Commissioner of Prohibition and Excise, A.P., Hyderabad Vs. White Horse Distilleries, Nellore and Another - Court Judgment

Excerpt:
constitution - prohibition on approval - rule 66 of andhra pradesh distillery rules, 1970 - petitioner presented labels of bottles of liquor for approval - approval not given by commissioner on ground of prohibition under new policy - court observed that restrictions did not flow from new excise policy - petitioner complied with requirements of rules relating to approval - not open to commissioner to refuse approval of labels on consideration falling outside those rules. - - liquors india limited who also had their own business of manufacturing liquor, the petitioner sought approval of labels which include the following inscription as well: the beverage corporation limited proposed to procure a, b, and c category of liquors from the distilleries located within the state and to import 'd' category liquors (premium bands). 9. it is also stated that for those who would like to establish the production facility within the existing distillery, may have a tie-up with local distilleries, and a specific period about 3 months was given. it is in this context that the labels represent symbolically the relative success or failure of the manufacturer of a product. 26. the contention of the learned counsel for the first respondent (petitioner in the writ petition) was that the writ petitioner having satisfied all the requirements contemplated under the relevant rules and the appellant-commissioner having granted licence for, manufacturing of iml he had no choice except approving the labels submitted by the petitioner. it may however be contended that the commissioner may exercise the discretion to withhold approval for related reasons like labels contravening any law relating to obscenity or public morals or patently contravening any trade mark law.ordervaman rao, j 1. this writ appeal is directed against the judgment of a learned single judge dated 19-7-1999 in writ petition no. 12292 of 1999.2. the parties will be referred to as they were arrayed in the writ petition.3. the facts pertaining to the case fall under a narrow compass:the petitioner is a proprietor of m/s. white horse distilleries. he was granted d2 licence under andhra pradesh distillery rules, 1970 (for short 'distillery rules') on 25-7-1977 for manufacture of indian made liquor. the petitioner had entered into a marketing tie up with m/s. liquors india limited for marketing its products. the petitioner also an approved rate contractor for supply of its products to the 2nd respondent (andhra pradesh breweries corporation limited), which has a monopoly in the state of andhra pradesh. it is stated that though the petitioner has a marketing tie up with m/s. liquors india limited, the product of the petitioner was supplied directly by the petitioner to the 2nd respondent for sale in the state of andhra pradesh.4. according to the petitioner, in terms of sub-rule (12) of rule 66 of the distillery rules, a licensee is required to get the labels approved by the first respondent (commissioner of prohibition and excise)before they are pasted on the bottles of liquor manufactured by the petitioner and for getting these labels approved, every licensee is supposed to make an application to the first respondent along with a copy of the proposed label and pay a fee of rs.25,000/- for approval of each label. the 'distillery rules' further provide that the bottles of liquor can only be sold when labels approved by the first respondent were affixed on them. it is stated that soon after the petitioner got licence for manufacturing liquor, he applied for approval of the labels. as he had a tie up with m/s. liquors india limited who also had their own business of manufacturing liquor, the petitioner sought approval of labels which include the following inscription as well:'for liquors india limited'.5. three labels were approved namely, 'english channel brandy', 'popular choice whisky' and 'white horse whisky'. below the approved name of the liquor, the following words inserted in the labels.'distilled, blended and bottled by the white horse distilleries, naidupet, for liquors india limited, hyderabad'.6. tie-up with regard to marketing between m/s. liquors india limited and the petitioner-white horse distilleries came to an end on 31-3-1999. the excise year commences from 1st april every year and ends on 31 st march of the next year. the petitioner applied for renewal of d2 licence on payment of requisite fee of rs. six lakhs and bank guarantee of rs.4 lakhs. the licensee was renewed and the petitioner is holding a valid licence presently.7. after the renewal of the licence, the petitioner made an application on 17-4-1999 along with the requisite fee for approval of two labels. these labels differed from the earlier approved labels to the extent that they did not have the inscription 'for liquors india limited, hyderabad'. thechange was necessitated because the marketing tie-up between the petitioner and the m/s. india limited had come to an end. the grievance of the petitioner is that the approvals for labels were not issued. the petitioner wrote various letters requesting him for approval as the petitioner's business has come to stand still and he could not transact any business in the absence of approval of labels. however, the petitioner received a letter on 14-6-1999 informing that his application for approving the label was rejected. it was this letter which was challenged in the writ petition.8. in the counter affidavit filed on behalf of respondent no.1 (the commissioner of prohibition and excise), it is admitted that the petitioner was granted d2 licence for manufacture of india made liquor but the petitioner's contention that he entered into marketing tie-up with m/s. liquor india limited for marketing its products is disputed. it is stated that as per the policy of the government on 1998-99, liquor is classified into four categories i.e., a, b, c, and d. the beverage corporation limited proposed to procure a, b, and c category of liquors from the distilleries located within the state and to import 'd' category liquors (premium bands).9. it is also stated that for those who would like to establish the production facility within the existing distillery, may have a tie-up with local distilleries, and a specific period about 3 months was given. this is explained to mean that the existing distillery may have a tie-up arrangement with the another distillery for protection of their brands. it is stated that in the instant case, m/s. liquor india limited have given authorisation to m/s. white horse distillery for manufacture of their brand. accordingly, these labels were approved duly indicating the word 'distilled, blended and bottled by white horse distillery, nayudupet, nellore district. for liquor india limited'. thus,it is stated that it was not tie-up for marketing but for producing the levied products of another distillery.10. it is stated that labels are to be affixed on the bottles by the licensee only after labels are approved by the commissioner. the application for approval of labels along with fee of rs.25,000/- for each variety of label shall be submitted to the superintendent for concerned distillery who shall forward them to the commissioner of excise through the director of distilleries and beverages for approval by the commissioner. one approved copy shall be retained in the office of the commissioner of excise and furnish one approved copy each to the concerned distillery officer and the licensee. the licensee is required to comply with such instructions as the commissioner may issued regarding any label.11. it is denied that m/s. liquors india limited has inserted a logo on the label 'for m/s. liquors india limited' simply because the petitioner have a marketing tie-up with m/s. liquors india limited. it is stated that under excise policy for 1998-99, a distillery can allow another distillery to produce its products under tie-up arrangement. in the instant case, m/s. liquors india limited has submitted an affidavit stating that m/s. white horse distilleries, nellore is permitted to manufacture indian made liquor of the brands of (1) 'popular choice whisky' (2) 'english channel brandy' and (3) 'white horse whisky'. it is stated that this affidavit was to be treated as authorisation to m/s. white horse distillery to use these trademarks of m/s. liquor india limited and sell as per the instructions of m/s. liquors india limited. it was specifically mentioned in the affidavit that an arrangement was entered into with the specific understanding that m/s. liquors india limited pay such charges per case of liquor as may be mutually agreed upon. in other words, the arrangement made betweenm/s. liquor india limited and m/s. white horse distilleries was that the product of m/s. liquors india