- 1 - NC: 2025:KHC:1934 WP No. 23295 of 2022 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 17TH DAY OF JANUARY, 2025 BEFORE THE HON'BLE MR JUSTICE ANANT RAMANATH HEGDE WRIT PETITION NO. 23295 OF 2022 (EXCISE) BETWEEN: 1. M/S SRI SAI GROUP'S A PARTNERSHIP FIRM CL-7, LICENCEE IKHATA NO.886 D1, 100 FEET ROAD, 8TH CROSS, ANUPINAKATTE MAIN ROAD, GOPALA, SHIMOGA TOWN - 577201, RERPESENTED BY ITS MANAGING PARTNER SHRINATH V. HEGDE, S/O LATE ITTAL HEGDE, AGED ABOUT 52 YEARS …PETITIONER (BY SRI MOHAN BHAT, ADVOCATE) AND: 1. THE COMMISSIONER OF EXCISE, 2ND FLOOR, TTMC BUILDING A BLOCK, BMTC, SHANTHINAGAR, BENGALURU - 560 027. 2. THE DEPUTY COMMISSIONER OF EXCISE, SHIVAMOGGA DISTRICT,SHIVAMOGGA - 577201. …RESPONDENTS (BY SRI MANJUNATH B, AGA FOR RESPONDENTS) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASHING THE IMPUGNED ORDER DATED 20.04.2022 IN NO.EXCISE/11014/343/2021.22 PASSED BY THE R1 VIDE ANNEXURE-D AND CONSEQUENTLY IMPUGNED NOTICE DATED 17.05.2022 IN NO.EXE/SMG(2)/CL-07/01/2021.22 ISSUED BY THE R2 VIDE ANNEXURE-E TO THE WRIT PETITION AND ETC. Digitally signed by PRAMILA G V Location: HIGH COURT OF KARNATAKA - 2 - NC: 2025:KHC:1934 WP No. 23295 of 2022 THIS PETITION, COMING ON FOR FINAL HEARING, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR JUSTICE ANANT RAMANATH HEGDE ORAL ORDER This petition is filed impugning the order at Annexure-E dated 17.05.2022 issued by second respondent. In terms of the said order, the petitioner is called upon to pay Rs.17,25,000/- as transfer fees in respect of the CL-7 licence issued under the Karnataka Excise (Sale of Indian and Foreign Liquors) Rules, 1968. 2. The admitted factual position as can be noticed from the impugned order itself would reveal that the licence was issued in favour of the petitioner which is a partnership firm. Initially, there were four partners. Each partner was having 25% stake in the partnership firm. One of the partners having 25% stake in the partnership firm exited from the partnership firm and transferred her 25% stake in favour of one more existing partner of the said firm who in addition to his earlier 25% stake acquired - 3 - NC: 2025:KHC:1934 WP No. 23295 of 2022 25% stake of the out going partner and thus acquired 50% stake, in all. 3. Because of the change in the share holding pattern of the partnership firm, the respondents insisted for additional fees invoking Rule 17-B of the Karnataka Excise (General Conditions of Licence) Rules, 1967 ('Rules, 1967' for short). 4. Learned counsel appearing for the petitioner would contend that in view of the law laid down in the case of Shankar Wines, Wilson Garden, Bengaluru vs The Commissioner of Excise in Karnataka, and Another1, the impugned order is unsustainable. He would contend that the transfer of 25% stake by one of the partners does not amount to the transfer of licence in favour of a new partnership firm so as to attract Rule 17-B of Rules, 1967. 5. Learned counsel for the respondents would contend that the partnership firm/licencee was required to 1 2017 SCC OnLine Kar 6942 - 4 - NC: 2025:KHC:1934 WP No. 23295 of 2022 obtain the prior permission of the Deputy Commissioner before making any changes in the partnership firm. 6. This Court has considered the contentions raised at the bar and perused the records. 7. As per the law laid down in the case of Shankar Wines, supra, Rule 17-B would apply only in a situation in case a third party acquires more than 50% stake in the existing partnership firm. In the instant case, the partnership firm is reconstituted wherein one of the partners having 25% stake, transferred 25% stake in favour of another person who is an existing partner. Thus, the said change in the share holding pattern of the partnership firm does not constitute a transfer to attract Rule 17-B of Rules, 1967. 8. Though the learned Government Advocate would contend that the change in the composition of the partnership firm is to be intimated to the Deputy Commissioner and his approval is to be obtained before making such changes, what is required to be noticed is - 5 - NC: 2025:KHC:1934 WP No. 23295 of 2022 that the said provision is incorporated by way of an amendment in the year 2024. The partnership firm is reconstituted in the year 2022 and impugned order is passed in 2022. Thus, Sub-Rule (3) of Rule 17-B Rules, 1967 has no application to the present set of facts of the case. Hence, the following:- ORDER i) Writ petition is allowed. ii) Impugned order dated 17.05.2022 marked at Annexure-E passed by second respondent is quashed. Sd/- (ANANT RAMANATH HEGDE) JUDGE CHS List No.: 1 Sl No.: 64