Bitters Sale On Amazon: Karnataka High Court Quashes Excise Proceedings Against Company Directors

A single judge bench of Justice M Nagaprasanna has allowed the petition filed by Kandula Raghava Rao and Noorulamin Mohd. Saheb Patel, both directors of Amazon Seller Service Private Limited, and quashed the proceedings pending against them under Sections 8, 13(1)(a), 15, 32, 34 and 38(A) of the Karnataka Excise Act, 1965.

Case Details:

The Department of Excise had purchased certain products from the seller "Happy and Healthy Foods" on the e-commerce platform Amazon. The department said Amazon facilitated the purchase for the Excise Department from the seller "Happy and Healthy Foods" and registered a case against the e-commerce platform's directors and other accused, on an allegation that the products contained alcoholic bitters by name "Angostura Aromatic Bitters", which contain 44.7% alcohol in a 200 ml bottle.

The bitters were construed to be alcohol since they are used for making cocktails and was sold interstate through the platform without having a valid licence from the Department of Excise, State of Karnataka. The further allegation was that these products were routed through Amazon without paying import duty and additional excise duty. Happy and Healthy Foods, the seller was charge sheeted along with the petitioners on the allegations of violation of provisions of Excise Act.

Findings:

The bench said whether an intermediary can be hauled into the proceedings is no longer res integra and relied on the coordinate bench judgment in the case of Kunal Bahl And Others Vs. State Of Karnataka, wherein the court held that:

"Though the platform is owned and operated by Snapdeal it is Accused No. 1, who has exhibited and offered its products for sale on the Snapdeal's platform. Snapdeal being an intermediary is exempt from criminal prosecution as aforestated. Neither Snapdeal nor its Directors can be or made liable for alleged offences punishable under Section 27(b)(ii) of the Drug and Cosmetics Act."

Following which it held, "Therefore, the said issue whether the proceedings against the intermediary can be initiated, stands covered on all its fours with the reasons rendered in the afore-quoted judgment and further proceedings, if permitted to be continued would become abuse of process of law."

Noting that Amazon as a company has not been made an accused in the proceedings, the bench said, "The petitioners are Directors of the Company. Without arraigning the Company as an accused, the Directors of the company cannot be hauled into the proceedings or proceedings against them cannot be permitted to be continued. The said issue also no longer res integra, in the light of the judgment of the Apex Court in the case of SUSHIL SETHI AND ANOTHER vs. STATE OF ARUNACHAL PRADESH ANDOTHERS (2020)3 SCC 240)."

Accordingly it allowed the petition.

Case Title: KANDULA RAGHAVA RAO & ANR v. STATE OF KARNATAKA & ANR

Case No: CRIMINAL PETITION NO. 6595 OF 2022

Citation: 2022 LiveLaw (Kar) 410

Date of Order: 25TH DAY OF AUGUST, 2022

Appearance: Sandesh Chouta - Senior Advocate, for Advocates Vikram Unni Rajagopal, Gitanjali Mathew, Meghana Satish Singh, Sudarshan MJ for petitioners

K.P YASHODHA, HCGP for respondent

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