1. The petitioner is engaged in the production and manufacture of certain medicinal and toilet goods dutiable under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955. A licence was issued to him for the purpose under the Act. On 9th May 1960, the Collector, Raipur, issued to him a notice asking him to show cause why his licence should not be suspended because of a breach on his part of the conditions of the licence about manufacture of the goods and of the provisions of the Act and the rules made thereunder.
The notice mentioned, inter alia, that the petitioner's manufactory was not a contiguous unit and did not conform to the specifications laid down in Rules 22 and 23; that the preparation of 'Ark Kikar--a Unani, preparation--was in contravention of the conditions of the licence; that he had failed to maintain correct accounts as required by Rule 56; that the accounts of the consumption of rectified spirit maintained by him were not correct; and that he had failed to pay duty amounting to Rs. 7,978.25 nP. By his letters dated 12th and 13th May 1960, the applicant denied these allegations and requested for an opportunity of a hearing. On 8th July 1960, the Excise Commissioner passed an order under Rule 87 of the Medicinal and Toilet Preparations (Excise Duties) Rules, 1956, suspending the petitioner's licence pending further enquiries. He found that the charges levelled against the petitioner had been prima facie established.
2. The applicant challenges the legality of this order of the Excise Commissioner and prays that a writ of certiorari be issued for quashing it.
3. Shri Sen, learned counsel appearing for the petitioner, submitted that under Rule 87 a licence could be suspended only at the conclusion of an enquiry and the Excise Commissioner had no power to suspend the petitioner's licence pending further enquiries. In our opinion, this contention must be accepted. Rule 87, in so far as it is material here, runs as follows:
'87. Revocation and suspension of licence.--(1) Any licence granted under these rules may be revoked or suspended by the licensing authority if the holder, or any person in his employ, is found to have committed a breach of the conditions thereof, or of any of the provisions of the Act or these rules or has been convicted of an offence under Section 161, read with Section 109 or with Section 116 of the Indian Penal Code (45 of 1860): Provided that such revocation or suspensionshall not be made until the holder of the licencehas been given a reasonable opportunity of showing cause against the action proposed to be taken. * * * * *'
The language of the rule clearly shows that a licence can be revoked or suspended only if the holder of the licence is found to have committed a breach of the conditions of the licence or of the provisions of the Act or the rules thereunder or has been convicted under Section 161 read with Section 109 or with Section 116, I. P. C. The expression 'if the holder.... is found to have committed a breach....' clearly shows that unless there is a finding about the breach of the conditions of the licence or of the provisions of the Act or the rules thereunder or about the conviction for an offence mentioned in Rule 87(1), there cannot be any revocation or suspension of the licence. The finding that is contemplated by Rule 87(1) is the final finding and not any provisional finding. This conclusion is reinforced by the proviso to Rule 87(1) under which revocation or suspension cannot be made until the holder of the licence has been given a reasonable opportunity of showing cause against the action proposed to be taken. The proviso unmistakably shows that the holder of the licence must be given a notice to show cause against the action proposed to be taken against him, and there must be an enquiry giving a reasonable opportunity to the holder of the licence for showing cause against the proposed action.
Learned Government Advocate said that under Rule 87(1) it was permissible to revoke or suspend the licence pending an enquiry after giving a notice to the holder of the licence to show cause against the action proposed to be taken. We do not agree. What the proviso says is that the revocation or suspension shall not be made until the licence-holder has been given a reasonable opportunity of showing cause against the action proposed to be taken and not that until the holder of the licence has been given a notice to show cause against the proposed action. It is only after a show cause notice has been given to the licence-holder and he has been given a reasonable opportunity and after a finding is given by the competent authority that a licence can be revoked or suspended under Rule 87(1).
4. It was argued by learned Government Advocate that even apart from Rule 87(1) the excise authorities could in the exercise of their administrative powers suspend a licence pending the enquiry and if the authorities were to have no such power the result would be that a licence-holder could with impunity continue to manufacture dutiable goods in contravention of the terms of the licence and of the provisions of the Act and the rules until the completion of the enquiry under Rule 87.
This contention is untenable. The power to suspend a licence as an interim measure till the completion of an enquiry must be found within the provisions of the Act or of the rules. It cannot be claimed independent of the Act and the Rules as incidental to the exercise of administrative or ministerial functions. There is no rule authorizing the suspension of licence pending an enquiry under Rule 87 (1). On the other hand, that rule shows that a licence cannot be suspended pending an enquiry against the licence-holder under Rule 87(1). It may be that in the absence of any power to suspend a licence pending an inquiry it is possible for the licence-holder to continue manufacturing dutiable goods in contravention of the terms of the licence and the provisions of the Act and the rules. But in order to stop this it would not be legitimate to read Rule 87(1) as permitting the suspension of a licence pending an enquiry, if the language of the rule does not permit such a reading. The stoppage of the manufacture of goods pending an enquiry can be achieved only by amending the rule. It is not that the authorities are without a remedy in a case where a licence-holder continues to manufacture dutiable goods in contravention of the licence and of the provisions of the Act and the rules pending an enquiry under Rule 87. Rule 114 authorizes an excise officer not below the rank of a sub-inspector to seize and remove or detain any goods if it appears to him that contravention of the provisions of the Act or the rules has occurred and to seize any impelments and machinery used in the manufacture of such goods. This rule gives adequate power to deal with a defaulting licence-holder to whom notice has been given under Rule 87 and against whom an enquiry is pending.
5. Learned counsel for the applicant also made the point that the petitioner had preferred an appeal to the State Government against the order dated 8th July 1960 of the Excise Commissioner and the dismissal of that appeal by the State without giving him any hearing was illegal. This contention is also substantial. It cannot be denied that in making an order for the revocation or suspension of a licence in the exercise of powers under Rule 87 the authority acts in a quasi-judicial capacity. If the proceedings before the authority are quasi-judicial and the order of revocation or suspension of a licence is a quasi-judicial order, then it follows that the proceedings in an appeal against that order are also quasi-judicial proceedings and the order made in the appeal is also a quasi-judicial order.
The functions and powers of the reviewing or the appellate authority can be only those which the authority passing the order sought to be reviewed or appealed from exercised. Therefore while deciding the appeal the State Government was required to act in a judicial capacity and it was imperative to give a reasonable opportunity of hearing to the petitioner before deciding the appeal. The point is covered by the decision of the Supreme Court in Shivji Nathubhai v. Union of India, AIR 1960 SC 606. In that case it was held that the Central Government acts in a quasi-judicial capacity while deciding a review application under Rule 54 of the Mineral Concession Rules, 1949, and as such it is incumbent upon it before giving a decision to give a reasonable opportunity to the other party in the review application whose rights were being affected, to represent his case.
6. For all these reasons, this petition is allowed and the order dated 8th July 1960 of theExcise Commissioner suspending the petitioner'slicence is quashed. The decision of the Government upholding the order of the Excise Commissioner is also quashed. The petitioner shall havecosts of this application. Counsel's lee is fixed atRs. 75/-. The outstanding amount of the securitydeposit shall be refunded to the petitioner.