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TMI Blog2003 (11) TMI 558X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the imposition of import fee on Beer vide Order 1-D(iii) of the Punjab Excise Fiscal Orders, 1932, amended from time to time, latest being notification dated 27.03.1996 which is impugned in the writ petition and for other consequential prayers. 4. Civil Appeal Nos. 2696 and 2697 of 2003 were filed by Penguin Alcohols (P) Ltd. and Another etc. against the State of Kerala and Others against the common judgment of the High Court of Kerala dated 06.04.2001 in Writ Appeal Nos. 3 and 10 of 2001 dismissing the appeal filed by them. 5. The original petitions were filed by appellants herein against Exhibit P1 notification issued by the State of Kerala enhancing the rate of import fee from Rs. 2/- per proof litre to Rs. 5/- on Indian Made Foreign Liquor (hereinafter referred to as "IMFL"). The import fee was initially levied under Government Order, G.O.(MS) No. 57/92/TD dated 31.12.1992. The learned Single Judge upheld the levy holding that it is a fee and regulatory in nature. The appellants preferred writ appeals, which were dismissed by the Division Bench by the impugned common order in Writ Appeal Nos. 3 and 10 of 2001. 6. In both the appeals, common questions arise for considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olesale trade in the State of Punjab. Under the rules, the licensee is required to obtain a licence in Form L-1, which is valid for one year. In addition to this under the Punjab Excise Fiscal Orders, 1932, the respondents is liable to pay duty/fee at the rates mentioned therein. As a result of this, the respondent has to pay excise duty/import fee as the case may be. Over and above this, there is an import fee which is levied by the State Government in exercise of its powers under Section 58 of the Act. According to learned counsel for the State of Punjab all these charges and levies are really a price for the privilege of carrying on the trade under the L-1 license as far as the privilege of importing alcohol into the State of Punjab. The impugned levy is under the Punjab Excise Act, 1914, which is a pre- Constitution Act. It is this Act which provides that no intoxicant shall be imported, exported or transported except after the payment of duty to which it may be liable under the Act. The words "duty to which it may be liable under this Act" were substituted by the words "duty of customs or excise to which it may be liable". This change was also brought about by the Government o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Court passed an order which read as under: "In the course of the argument, it was noticed that the principal argument on behalf of the respondents before the High Court, which was upheld by the High Court, was that the import fee, which is the subject matter of these proceedings, had been imposed by the State of Punjab without authority of law. The response on behalf of the State of Punjab before the High Court was that the right of the respondents to import beer into the State was privilege conferred by the State upon the respondents to which Article 301 had no application because the respondents had no right to trade in liquor de hors that privilege and that the import fee was the price for the privilege. In the course of the argument before us, we asked Mr. K.K. Venugopal, learned counsel for the State, to tall us what the source of power for thew imposition of the import fee was. Mr. Venugopal referred in reply to Section 18, 19, 34, 58 and 59 of the Punjab Excise Act, 1914. In other words, the contention of the State before us is that the import fee is a fee and the respondents are required to pay such fee to bring beer into the State." In compliance with the aforesaid orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is appeal is holding L-1 licence i.e. Wholesale and retail vend of foreign liquor to trade only. The said licence is given on fixed licence fee, which is subject to variation as per excise policy of the Government based on year to year. The State Government has incorporated as one of the terms and conditions on the L-1 holders to pay import fees also at the prescribed rate as per the Punjab Excise Fiscal Order, 1996. The respondent has been accepting the terms and conditions from 1992 onwards and acted on the same, the licence was renewed on yearly basis. 13. Similarly, under the provisions of the Punjab Liquor Permit & Pass Rules, 1932, the State Government issued permit in form L-32, in the case of import and the licensees are liable to pay permit fee at the prescribed rate. As already stated, the respondent has mixed up two different imposts. The respondent has referred to the duty paid under Rule 5 i.e. equivalent to Excise duty and fees under Order (1)(D) of the Punjab Fiscal Orders, 1932. As stated above, on imported goods by L-1 holder, there are two different and independent imposts in the shape of Excise duty under Rule 5 and import fee under Rule (1)(D) of Punjab Excise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de in paragraphs supra. 17. In my opinion, Articles 302 and 304A of the Constitution of India are not attracted to the present case as the imposition of import fee does not, in any way, restrict trade commerce and intercourse among the States. In my opinion, the permissive privilege to deal in liquor is not a "right" at all. The levy charged for parting with that privilege is neither a tax nor a fee. It is simply a levy for the act of granting permission or for the exercise of power to part with the privilege. In this context, we can usefully refer to Har Shankar and Ors. etc. etc. v. The Deputy Excise and Taxation Commissioner and Ors. etc. and Panna Lal and Ors. v. State of Rajasthan and Ors.. As noticed earlier, dealing in liquor is neither a right nor is the levy a tax or a fee. Articles 301-304 will be rendered inapplicable at the threshold to the activity in question. Further, there is not even a single judgment which upholds the applicability of Articles 301-304 to the liquor trade. On the contrary, numerous judgments expressly hold these Articles to be inapplicable to trade, commerce and intercourse in liquor. We can beneficially refer to the judgments in The State of Bomb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the learned counsel for the appellant/licensee, the power of the State to levy a tax or a fee should be traceable to the entries in the Seventh Schedule to the Constitution. Entry 51 of List II provides for a levy of duty of excise on alcoholic liquor for human consumption manufactured or produced in the State and countervailing duties at the same or lower rates of similar goods manufactured or produced elsewhere in India and, therefore, the State Legislature has no power to levy any countervailing duty on imported liquor in excess of the excise duty on liquor manufactured within the State. The State of Kerala imposes a countervailing duty on imported liquor which is equivalent to the excise duty paid by the manufacturers within the State. The State imposes an import fee in addition to the countervailing duty and the direct and immediate effect of the import fee is to favour local manufacturers by making the imported liquor costlier. He would further contend that Article 303(1) prohibits the State Legislature from taking discriminatory measures and Article 304A also prohibits the State from imposing such discriminatory levies. It is also submitted that the State Legislature has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undamental right. His right to import is referable to the import permit which he acquired on payment of the import fee. No further impediment has been created in the import of the liquor so that Article 301 is not attracted in relation to the payment of the import fee which was prior to getting his privilege of importing. The appellant/licensee having entered into a contractual relationship with the State obtained the privilege and enjoyed the benefit of it. It is not open to the petitioners to turn round subsequently and repudiate the obligations subject to which they obtained the privilege. Regulation in the interest of public health and order takes the case out of Article 301 and regulation for purpose of Article 301 is not confined to such regulations alone which will facilitate the trade. 21. An affidavit was also filed on behalf of the State of Kerala dated 16.04.2003 stating that the collection of import fee in the State of Kerala while issuing permit to import IMFL is referable to Sections 6 and 24 of the Abkari Act, 1977, and that it is the price payable by the grantee to the State for parting with the privilege of importing IMFL which is exclusively that of the State. Al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eavy expenses for regulating import of liquor into the State. Therefore, the import fee was increased from Rs. 2/- per proof litre to Rs. 5/- per proof litre in 1995. Even after the increase in the import fee, the import of liquor to the State was steadily increasing till 1999-2000. The affidavit now filed along with the Annexures gives us a clear picture of the levy of import fee while issuing permit to import IMFL. Before the High Court, the learned counsel of the appellants therein have raised only one contention that the imposition of import fee is not in the nature of regulatory fee. It was contended on behalf of the State that the levy is permissible and authorized under Sections 6, 7, 17 and 18 of the Act and that the import fee is the only fee realized from a firm which supplies liquor to the Kerala State Beverages Corporation to be supplied to other licensees in the State and that the levy of import fee is also well founded under the Act basically referable to the legislative Entries 8 and 66 of List III of the Seventh Schedule to the Constitution. The learned Single Judge and also the learned Judges of the Division Bench rejected the contention of the licensee and upheld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealt with in statute as also in the rules and involves a diverse range of separate licences, passes, permits and applications each of differing contained format and ambit. The import fee levied in the instant case is fully authorized by the 1914 Act and delegated legislation thereunder and is clearly intra vires. I have already listed in paragraphs above all the provisions authorizing the levy in question in the instant case which is mentioned in the additional affidavit of the State of Punjab. The provisions summarized above confer ample regulatory power upon the excise authority to regulate several activity related with liquor in any reasonable manner and in particular to regulate its import. The regulatory power includes power to levy a monthly fee in that regard such as the impugned import fee. Indeed levy for such fee to exclude and to keep out certain people from the liquor trade and to keep the number of persons participating in this trade within reasonable limits has been recognized by this Court in Har Shankar's case (supra) relying upon and quoting American decisions. 24. The statutory provision in question must be interpreted and read broadly and not narrowly. The appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contracts between the parties. The licensees voluntarily accepted the contracts. They fully exploited to their advantage the contracts to the exclusion of others. The High Court rightly said that it was not open to the appellants to resile from the contracts on the ground that the terms of payment were onerous. The reasons given by the High Court were that the licensees accepted the license by excluding their competitors and it would not be open to the licensees to challenge the terms either on the ground of inconvenient consequence of terms or of harshness of terms." As a matter of fact, the respondent is the only and the sole challenger of the instant levy of import fee. It is stated that no other liquor contractor or beer manufacturer or importer has challenged the import fee in Punjab at any point of time at any forum. The import fee on IMFL on rectified spirit was levied from the Year 1986 and at no time the respondent challenged the levy of import fee from 1986 onwards on IMFL and continued to import large quantities of beer and paid large sums of fee as per the prescribed rates. The writ petition was filed only in April, 1996. The respondent accepted the burden of this cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld not escape their contractual liability. This Court also further held that the establishment charges demanded are in the nature of price for parting with the privilege to permit manufacture and sale of liquor and the privilege exclusively rests with the Government. 