Synthetics & Chemicals Ltd. Vs. State of U.P. & Ors [1989] INSC 322 (25 October 1989)
Mukharji, Sabyasachi (J) Mukharji, Sabyasachi (J) Venkataramiah, E.S. (Cj) Misra Rangnath Oza, G.L. (J) Ray, B.C. (J) Singh, K.N. (J) Natrajan, S. (J)
CITATION: 1990 AIR 1927 1989 SCR Supl. (1) 623 1990 SCC (1) 109 JT 1989 (4) 267 1989 SCALE (2)1045
CITATOR INFO : E 1992 SC 872 (2,4,5,6)
ACT:
CONSTITUTION OF INDIA, 1950: Articles 19(1)(g), 21, 32, 47, 245, 246. 265, 277, Seventh Schedule, List I Entries 7.
52, 59, 84 96, 97, List II Entries 8, 24, 26, 27, 51, 52, 56 and List III Entries 19 and 13--Vend Fees and imposts levied under various State Acts--Constitutional validity of.
Preamble--Sovereignty--Conception and meaning of.
Articles' 19(1)(g) and 265--Arbitrary and excessive imposts by State--Whether a great disincentive for development of industries rendering units unviable and sick.
Articles 19(1)(g), 21, 47 and 265--Right to trade in goods obnoxious and injurious to health and dangerous to life--Whether State can claim privilege of--Whether violates fundamental rights.
Article 141--Precedent--When can be deviated.
Article 245, 246 and 265 and Part IV--Levy/fee in furtherance of directive principles--Whether empowers imposition, if otherwise ultra vires Constitution or laws.
Article 265--Fee--Whether justified if imposed for regulation of any activity--Where the revenue earned is substantial.
Article 277--Pre-Constitutional levy--Saving provision for-Whether ceases to be effective on amendment or addition to the levy after commencement of Constitution--Doctrine of privilege--Whether vests in any of the functionaries of State--Whether State can claim privilege for trading in goods obnoxious and injurious to health-Whether violative of Articles 21 and 47.
Police Power of State: Whether recognised as independent power-624 Whether same as sovereign power--Whether tax or levy justified on the theory of police power alone.
Andhra Pradesh Excise Act, 1968/Andhra Pradesh Distillery Rules, 1970/Bombay Prohibition Act, 1949: Section 49/Bombay Rectified Spirit (Transport in Bond) Rules 1951/Tamil Nadu Prohibition Act, 1937: Levy of vend fee or duty in respect of industrial alcohol--Legality of.
U.P. Excise Act. 1910/U.P. Excise Rules, 1972: Sections 24A, 24B and 40/Rule 17(2)--Right of State to levy vend fee or duties in respect of industrial alcohol--Legality of.
Industries (Development and Regulation) Act, 1951:
Sections 2 and 18G--Powers of State to legislate in respect of alcohol.
Statutory Interpretation: Constitution--Entries in legislative lists --Exclusionary clause--To be strictly and narrowly construed--Ruff of harmonious construction of--Reiterated.
Words and Phrases: 'Human consumption'--'Intoxicating liquor' --'Rectified spirit'--Meaning of.
HEAD NOTE:
Writ Petitions/Civil appeals challenging the notification dated 31st May, 1979 which substituted a new rule 17(2) of U.P. Excise Rules and provided for a vend fee, the amendment to section 49 of the Bombay Prohibition Act, 1949 treating exclusive privilege for State in liquor trade and imposing a transport fee, the Bombay Prohibition Act, 1949 as amended from time to time along with ordinance No. 15 of 1981 amending the Bombay Prohibition Act, 1949 and Section 49 added by reason of which the State was granted exclusive privilege of importing, exporting, transporting, manufacturing, bottling, selling, buying, processing or using any intoxicant; and seeking a declaration that alcohol plant of the petitioner-company was not covered by the A.P. Excise Act, 1968. 'A.P. Distillery Rules, 1970, and A.P. Rectified Spirit Rules. 1971 and that alcohol plant of the company was not a 'distillery' within the meaning of the said expression under the A.P. Distillery Rules and, therefore, the Distillery Rules had no application thereto and seeking an order to restrain from interfering with and/or regulating and controlling production, distribution, movement and supply of alcohol from the plant of the company and the Tamil Nadu Prohibition Act, were filed in this Court.
Review Petitions against the judgment and order of this Court dated 19th December, 1979 in State of U.P. etc. v. Synthetics and Chemicals Ltd. and Ors. etc., [1980] 2 SCR 531 re-agitating challenge 625 to sections 24A and 24B of the U.P. Excise Act, 1910 as amended in 1972 and 1976, declaring exclusive privilege of the Government for manufacture and sale of foreign liquor as defined, which included denatured spirit and industrial alcohol, were also filed.
The petitioners/appellants contended that the levies made by the respondent States on alcohol, which was utilised as raw material by the industries for manufacturing the products were invalid. Some of three industries'themselves manufactured alcohol as they had their own distillaries' and from where it passed through pipelines to their industrial units, where this was used as a raw material, whereas some purchased alcohol or denatured spirit on being allotted by the Government. It was alleged that, in addition to excise duty levied by the Central Government, excise duty and various levies in various names like vend lee, transport fee and others numbering about eight levies were imposed by the State Government. It was also contended that the State Legislature had no authority, in view of Entry 84 of List I read with Entry 51 of List I1 to impose such levies; this being alcohol which did not within the ambit of alcoholic liquors for human consumption. It is only the centre which had the authority to tax under Entry 84, and that Entry 8 In List II only authorised the State Legislature to enact laws to regulate but did not empower it to impose any levy and the various levies which hod been imposed by the State Legislature on industrial alcohol and even methylated spirit could not be brought within the ambit of regulatory duties for purposes of regulation only, and, therefore, could not be justified under Entry 8 of List H, that doctrine of privilege and consideration for sale of privilege could be available to the State only in respect of alcohol or alcoholic liquors which were for human consumption. that by merely widening the definition of intoxicating liquors in respective excise laws enacted by the States, the ambit of authority of taxation could not be enlarged by the State Legislature when in List II Entry 51 the words used were alcoholic liquors for human consumption. It was further contended that though the direction and commitment to improvement of the standards of living contained in Article 47 of the Constitution must be kept in view, this improvement could be achieved primarily by industrialisation involving increased production and employment and giving priority to the core sectors, that the Industries (Development & Regulation) Act, 1951 was enacted with a view to developing and controlling various important industries and that the petitioners/appellants were predominantly and primarily concerned with using ethyl alcohol (rectified spirit) as an industrial raw material and this industrial alcohol is required as an input for further manufacture of downstream products.
