Gujarat High Court
Gujarat Alcohol Based Ind Devlop ... vs State Of Gujarat on 24 December, 2021
Bench: Biren Vaishnav
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/LETTERS PATENT APPEAL NO. 2022 of 2010
in
R/SPECIAL CIVIL APPLICATION NO. 1837 of 2000
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE R.M.CHHAYA Sd/-
&
HONOURABLE MR. JUSTICE BIREN VAISHNAV Sd/-
================================================================
1 Whether Reporters of Local Papers may be allowed to see the No
judgment ?
2 To be referred to the Reporter or not ? No
3 Whether their Lordships wish to see the fair copy of the No
judgment ?
4 Whether this case involves a substantial question of law as to the No
interpretation of the Constitution of India or any order made
thereunder ?
================================================================
GUJARAT ALCOHOL BASED IND DEVLOP ASSO (GABIDA) & 1 other(s)
Versus
STATE OF GUJARAT
================================================================
Appearance:
MS DHARMISHTA RAVAL(707) ADVOCATE for the Appellant(s) No. 1,2
MS MANISHA L SHAH, GOVERNMENT PLEADER(1) with MS AISHWARYA
================================================================
CORAM:HONOURABLE MR. JUSTICE R.M.CHHAYA
and
HONOURABLE MR. JUSTICE BIREN VAISHNAV
Date : 24/12/2021
(PER : HONOURABLE MR. JUSTICE BIREN VAISHNAV)
1. This Appeal under Clause 15 of the Letters Patent arises out of
CAV Judgment of the learned Single Judge dated 14.06.2010
passed in Special Civil Application No.1837 of 2000, whereby,
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
the learned Single Judge dismissed the Petition of the Appel-
lants - Petitioners herein. (hereinafter the Appellants for the
sake of convenience shall be referred to as the "Petitioners")
2. The Petitioners, Gujarat Alcohol Based Industries Develop-
ment Association approached this Court in a petition under Ar-
ticle 226 of the Constitution of India for the following prayer:
"12(B) YOUR LORDSHIPS may be pleased to issue a
writ of mandamus or a writ of prohibition or any other
appropriate writ, or order direction quashing and setting
aside the (i) Bombay Denatured Spirit (Gujarat Amend-
ment) Rules, 1999 notified vide notification dated
24.12.99 (ii) Gujarat Industrial Alcohol (Import, Storage,
Sale for export, overseas, in Bond) (Ahmedabad) Rules,
1999 notified vide notification dated 4.11.99 (3) Bombay
Rectified Spirit (Gujarat Amendment) Rules, 1999 notified
vide notification dated 24.12.99 (4) Gujarat Denatured
Spirituous Preparation (Amendment) Rules, 1999 notified
vide notification dated 27.11.99."
3. The facts in brief are as under:
3.1 It is the case of the Petitioners that the Members of
the Petitioner No.1 - Association have Industrial units which
utilize denatured alcohol as raw-material for their finished
products. Denaturing of the spirit makes it unfair for human
consumption. The same is used as a raw material and the end
product varies from Industry to Industry.
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
3.2 The challenge is to the various notifications issued
by the Respondent State in exercise of powers under Section
107 read with Section 143(2)(u) of the Bombay Prohibition
Act,1949 (hereinafter referred to as "Prohibition Act" for
short). The appellants have challenged the following 4 amended
Rules notified by the State of Gujarat under the provisions of
the Bombay Prohibition Act, 1949 which read as under:
"a. Bombay Denatured Spirit (Gujarat Amendment)
Rules, 1999.
b. Bombay Rectified Spirit (Gujarat Amendment)
Rules, 1999.
c. Gujarat Industrial Alcohol (Import Storage and Sell
for export overseas in Bond) Amendment Rules, 1999.
d. Gujarat Denatured Spirituous Preparation
(Amendment) Rules, 1999."
3.3 The case of the Petitioners is that by issuing these
amended Notifications there has been an increase in the levy of
fees which is a substantial burden on the Industry and the Noti-
fications so issued are without any authority of law.
4. Ms. Dharmishta Raval, learned advocate has appeared for the
appellants and Ms. Manisha Lavkumar Shah, learned Govern-
ment Pleader assisted by Ms. Aishwarya Gupta, learned Assis-
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
tant Government Pleader has appeared for the Respondent-
State.
5. Written submissions have been filed by Ms. Dharmishta Raval,
learned counsel for the appellants. Her submissions are as un-
der:
5.1 The State Government under the Bombay Prohibi-
tion Act, 1947 does not have any legislative control over Indus-
trial Alcohol i.e. Alcohol which is not fit for human consump-
tion except to ensure that industrial alcohol is not diverted and
charge fees if the State Government is rendering any service.
5.2 Industrial Alcohol is not Alcoholic Liquor for hu-
man consumption.
5.3 The learned Single Judge has erred in concluding
that Alcoholic Liquids include all preparation made from Alco-
hol whether denatured or not and that expression "intoxicating
liquor" would include "denatured alcohol" also.
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
5.4 The decisions in case of State of Bombay & Anr.
v. F.N. Balsara reported in AIR 1951 SC 318. and Har
Shankar v. Deputy Excise and Taxation Commissioner re-
ported in AIR 1975 SC 1121 which dealt with potable alcohol
have been implicitly overruled by the Hon'ble Supreme Court
in the case of Synthetics and Chemicals and others v. State of
UP and others reported in 1990(1) SCC 109 and Mohan
Meakin Limited v. State of Himachal Pradesh reported in
2009(3) SCC 157.
5.5 The State Government is separately recovering fees
from the Appellants for the cost of regulation and supervision
over the industrial alcohol which the appellants are using. In
fact, the respondent is recovering the salary of the staff includ-
ing TA, DA, house rent, conveyance, transportation charges
etc., which fact has not been denied by the opponent. There-
fore, once the State Government has recovered the cost of su-
pervision it has no power to levy any further fees as sought for
under the impugned rules without rendering any service. The
Appellants are consumers of Industrial Alcohol, and the State
Government is not rendering any service by supervision be-
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
cause of the risk of the denatured spirit being converted into
potable liquor. In fact, the State is merely protecting its own
rights and hence impugned rules are without jurisdiction. In
this connection, she has relied on the decision in the case of
Mohan Meakin Limited v. State of Himachal Pradesh re-
ported in 2009(3) SCC 157 (Para 39).
5.6 The fee levied cannot be justified by way of privi-
leged fee as the Industrial Alcohol is within the seisin of Cen-
tral Government and hence the State Government cannot pass
on a privilege which it does not have.
5.7 The fee levied is nothing but colourable exercise of
power wherein a tax in the garb of fees is levied through the
proposed amendments.
5.8 It is submitted that the State is intending to raise
revenue through the amendment of rule which appears to be
primary object. This is an imposition of tax.
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
5.9 The State Government cannot levy fee which has
no nexus to the services rendered nor can it recover fees to pre-
vent nefarious activities which has no casual connection with
the production of Industrial Alcohol. In this connection, she
has relied on the decision in the case of K.C.P. Limited v. State
of Andhra Pradesh reported in 2015(13) SCC 765.)
5.10 The fees has been calculated while taking into ac-
count the ability of the Appellants to pay including the turnover
of the Appellants (Page Nos.46 and 56 of the SCA). The fees
are required to be calculated on the principle of equivalence
rather than on the principle of ability to pay. The fees are also
required to be based on the concept of reimbursement.
5.11 In catena of Judgments of the Hon'ble Supreme
Court it has been held that there has to be a nexus and a co-re-
lationship between the service rendered, fees levied, and ex-
penditure incurred. In the present case, the State Government
had imposed the said fees for implementing it's Prohibition
Policy. In this connection, she has relied on the decision in the
case of Hon'ble Division Bench in Special Civil Application
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
No.16304 of 2013 and allied matters in the case of Bharat
Petroleum Corporation Limited v. State of Gujarat and Anr.]
5.12 The learned Single Judge erred in upholding the
impugned Rules on the ground that the State can levy fees for
the purpose of implementing the prohibition policy for propa-
ganda or for vigilance staff while implementing the policy of
prohibition.
5.13 The fees collected under the impugned Rule are
sought to be utilized for a purpose other than the Rules under
which they are being collected. The opponents are recovering
the fees in order to achieve an objective which are not within
the exceptions carved out by the Hon'ble Supreme Court in the
case of Synthetics and Chemicals and others v. State of UP
and others reported in 1990(1) SCC 109 and State of U.P. v.
