M/s. VGR Restaurant & Bar V. State of Andhra Pradesh,

WP/23710/2016

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The case involves M/s. VGR Restaurant & Bar, represented by its managing partner V. Ganeswara Rao and his wife Smt. V. Adi Lakshmi, who challenged a notice demanding payment of Rs. 3,80,000 as a transfer fee for converting their partnership firm into a proprietary concern without the Commissioner’s sanction. The respondents argued that this conversion amounted to a transfer of license, necessitating the payment. The petitioners contended that the change was merely in the management structure and did not constitute a transfer of the license. The court found procedural lapses in how the notice was issued and the subsequent demand for payment, leading to the setting aside of the impugned notice.

• Counselvise Citation: [] 140 COUNSELVISE.COM (IT) 840679 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 18-02-2026
• Assessment Year: misc
• Other Referred Cases: Union of India and others v. Prakash Kumar Tondon
• Laws Referred To: Andhra Pradesh Excise (Grant of License of Selling by Bar and Conditions of License) Rules, 2005, Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: GP FOR PROHIBITION AP; GP FOR PROHIBITION EXCISE AP
• Assessee Lawyers: O MANOHAR REDDY
• Keywords: Excise License; Natural Justice; Transfer of License; Partnership to Proprietorship
• Section: 44AB

