Allahabad High Court

M/S LORDS DISTILLERY LIMITEDversusSTATE OF U.P. AND 2 OTHERS

Decided: 23 September 2026
Bench: PIYUSH AGRAWAL

Holding

The Court held that the demand orders were vitiated for violation of natural justice and must be set aside, with the matter remanded for fresh consideration after a proper show‑cause notice and hearing.

Summary

The petitioners, licensed distilleries, challenged a demand of Rs 54,52,731 for QR‑code costs imposed by the Uttar Pradesh Excise Department without any show‑cause notice or hearing. They argued that the demand violated natural justice, was based on an audit objection rather than an independent adjudication, and that the cost per bottle was an average annual figure not applicable to a three‑month period. The respondents contended that the demand arose from a breach of a licence condition and was merely administrative, thus not requiring a notice. The Court held that the demand orders were quasi‑judicial, required compliance with principles of natural justice, and were vitiated for lack of notice, hearing, and reasons. Consequently, the orders were set aside and the matter remanded for fresh consideration with a proper show‑cause notice and hearing. The writ petitions were allowed.

Issues considered

Whether a demand for QR‑code cost under the U.P. Excise Act requires a show‑cause notice and opportunity of hearing.
Whether the demand order is purely administrative and exempt from principles of natural justice.
Whether an audit objection can substitute an independent adjudicatory decision.
Whether the averaging methodology for QR‑code cost per bottle is valid for the period in question.
Whether the delay in raising the demand bars recovery under principles of laches.

Legislation cited

Indian Contract Act, 1872 — s. 72
U.P. Excise Act, 1910 — s. 17(2), 18, 34
U.P. Excise (Establishment of Distillery) Rules, 1910 — s. 27

Subjects

Excise law
QR code
Natural justice
Show cause notice
Administrative order
Quasi‑judicial
U.P. Excise Act
Section 72 Indian Contract Act
Article 14 Constitution
Remand
Writ petition

Judgment

Reserved on: 14.09.2026
Delivered on : 24.09.2026

HIGH COURT OF JUDICATURE AT ALLAHABAD
WRIT TAX No. - 213 of 2023

M/s Lords Distillery Limited
…..Petitioner(s)

Versus

State of U.P. and 2 others
…..Respondent(s)

Counsel for Petitioner(s) : Gaurav Gautam, Mohd Atif
Counsel for Respondent(s) : C.s.c

With

WRIT TAX No. - 1295 of 2022

M/S Radico Khaitan Limited
…..Petitioner(s)

Versus

State Of U.P. And 2 Others
…..Respondent(s)

Counsel for Petitioner(s) : Mohd Atif
Counsel for Respondent(s) : C.S.C.

And
WRIT TAX No. - 1317 of 2022

M/S India Glycols Limited And Another
…..Petitioner(s)

Versus

State Of U.P. And 2 Others
…..Respondent(s)
2
WTAX No. - 213 of 2023

Counsel for Petitioner(s) : Gaurav Gautam, Mohd Atif
Counsel for Respondent(s) : C.S.C.

Court No. - 7

HON'BLE PIYUSH AGRAWAL, J.

1. Heard Sri Shashi Nandan, learned Senior Advocate assisted by Sri Mohd
Atif, learned counsel for the petitioner(s) and Sri Amit Saxena, learned
Additional Advocate General assisted by Sri Ravi Shankar Pandey, learned
counsel for the opposite parties.

2. Since learned counsel for the parties submit that the issues involved in these
writ petitions are similar, therefore, the same are being decided by the
common order. With the consent of the parties, Writ Tax No.213 of 2023 is
taken as a leading case for deciding the controversy involved in these writ
petitions.

3. The present writ petition has been filed challenging the order dated
22.03.2022 passed by Respondent No. 1/Principal Secretary, Excise
(Adjudicating Officer), Aabkari Anubhag-2, Government of U.P. in Revision
Case No. 20/2021 (M/s. Lords Distillery Limited & Another vs. Excise
Commissioner, Uttar Pradesh & Others); and the order dated 25.02.2021
passed by Respondent No. 2/ Excise Commissioner, U.P directing the
petitioner to deposit an amount of Rs. 54,52,731/- towards the cost of QR Bar
Code @ 0.15 paisa per bottle.

4. The counsel for the petitioner submits that the petitioner is a licensee,
manufacturer and vendor of country liquor within the State of U.P., and the
demand of Rs. 54,52,731/- has been raised without issuance of any show
cause notice and without affording any opportunity of hearing to the
petitioner, in gross violation of the principles of natural justice.