626 It was submitted on behalf of Union of India that the legislative competence of the State enactments in the various States would have to be determined by reference to Entries 7, 52, 59, 84, 96 and 97 of List I and Entries 8, 24, 26, 27, 51, 52, 54, 56, 62 of List II and Entries 19 and 33 of List III, that then was a dichotomy between Entry 84 of List I and Entry 52 of List II, but this would not control the interpretation of other entries and that there was no such dichotomy in Entry 8 of List II, that the power to levy taxes had to be read from entry relating to the taxes and not from general entry, that none of the taxing entries in List II was controlled by Entry 52 of List I, that State's privilege to completely prohibit or farm out liquor containing alcohol for consumption did not comprehend a similar right of the State with regard to other intoxicating liquids containing alcohol and to so prohibit or collect fee for farming out, would be unconstitutional under Article 19(1)(g) of the Constitution, that under Entry 51 of List II, State Legislature had no power to levy excise duty on industrial alcohol, as it was not fit for human consumption, and though the State could collect an amount called vend fee, shop rent, etc. for conferring on a citizen the right to manufacture and sell alcoholic liquors if it is for human consumption, this power did not extend to industrial alcohol or alcohol contained in the medicinal or toilet preparations;
On behalf of the respondent States; it was contended that:
(a) Entry 52 of List I was an exceptional entry, which not only prescribed the field of legislation but also enabled and empowered the Parliament to make laws to the exclusion of the State and that, being exclusionary in nature unlike entries merely delineating fields of legislation, this entry had to be strictly and, therefore, narrowly construed;
(b) whenever the Constitution intended the Parliament to assume legislative competence in respect of the entire field, a declaration of an unqualified nature was provided for unlike qualified provision like Entry 52 of List 1,
(c) the words 'control' and 'regulation' were, at times, held to he interchangeable or used synonymously, but their use in the various entries either singly or jointly, indicated that they were sought to convey a different sense and the word 'control' had in the context, a narrower meaning, excluding details of regulatory nature by the State;
(d) comparing Entries 7, 23, 24, 27, 62, 64 and 67 of List I with Entry 52, would demonstrate that under entry 52, it was not the entire 627 field which was sought to be covered but only the control of industries; and that the absence of inclusion of qualifying words like 'the control of which' could not be brushed aside;
(e) in view of the declaration made in Section 2 of the I.D.R. Act, 1951 and the provisions made therein, the entire field was not occupied and the vend fee or other impost by the State legislatures were not infringing in the field treaded by the Central Legislature; the Act did not preclude or eclipse the legislative powers of the State; the Act also did not apply on its own terms to the levy; these operated on different tracks;
(f) the Parliament had no power to legislate on industrial alcohol, since industrial alcohol was also alcoholic liquor for human consumption and Entry 84 in List I expressly excluded this category and, therefore, the residuary Entry 97 of List I would not operate as against its own legislative intent;
(g) the State had legislative competence to impose the levy since it was, both on its language and in pith and substance, legislation failing under Entry 8 List II, intoxicating liquor, and Entry 51 List II, alcoholic liquor for human consumption, and what was required was intoxicating liquor and/or alcoholic liquor for human consumption;
(h) that the State had exclusive right to deal in liquor, and this power was reserved by and/or derived under, Article 19(6) and 19(6)(ii) of the Constitution, for parting which a charge was levied, and in a series of decisions it had been ruled that the charge was neither a fee nor a tax and was termed as privilege;
(i) there was no dichotomy between Ethyl Alcohol, to be used for beverages and for industrial purposes, and in any case the levy was on manufacture of the Ethyl Alcohol, and the dichotomy attempted to be drawn in Entry 84 of List I on the basis of the development of the concept of industrial alcohol and the inapplicability of the concept of potable liquor to the industry of alcohol was not valid.
(j) the levy was consistent with wider interpretation of alcoholic liquor based on pre-existing legislative history;
(k) when two interpretations were possible, the choice must fall on that interpretation which validated existing State legislations designed to raise revenues and rejection of the other interpretation 628 which was destructive of the scheme of distribution of powers;
(1) the words 'alcoholic liquor' in Lists I & II of the 7th Schedule to the Constitution must be interpretated so as to mean and take within its sweep alcohol as first obtained in the process of or as a product of fermentation industry at which stage, it was capable of being rendered potable, and the fact that it may be rendered unfit for human consumption, did not render the substance any less liable for taxation;
(m) imposition of a fee would be the most effective method of regulating intoxicating liquor other than alcohol and could be justified as the reasonable measure in regard to intoxicating liquor--as it is the duty of the State, being a welfare State, to denature by incurring extra cost and effort; quid pro quo was not necessary and, even if it was necessary, the requirements were met; and the price fixation was 'a valid method in regulation of consumption;
(n) under its police powers, the State had to regulate health, morality, welfare of society and incidental pauperism and crime;
(o) in enacting a law with respect to intoxication liquor as part of the legislative power, measures of social control and regulation of private rights were permissible and as such may even amount to prohibition;
(p) it has been accepted by Courts all along that the 'police power' of the State enabled regulations to be made regarding manufacture, transport, possession and sale of intoxicating liquor; and such police power could be exercised as to impose reasonable restrictions as to effectuate the power;
(q) trade in alcoholic drinks or intoxicating drinks, being obnoxious and injurious to health, a citizen had no fundamental right under Article 19(1)(g) of the Constitution and it Is the privilege of the State alone and it can part with this privilege on receipt of a consideration;
(r) the levy was stipulated jointly or severally, both under' Entries 8 of List II, Entry 51 of List II, Entry 33 of List III and what was described as police powers regulatory and other incidental charges, and the levy was justified, being a regulatory power under Article 19(6), and 19(6)(ii);
the State had. a monopoly in alcohol trade and Article 31C 629 granted immunity to the challenge under Articles 13, 14 and 19 of the Constitution, and under Article 298, trading power of the State must be recognised, coupled with century old monopoly of the State in alcohol; and (t) the vend fee was a pre-constitutional levy, and so saved under Article 277 of the Constitution: it was not a law either under Article 246 or Article 254 and was, therefore, outside the purview of the Central Act.
On the questions: (i) whether the vend fee in respect of the industrial alcohol under different legislations and rules in different States was valid; (ii) whether the power to levy excise duty m case of industrial alcohol was with the State legislature or the Central legislature; (iii) what was the scope and ambit of Entry 8 List Ii of the Seventh schedule of the Constitution; and (iv) whether, the State Government had exclusive right or privilege of manufacturing, selling, distributing, etc. of alcohols including industrial alcohol, and what was the extent, scope and ambit of such right of privilege, Allowing the Writ Petitions, Civil Appeals and Review Petitions, this Court,
HELD: Majority: (E.S. Venkataramiah, C.J.I, Sabyasachi Mukharji, Ranganath Misra, B.C. Ray, K.N. Singh and S. Natarajan, JJ.) Per Sabyasachi Mukharji, J.