29. The same effect is the judgment of this Court in the case of Assistant Excise Commissioner and Ors. v. Issac Peter and Ors. In the context of a liquor contract, this Court held as under: ".....We are, therefore, of the opinion that in case of contracts freely entered into with the State, like the present ones, there is no room for invoking the doctrine of fairness and reasonableness against one party to the contract (State), for the purpose of altering or adding to the terms and conditions of the contract, merely because it happens to be the State. In such cases, the mutual rights and liabilities of the parties are governed by the terms of the contracts (which may be statutory in some contracts are entered into pursuant to public auction, floating of tenders or by negotiation. There is no compulsion on anyone to enter into these contracts. It is voluntary on both sides. There can be no question of the State powe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate is neither excise duty nor licence fee but it is the price of the privilege. 36. In the case of State U.P. and Ors. v. Sheopat Rai and Ors. 1994 Supp (1) SCC 8 held that the term 'licence fee' in the context of the U.P. Excise Law connotes the idea of it being the consideration in money received by the Government from a private person by grant of a licence (contract) for parting in such person's favour, its exclusive privilege or right of carrying on certain activities in respect of country liquor or drugs under 'auction system' in public auctions. 37. In the case of State of Haryana and Ors. v. Lal Chand and Ors., AIR 1984 SC 1326, this Court has held that the licence fee is a price for acquiring such privilege and one who makes a bid for the grant of such privilege with a full knowledge of the terms and conditions attaching to the auction cannot be permitted to wriggle out of the contractual obligations arising out of the acceptance of his bid, by a petition under Article 226. 38. State of Punjab v. Dial Chand Gian Chand & Co. AIR 1983 SC 743 is also a case arising under the Punjab Intoxicants Licence and Sale Order, 1956. This Court held that the writ jurisdiction of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e privilege price through the process of licensing and it is not excise duty." "The concept of excise duty on production and manufacture as understood in the Central Excise Act cannot be equated in the case of excise duty under the Abkari Act since the manufacture and the sale of liquor are the exclusive privilege of the State and the State, by the process of licensing, is parting with the said privilege and what is charged by the State is only the privilege price through the process of licensing the price and it is not excise duty." 42. The above rulings are amongst the catena of cases on the point that the rights are vested in the State which it may part with for consideration. 43. I have already dealt with the concept of contractual relationship between the State and the licensee whereunder the licensee having obtained a privilege and enjoyed the benefit of it, it is not open to the licensees to turn round subsequently and repudiate the obligations attaching with the obtained privilege. The following are the cases on the point. 44. In the case of State of Haryana and Ors. v. Jage Ram and Ors. AIR 1980 SC 2018, this Court held that the bids in respect of country liquor vends ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities were in their very nature and essence extra-commercium although they might appear in the trappings of trade. They were considered to be a sinful and pernicious vice by the ancient seers and law-givers of India and have been deprecated by the laws of England, Scotland, United States of America and Australia. The Constitution-makers of India, out to create a welfare State, could never have intended to raise betting and gambling to the status of trade, business, commerce or intercourse. The petitioners, therefore, had no fundamental right under Article 19(1)(g) or freedom under Article 301 of the Constitution in respect of their prize competitions that could be violated and the validity of the impugned act, in pith and substance an Act relating to gambling, did not fall to be tested by Articles 19(6) and 304 of the Constitution" 50. In the case of Fatehchand Himmatlal and Ors. etc. v. State of Maharashtra, this Court held as follows: "A meaningful, yet minimal analysis of the Debt Act, read in the light of the times and circumstances which compelled its enactment, will bring out the human setting of the statute. The bulk of the beneficiaries are rural indigents and the rest ur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om of movement or passage of commodities from one par of the country to another. The progress of the country as a whole also requires free flow of commerce and intercourse as between different parts, without any barrier. This freedom of trade, commerce and intercourse throughout the country without any 'State barriers' is not confined to inter-State trade as well. In other words, subject to the provisions of Part XIII, no restrictions can be imposed upon the flow of trade, commerce and intercourse, not only between one State and another, but between any two points within the territory of India whether any State border has to be cross or not. It is now well settled that the regulatory measures or measures imposing compensatory taxes do not come within the purview of the restrictions contemplated by Article 301. The regulatory measures should, however, be such as do not impede the freedom of trade, commerce and intercourse. It cannot be said that the instructions conveyed by the State Government by the impugned teleprinter message imposing the requirement for the making of an endorsement by the Deputy Marketing Officer or the Senior Marketing Officer or the physical verification of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ression 'reasonable' precedes 'restrictions' and a further check is provided by the proviso thereto. Therefore, before Article 304 comes into play, it has to be held that the prohibition introduced by the amendment on movement and transport of any particular item amounts to a restriction. Any prohibition on movement of any article from one State to another has to be examined with reference to the facts and circumstances of that particular case - whether it amounts to regulation only, taking into consideration the local conditions prevailing, the necessity for such prohibition and what public interest is sought to be served by imposition thereof." 56. In the case of State of Bihar and Ors. v. Harihar Prasad Debuka etc. AIR 1989 SC 1119, this Court observed thus: "In the instant case what is being insisted is a permit disclosing particulars of the goods to be transported. Article 304(b) clearly permits the State legislature to impose such a reasonable restriction on the freedom of trade, commerce and intercourse with or within that State as may be required in the public interest. The word 'with' involves an element having its sit us in another State. It cannot be therefore said tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of reference made by a three Judge Bench of this Court is as to whether Article 301 of the Constitution of India (hereinafter referred to as "the Constitution") will have any application in relation to potable liquor the business whereof is said to be res extra commercium; in view of the decisions of this Court in Cooverjee B. Bharucha v. The Excise Commissioner & The Chief Commissioner, Ajmer, and Ors., [(1954) SCR 873]; The State of Bombay v. R.M.D. Chambarbaugwala [(1957) SCR 874]; Har Shanhar and Ors. v. The Deputy Excise & Taxation Commissioner and Ors., and Khoday Distilleries Ltd. and Ors. v. State of Karnataka and Ors. 60. These appeals arise out of judgments and orders passed by Punjab and Haryana High Court and Kerala High Court. The State of Punjab imposed tax on import of potable liquor manufactured in other States. The State of Kerala also imposed a similar levy. The Punjab and Haryana High Court by its judgment dated 17.01.1997 passed in Writ Petition (Civil) No. 5358 of 1996 quashed the notification dated 27.03.1996 imposing levy of import duty by the State of Punjab in exercise of its powers conferred upon it under Sections 31, 32 and 58 of the Punjab Excise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied not as a measure of tax but as a part of regulation on the trade. The learned counsel further contended, although such a stand has not been taken by the State before the High Court, but having regard to the well-settled principle of law as laid down by this Court and referred to hereinafter, the State can impose such duty as a price for parting with its exclusive privilege. 64. In support of the contentions the learned senior counsel appearing for the State of Punjab and that of Kerala relied upon the decisions of this Court in the cases of Har Shankar (supra), Nashirwar and Ors. v. State of Madhya Pradesh and Ors., State of Orissa and Ors. v. Harinarayan Jaiswal and Ors., State Bank of Haryana and Ors. v. Jage Ram and Ors., State of Andhra Pradesh v. Y. Prabhakara Reddy, State of U.P. and Ors. v. Sheopat Rai and Ors. 1994 Suppl. (1)SCC 8, State of Haryana and Ors. v. Lal Chand and Ors., State of Punjab v. Dial Chand Gian Chand and Company, Solomon Antony and Ors. v. State of Kerala and Ors. (2001) 3 SCC 694, Khoday Distilleries Ltd. and Ors. (supra) and Government of Maharashtra and Ors. v. Deokar's Distillary JT 2003 (3) SC 86. 65. Mr. Mohan Jain, learned counsel appearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Article 14 of the Constitution. Reliance in this behalf has been placed on State of M.P. and Ors. v. Nandlal Jaiswal and Ors. (5) The Constitution Bench of this Court in Krishna Kumar Narula v. The State of Jammu and Kashmir and Ors. having clearly laid down that trade in liquor would come within the purview of Article 19(1)(g) of the Constitution, the State can only impose a reasonable restriction in terms of Clause (6) of Article 19 thereof. In Khoday Distilleries Ltd. (supra), this Court haying clearly held that when a licence is granted, persons similarly situated cannot be discriminated against which would clearly lead to the conclusion that not only a fundamental right in terms of Article 14 of the Constitution but also other constitutional rights including those contained in Part XIII of the Constitution are available in relation to trade in liquor. (6) In Kalyani Stores (supra), H. Anraj v. Government of Tamil Nadu and State of Madhya Pradesh v. Bhailal Bhai and Ors. this Court having clearly held that Article 301 of the Constitution would be applicable also in relation to obnoxious trade, there is no reason as to why the said decisions shall be departed from. (7) Keepin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted. 3. In the said Orders in order 1-B- (a) for the words "rupees three" the words "rupees two" shall be substituted; and (b) for Clause (iii) to the proviso, the following clause shall be substituted namely:- "(iii) the Indian Made Beer shall be at the rate of thirty-eight paise per bulk litre." 4. In the said orders in order 1-D, for item (iii), the following item shall be substituted namely:- "(iii) rupees four and sixty paise per bulk litre." II. "S.R.O. No. 330/96. In exercise of the powers conferred by sections 6, 7, 17 and 18 of the Abkari Act, 1 of 1077 and in modification of notification issued under G.O. (p) No. 24/94/TD dated 3rd March, 1994 and published as S.R.O. No. 256/94 in the Kerala Gazette Extraordinary No. 180 dated 3rd March, 1994, as subsequently amended, the Government of Kerala hereby direct that the import and export fees, the excise duty and luxury tax under the said sections shall be levied on the following kinds of liquors manufactured in the State and exported outside the State under bond in force or manufactured elsewhere in India and imported into the State by land, air, or sea under bond, at the rates mentioned against each kind of liquor. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 3 per bulk litre IV, Medicated wine and similar preparations but not including preparations on which duty is leviable under the Medicinal and toilet preparations (Excise Duties) Act, 1955 Rs. 12 (Rupees twelve only) per proof litre Published in K.G. Ex. No. 379 dt. 29.3.1997 as S.R.O. No. 210/97 Explanation:-Where any liquor is chargeable with duty at a rate depending on the value of the liquor, such value shall be the value at which the Kerala State Beverages (Manufacturing and Marketing) Corporation Ltd., purchases such liquor from the suppliers and in case any such liquor is not purchased by the Kerala State Beverages (Manufacturing and Marketing) Corporation, such value shall be the value fixed by the Commissioner. This notification shall come into force on 1st day of April, 1996." 