Introduction:

In the case of M/s Tiloksons Brewery & Distillery v. State of Himachal Pradesh & Ors. (CWP No. 16382 of 2025), decided on 02.04.2026, the Himachal Pradesh High Court, through Justice Jyotsna Rewal Dua, delivered an important judgment dealing with procedural compliance under the Himachal Pradesh Excise Act, 2011 and the limits of administrative decision-making. The petitioner, a licensed manufacturer of Indian Made Foreign Liquor (IMFL) and country liquor, was operating under valid licenses issued by the State authorities. On 4 May 2025, a surprise inspection was conducted at the petitioner’s premises by a team constituted by the authorities, which allegedly discovered several violations such as unauthorized bottling, use of unapproved brands, illegal storage of materials, and operation beyond permitted hours. Based on this inspection, an FIR was registered and departmental proceedings were initiated. Subsequently, an inquiry was conducted, and the Collector recommended cancellation of the petitioner’s licenses. Acting upon this recommendation, the Commissioner passed an order dated 4 July 2025 cancelling the licenses. Aggrieved by this decision, the petitioner approached the High Court challenging the legality of the inspection and the consequent cancellation order. The case raised critical questions regarding whether non-compliance with statutory requirements in constituting an inspection team vitiates the proceedings and whether administrative authorities must exercise independent judgment rather than mechanically relying on recommendations.

Arguments of the Petitioner (Brewery & Distillery):

The petitioner, M/s Tiloksons Brewery & Distillery, assailed the cancellation order primarily on the ground that the very foundation of the proceedings—the inspection conducted on 4 May 2025—was illegal and contrary to the statutory framework. The petitioner argued that the Himachal Pradesh Excise Act, 2011, along with the relevant notifications, clearly prescribed the composition of the inspection team. It was mandatory that such a team include an Executive Magistrate of the First Class and a Police Officer of a specified rank. However, in the present case, the inspection team did not include either of these essential members. The petitioner emphasized that this was not a mere procedural irregularity but a substantive violation of statutory requirements, rendering the inspection itself unlawful. It was further contended that the inspection report failed to mention the names or ranks of any police officers who were allegedly part of the team, thereby casting serious doubt on the credibility and legality of the inspection. The petitioner argued that when a statute prescribes a particular manner for performing an act, it must be done in that manner alone, and any deviation would invalidate the action. Building upon this, the petitioner submitted that all subsequent proceedings, including the FIR and departmental inquiry, were vitiated as they were based on an illegal inspection. The petitioner also challenged the decision-making process of the Commissioner, arguing that the cancellation order was not based on independent application of mind but was merely a mechanical acceptance of the recommendations made by the Collector. It was contended that the Commissioner, being the competent authority, was required to independently evaluate the evidence and circumstances before taking such a drastic step as cancellation of licenses, which had serious civil and economic consequences. The petitioner further argued that the alleged violations were either exaggerated or unsupported by credible evidence and that the principles of natural justice were not adequately followed. The petitioner thus prayed for quashing of the cancellation order on the grounds of illegality, arbitrariness, and lack of due process.

Arguments of the Respondents (State Authorities):

The State authorities, represented by the Additional Advocates General, opposed the writ petition and sought to justify the cancellation of the licenses. The respondents argued that the inspection conducted on 4 May 2025 had revealed serious violations of the Excise Act and the conditions of the licenses held by the petitioner. These violations included unauthorized bottling, use of unapproved brands, illegal storage of raw materials, and operation beyond permitted hours. According to the State, these were grave infractions that justified strict action, including cancellation of licenses. The respondents contended that the inspection was carried out by a competent team of officials and that minor deviations, if any, in the composition of the team did not invalidate the entire exercise. It was argued that the primary objective of the inspection was to ensure compliance with the law and to detect violations, which had been successfully achieved in this case. The State further submitted that an FIR had been registered based on the findings of the inspection, indicating that the matter had criminal implications as well. Therefore, the petitioner could not escape liability merely by pointing out technical defects in the composition of the inspection team. The respondents also argued that the petitioner had not demonstrated any actual prejudice caused by the alleged non-compliance with the statutory requirements. In the absence of such prejudice, it was contended, the proceedings should not be set aside. With regard to the decision-making process, the State maintained that the Commissioner had acted within his powers and had taken into account the findings of the inquiry and the recommendations of the Collector. It was argued that administrative authorities are entitled to rely on reports and recommendations of subordinate अधिकारियों (officials) and that such reliance does not necessarily imply lack of independent application of mind. The respondents thus urged the Court to uphold the cancellation order in the interest of maintaining regulatory discipline and preventing misuse of excise licenses.

Court’s Judgment:

The Himachal Pradesh High Court, after carefully considering the rival submissions and examining the statutory provisions, delivered a nuanced judgment addressing both procedural compliance and administrative decision-making. Justice Jyotsna Rewal Dua first examined the legality of the inspection conducted on 4 May 2025. The Court noted that the relevant statutory notification under the Himachal Pradesh Excise Act explicitly required that the inspection team must include an Executive Magistrate of the First Class and a Police Officer of a specified rank. However, in the present case, the inspection team did not include an Executive Magistrate, nor did the inspection report clearly mention the names or ranks of any police officers involved. The Court observed that this was a clear deviation from the statutory requirements and held that the constitution of the inspection team was not in consonance with the Act and the applicable notification. However, the Court went on to clarify that such a defect in the constitution of the inspection team would not automatically invalidate the entire proceedings. The Court emphasized that the petitioner had failed to demonstrate how the absence of the required officials caused any actual prejudice to its case. It also noted that an FIR had already been registered based on the inspection, indicating that the matter had independent evidentiary basis beyond the inspection report. Thus, while acknowledging the procedural irregularity, the Court refused to hold that it vitiated all subsequent actions. The Court then turned its attention to the decision-making process adopted by the Commissioner. Upon examining the cancellation order, the Court found that the Commissioner had largely relied upon the recommendations of the Collector without independently analyzing the evidence or recording his own reasons. The Court held that such an approach was legally untenable, as it amounted to abdication of statutory responsibility. The Commissioner, being the competent authority, was required to apply his own mind and arrive at an independent conclusion based on the material on record. The failure to do so rendered the cancellation order arbitrary and unsustainable. The Court thus concluded that while the procedural defect in the inspection alone may not have been sufficient to quash the proceedings, the lack of independent reasoning in the Commissioner’s order was a serious flaw that vitiated the decision. Accordingly, the Court quashed the cancellation order dated 4 July 2025. The judgment underscores the importance of adhering to statutory procedures as well as the necessity for administrative authorities to exercise independent judgment, particularly when their decisions have significant consequences for individuals and businesses.