Judgement Text

"APHC010605342016 IN THE HIGH COURT OF ANDHRA PRADESH WEDNESDAY, THE EIGHTEENTH DAY OF FEBRUARY TWO THOUSAND AND TWENTY SIX THE HONOURABLE SRI JUSTICE TARLADA RAJASEKHAR RAO WRIT PETITION No. BETWEEN: 1. M/S. VGR RESTAURANT & BAR, ANAKAPALLI, REP. BY ITS MANAGING PARTNER, V.GANESWARA RAO, S/o. LATE ADI NARAYANA, AGED ABOUT 50 YEARS, OCC:BUSINESS, R/O. D.NO.19-2-81, V.J NAIDU STREET, ANAKAPALLI, VISAKHAPATNAM DISTRICT. 2. SMT. V.ADI LAXMI,, W/O. V.GANESWARA RAO, AGED ABOUT 39 YEARS, OCC: BUSINESS, PARTNEI OF M/S. VGR RESTAURANT & BAR, ANAKAPALLI, R/O. D.No.19 NAIDU STREET, ANAKAPALLI, VISAKHAPATNAM DISTRICT 1. STATE OF ANDHRA PRADESH, RE DEPARTMENT, SECRETARIAT, HYDERABAD. REP. BY ITS PRL. SECRETARY 2. THE COMMISSIONER OF PROHIBITION AND EXCISE, GOVERNMENT OF ANDHRA PRADESH AT VIJAYAWADA. 3. THE DEPUTY COMMISSIONER OF PROHIBITION AND, EXCISE, VISAKHAPATNAM, 4. THE PROHIBITION AND EXCISE SUPERINTENDENT, ANAKAPALLE, VISAKHAPATNAM DISTRICT. IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI (Special Original Jurisdiction) WEDNESDAY, THE EIGHTEENTH DAY OF FEBRUARY TWO THOUSAND AND TWENTY SIX PRESENT THE HONOURABLE SRI JUSTICE TARLADA RAJASEKHAR RAO WRIT PETITION No. 23710/2016 M/S. VGR RESTAURANT & BAR, ANAKAPALLI, REP. BY ITS MANAGING PARTNER, V.GANESWARA RAO, S/o. LATE ADI NARAYANA, AGED ABOUT 50 YEARS, OCC:BUSINESS, R/O. 81, V.J NAIDU STREET, ANAKAPALLI, VISAKHAPATNAM DISTRICT. SMT. V.ADI LAXMI,, W/O. V.GANESWARA RAO, AGED ABOUT 39 YEARS, OCC: BUSINESS, PARTNEI OF M/S. VGR RESTAURANT & BAR, ANAKAPALLI, R/O. D.No.19 NAIDU STREET, ANAKAPALLI, VISAKHAPATNAM DISTRICT ...PETITIONER(S) AND STATE OF ANDHRA PRADESH, REVENUE (EXCISE DEPARTMENT, SECRETARIAT, HYDERABAD. REP. BY ITS PRL. SECRETARY THE COMMISSIONER OF PROHIBITION AND EXCISE, GOVERNMENT OF ANDHRA PRADESH AT VIJAYAWADA. THE DEPUTY COMMISSIONER OF PROHIBITION AND, EXCISE, VISAKHAPATNAM, VISAKHAPATNAM DISTRICT. THE PROHIBITION AND EXCISE SUPERINTENDENT, ANAKAPALLE, VISAKHAPATNAM DISTRICT. ...RESPONDENT(S): IN THE HIGH COURT OF ANDHRA PRADESH [3330] WEDNESDAY, THE EIGHTEENTH DAY OF FEBRUARY THE HONOURABLE SRI JUSTICE TARLADA RAJASEKHAR RAO M/S. VGR RESTAURANT & BAR, ANAKAPALLI, REP. BY ITS MANAGING PARTNER, V.GANESWARA RAO, S/o. LATE ADI NARAYANA, AGED ABOUT 50 YEARS, OCC:BUSINESS, R/O. 81, V.J NAIDU STREET, ANAKAPALLI, SMT. V.ADI LAXMI,, W/O. V.GANESWARA RAO, AGED ABOUT 39 YEARS, OCC: BUSINESS, PARTNEI OF M/S. VGR RESTAURANT & BAR, ANAKAPALLI, R/O. D.No.19-2-81, V.J NAIDU STREET, ANAKAPALLI, VISAKHAPATNAM DISTRICT ...PETITIONER(S) VENUE (EXCISE - II) DEPARTMENT, SECRETARIAT, HYDERABAD. REP. BY ITS THE COMMISSIONER OF PROHIBITION AND EXCISE, GOVERNMENT OF ANDHRA PRADESH AT VIJAYAWADA. THE DEPUTY COMMISSIONER OF PROHIBITION AND, VISAKHAPATNAM DISTRICT. THE PROHIBITION AND EXCISE SUPERINTENDENT, ...RESPONDENT(S): Printed from counselvise.com 2 Counsel for the Petitioner(S): 1. O MANOHER REDDY Counsel for the Respondent(S): 1. GP FOR PROHIBITION (AP) 2. GP FOR PROHIBITION EXCISE (AP) The Court made the following: Printed from counselvise.com 3 ORDER: The 4th respondent has issued notice in RC No.272/2014/A1, dated 16.6.2016, directing the petitioners herein to pay the arrear amount of Rs.3,80,000/- by way of challan immediately and to submit the same in the office of the 4th respondent otherwise, necessary further proceedings will be initiated against the petitioners basing on the material available on the record. The reason for issuing the said notice is that the petitioners are granted 2B license under the name and style of M/s. V.G.R. Restaurant and Bar with license No.13/2006-07 dated 25.01.2007 under Rule 4 of A.P. Excise [Amendment of License of selling by Bar and conditions license] Rules, 2005, and the said license was granted on the partnership firm, later it was converted into proprietary concern by retiring one of its partner namely Smt. V. Adi Lakshmi, without the sanction of the Commissioner. And the APBCL Depot was issuing liquor stock in the name of proprietary concern only and deducting income tax on PAN No. (AAUPV2652H) allotted to its proprietor Sri V. Ganeswar Rao. Since, conversion of partnership firm into proprietary concern amounts to transfer of licene, 10% of the license fee (Rs.38,00,000/-) for such transferring amounting to Rs.3,80,000/- is to be collected. 2. The petitioners herein submitted representation 30.06.2016 stating that originally bar license was issued in the name of M/s. V.G.R. Restaurant and Bar, partnership firm, in which Sri P. Mutyalanaidu and Y.V. Satyanarayana were partners, later on, in the due course of Printed from counselvise.com 4 business, new partners V. Ganeswararao and V. Adilakshmi were entered into business and P. Mutyalanaidu and Y.V. Satyanarayana were retired, accordingly there was change in the partners and not in partnership. Since then, the partnership business in the name and style of M/s.V.G.R. Restaurant & Bar, continuing till date with partners V. Ganeswara Rao and V. Adi Lakshmi, without any change. 3. Only, the APBCL depot which had collected the PAN number of partner and deposited the TCS in his PAN erroneously. Collecting and entering the PAN of partner instead of firm PAN, does not amounts to change in partnership, as noted in the notice issued and therefore prayed to drop action initiated to collect the amount. 4. The 4th respondent-Prohibition and Excise Superintendent vide impugned proceedings dated 09.07.2016, directed to pay an amount of Rs.3,80,000/- by challan immediately, after dissatisfied with the reply submitted by the petitioners dated 30.06.2016. The said notice was assailed in the present Writ Petition on the ground that the impugned proceedings dated 09.07.2016 is without considering explanation submitted by the petitioners, which is illegal, arbitrary and violation of principles of natural justice. 