69. Before embarking upon the questions raised in these appeals, the relevant provisions of the Punjab Act may be noticed which run thus:- Section 3.(9) "Excise revenue" means revenue derived or derivable from any payment, duty fee, tax, confiscation, or fine imposed or ordered under the provisions of this Act or of any other law for the time being in force relating to liquor or intoxicating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Section 21. Provided as follows:- (i) duty shall not to be so imposed on any article which has been imported into India and was liable on importation to duty under the Indian Tariff Act, 1894, or the Sea Customs Act, 1878. Explanation:- Duty may be imposed under this, section at different rates according to the places to which any excisable article is to be removed for consumption, or according to the varying strength and quality of such article. Section 32. Manner in which duty may be levied:-Subject to such rules regulating the time, place and manner as the Financial Commissioner may prescribed such duty shall be levied rateably, on the quantity of exciseable article imported, exported, transported, collected or manufactured in or issued from a distillery brewery or warehouse; Provided that duty may be levied:- (a) on intoxicating drugs by an acreage rated levied on the cultivation of the hemp plant or by a rate charged on the quantity collected. (b) On spirit or beer manufactured in any distillery established or any distillery or brewery licensed, under this Act in accordance with such scale of equivalents calculated on the quantity of materials used or by the degree of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e such security for the observance of the terms of his licence, or to make such deposit in view of security, as such authority may think fit. Section 58. Power of State Government to make Rules: (1).... (2) in particular and without prejudice to the generality of the foregoing provision, the State Government may make rules:- (d) regulating the import, export, transport or possession of any intoxicant or Excise bottle and the transfer, price or use of any type or description of such bottle. (e) regulating the period and localities for which and the persons or classes of persons to whom licenses, permits and passes for the vend by wholesale or by retail of any intoxicants may be granted and regulating the number of such licences which may be granted in any local area; (f) prescribing the procedure to be followed and the matters to be ascertained before any licence is granted for the retail vend for consumption on the premises. Section 59. Powers of Financial Commissioner to make rules:- The Financial Commissioner may by notification make rules:- (d) prescribing the scale of fees or the manner of fixing the fees, payable in respect of any licence, permit or pass or in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or XXX (2) The luxury tax on liquor or intoxicating drugs shall be levied:- (i) in the case of any liquor in the form of a fee for licence for the sale of the liquor and in the form of a gallonage fee or vending fee, or in any one of such forms; and; (ii) in the case of an intoxicating drug, in the form of a fee for licence for the sale of the intoxicating drug. (3) The duty of excise under Sub-section (1) and the luxury tax under Sub- section (2) shall be levied at such rates as may be fixed by the Government from time to time, by notification in the Gazette, not exceeding the rates specified below:- (1) Duty of excise Maximum rates (i) Duty of excise on liquors (Indian made) Rs. 200 per proof litre or an amount equal to 200 per cent of the value of the liquor. (ii) Duty of excise on intoxicating drugs Rs. 1 per gram or Rs. 933.10 per seer. (iii) Duty of excise in the form of tax on trees tapped for toddy Rs. 50 per tree per half-year or part thereof (2) Luxury tax: (a) When levied in the form of a fee for licence for sale of foreign liquor - (i) For licence for sale of foreign liquor in wholesale Rs. 1 5000 for a year or part thereof (ii) For licence for sale of forei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h conditions; and (d) shall be in such form and contain particulars - as the Government may direct either generally, or in any particular instance in this behalf." 72. The State, of Kerala raised a contention that the imposition of levy is referable to Entry 66 of List II of the Seventh Schedule to the Constitution. An additional affidavit was filed before the Kerala High Court wherein it was averred that such a levy has been imposed also by way of a regulatory fee. No plea whatsoever has been raised that such a levy is towards a price or a part of price for parting with exclusive privilege. The High Court accepted plea of the State that the levy is by way of regulatory tee in relation whereto doctrine of 'quid pro quo' has no application. 73. Before the High Court of Punjab and Haryana although a plea was raised that the impost was by way of a price for parting with the exclusive privilege but in its impugned judgment the High Court rejected the same having regard to the provisions contained in Section 33A of the Punjab Act. 74. The Excise Acts referred to hereinbefore seek to regulate trade and business in liquor. They have their origin before coming into force of the Governme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but not including medicinal and toilet preparations containing alcohol or any substance included in Sub-paragraph (b) of this entry." 76. Legislative competence of the State to levy any fee is, therefore, limited to levy of countervailing duty. In other words, any levy on import can not exceed the excise duty levied on the manufacturers of the State. The State, therefore, cannot levy any duty in addition to the countervailing duty. The notification refers to excise duty and countervailing duty, which in terms of Section 3(6-B) of the Punjab Act mean any such excise duty or countervailing duty as the case may be, as is mentioned in Entry 51 of List II of the Seventh Schedule to the Constitution. The State, therefore, cannot levy any import fee over and above the excise duty/countervailing duty, having regard to the said definition. Sections 17 and 18 of the Abkari Act which are in pari materia with Sections 31 and 32 of the Punjab Act are referable to Entry 51 alone. As Entry 51 puts an embargo on the State to make a legislation, there cannot be any gainsaying that any levy in terms of Sections 17 and 18 of the Abkari Act would be subject thereto. 77. Can the levy be said to be va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 78 SC 851). On the same analogy, a legislation which is found to be fraud on the Constitution, cannot, inter alia, be upheld on any other ground. Entry 8 of List II of the Seventh Schedule to the Constitution does not permit the State to levy a fee on import of liquor. It deals only with production, manufacture, possession, transport, purchase, and sale of intoxicating liquors and nothing else. Entry 8 of List II, thus, does not speak of import or export. Its purpose is to regulate and not impose any statutory impost. The State in exercise of its delegated powers cannot do what would constitutionally be impermissible. 81. A subsidiary question which arises for consideration is as to whether the State of Punjab, having regard to Section 33A of the Punjab Act, could levy such duty. In Sub-section (1) of Section 33A provision has been made permitting the State to continue to levy any duty which it had lawfully been levying immediately before the commencement of the Constitution. The said provision is in tune with Article 305 of the Constitution, therefore, the same calls for a strict construction. Sub-section (3) of Section 33A is couched in negative language by reason whereof power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jit P. Gohil and Ors. [JT 2003 (2) SC 335]. In the said seven Judge Bench decision, this Court observed thus: "On an analysis of the various Abkari Acts and Excise Acts, it appears 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 possession and use. Not all but some of the 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." 85. In view of the foregoing discussions, I am of the opinion that the impugned levy cannot be sustained. Re: Questions (ii) and (in) What is Res-Extra-Commercium: 86. In Black's Law Dictionary, Fifth Edition, 'Res' has been defined as follows: "By "res", according to the modern civilians, is meant everything that may form an object of rights, in op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he word commercial, usually attached to it. As it is hardly likely that the courts intended to say that commerce is intercourse in the sense in which it is defined "communication between persons or places"; Cent. Dict.: it is probable that the word was not intended to be used to express more than such intercourse as is connected with traffic and transportation with foreign countries or between the States." 90. Dealing in liquor or for that matter in lottery, tobacco is not prohibited under the Constitution. On the other hand, in the constitutional schemes itself Parliament or the State Legislature has been conferred power to regulate the said trade like any other trade. In fact India has entered into trade agreements to deal in liquor with other sovereign countries. India has entered into International treaties in the matter of foreign investment in liquor. Trade in liquor finds place in World Trade Organization (WTO) and General Agreement on Trade and Tariff (GAIT). In terms of the WTO and GATT guidelines have been laid down as regards import and export of potable liquor. India, as a signatory to WTO and GATT, is expected to follow the said guidelines. It is expected to remove al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatute, cannot turn round and contend that it will exercise its power of exclusive privilege even though it had granted licence in terms of the statute. Having regard to the constitutional scheme the power of the State to undertake trade and business is referable to Article 298 of the Constitution. The duties, functions and responsibilities of a Government in a democracy are different from monarchism. Rights and privileges of a monarch cannot be equated with an elected Government in a democratic set-up. If the power of the Government in other words to deal in trade or commerce, be it liquor or any other commodity, can only be traced to Article 298 of the Constitution, it goes without saying that the same would be subject to all constitutional limitations applicable in relation thereto. The State while exercising its constitutional power under Article 298 of the Constitution cannot itself be an extra constitutional authority so as to violate the constitutional provisions. It like any other trader must confine itself within the four corners of the statutes governing the field which are enacted in terms of one entry or the other made in any of the three lists to the Seventh Schedule o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thus, can be claimed by a State in a 'no right' situation, namely, when citizen is not permitted to carry on trade. But once the State takes a decision to part with its privilege, it cannot make any discrimination whatsoever. Dealing in liquor by the persons in whose favour licences have been granted in terms of the statutory, enactments derive a right therefore which, cannot be said to be "Res-Extra Commercium" 95. Now comes the question as to how far and to what extent, if any, the fundamental and other rights of a citizen could be available in the matter of trade in potable liquor. Article 19(1)(g) guarantees that all citizens shall have the right to practice any profession or to carry on any occupation, trade or business. However, in terms of Article 19(6) this right can be restricted by a statute imposing reasonable restrictions. A combined reading of Clauses (1) and (6) of Article 19 makes it clear that a citizen has a fundamental right to carry on any trade or business and the State can make a law imposing reasonable restrictions on the said right in the interest of the general public. It is, therefore, obvious that unless dealing in liquor is excluded from 'trade or busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impost in terms of an executive order having no authority of law would be illegal imposition. 