1974 (11) TMI 91 - SC - Central Excise

Whether it is permissible for the State Government to auction licences for carrying on the business of selling foreign liquor which is neither manufactured nor imported by the State Government? Held that - The grant of a lease either by public auction or for a sum is a regulation pertaining to liquor One of the purposes of regulation is to raise revenue. Revenue is collected by the grant of contracts to carry on trade in liquor. These contracts are sold by auction. The grantee is given a licence on payment of auction price. For these reasons we hold that the State has the exclusive right or privilege of manufacturing and selling liquor. The State grants such right or privilege in the shape of a licence or a lease. The State has the power to hold a public auction for grant of such right or privilege and accept payment of a sum in consideration of grant of lease. The appeals and the writ petitions are, therefore, dismissed.

Issues Involved:
1. Permissibility of the State Government to auction licenses for selling foreign liquor.
2. Fundamental right to trade in liquor.
3. State's right or privilege in the manufacture or sale of liquor.
4. Legislative power of the State to regulate the trade of liquor.
5. Validity of public auction for granting liquor licenses.

Detailed Analysis:

1. Permissibility of the State Government to auction licenses for selling foreign liquor:
The primary question was whether the State Government could auction licenses for selling foreign liquor that it neither manufactures nor imports. The Madhya Pradesh appeals were governed by the Central Provinces and Berar Excise Act, 1915, while the Kerala appeals were governed by the Abkari Act. The State of Madhya Pradesh amended its Act in 1964 to allow the auctioning of licenses for foreign liquor, which was previously limited to country liquor. This amendment led to public auctions for foreign liquor licenses, and subsequent notifications in 1968 and 1970 further detailed the auction process and fees. The Kerala Abkari Act similarly allowed the State to grant exclusive privileges for manufacturing or selling liquor, with the amount of rental settled by auction, negotiation, or other methods.

2. Fundamental right to trade in liquor:
The appellants contended that citizens have a fundamental right to trade in liquor under Article 19(1)(g) of the Constitution. However, the court cited previous rulings, including Cooverjee B. Bharucha v. The Excise Commissioner, which held that there is no inherent right to trade in intoxicating liquors. The court reiterated that the State has the authority to regulate or even prohibit such trade due to its potentially harmful nature.

3. State's right or privilege in the manufacture or sale of liquor:
The State argued that it holds the exclusive right or privilege to manufacture, possess, and sell intoxicating liquor, which it can grant to individuals through licenses or leases. This right is supported by the Madhya Pradesh Act and the Abkari Act, which both allow the State to impose conditions and collect fees for such privileges. The court affirmed that the State's right to control liquor trade is rooted in public morality, health, and revenue considerations.

4. Legislative power of the State to regulate the trade of liquor:
The court emphasized that the State Legislature is empowered to regulate the trade of liquor under Entry 8 of List II of the Constitution, which covers intoxicating liquors, including their production, manufacture, possession, transport, purchase, and sale. This legislative power allows the State to implement measures such as public auctions to regulate the trade and collect revenue.

5. Validity of public auction for granting liquor licenses:
The court upheld the validity of public auctions for granting liquor licenses, stating that such auctions are a method of regulation aimed at raising revenue. The highest bid at an auction represents the consideration for the lease or privilege granted by the State. Previous cases, including M/s. Guruswamy & Co. v. State of Mysore and State of Orissa v. Hari Narayan Jaiswal, supported the view that public auctions for liquor licenses are a legitimate exercise of the State's regulatory power.

Conclusion:
The court concluded that the State has the exclusive right or privilege to manufacture and sell liquor and can grant this right through public auctions. The appeals and writ petitions were dismissed, affirming the State's authority to regulate the liquor trade and collect revenue through auctioned licenses. The court held that there is no fundamental right for citizens to trade in liquor, and the State's regulatory measures, including public auctions, are valid and constitutional. The appeals and petitions were dismissed, with parties bearing their own costs.

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