- 1 - HC-KAR NC: 2025:KHC-D:9697-DB WA No. 100316 of 2025 IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH DATED THIS THE 4TH DAY OF AUGUST, 2025 PRESENT THE HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE AND THE HON'BLE MR. JUSTICE C.M. POONACHA WRIT APPEAL NO.100316 OF 2025 (EXCISE) BETWEEN: 1. THE STATE OF KARNATAKA, REPRESENTED BY ITS CHIEF SECRETARY, FINANCE DEPARTMENT, VIDHANA SOUDHA, BENGALURU-560001. 2. THE EXCISE COMMISSIONER IN KARNATAKA, 2ND FLOOR, TTMC, ‘A’ BLOCK, BMTC BUILDING, SHANTINAGAR, BENGALURU-560027. 3. THE DEPUTY COMMISSIONER, BALLARI DISTRICT, BALLARI-583101. 4. THE DEPUTY COMMISSIONER OF EXCISE, BALLARI DISTRICT, BALLARI-583101. - APPELLANTS (BY SRI. G.K. HIREGOUDAR, ADDITIONAL GOVERNMENT ADVOCATE) AND: HOTEL ROCK REGENCY HOTELS PVT. LTD., A COMPANY INCORPORATED UNDER COMPANIES ACT 1956, LICENSEE IN FORM CL-7, DOOR NO.1153/A, KUREKUPPA VILLAGE, SANDOOR TALUK, BALLARI DISTRICT-583101. REPRESENTED BY ITS MANAGING DIRECTOR, SRI. POLA RADHAKRIDHNA, S/O. POLA VENKAIAH CHETTY, AGED ABOUT 63 YEARS. - RESPONDENT YASHAVANT NARAYANKAR Digitally signed by YASHAVANT NARAYANKAR Location: HIGHCOURT OF KARNATAKA DHARWAD BENCH DHARWAD - 2 - HC-KAR NC: 2025:KHC-D:9697-DB WA No. 100316 of 2025 THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF KARNATAKA HIGH COURT ACT, 1961, PRAYING TO SET ASIDE THE ORDER PASSED BY THE LEARNED SINGLE JUDGE, HIGH COURT OF KARNATAKA, DHARWAD BENCH IN W.P. NO. 100197/2022 (EXCISE) DATED 27.11.2024 & ETC. THIS WRIT APPEAL, COMING ON FOR PRELIMINARY HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: THE HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE AND THE HON'BLE MR. JUSTICE C.M. POONACHA ORAL JUDGMENT (PER: THE HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE) 1. For the reasons stated in the application - I.A. No.1/2025, the delay of 77 days in filing the appeal is condoned. 2. The appellant has filed the present appeal impugning the order dated 27.11.2024 passed by the learned Single Judge of this Court in W.P. No. 100197/2022 captioned 'Rock Regency Hotels Pvt. Ltd. & Anr. Vs. The State of Karnataka & Ors.' 3. Respondent No.1 had filed the said writ petition impugning the order dated 15.12.2021 passed by the Deputy Commissioner, Ballari District (arrayed as - 3 - HC-KAR NC: 2025:KHC-D:9697-DB WA No. 100316 of 2025 respondent No.3 in the writ petition) whereby the appellant was called upon to pay differential licence fee for the period 30.07.2012 to 16.01.2015. According to the appellant, the respondent was required to obtain a licence in Form CL-6A. However the appellant had obtained a licence in form CL-7 under Rule 3(7) of the Karnataka Excise (Sale of Indian and Foreign Liquor) Rules, 1968 [the Rules]. The appellant had paid the licence fee as payable for the licence granted to it. However, the respondents demanded a sum of `11,20,384/- for the period 2012-13 and 2013-14 and for further fee of `5,98,000/- for the year 2014-15 as the differential amount of licence fee payable for a licence under Rule 3(6A) of the Rules and the licence fee paid by the appellant. 4. According to the respondent, it had not violated any of the rules and regulations and therefore no further licence fee was payable. Initially, the respondent’s appeal was accepted by the Excise Commissioner and the matter - 4 - HC-KAR NC: 2025:KHC-D:9697-DB WA No. 100316 of 2025 was referred to the Deputy Commissioner of Excise for consideration afresh. However the Deputy Commissioner had reiterated the demand, which led the respondent to file the writ petition. The said writ petition was disposed of with the directions to the Deputy Commissioner, Ballari District to consider the reply furnished by the respondent and pass a fresh order. Pursuant to the said directions, the Deputy Commissioner had passed an order dated 15.12.2021 which was challenged by the petitioner in the writ petition (W.P. No. 100197/2022). As noted above, the said petition was allowed in terms of the impugned order. 5. At the outset, it would be relevant to refer to Sub- rule (6) and (7) of Rule 3 of the Rules. The relevant extract of Sub-rules (6), (6-A) and (7) of Rule 3 of the said Rules are set out below: Rule 3 - xxxx (6) Special licences – These licences shall be granted in Form CL-6 by the Deputy Commissioner of the district with the previous sanction of the Excise Commissioner, - 5 - HC-KAR NC: 2025:KHC-D:9697-DB WA No. 100316 of 2025 when the circumstances are such as not to allow of the issue of licences of any of the above descriptions, on such terms and conditions and for such periods, as he may on each occasion determine. (6-A) Star Hotel Licences – Licences under this clause shall be granted by the Deputy Commissioner in Form 6-A to Star Hotels for possession and sale of liquor. The licensees under this clause may serve liquor to the residents in the rooms and open more than one counter for the convenience of the residents and boarders within the licensed premises with the approval of the Deputy Commissioner. (7) Hotel and Boarding House licences – (a) A licence under this clause shall be applied for and obtained in Form CL-7 from the Deputy Commissioner. (b) No liquor under this licence shall be sold to persons other than those accommodated in the licenced hotel and boarding houses and their guests and causal visitors who take meals in such places. 6. In terms of the licence granted under Sub-rule (6A) of Rule 3 of the Rules the licencee is entitled to serve liquor to residents in the rooms and also open more than one counter for the convenience of the residents and - 6 - HC-KAR NC: 2025:KHC-D:9697-DB WA No. 100316 of 2025 boarders within the licenced premises. The respondent had not obtained any licence under Sub-rule (6-A) but was granted licence under Sub-rule (7). It is material to note that in terms of the said rule the respondent was proscribed from selling liquor to persons other than those accommodated in the licenced premises. Additionally the respondent was not entitled to serve liquor from counters. Admittedly, the respondent had not violated any of the conditions of the licence granted to it. There is no allegation that respondent had served liquor from any counter, or to persons other than those accommodated within the licenced premises. 