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2017 (12) TMI 779 - HC - Indian LawsDenatured alcohol - whether the State has power to regulate denatured alcohol viz. rectified alcohol after its denatured? Held that - It is clear from the various judgments of the Supreme Court commencing from Synthetics and Chemicals 1989 (10) TMI 214 - SUPREME COURT OF INDIA that the State has the power to regulate so as to prevent the conversion of alcoholic liquors for industrial use to one for human consumption and for that purpose regulatory fees imposed by the State are justified. It is clearly held that the intoxicating liquor in Entry 8 List II does not cover denatured alcohol which is incapable of human consumption. The Supreme Court in the case of BIHAR DISTILLERY AND ANR. Versus UNION OF INDIA AND ORS. 1997 (1) TMI 519 - SUPREME COURT OF INDIA , has thus drawn a distinction between rectified spirit meant exclusively for supply to industries whether after denaturing it or without denaturing it and the rectified spirit in the process of manufacture or after manufacture being diverted or misused for potable purpose. The Supreme Court has held that the State Government has no power to regulate the former i.e. rectified spirit which is exclusively for supply to industries other than for potable purposes. The Bombay Denatured Spirit Rules, 1959 to the extent that they regulate the possession, use, sale, import, export and transport of denatured spirit viz. Rules 23 to 62 are ultra vires and unconstitutional and are struck down - There shall be no licence required under the Maharashtra Prohibition Act for sale, purchase, transport, possession, storage, dehydration, import and export of denatured spirit - petition disposed off.
Issues Involved:
1. Constitutionality of the Bombay Denatured Spirit Rules, 1959. 2. Requirement of a license for the sale, purchase, transport, possession, storage, dehydration, import, and export of denatured spirit under the Maharashtra Prohibition Act. 3. State's power to regulate denatured spirit. Issue-wise Detailed Analysis: 1. Constitutionality of the Bombay Denatured Spirit Rules, 1959: The Petitioners challenged the Bombay Denatured Spirit Rules, 1959, arguing that the rules regulating possession, use, sale, import, export, and transport of denatured spirit are ultra vires and unconstitutional. They contended that the State has no legislative competence to impose such regulations on denatured spirit, which is industrial alcohol and not meant for human consumption. The Petitioners relied on the definition of "denatured" in Section 2, sub-section (10) of the Bombay Prohibition Act, which renders alcohol unfit for human consumption. They argued that Entry 51 of List II of Schedule VII of the Constitution of India only allows the State to levy duties on alcoholic liquors for human consumption, not on denatured spirit. The Court agreed with the Petitioners, noting that the State's power to regulate alcoholic liquors under the Constitution is restricted to those meant for human consumption. Consequently, the Court declared Rules 23 to 62 of the Bombay Denatured Spirit Rules, 1959, as ultra vires and unconstitutional. 2. Requirement of a License under the Maharashtra Prohibition Act: The Petitioners sought directions from the Court that they, as manufacturers of denatured spirit, do not require a license under the Maharashtra Prohibition Act for activities related to denatured spirit. The Court observed that the Petitioners had already obtained licenses for manufacturing denatured spirit and the re-distillation process under the relevant rules. However, the Petitioners were aggrieved by the requirement of obtaining permits and licenses for various activities involving denatured spirit as stipulated in Rules 23 to 62 of the Bombay Denatured Spirit Rules, 1959. The Court held that no license is required under the Maharashtra Prohibition Act for the sale, purchase, transport, possession, storage, dehydration, import, and export of denatured spirit, thereby granting relief to the Petitioners. 3. State's Power to Regulate Denatured Spirit: The Petitioners argued that the State's power to regulate and control denatured spirit ends once the rectified spirit is denatured, as denatured spirit is incapable of human consumption. They cited various Supreme Court judgments, including Synthetic & Chemicals Vs. State of U.P. and Bihar Distillery Vs. Union of India, which consistently held that the State's regulatory power stops with the denaturation of industrial alcohol. The State, represented by Mr. Vagyani, contended that denatured spirit could potentially be renatured and misused for human consumption, necessitating regulation. However, the Court reiterated the Supreme Court's stance that the State's power to regulate industrial alcohol ceases once it is denatured. The Court clarified that the State could only ensure that rectified spirit is not diverted or misused for potable purposes, but it could not regulate denatured spirit. The Court's order struck down the impugned rules and confirmed that denatured spirit falls under the exclusive control of the Union, not the State. Order: (a) Rules 23 to 62 of the Bombay Denatured Spirit Rules, 1959, are declared ultra vires and unconstitutional. (b) No license is required under the Maharashtra Prohibition Act for activities involving denatured spirit. (c) The State's power is limited to ensuring rectified spirit is not diverted for potable purposes. (d) The Writ Petitions are made absolute with no order as to costs.
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