1.1 The relevant provisions of the U.P Excise Act, 1910, A.P. Excise Act, 1968, Tamil Nadu Act, and Bombay Prohibition Act, 1949 are unconstitutional insofar as these purport to levy a tax or charge imposts upon industrial alcohol, namely, alcohol used and usable for industrial purposes. [680G-H]
1.2 Having regard to the principles of interpretation and the Constitutional provisions, in the light of the language used and, having considered the impost and the composition of industrial alcohol, and the legislative practice of this country. the imposts in question cannot be justified as State imposts. [680G-H]
1.3 The different provisions, in question are not merely regulatory, but are much more than that. These seek to levy imposition in their pith and substance, not as incidental or as merely disincentives, 630 but as attempts to raise revenue for States' purposes. There is no taxing provision permitting these in the lists in the field of industrial alcohol for the State to legislate.
Furthermore, in view of the occupation of the field by the Industrial Development and Regulation Act, it was not possible to levy this impost. Besides, in view of the language used in the specific provision the levy is not on the manufacture of alcohol as such. Therefore, these levies cannot in essence be sustained as duty of excise, [681A-B]
2.1 The meaning of the expressions used in the Constitution must be found from the language used. The words of the Constitution should be interpreted on the same principle of interpretation as one applies to an ordinary law but these very principles of interpretation compel one to take into account the nature and scope of the Act which requires interpretation. [672H, 673A]
2.2 A Constitution is the mechanism under which laws are to be made and not merely an Act which declares what the law is to be. [673B]
2.3 It is also well-settled that a Constitution must not be construed in any narrow or pedantic sense and that construction which is most beneficial to the widest possible amplitude of its power, must be adopted. An exclusionary clause in any of the entries should be strictly and, therefore, narrowly construed. No entry should, however, be so read as not to rob it of entire content. A broad and liberal spirit should, therefore, inspire those whose duty it is to interpret the Constitution, and the Courts are not free to stretch or to pervert the language of an enactment in the interest of any legal or constitutional theory. Constitutional adjudication is not strengthened by such an attempt but it must seek to declare the law. It must not try to give meaning on the theory of what the law should be, but must so look upon a Constitution that it is a living and organic thing and must adapt itself to the changing situations and pattern in which it has to be interpreted. Where division of powers and jurisdiction in a federal Constitution is the scheme, it is desirable to read the Constitution in harmonious way. Further, in deciding whether any particular enactment is within the purview of one Legislature or the other, it is the pith and substance of the legislation in question that has to be looked into. [673B-E]
3.1 It is well-settled that the various entries in the three lists of the Indian Constitution are not powers but fields of legislation. The power to legislate is given by Article 246 and other Articles of the Constitution. The three lists of the 7th Schedule to the Constitution are legislative heads or fields of legislation. These demarcate the area over 631 which the appropriate legislatures can operate. [673F]
3.2 It is also well-settled that widest amplitude should be given to the language of the three entries but some of these entries in different lists or in the same list may over-ride and sometimes may appear to be in direct conflict, with each other, then and then comes the duty of the Court to find the true intent and purpose and to examine the particular legislature in question. Each general word should be held to extend to all anciliary or subsidiary matters which can fairly and reasonably be comprehended in it.
[673F-G]
3.3 In interpreting an entry it would not be reasonable to import any limitation by comparing or contrasting that entry with any other in the same list. It has to be interpreted that the Constitution must be interpreted as the organic document in the light of the experience gathered. [673H]
3.4 In the Constitutional scheme of division of power under the legislative lists, there are separate entries pertaining to taxation and other laws. [674A] The relevant entries in the Seventh Schedule to the Constitution demarcate legislative fields and are closely linked and supplement one another. [674E] The Constitution of India like most other Constitutions is an organic document. It should be interpreted in the light of the experience. It has to be flexible and dynamic so that it adapts itself to the changing conditions and accommodates itself in a pragmatic way to the goals of national development and the industrialisation of the country. This Court should, therefore, endeavour to interpret the entries and the powers in the Constitution in such a way that it helps to the attainment of undisputed national goals, as permitted by the Constitution. [674C-D] M.P.V. Sundararamier & Co. v. State of A.P., [1958] SCR 1422 at pages 1480-82, relied on.
The India Cement Ltd. etc. v. The State of Tamil Nadu etc., [1990] 1 SCC 12 and Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938 [1939] FCR 18 at 37-38, referred to.
4.1 The expression of a Constitution must be understood in its common and normal sense. Industrial alcohol as it ISI, is incapable of 632 being consumed by a normal human being. The expression 'consumption' must also be understood in the sense of direct physical intake by human beings in this context. No doubt, utilisation in some form or the other is consumption for the benefit of the human beings, if industrial alcohol is utilised for production of rubber, tyres used. But the utilisation of those tyres in the vehicle of man cannot in the context in which the expression has been used in the Constitution, be understood to mean that the alcohol has been used for human consumption. [665C-D]
4.2 The expression 'alcoholic liquor for human consumption' was meant and still means that liquor which, as it is, is consumable in the sense capable of being taken by human beings as such as beverage of drinks. Hence, the expression under Entry 84 List I must be understood in the light. [665E]
4.3 Constitutional provisions specially dealing with delimitation of powers in a federal polity must be understood in a broad commonsense point of view as understood by common people for whom the Constitution is made. In terminology, as understood by the framers of the Constitution and as also viewed at the relevant time of its intepretation it is not possible to proceed otherwise. Alcoholic or intoxicating liquors must be understood as these are, what these are capable of or able to become. [665G-H]
5.1 By common standards ethyl alcohol (which has 95%) is an industrial alcohol and is not fit for human consumption.
The petitioners 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 alcohol. Beverage and industrial alcohols are clearly and differently treated. Rectified spirit for industrial purposes is defined as "spirit purified by distillation having a strength not less than 95% of volume by ethyl alcohol".
Dictionaries and technical books would show that rectified spirit (95%) is an industrial alcohol and is not potable as such. Therefore, industrial alcohol which is ethyl alcohol (95%) by itself is not only non-potable but is highly toxic.
The range of spirits 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. Therefore, ethyl alcohol (95%) is not alcoholic liquors for human consumption but can be used as raw material input after processing and substantial dilution in the production of whisky, Gin, Country Liquor, etc. [677D-G] 633 Delhi Cloth and General Mills Co. Ltd. v. The Excise Commissioner, U.P. Allahabad and Anr., Special Appeal No. 177 of 1970, decided on 29.3.1973, referred to.