7. It is the appellant’s case notwithstanding that the respondent had not violated the terms of its licence, it was required to pay the difference of the licence fee payable for licence under Sub-rule (6-A) and Sub-rule (7) of Rule 3 of the Rules. - 7 - HC-KAR NC: 2025:KHC-D:9697-DB WA No. 100316 of 2025 8. The learned Single Judge did not find any merit in the said contention. The relevant extract of the impugned order, which indicates the reasons for allowing the writ petition, is reproduced below; “9. The bare reading of Rule 3(6-A) and the Rule 7 discloses the difference between a star hotel license and normal hotel and boarding house license. If a person is having a 6-A star hotel licence, he can serve liquor to the residence in the rooms and in open more than one counter for the convenience of the residence and borders within the licensed premises with the approval of the Deputy Commissioner. When it comes to the other category that is CL-7 there they can only sell the liquor to the persons who are accommodated in the licensed hotel and boarding houses and their guests in the rooms. As per this, liquor cannot be sold to the persons other than those accommodated in the licensed Hotel. The contention of the learned senior counsel is that all the while they have obtained the license under CL-7 and they have been running the business as per the conditions and as per the license that is granted to the petitioner. There is nothing forthcoming from the respondents that during the subsistence of the status of a star hotel, whether the petitioner has conducted the business as per the conditions applicable to CL-7 or as per the conditions applicable for a 6(A) license. It is also undisputed fact that there would be a routine inspection by the Excise Department with respect to - 8 - HC-KAR NC: 2025:KHC-D:9697-DB WA No. 100316 of 2025 these hotels and they are also conscious of the fact that they had issued the CL-7 license. Even assuming for the argument sake, there is suppression from the petitioner, they are aware that they have issued CL-7 license. If the petitioner is selling the liquor as per 6-A license, if he is having more number of counters in the hotel premises, action would have been initiated by the Excise Department. It is not at all the case of the Department that at any point of time, the petitioner has conducted the business as per the 6-A license conditions which is applicable to the star hotel. The argument of the learned AAG that whether he is conducting the business as per the license under 6-A or he is conducting the business as per CL-7 is immaterial and the petitioner needs to have the license under 6-A, as it is a star hotel. In the considered opinion of this Court, this argument has no legs to stand. A bare reading of Rule 6-A of the Rules makes it clear that nowhere a condition is imposed that every star hotel shall have a license under 6-A. Under 6-A, a facility is given to the star hotel. A person who is running a hotel and boarding house is having CL-7 license even if he wants to have a license under 6- A, he cannot have because he do not have the status of a star hotel and at the same time the licensing authority cannot compel a person to have a license and sell the liquor. It is for the person who is obtaining the license to ask for a license and do the business as per the conditions laid down in the said license. In the light of the fact that there is no material put forth before the Court nor it is - 9 - HC-KAR NC: 2025:KHC-D:9697-DB WA No. 100316 of 2025 forthcoming from any of the orders that are passed that the petitioner has contravened the conditions under CL- 7 and conducted the business under 6-A, the question of asking the petitioner to pay the licence fee as per Rule 3(6-A) is arbitrary and illegal. Even if, this Court remands the matter by giving opportunity to the authorities to find out whether the petitioner had violated the CL-7 license conditions, they would not be able to find out in that regard because they will not be any material with them and further admittedly no notice is issued to the petitioner for contravention of the license conditions and further as rightly submitted by the learned senior counsel, just basing on the Accountant General report in a mechanical manner, the Deputy Commissioner or the Excise Department cannot pass such an order.” 9. We find no ground to differ from the said view. There is no allegation that the respondent had violated any terms of CL-7 licence that was granted to it. Thus, there is no material to hold that the respondent had served liquor in the manner as permissible under Sub-rule (6-A) of Rule 3 without obtaining the said licence. In the event licencee serves liquor contrary to the licence, it is open for the authorities to take steps in accordance with law. However, it would be impermissible for the excise - 10 - HC-KAR NC: 2025:KHC-D:9697-DB WA No. 100316 of 2025 authorities to demand licence fee for a licence that was neither granted nor availed by concerned person. 10. In the present case, admittedly, the respondent had not been granted licence under Sub-rule (6-A) of Rule 3 of the Rules. Therefore, a demand for fees for such a licence is unsustainable unless the authorities establish that such a licence was necessary for serving liquor in the manner as done by the concerned person, no demand for the licence fee can be made. In view of the above, we find no infirmity with the impugned order. The appeal is accordingly dismissed. Sd/- (VIBHU BAKHRU) CHIEF JUSTICE Sd/- (C.M. POONACHA) JUDGE BVV List No.: 1 Sl No.: 21