limited is to be manufactured by m/s. white horse distillery for which m/s. liquor india limited shall pay certain charges for the work done by m/s. white horse distillery.12. it is stated a similar arrangement was made by m/s. liquors india limited with m/s. durga wines, vijayawada for two of the three products during the year 1997-98. it is stated from this it is clear that these brands belong to m/s. liquors india limited. the labels of (1) english channel brandy and (2) popular choice whisky were originally approved/registered in favour of m/s. liquors india limited during the year 1993-94 as seen from the letter of the commissioner of excise vide no.b2/5801/ 91/ddb/ex., dated 3-12-1993. thus, the petitioner has no right to claim that these labels are of his own. it is admitted that the licence of the petitioner for the year 1999-2000 was renewed.13. it is stated that the petitioner submitted two labels, namely, (1) english channel brandy (2) popular choice whisky as if these labels belong to m/s. white horse distillery. the petitioner, however, submitted letters supposed to have been issued by m/s. liquors india limited stating that these labels belong to m/s. white horse distilleries and that m/s. liquors india limited have no objection for approval in favour of m/s. white horse distilleries. this amounts to approval of brand label of one distillery to another distillery for which there is no provision in the distillery rules. as per the policy of the government for the year 1999-2000, there is no change in the system and the position as existed in the year 1998-99 has to be continued. by virtue of that, only brands of indian made liquor which were approved during the year 1998-99 are being considered and approved for the year ,1999-2000 and no new label is being approved. thedepartment has no objection if the petitioner comes up with the same arrangement as was done in the year 1998-99 i.e., tie-up with m/s. liquors india limited to approve these labels inasmuch as he has applied for approval of those labels claiming as his own. it is admitted that the request for approval of labels was rejected.14. it is stated that assumption that these labels belong to m/s. liquors india limited is based on facts available on record inasmuch as the proceedings dated 7-4-1998 approving the labels earlier would show that the liquors in question were manufactured by m/s. white horse distillery on behalf of m/s. liquors india limited for the year 1998-99. it is stated that these labels were approved for m/s. liquors india limited as seen from the proceedings dated 3-12-1993 for 1993-94.15. it is, however, admitted that m/s. liquors india limited have given a letter that these labels belong to m/s. white horse distilleries, nayudupet and that they have no objection for approval of the labels in the name of m/s. white horse distilleries. it is stated that on the strength of such a letter, the department cannot hold that these labels belong to m/s. white horse distilleries. thus, it is stated that previous records and labels have been taken into consideration and it was concluded that these labels belong to m/s. liquors india limited. it is stated that in view of the new excise policy for 1999-2000 vide g.o. ms. no.234, dated 22-3-1999, the same labels have to be approved as existed in the previous year. it is stated by way of clarification that the department has no objection if the request for approval of labels is made in the same format as was done in the year 1998-99 i.e., under tie-up agreement with m/s. liquors india limited.16. it is stated that under section 64 of the a.p. excise act, the petitioner has an opportunity to prefer revision before thegovernment against the order of the commissioner of prohibition and excise. in the instant case, the petitioner approached the high court without exhausting remedy available under the a.p. excise act.17. a reply affidavit has been filed onbehalf of the petitioner. it is stated that even assuming that the labels belong to m/s. liquors india limited, the first respondent was obliged to renew the labels in view of the letter given by m/s. liquors india limited that they have no objection for approval of these labels in favour of the petitioner. the respondent no.1 has no authority under law to enquire into infringement of trade mark or copy right. similarly, the first respondent has no authority to look into the arrangement between m/s. liquors india limited and m/s. white horse distilleries to point out whether it was marketing tie-up or the petitioner was manufacturing the liquor under the brand names for supply to liquors india limited. it is stated that the tie-up with m/s. liquors india limited came to an end on 31-3-1999 and the petitioner applied for approval of labels with two brand names enclosing a letter from m/s. liquors india limited as mentioned above.18. on these pleas, the learned single judge allowed the writ petition and directed the approval of the labels submitted by the petitioner.19. the first respondent in the writ petition ie., the commissioner of prohibition and excise, hyderabad filed this appeal challenging this order.20. it was contended by the learned advocate general that in the matter of trade of liquors, labels assume great significance and the question of approval or rejection of labels has to be viewed in the light of the current excise policy of the government. it is pointed out that the excise policy for 1999-2000, as enunciated in g.o. ms.no.234 dated 22-3-1999 does not contemplate approval of any request for tie-up arrangements by outside distilleries, and breweries with those located in the state.21. it cannot be denied that in these days of corporate obsession to build brand images and to acquire brand leadership in the markets, labels in respect of any consumer products are of great significance. tin's is all the more so in the case of alcoholic liquors. having stated this, it may be observed that the labels have significance in the context of consumers' exercise of choice in selecting a product at which all the marketing strategies are directed. it is in this context that the labels represent symbolically the relative success or failure of the manufacturer of a product. it is in this context that labels become subject matter of controversy when a successful brand label is sought to be imitated by the rival manufacturer.22. but, the real question is whether this aspect has any bearing on the question of approval of labels by the commissioner of excise in the light of the statutory provisions applicable to it. an examination of relevant rules does not indicate any nexus between them.23. the contention of the learned advocate general that the statutory rules have to be read in the light of the excise policy on the subject if there is no conflict between the statutory rules and the elements of policy does not admit of any controversy.24. the further contention of the learned advocate general is that the policy as enunciated in the government orders has to be ignored only when it is opposed to statutory rules is unexceptionable.25. here again, the question is whether there was any change in the policy which has a bearing on the question of approval of labels by the commissionerin the light of the statutory provisions including the rules.26. the contention of the learned counsel for the first respondent (petitioner in the writ petition) was that the writ petitioner having satisfied all the requirements contemplated under the relevant rules and the appellant-commissioner having granted licence for, manufacturing of iml he had no choice except approving the labels submitted by the petitioner.27. these contentions have to be examined in the light of the statutory provisions.28. it is an admitted fact that the petitioner has a subsisting licence for manufacture of iml in his distillery and that the licence granted to him under section 13 of the a.p. excise act continues to be inforce. it is, therefore, obvious that having been granted license for manufacturing liquor and with further agreement that the andhra pradesh beverages corporation would purchase the products manufactured by him, the petitioner is entitled to manufacture iml and market it to the 2nd respondent-a. p. beverages corporation. granting of licence under section 13 of the act makes it obligatory on the part of the commissioner of prohibition and excise and the government to ensure that the petitioner is allowed to carry on business of manufacture and sale of iml, however, consistently with the other provisions of law and the rules. the other statutory rules including the relevant rule providing for the approval of the labels submitted by the petitioner have to be construed harmoniously and consistently with the privileges and rights of the petitioner accrued to him by virtue of his having been granted the licence under section 13 of the act. the relevant provisions relating to labels to be affixed on the bottles of liquor and requirement to obtain approval for the same are contained under rule 66 of thedistillery rules, 1970. rule 66 deals with various aspects of bottling the liquor, its strength or purity, the mode and method of bottling, the requirement as to the presence of the concerned officers at the time of bottling, the inscriptions required on the bottles, regarding quantity to be filled up in the bottle, the requirement as to inscription of the name of the manufacturer on the bottles, the strength of liquor in the degrees of proof, the method and procedure of using corks for closing the bottles etc.29. it is in this background, the following sub-rules of rule 66 of the distillery rules deal with the labels to be affixed on the bottles.'