Gokul Foods: State Licence, ₹26 Crore Turnover and Units in Three States
Gokul Foods Pvt. Ltd. makes namkeen and snack puffs at a factory in Kanpur and runs packaging-cum-distribution units at Patna and Jaipur. Its audited gross turnover for 2023-24 is ₹26.4 crore: ₹19.8 crore from the Kanpur factory, ₹3.2 crore from the two other units and ₹3.4 crore from exports to the Gulf. The company holds only a State licence issued by the Designated Officer, Kanpur, and prints that licence number on every pack. Neither the Patna nor the Jaipur premises has a licence of its own. During a warehouse inspection in Jaipur, the Food Safety Officer records that a ₹26 crore business is operating on a State licence and proposes prosecution for carrying on business without a valid licence. The company's manager argues that a warehouse does not 'manufacture' anything, that turnover must be computed unit-wise, and that the Kanpur unit's ₹19.8 crore is below the ₹20 crore threshold. The Designated Officer must decide the licensing question before the prosecution file moves.
1. Which authority should have licensed Gokul Foods, and does the Kanpur State licence authorise the Patna and Jaipur operations? Work through the turnover argument.
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Licensing tier follows the FBO, not the premises. A Central licence is required where the FBO's annual turnover is ₹20 crore or more, where it operates in two or more States, and for importers/exporters and 100% export-oriented units; the State Designated Officer licenses the rest.
Both limbs are met here. Gokul is one legal entity operating in Uttar Pradesh, Bihar and Rajasthan, and it exports. Its gross turnover is ₹26.4 crore. The manager's unit-wise arithmetic is wrong in law: turnover is computed for the food business operator as a whole, from all units and all activities, because the satellite units are divisions of the same company and not separate FBOs. Even on his own method of excluding exports, ₹19.8 + ₹3.2 = ₹23.0 crore still clears ₹20 crore.
Effect on the licence. The Kanpur State licence is not a nullity - it was granted by a competent authority - but it no longer matches the FBO's statutory category and cannot cover premises in other States. Each premises must be covered by a licence, and a Central licence is the correct instrument. The remedy is to apply for a Central licence on FoSCoS, get all three premises endorsed, and then surrender the State licence. Until that is done, the Jaipur and Patna operations have no valid licence of their own.
2. Is prosecution for 'carrying on business without a valid licence' the right first response in Jaipur? What sequence would you advise the Designated Officer to follow?
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Separate the two questions. (a) Is there a licence for the Jaipur premises at all? (b) Was the company's error a jurisdictional mistake or evasion? The answer to (a) is no. The Rajasthan authorities have jurisdiction over premises inside Rajasthan irrespective of who grants the company's main licence, so the Jaipur FSO is entitled to act.
Proportionality. The FBO held a licence granted after disclosure of its turnover; that is a mitigating fact going to intent and sentence, not a defence. Before prosecution, the file should show: the inspection report; the licence and its scope; audited accounts and GST returns proving turnover; correspondence, if any, on migration to a Central licence; and photographs/panchnama of the warehouse stock.
Recommended sequence. 1) Record the contravention and issue a written direction to obtain the correct licence within a fixed period, supported by an improvement notice where the deficiency is capable of remedy. 2) Refer the licensing-tier issue to FSSAI so the Central licence application is regularised. 3) Seize product only if it is unsafe or misbranded, not merely because of the licence gap. 4) If the FBO still operates unlicensed after the notice period, launch adjudication/prosecution for the contravention; compounding under the Act remains open for compoundable offences, and the licence obtained later is relevant to penalty, not to guilt.
3. What evidence would you require before accepting the ₹26.4 crore figure, and what happens if the FBO under-declared turnover to stay in the State tier?
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Evidence. Audited financial statements of the legal entity for the relevant year; GST returns (GSTR-1/3B and annual return) reconciled to the accounts; the export invoices and shipping bills behind the ₹3.4 crore; and a premises-wise schedule reconciling ₹19.8 + ₹3.2 + ₹3.4 crore. A chartered accountant's certificate alone is weak; it must tie to statutory filings. Where the declared turnover in the licence application differs materially from the audited figure, the reason for the difference must be documented.
If turnover was under-declared. The licence was obtained on a false or incomplete declaration. That is a distinct contravention from trading without the correct licence: it goes to the honesty of the application and can justify suspension/cancellation proceedings by the licensing authority, prosecution for furnishing false information, and refusal of the Central licence until the discrepancy is explained. The correct course is to reopen the licence file, issue notice to show cause, and in parallel direct migration to the Central tier. The Designated Officer should also check whether the same declaration was used to obtain benefits in the other two States, since a pattern of under-declaration is more serious than a one-off error.