1976 (10) TMI 148 - SC - Central Excise

Whether Ajodhya Prasad was entitled to the issue of the licenses for the seven shops? Whether the State Government had the authority to direct the withholding and reauctioning of the licenses, and held, inter alia, that the State Government had no power to interfere with the auction held by the Collector after it had become final in appeal and revision , and could not direct a reauction? Held that - The State Legislature was authorised to make a provision for public auction by reason of the power contained in Entry 8 List II of the Seventh Schedule to the Constitution and that there was no fundamental right of citizens to carry on trade or to do business in liquor. The State has the exclusive right and privilege of manufacturing and selling liquor and that it has the power to hold a public auction for the grant of such a right or privilege and to accept payment of a sum therefor. It was accordingly held that the right granted to the appellants by public auction and the licenses issued to them was clearly an exclusive privilege within the meaning of section 22(1) of the Act and that it has expressly been provided in section 29 that it would be permissible for the State Government to accept payment of a sum in conSideration of the exclusive privilege under section 22. The High Court has taken the view that rule 103(1) of the Board s Excise Rules regarding the manner of fixation and realization of the consideration for the grant of a license for the exclusive privilege of retail vend of country spirit was incompetent and ultra vires the act. The High Court took that view under the mistaken impression that the State was not entitled to collect a tax under the garb of a fee and the auction price for a license is not duty within the meaning of Entry 51 of List 11 of the Seventh Schedule to the Constitution. But, as has been shown, what was sought to be raised was consideration and not fee . The use of the expression fees in the rule is therefore inaccurate, but that cannot detract from the real nature of the recovery. There can be no doubt therefore that the High Court erred in taking a contrary view. Appeal allowed.

Issues Involved:
1. Entitlement to the issue of licenses for seven shops.
2. Authority of the State Government to direct withholding and reauctioning of licenses.
3. Validity of Rule 103(1) of the Board's Excise Rules.
4. Nature of the auction price for a license.
5. Validity of the Bihar and Orissa Excise (Orissa Amendment) Act, 1970.
6. Fundamental right to carry on business in liquor.
7. Validity of the Bihar and Orissa Excise (Second Orissa Amendment) Act, 1971.
8. Vires of sections 22 and 29 of the Bihar and Orissa Excise Act, 1915.

Detailed Analysis:

1. Entitlement to the Issue of Licenses for Seven Shops:
The High Court examined whether Ajodhya Prasad was entitled to the issue of licenses for the seven shops. It held that the State Government had no power to interfere with the auction held by the Collector after it had "become final in appeal and revision." The High Court concluded that Ajodhya Prasad was entitled to the grant of the exclusive privilege under section 22 by virtue of section 6(a) of the Amending Ordinance, irrespective of the validity of Rule 103(1) of the Board's Excise Rules.

2. Authority of the State Government to Direct Withholding and Reauctioning of Licenses:
The High Court held that the State Government had no authority to direct the withholding and reauctioning of the licenses once the auction had become final. However, the Supreme Court found that the State Government's direction for reauction was valid as the bids at the auction were unsatisfactory, and the High Court erred in holding otherwise.

3. Validity of Rule 103(1) of the Board's Excise Rules:
The High Court declared Rule 103(1) of the Board's Excise Rules as ultra vires the Act. However, the Supreme Court noted that the rule was not a tax but a consideration for the exclusive privilege granted by the State. The use of the term "fees" was inaccurate but did not detract from the real nature of the recovery.

4. Nature of the Auction Price for a License:
The High Court held that the auction price for a license was not excise duty within the meaning of Entry 51 of List II of the Seventh Schedule to the Constitution. The Supreme Court disagreed, stating that the auction price was a consideration for the exclusive privilege granted by the State, not a fee or tax.

5. Validity of the Bihar and Orissa Excise (Orissa Amendment) Act, 1970:
The High Court examined the amendments to the Act and held that the amendments were valid. The Supreme Court upheld this view, noting that the amendments made to sections 2 to 5 of the Act were not retrospective, but the Bihar and Orissa Excise (Second Orissa Amendment) Act, 1971, made the necessary changes retrospectively.

6. Fundamental Right to Carry on Business in Liquor:
The High Court initially held that a citizen had a fundamental right to carry on business in liquor, relying on the decision in Narula's case. However, the Supreme Court clarified that there was no fundamental right to do trade or business in intoxicants, as held in subsequent cases like Nashirwar and Har Shankar.

7. Validity of the Bihar and Orissa Excise (Second Orissa Amendment) Act, 1971:
The Supreme Court noted that the Bihar and Orissa Excise (Second Orissa Amendment) Act, 1971, addressed the deficiencies in the earlier amendments by making the necessary changes retrospective and validating the earlier acts.

8. Vires of Sections 22 and 29 of the Bihar and Orissa Excise Act, 1915:
The High Court examined the challenge to the vires of sections 22 and 29 of the Act and upheld their validity. The Supreme Court agreed, noting that the State had the exclusive right to grant the privilege of manufacturing and selling liquor and could impose conditions and restrictions for its regulation.

Conclusion:
The Supreme Court allowed the appeals and set aside the judgments of the High Court, dismissing the writ petitions. The Court upheld the validity of the amendments to the Bihar and Orissa Excise Act and clarified that the auction price was a consideration for the exclusive privilege granted by the State. The Court also reiterated that there was no fundamental right to do trade or business in intoxicants.

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