6.1 Entry 8 of List I which contains the words "intoxicating liquor'' cannot support a tax. The meaning of this expression has been rightly interpreted by the High Court in Balsara' s case. Hence, the observations of this Court in Balsara's case require consideration. [677H, 675A-B]
6.2 In the light of the new experience and development, "intoxicating liquor" must mean liquor which is consumable by human being as it is. When the word "liquor" was used by this Court, it did not have the awareness of full use of alcohol as industrial alcohol. It is true that alcohol was used for industrial 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 experience give new colour to the meaning. [675B-C] F.N. Balsara v. State of Bombay, AIR 1951 Born 210 & 214, approved.
State of Bombay & Anr. v. F.N. Balsara, [1951] 2 SCR 682; Har Shankar & Ors. etc. v. The Dy. Excise & Taxation Commissioner & Ors., [1975] 3 SCR 254; Adhyaksha Mathur Babu's Sakti Oushadhalaya Dacca (P) Ltd. v. Union of India, [1963] 3 SCR 9571; M/s Guruswamy & Co. etc. v. State of Mysore & Ors., [1967] 1 SCR 548; State of Mysore v. S.D. Cawasji & Co. & Ors., [1971] 2 SCR 799; R.C. Jallv. Union of India, [1962] Suppl 3 S.C.R. 436; Om Prakash v. Giriraj 'Kishore, [1986] 1 SCR 149; Inspector of Taxes v. Australian Mutual Provident Society, [1959] 3 All England Law Report 245 and Commonwealth of Massachusetts Et AI v. USA, 92 Lawyers, Edition p. 968, referred to.
6.3 Article 47 of the Constitution imposes upon the State the duty to endeavour to bring about prohibition of the consumption except for medicinal purpose of intoxicating drinks and products which are injurious to health. If the meaning of the expression "intoxicating liquor" is taken in the wide sense adopted in Balsara's case, it would lead to an anamolous result and would oblige the State to prohibit even such industries as are licensed under the IDR Act but which manufacture industrial alcohol. This was never intended by the Constitution or judgments of this Court. Therefore, the decision in the Synthetics & Chemicals Ltd.'s case was not correct on this aspect. [679C-D] State of U.P., etc. v. Synthetics & Chemicals Ltd. & Ors. etc., 634 [1980] 2 SCR 531 and State of Bombay & Anr. v. F.N. Balsara, [1951] 11 SCR 682, overruled.
K.K. Narula v. State of J & K, [1967] 3 SCR 50, referred to.
7. The Indian Constitution does not recognise police power as such. But, the exercise of sovereign power, which gives the State sufficient authority to enact any law, subject to the limitations of the Constitution to discharge its functions must be recognised. The Indian Constitution as a sovereign State has power to legislate on all branches except to the limitation as to the division of powers between the Centre and the States, and also subject to the fundamental rights guaranteed under the Constitution. The Indian State, between the Centre and the States, has sovereign power. The sovereign power is plenary and inherent in every sovereign State to do all things which promote the peace, morals, education and good order of the people.
Sovereignty is difficult to define. This power of sovereignty is, however, subject to Constitutional limitations. [666F-H]
8.1 In interpreting the provisions of the Constitution, one should go by the plain words used by the Constitution makers. Importing of expression like 'police power', which is a term of variable and indefinite connotation, can only make the task of interpretation more difficult. [671B] State of West Bengal v. Subodh Gopal & Ors., [1954] 5 SCR 587 at 601-604 and Kameshwar Prasad & Ors. v. The State of Bihar & Anr., [1962] 3 Suppl. SCR 369, referred to.
8.2 The power of the State to regulate, though not as emanation of police power, but as an expression of the sovereign power of the State is recognised, but that power has its limitations. [671G]
8.3 Whether the States have the police power or not, they 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. However, the question is whether, in the garb of regulations, a legislation which is in pith and substance, fee or levy which has no connection with the cost or expenses administering the regulation, could be imposed purely as regulatory measure. [671D-E] In the instant case, judged by the pith and substance of the legisla635 tion in question, these levies cannot be treated as part of regulatory measures.[671E]
9.1 The activity in potable liquor, which was regarded as a safe and exclusive right of the State earlier, cannot be justified under the police power of the State, i.e., the power to preserve public health, morals, etc. This reasoning can never apply to industrial alcohol manufactured by industries which are to be developed in the public interest, and which are being encouraged by the State. In such a situation, it is essential to strike a balance, and while doing so, it is difficult to find any justification for any exclusive right of a State to deal with industrial alcohol.
Restriction valid under one circumstance may become invalid in changing circumstances. [680C-D] Nashville, Chattangooga & St. Louis Railway v. Herbert S. Walters, 79 Lawyers' Edition 949; Leo Nebbia v. People of the State of New York, 78 Lawyers' Edn. 940 at p. 941 and Motor General Traders & Anr. etc. v. State of Andhra Pradesh
9.2 Arbitrary and excessive imposts under the so-called privilege of the States are a great disincentive for development of industries in the public interest and for industrial development in general and can render units unviable and sick. It is essential that there should be uniformity in the industry so that these are free from the vagaries and arbitrary and differential treatment meted out from State to State and even in the same State from time to time. [644C-D]
9.3 Right to tax or levy must be in accordance with the provisions of the Constitution. It is clear that all duties of excise, save and except the items specifically excepted in entry 84 of List 1, are generally within the taxing power of the Central Legislature. The State Legislature has power, though limited in imposing duties of excise. That power is circumscribed under Entry 51 of List II of the 7th Schedule to the Constitution. [666H, 667A, 674G]
10. In view of the subsequent amendments and additions to the levies, the levies in question are not pre-Constitutional levies. [662E]
11.1 After 1956 amendment to the Industries (Development and Regulation) Act, 1951 bringing alcohol industries (under fermentation industries)as item 26 of the First Schedule to the Act, the control of this industry has vested exclusively in the Union. Thereafter, licences to 636 manufacture both potable and non-potable alcohol is vested in the Central Government. Distilleries are manufacturing alcohol under the Central Licences under IDR Act. No privilege for manufacture even if one existed, has :been transferred to the distilleries by the State. The State cannot itself manufacture industrial alcohol without.the permission of the Central Government. The States cannot claim to pass a right which these do not possess. Nor can these States claim exclusive right to produce and manufacture industrial alcohol which are manufactured under the grant of licence from the Central Government. Industrial alcohol cannot upon coming into existence under such grant be amenable to States' claim of exclusive possession of privilege. The State can neither rely on Entry 8 of List II nor Entry 33 of list III as a basis for such a claim. It cannot claim that under Entry 33 of List III, it can regulate industrial alcohol as a product of the scheduled ,industry, because the Union, under section 18 G of the IDR Act, has evinced clear intention to occupy tile whole field. Even otherwise, sections like Section 24A and 24B of the U.P. Act do not constitute any regulation in respect of the industrial alcohol as product of the scheduled industry. On the contrary, these purport to deal with the so-called transfer of privilege regarding manufacturing and sale. This power, admittedly, has been exercised by the State purporting to act under Entry 8 of list II and not under Entry 33 of list III.