100. This principle has been affirmed by a Constitution Bench of this Court in Krishna Kumar Narula v. State of Jammu and Kashmir and Ors. After discussing all previous decisions, Subba Rao, C.J., held that "a scrutiny of these decisions does not support the contention that the court held that dealing in liquor was not business or trade. They were only considering the provisions of the various Acts which conferred a restricted right to do business. None of them held that a right to do business in liquor was not a fundamental right". It was observed that "If the activity of a dealer, say, in ghee is business; then how does it cease to be business if it is in liquor. Liquor can be manufactured, brought or sold like any other commodity. It is consumed throughout the World though some countries restrict or prohibit the same on economic or moral grounds". It was further held that "dealing in liquor is business and a citizen has a right to do business in that commodity; but the State can make a law imposing reasonable restrictions on the said right, in public interests." 101. In R.M.D. Chamarb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke any discrimination and its acts must be lair and reasonable. [See Nandlal Jaiswal (supra)] (v) The State's right is absolute when a complete prohibition is imposed and at that stage the State can part with its exclusive privilege in any manner it likes and it is also entitled to take any measures for having the best price. [See Har Shankar (supra)]. 104. In Khoday Distilleries Ltd. (supra) at pages 608-609, a Constitution Bench referred to some of the decisions as referred to hereinbefore and summed up its findings [para 60(a)(b)(e)(f)(g)]: "(a) The rights protected by Article 19(1) are not absolute but qualified. The qualifications are stated in Clauses (2) to (6) of Article 19. The fundamental rights guaranteed in Article 19(1)(a) to (g) are, therefore, to be read along with the said qualifications. Even the rights guaranteed under the Constitutions of the other civilized countries are not absolute but are read subject to the implied limitations on them. Those implied limitations are made explicit by Clauses (2) to (6) of Article 19 of our Constitution. (b) The right to practise any profession or to carry on any occupation, trade or business does not extend to practising a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) expressly or by necessary implication fundamental right to deal in any goods is accepted. Only exception which was made are those commodities, business of which is inherently noxious and pernicious and is condemned by the civilized society. It has sought to lay down the law that there cannot be a business in crime. 106. Dealing in a commodity which is governed by a statute cannot be said to be inherently noxious and pernicious. A society cannot condemn a business nor there exists a presumption in this behalf if such business is permitted to be carried out under statutory enactments made by the legislature competent therefore. The legislature being the final arbiter as to the morality or otherwise of the civilized society has also to state as to business in which article (s) would be criminal in nature. The society will have no say in the matter. The society might have a say in the matter which could have been considered in a Court of law only under common law right and not when the rights and obligations flow out of statutes operating in the field. Health, safety and welfare of the general public may again be a matter for the legislature to define and prohibit or regulate by le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wever, has not been imposed. Once a licence is granted to carry on any trade or business can it be said that a person is committing a crime in carrying on business in liquor although he strictly complies with the terms and conditions of licence and the provisions of the statute operating in the field? If the answer to the said question is to be rendered in affirmative it will create havoc and lead to anarchy and judicial vagaries. When it is not a crime to carry on such business having regard to the fact that a person has been permitted to do so by the State in compliance with the provisions of the existing laws, indisputably he acquires a right to carry on business. Even in respect to trade in food articles or other essential commodities either complete prohibition or restrictions are imposed in the matter of carrying on any trade or business, except in terms of a licence granted in that behalf by the authorities specified in that behalf. The distinction between a trade or business being carried out legally or illegally having regard to the restrictions imposed by a statute would have, therefore, to be judged by the fact as to whether such business is being carried out in complian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rimination may be in between persons and persons, persons and State and State and State. 112. Can a State which exercises its right to create monopoly, prevent another State to export or import its product? If in between two States such discriminations are not possible, a discrimination inter se between licensees of two States would also not be permissible. Such discrimination would also not be permissible between a State and a person carrying on similar trade or commerce in one State vis--vis a person or State carrying on business in another State, 113. Once the regulations restricting the right to carry on business in potable liquor is attributed to reasonable restrictions and public interest clause, contained in Clause (6) of Article 19 of the Constitution, the fundamental right to carry on trade under Article 19 is conceded. Once such a right is conceded, it cannot be said that although a person has a Fundamental Right to carry on trade or business for the purpose of Article 19(1)(g), subject to imposition of reasonable restrictions by a law made in terms of Clause (6) of Article 19, he does not have such a right in terms of Article 301 of the Constitution or for that matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regulation of trade, commerce or revenue to one unit over another: Provided also that nothing in this section shall preclude the Federal Parliament from imposing by Act restrictions on the freedom of trade, commerce and intercourse among the units in the interests of public order, morality or health or in cases of emergency." 116. The marginal note appended to Sir B.N. Rau's Clause 17 to the effect "Freedom of trade, commerce and intercourse among the units" is clearly suggestive of the fact that Section 92 of the Australian Constitution provided for a comparable provision vis--vis other Constitutions. It is also beneficial to notice that Sections 92 and 99 of the Australian Constitution confer different rights and the same are independent of each other. Trade, commerce and intercourse as noticed hereinbefore are of wide amplitude. The term "commerce" is wider than trade. 117. In United States v. Patterson [55 Fed.Rep. 605 at 639], it is held; "The word "commerce" is undoubtedly, in its usual sense, a larger word than "trade", in its usual sense. Sometimes "commerce" is used to embrace less than "trade", and sometimes "trade" is used to embrace as much as "commerce". 118. An inh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticles 302 and 303 categorically state that there shall be no discrimination between one State and the other but restrictions inhere in such liberty as would appear from clause 2 of Article 303 of Constitution, if a situation stipulated therein arises for consideration. In other words, discrimination is at the heart of this Chapter. By reason of the said provision, the State is prohibited from imposing a tax without making any discrimination whatsoever so as to impede free flow of inter- State or intrastate trade. The State, however, is entitled to impose reasonable restrictions as also levy tax in public interest. But the same indisputably would be subject to the conditions laid down in Articles 303 and 304 of the Constitution, 119. The precise question which arises for consideration is as to whether a trade in liquor would come within the purview of trade, commerce and intercourse, within the meaning of Article 301 of the Constitution. In the earlier part of this judgment I have considered the difference between a trade to which a citizen has an absolute right and a trade where no such absolute right exists being dangerous or obnoxious; but once such trade is permitted in terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titution Bench an argument was advanced to the effect that Article 301 is circumscribed by Article 303 but the same was not accepted. Gajendragadkar, J. (as he then was) held at pages 843-844 as follows: "In drafting the relevant Articles of Part XIII the makers of the Constitution were fully conscious that economic unity was absolutely essential for the stability and progress of the federal policy which had been adopted by the constitution for the governance of the country. Political freedom which had been won, and political unity which had been accomplished by the Constitution, had to be sustained and strengthened by the bond of economic unity. It was realised that in course of time different political parties believing in different economic theories or ideologies may come in power in the several constituent units of the Union, and that may conceivably give rise to local and regional pulls and pressures in economic matters. Local or regional fears or apprehensions raised by local or regional problems may persuade the State Legislatures to adopt remedial measures intended solely for the protection of regional interests without due regard to their effect on the economy of the nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by law impose restrictions on such freedom in the public interest; and the said law can be made by virtue of any entry with respect where of Parliament has power to make a law. (4) The State also, in exercise of its legislative power, may impose similar restrictions, subject to the two conditions laid down in Article 304(b) and subject to the proviso mentioned therein. (5) Neither Parliament nor the State Legislature can make a law giving preference to one State over another or making discrimination between one State and another, by virtue of any entry in the Lists, infringing the said freedom. (6) This ban is lifted in the case of Parliament for the purpose of dealing with situations arising out of scarcity of goods in any part of the territory of India and also in the case of a State under Article 304(b), subject to the conditions mentioned therein. And (7) The State can impose a non-discriminatory tax on goods imported from other States or the Union territory to which similar goods manufactured or produced in that State are subject. 124. 'Commerce and intercourse' include trade in all its manifestations, Obstructions or impediments to the free flow of trade would be violative o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rictions imposed were reasonable and in the public interest. 127. In Anraj's case (supra) this Court considered Entry 34 of List II in terms whereof the State Legislature has been conferred power to enact Statutes on gambling. In Maruthi Agencies, Bangalore rep. by its Proprietor v. The State of Tamil Nadu and Ors., 1997(1) MLJ 589, it was held that in the event lotteries are organized by a State, sale of tickets thereof cannot be prohibited in other States on the ground that it is gambling and prohibited by List II. If trade in liquor like gambling or betting were not to be regulated by statutes it is difficult to comprehend as to why entries in respect thereof have been made in the Seventh Schedule to the Constitution. 128. The American decisions relied upon before this Court may not be held to have any application having regard to the fact that trade in liquor in the United States of America was completely prohibited at one point of time but the same was modified by reason of Constitution Twenty-first Amendment. Let me now take the case of 21st Amendment in US Constitution. In the Constitution of the United States, an express provision guaranteeing freedom from inter-State tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing effect: "1a. Appellants challenge the constitutionality of the Hawaii liquor tax, which is a 20% excise tax imposed on sales of liquor at wholesale. Specifically at issue are exemptions from the tax for certain locally produced alcoholic beverages. The Supreme Court of Hawaii upheld the tax against challenges based upon the Equal Protection Clause, the Import- Export Clause, and the Commerce Clause. In re Bacchus Imports, Ltd., 65 Haw 566, 656 P2d 724 (1982). We noted probable jurisdiction, 462 US 1130, 77 L.Ed 2d 1365, 103 S Ct 3109 (1983), and now-reverse." 