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TMI Blog1979 (12) TMI 149X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose is different from the ordinary denatured spirit. The definition of alcohol under rule 12 includes both ordinary as well as specially denatured spirit. It is true that the stand taken by the Government in the earlier proceedings was different but that would not make any difference so long as the Government had a right to impose the levy. It has been found that after the addition of S. 24A by Act 30 of 1972, the Commissioner was entitled to accept payment for conferring the privilege which the State owned exclusively. The conditions relating to grant of a licence for issue of denatured spirit for industrial purpose are laid down in rule 4. Special conditions regarding licence in form F.L. 39, 40 and 41 are prescribed in rule 5. The appellants/petitioners having applied for and obtained licences in form F.L. 39 are bound to comply with the conditions. Act 5 of 1976 has been given retrospective effect as the levy imposed under Act 30 of 1972 was found to be illegal and unsustainable by the Allahabad High Court which was reversed by this Court by giving retrospective effect, the State has only restored the status quo enabling the collection of the levy validly made by Act 30 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing liquor which included denatured spirit and the levy of a licence fee and vend fee constituted consideration for permitting the appellants to carry on wholesale trade of the denatured spirit. The main point that was considered by the High Court was whether the imposition of vend fee on denatured spirit for grant of license for wholesale vend of denatured spirit is within the competence of State Government. This Court in Nashirwar v. State of Madhya Pradesh and Har Shankar v. The Deputy Excise and Taxation Commissioner, held that the State has exclusive privilege to deal in intoxicating liquor and, therefore, the State can auction the right to vend by retail or wholesale foreign liquor. It also found that intoxicating liquor included denatured spirit and the validity of the levy of the vend fee by the State cannot be questioned. Following this view the High Court dismissed the Writ Petitions. Against the decision, the appeals have been preferred by special leave. A batch of Writ Petitions have been filed in this Court under Art. 32 of the Constitution of India challenging the validity of the levy of vend fee. Apart from the grounds taken in the Civil Appeals, the Constituti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned counsel was that the levy of vend fee (under rule 17-para 680 of the Excise Manual-page 200-201) on the denatured spirit is without legislative competence as it does not fall within Entry 8 of List II of the Seventh Schedule. Even if it is held that the exclusive right of the State to grant privilege for the manufacture and sale of intoxicating liquor, it was submitted that the right did not extend to denatured spirit used for industrial purposes as it is confined only to potable liquor. The second important contention raised by the learned counsel was that after the enactment of Industries (Development and Regulation) Act, 1951 under Entry 52 of List 1 by Parliament, the Union had taken under its control in public interest the industries including the fermentation of industrial alcohol and as such the Central Government alone is empowered to provide for regulating by licence/permit or otherwise the distribution, transport, disposal, acquisition, possession, use or consumption of any article relatable to a schedule industry as for example denatured spirit or industrial alcohol. In State of Bombay and Anr. v. F. N. Balsara Ors. The Constitutional validity of the Bombay Proh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso all liquids containing alcohol. By adopting another method of approach, the Court observed that the object of the Prohibition Act was not merely to levy excise duties but also to prohibit the use, consumption, possession and sale of intoxicating liquor and to enforce the prohibition effectively, the wider definition of the word liquor would have to be adopted so as to include all alcoholic liquids which may be used as substitution of intoxicating drinks to the detriment of the health. In Nashirwar v. The State of Madhya Pradesh (supra), Chief Justice Ray held that the State Legislature is authorised to make a provision for public auction by reason of power contained in Entry B of List II of the Constitution. The decision negatived the concept of inherent right of citizen to do business in liquor. This Court gave three principal reasons to hold that there is no fundamental right of citizen to carry on trade or to do business in liquor. First, there is the police power of the State to enforce public morality to prohibit trades in noxious or dangerous goods. Second, there is power of the State to enforce an absolute prohibition of manufacture or sale of intoxicating liquor. Arti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... absolute prohibition of the sale of liquor. The Court also took into account the public expediency and public morality and police power of State to regulate business and mitigate evils. In M/s. Guruswamy Co. etc. v. State of Mysore Ors. the auction related to exclusive privilege of selling toddy from certain shops. The