1997 (1) TMI 519 - SC - Indian Laws

Summary

Issues Involved:
1. Legislative Powers and Control over Rectified Spirit.
2. Exclusive Control of Union vs. State Control.
3. Interpretation of "Intoxicating Liquors" under Entry 8 of List-II.
4. Validity of Item 26 of Schedule to the I.D.R. Act.
5. Regulatory Fees and State Powers.
6. Demarcation of Spheres of Union and States in Alcohol Control.

Summary:

1. Legislative Powers and Control over Rectified Spirit:
The judgment discusses the legislative powers concerning rectified spirit, emphasizing its dual use in manufacturing country liquor and industrial purposes. The petitioner contended that the grant and cancellation of licenses for distilleries manufacturing rectified spirit fall under the exclusive jurisdiction of the Union of India, citing the seven-Judge Constitution Bench decision in Synthetics and Chemicals Limited v. State of Uttar Pradesh.

2. Exclusive Control of Union vs. State Control:
The court examined the division of legislative powers under the Seventh Schedule to the Constitution, particularly Entry 24 in List-II and Entries 7 and 52 in List-I. The I.D.R. Act, 1951, and its 1956 amendment, which included the alcohol industry, were scrutinized. Despite the amendment, states continued to regulate the establishment, functioning, and disposal of rectified spirit. The judgment referred to the decision in Synthetics, which held that "rectified spirit" lies within the exclusive control of the Union by virtue of the I.D.R. Act.

3. Interpretation of "Intoxicating Liquors" under Entry 8 of List-II:
The court noted that the term "intoxicating liquors" in Entry 8 of List-II refers only to potable liquors, as determined by the standards specified by the I.S.I., i.e., alcohol content not exceeding 43% v/v. The states' power to legislate on liquors is restricted to potable liquors alone. Rectified spirit with 95% and above purity was classified as non-potable and thus under Union control.

4. Validity of Item 26 of Schedule to the I.D.R. Act:
The judgment addressed the states' contention that rectified spirit is "intoxicating liquor" within the meaning of Entry 8 of List-II, challenging the validity of Item 26 of the Schedule to the I.D.R. Act. The court considered the legislative history and technical data presented by the states but upheld the decision in Synthetics, affirming the Union's control over industrial alcohol.

5. Regulatory Fees and State Powers:
The court examined the distinction between regulatory fees and fees for services rendered, referencing the decision in Corporation of Calcutta v. Liberty Cinema. It was held that states could levy regulatory fees to defray the cost of ensuring rectified spirit is not diverted for potable purposes. The judgment also addressed the interplay between the I.D.R. Act and state laws, affirming that states are not completely deprived of their legislative power under Entry 24 of List-II.

6. Demarcation of Spheres of Union and States in Alcohol Control:
The court delineated the respective spheres of the Union and States in the control over rectified spirit. It held that industries manufacturing rectified spirit exclusively for industrial purposes fall under Union control, while those for potable purposes are under State control. Joint control was suggested for industries manufacturing rectified spirit for both purposes. The court emphasized the necessity for Union regulations to prevent misuse of rectified spirit meant for industrial purposes.

The writ petition was disposed of with directions and clarifications, instructing the Bihar Excise authorities to consider the law declared herein while addressing the show-cause notice issued to the petitioner.