133. White, J, speaking for the majority stated the law thus: "3. A cardinal rule of Commerce Clause jurisprudence is that "no State, consistent with the Commerce Clause, may 'impose a tax which discriminates against interstate commerce...by providing a direct commercial advantage to local business.'" Boston Stock Exchange v State Tax Comm'n, 429 US 318, 329, 50 L Ed 2d 514, 97 S Ct 599 (1977)(quoting Northwestern States Portland Cement Co. v Minnesota, 358 US 450, 458, 3 L Ed 2d 421, 79 S ct 357, 67 ALR2d 1292 (1959)), Despite the fact that the tax exemption here at issue seems clearly to discriminate on its face a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the State's right on economic protectionism it was said: "A finding that state legislation constitutes "economic protectionism" may be made on the basis of either discriminatory purpose, see Hunt v Washington Apple Advertising Comm'n, 432 US 333, 352-353, 53 L Ed 2d 383, 97 S Ct 2434 (1977), or discriminatory effect see Philadelphia v New Jersey, supra. See also Minnesota v Clover Leaf Creamery Co., supra, at 471, n 15, 66 L Ed 2d 659, 101 S Ct 715. Examination of the State's purpose in this case is sufficient to demonstrate the State's lack of entitlement to a more flexible approach permitting inquiry into the balance between local benefits and the burden on interstate commerce. See Pike v Bruce Church. Inc., 397 US 137, 142, 25 L Ed 2d 174, 90 S Ct 844 (1970). The Hawaii Supreme Court described the legislature's motivation in enacting the exemptions as follows: "The legislature's reason for exempting "ti root okolehao' from the 'alcohol tax' was to 'encourage and promote the establishment of a new industry,' S.L.H. 1960, c 26; Sen Stand Comm Rep No. 87, in 1960 Senate Journal, at 224, and the exemption of 'fruit wine manufactured in the State from products grown in the State' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellee Dias 40. If we were to accept that justification, we would have little occasion ever to find a statute unconstitutionally discriminatory. Virtually every discriminatory statute allocates benefits or burdens unequally; each can be viewed as conferring a benefit on one party and a detriment on the other, in either an absolute or relative sense. The determination of constitutionality does not depend upon whether one focuses upon the benefited or the burdened party. A discrimination claim, by its nature, requires a comparison of the two classifications, and it could always be said that there Was no intent to impose a burden on one party, but rather the intent was to confer a benefit on the other. Consequently, it is irrelevant to the Commerce Clause inquiry that the motivation of the legislature was the desire to aid the makers of the locally produced beverage rather than to harm out-of-state producers." 138. The learned Judge explained the application of 21st Amendment by posing the question: "Whether the interests implicated by a state regulation are so closely related to the powers reserved by the Twenty-first Amendment that the regulation may prevail, notwithstanding t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, J. in Pilkington v. Frank Hammond Pty. Ltd. (1974) 131 C.L.R. 124 interpreted Section 92 of the Australian Constitution in the following terms: "The section does not in terms speak of the private right of the individual to engage in trade, commerce, and intercourse among the States; it refers to trade, commerce and intercourse among the States as an entire and total concept and provides that it is to be 'absolutely free' in the sense in which this expression has been discussed in the decided cases. In saying so much the section protects the right of the individual to engage in inter- State trade, commerce and intercourse but it needs to be recognized that this protection is incidental to, and in a sense consequential upon, the protection which is given to the entire concept of inter-State trade, commerce and intercourse., including the various acts and transactions by which it is constituted." 142. Reference in this connection may also be made to North Eastern Dairy Co. Ltd. v. Dairy Industry Authority of New South Wales (1974-1975) 134 C.L.R. 559, at 615). In India, the constitutional guarantee under Article 301 of the Constitution is more extensive than either in United St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t process, subject the goods imported from other States to a discriminatory rate of taxation, i.e., a higher rate of sales tax vis-a-vis similar goods manufactured/produced within that State and sold within that State. Prohibition is against discriminatory taxation by the States. It matters not how this discrimination is brought about............. We find it difficult to appreciate how can the concept of classification be read into Clause (a) of Article 304 to undo the precise object and purpose underlying the clause. Shri Verma repeatedly stressed that the object underlying the impugned measure is a laudable one and that it seeks to serve and promote the interest of the State of Jammu and Kashmir which is economically and industrially an undeveloped State, besides being a disturbed State. We may agree on this score but then the measures necessary in that behalf have to be taken by the appropriate authority and in the appropriate manner. Part XIII of the Constitution itself contains adequate provisions to remedy such a situation and there is no reason why the necessary measures cannot be token to protect the edible oil industry in the State in accordance with the provisions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orth; it means freedom governed by law, as was pointed out in McArthur's case, Free love, on the contrary, means licence or libertinage, though, even so, there are limitations based on public decency and so forth. Free dinner generally means free of expense, and sometimes a meal open to any one who comes, subject however, to his condition or behavior not being objectionable. Free trade means, in ordinary parlance, freedom from tariffs. "Free" in Section 92 cannot be limited to freedom in the last mentioned sense. There may at first sight appear to be some plausibility in that idea, because of the starting-point in time specified in the section, because of the sections which surround Section 92, and because the proviso to Section 92 relates to customs duties. But it is clear that much more is included in the term; customs duties and other like matters constitute a merely pecuniary burden; there may be different and perhaps more drastic ways of interfering with freedom, as by restriction or partial or complete prohibition of passing into or out of the State. Nor does "free" necessarily connote absence of discrimination between inter-State and intra-State trade. No doubt conditions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, cannot be said to have any application in the instant case. The decisions in these cases were rendered in the fact situation obtaining therein. The licensees therein questioned the power of the State to hold auction by the State and/or they refused to comply with the terms and conditions of licence. In tact in Harshankar (supra) the Court on the factual matrix obtaining therein clearly came to the conclusion that the writ petition was not maintainable as thereby the licensees sought avoidance from compliance of contractual terms and licensing conditions and, thus, they were not entitled to any relief. The writ petitioners before the High Court had not questioned any of the terms and conditions of the licence. In Kerala case they are not even licensees at all. They are manufacturers of potable liquor, licences wherefor had been granted by other States. The State of Kerala has not parted any privilege in their favour. Even otherwise when the legislative competence of a State is in question, the same goes to the root of the jurisdiction. Once it is found that the State Legislature has exceeded its jurisdiction in imposing the impugned levy, the same being a fraud on the Constitutio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Constitution of India can be held to be inapplicable to the trade of liquor which is permitted by the State itself? 3. If Article 14 of the Constitution of India is applicable in the matter of grant of contract by the State, in exercise of its power under Article 298 of the Constitution, can it be said that another constitutional provision, namely, Article 301 would not be applicable? 4. Whether in interpreting a constitutional provision, the Court should take into consideration international treaties and covenants covering the subject-matter and having regard to the social milieu? 5. Whether Kalyani Stores (supra), having been rendered by a Constitution Bench, is it permissible for another coordinate bench to ignore the said decision relying on or on the basis of subsequent decisions which either had not discussed the said decision nor overruled the same? 158. The Punjab and Haryana High Court applied Kalyani Stores (supra) for striking down the provisions contained in Sections 16 and 31 of the Punjab Act, 1932. The Kerala High Court, however, dismissed the writ petition upholding the validity of Section 17 of the Kerala Abkari Act, 1902 on the sole ground that by reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid entry [See Commissioner of Sales Tax, M.P. v. Popular Trading Company, Ujjain. 163. In Indian Aluminium Company Ltd. etc. v. Assistant Commissioner of Commercial Taxes (Appeals) and Anr. etc. [(2001) 2 SCC 201] the expression 'that is to say' both in original Entry 11 and in the new Entry 67 has been held to have clearly indicated that the items mentioned therein were exhaustive. 164. It is, therefore, evident that import of liquor in terms of the licences granted under the provisions of a statute cannot be the subject- matter of regulation within the purview of Entry 8 of List II of the Seventh Schedule of the Constitution of India. 165. Furthermore, on a plain reading of Entry 51 no duty can be imposed on import of liquor over and above the countervailing duty. Ex-facie, therefore, the imposition of import duty on liquor is unconstitutional. 166. For determining the legislative competence reference to Directive Principles contained in Part IV of the Constitution of India may be proper (as was done in Welfare Association ARP Maharashtra and Ors. v. Ranjit P. Gohil and Ors. reported in 2003 (2) SCALE 288) but not when the constitutionality of a taxing statute is in question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the same. The Constitution of India or the State Legislatures do not state that trade in liquor ipso facto is totally prohibited. States of Punjab and Kerala have not adopted any policy of prohibition whether in whole or in part. 172. For imposing total prohibition the State must formulate a policy decision having regard to Article 47 of the Constitution of India, necessitating issuance of a declaration either through legislative process or through executive instructions. 173. For judging the validity of taxing statutes, Part IV of the Constitution or Article 47 will have no role to play. Recourse to Part IV or Part IVA of the Constitution can only be taken as regard interpretation of a legislative enactment for giving effect to objects and purport thereof and not for any other purpose. A statute imposing a levy or tax must not only satisfy the tests of Article 245 of the Constitution but also other provisions of the Constitution. 174. Trade in liquor is regulated by statutes and, thus, if it is carried out within the parameters of the regulatory provisions and subject to observance of the terms and conditions of the licence, it would be legal. All rights and obligations flow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on cannot be further restricted. (See Krishna Kumar Narula v. The State of Jammu, and Kashmir and Ors. AIR 1967 SC 1368). 