(12) the labels shall be affixed to the bottles by the licensee only after such labels are duly approved by the commissioner. for this purpose, the licensee shall submit a copy of the labels proposed to be affixed by him quadruplicate and challan of remittance of a fee of rs.25,000/- for each such variety of label sought to be approved under appropriate head of account at any government treasury in the state. the applicant should also get the label reapproved for each excise year by paying a fee of rs.25,000/- for each variety of label. the application shall be submitted to the superintendent of distilleries, who shall forward them to the commissioner of excise through director of distilleries and breweries for approval by the commissioner. one approved copy shall be retained in the office of the commissioner of excise and three copies shall be returned to the superintendent for distilleries who shall retain one copy in his office and furnish one approved copy each to the concerned distillery officer and the licensee. the licensee shall comply with such instructions as the commissioner may issue regarding any label. the application shall be in the form d10duly affixed with court fee stamp of value of rs.2/-. the format of the label submitted for such approval shall contain the following. (a) name and address of manufacturer (b) batch number, month and year of manufacture (c) net contents (d) proof strength (e) kind of liquor (13) all labels required to be used on the bottles of spiced spirit shall bear the words 'missalahdar' in hindi and its telugu equivalent and the words 'spiced spirit' in english. (14) labels bearing the word 'special' shall be used on bottles of special spiced spirit, labels containing the 'old' shall only be affixed to bottles containing spirit which has been kept for more than one year in bond from the date of distillation. (15) labels shall be so affixed as to be easily distinguishable. no label shall be pasted over the words and figures, 750 ml. or 600 ml. or 300 ml. or 180 ml. moulded on the bottles. (16) an account of spirit received and used for bottling shall be maintained in form d4. (17) the licensee shall not advertise his products by extolling their merits or in any other objectionable manner. 30. a careful scrutiny of these provisions relating to labels would show that their purpose is to protect the interests of the consumers by ensuring that correct information is inscribed as to the quantity and quality of the liquor and also about the information as to the manufacturer and bottling agency of the liquor. sub-rule (11) of rule 66 contains most importantrequirement as to what the label should contain. it postulates that a label printed in english or telugu language should show the name of the licensed distillery and the place where the bottling was done. under sub-rule (12), a licensee is required to submit the label for approval through the concerned authorities and the commissioner has been empowered to approve the labels. the commissioner is also empowered to issue such directions as he may consider it necessary with regard to any label. sub-rule (12) mandates that the label submitted shall contain the following information, name and address of the manufacture, batch number, month and year of manufacturer, net contents, proof strength and kind of liquor. from these provisions, it is apparent that the purpose of statutory requirement to obtain approval of label is to ensure that the licensee-manufacturer does not inscribe any particulars or information on the label in regard to the quality or quantity of the liquor contrary to the facts with a view to misleading the consumers. if the labels contained prescribed information correctly, the commissioner does not seem to have any discretion to withhold the approval of the labels. it may however be contended that the commissioner may exercise the discretion to withhold approval for related reasons like labels contravening any law relating to obscenity or public morals or patently contravening any trade mark law. such discretion may be implied on the principle that a public authority cannot be expected to affix its seal of approval on anything, which is patently illegal. this question does not arise in this case.31. the impugned letter dated 14-6-1999 under which the request for the approval of the labels of the petitioner has been rejected discloses the following reasons for refusing the approval.32. that these labels were approved for 1997-98 in favour of m/s. liquors india limited. subsequently in 1998-99, theselabels of m/s. liquors india (p) limited were approved for bottling at m/s. white horse distilleries on tie-up arrangement on the basis of information furnished by m/s. liquors india pvt. ltd., in an affidavit that these labels arc owned by liquors india private limited and that they had permitted m/s. white horse limited for manufacture of their brand liquor at their distillery at naidupet, nellore district for sale for the period ending upto 31-3-1999.33. the petitioner changed the labels by removing the words 'manufactured for m/s. liquors india (p) limited' and also redesigned the labels altogether claiming that these labels are owned by m/s. white horse distilleries limited, nellore for 1999-2000.34. it is difficult to conceive how the concerned authority - the commissioner could have approved any labels of m/s. liquors india private limited. admittedly, it was the petitioner who was the licensee and manufacturer of the products and who submitted the labels for approval. merely because the petitioner had an understanding with m/s. liquors india limited and inscribed on his label 'for liquors india limited' it cannot be said that the labels of liquors india limited were approved. the question - of approving the liquors india limited does not arise as neither liquors india limited had submitted the labels nor was it a licensee under section 13 of the act.35. further, it is mentioned in the rejection letter that in view of the new excise policy communicated vide g.o. ms. no.234 dated 23-3-1999 for the year 1999-2000 the petitioner's labels were not approved. this rejection in no way can emanate from the so called new excise policy enunciated in g.o. ms. no.234 dated 22-3-1999. firstly, the policy document in the said g.o. does not deal with the labels at all. the only change the new excise policy seems to contemplate is that no further request for tie-uparrangement by outside distilleries/beverages with those located in the state shall be entertained. it is difficult to conceive how the labels submitted by the petitioner for approval would have the effect of contravening the excise policy.36. what this policy enunciated in para 5 of the said g.o. contemplates is that the new request for tie-up arrangement by outside distilleries/beverages with those located in the state shall not be entertained. the label submitted for approval in this case do not indicate that they outside distillery or beverage has requested for any tie-up arrangement for manufacture with the petitioner who is the local distillery. on the other hand, these new labels when compared with the old approved labels appear emphatically to indicate saying that while in the previous year, the petitioner was manufacturing the iml on behalf of m/s. liquors india limited, but, in the new year, he was proposing to manufacture on his own account and not for someone else as amply indicated by the omission of words 'for liquors india limited'.37. thus, the labels submitted for approval do not disclose any intrinsic of contravention of the new excise policy of the government.38. further, whether a licensee can be permitted to have tie-up with some other manufacturer is a matter relating to regulation of manufacture, possession and sale of excisable articles. it is a substantive element which must find place in the terms and conditions of license issued under section 13 of the act. such an important element of regulation cannot be decided upon, on the basis of a mere label submitted by the petitioner for approval.39. a