Vam Organics Chemicals Limited and Ors. reported in
2004(1) SCC 225.
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
5.14 There is no averment by the opponent that extra
staff is posted or employed by the opponent to prevent the mis-
use of Industrial Alcohol.
5.15 The levy of fees is nothing but a tax in the garb of
fee. More particularly, as there is no element of quid pro quo
and no services have been rendered to the appellants and the
fees has been enhanced taking into consideration the ability
and capacity to pay.
6. Ms. Manisha Lavkumar Shah, learned Government Pleader in
her submissions has supported the CAV Judgment of the
learned Single Judge and also extensively relied upon the Affi-
davit-in-Reply and the Affidavit-in-Sur-Rejoinder filed on be-
half of the State of Gujarat.
7. In a nut-shell, her submissions are as under: -
i) The State can impose a fee in exercise of its regulatory
power on the spirit and traffic in intoxicating liquor or alcohol.
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
ii) The Industries (Development and Regulation) Act, 1951
does not in any way affect the inherent police powers of the
State to its legislative competence under Entry 8 of List II of
the 7th Schedule. Reliance was placed on the definitions of the
term "liquor" and the term "intoxicant" under the Prohibition
Act and it was submitted that the State has the power to charge
fees. Entry 8 of List II and Entry 66 of List II specifically em-
powers the State to charge fees with regard to permit, licence
etc.
iii) The amount of fees by virtue of the amendments in the
Rules has been effected after a span of almost 10 years since
the last increase was effected in 1986-87. While doing so care
has been taken to see that small and medium scale consumers
are not adversely affected. Major increase in certain cases is
made keeping in mind the annual production, sale, turnover etc
of the licensee.
iv) The Rules under challenge are not limited to providing
services to the subjects governed and quid pro quo rendered to
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
the persons on whom the fees are imposed is not required to be
proved.
v) Detailed reference has been made to the expenditure that
the department has to make and the utilization therefore of this
increased levy of fees is justified.
vi) No comparison can be drawn between the State of Maha-
rashtra and the State of Gujarat. The State of Maharashtra has
no prohibition and therefore there is a substantial income from
the revenues as compared to the State of Gujarat.
8. Both the Learned Counsels for the respective parties have re-
lied upon various decisions.
9. Ms. Dharmishta Raval, learned counsel for the appellants has
relied on the following decisions:
"1. Indian Mica and Micanite Industries reported in
1971(2) SCC 236.
2. Synthetics and Chemicals and others v. State of
UP and others reported in 1990(1) SCC 109.
3. M/s. Gujchem Distillers India Limited v. State of
Gujarat and Anr. reported in 1992(2) SCC 399.
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
4. Ashok Organics Industries Limited v. State of
Gujarat reported in 2001(1) GLH 454.
5. State of U.P. v. Vam Organics Chemicals Limited
and Ors. reported in 2004(1) SCC 225.
6. Mohan Meakin Limited v. State of Himachal
Pradesh reported in 2009(3) SCC 157.
7. K.C.P. Limited v. State of Andhra Pradesh
reported in 2015(13) SCC 765.
8. State of Tamil Nadu and Anr. v. TVL South
Indian Sugar Mills Association and Ors. reported in
2015(13) SCC 748.
9. Bharat Petroleum Corporation Limited v. State of
Gujarat and Anr. (Special Civil Application No.16304
of 2013).
10. Gupta Modern Breweries v. State of J & K and
Others reported in 2007(6) SCC 317."
10. Ms. Manisha Lavkumar Shah, learned Government Pleader for
the respondent too has relied on the following decisions:
"(I) State of Bombay & Anr. v. F.N. Balsara reported
in AIR 1951 SC 318.
(II) Tika Ramji v. State of U.P. reported in AIR 1956
SC 676.
(III) Har Shankar v. Deputy Excise and Taxation
Commissioner reported in AIR 1975 SC 1121.
(IV) Razakbhai Issakbhai Mansuri v. State of Gujarat
reported in 1993(1) GLH 1169.
(V) Ugar Sugar Works Limited v. Delhi
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
Administration reported in AIR 2001 SC 1447.
(VI) State of Madhya Pradesh v. K.C.T. Drinks
Limited reported in AIR 2003 SC 1255.
(VII) Lilasons Breweries Pvt. Ltd. v. State of M.P.
reported in 1992(3) SCC 293.
(VIII) Sona Chandi Oil Committee v. State of
Maharashtra reported in AIR 2005 SC 635.
(IX) State of Bihar v. Baidhyanath Ayurved Bhavan
reported in 2005(2) SCC 762.
(X) State of Maharashtra v. Nagpur Distilleries
reported in AIR 2006 SC 1987.
(XI) Jantia Hill Truck Owners Association v. Shailang
Area Coal Dealer and Truck Owner Association
reported in AIR 2009 SC 3041.
(XII) Calcutta Municipal Corporation v. M/s. Shrey
Mercantile Pvt. Ltd. reported in AIR 2005 SC 1879.
(XIII) Vijaya Laxmi Rice Mills v. Commercial
Tax Officers reported in 2006(6) SCC 763.
(XIV) Jindal Stainless Steel Ltd. v. State of
Haryana reported in 2006(7) SCC 241 &
(XV) Chandulal Jethalal Jaiswal v. State of Gujarat
reported in 1963(4) GLR 1033.
11. Considering the submissions and in light thereof we need to ad-
judge the issue of the correctness of the CAV Judgment of the
learned Single Judge.
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
12. The various impugned notifications are issued under the powers
vested in the State in accordance with the provisions of the
Prohibition Act. They are so vested in the State by virtue of
Section 107 read with Section 143(2)(u) of the Act. Section
107 of the Act falls in Chapter VIII of the Prohibition Act
which is titled "Excise Duties". Section 105 speaks of excise
duties on any alcohol liquor for human consumption, any intox-
icating drug or any other excisable article. Section 106 speaks
about the manner and the method of levying excise duties. Sec-
tion 107 of the Gujarat Prohibition Act, 1949 provides for
Fees which reads as under:
Section 107 - Fees:
"[107. Fees-- [Power to exempt, remit or refund excise
duty.] Deleted by Bom. 22 of 1960, s. 69.
The State Government may, by rules prescribe the fees
payable in respect of any privilege, licence, permit, pass or
authorisation granted or issued under this Act]."
13. Under section 107 the State Government may by Rules, pre-
scribe fees payable in respect of any privilege, license, permit,
pass, authorization granted or issued under the Act.
14. Under Chapter XI "Miscellaneous" Section 139 the State
Government has powers including powers to regulate
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
import ,export, transport, possession, sale, purchase, consump-
tion or use of any intoxicant etc or any article which is likely to
be used for the manufacture of an intoxicant with or without li-
cense, permit, pass, permit or authorization etc.
