, this Court is inclined to dispose of the petition on the short question of lack of opportunity reading down the impugned demand as notice and with liberty to the petitioner to show cause against the demand and directing the respondents to consider any cause that may be shown and adjudicate on the cause shown leaving open all questions. In the light of the afore, the following: ORDER a. The petition is disposed of reading down the impugned demand dated 12.12.2023 issued by the fourth respondent to be a Show Cause Notice with liberty to the petitioner to file further response, if any, within a period of four [4] weeks from the date of receipt of a certified copy of this order. - 7 - NC: 2025:KHC:10472 WP No. 14889 of 2024 b. The third respondent [the Admitted Authority] who will have to adjudicate in the cause shown, is called upon to decide on the cause before raising a demand. c. It is needless to observe that all questions on the merits of the demand are left open. Sd/- (B M SHYAM PRASAD) JUDGE RB