5. He further submits that the Excise Policy for the year 2018-19 for the first
time introduced the requirement of Track and Trace System through QR Bar
Code/Bar Code.

6. The petitioner, on account of practical and technical difficulties including
non-readiness of the U.P. Excise Portal, sought extension of time through
3
WTAX No. - 213 of 2023

repeated representations dated 02.04.2018, 12.04.2018, 18.04.2018,
20.04.2018, 03.05.2018 and 14.06.2018, and the Excise Commissioner itself,
vide order dated 21.04.2018, permitted the distilleries to continue affixing Bar
Code on the outer master carton only till 15.06.2018, pending 100%
implementation.

7. He further submits that the petitioner had already incurred huge capital
expenditure towards procurement of the requisite equipment, printers and
software, having placed purchase orders as early as 23.03.2018/30.03.2018,
and that there is no allegation of fraud, concealment or misrepresentation
against the petitioner.

8. He further submits that the cost of 0.15 paisa per bottle was an average
costing fixed in the Excise Policy 2018-19 for the entire excisable year, based
on the aggregate operational expenditure including plant, machinery, software
and other allied costs, and could not be mechanically applied on a per-bottle
basis for three months in isolation.

9. He also submits that the demand, having been raised in the year 2021 for
the period April-June 2018, i.e., after a lapse of almost three years, is
hopelessly barred by delay and laches, more so when the Excise Policy 2018-
19 itself stood terminated on 31.03.2019 without any saving clause permitting
recovery proceedings thereafter.

10. Lastly, he submits that neither the demand order dated 25.02.2021 nor the
revisional order dated 22.03.2022 records any independent reasons and thus,
both are non-speaking, mechanical orders passed without adverting to the
pleadings and material placed on record by the petitioner, including the
exemption order dated 21.04.2018. Hence, the present petition.

11. In support of his submissions, learned counsel for the petitioner has placed
reliance on the judgment of the Hon'ble Supreme Court in Keasar Enterprises
Limited Vs. State of U.P., Civil Appeal No. 6896 of 2002, decided on
06.07.2011; and Kranti Associates (P) Ltd. & Another Vs. Masood Ahmed
Khan & Others, (2010) 9 SCC 496.
12. Per Contra, learned counsel for the respondent has supported the
impugned orders and submits that the demand was raised pursuant to an audit
objection of the Principal Accountant General (A&E), U.P. dated 01.08.2019
(reiterated 15.01.2020), which found that the petitioner had issued 3,63,51,540
bottles of country liquor during 01.04.2018 to 15.06.2018 without affixing the
4
WTAX No. - 213 of 2023

QR Code, in violation of Condition No. 7(b) of its P.D.-2 License, a mutually
agreed contractual term binding on the petitioner under Sections 17(2), 18 and
34 of the U.P. Excise Act, 1910 and Rule 27 of the U.P. Excise (Establishment
of Distillery) Rules, 1910.

13. He submits that the cost of the QR Code @ Rs. 0.15 per bottle was already
built into the Ex-Distillery Price and recovered by the petitioner from
consumers, having collected this cost without incurring the corresponding
expenditure, the petitioner stands unjustly enriched, and the demand is merely
to restitute this amount to the public exchequer.

14. He further submits that the demand notice dated 25.02.2021, being issued
in terms of a license condition, is purely administrative and contractual, not
quasi-judicial and therefore did not attract principles of natural justice or a
formal show cause notice, rendering Keasar Enterprises Limited (supra)
inapplicable.

15. Lastly, he submits that since the petitioner passed on the cost to consumers
and suffered no loss itself, the claim is not barred under Section 72 of the
Indian Contract Act, 1872, and in any case is not maintainable in writ
jurisdiction. On these grounds, the petition is stated to be devoid of merit and
liable to be dismissed.

16. Further, the counsel for the petitioner in reply to counter argument submits
that mere reliance on an audit objection cannot, by itself, form the basis for
raising or sustaining a demand against the petitioner, nor can it substitute the
independent application of mind required of the competent quasi-judicial
authority. In support of his submission, the counsel for the petitioner has
placed reliance on the judgment of the Hon'ble Supreme Court in Indian and
Eastern Newspaper Society, New Delhi Vs. Commissioner of Income Tax ,
New Delhi (2017) 13 SCC 780.
17. After hearing learned counsel for the parties, the court has perused the
record.
18. The record shows that admittedly no show cause notice was issued to the
petitioner nor was any opportunity of hearing afforded prior to passing of the
order dated 25.02.2021 raising the demand of Rs. 54,52,731/-.