15. Section 139 of the Act reads as under:
Section 139 - General powers of State Government in
respect of licences, etc.:
"139. General powers of [State] Government in respect of
licences, etc.--
[(1)] Notwithstanding anything contained in this Act
or the rules made thereunder, the [State]
Government may, by general or special order,--
(a) prohibit the grant of any kind of licences,
permits, passes or authorizations throughout the
[State] or in any area;
(b) regulate the import, export, transport, possession,
sale, purchase, consumption or use of any
intoxicant, hemp, mhowra flowers, molasses or any
article which is likely to be used for the
manufacture of an intoxicant with or without
licence, permit, pass or authorization throughout the
[State] or within the limits of any local area subject
to such conditions [as it may impose];
(c) exempt any person or institution or any class of
persons or institutions from all or any of the
provisions of this Act or from all or any of the
rules, regulations or orders made thereunder or
from all or any of the conditions of any licence,
permit, pass or authorization granted thereunder,
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
subject to such conditions as it may impose;
(d) exempt any intoxicant or class of intoxicants,
denatured spirituous preparation, hemp, mhowra
flowers or molasses from all or any of the
provisions of this Act or from all or any of the
rules, regulations or orders made thereunder, subject
to such conditions as it may impose;
(d1) remit or refund wholly or partially any fee in
respect of any privilege, licence, permit, pass or
authorization granted under this Act or any duty on
toddy producing trees or any excise or
countervailing duty or fee leviable under this Act on
any intoxicant, hemp, mhowra flowers or molasses
from any person or institution or from a class of
persons or institutions or exempt any person or
institution or class of persons or institutions from the
payment of such duty or fee, subject to such
conditions as it may impose;]
(e) prescribe the maximum number of licences,
permits, passes or authorizations of any kind which
may be granted in any area or to any class of
persons;
(f) prescribe the number of places at which any
intoxicant specified in such order [denatured
spirituous preparation,] hemp, mhowra flowers or
molasses may be sold in any area, the location of
such places in any area, the days and hours during
which such places may or may not be kept open, the
number of such places in respect of which licences
for sale may be grated and the number of such
places which may be [managed by the State
Government departmentally;]
(g) direct that no licence, permit, pass or
authorization of the kind specified in such order
shall be granted without the previous approval of
the [State] Government or also direct any additions
or alterations to be made to or in the conditions
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
subjects to which under any other provisions of this
Act, such licence, permit, pass or athorization can be
granted;
(h) prescribe the maximum quantity of any
intoxicant, [denatured spirituous preparation,]
hemp, mhowra flowers or molasses which may be
sold in any area or at any place;
(i) prescribe in respect of any place or area, the
maximum number of toddy producing trees for
tapping which or for drawing toddy from which
licence or licences may be granted;
(j) prescribe the procedure for the disposal of any
shop or shops authorised to sell any intoxicant,
denatured spirituous preparation, hemp, mhowra
flowers or molasses under this Act and the
procedure to be followed before granting any
licence or licences;]
(k) direct that before granting licences, auctions may
be held, tenders called for or offers received and
that licences shall be granted [subject to such
conditions as may be prescribed] to persons whose
bids, tenders or offers are accepted by the Collector,
(l) specify the person or class of persons [to whom
licences may or may not be granted] and in cases in
which auctions are held, the person or classes of
persons who may or may not be permitted to offer
bids at such auctions;
(m) direct that licences of the kind specified in such
order shall be granted to persons specified in such
order; and
(n) issue such other instructions in any matter
pertaining to the grant or otherwise of licences,
permits, passes or authorizations under this Act, as
the [State] Government may deem proper.
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
(2) An order made under sub-section (1) shall, if it is of
a general nature or affecting a class of persons, be notified
in the Official Gazette.]"
16. Under section 143 of the Prohibition Act, the State Govern-
ment has power to make Rules for the purpose of carrying out
the provisions of the Act or any other law for the time being in
force relating to excise revenues. Section 143 (h1); (h1iii), (h2)
(i)(ii)(iii);(k);(p)(u) read as under:
Section 143 (h1), h1iii:
"(h1) Prescribing the restrictions under which and the
conditions on which any licence, permit, pass or
authorization may be granted including--
(iii) the prohibition of sale of any intoxicant, [denatured
spirituous preparation, hemp, rottern gur or ammonium
chloride] except for cash;
h2(i)(ii)(iii)(k)(p)(u) reads as under:
(h2) (i) declaring the processes by which spirits shall
be denatured in particular areas, or for particular
purposes;
(ii) for causing such spirits to be denatured through the
agency or under the supervision of the Government
Officers and for the payment of charger for such
supervision;
(iii) for ascertaining whether such spirits have been
denatured.
(p) imposing restrictions and conditions on buyers of
intoxicant, denatured spirituous preparation, hemp,
[mhowra flowers, molasses, rotten gur or ammonium
chloride] or any article the purchase of which is regulated
by clause (b) of sub-section (1) of section 139 including
provision for compelling them to sign entries pertaining to
the purchase by them of any of these articles;]
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
(u) prescribing the fees payable in respect of any
privilege, licence, permit, pass or authorization granted or
issued under this Act;"
17. Reading of these Sections clearly provide that the State has
powers to prescribe restrictions in context of denatured spirit
and prescribing fees for such products. Denatured spirit is
therefore a part and parcel of and the product comes under the
mechanism of control and regulation for the purposes of the
Prohibition Act of the State.
18. When one views this in context and juxtaposition of the defini-
tions of certain terms as laid down in Section 2 of the Prohibi-
tion Act, the picture becomes even more clear.
19. Section 2(10) and Section 10(a) define "denatured" and "dena-
tured spirituous preparations", Section 2(22) defines the term
"intoxicant", Section 2(24) defines the term "liquor" and Sec-
tion 2(25) defines the term "Manufacture." The same read as
under:
Section 2(10) and Section 10(a) define "denatured" and
"denatured spirituous preparations:"
(10) "denatured" means subjected to a process
prescribed for the purpose of rendering unfit for
human consumption;
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
[(10a)] "denatured spirituous preparation" means
[any liquid preparation made with and containing
denatured spirit] [or denatured alcohol] and
includes lacquers, French polish, and varnish
prepared out of such spirit or alcohol;]
Section 2(22) defines the term "intoxicant:"
(22) "intoxicant" means any liquor, intoxicating
drug, opium or any other substance, which the
[State] Government may, by notification in the
Official Gazette declare to be an intoxicant;
Section 2(24) defines the term "liquor:"
(24) "liquor" includes: -
(a) [Spirits] [denatured spirits] wine, bear, toddy
and all liquids consisting of or containing
alcohol: and
(b) any other intoxicating substance which the
[State] Government may, by notification in the
Official Gazette, declare to be liquor for the
purposes of this Act;
Section 2(26) defines the term "manufacture:
(25) "Manufacture" includes--
(a) every process whether natural or artificial by
which any liquor or intoxicating drug is
produced, prepared or blended and also
redistilation and every process for the
[rectification, flavouring, or colouring of
liquor or intoxicating drug] but does not
include flavouring, blending or colouring of
liquor or intoxicanting drug lawfully
possessed for private consumption; and
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
(b) every procesng of producing and drawing of
toddy from trees;
20. Reading these provisions makes it clear that the term "liquor"
includes denatured spirits. The term denatured and denatured
spirituous preparation have been also so defined to be any liq-
uid prepared out of alcohol and after being subjected to a pre-
scribed process rendered unfit for human consumption.
21. From the Scheme of the Act when read in the context of the
provisions reproduced herein-above it is evident that though
when the preparation made out of alcohol is denatured it does
become unfit for human consumption, however, by virtue of it
being in-consumable would not automatically bring out the
product from the rigors of the Prohibition Act. In the process
of it being made unfit for human consumption it has to be
within the purview of the regulating mechanisms including pre-
scription of fees when the entire Act and the provisions repro-
duced herein-above are read conjointly. As is evident from
reading the Preamble of the Act the same is framed to consoli-
date the law relating to the promotion and enforcement of and
carrying into effect the policy of Prohibition.
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
22. Let us now in this context appreciate the submission of the
Learned Counsel for the appellants Ms. Dharmishta Raval with
regard to the legislative competence of the State Government
in prescribing fees in context of the product i.e denatured
spirit.
23. In her submission as per entry 84 of List-I only the Central
Government is empowered to levy duty and excise on tobacco
etc except alcoholic liquors for human consumption. Relying
on Paragraph Nos.53 and 54 of the decision in the case of Syn-
thetics Chemicals Limited (Supra) she had submitted that only
the Central Government has the power to make provisions for
excise and duties in this context and the State cannot claim to
regulate industrial alcohol. It is the Union which has the inten-
tion to occupy the field relating to Industrial Alcohol. The
State's power is restricted only to potable alcohol and its mis-
use.
24. From reading the definitions and the provisions of the Act laid
out herein-above we do not find any merit in the submission of
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
Ms. Raval. The process of manufacture and regulations are in
the Act where the term defined is "liquor" which includes de-
natured spirit and has no relevance to the issue of industrial al-
cohol. The emphasis on the term "industrial alcohol" and read-
ing the judgment in the case of Synthetics and Chemicals
(Supra) is therefore misconceived. The term "denatured spiri-
tuous" preparation and "denatured" when read in context of
the definition of liquor imminently makes it clear that the
terms and the product fall within the purview of liquor and not
expressly "industrial alcohol".
25. Entry 8 List-II when read in conjunction with Entry 51 of List
II of the Seventh Schedule of the Constitution of India makes it
abundantly clear that it is within the powers of the State inas-
much as liquors and its manufacturing etc comes within the
purview of Entry 8 of List II. Moreover when Entry 8 is read
with Entry 55 and 66 of the List II of the Seventh Schedule of
the Constitution of India the State has the power to levy any
fees in respect of any matters in List II. For the sake of conve-
nience Entry 84 of List-I, Entries 8, 51 and 66 of List-II of the
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
7th Schedule of the Constitution of India are reproduced here-
under:
List - I, Entry 84:
Duties of excise on the following goods manufactured
or produced in India, namely: -
(a) Petroleum crude;
(b) High speed diesel;
(c) Motor spirit (commonly known as petrol);
(d) Natural gas;
(e) Aviation turbine fuel; and
(f) Tobacco and tobacco products;
List - II, Entry 8, 51 and 66:
8. Intoxicating liquors, that is to say, the production, manu-
facture, possession, transport, purchase and sale of intoxicating
liquors.
