Can't Permit Sales Practices That Lure People Into Hoarding Liquor, Illicit Trafficking: Delhi Govt to High Court On 'No-Discount' Policy

Defending its decision to prohibit the grant of discounts or concessions by retail licensees on MRP of liquor in the city, the Delhi Government has told the High Court that it cannot permit sale practices that lure people to indulge in illicit and illegal liquor trafficking and hoarding liquor beyond the permissible limit as defined under Rule 20 of Delhi Excise Rules, 2010.

The development came in a counter affidavit filed on behalf of the Delhi Government in a plea filed by five private players holding valid L7Z licenses challenging the order dated February 28, 2022 passed by the Department of Excise, Entertainment and Luxury Tax of the Delhi Government.

The petition is filed in the backdrop of the new Delhi Excise Policy approved in June last year by the Delhi government for the year 2021-2022. This policy sets out the framework for various aspects pertaining to the liquor business.

Consequent to the excise policy being approved, the Delhi Government had floated tenders for zonal licences for retail vends of Indian and foreign liquor. The petitioners participated in the tenders floated and had emerged as the successful bidders for different zones within the city.

"Though the Government vide Excise Policy 2021-22 secured its revenue through front loading the Excise duty in the license fee of the zonal retail license but it cannot permit sale practices that lure the people to indulge in illicit and illegal liquor trafficking and hoarding liquor beyond the permissible limit as defined under Rule 20. The social and ethical responsibility of the Government towards its citizens is as important as securing the Revenue earned from liquor trade," the affidavit reads.

"Can't Promote Drunkenness Through Discounts": Delhi Govt Defends Decision To Prohibit Concessions On Liquor MRP

It added "There was smooth implementation of Excise Policy 2021-22 w.e.f 17.11.2021 and business commenced under the new duty structure. In the month of February 2022, some of the retail L-7Z licensees started giving huge discounts/offers on the MRP of liquor ('buy one, get one' and 'buy one, get two' etc). Further, banners and hoardings were put up by the licensees in front of liquor stores and messages were circulated on social media platforms promoting discounts and luring customers with freebies. This resulted in huge crowds gathering outside the liquor vends leading to adverse law and order situation, particularly in the backdrop of the pandemic which necessitates following of social distancing norms and also people purchasing liquor beyond the normal consumption capacity. It was further noticed that some people had also started buying liquor in bulk for hoarding or bootlegging, including interstate movement of liquor."

The affidavit also states that the increased sales due to discounting cannot be logically attributed to only increase in consumption as the average sales during the discounting period showed a significant spike and the chances of illicit hoarding, black marketing and inter-state movement of liquor cannot be ruled out.

Emphasizing that the promotion of responsible drinking and also preventing the illicit trade of liquor is the primary objective of the Delhi Government, the affidavit reads:

"There should be no hoarding of liquor or black marketing of liquor which could not be ruled out along with interstate movement of liquor across Delhi borders to the states which have higher duty structures in the current scenario. Further, the order issued by the Excise Commissioner was in the nature of an administrative direction which does not require granting an opportunity of hearing unless mandated by the statute."

"Further, the intent of the Government to allow discounting was not being fulfilled by the licensees and the unregulated discounting was leading to luring of consumers and the consumers were driven and lured to purchase liquor beyond their normal consumption capacity. Further, the possibility of hoarding and future black marketing could not be ruled out in the instant case."

The Delhi Government has also stated that the licensees have misconceived the discounting clause and have started giving freebies to the consumer in form of offers being floated to achieve short term monetary gains while compromising the ill effects of heavy drinking and consumption of liquor.

"The present petition is wholly misconceived and has been filed to create an impression that discounts are the norm in the market and that the market will not be able to function without the discount," the affidavit states.

The plea avers that the discounts were permitted and the licensees were giving and adopting discounts. According to the petitioners, the same was based on arrangements as licensees could enter into with L1 licensees, and that the same was free market and fair competition principles in operation.

However, it is the petitioners' case that without any opportunity of hearing and in a completely impermissible manner, the Delhi Government had passed the impugned order prohibiting the grant of discounts or rebates and concessions.

"For that no opportunity of being heard was given before withdrawing commercial clauses having impact on civil rights of licensees. There has been total breach of natural justice," the plea states.

It adds, "For that the impugned decision of the Respondent completely take away the Petitioners right to take business decisions with regards to discounts/concessions/rebate which the petitioners were otherwise empowered to take under the new Excise policy and tender documents. 'Clauses' such as to give discounts formed an essential part of the new Excise policy scheme. Hence, the impugned to discontinue/withdraw an important clause, is in complete contradiction to the letter and spirit of the Excise Policy."

Accordingly, the plea sought quashing of the impugned order.

Case Title: BHAGWATI TRANSFORMER CORP. AND ORS v. GOVERNMENT OF NCT OF DELHI