look at the form d10 to be submitted for obtaining approval of label would show that it seeks information about full address, kind of license, thename of the proprietor concerned, address of the distillery, brand name of the liquors for which label is sought and whether prescribed fee has been paid. it does not seek to elicit any information on the question of tie-up arrangement or the ownership of the label.40. thus, firstly, the label submitted for approval does not furnish any material to show that the activities of the licensee in any way contravened the so called new excise policy. secondly, the question of tie-up arrangement is irrelevant and extraneous consideralion having regard to the various stauitory provisions extracted above which have a bearing on the question of approval of the labels. as stated above, the object of requiring approval for a label is to ensure that the information furnished on the labels is in accordance with the rules. it is conceivable that while approving the label, the competent authority may also examine whether prima facie the label submitted for approval does not constitute any infringement of trade mark of some other manufacturer.41. in this case one of the grounds for refusal to approve the label appears to be, as stated in the impugned letter, that the labels of m/s. liquors india limited have been re-designed as the labels of m/s. white horse distilleries which amounts to submission of labels of another distillery.42. firstly, it is the liquors india limited which must be aggrieved by the action of the petitioner in presenting their labels for approval. in this case, it is acknowledged by the commissioner in the impugned letter that the liquors india limited had given a letter that they do not claim any right in respect of those labels and authenticity of this letter is not doubted. further, it may be remembered that the trade mark rights, if any, are transferable and they can be lawfully transferred. when the alleged owners of the label (trademark)have informed the commissioner that they do not claim any right in the labels, withholding approval of labels on that ground appears highly arbitrary and unreasonable.43. the statement in the impugned letter that as there is no tie-up with the petitioner and m/s. liquors india limited, this would be against the excise policy for the year 1999-2000 shows in the light of above observations in this regard that the so-called new excise policy is being used as a mere pretext for refusing the approval of the labels. as seen above, the new excise policy prohibits to entertain request for new tie-up arrangement with outside distilleries and breweries. assuming that for the year 1998-99, there was tie-up arrangement between the petitioner and m/s. liquors india limited, the fact that such tie-up arrangement has been dispensed with for the year 1999-2000 would go to show that it was inconsonance with the new excise policy as what is prohibited in the new excise policy is having new tie-up arrangement and not breaking up the earlier tie-up arrangements. the statement in the impugned letter that as there was no tie-up arrangement between the petitioner and the liquors india limited, hence it contravenes the new excise policy, shows complete non-application of mind on the part of the commissioner.44. another reason mentioned for refusing approval of labels is said to be that under the excise policy only brands approved for 1998-99 are being considered for 1999-2000 and no new labels are being approved. the very fact that every year the licensee is required to submit labels for approval would go to show that new labels have to be considered. at any rate, the relevant rules quoted above do not confer on the commissioner any such power to reject new labels summarily on the ground of the same being new. this restriction does not also flow from the new excise policy.45. it is true that the appellant-commissioner in this case was exercising his administrative discretion while refusing approval for labels as contemplated under rule 66(12) of the distillery rules. exercise of administrative discretion must be within the confines of statutory rules. such exercise of discretion must be on grounds which are germane or relevant to the policy. in this case, the first respondent seems to have exercised his discretion in refusing approval of labels on the basis of irrelevant considerations which neither emanate from nor have any nexus with the object of the statutory rules. administrative action has to be judged on the test of fair play. arbitrary exercise of discretion specially where the action involves civil consequences must be held to strike against guarantee of equal protection of laws under article 14 of the constitution of india.46. it may be pointed out that there does not appear to be any intimation to the petitioner after applications for labels were given as to the various factors which the commissioner considered as relevant for refusing the approval of the labels. having complied with the statutory rules and having paid the prescribed fee, the petitioner gave an application for approval and waited for positive orders. it was in the impugned letter rejecting his request for approval that he was informed of the various grounds which involve quite a few questions of fact not required to be mentioned in the application form on which his application was rejected. in this view of the matter, there has been a violation of principles of natural justice and fairness inasmuch as petitioner was not afforded any opportunity to be heard on these questions of fact. on this ground also, the impugned letter can be assailed as untenable.47. there is another circumstance which appears significant in this case. itis not disputed that the petitioner continues to be a licensee and his license has been renewed for the relevant period on payment of substantial amount of fee running into lakhs. as a consequence of renewal of licence, the petitioner has been bestowed with the privilege of manufacturing of iml and selling it. unless the labels are approved, his business activity will come to stand still. the petitioner will be virtually deprived of the benefit of privilege which he was granted for substantial consideration by renewing his licence. the action of the commissioner in withholding the approval of labels virtually has the effect of cancellation of his license. this could not be the object of the rules relating to approval of the labels.48. viewed in this context, the power of the commissioner to refuse approval of label could be exercised only on the ground and in relation to circumstance as provided in the relevant sub-rules under rule 66 of the distillery rules. this goes to indicate that once the petitioner complied with the requirement of those rules, it is not open to the commissioner to refuse approval of the labels on considerations falling outside those rules.49. in the case of i.e. newspapers (bombay) p. ltd v. union of india, : [1986]159itr856(sc) , it was held by the supreme court that where an executive authority has not applied its mind to the relevant considerations, such an exercise of discretion deserves to be set aside.50. in the case of fasih chaudhary v. d.g., doordarshan, : air1989sc157 , it was held that administrative actions have to be judged on the test of fair play.51. in the case of h.l. trehan v. union of india, : air1989sc568 , the supreme court pointed out that non-arbitrariness would also require compliance of rules ofnatural justice where the impugned action involves civil consequences. it was further held that post-decisional opportunity of hearing docs not subserve the rules of natural justice.52. similarly, the supreme court in the case of style (dress land) v. union territory chandigarh, : air1999sc3678 , observed that a court can strike down an executive order based on irrelevant and extraneous reasons by exercise of its powers under article 226 of the constitution of india. it has also been held that administrative orders which affect the rights of the citizens to the property or the attributes of the property are required to be in consonance with the rules of natural justice.53. thus, taking any view of the matter, there is no escape from holding that the action of the appellant, excise commissioner, in rejecting the approval of the labels submitted by the petitioner in the impugned letter is based on irrelevant considerations and is in violation of statutory rules and principles of natural justice. the impugned order is, therefore, held to be in violation of guarantee of equal protection of laws and hence the order of the learned single judge in selling aside the impugned order and his further direction to the excise commissioner (appellant herein) to approve the labels submitted by the petitioner is upheld.54. the writ appeal, therefore, stands dismissed. no costs.