51. Duties of excise on the following goods manufactured or
produced in the State and countervailing duties at the same
or lower rates on similar goods manufactured or produced
elsewhere in India: -
(a) alcoholic, liquors for human consumption;
(b) opium, Indian hemp and other narcotic drugs and
narcotics, but not including medicinal and toilet prepara-
tions containing alcohol or any substance included in the in
sub-paragraph (b) of this entry.
66. Fees in respect of any of the matters in this List, but not in-
cluding fees taken in any Court.
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
26. Reliance placed on the decisions in the case of Vam Organic
Chemicals and Ashok Organics (Supra) also appears to be
misplaced. Even the decision in the case of Mohan Meakin
Limited (Supra) that a subordinate legislation which, however
is beyond the legislative competence of the State and hence ul-
travires also does not hold good.
27. Section 105 of the Prohibition Act does provide for powers to
prescribe rates of excise duties on any excisable article and de-
natured spirituous preparation being a part of the larger term
"liquor" comes within the purview of the competence of the
State legislature when read in the context of the definitions,
clause and the other provisions set out in the earlier part of this
judgment.
28. Even in the case of Synthetics and Chemicals (Supra) the
State's power to regulate use of Alcohol and that power includ-
ing the power to make provisions to prevent and/or check in-
dustrial alcohol being used as intoxicating or drinkable alcohol
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
was recognized. Relevant Paragraph Nos.61 to 63 of Synthetics
and Chemicals (Supra) read as under:
61. It is true that in the State of West Bengal v. Subodh
Gopal Bose & Ors., [1954] V SCR 587 at 601-604 and
Kameshwar Prasad & Ors. v The State of Bihar & Anr.,
[1962] 3 Suppl SCR 369 the concept of police power was
accepted as such, but this doctrine was not accepted in In-
dia as an independent power but was recognised as part of
the power of the State to legislate with respect to the mat-
ters enumerated in the State and Concurrent Lists, subject
to Constitutional limitations. It was stated that the Ameri-
can jurisprudence of police power as distinguished from
specific legislative power is not recognised in our Constitu-
tion and is, therefore, contrary to the scheme of the Con-
stitution. In interpreting the provisions of our Constitution,
we should go by the plain words used by the Constitution-
makers and the importing of expression like 'police power',
which is a term of variable and indefinite connotation, can
only make the task of interpretation more difficult. It was
contended that in enacting a law with respect to intoxicat-
ing liquor as part of the legislative power measures of so-
cial control and regulation of private rights are permissible
and as such may even amount to prohibition.
62. We are of the opinion that we need not detain our-
selves on the question whether the States have police power
or not. We must accept the position that the States have the
power to regulate the use of alcohol and that power must
include power to make provisions to prevent and/or check
industrial alcohol being used as intoxicating or drinkable
alcohol. The question is whether in the garb of regulations
a legislation which is in pith and substance, as we look
upon the instant legislation, fee or levy which has no con-
nection with the cost or expenses administering the regula-
tion, can be imposed purely as regulatory measure. Judged
by the pith and substance of the impugned legislation, we
are definitely of the opinion that these levies cannot be
treated as part of regulatory measures. In this view of the
matter we do not detain ourselves with examining the nu-
merous American decisions to which our attention was
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
drawn by learned counsel very elaborately and thor-
oughly.
63. We recognise power of the State to regulate though
perhaps not as emanation of police power, but as an ex-
pression of the sovereign power of the State. But that
power has its limitations. We have noted the submissions
made to this effect by the learned Advocates-General of
different States, including the State of Gujarat. Some of
the interveners have also made the submissions. We have
considered the submissions made by M/s. Kantilal & Co.
as interveners in respect of the Constitutional validity of
the Bombay Prohibition Act as amended by the Bombay
Prohibition (Gujarat Amendment) Act, 1978. We have
also the advantage of the submissions made on behalf of
Advocate-General of Madhya Pradesh by Mr. R.B.
Datar. He submit-ted that the substance of the case put
forward by the petitioners and/or appellants, is that the
vend fee in respect of industrial alcohol is not a fee for
any services rendered, it is a compulsory exaction of
money. The answer to the question posed lies not in the la-
bels used, according to Mr. Datar for describing the com-
modity in question. It lies in the examination of the chemi-
cal reality of the substance. He says that no process of in-
terpretation can alter the law of chemistry or the chemical
structure of the substance described in common parlance
as industrial alcohol or potable alcohol, or alcohol for hu-
man consumption. He referred us to Organic Chemistry
and other books but, as mentioned before, the meanings
must be found but in the conditions as these are.
(Emphasis Supplied)
29. What is well settled is that in deciding that whether a particular
enactment is within the purview of one legislature or the other,
it is the pith and the substance of the legislation in question that
has to be seen. Various entries in the three lists of the Constitu-
tion are not powers but fields of legislation. The case of Bal-
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
sara (Supra) has been referred to by the Supreme Court in the
case of Synthetics and Chemicals (Supra) where the Court was
consciously aware of the fact that it was dealing with the term
"industrial alcohol" and not as is in the present case where the
question is of "denatured spirituous preparation" as defined un-
der the Prohibition Act. That is also evident on reading Para-
graph Nos.73 and 74 in the case of Synthetics and Chemicals
(Supra) reproduced as under:
"73. It has to be borne in mind that by common
standards ethyl alcohol (which has 95%) is an indus-
trial alcohol and is not fit for human consumption. The
petitioner and the appellants were manufacturing ethyl
alcohol (95%) (also known as rectified spirit) which is
an industrial alcohol. ISI specification has divided ethyl
alcohol (as known in the trade) into several kinds of al-
cohol. Beverage and industrial alcohols are clearly and
differently treated. Rectified spirit for Industrial pur-
poses is defined as "spirit puri- fied by distillation hav-
ing a strength not less than 95% of volume by ethyl al-
cohol". Dictionaries and technical books would show
that rectified spirit (95%) is an industrial alcohol and is
not potable as such. It appears, therefore, that indus-
trial alcohol which is ethyl alcohol (95%) by itself is
not only non-potable but is highly toxic. The range of
spirit of potable alcohol is from country spirit to whisky
and the Ethyl Alcohol content varies between 19 to
about 43 per cent. These standards are according to the
ISI specifications. In other words, ethyl alcohol (95%)
is not alcoholic liquor for human consumption but can
be used as raw material input after processing and sub-
stantial dilution in the production of Whisky, Gin,
Country Liquor, etc. In many decisions, it was held that
rectified spirit is not alcohol fit for human consumption.
Reference may be made in this connection to Delhi
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
Cloth and General Mills Co. Ltd. v. The Excise Com-
missioner, U.P. Allahabad and Anr. Special Appeal
No. 177 of 1970, decided on 29th March, 1973. In this
connection, it is important to bear in mind the actual
provision of entry 8 of list II. Entry 8 of list II cannot
support a tax. The above entry contains the words "in-
toxicating liquor". The meaning of the expression "in-
toxicating liquor" has been tightly interpreted by the
Bombay High Court in the Balsara's case (supra). The
decision of the Bombay High Court is reported in AIR
1951 Bombay 210, at p. 214. In that light, perhaps, the
observations of Fazal Ali, J. in Balsara's case (supra)
requires consideration. It appears that in the light of the
new experience and development, it is necessary to state
that "intoxicating liquor" must mean liquor which is
consumable by human being as it is and as such when
the word "liquor" was used by Fazal Aft, J., they did
not have the awareness of full use of alcohol as indus-
trial alcohol. It is true that alcohol was used for indus-
trial purposes then also, but the full potentiality of that
user was not then comprehended or understood. With
the passage of time, meanings do not change but new
experiences give new colour to the meaning. In Har
Shankar's case (supra), a bench of five judges have
surveyed the previous authorities. That case dealt with
the auction of the right to sell potable liquor. The posi-
tion laid down in that case was that the State had the
exclusive privilege or right of manufacturing and sell-
ing liquor and it had the power to hold public auctions
for granting the right or privilege to sell liquor and that
traditionally intoxicating liquors were the subject mat-
ters of State monopoly and that there was no funda-
mental right in a citizen to carry on trade or business in
liquor. All the authorities from Cooverji Barucha's case
(1954) SCR 673 to Har Shankar's case (supra) dealt
with the problems or disputes arising in connection with
the sale, auction, licensing or use of potable liquor.