[681C-F]
11.2 The position with regard to control of alcohol industry has, therefore, undergone material and significant change and the State is left with only powers to pass any legislation in the nature of prohibition of potable liquor referable to Entry 6 of list II and regulating powers, lay down regulations to ensure that non-potable alcohol is not diverted and misused as a substitute for potable alcohol, and charge excise duty on potable alcohol and sales tax under Entry 52 of list II; however, sales tax cannot be charged on industrial alcohol in the present case, because under the Ethyl Alcohol (Price Control) Orders, sales tax cannot be charged by the State on industrial alcohol; and in case State is rendering any service, as distinct from its claim of so-called grant of privilege, it may charge fees based on quidpro quo. [681G-H, 682A-C] Indian Mica and Micanite Industries v. State of Bihar, [1971] 2 SCC 236, relied on.
12.1 On an analysis of the various Abkari Acts and Excise Acts, it is clear 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 637 possession and use. Not all but some of States have provided 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 regarded as one and the same thing. So-called privilege was reserved by the State mostly in respect of country liquor and not foreign liquor which included denatured spirit. [682D-E]
12.2 On an analysis of various decisions and practice, it is clear that is respect of industrial alcohol the States are not authorised to impose the impost they have purported to do. Hence, such impositions and impost must go as being invalid. However, this would not affect any impost so far as potable alcohol as commonly understood is concerned. It will also not affect any impositions of levy on industrial alcohol fee, where there are circumstances to establish that there was quid pro quo for the fee sought to be imposed.
This will also not affect any regulating measure as such.
[682F-G] The provisions are, therefore, declared to be illegal and invalid prospectively. The Respondent-States are restrained from enforcing the said levy any further but they will not be liable for any refund and the tax already collected and paid will not be refunded. [683B] In respect of Tamil Nadu, no further realisations will be made in future by the State Government from the petitioners. Regarding past realisations, the application for that part of the direction should be placed before a Division Bench, for disposal upon notice both to the State and the Central Governments. [683F] Calcutta Gas Co. (Proprietory) Ltd. v. The State of West Bengal . and Ors., [1962] Suppl. 3 SCR 1; Nashirwar etc. v. The State of M.P., [1975] 2 SCR 861; SheopatRai & Ors. v. State of U. P., [1972] All. L.J. 1000; Indian Mica & Micanite Industries Ltd. v. State of Bihar & Ors., [1971] Suppl. SCR 319; Town Municipal Committee, Amraoti v. Ramachandra Vasudeo Chimote & Anr., [1964] 6 SCR 947; P.N. Kaushal etc. v. Union of India, [1979] 1 SCR 122; M/s Guruswamy & Co. etc. v. State of Mysore & Ors., [1967] 1 SCR 548; Cooverjee B. Bharucha v. The Excise Commissioner and the Chief Commissioner, Ajmer & Ors., [19541 SCR 873; Crowley v. Christensen, [1890] 34 Lawyers' Edn. 620 and Southern Pharmaceuticals & Chemicals Trichur & Ors. etc. v. State of Kerala & Ors. etc., [1982] 1 SCR 519 at 537, referred to.
638 Per Oza, J. (Concurring)
13.1 The State Legislature had no authority to levy duty or tax on alcohol which is not for human consumption as that could only be levied by the Centre. [686G]
13.2 A comparison of the language of Entries 84 of List I and 51 of List II clearly demonstrates that the powers of taxation on alcoholic liquors have been based on the way in which they are used. Admittedly, alcoholic liquor is a very wide term and may include variety of types of alcoholic liquors, but our Constitution makers have distributed them into heads, namely, (a) for human consumption, and (b) other than for human consumption. Alcoholic liquors which are for human consumption were put in Entry 51 List II authorising the State Legislature to levy tax on them whereas alcoholic liquors other than for human consumption have been left to the Central Legislature under Entry 84 for levy of duty of excise. This scheme of these two entries in List I and II is clear enough to indicate the line of demarcation for purposes of taxation of alcoholic liquors. What has been excluded in Entry 84 has specifically been put within the authority of the State for purposes of taxation. [685E-H]
13.3 From the scheme of entries in the three lists, it is clear that taxing entries have been specifically enacted conferring powers of taxation, whereas other entries pertain to the authority of the Legislature to enact laws for purposes of regulation. If Entry 8 in List II is compared with Entry 51 it is clear that while Entry 51 authorises the State Legislature to levy tax and duties on alcoholic liquors failing under this entry, Entry 8 confers authority on the State Legislature to enact laws for regulation. Similarly are Entries in List I. But since a declaration has been made by the Parliament under Entry 52, List I, declaring the industry based on fermentation and alcohol to be an industry under the Industrial (Development and Regulation) Act, 1951, and placing it directly under the control of the Centre, even in respect of regulation, the authority of the State Legislature in Entry 8, List II could only be subject to the Act or rules made by the Centre. Therefore, in view of clear demarcation of authority under various items in the three Lists, Entry 8 List II could not be invoked to justify the levies which have been imposed by the State in respect of alcoholic liquors which are not meant for human consumption.