179. With respect, I am of the opinion that constitutionality of a statute could not determined solely relying on or on the basis of the said maxim without any reference to the limitations contained in the Constitution. CASE LAWS - Analysis of: (A) Case Laws Where 'Res Extra Commercium' was applied: 180. In Chamarbaugwala (supra), this Court applied the doctrine of res extra commercium having regard to the obnoxious nature of trade but in subsequent decisions the said principle had been extended mechanically to trade of liquor without tracing the history as to whether Indian Made Foreign Liquor (IMFL) or the other expensive liquors imported from foreign country would fall in that category. No discussions have been made as to in which areas and in relation to which stratas of the society consumption of liquor was looked down upon. The fact that at different ages, at least in respect of liquor in higher echelons of the society drinks became a part of 'culture' was not taken into consideration. 181. For the purpose of determination of the issue, the Courts were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly stated therein "The regulatory measures should, however, be such as do not impede the freedom of trade, commerce and intercourse." 187. The said decision does go to show that validity of these regulatory measures are required to be considered on the constitutional anvil on its own force. 188. In State of Tamil Nadu v. Hind Stone etc. [AIR 1981 SC 711] validity of rule 8C of the Tamil Nadu Minor Mineral Concession Rules, 1959 came to be questioned. The said rule was made by the State in exercise of its power conferred upon it under Section 15 of the Mines and Minerals (Regulation and Development) Act, 1957. By reason of said rule lease of quarrying in respect of black granite was proposed to be granted only, in favour of any corporation wholly owned by the State. Such a power also exists in the Central Government under Section 17A of the 1957 Act. As the said rule had nothing to do with inter-State trade or commerce, it was held that the same was outside the purview of Article 301 and in any event would come within the purview of Article 305. 189. We are not at all concerned with the said question, as therein the Court was dealing with question of State monopoly created under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant therein filed a writ petition asking for a direction quashing the auction held on March 23, 1968 and secondly, they asked that the respondents be restrained from enforcing the obligations arising under the terms and conditions of the auction. 194. In the aforementioned backdrop, the Court distinguished K.K. Narula (supra) stating: "It was unnecessary in Krishna Kumar Narula's case (supra) to examine the question from this broader point of view, as the only contention bearing on the constitutional validity of the provision impugned therein was not permitted to be raised as it was not argued in the High Court. The discussion of the question whether a citizen has a fundamental right to do trade or business in liquor proceeded in that case, avowedly, from a desire to clear the confusion arising from the "different views" expressed by the two Judges of High Court. This may explain why the Court restricted its final conclusion to holding that dealing in liquor is business and the citizen has a right to do business in that commodity. The court did not say, though such an implication may arise from its conclusion, that the citizen has a fundamental right to do trade or business in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he game. It was held that therein there is only an element of chance in contrast to trade and commerce where there is an exchange of goods, production or properties or exchange of any article either by barter or money. The said principle would not apply herein. 199. Even in B.R. Enterprises (supra) lotteries were held to be 'goods' for the purpose of Article 298 being included in the expression 'trade and business'. Despite holding that Articles 301 and 304 of the Constitution of India were not applicable, it having realised that Section 5 of the Lotteries Act was without any guidelines read down the provisions thereof evidently to bring it within the purview of Articles 14 and 246 of the Constitution of India. 200. The reasoning in the aforesaid judgment in the case of B.R. Enterprises v. State of UP (supra) - (2 Hon'ble Judges) is contrary to and in conflict with the earlier decisions in the cases of (i) H. Anraj and Ors. v. State of Maharashtra (ii) H. Anraj v. State of Tamil Nadu, (iii) State of Haryana v. Suman Enterprises and Ors. 201. The Court noticed that in Krishna Kumar Narula, a Constitution Bench has held that a right to trade in liquor was business but committed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng comity in the judicial decisions but also to bring the law in conformity with the provisions of the Constitution. The fundamental rights conferred by our Constitution are not absolute. Article 19 has to be read as a whole. The fundamental rights enumerated under Article 19(1) are subject to the restrictions mentioned in Clauses (2) to (6) of the said article. Hence, the correct way to describe the fundamental, rights under Article 19(1) is to call them qualified fundamental right's. To explain this position in law, we may take the same illustration as is given in K.K. Narula case. The citizen has undoubtedly a fundamental right to carry on business in ghee. But he has no fundamental right to do business in adulterated ghee. To expound the theme further, a citizen has no right to trafficking in women or in slaves or in counterfeit coins or to carry on business of exhibiting and publishing pornographic or obscene films and literature. The illustrations can be multiplied. This is so because there are certain activities which are inherently vicious and pernicious and are condemned by all civilised communities. So also, there are goods, articles and services which are obnoxious and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Court explaining the doctrine of 'res-extra commercium' observed: (a) There cannot be a business in crime; (b) What is res-extra commercium would be trade or business in liquor when it is completely prohibited; (c) The State can create a monopoly to do the business itself or through an agency in terms of Article 19(6) or otherwise; (d) Restrictions and limitations on the trade or business in potable liquor can be both under Article 19(6) or otherwise; (e) When the State permits trade or business in the potable liquor with or without limitation, the citizen has the right to carry on trade or business subject to the limitations, if any, and the State cannot make a discrimination between the citizens who are qualified to carry on the trade or business. 209. The various rights granted in favour of a citizen under the provisions of the Constitution must be considered to be an amalgam of rights. Such rights are required to be given effect to and when a law is enacted or an executive instruction is issued prohibiting or regulating such rights, the conditions precedent therefore under the relevant Constitutional provisions individually and separately are required to be fulfille ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i and Ors., this Court has clearly held that Article 301 shall be applicable in relation to tobacco holding : "...There can be no doubt, therefore that even though it is the sale in Madhya Bharat of the imported goods that creates the liability to tax and not the import by itself, the trade and commerce as between Madhya Bharat and other parts of India is directly impeded by this tax..." (C) Some decisions where this court enforced the rights of a grantee: 215. In State of Bihar and Ors. v. Industrial Corporation Pvt. Ltd. and Ors. reported in 2003 (9) SCALE 169, it was held: "...Revenue being a subject-matter of legislation in terms of Entry 8 of List II of the Seventh Schedule of the Constitution of India, the recovery thereof must be made in terms of the provisions of a legislative Act enacted pursuant thereto arid not by reason of any executive fiat." 216. In Industrial Corporation Pvt. Ltd. (supra), it was further held : "In the present case, what we find is that before creating a demand of penal duty or penalty, there was no adjudication by any authority as regard to the breach committed by the respondents. We also find that no opportunity of any kind was offered to the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... language in Synthetics) whether in the garb of regulations a legislation which is in pith and substance, as we look upon the instant legislation, a fee or levy which has no connection with the cost or expenses administering the regulation, can, be imposed purely as a regulatory measure. Judged by the pith and substance of the impugned legislation, we are definitely of the opinion that these levies cannot be treated as part of regulatory measures..." 220. Yet again in State of UP and Ors. v. Jagjeet Singh and Ors. [JT 2003 (8) SC 40] a three-Judge Bench of this Court while interpreting Rule 34 of U.P. Excise Licenses (Tender-cum-Auction) Rules, 1991 vis--vis Para 179 of the Excise Manual enforced the right of the liquor vendors as regard remission of fee in terms thereof. The said decision is, therefore, an authority for the proposition that the rights contained in the statutory rules can be enforced in a given situation. Thus, it cannot said that the licensees have no enforceable right at all. 221. The statute lays down that the Acts regulating the trade would be lawful, if done in the manner and to the extent provided by the provisions thereof or any rules, regulations or order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to carrying on a business, total prohibition would not be regarded as unreasonable restriction. It is also trite that in such a situation, the greater the restriction, the more would be the need of strict scrutiny by the courts. [See Narendra Kumar and Ors. v. The Union of India and Ors. - 1960 (2) SCR 3751. 227. As regard application of strict scrutiny test see also Saurabh Choudhary v. Union of India [2003 (9) SCALE 272]. 228. In Municipal Corporation of the City of Ahmedabad and Ors. v. Jan Mohammed Usmanbhai and Anr., this court held: "15. Before proceeding to deal with the points urged on behalf of the appellants it will be appropriate to refer to the well-established principles in the construction of the constitutional provisions. When the validity of a law placing restriction on the exercise of a fundamental right in Article 19(1)(g) is challenged, the onus of proving to the satisfaction of the court that the restriction is reasonable lies upon the State. If the law requires that an act which is inherently dangerous, noxious or injurious to the public interest, health or safety or is likely to prove a nuisance to the community shall be done under a permit or a licence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling social values as also social needs which are intended to be satisfied by restrictions have to be borne in mind. (See State of U.P. v. Kaushaliya. (6) There must be a direct and proximate nexus or a reasonable connection between the restrictions imposed and the object sought to be achieved. If there is a direct nexus between the restrictions and the object of the Act, then a strong presumption in favour of the constitutionality of the Act will naturally arise. (See Kavalappara Akottarathil Kochuni v. State of Madras and Kerala, O.K. Ghosh v. E.X. Joseph." 