74.Only in two cases the question of industrial alcohol
had come up for consideration before this Court. One is
the present decision which is under challenge and the
other is the decision in Indian Mica & Micanite Indus-
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
tries's case (supra). In the latter case, in spite of the ear-
lier judgments including Bharucha's case, denatured
spirit required for the manufacture of micanite was not
regarded as being within the exclusive privilege of the
State. It appears that in that decision at p. 321 of the re-
port, it was specifically held that the power of taxation
with regard to alcoholic liquor not fit for human con-
sumption, was within the legislative competence of cen-
tral legislature. The impost by the State was held to be
justifiable only if it was a fee there- by impliedly and
clearly denying any consideration or price for any priv-
ilege. For the first time, in the Synthetics & Chemicals
Ltd. 's case (supra), the concept of exclusive privilege
was introduced into the area of industrial alcohol not
fit for human consumption."
30. Even when Paragraph No.86 of the decision in the case of Syn-
thetics and Chemicals (Supra) is read, the position post the
amendment in the IDR Act is recognized in context of the
State's power to legislate and lay down regulations to ensure
that non-potable alcohol is not diverted and misused as a sub-
stitute for potable alcohol. Paragraph No.86 reads as under:
"86. On an analysis of the various Abkari Acts
and Excise Acts, it appears that various Provinces / States
reserve to themselves in their respective States the right to
transfer exclusive or other privileges only in respect of
manufacture and sale of alcohol and not in respect of
possession and use. Not all but some of States have pro-
vided such reservation in their favour. The price charged
as a consideration for the grant of exclusive and other
privileges was generally regarded as an excise duty. In
other words, excise duty and price for privileges were re-
garded as one and the same thing. So-called privilege was
re-served by the State mostly in respect of country liquor
and not foreign liquor which included denatured spirit."
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
31. The purposes of the Prohibition Act and reading of the Pream-
ble makes it amply clear that it is for enforcing prohibition and
therefore for the purpose and control of "denatured spirituous
preparation" which is "liquor" and is not used for diverting to
potable alcohol the State has the power to make regulations and
rules therefore.
32. In the case of Tikka Ramjj (Supra) on a comparison of the
U.P. Sugar Factories Control Act, 1938 and the U.P. Sugarcane
(Regulation of Supply and Purchase) Act, the Court held that
there was no trenching upon the jurisdiction of the Center
when the law made by the State occupies the same field if both
the legislations deal with separate and distinct matters. The
case on hand is dealing with the purposes of enforcing prohibi-
tion and hence, preventing the misuse of denatured spirit and,
therefore, fees prescribed and regulating such enforcement
comes within the purview of the State legislature. Para No.36
of Tikka Ramji (Supra) is reproduced hereunder:
"36. Parliament Was well within its powers in legislating
in regard to sugarcane and the Central Government was
also well within its powers in issuing the Sugarcane Control
Order, 1955 in the manner it did because all this was in
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
exercise of the concurrent power of legislation under Entry
33 of List III. That, however, did not affect the legislative
competence of the U. P. State Legislature to enact the law
in regard to sugarcane and the only question which re-
mained to be considered was whether there was any re-
pugnancy between the provisions of the Central legislation
and the U. P. State legislation in this behalf.
As we have noted above, the U. P. State Government. did
not at all provide for the fixation of minimum prices for
sugarcane nor did it provide for the regulation of move-
ment of sugarcane as was done by the Central Govern-
ment in clauses (3) and (4) of the Sugarcane Control Or-
der, 1955.
The impugned Act did not make any provision for the
same and the only provision in regard to the price of sug-
arcane which was to be found in the U. P. Sugarcane
Rules, 1954, was contained in Rule 94 which provided that
a notice of suitable size in clear bold lines showing the
minimum price of cane fixed by the Government and the
rates at which the cane is being purchased by the centre
was to be put up by an occupier of a factory or the pur-
chasing agent as the case may be at each purchasing cen-
tre.
The price of cane fixed by Government here only meant
the price fixed by the appropriate Government which
would be the Central Government, under clause 3 of the
Sugarcane Control Order, 1955, because in fact the U. P.
State Government never fixed the price of sugarcane to be
purchased by the factories. Even the provisions in behalf
of the agreements contained in clauses 3 and 4 of the U.
P. Sugarcane Regulation of Supply and Parchase Order,
1954, provided that the price was to be the minimum price
to be notified by the Government subject to such deduc-
tions, if any, as may be notified by the Government from
time to time meaning thereby the Central Government, the
State Government not having made any pro- vision in that
behalf at any time whatever.
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
The provisions thus made by the Sugarcane Control Order,
1955, did not find their place either in the impugned Act or
the Rules made thereunder or the U.P. Sugarcane Regula-
tion of Supply and Purchase Order, 1954, and the provi-
sion contained in section 17 of the impugned Act in regard
to the payment of sugarcane price and recovery thereof as
if it was an arrear of land revenue did not find its place in
the Sugarcane Control Order, 1955. These provisions,
therefore, were mutually exclusive and did not impinge
upon each other there being thus no trenching upon the
field of one Legislature by the other.
Our attention was drawn to the several provisions con-
tained in the Sugarcane Control Order, 1955 and the U.P.
Sugarcane Regulation of Supply and Purchase Order,
1954 and the agreements annexed thereto and it was
pointed out that they differed in material particulars, the
provisions of the latter being more stringent than those of
the former. It is not necessary to refer to these provisions
in any detail.
Suffice it to say that none of these provisions do overlap,
the Centre being silent with regard to some of the provi-
sions which have been enacted by the State and the State
being silent with regard to some of the Provisions which
have been enacted by the Centre. There is no repug-
nancy whatever between these provisions and the im-
pugned Act and the Rules framed thereunder as also
the U.P. Sugarcane Regulation of Supply and Purchase
Order, 1954 do not trench upon the field covered by Act
X of 1955.
There being no repugnancy at all, therefore., no ques-
tion arises of the operation of article 254(2) of the
Constitution and no provision of the impugned Act and
the Rules made thereunder is invalidated by any provi-
sion contained in Act LXV of 1951 as amended by Act
XXVI of 1953 or Act X of 1955 and the Sugarcane
Control Order, 1955 issued thereunder.
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
33. Even in the case of Razakbhai (Supra), the provisions and the
powers of the State to make amendments in context of "rotten
gur" and restrictions thereto under the Prohibition Act were
challenged on the ground that the State lacked legislative com-
petence. In that context the Court has held in paragraph Nos.9
to 12 and 13 to 15 which are reproduced hereunder:
"9. While considering the argument, addressed on be-
half of the petitioners, it should be kept in mind that the
impugned provisions do not place absolute restriction or
prohibition either against the possession of'' rotten gur'' or
the manufacture, use or consumption thereof. The law re-
quires only a permit to be taken in advance and admittedly
there is no hurdle in obtaining such a permit which is read-
ily available on the payment of a nominal fee. The pur-
pose of the permit is to make available information to the
authorities concerned as to the persons dealing in "rotten
gur" to facilitate vigilance against misuse of'' rotten gur''
for preparation of intoxicating liquors. There is absolutely
no difficulty in obtaining such a permit in advance which
will be a complete remedy for al the hardships highlighted
on behalf of the petitioners. The grievance of the peti-
tioner is that the requirement to obtain permit is violative
of the freedom to carry on any trade and business of one's
choice guaranteed by Article 19(l)(g). We do not find any
substance in the argument that the restriction complained
against, can be considered to be such a hindrance as to in-
fringe Sub-clause (g). The freedom is not uncontrolled and
Clause 6 of Article 19 authorises legislation which imposes
reasonable restrictions on this right in the interests of the
general public. The question, therefore, is whether the re-
striction placed by the impugned amendment is in the inter-
ests of the general public and can be considered reason-
able.
10. It has been repeatedly observed by this Court that
the test of reasonableness should be applied to each
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
individual statute impugned. No abstract standard, or
general pattern of reasonableness can be laid down as
applicable to all cases. The nature of the right alleged to
have been infringed, the underlying purpose of the
restrictions imposed, the extent of the evil sought to be
remedied thereby, the disproportion of the imposition, the
relevant prevailing conditions, should all enter into the
judicial verdict. The limitations in enjoyment of the right
should not, however, be arbitrary or of an excessive
nature. In other words it should not be more than what is
essential in the interests of the public.