5. Giving of reasons is a judicial discipline either by quasi-judicial or judicial orders, to make known that there has been proper and due Printed from counselvise.com 5 application of mind to the issue before the authority. Non consideration of the representation amounts to violation of principles of natural justice. Rules 17(4) and 17(5) of Andhra Pradesh Excise (Grant of License of Selling by Bar and Conditions of License) Rules, 2005, apply only one of the partners withdraws or expires, resulting in the change of firm status from partnership to proprietary concern due to transfer of license. It is further submitted that in the present case, none of the clauses have any application and as on the date, the 2nd petitioner is continuing as partner of the firm. Merely because, the APBCL is deducting the income tax on PAN belonging to the 1st petitioner instead of partnership firm, cannot be a ground to issue the impugned proceedings. And the partnership firm has got PAN and instead of collecting the PAN of the firm, they have collected PAN of the 1st petitioner and deducting the amount and the same does not amount to change in partnership firm as stated in the notice. And both notices dated 09.07.2016 and 16.06.2016 without issuing proper notice to the petitioners, calling for explanation and even after submitting explanation without considering it, passing the impugned order is not legal and the same is arbitrary and in violation of principles of natural justice. Hence, prayed to set aside the impugned notice dated 09.07.2016. 6. The 4th respondent has filed, the counter affidavit and it is stated that during the auditing held by the Accountant General Office, Andhra Printed from counselvise.com 6 Pradesh and Telangana for the years 2011-12, 2012-13 and 2013-14, the irregularity has been noticed in respect of M/s. V.G.R. Restaurant and Bar, that the license was issued in the name and style of M/s. V.G.R. Restaurant, partnership firm in which Sri P. Mutyalanaidu S/o. Appalanaidu and Sri Y.V. Satyanarayana s/o. Appalaswamy were partners and the bar license was transferred to a partnership firm in which Sri V. Ganeswara Rao and Smt. V. Adi Lakshmi, were partners. Further, it was noticed that bar license which was transferred to a partnership firm was converted into proprietary concern by retiring one of its partner namely Smt. V. Adi laxmi, without the sanction of the Commissioner, APBCL depot was issuing liquor stock in the name of proprietary concern only and deducting income tax on PAN numbers (AAUPV2652H) allotted to its proprietor Sri V. Ganeswara Rao, since conversion of partnership firm into proprietary concern amounts to transfer of license, 10% of the licence fee (Rs.38,00,000/-) for such transfer, amounting to Rs.3,80,000/- is to be collected. 7. It is further stated that as per the tax audit report filed under Section 44AB of Income Tax Act, 1961, income tax returns filed for the business running in the name of Sri V. Ganeswara Rao. Hence, it is very clear that the partnership firm was converted into proprietary concern and the licensee is liable to pay transfer fee of Rs.3.80 Lakh. It is further stated that the explanation offered by the petitioners is not Printed from counselvise.com 7 satisfactory and hence directed the petitioner No.1 to pay the demand of Rs.3,80,000/- which is legal. Hence, prayed to dismiss the Writ Petition. 8. Heard learned Senior Counsel Sri O. Manoher Reddy for OMR Law Firm for the petitioners and learned Government Pleader for the respondents. 9. It is known law that the partners of the partnership firm have to mandatorily obtain PAN distinct from the individual PAN of its personnel for filing income tax returns of the partnership firm. Though, the partnership firm has obtained the PAN, for whatever reason, as per the invoice of APBCL and income tax returns indicate that the business was running in the name of Sri V. Ganeswara Rao. The tax that filed under Section 44AB of Income Tax Act, 1961 and the audit report indicates that the business was running in the name of Sri V. Ganeswara Rao. It clearly indicates that the firm is not paying income tax. 10. Learned senior counsel had drawn the attention of this Court and referred the renewal endorsement issued by the Superintendent, Excise, Anakapally and stated that as per the renewal endorsement, the partnership firm is continuing and there is no such violation of Rule 17(4) and (5) of the Rules to treat the conversion of the partnership firm into proprietary concern that does not amounts to transfer of license. No reasonable opportunity was given by the 4th respondent to show cause Printed from counselvise.com 8 against the proposed action; that the impugned order does not state the reasons why the explanation offered rebutting the contentions raised in the impugned order. Hence, prayed to allow the Writ Petition by setting aside the impugned notice dated 09.07.2016. 11. On careful perusal of the impugned order, there is no discussion or reasons given in the impugned order (except saying that not satisfactory) for not accepting the explanation. There are a slew of judgments for the aforesaid proposition. This Court quotes a judgment of the Hon’ble Apex Court in the case of Union of India and others v. Prakash Kumar Tondon1 “the order removing trustees without considering explanation and without assigning reasons for the non-acceptance of the explanation vitiated the order of Government removing/dismissing the trustees.” 12. After giving careful thought to the arguments advanced by the petitioners’ counsel and respondents’ counsel, the respondents have not issued any show-cause notice and called for explanation and the respondents have not considered the explanation and no reasons are given in the impugned notice dated 09.07.2016 and the endorsement that was issued by the Prohibition and Excise Superintendent, indicates that the firm is ongoing existence and not considering the explanation as 1 2009 (2) SCC 541. Printed from counselvise.com 9 argued by the learned senior counsel for the petitioners, amounts to violation of principles of natural justice. 13. As it is essential requisite to consider the representation, this issue has to be addressed by the respondents, hence, the Writ Petition stands allowed by setting aside the impugned proceedings of the 4th respondent dated 09.07.2016. However, the respondents are not precluded or barred from initiating fresh proceedings by due process of law to the petitioners. There shall be no order as to costs. As a sequel thereto, Interlocutory Applications pending, if any, shall stand closed. __________________________________ JUSTICE TARLADA RAJASEKHAR RAO Date: 18.02.2026 Harin Printed from counselvise.com 10 12 THE HON’BLE SRI JUSTICE TARLADA RAJASEKHAR RAO W.P.No. 23710 OF 2016 Date: 18-02-2026 Harin Printed from counselvise.com "