Authority: High Court of Chhattisgarh at Bilaspur

Order Date: 06 October 2026

Case Overview

  • Petitioners: Legend Distilleries Pvt. Ltd (along with other distilleries) filed multiple writ petitions (WPC Nos. 1216/2021, 1407/2023, 2218/2021, 3190/2021, 1577/2023, 5397/2021, 199/2022, 1849/2023, 1860/2023, 1857/2023, 1855/2023, 1002/2022, 1583/2023, 1832/2023, 1833/2023, 2933/2023) against the State of Chhattisgarh, the Excise Department, the Collector (Excise) and Chhattisgarh State Beverages Corporation Ltd (CSBCL).
  • The dispute centres on a recovery order (Annexure P/1) imposing a penalty of Rs 6,24,785 under Rule 17(2) of the Chhattisgarh Foreign Liquor Rules, 1996 for an alleged loss of 1,724.02 proof litres of foreign liquor.
  • The parties had a rate contract dated 26‑02‑2019 whereby Legend supplied foreign liquor to CSBCL’s Lingiyadih godown; Clause 2.3 of the contract placed risk and property with the purchaser (CSBCL) except for breakage caused by defective packing or manufacturing defect (Clause 3.10).
  • The Collector, invoking Rule 17(2), fastened the entire liability on the petitioner, issuing a show‑cause notice on 04‑12‑2020 demanding payment of the penalty. The notice did not allege defective packing or a manufacturing defect, and the petitioner did not file a reply; the Collector proceeded ex‑parte and passed the order on 11‑01‑2021.
  • Petitioners argued that liability could attach only under Clause 3.10, which requires proof of defective/improper packing or a manufacturing defect—facts absent from the notice and the order. They contended that the Collector’s action violated the contractual risk allocation and the statutory requirement of establishing factual ingredients before imposing a penalty.
  • State counsel maintained that the order was appealable under Section 62 of the Chhattisgarh Excise Act, 1915 and that the petitioner must exhaust the statutory remedy before approaching the High Court.

Final Outcome

  • The Court held that the Collector’s order was arbitrary and illegal because it ignored the contractual terms that place risk with the purchaser and failed to establish any defect‑based breakage.
  • The Court rejected the preliminary objection that the existence of an alternative statutory remedy barred writ jurisdiction, noting that such a rule is discretionary, not absolute.
  • All impugned orders imposing the Rs 6.24 lakh penalty in the sixteen writ petitions were quashed and set aside; the petitioners were absolved of any liability.
  • The Court clarified that any future deficiency actions must be adjudicated in strict compliance with the statutory provisions of Rules 17 and 19 and the contractual provisions of Clauses 2.3 and 3.10.

Topics: Excise Penalty, Contractual Liability