Judgment:
ORDER

Vaman Rao, J

1. This writ appeal is directed against the judgment of a learned single Judge dated 19-7-1999 in Writ Petition No. 12292 of 1999.

2. The parties will be referred to as they were arrayed in the writ petition.

3. The facts pertaining to the case fall under a narrow compass:

The petitioner is a proprietor of M/s. White Horse Distilleries. He was granted D2 licence under Andhra Pradesh Distillery Rules, 1970 (for short 'Distillery Rules') on 25-7-1977 for manufacture of Indian Made Liquor. The petitioner had entered into a marketing tie up with M/s. Liquors India Limited for marketing its products. The petitioner also an approved rate contractor for supply of its products to the 2nd respondent (Andhra Pradesh Breweries Corporation Limited), which has a monopoly in the State of Andhra Pradesh. It is stated that though the petitioner has a marketing tie up with M/s. Liquors India Limited, the product of the petitioner was supplied directly by the petitioner to the 2nd respondent for sale in the State of Andhra Pradesh.

4. According to the petitioner, in terms of sub-rule (12) of Rule 66 of the Distillery Rules, a licensee is required to get the labels approved by the first respondent (Commissioner of Prohibition and Excise)before they are pasted on the bottles of liquor manufactured by the petitioner and for getting these labels approved, every licensee is supposed to make an application to the first respondent along with a copy of the proposed label and pay a fee of Rs.25,000/- for approval of each label. The 'Distillery Rules' further provide that the bottles of liquor can only be sold when labels approved by the first respondent were affixed on them. It is stated that soon after the petitioner got licence for manufacturing liquor, he applied for approval of the labels. As he had a tie up with M/s. Liquors India Limited who also had their own business of manufacturing liquor, the petitioner sought approval of labels which include the following inscription as well:

'For Liquors India Limited'.

5. Three labels were approved namely, 'English Channel Brandy', 'Popular Choice Whisky' and 'White Horse Whisky'. Below the approved name of the liquor, the following words inserted in the labels.

'Distilled, Blended and Bottled by the White Horse Distilleries, Naidupet, for Liquors India Limited, Hyderabad'.

6. Tie-up with regard to marketing between M/s. Liquors India Limited and the petitioner-White Horse Distilleries came to an end on 31-3-1999. The Excise year commences from 1st April every year and ends on 31 st march of the next year. The petitioner applied for renewal of D2 licence on payment of requisite fee of Rs. six lakhs and bank guarantee of Rs.4 lakhs. The licensee was renewed and the petitioner is holding a valid licence presently.

7. After the renewal of the licence, the petitioner made an application on 17-4-1999 along with the requisite fee for approval of two labels. These labels differed from the earlier approved labels to the extent that they did not have the inscription 'for Liquors India Limited, Hyderabad'. Thechange was necessitated because the marketing tie-up between the petitioner and the M/s. India Limited had come to an end. The grievance of the petitioner is that the approvals for labels were not issued. The petitioner wrote various letters requesting him for approval as the petitioner's business has come to stand still and he could not transact any business in the absence of approval of labels. However, the petitioner received a letter on 14-6-1999 informing that his application for approving the label was rejected. It was this letter which was challenged in the writ petition.

8. In the counter affidavit filed on behalf of respondent No.1 (The Commissioner of Prohibition and Excise), it is admitted that the petitioner was granted D2 licence for manufacture of India Made Liquor but the petitioner's contention that he entered into marketing tie-up with M/s. Liquor India Limited for marketing its products is disputed. It is stated that as per the policy of the Government on 1998-99, liquor is classified into four categories i.e., A, B, C, and D. The Beverage Corporation Limited proposed to procure A, B, and C category of liquors from the distilleries located within the State and to import 'D' category liquors (Premium Bands).

9. It is also stated that for those who would like to establish the production facility within the existing distillery, may have a tie-up with local distilleries, and a specific period about 3 months was given. This is explained to mean that the existing distillery may have a tie-up arrangement with the another distillery for protection of their brands. It is stated that in the instant case, M/s. Liquor India Limited have given authorisation to M/s. White Horse Distillery for manufacture of their brand. Accordingly, these labels were approved duly indicating the word 'Distilled, Blended and Bottled by White Horse Distillery, Nayudupet, Nellore District. For Liquor India Limited'. Thus,it is stated that it was not tie-up for marketing but for producing the levied products of another distillery.

10. It is stated that labels are to be affixed on the bottles by the licensee only after labels are approved by the Commissioner. The application for approval of labels along with fee of Rs.25,000/- for each variety of label shall be submitted to the Superintendent for concerned Distillery who shall forward them to the Commissioner of Excise through the Director of Distilleries and Beverages for approval by the Commissioner. One approved copy shall be retained in the office of the Commissioner of Excise and furnish one approved copy each to the concerned Distillery officer and the licensee. The licensee is required to comply with such instructions as the Commissioner may issued regarding any Label.

11. It is denied that M/s. Liquors India Limited has inserted a logo on the label 'for M/s. Liquors India Limited' simply because the petitioner have a marketing tie-up with M/s. Liquors India Limited. It is stated that under excise policy for 1998-99, a Distillery can allow another distillery to produce its products under tie-up arrangement. In the instant case, M/s. Liquors India Limited has submitted an affidavit stating that M/s. White Horse Distilleries, Nellore is permitted to manufacture Indian Made liquor of the Brands of (1) 'Popular Choice Whisky' (2) 'English Channel Brandy' and (3) 'White Horse Whisky'. It is stated that this affidavit was to be treated as authorisation to M/s. White Horse Distillery to use these trademarks of M/s. Liquor India Limited and sell as per the instructions of M/s. Liquors India Limited. It was specifically mentioned in the affidavit that an arrangement was entered into with the specific understanding that M/s. Liquors India Limited pay such charges per case of liquor as may be mutually agreed upon. In other words, the arrangement made betweenM/s. Liquor India Limited and M/s. White Horse Distilleries was that the product of M/s. Liquors India limited is to be manufactured by M/s. White Horse Distillery for which M/s. Liquor India Limited shall pay certain charges for the work done by M/s. White Horse Distillery.

12. It is stated a similar arrangement was made by M/s. Liquors India Limited with M/s. Durga Wines, Vijayawada for two of the three products during the year 1997-98. It is stated from this it is clear that these brands belong to M/s. Liquors India Limited. The labels of (1) English Channel Brandy and (2) Popular Choice Whisky were originally approved/registered in favour of M/s. Liquors India Limited during the year 1993-94 as seen from the letter of the Commissioner of Excise vide No.B2/5801/ 91/DDB/Ex., dated 3-12-1993. Thus, the petitioner has no right to claim that these labels are of his own. It is admitted that the licence of the petitioner for the year 1999-2000 was renewed.

