Facts of the Case

The petitioner, Omprakash Loya, was carrying on business through Omprakash Loya and Company and claimed to be engaged in the lawful trade of jaggery under a valid licence and registration. The petitioner alleged that the respondent Excise and Police authorities were interfering with his business activities, including the business in black jaggery and alum, despite the production of bills and way bills evidencing lawful purchase and transportation of the goods.

The petitioner further complained of seizure of jaggery and alum and interference with the vehicle bearing Registration No. AP-15-TC-0660. According to the petitioner, such interference prevented him from carrying on a lawful business and was illegal, arbitrary and unsupported by any authority of law.

Accordingly, the petitioner invoked the writ jurisdiction of the High Court under Article 226 of the Constitution of India, seeking a writ of mandamus against unlawful interference, harassment and seizure.

When the matter came up for hearing, the petitioner submitted that the issue raised in the writ petition was squarely covered by the Telangana High Court’s earlier orders in:

  • W.P. No. 31519 of 2016, decided on 19.04.2022; and
  • W.P. No. 1677 of 2016, decided on 26.07.2022.

The learned Government Pleader for Prohibition and Excise did not dispute this submission.

Issues Involved

The principal issues arising from the case were:

  1. Whether Excise and Police authorities could interfere with a trader’s lawful business in jaggery, black jaggery and alum merely because such commodities might potentially be used in the manufacture of illicitly distilled liquor.
  2. Whether seizure of jaggery, alum, business stocks or a transport vehicle could be sustained without specific legal authority and without compliance with due process.
  3. Whether the mere possession, storage, purchase, sale or transportation of black jaggery could justify coercive action when such trade was not otherwise prohibited by law.
  4. Whether authorities could interfere with a validly licensed and registered business despite the production of bills, invoices or way bills supporting lawful transactions.
  5. Whether such interference violated the constitutional guarantees under Articles 14, 19(1)(g) and 21 of the Constitution of India.
  6. Whether action under the GUR (Regulation of Use) Order, 1968, particularly in the context of Rule 5, required lawful grounds and procedural compliance before adverse action could be taken.

Petitioner’s Arguments

The petitioner contended that he was conducting a lawful business in jaggery under a valid licence and registration issued by the competent authorities.

It was argued that the goods had been purchased under proper bills and transported under way bills, and therefore the respondents had no authority to seize the stocks or interfere with the business merely on suspicion.

The petitioner maintained that black jaggery and alum were not, by themselves, prohibited commodities or contraband. Consequently, lawful possession, storage, sale and transportation could not automatically be treated as illegal.

The petitioner further contended that arbitrary interference by the authorities with a legally permitted business amounted to an infringement of the constitutional right to carry on trade or business and was contrary to due process of law.

At the time of final hearing, the petitioner specifically relied upon the orders in W.P. No. 31519 of 2016 and W.P. No. 1677 of 2016, submitting that the controversy was fully covered by those decisions.

Respondents’ Arguments

The learned Government Pleader for Prohibition and Excise appeared on behalf of the respondents.

In the present writ petition, the submission that the issue was covered by the earlier orders dated 19.04.2022 and 26.07.2022 was not disputed.

The broader stand of the authorities, as reflected in the related cases annexed to the order, was based on the State’s objective of eradicating the manufacture and sale of illicitly distilled liquor and preventing diversion of black jaggery as a raw material for such illegal manufacture.

In the related proceedings, the authorities had also sought to justify raids, searches and seizures on grounds such as non-production of bills or way bills, storage of substantial quantities of black jaggery, and suspected supply to persons engaged in illicit liquor manufacture.

However, the Court’s related rulings emphasized that a legitimate policy objective to eradicate illicit liquor does not, by itself, confer unrestricted authority to interfere with an otherwise lawful trade.

Court Order / Findings

The High Court recorded that the petitioner’s counsel had submitted that the issue was squarely covered by the earlier orders in W.P. No. 31519 of 2016 dated 19.04.2022 and W.P. No. 1677 of 2016 dated 26.07.2022.

The Court further recorded that this submission was not disputed by the learned Government Pleader appearing for the respondents.

Accordingly, the High Court disposed of the writ petition and directed the respondents to follow the directions contained in the earlier orders passed in those two writ petitions.

The Court imposed no order as to costs and directed that pending miscellaneous petitions, if any, should stand closed.

The Registry was also directed to annex copies of the orders passed in the two related writ petitions to the present order.

Important Clarification

The present judgment must be read together with the two earlier orders expressly adopted by the High Court. The legal position emerging from those decisions is significant:

First, the manufacture and sale of black jaggery or jaggery by traders was held not to be prohibited merely by reason of the commodity itself.

Second, black jaggery had been recognized in Government Memo No. 47802/Ex.III.1/2006-13 dated 20.12.2010 as an agricultural produce or its bio-product.

Third, a person conducting a business permitted by law cannot be subjected to raids, coercive interference, seizure or forced closure merely because the State has adopted a policy to eradicate illicitly distilled liquor.

Fourth, powers of entry, inspection, search and seizure under the GUR (Regulation of Use) Order, 1968 must be exercised within the limits of law and on the existence of legally relevant grounds.