11. Although the Directive Principles of State Policy as
contained in Part IV of the Constitution are not
enforceable by Courts, nonetheless it is the duty of the
State to give effect to those principles by making
appropriate laws. It has been described as matters of
constitutional obligation of the State to do so in the public
interest. A large body of legislation under Article 19(l)
(g) when challenged, has been upheld by Courts, as being
in furtherance of such policy, as valid on the ground of
the Directive Principle. So far the intoxicating drinks are
concerned their evil effects are well-established specially
for the Indian society. This was why the framers of the
Constitution considered it fit to include it, in expressed
terms, in Article 47 while indicating the duty of the State to
raise the standard of living and to improve the public
health. It is, therefore, within the authority of the State to
prohibit consumption of intoxicating liquor and the State
of Gujarat was fully justified when i t adopted the policy
of prohibition. In order that this policy may succeed, it is
not sufficient to merely ban manufacture and consumption
of alcoholic drinks. To render it really effective further
measures became essential in order to defeat the illegal
activities of the anti-social elements engaged in illicit
manufacture and illegal distribution of the liquor in the
market. It, therefore, became; obligatory for the State to
take all such steps as found necessary for implementing
the prohibition! policy, by not only placing restrictions on
the manufacture, sale and consumption of liquors but also
by adopting such other regulatory measures, essential to
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
achieve the objective. In this connection we may usefully
quote the following extract from Balsara's case (supra) at
page 707:
Laws of this nature designed for the promotion of public
order, safety, or morals and which subject those who
contravene them to criminal procedure and punishment,
belong to the subject of public wrongs rather than to that
of civil rights. They are of a nature which falls within the
general authority of Parliament to make laws for the
order and good government of Canada....(7 A.C. 829 at
p.839) Again, referring to liquor laws and liquor control,
a learned British author (The Encyclopaedia 5 Britannica,
14th Edition, Volume 14, page 191) says as follows:
The dominant motive everywhere, however, has been a
social one, to combat a menace to public order and the
increasing evils of alcoholism in the interest of health and
social welfare. The evils vary greatly from one country to
another according to differences in climate, diet, economic
conditions and even within the same country according to
differences in habits. social, customs and standards of
public morality. A new factor of growing importance since
the middle of the 19th century has been the rapid
urbanization, industrialization and mechanization of our
modern every day life in the leading nations of the world,
and the consequent wider recognition of the advantages of
sobriety in safeguarding public order and physical
efficiency.
12. The question which arises here is as to whether
restrictions are permissible only in relation to the alcoholic
liquors directly or can be extended to such articles which
are not intoxicating by themselves but which have the
potentiality to defeat the policy. The stand of the
petitioners is that the business in intoxicating liquor is
altogether on a different level when a question of right
arises. But so far the business in 'gur' is concerned it
cannot be prohibited and for that reason the impugned
provisions must be struck down.
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
14. As has been mentioned earlier, there is no restriction
whatsoever on carrying on business in' gur' or'' rotten gur'',
and what is required by the law is merely to get a permit
which is granted as a matter of course to anyone making
an application. The argument on behalf of the petitioners
is that although the law docs not require the taking of a
permit for business in "gur', it becomes necessary to do so
also for a person engaged exclusively in the business of
'gur' and not in "rotten gur''; and that in view of the wide
powers available to the enforcing machinery the restriction
is arbitrary and uncalled for. The basis of this argument is
the assumed fact that it becomes difficult to distinguish
between 'gur' and' 'rotten gur'' for the purposes of Section
2(39A). It has been stated that in the course of a few days
while' gur' of fairly good quality is being transported from
the other States to Gujarat it deteriorates in quality on the
way and may be mistaken for "rotten gur". In other words
the process of 'gur' being rendered "rotten gur'' is not a
long one and it does not take much time for the article to
reach from one stage to another. If we accept what is
being asserted before is us on behalf of the petitioners as
correct, it means that the chances of 'gur' turning into
"rotten gur'' are inherent in the business. What follows
from this? By whatever reason it may be, the article
misused for the purpose of preparing intoxicating liquor.
If this mischief is not taken care of, it will become difficult
to effectively implement the policy of prohibition. We are
also of the opinion that for the purpose of Prohibition Act,
it can define rotten gur even if it is fit for human
consumption in such a way to eliminate the mischief. The
question is; is it capable of misuse? The impugned
restriction, therefore, is fully justified and cannot be
condemned as excessive or unreasonable.
15. We appreciate the difference between the power to
control the business in intoxicating liquor directly and the
extent to which regulatory measures can be taken in
respect of other commodities. But so far these cases are
concerned, this aspect does not assume any significance, in
view of our unhesitating conclusion that the restrictions
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
imposed by the impugned provisions arc reasonable and in
the public interest, and are, therefore, fully protected by
clause (6) of Article 19. We also hold that there is no merit
in the argument based on Article 14 in view of the
discussions made above."
34. In the case of M/s Ugar Sugar Works (Supra) the Supreme
Court has held that there is no fundamental right in trade in in-
toxicants etc. Relevant paragraph Nos.13, 15 16 and 22 are
quoted hereunder:
"13. That there is no fundamental right to trade in intoxi-
cants, like liquor, has been conclusively held by this Court
in State of A.P. & Ors. v. Mc Dowell & Co. & Ors.,
[1996] 3 SCC 709, where taking note of some of the ear-
lier Constitution Bench decisions of this Court, the argu-
ment that a citizen of this country has a fundamental right
to trade in intoxicant liquor was once again emphatically
repelled. That issue is, thus, no longer res Integra. The fol-
lowing observations of the Bench in Mc Dowell's case
(supra) are educative:
"The contention that a citizen of this country has a funda-
mental right to trade in intoxicating liquors refuses to die
in spite of the recent Constitution Bench decision in Kho-
day Distilleries, [1995] 1 SCC 574. It is raised before us
again. In Khoday Distilleries, this Court reviewed the en-
tire case-law on the subject and concluded that a citizen
has no fundamental right to trade or business in intoxicat-
ing liquors and that trade or business in such liquor can be
completely prohibited. It held that because of its vicious
and pernicious nature, dealing in intoxicating liquors is
considered to be res extra commercium (outside com-
merce). Article 47 of the Constitution, it pointed out, re-
quires the State to endeavour to bring about prohibition of
the consumption except for medicinal purposes of intoxi-
cating drinks and all drugs which are injurious to health.
For the same reason, the Bench held, the State can treat a
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
monopoly either in itself or in an agency created by it for
the manufacture, possession, sale and distribution of
liquor as a beverage. The holding is emphatic and unam-
biguous. Yet an argument is sought to be built upon certain
words occurring in clauses (e) and (f) of the summary
contained in para 60 of the decision. In these clauses, it
was observed that creation of a monopoly in the State to
deal in intoxicating liquors and the power to impose re-
strictions, limitations and even prohibition thereon can be
imposed both under clause (6) of Article 19 or even other-
wise. Seizing upon these observations, Shri Ganguly ar-
gued that this decision implicitly recognizes that business in
liquor is a fundamental right under Article 19(l)(g). If it
were not so, asked the learned counsel, reference to Article
19(6) has no meaning. We do not think that any such ar-
gument can be built upon the said observations. In clause
(e), the Bench held, a monopoly in the State or its agency
can be created "under Article 19(6) or even otherwise".
Similarly, in clause (f), while speaking of imposition of re-
strictions and limitations on this business, it held that they
can be imposed "both under Article 19(6) or otherwise".
The said words cannot be read as militating against the ex-
press propositions enunciated in clauses (b), (c), (d), (e)
and (f) of the said summary. The said decision, as a mat-
ter of fact, emphatically reiterates the holding in Har
Shanker, [1975] 1 SSC 737, that a citizen has no funda-
mental right to trade in intoxicating liquors. In this view of
the matter, any argument based upon Article 19(l)(g) is out
of place". (Emphasis ours)
15. In Har Shanker's case (supra) after considering de-
cisions of five Constitution Benches, the law was summed
up thus :
"These unanimous decisions of five Constitution Benches
uniformly emphasized after a careful consideration of the
problem involved that the State has the power to prohibit
trades which are injurious to the health and welfare of the
public, that elimination and exclusion from business is in-
herent in the nature of liquor business, that no person has
an absolute right to deal in liquor and that all forms of
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
dealings in liquor have, from their inherent nature, been
treated as a class by themselves by all civilised communi-
ties. The contention that the citizen had either a natural or
a fundamental right to carry on trade or business in liquor
thus stood rejected". (Emphasis supplied).