[686C-D, F-G] The State, in exercise of powers under Entry 8 of List II and by appropriate law may, however, regulate and that regulation could be to 639 prevent the conversion of alcoholic liquors for industrial use to one for human consumption and for the 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. [690H, 691A]
14.1 There is nothing like privilege vested in any one of the functionaries of the State. In the background of this basic feature of our Constitution, the doctrine of privilege is difficult to reconcile with when this privilege of trading in commodities injurious to health and dangerous to life is examined especially in the context of Article 21 and Article 47 of our Constitution. [688C-D]
14.2 Article 21 castes a duty on the State to protect the life of every citizen except as is provided under the Article. If this duty of the State is compared with the scheme of privilege, it means that the State has a privilege to endanger human life (the life of a citizen). Such a privilege runs contrary to Article 21 [688F]
14.3 Article 47 appears in the Chapter of Directive Principles of State Policy. Inclusion of this Article in this Chapter clearly goes to show that it is the duty of the State to do what has been provided in this Article. It has provided that it is the duty of the State to improve public health and this duty will be discharged by endeavouring to bring about prohibition. It, therefore, sounds contradictory for a State, which is duty bound to protect human life, to claim that it has the privilege of manufacture and sale of alcoholic beverages which are expected to be dangerous to human life and injurious to human health and transferring this privilege of selling this privilege on consideration to earn huge revenue without thinking that this trade in liquor ultimately results in degradation of human life even endangering human life and is nothing but moving contrary to the duty cast under Articles 21 and 47 and ideal of prohibition enshrined in Article 47. [688H, 689A-C] Therefore, in view of Articles 21 and 47, the State cannot claim the privilege of having the right to trade in goods obnoxious and injurious to health. [689D]
15. The doctrine of police powers enunciated in various decisions of foreign courts is not applicable in the Indian context. In India, as the Constitution was enacted or was framed, after having the experience of various countries in the world, the concept of fundamental rights and rights like life, liberty, procedure established by law and various legislative functions which were divided between the States and the 640 Union, left no scope for any power except which could be derived from any provision in the Constitution coupled with an Entry in one of the three Lists which would indicate that the power vested in either the State or the Centre. Apart from it, the scheme of our Constitution is that there are no residuary powers which vest in the State and scheme of our Constitution also reveals that in case of any conflicts it is the Centre which prevails and not the State and, therefore, applying the doctrine of police powers will only mean to do violence to the scheme of the Constitution. In fact, under our Constitution no powers could be conceived for which there is no provision in any one of the entries in the three Lists or which could not be justified under any specific Article of the Constitution. Thus, even under the concept of the doctrine of police powers, the levies imposed by the State on alcohol or alcoholic liquors cannot be justified. [689E, G-H, 690A-C] & ORIGINAL JURISDICTION: Writ Petition No. 182 of 1980 Etc. Etc.
(Under Article 32 of the Constitution of India).
F.S. Nariman, M.H. Baig, A.B. Divan, Rajinder Sacher, L.M. Singhvi, R.N. Banerjee, K.J. John, Harish N. Salve, S.C. Sharma, S.S. Shroff, Mrs. P. Shroff, Ms. S. Sharma, J.B. Dadachanji, A.P. Hathi, S. Ganesh, S. Sukumaran, D.N. Misra, Mrs. A.K. Verma, Sandip I. Thakore, R.F. Nariman, P.H. Parekh, Shishir Sharma, Poppat, Ms. Shalini Soni, Sunita Sharma, M.L. Lahoty, Shiv Prasad Sharma, Himanshu Shekhar, D.D. Gupta, Ms. M. Gupta, A.T.M. Sampath, Mrs. Swaran Mahajan, Ms. Anuradha Mahajan, K.K. Mohan, Laxmi Kant Pandey, R.B. Mehrotra, K.C. Dua, K.R. Nagaraja, P.D. Sharma, V. Balachandran, O.P. Sharma, A.K. Sangal, Anil Kumar, D. Goburdhan, K.D. Prasad and Mrs. Naresh Bakshi for the Petitioners.
K. Parasaran, Attorney General, C. Shivalha, G. Rath, V.M. Tamaskar, Altar Ahmed, N.N. Gooptu, Dinesh Chandra Swami, A.S. Bobde, K. Alagiri Swamy, V.Venkataramaniah, Inder Singh, Advocate Generals, R.N. Trivedi, Additional Adv. Genl., Yogeshwar Prasad, S.K. Dholakia, P.S. Poti, A.K. Ganguli, Satish Chandra, R.B. Datar, G.L. Sanghi, P.R. Ramasesh, R.K. Mehta, S.K. Bhattacharya, H.K. Purl. Probir Chowdhary, N.K. Sharma, M.N. Shroff, Ashok K. Srivastava, R.S. Rana, A.S. Bhasme, A.M. Khanwilkar, Sunil Gupta, T.T. Kunhikanan, V. Krishnamurthy, P. Venugopal, T.V.S.N. Chari, D.R.K. Reddy, Jagan M. Rao, Ms. A. Subhashini, 641 A. Subba Rao, K.C. Dua, Satish K. Agnihotri, Ashok Singh, Indra Makwana, Ms. Amrita Sanghi and N.K. Sharma for the RespondentsThe following Judgments of the Court were delivered:
SABYASACHI MUKHARJI, J. These writ petitions, civil appeals and review petitions relate to the right of the States to levy vend fee or duties in respect of industrial alcohol under different legislations in different States. We will first deal with writ petition No. 182/80. In Writ Petition No. 182/80 (Synthetics & Chemicals Ltd. v. State of U.P. & Ors.), we are concerned with the notification dated 31st May, 1979, substituting new rule 17(2) for old rule 17(2) and providing for a vend fee of Rs. 1.10 per bulk liter for all issues from distillery but in case of FL 39 Licence (like the petitioner in this case), the vend fee would be so charged that the amount of this fee and purchase tax together does not exceed 25 paise per bulk litre; Then there are three review petitions, namely, Review Petition Nos. 202-04/80 (Synthetics & Chemicals Ltd. v. State of U.P. ) and Review Petition No. 17 of 1980 (Kesar Sugar Works Ltd. v. State of U.P.). These are directed against the judgment and order of this Court dated 19th December, 1979 in State of U.P., etc. v. Synthetics & Chemicals Ltd. & Ors. etc., [1980] 2 SCR 531 re-agitating the challenge to sections 24A & 24B of the U.P. Excise Act, 1910 as amended in 1972 and 1976 declaring exclusive privilege of the Government for manufacture and sale of foreign liquor as defined (which includes denatured spirit and industrial alcohol). Then there is Writ Petitions Nos. 3163-64 of 1982 (All India Alcohol Based Industries Development Association v. State of Maharashtra, ) which challenges the amendment to section 49 of the Bombay Prohibition Act, 1949 treating exclusive privilege for State in liquor trade and imposing a transport fee of Rs. 1.15 per bulk litre. There is Writ Petition No. 4501/78 (Chemicals & Plastics India Ltd. v. State of Tamil Nadu), Writ Petition No. 2580/82 (Kolhapur Sugar Mills and Anr. v. S.R. Hegde & Anr. ), which challenge the Bombay Prohibition Act, 1949 as amended from time to time along with Ordinance No. 15 of 1981 which amended the Bombay Prohibition Act, 1945 and section 49 added by reason of which the State was granted exclusive privilege of importing, exporting, transporting, manufacturing, bottling, selling, buying, processing, or using any intoxicant. Thereafter, the Bombay Rectified Spirit (Transport in Bond) Rules, 1951 were amended and transport fee was increased from the rate of 17 paise to the rate of Rs. 1.25 paise.