13. It is stated that the petitioner submitted two labels, namely, (1) English Channel Brandy (2) Popular Choice Whisky as if these labels belong to M/s. White Horse Distillery. The petitioner, however, submitted letters supposed to have been issued by M/s. Liquors India Limited stating that these labels belong to M/s. White Horse Distilleries and that M/s. Liquors India Limited have no objection for approval in favour of M/s. White Horse Distilleries. This amounts to approval of brand label of one distillery to another distillery for which there is no provision in the Distillery Rules. As per the policy of the Government for the year 1999-2000, there is no change in the system and the position as existed in the year 1998-99 has to be continued. By virtue of that, only brands of Indian Made Liquor which were approved during the year 1998-99 are being considered and approved for the year ,1999-2000 and no new label is being approved. TheDepartment has no objection if the petitioner comes up with the same arrangement as was done in the year 1998-99 i.e., tie-up with M/s. Liquors India Limited to approve these labels inasmuch as he has applied for approval of those labels claiming as his own. It is admitted that the request for approval of labels was rejected.

14. It is stated that assumption that these labels belong to M/s. Liquors India Limited is based on facts available on record inasmuch as the proceedings dated 7-4-1998 approving the labels earlier would show that the liquors in question were manufactured by M/s. White Horse Distillery on behalf of M/s. Liquors India Limited for the year 1998-99. It is stated that these labels were approved for M/s. Liquors India Limited as seen from the proceedings dated 3-12-1993 for 1993-94.

15. It is, however, admitted that M/s. Liquors India Limited have given a letter that these labels belong to M/s. White Horse Distilleries, Nayudupet and that they have no objection for approval of the labels in the name of M/s. White Horse Distilleries. It is stated that on the strength of such a letter, the department cannot hold that these labels belong to M/s. White Horse Distilleries. Thus, it is stated that previous records and labels have been taken into consideration and it was concluded that these labels belong to M/s. Liquors India Limited. It is stated that in view of the new excise policy for 1999-2000 vide G.O. Ms. No.234, dated 22-3-1999, the same labels have to be approved as existed in the previous year. It is stated by way of clarification that the department has no objection if the request for approval of labels is made in the same format as was done in the year 1998-99 i.e., under tie-up agreement with M/s. Liquors India Limited.

16. It is stated that under Section 64 of the A.P. Excise Act, the petitioner has an opportunity to prefer revision before theGovernment against the order of the Commissioner of Prohibition and Excise. In the instant case, the petitioner approached the High Court without exhausting remedy available under the A.P. Excise Act.

17. A reply affidavit has been filed onbehalf of the petitioner. It is stated that even assuming that the labels belong to M/s. Liquors India Limited, the first respondent was obliged to renew the labels in view of the letter given by M/s. Liquors India Limited that they have no objection for approval of these labels in favour of the petitioner. The respondent No.1 has no authority under law to enquire into infringement of trade mark or copy right. Similarly, the first respondent has no authority to look into the arrangement between M/s. Liquors India Limited and M/s. White Horse Distilleries to point out whether it was marketing tie-up or the petitioner was manufacturing the liquor under the brand names for supply to Liquors India Limited. It is stated that the tie-up with M/s. Liquors India Limited came to an end on 31-3-1999 and the petitioner applied for approval of labels with two brand names enclosing a letter from M/s. Liquors India Limited as mentioned above.

18. On these pleas, the learned single Judge allowed the writ petition and directed the approval of the labels submitted by the petitioner.

19. The first respondent in the writ petition ie., the Commissioner of Prohibition and Excise, Hyderabad filed this appeal challenging this order.

20. It was contended by the learned Advocate General that in the matter of trade of liquors, labels assume great significance and the question of approval or rejection of labels has to be viewed in the light of the current excise policy of the Government. It is pointed out that the excise policy for 1999-2000, as enunciated in G.O. Ms.No.234 dated 22-3-1999 does not contemplate approval of any request for tie-up arrangements by outside distilleries, and breweries with those located in the State.

21. It cannot be denied that in these days of corporate obsession to build brand images and to acquire brand leadership in the markets, labels in respect of any consumer products are of great significance. Tin's is all the more so in the case of alcoholic liquors. Having stated this, it may be observed that the labels have significance in the context of consumers' exercise of choice in selecting a product at which all the marketing strategies are directed. It is in this context that the labels represent symbolically the relative success or failure of the manufacturer of a product. It is in this context that labels become subject matter of controversy when a successful brand label is sought to be imitated by the rival manufacturer.

22. But, the real question is whether this aspect has any bearing on the question of approval of labels by the Commissioner of Excise in the light of the statutory provisions applicable to it. An examination of relevant rules does not indicate any nexus between them.

23. The contention of the learned Advocate General that the statutory rules have to be read in the light of the Excise Policy on the subject if there is no conflict between the statutory rules and the elements of policy does not admit of any controversy.

24. The further contention of the learned Advocate General is that the policy as enunciated in the Government Orders has to be ignored only when it is opposed to statutory rules is unexceptionable.

25. Here again, the question is whether there was any change in the policy which has a bearing on the question of approval of labels by the Commissionerin the light of the statutory provisions including the Rules.

26. The contention of the learned Counsel for the first respondent (petitioner in the writ petition) was that the writ petitioner having satisfied all the requirements contemplated under the relevant rules and the appellant-Commissioner having granted licence for, manufacturing of IML he had no choice except approving the labels submitted by the petitioner.

27. These contentions have to be examined in the light of the statutory provisions.

28. It is an admitted fact that the petitioner has a subsisting licence for manufacture of IML in his distillery and that the licence granted to him under Section 13 of the A.P. Excise Act continues to be inforce. It is, therefore, obvious that having been granted license for manufacturing liquor and with further agreement that the Andhra Pradesh Beverages Corporation would purchase the products manufactured by him, the petitioner is entitled to manufacture IML and market it to the 2nd respondent-A. P. Beverages Corporation. Granting of licence under Section 13 of the Act makes it obligatory on the part of the Commissioner of Prohibition and Excise and the Government to ensure that the petitioner is allowed to carry on business of manufacture and sale of IML, however, consistently with the other provisions of Law and the Rules. The other statutory rules including the relevant rule providing for the approval of the labels submitted by the petitioner have to be construed harmoniously and consistently with the privileges and rights of the petitioner accrued to him by virtue of his having been granted the licence under Section 13 of the Act. The relevant provisions relating to labels to be affixed on the bottles of liquor and requirement to obtain approval for the same are contained under Rule 66 of theDistillery Rules, 1970. Rule 66 deals with various aspects of bottling the liquor, its strength or purity, the mode and method of bottling, the requirement as to the presence of the concerned officers at the time of bottling, the inscriptions required on the bottles, regarding quantity to be filled up in the bottle, the requirement as to inscription of the name of the manufacturer on the bottles, the strength of liquor in the degrees of proof, the method and procedure of using corks for closing the bottles etc.