231. The question has also been considered in Indian Handicrafts Emporium (supra) wherein this Court held : "In Narender Kumar and Ors. v. Union of India and Ors., this Court while interpreting the word 'restrictions' held as follows: "It is reasonable to think that the makers of the Constitution considered the word "restriction" to be sufficiently wide to save laws "inconsistent" with Article 19(1), or "taking away the rights" conferred by the Article, provided this inconsistency or taking away was reasonable in the interests of the different matters mentioned in the clause. There can be no doubt therefore that they intend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the meaning of Article 19(1)(g) of the Constitution of India can be extended to prohibition. Such prohibition may not be permissible in other cases, as noticed hereinbefore. The decisions of this Court clearly show that such a prohibition can be imposed by laying down a law only in the event that the trade in relation thereto is noxious ones and not otherwise. The distinction made by this Court in a large number of judgments is to be applied in proper perspective, insofar as the words trade in liquor will carry two different meanings - one in respect of trade which are noxious or pernicious and the others which are not. If it is held that Article 19 of the Constitution of India and for that matter any other provision of the Constitution of India including Article 301 will not have any application in relation to pernicious or obnoxious trade, the State will not be entitled to issue any prohibitory order in relation thereto. The very fact that this Court in no uncertain terms held that the trade in liquor can be prohibited being noxious or pernicious, it implicitly goes to show that prohibition of such a trading activity must be referable to legislations made in terms of Clause (6) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xclusive privilege set out in Section 22 was not denied. It was also not disputed that these privileges could be sold by public auction. Public auctions are held to get the best possible price. Once these aspects are recognised, there appears to be no basis for contending that the owner of the privileges in question who had offered to sell them cannot decline to accept the highest bid if he thinks that the price offered is inadequate. It will be seen from these observations that the validity of Clause (6) of the Order dated January 6, 1971 was upheld by this Court on the ground that having regard to the object of holding the auction, namely, to raise revenue, the Government was entitled to reject even the highest bid, if it thought that the price offered was inadequate. The Government was bound to accept the tender of the person who offered the highest amount and if the Government rejected all the bids made at the auction, it did not involve any violation of Article 14 or 19(1)(g). This is a self-evident proposition and we do not see how it can be of any assistance to the respondents." 241. In Har Shankar and Ors. v. Dy. Excise and Taxation Commissioner (supra), this Court held: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be applicable. 245. A 11-Judge Bench of this Court in T.M.A. Pai Foundation (supra), observed: "The question of whether there is a fundamental right or not cannot be dependent upon whether it can be made the subject-matter of controls." 246. It is relevant to note that two of the Hon'ble Judges were parties to Kalyani Stores (supra) as also to Krishna Kumar Narula (supra) which again being a Constitution Bench judgment wherein it has been held that a person has a fundamental right under Article 19(1)(g) to carry on trade or business in liquor. K.K. Narula (supra) has not been overruled. The same holds the field. In that view of the matter, we cannot ignore K.K. Narula (supra). 247. Furthermore, there exists a distinction between a fundamental right of a citizen to carry on business in noxious or pernicious trade under Article 19(1)(g) of the Constitution of India and freedom to carry on such trade through out the country without any hindrance or obstruction except in terms of reasonable regulations which may be made under Article 304(b) of the Constitution of India. ARTICLE 14 - SOME FACETS OF COUNTRY AND FOREIGN LIQUOR, DIFFERENCE BETWEEN: 248. The equality clause contain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided such classification was reasonable. (ii) Permitting the use or consumption of foreign liquor among members of the Military and Naval Officers does not offend Article 14, as the members of such Force could be regarded as a class by themselves, and such classification was reasonable. (iii) Restrictions, which are imposed for securing the objects, which are enjoined by the Directive Principles of State Policy in the Constitution, may be regarded as reasonable restrictions within the meaning of Clauses (2) and (6) of Article 19 of the Constitution of India. (iv) When restrictions imposed by a law on the exercise of Fundamental Rights are reasonable in respect of certain items and unreasonable in respect of certain other items, the law as a whole will not be void when the offending provisions are severable; the provisions of the law imposing unreasonable restrictions alone would be void, and those provisions which impose reasonable restrictions will be valid. (v) Prohibition of possession, consumption, buying or selling of wines by a law is a reasonable restriction upon the right to "acquire, hold and dispose of property" conferred by Article 19(1)(f) having regard to the Dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitation contained in the power of Parliament to invade the freedom of trade and commerce is confined to cases arising from scarcity of goods in any part of the territory of India and in the case of states, it must be justified on the grounds of public interest...the action of the states in invading the freedom of trade and commerce in the public interest is also made subject to the condition that any Bill affecting the freedom of trade and commerce shall have previous sanction of the President; otherwise the State would not be in a position to undertake such a legislation..." [See Constitutional Assembly Debates, 8th September, 1949, Vol.9, pp. 1124-25] 261. This point of view was supported by T.T. Krishnamachari who in reply to the strong stand taken by Pandit Bhargava stated that the entire Chapter provides the maximum possible amount of liberty for trade and commerce. It provides the maximum amount, of concession that can be given to maintain consistency with the future economic improvement of the country. But he strongly emphasized that, "the world has well-high come to the position when trade and commerce cannot run without control and some kind of direction by the governm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain level of legislative restrictions in order to ensure that the greater economic interests of the country are not hampered, to make provision for public interest, and to make way in times of emergencies. However, it was the very obvious intent of the Constitutional Framers to place only this minimum level of restrictions on the freedom of trade and business. Any restriction, not falling within these categories will be bad in law and will run contrary to the intention behind its presence in the Constitution. 267. External aids such as the Constitution Assembly Debates are an able guide for discerning the meaning behind a particular provision and in exactly what light their interpretation should take place. The debates in the Constitution Assembly would show how Article 301, on the one hand, is more near the Australian Constitution provisions contained in Sections 92 and 99 and different in material particulars from the American Constitution. 268. Sections 92 and 99 of the Australian Constitution along with Section 297 of the Government of India ct, 1935 served as a source for Article 301. These provisions in the Australian Constitution serve to guarantee an omnibus right of int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o several restrictions. It must not impose regulation in conflict with regulations of Congress. It must not, even in the absence of conflict, impose regulations if the Congress is deemed to have occupied the field. The states may not tax interstate and foreign commerce (See Powell, Thomas Reed, "Vagaries and Varieties in Constitutional Interpretation", p. 180). There is no Cooley law governing state taxation. Marshall, J. in Brown v. Maryland, a case involving state tax on selling imported goods wholesale, wherein the tax discriminated against selling goods of foreign origin, but Marshall did not base condemnations on that ground. He held that the Constitutional ban on state taxation of imports keeps the state from subjecting them to a general non- discriminatory tax, so long as they remain imports. (See Powell, Thomas Reed, "Vagaries' and Varieties in Constitutional Interpretation", p. 181) 275. As regard whether state laws regulating commerce could be valid, there was a series of tests evolved. The first was the dichotomy evolved by Marshall, J. between 'commerce' and 'police' powers. This evolved primarily because states had waged destructive wars on each other. A common diagno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ign of the British. There were no existing interprovincial duties or trade barriers. However, with the advent of provincial autonomy, it was considered necessary to have a statutory basis. Accordingly, Section 297 of the Government of India Act, 1935 prohibited Provincial governments from imposing barriers on trade within the country. They also could not levy tax, cess, toll or other due which discriminated between goods manufactured in one locality and similar goods manufactured elsewhere. [See Shiva Rao, B. "The Framing of India's Constitution", p.699]. 281. This trend of thought prevailed even at the stage of the framing of the Constitution. In the historical backdrop of the formation of an All- India Union, it was felt that such a Union would be meaningless and devoid of purpose if trade and commerce throughout India were not free. 282. Thus, from a single glance at the documents and debates that went into the framing of the Constitution, one can discern that this strand of thought was still extremely prevalent during the drafting of the Constitution. However, it was met with a worthy and able opponent- one that warned of the danger behind the taking such and absolute view. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pation, trade or business. Thirdly, and this is the result of the Constitution (First) Amendment Act of 1951 - it enables the State to carry on any trade or business either by itself or through a corporation owned or controlled by the State to the exclusion of private citizens wholly or in part." 288. It was observed: "As has been held by this Court in the case of Cooverjee v. The Excise Commissioner, etc. ([1954] S.C.R. 873) whether the restrictions are reasonable or not would depend to a large extent on the nature of the trade and the conditions prevalent in it." 289. It was categorically held: "With regard to the second point also we do not think that the learned Judges have approached the question from the proper stand point. There is undoubtedly a presumption in favour of the constitutionality of a legislation. But when the enactment on the face of it is found to violate a fundamental right guaranteed under Article 19(1)(g) of the Constitution, it must be held to be invalid unless those who support the legislation can bring it within the purview of the exception laid down in Clause (6) of the article. If the respondents do not place any materials before the Court to establ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty" and "Countervailing duty" are well-known concepts and are attracted in different situations, "Excise duty" is essentially a duty on manufacture of goods, and the taxable event is the manufacture of the excisable goods. "Countervailing duty", on the other hand, is imposed when excisable articles are imported into the State, in order to counterbalance the excise duty, which is leviable on similar goods if manufactured within the State. So far as countervailing duty is concerned, the incidence of the impost is on the import of the excisable articles, i.e., at the time of entry into the State." 302. In Aristocrat Agencies, Hyderabad v. Excise Superintendent, Hyderabad and Ors. [(2001) 1 SCC 496] in which Lahoti, J. was a member, this Court held: "In our opinion, the demand of differential amount of countervailing duty from the appellant, under the circumstances, was perfectly justified since demand was made on the basis of the duty as in force on the date of import of the consignment into the State. The duty was to be assessed and collected as in force at the time of obtaining the permit." 303. The terms "Excise Duty", "Countervailing Duty", "import duty" are not terms of art. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances. Others insist that judges be strictly bound by its words and by the historical record of what the framers of both the original text and the amendments intended. 307. A constitutional provision should always receive a fair, liberal and progressive interpretation so that its true objects might be promoted. By this it can fulfil the aspirations of the people at large. 