Thereafter, the Bombay Rectified Spirit (Transport in Bond) Amendment Rules, 1982 were amended and the transport fee was reduced from Rs. 1.25 per litre to 0.40 paise per litre.
Then there is Writ Peri642 tion No. 1892/73 (Hindustan Polymers Ltd. v. State of A.P.) which seeks a declaration that alcohol plant of the petitioner company is not covered by the A.P. Excise Act, 1968, A.P. Distillery Rules, 1970 and A.P. Rectified Spirit Rules, 1971 and further to declare that the alcohol plant of the company is not a 'distillery' within the meaning of the said expression under the A.P. Distillery Rules and therefore, the Distillery Rules have no application thereto. It seeks also an order to restrain from interfering with and/or regulating and controlling the production, distribution, movement and supply of alcohol from the alcohol plant of the company and also a writ of prohibition with the appropriate directions. Civil Appeal No. 4384/84 also challenges the A.P. Excise Act, 1968 and A.P. Distillery Rules. Similar is the position in C.As. Nos. 466-67 of 1980 which challenge the Tamil Nadu Prohibition Act.
The main question that falls for consideration in these matters is whether the vend fee in respect of the industrial alcohol under different legislations and rules in different States is valid. The question is. is the vend fee and impost leviable or extractable by the States under different Acts.
The question mainly involved in all these matters is a common question of law but we will have to deal with diverse factual situations as well as the particular provisions of the various Acts. The questions with which we are mainly concerned are the following:
(i) whether the power to levy excise duty in case of industrial alcohol was with the State legislature or the Central legislature?
(ii) what is the scope and ambit of entry 8 of list II of the Seventh Schedule of the Constitution?
(iii) whether, the State government has exclusive right or privilege of manufacturing, selling, distributing, etc. of alcohols including industrial alcohol. In this connection, the extent, scope and ambit of such right or privilege has also to be examined.
It is necessary to bear in mind that in the last four to five decades there has been a tremendous change in the industrial horizon of this country. During the initial stages of the Constitution, the only well-known industrial sectors in India were iron and steel, textiles, jute and cement. The rest of the production was raw materials geared to feed and supply the industrial base of the foreign power.
After independence, an Industrial Policy Resolution was adopted to achieve 643 rapid industrialisation in a big way. In the last few decades, there has been a great transformation and tremendous upsurge not only in industry and commerce, but also in sophisticated technology and industries. The chemical, fertilizer, plastic and engineering industries are only some of the fields in industrial development. In this background, the views expressed previously relating to 'intoxicating liquor' and 'alcoholic liquor for human consumption' have to be borne in mind. It is, in this connection, also necessary to refer to Article 47 of the Constitution. The said Article which deals with the duty of the State to raise the level of nutrition and the standard of living and to improve public health, enjoins that the State shall regard the raising of the level of nutrition and the standard of living of its people and the improvement of public health as among its primary duties and, in particular, the State shall endeavour to bring about prohibition of the consumption except for medicinal purposes of intoxicating drinks and of drugs which are injurious to health. We were invited on behalf of the petitioners by Mr. Nariman, Mr. Divan, Mr. Banerjee, Mr. Baig and others that though this direction and this commitment to improvement of the standard of living must be kept in view but it must be borne in mind that this improvement can be achieved primarily by industrialisation involving increased production and employment and giving priority to the core sectors. Entry 52 of list I of the Seventh Schedule to the Constitution deals with "industries", the control of which by the Union is declared by Parliament by law to be expedient in the public interest. It is the contention of the petitioners and appellants that the Industries (Development & Regulation) Act, 1951 (hereinafter called the 'IDR Act') was enacted with a view to developing and controlling various important industries. Section 2 of the IDR Act declares that it is expedient in the public interest that Union should take under its control the industries specified in the First Schedule. The cases in this bunch are in respect of industries which are not concerned with potable alcohol for the purpose of human consumption. These are predominantly and primarily concerned with using ethyl alcohol (rectified spirit) as an industrial raw material.
This industrial alcohol is required as an input for further manufacture of downstream products. For this purpose, some of the industries have their captive plants. Reference in this connection may be made and our attention was drawn to the report of the Alcohol Committee, 1956. This Report indicates that-
(a) that industrial alcohol is an input and should be available at reasonable price.
(b) there should be uniform railway freight.
644
(c) larger capacities of molasses etc.,should be available, and (d) uniform taxation policies are essential for the development of these industries.
In order to appreciate the controversy in these matters, it is, therefore, necessary to keep these objectives in mind. In these matters, this Court is concerned with the taxing power of the States to impose and levy excise duty on industrial alcohol and/or imposts as vend fees. This has been, and as has been noticed hereinbefore, claimed as a part of the exclusive privilege of the States to impose a levy as a consideration or price for manufacturing of and/or dealing with industrial alcohol. It is essential that there should be uniformity in the industry so that these are free from the vagaries and arbitrary and differential treatment meted out from State to State and even in the same State from time to time. Arbitrary and excessive imposts under the so-called privilege are a great disincentive for development of industries in the public interest and for industrial development in general and can render units unviable and sick.
In the above background, it is necessary to refer to certain facts and as such it would be appropriate to refer to the facts and contentions in writ petition No. 182/80, i.e. Synthetics & Chemicals Ltd. v. State of U.P., which is under Art. 32 of the Constitution, filed by M/s. Synthetics & Chemicals Ltd.--a registered Company in Bombay, and one Mr. A.K. Roy, Director and shareholder of the said company.
The respondent therein is the State of Uttar Pradesh and the Excise Commissioner, Uttar Pradesh.
In the said writ petition, a notification of the State of Uttar Pradesh, being No. 4840E/XIII-330/79, dated Lucknow May 31, 1979 was made in exercise of the power under subsection (1) of s. 40 of the U.P. Excise Act, 1910 (hereinafter referred to as 'the U.P. Act') read with clause (d) of sub-section (2) of the said section.
However, in order to appreciate the position, we should bear in mind the history of the legislative powers and different lists in the 7th Schedule, regarding impost in respect of industrial alcohol. It appears that local legislatures of Uttar Pradesh had enacted the United Provinces Act, 1910 being Act IV of 1910, and it received the assent of the Governor on 18th December, 1909 and of the Governor General on 14th February, 1910. Before 1920 there was as such no distinct dis645 tribution of legislative subjects between the Central Legislature and the State Legislatures. It appears that the local legislatures enacted with the assent of the Governor-General, Excise Acts imposing duties and regulating production, supply and distribution of alcoholic liquors including denatured spirits and methylated spirits. These were done under the Indian Councils Act, 1861 and the Indian Councils Act, 1909. The provisions of the Indian Council Act, 1861 were initially applicable only to the Presidencies of Fort St. George and Bombay, but were later made applicable to other provinces by virtue of the Indian Councils Act, 1892 and 1909.