29. It is in this background, the following sub-rules of Rule 66 of the Distillery Rules deal with the labels to be affixed on the bottles.

'(12) The labels shall be affixed to the bottles by the licensee only after such labels are duly approved by the Commissioner. For this purpose, the licensee shall submit a copy of the labels proposed to be affixed by him quadruplicate and challan of remittance of a fee of Rs.25,000/- for each such variety of label sought to be approved under appropriate head of account at any Government Treasury in the State. The applicant should also get the label reapproved for each Excise year by paying a fee of Rs.25,000/- for each variety of label. The application shall be submitted to the Superintendent of Distilleries, who shall forward them to the Commissioner of Excise through Director of Distilleries and Breweries for approval by the Commissioner. One approved copy shall be retained in the office of the Commissioner of Excise and three copies shall be returned to the Superintendent for Distilleries who shall retain one copy in his office and furnish one approved copy each to the concerned Distillery Officer and the licensee. The licensee shall comply with such instructions as the Commissioner may issue regarding any label. The application shall be in the Form D10duly affixed with Court fee stamp of value of Rs.2/-. The format of the label submitted for such approval shall contain the following.

(a) Name and Address of Manufacturer

(b) Batch Number, Month and Year of Manufacture

(c) Net contents

(d) Proof strength

(e) Kind of liquor

(13) All labels required to be used on the bottles of spiced spirit shall bear the words 'Missalahdar' in Hindi and its Telugu equivalent and the words 'spiced spirit' in English.

(14) Labels bearing the word 'Special' shall be used on bottles of special spiced spirit, Labels containing the 'old' shall only be affixed to bottles containing spirit which has been kept for more than one year in bond from the date of distillation.

(15) Labels shall be so affixed as to be easily distinguishable. No label shall be pasted over the words and figures, 750 ml. or 600 ml. or 300 ml. or 180 ml. moulded on the bottles.

(16) An account of spirit received and used for bottling shall be maintained in Form D4.

(17) The licensee shall not advertise his products by extolling their merits or in any other objectionable manner.

30. A careful scrutiny of these provisions relating to labels would show that their purpose is to protect the interests of the consumers by ensuring that correct information is inscribed as to the quantity and quality of the liquor and also about the information as to the manufacturer and bottling agency of the liquor. Sub-rule (11) of Rule 66 contains most importantrequirement as to what the label should contain. It postulates that a label printed in English or Telugu language should show the name of the licensed distillery and the place where the bottling was done. Under sub-rule (12), a licensee is required to submit the label for approval through the concerned authorities and the Commissioner has been empowered to approve the labels. The Commissioner is also empowered to issue such directions as he may consider it necessary with regard to any label. Sub-rule (12) mandates that the label submitted shall contain the following information, name and address of the manufacture, batch number, month and year of manufacturer, net contents, proof strength and kind of liquor. From these provisions, it is apparent that the purpose of statutory requirement to obtain approval of label is to ensure that the licensee-manufacturer does not inscribe any particulars or information on the label in regard to the quality or quantity of the liquor contrary to the facts with a view to misleading the consumers. If the labels contained prescribed information correctly, the Commissioner does not seem to have any discretion to withhold the approval of the labels. It may however be contended that the Commissioner may exercise the discretion to withhold approval for related reasons like labels contravening any law relating to obscenity or public morals or patently contravening any trade mark law. Such discretion may be implied on the principle that a public authority cannot be expected to affix its seal of approval on anything, which is patently illegal. This question does not arise in this case.

31. The impugned letter dated 14-6-1999 under which the request for the approval of the labels of the petitioner has been rejected discloses the following reasons for refusing the approval.

32. That these labels were approved for 1997-98 in favour of M/s. Liquors India Limited. Subsequently in 1998-99, theselabels of M/s. Liquors India (P) Limited were approved for bottling at M/s. White Horse Distilleries on tie-up arrangement on the basis of information furnished by M/s. Liquors India Pvt. Ltd., in an affidavit that these labels arc owned by Liquors India Private Limited and that they had permitted M/s. White Horse Limited for manufacture of their brand liquor at their distillery at Naidupet, Nellore District for sale for the period ending upto 31-3-1999.

33. The petitioner changed the labels by removing the words 'manufactured for M/s. Liquors India (P) Limited' and also redesigned the labels altogether claiming that these labels are owned by M/s. White Horse Distilleries Limited, Nellore for 1999-2000.

34. It is difficult to conceive how the concerned authority - the Commissioner could have approved any labels of M/s. Liquors India Private Limited. Admittedly, it was the petitioner who was the licensee and manufacturer of the products and who submitted the labels for approval. Merely because the petitioner had an understanding with M/s. Liquors India Limited and inscribed on his label 'for Liquors India Limited' it cannot be said that the labels of Liquors India Limited were approved. The question - of approving the Liquors India Limited does not arise as neither Liquors India Limited had submitted the labels nor was it a licensee under Section 13 of the Act.

35. Further, it is mentioned in the rejection letter that in view of the new Excise Policy communicated vide G.O. Ms. No.234 dated 23-3-1999 for the year 1999-2000 the petitioner's labels were not approved. This rejection in no way can emanate from the so called new excise policy enunciated in G.O. Ms. No.234 dated 22-3-1999. Firstly, the policy document in the said G.O. does not deal with the labels at all. The only change the new excise policy seems to contemplate is that no further request for tie-uparrangement by outside distilleries/beverages with those located in the State shall be entertained. It is difficult to conceive how the labels submitted by the petitioner for approval would have the effect of contravening the excise policy.

36. What this policy enunciated in Para 5 of the said G.O. contemplates is that the new request for tie-up arrangement by outside distilleries/beverages with those located in the State shall not be entertained. The label submitted for approval in this case do not indicate that they outside distillery or beverage has requested for any tie-up arrangement for manufacture with the petitioner who is the local distillery. On the other hand, these new labels when compared with the old approved labels appear emphatically to indicate saying that while in the previous year, the petitioner was manufacturing the IML on behalf of M/s. Liquors India Limited, but, in the new year, he was proposing to manufacture on his own account and not for someone else as amply indicated by the omission of words 'For Liquors India Limited'.

37. Thus, the labels submitted for approval do not disclose any intrinsic of contravention of the new excise policy of the Government.

38. Further, whether a licensee can be permitted to have tie-up with some other manufacturer is a matter relating to regulation of manufacture, possession and sale of excisable articles. It is a substantive element which must find place in the terms and conditions of license issued under Section 13 of the Act. Such an important element of regulation cannot be decided upon, on the basis of a mere label submitted by the petitioner for approval.