19. The stand of the respondents that the said notice, having been issued in
terms of Condition No. 7(b) of the P.D.-2 License, is purely administrative in
character and does not require compliance of natural justice, cannot be
5
WTAX No. - 213 of 2023

accepted, inasmuch as the demand entails civil consequences and monetary
liability upon the petitioner, and the authority, in determining and quantifying
such liability upon disputed questions of fact (including the petitioner's
contention regarding averaging of costs and the exemption order dated
21.04.2018), was in substance required to act quasi-judicially.

20. The Hon'ble Supreme Court in Keasar Enterprises Limited (supra), dealing
with an analogous provision of the U.P. Excise Act, 1910, has categorically
held that before raising any demand or initiating recovery, an adjudication
must take place on the basis of a show cause notice and opportunity of
hearing, and that failure to do so renders the action violative of Article 14 of
the Constitution of India. Applying the said ratio, the demand order dated
25.02.2021 having been passed without notice or hearing, is ex facie vitiated
on the ground of breach of natural justice.

21. It is also borne out from the counter affidavit itself that the demand came
to be raised by Respondent No. 2 pursuant to, and consequent upon, the audit
objection of the Principal Accountant General (A&E), U.P. dated 01.08.2019,
reiterated on 15.01.2020. Nothing on the record of the impugned order dated
25.02.2021 or the revisional order dated 22.03.2022 indicates that the
competent authority independently examined the petitioner's case, including
its explanation regarding the averaged costing methodology and the
exemption order dated 21.04.2018, before mechanically proceeding to
quantify and raise the demand.

22. The Hon'ble Supreme Court in Indian and Eastern Newspaper Society
(supra), has held that an audit objection is merely an opinion on a question of
fact or law and cannot by itself substitute the independent application of mind
and satisfaction of the competent authority. The impugned orders, having
proceeded substantially on the basis of the audit objection without recording
independent reasons or dealing with the petitioner's specific pleas, suffer from
this additional infirmity.

23. Further, the revisional order dated 22.03.2022 passed by Respondent No. 1
is equally unsustainable. A bare perusal of the said order shows that it
proceeds on the singular premise that non-affixation of QR Bar Code resulted
in undue gain/benefit of 0.15 paisa per bottle to the petitioner, without
discussing or dealing with the specific pleas raised by the petitioner that the
6
WTAX No. - 213 of 2023

said costing of 0.15 paisa was an average annual costing for the entire
excisable year 2018-19 and not a per-bottle, per-month recoverable charge.

24. The petitioner had, in fact, incurred substantial capital expenditure in
procuring the requisite equipment as early as March 2018 and the Excise
Commissioner had itself, by order dated 21.04.2018, granted
exemption/extension permitting affixation of Bar Code on the master carton
alone till 15.06.2018.

25. None of these contentions as stated above finds any discussion or reasoned
rejection in the impugned order dated 22.03.2022, which is thus rendered a
non-speaking order. As held by the Hon'ble Supreme Court in Kranti
Associates (P) Ltd. (supra), a quasi-judicial authority is bound to record
reasons in support of its conclusions; recording of reasons is not a mere
formality but serves the wider principle that justice must not only be done but
must also appear to have been done, operates as a check against arbitrary
exercise of power, and facilitates meaningful judicial review.

26. A "pretence of reasons" cannot be equated with a valid decision-making
process. Tested on this touchstone, the impugned order dated 22.03.2022,
being conclusory and unreasoned, cannot be sustained.

27. Accordingly, all the impugned orders passed by Respondent No.
1/Principal Secretary, Excise (Adjudicating Officer), Aabkari Anubhag-2,
Government of U.P. as well as impugned orders passed by Respondent No.
2/Excise Commissioner, U.P are hereby set aside.

28. The matters are remanded to respondent no.2/Excise Commissioner, U.P.
for fresh consideration. Respondent No. 2 shall issue a proper show cause
notice to the petitioners, specifically setting out the basis of the proposed
demand, and shall thereafter afford an opportunity of hearing to the
petitioners, including consideration of the petitioner's submissions

29. The writ petitions succeed and are allowed.

(Piyush Agrawal,J.)

September 14, 2026
A.N. Mishra

Digitally signed by :-
AMARNATH MISHRA
High Court of Judicature at Allahabad

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