The Himachal Pradesh High Court has ruled that merely failing to affix the prescribed holograms on liquor bottles does not constitute an offence under Section 39 of the Himachal Pradesh Excise Act. The Court held that such an omission amounts to a breach of licence conditions and can attract a penalty under Section 43 of the Act rather than criminal prosecution under Sections 39(1) and 39(2).
Justice Sandeep Sharma passed the order while hearing a petition filed by Manik Kumar, proprietor of M/s Mars Bottlers, seeking quashing of FIR No. 5 of 2020 registered at Police Station SV and ACB, Una. The FIR was registered under Sections 39(1) and 39(2) of the Himachal Pradesh Excise Act in connection with allegations concerning the transportation and possession of country liquor bottles of the brand Himachali Santra.
The case originated from secret information alleging that M/s A-One Enterprises and M/s Mars Bottlers were illegally transporting liquor without the requisite transport licence and were repeatedly using the same permit. However, during the search conducted on June 8, 2020, the investigating team did not find evidence of illegal transportation without a valid licence. Instead, certain liquor nips and bottles were found without the required holograms.
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Following the investigation, the police filed a challan against M/s Mars Bottlers, while M/s A-One Enterprises was not made an accused. The petitioner argued before the High Court that the allegations in the FIR and the material collected during investigation did not disclose any offence under Section 39, as there was no allegation or evidence establishing transportation of liquor without a valid licence. According to the petitioner, the absence of holograms could, at most, constitute a violation punishable under Section 43 of the Excise Act, which provides for a penalty for breach of licence conditions.
The petitioner also relied on an earlier coordinate bench judgment in Sant Ram v. State of Himachal Pradesh, where an FIR against an Excise and Taxation Officer posted at the factory premises had been quashed on similar grounds. It was further submitted that the Excise Department itself had informed the police that the alleged omission regarding holograms did not warrant prosecution under Section 39 and that the matter could be dealt with through the statutory mechanism for compounding.
The State, however, argued that the absence of holograms constituted a violation and that the investigating agency was justified in filing the challan under Sections 39(1) and 39(2). The State also contended that since the licence had been issued in the petitioner’s name, he was responsible for ensuring compliance with the requirements under the Excise Act.
After examining the relevant provisions, the High Court disagreed with the State’s contention. The Court distinguished between Section 39, which deals with unlawful activities relating to the production, manufacture, possession, import, export, transport and sale of liquor, and Section 43, which deals with breaches of licence conditions by a licensee.
The Court held that the failure to affix holograms on liquor bottles falls within the scope of Section 43 and does not, by itself, constitute an offence under Sections 39(1) and 39(2). The Court observed that an omission by the manufacturer or licensee to affix the required holograms could result in the imposition of a penalty under Section 43, but could not automatically lead to criminal prosecution under Section 39.
The High Court also took note of a communication sent by the Excise Department to the police on October 21, 2021. In the communication, the department stated that the failure to affix holograms appeared to have occurred due to human error and was compoundable under the relevant provisions of the Excise Act. The department had also requested that the matter be transferred to the Department of State Taxes and Excise for appropriate action, but the request was not acted upon by the police.
The Court further noted that the Excise and Taxation Officer posted at the factory was responsible for ensuring that holograms were affixed to the liquor bottles. The FIR against co-accused Santram, who was serving in that capacity, had already been quashed by a coordinate bench in the earlier case.
While the High Court acknowledged that the petitioner, as the licensee, was required to ensure compliance with the hologram requirement under the notification issued by the Excise and Taxation Commissioner on May 23, 2012, it held that the legal consequence of such a violation was a penalty under Section 43 and not prosecution under Section 39.
The Court accordingly concluded that no offence under Sections 39(1) and 39(2) of the Himachal Pradesh Excise Act was made out against Manik Kumar. It held that continuation of the criminal proceedings would amount to an abuse of the process of law and would unnecessarily subject the petitioner to a trial that was bound to fail.
Consequently, the Himachal Pradesh High Court quashed the FIR and all consequential proceedings against the petitioner. The Court noted that separate proceedings under Section 43 had already been initiated before the Collector (Excise), North Zone, pursuant to a notice issued on June 12, 2020.
With the consent of the parties, the High Court imposed a penalty of Rs 1 lakh on the petitioner under Section 43 of the Excise Act. The petitioner was directed to deposit the amount with the Excise Department within four weeks. Upon payment, the pending proceedings under Section 43 before the Collector were directed to stand concluded.
The matter, titled Manik Kumar v. State of Himachal Pradesh and Another, was disposed of by the High Court, with the case listed for compliance on August 24, 2026. The ruling clarifies that failure to affix holograms on liquor bottles, without more, is a regulatory breach attracting the penalty mechanism under Section 43 and does not by itself constitute an offence under Section 39 of the Himachal Pradesh Excise Act.
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