16. In view of this settled position of law, any argument
impugning the policy decision of the State Government, as
reflected in the impugned notification, based upon Article
19(l)(g) is totally out of place and merits outright rejection
and we have no hesitation in doing so most emphatically.
22. The State has every right to regulate the supply of
liquor within its territorial jurisdiction to ensure that what
is supplied is 'liquor of good quality' in the interest of
health, morals and welfare of the people. One of the
modes for determining that the quality of liquor is 'good' is
to ascertain whether that particular brand of liquor has
been tested and tried extensively elsewhere and has found
its acceptability in other States. The manner in which the
Government chooses to ascertain the factor of higher ac-
ceptability, must in the very nature of things, fall within
the discretion of the Government so long as the discretion
is not exercised mala fide, unreasonably or arbitrarily.
The allegations of mala fide made in the writ petition are
totally bereft of any factual matrix and we, therefore, do
not detain ourselves at all to consider challenge on that
ground, in fairness to learned counsel for the petitioner we
may record that challenge to notification on grounds of
mala fide was not pressed during arguments. Laying down
requirement of achieving minimum sale figures of a par-
ticular brand of liquor in other States, as a mode for de-
termination of the "acceptability" of that brand of liquor,
is neither irrelevant, nor irrational or unreasonable. It ap-
pears that prescription of MSF requirement is aimed at al-
lowing sale of only such brands of liquor which have been
tested, tried and found acceptable at large in other parts of
the country."
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
35. Dealing with the submission of the Appellants that the recovery
of fees is in the colourable exercise of power and that there is
no quid pro quo and hence the impugned rules are without ju-
risdiction by placing reliance on the decisions in the case of
Mohan Meakins and K.C.P. Ltd. (Supra) it will be fruitful to
refer to the observations of the Supreme Court in the case of
M/s. K.C.T. Drinks Ltd. (Supra) wherein Synthetics Chemi-
cals Limited (Supra) was considered and the Supreme Court
has held as under: The relevant paragraphs i.e. Paragraph Nos.9
to 11 are reproduced hereunder:
"9. In Shri Bileshwar Khand Udyog Khedut Sahakari
Mandali Ltd. v. State of Gujarat & Anr. [(1992) 2
SCC 42] validity of demand under Section 58A of the
Bombay Prohibition Act, 1949 for maintenance of ex-
cise staff for supervision of manufacture of industrial
alcohol was assailed on the ground of lack of legisla-
tive competence of the State. In that case, the Court ob-
served thus:
"4. According to learned counsel since the entire
judgment of the High Court proceeded on privilege
theory it cannot withstand the principle laid down in
Synthetics and Chemicals Ltd. v. State of U.P.
[(1990) 1 SCC 109]. Levy as a fee under Entry 8
of List II of Seventh Schedule or excise duty under
Entry 51 are different than cost of supervision
charged under Section 58-A. The former has to
stand the test of a levy being in accordance with law
on power derived from one of the constitutional en-
tries. Since Synthetics and Chemicals Case finally
brought down the curtain in respect of industrial al-
cohol by taking it out of the purview of either Entry
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
8 or 51 of List II of Seventh Schedule the compe-
tency of the State to frame any legislation to levy
any tax or duty is excluded. But by that a provision
enacted by the State for supervision which is
squarely covered under Entry 33 of the Concurrent
List which deals with production, supply and distri-
bution which includes regulation cannot be assailed.
The bench in Synthetics and Chemicals case made it
clear that even though the power to levy tax or duty
on industrial alcohol vested in the Central Govern-
ment the State was still left with power to lay down
regulations to ensure that non- potable alcohol, that
is, industrial alcohol, was not diverted and misused
as substitute for potable alcohol. This is enough to
justify a provision like Section 58-A. In paragraph
88 of the decision it was observed that in respect of
industrial alcohol the States were not authorised to
impose the impost as they have purported to do in
that case but that did not effect any imposition of
fee where there were circumstances to establish that
there was quid pro quo for the fee nor it will affect
any regulatory measure. This completely demolishes
the argument on behalf of the appellant."
10. The aforesaid decision was referred to and
relied upon in M/s Gujchem Distillers India Ltd. v.
State of Gujarat [(1992) 2 SCC 399].
11. In view of the aforesaid settled legal position,
the condition empowering the State Government to re-
cover the actual cost of supervisory staff posted at the
premises of respondent cannot be said to be in any way
illegal or ultra vires as it constitutes the price or consid-
eration which the Government charges to the licensee
for parting with its privilege and granting licence. In
this view of the matter, the impugned judgment and or-
der passed by the High Court requires to be set aside."
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
36. Even in the case of Sona Chandi Oal Committee (Supra) the
difference between a tax and a fee has been succinctly dis-
cussed. Relevant paragraph No.20 reads as under:
"20. A three Judge Bench of this Court in B.S.E. Brokers'
Forum, Bombay and Others v. Securities and Exchange
Board of India and Others [(2001) 3 SCC 482], after
considering a large number of authorities, has held that
much ice has melted in Himalayas after the rendering of
the earlier judgments as there was a sea change in the ju-
dicial thinking as to the difference between a tax and a fee
since then. Placing reliance on the following judgments of
this Court in the last 20 years, namely, Sreenivasa Gen-
eral Traders Vs. State of Andhra Pradesh, (supra); City
Corporation of Calicut Vs. Thachambalath Sadasivan,
(1985) 2 SCC 112; Sirsilk Ltd. Vs. Textiles Committee,
(1989) Supp. 1 SCC 168; Commissioner & Secretary to
Government Commercial Taxes & Religious Endow-
ments Department Vs. Sree Murugan Financing Corpo-
ration Coimbatore, (1992) 3 SCC 488; Secretary to Gov-
ernment of Madras Vs. P.R.Sriramulu, (1996) 1 SCC
345; Vam Organic Chemicals Ltd. Vs. State of U.P.,
(1997) 2 SCC 715; Research Foundation for Science,
Technology & Ecology Vs. Ministry of Agriculture,
(1999) 1 SCC 655 and Secunderabad Hyderabad Hotel
Owners' Association Vs. Hyderabad Municipal Corpo-
ration, Hyderabad, (1999) 2 SCC 274, it was held that
the traditional concept of quid pro quo in a fee has under-
gone considerable transformation. So far as the regulatory
fee is concerned, the service to be rendered is not a condi-
tion precedent and the same does not loose the character
of a fee provided the fee so charged is not excessive. It
was not necessary that service to be rendered by the col-
lecting authority should be confined to the contributories
alone. The levy does not cease to be a fee merely because
there is an element of compulsion or coerciveness present
in it, nor is it a postulate of a fee that it must have a direct
relation to the actual service rendered by the authority to
each individual who obtains the benefit of the service. The
quid pro quo in the strict sence was not always a sine qua
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
non for a fee. All that is necessary is that there should be
a reasonable relationship between the levy of fee and the
services rendered. It was observed that it was not neces-
sary to establish that those who pay the fee must receive
direct or special benefit or advantage of the services ren-
dered for which the fee was being paid. It was held that if
one who is liable to pay, receives general benefit from the
authority levying the fee, the element of service required
for collecting fee is satisfied.
37. Even in the case of Jantia Hill Truck Owners Association
(Supra) in Paragraph No.22 the Supreme Court has observed
as under:
"22. The core question which arises for consideration
in these appeals is as to whether the State Government
is empowered to issue any executive order in respect of
the matters required to be prescribed by Rules."
38. On a comparison drawn between State of Maharashtra and
State of Gujarat, it is evident that since State of Maharashtra
has no prohibition the excise income then of the State was
Rs.2,500 Crores against a much smaller amount of Rs.50
Crores of the State of Gujarat. The State is engaged in enforc-
ing the prohibition policy and has therefore to incur huge ex-
penditure which too justifies the levy of higher fees as envis-
aged by virtue of the amended notifications.