Court held that the auction enabled the licensee to sell the toddy and the licensee paid what he considered to be the equivalent value of the right. State of Orissa Ors. v. Harinarayan Jaiswal Ors. related to sale by public auction of the exclusive privilege of selling country liquor in retail shops. Amar Chandra Chakraborty v. Collector of Excise, Government of Tripura and Ors, also related to the cancellation of the licence by the Excise Collector to establish warehouse for the storage in bond and wholesale vend of country spirit by import and for supply to the excise vendors in the territory of Tripura. The next case that was referred to by the learned counsel was Har Shankar Ors. etc. v. The Dy. Excise Taxation Commissioner Ors. Chandrachud, J. as he then was, speaking for the Court stated:- In our opinion the true position gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly foreign liquor for consumption were challenged as arbitrary, without authority and illegal. The provisions in the Act which provided for a levy on retail vend of foreign liquor was held to be valid. The decisions referred to above make it clear that the power to legislate under List II Entry 8 relating to intoxicating Liquor comprises of liquor which contains alcohol whether it is potable or not. The plea of the State is that the levy is for parting with the exclusive right of the State with regard to intoxicating liquor and the levy was for the purpose of conferring a right on the licensees. That the State has the exclusive right of manufacture or sale of intoxicating liquor which includes liquor containing alcohol has been recognised. The second most important contention raised by Mr. Nariman is that after passing of the Industries (Development and Regulation) Act, 1951, the claim by the State to monopoly with regard to production and manufacture and the sale of the denatured spirit or industrial alcohol is unsustainable. In order to appreciate this contention it is necessary to refer to the relevant entries in Lists I and II of the Seventh Schedule of the Constitution. Lis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to be made into scheduled industries and industrial undertakings. Section 18(b) confers power on the Central Government to control, supply, distribution, price, etc. of certain articles. As considerable reliance was placed on Section 18(G) for the contention that the Central Government has the exclusive power with regard to notified industries to control supply distribution, fixation of price etc. it is necessary to set out the material part of the Section in full. Section 18 (G) (1) runs as follows:- The Central Government, so far as it appears to it to be necessary or expedient for securing the equitable distribution and availability at fair prices of any article or class of articles relatable to any scheduled industry, may, notwithstanding anything contained in any other provision of this Act, by notified order, provide for regulating the supply and distribution thereof and trade and commerce therein. Sub-section 2 of Section 18(G) confers certain powers without prejudice to the generality of the powers conferred by sub-section (1) by a notified order to provide for matters enumerated in it (a) to (h) of the sub-section. These powers include amongst others ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent and Regulation) Act, 1951 fixed the maximum ex-distillery price for industrial alcohol and rectified spirit under cl. 1 and 2 of the Order. Cl. 3 permitted certain additional charges in certain cases of alcohol supplied after denaturation with general or special denaturants, the cost of such denaturation being allowed to be charged. Ethyl Alcohol (Price Control) order, 1964 while fixing the maximum ex-distillery price of ethyl alcohol under cl. 3 permitted additional charges to be levied in certain cases such as for covering costs incurred for transport of molasses to the distillery and any octroi duty paid or payable on molasses and when alcohol is supplied after denaturation, to include actual cost of such denaturants plus some octroi charges as specified in the clauses. Cl. 3(a) empowered the Excise Commissioner of the State to determine the additional charges leviable under cl. 3 in case of any doubt or distillery price of ethyl alcohol provided for fixation of the price after taking into account various factors enumerated in cl. 2(2) (a to h). Reading various Ethyl Alcohol (Price Control) orders passed by the Government from time to time, it is clear that the order perm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to which area is assigned from entering into an agreement to purchase cane except through a cane growers Cooperative Society under certain circumstances and assigning different sugarcane factories specified to certain purchase centre for supply to them sugarcane for the crushing season were challenged as ultravires. The plea was that the subject matter of the legislation fell within the exclusive jurisdiction of Parliament and the impugned notifications were repugnant to the notifications made under the Industries (Development and Regulation) Act, 1951. On 31st October, 1951, Parliament enacted the Industries (Development and Regulation) Act, 1951 to provide for development and regulation of certain industries. By section 2 of the Act it was declared that it was expedient in public interest that the Union