Fifth, in the related W.P. No. 1677 of 2016, the Court clarified that mere possession of 7,480 kg of jaggery would not by itself justify action unless the trader failed to produce purchase invoices when lawfully required to do so.

Sixth, the Court clarified that under the applicable VAT framework, way bills were required in the context explained by the Court and could not mechanically be demanded for every retail transaction.

Seventh, in the absence of material showing issuance of notice under Rule 5 of the GUR (Regulation of Use) Order, 1968 calling upon the trader to furnish particulars of purchases and sales with supporting bills or invoices, a mere allegation of storing large quantities of black jaggery or not producing way bills was insufficient.

Eighth, interference with lawful business without authority of law was held in the related proceedings to offend Articles 14, 19(1)(g) and 21 of the Constitution of India.

Ninth, the State’s objective of eradicating illicitly distilled liquor, however legitimate, does not permit authorities to bypass due process or presume that every sale of black jaggery is intended for illegal liquor manufacture.

Related Case Law in Detail

1. W.P. No. 31519 of 2016 – Telangana High Court, decided on 19.04.2022

This was the principal precedent relied upon in the present matter.

The Court held that manufacture and sale of black jaggery and jaggery by manufacturers or traders was not prohibited under the law in Telangana. The petitioner in that case was a registered dealer carrying on business in jaggery.

The authorities contended that regular raids were being conducted pursuant to governmental instructions aimed at eradicating illicitly distilled liquor and preventing supply of black jaggery for its manufacture.

The High Court rejected any proposition that the State’s policy objective, by itself, created unrestricted power to enter business premises, search, inspect, seize documents or coerce a trader to stop selling black jaggery.

The Court held that where a trader carries on a legally permitted business under valid permissions and registrations, authorities cannot interfere merely on a generalized assumption that black jaggery may be used for illicit liquor manufacture.

The Court further held that, in the absence of material showing involvement of the trader in manufacture of illicit liquor or showing that the stored black jaggery was intended for such manufacture, lawful sales to buyers could not automatically make the trader an accomplice.

The writ petition was allowed, and the authorities were directed not to interfere with the petitioner’s life, liberty and lawful trade except in accordance with law or until such activity was otherwise prohibited by the State.

2. W.P. No. 1677 of 2016 – Telangana High Court, decided on 26.07.2022

In this related case, the petitioner was a registered trader dealing in jaggery. The authorities had seized 7,480 kg of jaggery and relied, among other things, on alleged non-production of relevant documents.

The Court held that mere possession of a large quantity of jaggery did not, by itself, justify adverse action. The Court examined the distinction concerning production of way bills and purchase invoices and emphasized the requirement of lawful procedure.

The Court noted the absence of material showing that the authorities had called upon the petitioner to produce relevant purchase and sale documentation and that the petitioner had failed to comply.

It was further held that, in the absence of notice under Rule 5 of the GUR (Regulation of Use) Order, 1968, the authorities could not justify interference merely on the allegation that a large quantity of black jaggery was stored or that way bills were not produced.

The Court concluded that the raid and seizure amounted to interference with lawful business and contravened Articles 14, 19(1)(g) and 21 of the Constitution of India. A writ of mandamus was issued restraining unlawful interference except in accordance with law.

3. Ganesh Traders (Kirana and General Merchants), Dharmapuri, Karimnagar District vs District Collector, Karimnagar and Others – Full Bench

The respondents relied upon the Full Bench decision reported as 2002 (1) ALD 210 (FB).

However, in W.P. No. 31519 of 2016, the Telangana High Court distinguished that decision on facts. The Court noted that in Ganesh Traders, there was specific material, including circumstances giving rise to a reasonable belief that black jaggery was intended for manufacture of illicitly distilled liquor and a Chemical Examiner’s report concerning fitness for human consumption.

By contrast, where no comparable material exists linking the trader or the goods to illicit liquor manufacture, the Full Bench ruling cannot be mechanically invoked to justify interference with lawful trade.

Sections / Constitutional Provisions / Legal Instruments Involved

Article 226 of the Constitution of India – Writ jurisdiction of the High Court.

Article 14 of the Constitution of India – Protection against arbitrary State action and guarantee of equality before law.

Article 19(1)(g) of the Constitution of India – Right to practise any profession or carry on any occupation, trade or business, subject to lawful restrictions.

Article 21 of the Constitution of India – Protection of life and personal liberty except according to procedure established by law.

Section 34(e) of the A.P. Excise Act, 1968 – Referred to in the connected proceedings concerning alleged offences associated with illicit liquor-related activities.

Rules 4 and 5 / Rule 5 of the GUR (Regulation of Use) Order, 1968 – Relevant to regulation, calling for particulars and the lawful exercise of powers in relation to gur or jaggery where misuse is suspected.

A.P. Value Added Tax Act, 2005 / Telangana Value Added Tax framework – Relevant in the connected case concerning registered dealers, invoices, way bills and lawful trade transactions.

Government Memo No. 47802/Ex.III.1/2006-13 dated 20.12.2010 – Referred to for recognition of black jaggery as an agricultural produce or its bio-product.

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