308. To achieve the above goal, the Organic method of interpretation which is now universally accepted, requires us to see the present social conditions and interpret the Constitution in a manner so as to resolve the present difficulties. The social conditions existing at the time when the Constitution was made may be very different from the present conditions and hence if we interpret the Constitution from the angle of the Constitution makers we may arrive at a completely outdated and unrealistic view. As Justice Marshall observed in McCulloch v. Maryland, (1819) 4 Wheat 316 "this provision is made in a Constitution, intended to endure for ages to come, and consequently to be adopted to the various crises of human affairs". So "a Constitutional provision will not be interpreted in the attitude of a lexico ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rade leading to WTO has been noticed by a Constitution Bench of this Court in Islamic Academy of Education (supra) stating : " ...The right of a minority is a human right, so also the right of development. Thus, subject to reasonable restrictions, any unaided institution imparting professional courses may although exercise greater autonomy in the matter of management and determination of the fee structure, it will have a limited right so far as the right to admit students is concerned. T.M.A. Pai Foundation says that merit shall be the criteria. Right, of development finds place in WTO and GATT. It takes into consideration globalisation and opening up of economy. Excellence in professional education must be viewed from the economic interest in the country. In order to compete with the other developed countries, GDP of India should be around 15% instead of present rate of 5%. This can be achieved only by producing students of excellence, which can be achieved only by encouraging institutions of excellence imparting professional education to those who are meritorious. Giving encouragement to the students, having better merit will, thus, have a direct nexus with the economic and cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irectly, upon the manufacture, production or export of any merchandise." [See WTO in the New Millenium, 5ed., p.123]. 323. What is the rationale behind the imposition of a countervailing duty? 324. The economic rationale is very doubtful, as the effect of a countervailing duty is to make the product more expensive in the importing country. However, there has been some level of an explanation provided. Every time a tariff barrier is negotiated and agreed on, WTO members have reasonable expectations that they, can profit from the conditions of competition established in the market of the member, binding its tariff and gain market share. Moreover, members have 'paid' for the binding by promising to open up their market, that is, by binding their own tariffs. WTO members may not frustrate their promises by subsidising their domestic industry producing the product for which a tariff binding, has been previously offered. If this were allowed WTO members might lose the incentive to make concessions in the future. [See "The World Trade Organisation-Law, Practice and Policy" by Mitsuo Matsushita, Thomas J. Schoenbaum & Petros C. Mavroidis P.279]. 325. We need not go into the question in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as has been highlighted by this Court in M.V. Al Quamar v. Tsavliris Salvage (International) Ltd. and Ors. [(2000) 8 SCC 278] wherein it was opined: '43. The two decisions noted above in our view deal with the situation amply after having considered more or less the entire gamut of judicial precedents. Barker, J's judgment in the New Zealand case ((1980) 1 - NZLR 104 (NZSC)) very lucidly sets out that the court has to approach the modern problem with some amount of flexibility as is now being faced in the modern business trend. Flexibility is the virtue of the law courts as Roscoe Pound puts it. The pedantic approach of the law courts are no longer existing by reason of the global change of outlook in trade and commerce. The observations of Barker, J. and the findings thereon in the New Zealand case ((1380) 1 NZLR 104 (NZSC)) with the longish narrations as above, depicts our inclination to concur with the same, but since issue is slightly different in the matter under consideration, we, however, leave the issue open, though the two decisions as above cannot be doubted in any way whatsoever and we feel it expedient to record that there exists sufficient reasons and justification i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Continued Presence of South Africa in Namibia (South West Africa) notwithstanding Security Council Resolution 276 (1970), Advisory Opinion, I.C.J. Reports 1971, p. 31, para 53), and these principles are "not limited to the rules of international - law applicable at the time the treaty was concluded." 336. In People's Union for Civil Liberties and Anr. v. Union of India and Anr. it held : "...It is established that fundamental rights themselves have no fixed content, most of them are empty vessels into which each generation must pour its content in the light of its experience. The attempt of the court should be to expand the reach and ambit of the fundamental rights by process, of judicial interpretation. The Constitution is required to be kept young, energetic and alive". Public Policy: 337. The matter is covered by statutory provisions. The court cannot interpret on equality, freedom or commerce clauses of the Constitution in such a manner so as to take away the rights and obligations created under a statute on the ground of public morality or otherwise. When a statute permits a trade, morality takes a back seat as 'legislature' as contra distinguished from 'judiciary' is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Framers sought to achieve exist in the same form even today, bearing in mind the changes that have taken place due to the onslaught of globalization in the last 2 decades? All these factors have to borne in mind while an interpretation of the Constitution has to take place. 341. Opposition will rise to every conceivable change in socio-political- economic scenarios. Some persons are by nature, conservative in their subconscious evaluation of change. They refuse to acknowledge man's power to make his own history and they explicitly reject the notion that observed institutions of interaction are in themselves, products of intended human action. (See Buchanan, James A., "Sources of Opposition to Constitutional Reform", in McKenzie, Richard B., "Constitutional Economics", at p.22) Thus any change proposed to be made by the lawmakers or the judiciary will meet with a certain level of opposition, but that does not mean that age-old notions are clung to. The impact of changes in society also has to be reflected in the lawmaking process. 342. In interpretation of the provisions of the Constitution especially those provisions dealing with the regulation of economy of the nation must r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the text and structure of the Constitution and believes that its role is to strike down legislation that exceeds the commerce power (rather than relying on Congress to exercise self- restraint), it will need to apply some sort of administrable test to distinguish among classes of activities. It could seek to limit congressional power through a highly sensitive test for measuring the existence of "substantial effects on commerce," but the interconnectedness of our society and the fact that every act has "economic" consequences combine to suggest that, with respect to almost any activity, one could make a strong argument that its repetition all over the country probably will substantially affect commerce. If any activity can meet the substantial effects test, then the only other possibility may be the one the court pursued: limiting the category of activities that can be aggregated in the first place - for example, by focusing on "commercial" activities as Lopez appears to have done. If that proved unworkable in practice, then the Court may find itself unable, after all, to effectuate any substantive limits on Congress' commerce power - unless the Court takes the truly dramatic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... state commerce. The decision recognizes a debate as regard Congress' commerce power. Commenting upon Lopez, the learned Author States: "It is by no means certain, of course, that future applications of Lopez will turn entirely, or even predominantly, on deciding whether a regulated activity is sufficiently "commercial" to qualify for the "substantial effects" test and the aggregation principle. The Lopez Court did not expressly hold that only economic or commercial activities could be regulated by Congress whenever they meet these impact tests. Lopez relied ultimately on the more general meta- principle that upholding the Gun-Free School Zones Act as a regulation of activity substantially affecting commerce "would require us to conclude that the Constitution's enumeration of powers does not presuppose something not enumerated... This we are unwilling to do." 349. The American decisions are replete with conflicting views taken from time to time from Gibbons v. Ogden [22 US (9Wheat) 1 (1824) to NLRB v. Jones & Laughlin Steel Corp. [301 US 1 (1937) and Katzenbach v. McClung [379 US 294 (1964)] as to whether the Congress should be the sole authority to control the commerce clause or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Justice Holmes in his dissenting view, however, resented the economic theory governing the majority judgment. 354. In India even such a debate is necessary having regard to the provisions contained in Part XIII of the Constitution of India in terms whereof the State in relation to certain matters may have a regulatory or taxing power but the same would be subject to the commerce clause. PRECEDENT: 355. Doctrine of precedent is a well-accepted principle. A ruling is generally considered to be binding on lower courts and courts having a smaller Bench structure. "A precedent influences future decisions. Every decision is pronounced on a specific set of past facts and from the decision on those facts a rule has to be extracted and projected into the future. No one can foresee the precise situation that will arise, so the rule has to be capable of applying to a range of broadly similar situations against a background of changing conditions. It has therefore to be in general terms and 'malleable'... No word has one proper meaning, nor can anyone seek to fix the meaning of words for others, so the interpretation of the rule remains flexible and open-ended. (See Dias Jurisprudence, 5th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p Chand Das and Ors., But no decision can be arrived at contrary to or inconsistent with the law laid down by the coordinate bench. Kalyani Stores (supra) and K.K. Narula (supra) both have been rendered by the Constitution Benches. The said decisions, therefore, cannot be thrown out for any purpose whatsoever; more so when both of them if applied collectively lead to a contrary decision proposed by the majority. 361. In Halsbury's Laws of England (Fourth Edition) Vol. 26, at pages 297-298, Para 578, it is stated: " A decision is given per incuriam when the court has acted in ignorance of a previous decision of its own or of a court of coordinate jurisdiction which covered the case before it, in which case it must decide which case to follow Young v. Bristol Aeroplane Co. Ltd. (1944) 1 KB 718 at 729 (1944) 2 ALT ER 293 at 300. In Hudderfield Police Authority v. Waton (1947) KB 842 (1947) 2 All ER 193 or when it has acted in ignorance of a House of Lords decision, in which case it must follow that decision; or when the decision is given in ignorance of the terms of a statute or rule having statutory force Young v. Bristol Aeroplane Co. Ltd (1944) 1 KB 718 at 729 (1944) 2 All ER 293 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and it must be respected at all costs". 363. In State of Bihar v. Kalika Kuer @ Kalika Singh and Ors. [JT 2003 (4) SC 489], a Bench of this Court upon taking a large number of decisions into consideration observed : "Looking at the matter, in view of what has been held to mean by per incuriam, we find that such element of rendering a decision in ignorance of any provision of the statute or the judicial authority of binding nature, is not the reason indicated by the Full Bench in the impugned judgment, while saying that decision in the case of Ramkrit Singh (supra) was rendered per incuriam." 364. It was further opined: "...The earlier judgment may seem to be not correct yet it will have the binding effect on the letter bench of coordinate jurisdiction. Easy course of saying that earlier decision was rendered per incuriam is not permissible and the matter will have to be resolved only in two ways - either to follow the earlier decision or refer the matter to a larger Bench to examine the issue, in case it is felt that earlier decision is not correct on merits." 365. It is also trite that the binding precedents which are authoritative in nature and are meant to be applied shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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