K.M. Sugar Mills Limited v. State of Bihar: Refund Entitlement Judgement

In a significant ruling by the Supreme Court of India, the case of K.M. Sugar Mills Limited v. State of Bihar explores the entitlement to refunds for specific periods due to sealing and suspension of premises. The judgement addresses key aspects of legal refund claims, shedding light on the rights and considerations of parties involved. Let’s delve into the details of this landmark decision.


  • The premises of M/s K.M. Sugar Mills Limited, the Respondent here, were sealed multiple times due to various violations including non-supply of minimum quantity of country liquor and production of substandard liquor.
  • There were instances of suspension and cancellation of the Respondent’s license due to non-compliance with the tender conditions and license requirements.
  • The State of Bihar imposed a total ban on the consumption and production of country liquor as part of the New Excise Policy announced in 2016.
  • The Respondent sought refunds for periods during which their premises were sealed or license was suspended, citing lack of prior adjudication in their favor regarding these actions.
  • Various inspections and notices were issued to the Respondent highlighting violations such as producing liquor with higher strength than allowed and not meeting the minimum guaranteed quantity requirements.
  • The High Court allowed the Writ Petitions filed by the Respondent, directing refunds based on the illegalities surrounding sealing and suspension actions taken against them.
  • High Court failed to notice lack of prior adjudication in favour of the Respondent
  • Appellants directed to refund licence fee and differential amount for period of closure
  • Relief granted due to lack of opportunity given to manufacturers before suspension and cancellation of licenses
  • Appellant directed to consider claims for compensation for furnished raw material due to unlawful closure
  • Clause 22 of the licence indicates Respondent not entitled to compensation
  • High Court not informed about suspension of licence when previous case was heard
  • No notice given before suspension order was passed
  • Writ Petitions allowed for refund of fees and differential amount for unlawful closure of premises

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  • Whether Respondent is entitled to refund of licence fee and differential amount for sealed period
  • Evidence presented by the Petitioner for denying refund
  • Arguments made by Respondent in favor of refund
  • Consideration of entitlement to refund during sealed period

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  • The sealing order dated 13.12.2015 was set aside by the High Court in CWJC No.1364 of 2016.
  • Section 42(4) of the Bihar Excise Act states that the license holder is not entitled to any compensation for cancellation or suspension, or any refund of fees or deposits made.
  • It was argued that the High Court erred in considering all four writ petitions together, despite differing facts.
  • Questioning the necessity of a show-cause notice before a suspension order was passed was raised.
  • Final judgement entitles the Respondent for refund of licence fee and the deferential amount for the period between 13.12.2015 and 20.01.2016.

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  • High Court’s reason for holding that the Respondent is entitled to refund is not correct
  • The entitlement for refund was not based on a prior adjudication
  • The prior adjudication mentioned in the case was not the basis for the refund entitlement


  • The High Court set aside the order dated 13.02.2016 by its judgment dated 20.04.2016.
  • The penalty was imposed on the Respondent due to failure of payment, leading to sealing of premises.
  • The Respondent is entitled to refund of license fee and differential amount for specific periods.
  • No show-cause notice was given before the orders of cancellation and suspension, impacting the entitlement for refund.
  • Judgment of the High Court is affirmed and the appeal is dismissed.


Case Number: C.A. No.-007951-007951 / 2019

Click here to read/download original judgement

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