39. A look at the Form D10 to be submitted for obtaining approval of label would show that it seeks information about full address, kind of license, thename of the proprietor concerned, address of the distillery, brand name of the liquors for which label is sought and whether prescribed fee has been paid. It does not seek to elicit any information on the question of tie-up arrangement or the ownership of the label.

40. Thus, firstly, the label submitted for approval does not furnish any material to show that the activities of the licensee in any way contravened the so called new excise policy. Secondly, the question of tie-up arrangement is irrelevant and extraneous consideralion having regard to the various stauitory provisions extracted above which have a bearing on the question of approval of the labels. As stated above, the object of requiring approval for a label is to ensure that the information furnished on the labels is in accordance with the rules. It is conceivable that while approving the label, the competent authority may also examine whether prima facie the label submitted for approval does not constitute any infringement of trade mark of some other manufacturer.

41. In this case one of the grounds for refusal to approve the label appears to be, as stated in the impugned letter, that the labels of M/s. Liquors India Limited have been re-designed as the labels of M/s. White Horse Distilleries which amounts to submission of labels of another distillery.

42. Firstly, it is the Liquors India Limited which must be aggrieved by the action of the petitioner in presenting their labels for approval. In this case, it is acknowledged by the Commissioner in the impugned letter that the Liquors India Limited had given a letter that they do not claim any right in respect of those labels and authenticity of this letter is not doubted. Further, it may be remembered that the trade mark rights, if any, are transferable and they can be lawfully transferred. When the alleged owners of the label (trademark)have informed the Commissioner that they do not claim any right in the labels, withholding approval of labels on that ground appears highly arbitrary and unreasonable.

43. The statement in the impugned letter that as there is no tie-up with the petitioner and M/s. Liquors India Limited, this would be against the Excise Policy for the year 1999-2000 shows in the light of above observations in this regard that the so-called new excise policy is being used as a mere pretext for refusing the approval of the labels. As seen above, the new excise policy prohibits to entertain request for new tie-up arrangement with outside distilleries and breweries. Assuming that for the year 1998-99, there was tie-up arrangement between the petitioner and M/s. Liquors India Limited, the fact that such tie-up arrangement has been dispensed with for the year 1999-2000 would go to show that it was inconsonance with the new excise policy as what is prohibited in the new excise policy is having new tie-up arrangement and not breaking up the earlier tie-up arrangements. The statement in the impugned letter that as there was no tie-up arrangement between the petitioner and the Liquors India Limited, hence it contravenes the new excise policy, shows complete non-application of mind on the part of the Commissioner.

44. Another reason mentioned for refusing approval of labels is said to be that under the excise policy only brands approved for 1998-99 are being considered for 1999-2000 and no new labels are being approved. The very fact that every year the licensee is required to submit labels for approval would go to show that new labels have to be considered. At any rate, the relevant rules quoted above do not confer on the Commissioner any such power to reject new labels summarily on the ground of the same being new. This restriction does not also flow from the new excise policy.

45. It is true that the appellant-Commissioner in this case was exercising his administrative discretion while refusing approval for labels as contemplated under Rule 66(12) of the Distillery Rules. Exercise of administrative discretion must be within the confines of statutory rules. Such exercise of discretion must be on grounds which are germane or relevant to the policy. In this case, the first respondent seems to have exercised his discretion in refusing approval of labels on the basis of irrelevant considerations which neither emanate from nor have any nexus with the object of the statutory rules. Administrative action has to be judged on the test of fair play. Arbitrary exercise of discretion specially where the action involves civil consequences must be held to strike against guarantee of equal protection of laws under Article 14 of the Constitution of India.

46. It may be pointed out that there does not appear to be any intimation to the petitioner after applications for labels were given as to the various factors which the Commissioner considered as relevant for refusing the approval of the labels. Having complied with the statutory rules and having paid the prescribed fee, the petitioner gave an application for approval and waited for positive orders. It was in the impugned letter rejecting his request for approval that he was informed of the various grounds which involve quite a few questions of fact not required to be mentioned in the application form on which his application was rejected. In this view of the matter, there has been a violation of principles of natural justice and fairness inasmuch as petitioner was not afforded any opportunity to be heard on these questions of fact. On this ground also, the impugned letter can be assailed as untenable.

47. There is another circumstance which appears significant in this case. Itis not disputed that the petitioner continues to be a licensee and his license has been renewed for the relevant period on payment of substantial amount of fee running into lakhs. As a consequence of renewal of licence, the petitioner has been bestowed with the privilege of manufacturing of IML and selling it. Unless the labels are approved, his business activity will come to stand still. The petitioner will be virtually deprived of the benefit of privilege which he was granted for substantial consideration by renewing his licence. The action of the Commissioner in withholding the approval of labels virtually has the effect of cancellation of his license. This could not be the object of the Rules relating to approval of the labels.

48. Viewed in this context, the power of the Commissioner to refuse approval of label could be exercised only on the ground and in relation to circumstance as provided in the relevant sub-rules under Rule 66 of the Distillery Rules. This goes to indicate that once the petitioner complied with the requirement of those rules, it is not open to the Commissioner to refuse approval of the labels on considerations falling outside those rules.

49. In the case of I.E. Newspapers (Bombay) P. Ltd v. Union of India, : [1986]159ITR856(SC) , it was held by the Supreme Court that where an executive authority has not applied its mind to the relevant considerations, such an exercise of discretion deserves to be set aside.

50. In the case of Fasih Chaudhary v. D.G., Doordarshan, : AIR1989SC157 , it was held that administrative actions have to be judged on the test of fair play.

51. In the case of H.L. Trehan v. Union of India, : AIR1989SC568 , the Supreme Court pointed out that non-arbitrariness would also require compliance of Rules ofnatural justice where the impugned action involves civil consequences. It was further held that post-decisional opportunity of hearing docs not subserve the rules of natural justice.

52. Similarly, the Supreme Court in the case of Style (Dress Land) v. Union Territory Chandigarh, : AIR1999SC3678 , observed that a Court can strike down an executive order based on irrelevant and extraneous reasons by exercise of its powers under Article 226 of the Constitution of India. It has also been held that administrative orders which affect the rights of the citizens to the property or the attributes of the property are required to be in consonance with the rules of natural justice.

53. Thus, taking any view of the matter, there is no escape from holding that the action of the appellant, Excise Commissioner, in rejecting the approval of the labels submitted by the petitioner in the impugned letter is based on irrelevant considerations and is in violation of statutory rules and principles of natural justice. The impugned order is, therefore, held to be in violation of guarantee of equal protection of laws and hence the order of the learned single Judge in selling aside the impugned order and his further direction to the Excise Commissioner (appellant herein) to approve the labels submitted by the petitioner is upheld.

54. The writ appeal, therefore, stands dismissed. No costs.