Section 43 of the Indian Councils Act, 1861 enjoined that it shall not be lawful for the Governor in Council of either of the Presidencies, except with the sanction of the Governor-General, previously communicated to him, to make regulations or take into consideration any law or regulation for any of the purposes mentioned therein and one of the purposes, inter alia, mentioned was, anything affecting the public debt of India or the Customs Duties, or any other tax or duty then in force and imposed by the authority of the Govt. of India for the general purposes of such Government.
The Government of India Act, 1915 was amended from time to time with a view to consolidate and amend the enactment relating to the Govt. of India. The Governor General-in Council with the sanction of the Secretary of State-in Council made Devolution Rules. Rule 3(1) thereof provided for distinguishing the functions of the local governments and local legislatures of governors' provinces and of the province of Burma from the functions of the Governor General in Council. It was provided that any matter which is included in the list of provincial subjects set out in Part II of Schedule I of the said Act shall, to the extent of such inclusion, be excluded from any central subject of which, but for such inclusion, it would form part. Part II of the Government of India Act, 1915 provided that any matter which is included in the provincial subjects set out in Part II of Schedule I shall, to the extent of such inclusion be excluded from any central subject of which, but for such inclusion, it would form part. Part II dealt with provincial subjects. Item 16 of Part II provided as under:
"Excise, that is to say, the control of production, manufacture, possession, transport, purchase, and sale of alcoholic liquor and intoxicating drugs, and the levying of excise duties and licence fees on or in relation to such articles, but excluding, in the case of opium, control of cultivation, manufacture and sale for export." 646 It appears that the Govt. of U.P. levied a vend fee on denatured spirit for the first time @ 8 annas per bulk gallon, vide notification dated January 18, 1937 under s. 40(2) of the U.P. Excise Act, 1910. It was levied as a duty.
By this notification Rule 17(2) was added which enjoined that in case of issues from a distillery a vend fee of annas 8 per bulk gallon shall be payable in advance before the spirit is issued. The fee was not made chargeable in case of issues to hospitals, dispensaries and other charitable and educational institutions upto a quantity allowed to be issued by the Excise authorities, and also on the issues for export out of the provinces.
Thereafter, on 1st April, 1937 the Govt. of India Act, 1935 came into effect. The federal legislative list in the 7th Schedule to the said Act contained entry 45 which included duties of excise on tobacco and other goods manufactured or produced in India except alcoholic liquors for human consumption. The provincial legislative List being List II of the 7th Schedule. contained entry 31 on intoxicating liquors and narcotic drugs, that is to say, the production, manufacture, possession, transport, purchase and sale of intoxicating liquors, opium and other narcotic drugs, but subject, as respects opium, to certain provisions. It also included entry 40 which was on duties of excise including, inter alia, all these items and alcoholic liquors, opium, Indian hemp and medicinal and toilet preparations containing alcohol.
It was contended on behalf of M/s Synthetic Chemicals Ltd. that the duties previously levied by the local legislatures continued in force by virtue of s. 143(2) of the Govt. of India Act, 1935 only if these were levied before 31st January, 1935, and that only these duties were to be so continued until provisions to the contrary were made by the Federal Legislature.
The Constituent Assembly which derived from the people all power and authority, was convened. On 15th August, 1947 the British Parliament passed the Indian Independence Act, 1947 making provisions for the setting up in India of two independent dominions. Under s. 6(1) of the said Act, the legislature of each of the new dominions was to have full powers to make laws for that dominion including laws having extra-territorial operations. Under s. 8(2) read with s. 9(1) of the Indian Independence Act, 1947 the Governor General adopted the provisions of the Govt. of India Act, 1935. It appears that on 3rd April, 1948 the Constituent Assembly acting as the Dominion Legislature passed the Indian Power Alcohol Act, 1948 which received the assent of Governor General on the same day. By this Act, the Central 647 Government took under its control the Power Alcohol Industry. This was in pursuance of the declaration made by the Dominion Legislature under entry 34 of List I of the 7th Schedule to the Government of India Act, 1935. The entry was: "Development of Industries where development under Dominion control is declared by Dominion Law to be expedient in public interest". "Power Alcohol" was defined as meaning Ethyle Alcohol containing not less than 95.5% by volume of Ethanol measured at 60 degree F, corresponding to 74.4 over proof strength.
It may be mentioned that Rectified Spirit is Ethyl Alcohol or Ethanol with 96% alcohol v/v. ON dehydration, Ethyl Alcohol with 99.5% volume of Ethanol is produced. It was suggested that take over by the Dominion of the potable liquor industry was precluded by virtue of entries 29 & 31 of list II read with entry 34 of list I of the Govt. of India Act, 1935. It may be mentioned that the word 'industries' is the analogous provision in the State list under the Constitution of India, 1950, hence, the meaning given to it in that list, must be applied. According to the petitioners/appellants, the expression 'industries' has been given a restricted meaning so as not to entrench on the State's power with respect to other industries specifically assigned to the State under other entries in the State list. See Calcutta Gas Co., [1962] Suppl 3 SCR 1.
By virtue of the Constitution of India which came into effect from 26th January, 1950 the powers of legislation in respect of alcohol were distributed between list I and list II of the 7th Schedule to the Constitution. Duties of excise on tobacco and other goods manufactured or produced in India except, inter alia, alcoholic liquors for human consumption, and opium, Indian hemp and other narcotic drugs and narcotics, but including medicinal and toilet preparations containing alcohol or any such substance were given to Parliament under entry 84, list 1. But duties of excise on goods manufactured or produced in the State and countervailing duties at the similar rates, inter alia, alcoholic liquors, the State was given power by entry 51 of list II to legislate. By entry 8 of list II, States were given power to legislate on liquors, that is to say production, manufacture, processing, transport, purchase and sale thereof.
On or about 8th May, 1952 the Parliament enacted the Industries (Development & Regulation) Act, 1951. Chapter IIIB of the said Act contains s. 18G whereby the Central Govt. was empowered for securing equitable distribution and availability at fair prices of any article or 648 class of articles relatable to any scheduled industry to provide for regulating the supply and distribution thereof, and trade and commerce therein by a notified order. The notified order was also to provide for controlling the prices at which such article or class of articles could be bought or sold. The said Act was amended in 1956. Item 26 was inserted in the First Schedule to the said Act and empowered the Central Govt. to control the Fermentation Industries including alcohol industries. Item 26 was as follows:
"26. Fermentation Industries.
(1) Alcohol (2)