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
39. Having extensively dealt with and dealing and giving separate
reasons we also however think it fit to reproduce the reasonings
of the learned Single Judge while upholding the same. Relevant
paragraph Nos.52 to 60 of the judgment dated 14.06.2010
passed in Special Civil Application No.1837 of 2000 of the
learned Single Judge read as under:
"52. Having heard the learned counsels appearing for
the petitioners and learned Government Pleader appearing
for the respondents and having considered their rival
submissions in light of the statutory provisions contained in
the Bombay Prohibition Act, 1949 and the Rules framed
thereunder as well as having considered the constitutional
provisions and decided case law on the subject, the Court
is of the view that the State Government has authority and
power under Section-143(1) of the Act to make rules for
the purpose of carrying out the provisions of the Bombay
Prohibition Act or any other law for the time being in
force relating to excise revenue. The State Government can
make rules regulating the delegation of any powers by the
Director, or by Collector or by any other Prohibition
Officer. The State Government can also make rules for
regulating import, export, transport (collection), sale,
purchase, (bottling), consumption, use or possession of any
intoxicant, (denatured spirituous preparation) or hemp,
mhowra or molasses. The State Government has also
power to frame the rules prescribing the fees payable in
respect of any privilege, license, permit, pass or
authorization granted or issued under the Bombay
Prohibition Act. Under Section-105 of the Act the State
Government has also power to impose an excise duty or
countervailing duty, either generally or for any specified
local area on any alcoholic liquor for human consumption
or any intoxicating drug or hemp or opium or any other
excisable article, when imported, exported, transported,
possessed, manufactured or sold in or from the State as
the case may be. Under Section-107 of the Act the State
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
Government may, by rules, prescribe the fees payable in
respect of any privilege, licence, permit, pass or
authorization granted or issued under this Act.
53. Considering the above provisions, it cannot be
disputed that in exercise of its regulatory power the State
Government can impose fee of the nature of license fee on
any alcoholic liquor for human consumption or any
intoxicating drug or hemp or opium etc. The only question
that arises for court's consideration is whether such powers
are exercised within the legislative competence of the State
Government under Entry-8 of List-II or Entry-51 of List-
II of 7th Schedule to the Constitution of India and in light
of law laid down by the Apex Court in the case of
Synthetics & Chemical Ltd., and Ors. (Supra) as well as
State of U.P. Vs. Vam Organic Chemical Ltd., and Ors
(Supra). The insistence on behalf of the petitioners is that
in view of these two decisions the issue remains no longer
res-integra and since all petitioners are dealing only in
industrial alcohol the enhancement of fees levied by the
State Government by amending the rules in question is
absolutely unconstitutional and contrary to these two
judgments of the Apex Court.
54. The expression "intoxicating liquor" in Entry-8 in
List-II of the Constitution, must be held to include both
ethyl alcohol and denatured alcohol for the latter is not
basically different from the former, inasmuch as
denatured alcohol is nothing else but ethyl alcohol to
which is added a very small percentage of other
ingredients to make it impalatable but which ingredients
are removable by chemical process or made innocuous
when diluted with other substance so as to make it a
substitute for intoxicating liquor. The expression
"intoxicating liquor" in Entry-8 has a wide connotation
and must, prima-facie, include all articles made from
ethyl alcohol which are capable of intoxication. It is,
therefore, clear that the State Legislature while dealing
with denatured alcohol and denatured spirituous
preparations which admittedly contain alcohol and which
may be used as substitute for intoxicating drinks to the
detriment of health would be within its legislative
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
competence and such legislation cannot be held to be
invalid or void on the ground of its being beyond the scope
of Entry-8 in List-II of the Seventh Schedule of the
Constitution. Alcoholic liquids must include all
preparations made from alcohol whether denatured or
not.
55. At one stage, during the pendency of these petitions
an impression was given to the Court that the State
Government may reconsider about the amendment to the
rules which are challenged in the present petitions.
However, in view of the specific affidavit filed by the Dy.
Secretary, Home Department on 4.5.2010 it is made clear
that the above referred two judgments of the Apex Court
do not have application to the facts of the case and this
group of petitions be decided in accordance with law. It is
also made clear that the rules are amended in the year
1999 and they are already implemented, though at the
initial stage limited indulgence was shown by the Court to
make payment of enhanced fees for a few months.
However, since then, the fees are levied by the State
Government as per the amended rules and they have been
paid by the petitioners and all other persons covered under
the said rules.
56. It is true that in the case of Synthetics Chemicals
Ltd., and Vam Organic Chemicals Ltd., the Apex Court
has made very shuttle distinction between "industrial
alcohol" as well as any other "alcoholic liquor" for human
consumption and also made distinction between the tax
and fees and has clearly drawn a line between exercise of
legislative powers by the Central as well as State
legislatures, and at more than one place, it is clarified that
the State legislature cannot levy any tax on industrial
alcohol, save and except to regulate and to ensure that
industrial alcohol is not surreptitiously converted into
potable alcohol so that the State is not deprived of the
revenue on the sale of such potable alcohol and public is
protected from consuming such illicit liquor. Even in
Synthetic's case Apex Court held that the State in exercise
of powers under Entry-8 of List-II and by appropriate law
regulate and that regulations could be to prevent the
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
conversion of alcoholic liquors for industrial use to one
for human consumption and for purpose of regulation, the
regulatory fees only could be justified. In fact, the
regulation should be the main purpose, the fee or earning
out of it has to be incidental.
57. In Razakbhai Mansuri's case while upholding the
justification of prohibition policy adopted by the State of
Gujarat in view of Article-47 of the Constitution, the Apex
Court made it clear that in order that the prohibition policy
may succeed, it is not sufficient to merely ban manufacture
and consumption of alcoholic drinks, but in order to make
it really effective further regulating measures are essential
so as to defeat the illegal activities of the anti-social
elements engaged in illicit manufacture and illegal
distribution of the liquor in the market.
58. In Sona Chandi Oal Committee's case, inspection
fees charged are held to be regulatory in nature and its
validity is upheld on the ground that the State is
performing its duties even though the revenue under the
Act is not even sufficient to meet the expenditure on the
State performing duties under the Act.
59. Considering the above parameters in mind and
further considering the entire case law till this date on the
subject, the Court is of the view that what is done by the
respondent - State is merely an enhancement of the fees,
looking to the changed circumstances. The original levy of
the fees was not challenged either by the petitioner or by
any one else. Prior to 1996 there was no increase in fees
since 1986-87. The enhancement in the fees was made
after considering the enhancement of salary and
allowances of the staff as well as increase of stationary
charges. The amendments in the rules made are regulatory
in nature. It is also necessary to take note of the fact that
for the purpose of implementation of the prohibition policy
in the State, huge administrative expenses are to be
incurred. The State is giving due importance to the
constitutional spirit as contained in Article-47 of the
Constitution of India. By adopting this prohibition policy
the State has to forgo its excise income running into crores
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
of rupees and hence any comparison between the State
having prohibition policy and the State where there is no
prohibition is absolutely illogical and impracticable. The
fees which are charged by amending the rules are
regulatory in nature to control and supervise execution and
enforcement of various provisions of the rules. A dispute
was raised by the petitioners that there is no quid-pro-quo
while enhancing the fees and there is no reasonable
relationship between levy of fees and service rendered by
the State. However, considering the various efforts made
by the State for the purpose of regulating and
implementing the prohibition policy including the
modernization, computerization and providing training,
creating website etc., maintaining vigilance staff,
propaganda staff, incurring capital expenditure for
purchase of vehicles, office furniture, constructing excise
Bhavan at Gandhinagar, it cannot be said that the
increase in fees is not justified. The turn over and profit of
the manufacturers and sellers is one of the factors and not
the sole factor as contended on behalf of the petitioners. It
is necessary to have the proper check and balance so that
unscrupulous manufacturer or trader may not misuse the
license or permit issued for specific purpose and convert
an industrial alcohol into potable alcohol, as the process
for such conversion is so thin that unless there is close
scrutiny and constant watch on their activities it is difficult
to plug such illegal or unauthorized activities. Considering
sensitive nature of intoxicants and the avowed object
behind enhancement of fees, the Court does not find any
substance in the challenge to the amendment in the rules
and especially when it is already implemented for the last
more than one decade.
60. In the above view of the matter, the Court is not
inclined to interfere in any of these petitions and Court
therefore holds that looking to the facts and circumstances
of the present case, the support sought to be derived by the
petitioners from the above referred two judgments of the
Apex Court is wholly uncalled for and unwarranted. All
these petitions are, therefore, dismissed. Rule is discharged
in each of these petitions without any order as to costs."
C/LPA/2022/2010 CAV JUDGMENT DATED: 24/12/2021
40. For the aforesaid reasons, we find no merits in the Appeal and
the same deserves to be dismissed and accordingly, it is dis-
missed. Rule is discharged with no order as to costs.
Sd/-
[ R.M.CHHAYA,J. ]
Sd/-
[ BIREN VAISHNAV, J. ]
VATSAL S. KOTECHA