should take in its control the industries specified in the First Schedule which included in Item 8 thereof, the industries engaged in the manufacture or production of sugarcane. Industries (Development and Regulation) Act, 1951 was amended by Act 26 of 1953 by adding Chapter IIIA entrusting Central Government with power so far as it appears necessary or expedient for securing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mines and minerals could be substituted for the terms and conditions laid down in the Bihar Mines and Minerals Concession Rules. On the strength of the amended section 10(2) of the Reforms Act and amended Rules 20 the Bihar Government demanded from the appellant rent contrary to the terms of his lease. It was held that Entry 54 in Union List speaks of requirements of mines and minerals development and Entry 23 in List II is subject to entry 54. Once a declaration was made under entry 54 specifying the extent of vesting the competency was only with Parliament. The attempt of the learned counsel to trace the power to enact the second proviso to section 10 of the Act to Entry 18 of List II was rejected. The plea of the learned counsel was that the modification of the existing lease was a separate topic and not covered by section 15 of Act 67 of 1957. The Court rejected the plea on the ground that the entire legislative field in relation to mines and minerals had been withdrawn from the State Legislature. The decision does not help the appellants for on the facts it is clear that the entire field relating to mines and minerals had been occupied and taken away from the Legislature an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g drug. Excise Duty, and Countervailing duty is defined under S. 3 and 3(a) as meaning such excise duty or countervailing duty, as the case may be, as mentioned in entry 51 of List II of the Seventh Schedule of the Constitution. Chapter II relates to establishment and control of the Excise Department. Chapter III prohibits import of intoxicants. Intoxicant means any liquor which in turn includes any liquids containing alcohol. S. 12 prohibits import unless permission is obtained and conditions imposed by the State Government are satisfied and any duty imposed under S. 28 is paid. S. 28 refers to duties and fee and provides that an excise duty or countervailing duty, as the case may be, directed by the State Government may be imposed on any exciseable article. Under this section, a duty on import, export, transport, manufacture is levied in accordance with the provisions of S. 12(1), 13, 17 and 18. The stand taken by the State before us is that the levy which is being collected, is not in the nature of an excise duty or counter-veiling duty. Though a duty under S. 28, Proviso II on denatured spirit was levied after Proviso II to S. 28 was omitted by the Government (Adaptation of Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ants. In 1972 U.P. Act 30/1972 added S. 24A which provides that subject to provisions of S. 31, the Excise Commissioner may grant to any person a licence or licences for the exclusive privilege of selling by retail at shops (for consumption both on and off the licensed premises, or for consumption off the licensed premises only) any foreign liquor in any locality. After the introduction of S. 24A, the Excise Commissioner is empowered to grant any person a licence for the exclusive privilege of selling foreign liquor. Before the amendment, S. 24 was restricted to country liquor or intoxicating drug. By the amended Sec. 24A the Excise Commissioner may accept payment of a sum in consideration for the grant of the licence for any exclusive privilege for selling foreign liquor. S. 31 to which S. 24A is subject, relates to grant of licences and it does not in any way restrict the power thus conferred by S. 24A. The plea put forward by the learned counsel is that the word foreign liquor cannot be understood as including denatured spirit as the Section would itself indicate that the licence is for selling for consumption which would indicate that foreign liquor is meant for human consump ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was introduced providing that it shall be deemed to have been in force ever since the commencement of the United Provinces Excise Act, 1910. After S. 24 of the principal Act, S. 24A was introduced. S. 24A(1) re-enacts S. 24A(1) added by U.P. Act 30 of 1972. S. 24B was introduced for removal of doubts which declared (1) that the State Government has exclusive privilege for manufacture and sale of country and foreign liquor; (2) that the amount described as licence fee in cl. (c) of S. 41 is in its essence rental or consideration for the grant of such right or privilege by the State Government and (3) that the Excise Commissioner as the head of the Excise Department of the State shall be deemed while determining or realising such fee, to act for and on behalf of the State Government. S. 30 was substituted which specifically mentioned that the Excise Commissioner may accept payment of a sum in consideration of the grant of privilege for any exclusive or other privilege under S. 24A. S. 24A was not specifically mentioned in S. 30 as it stood before the re-enactment. After the introduction of S. 24A, the Excise Commissioner had a right to grant the privilege of selling of foreign liquo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he difference in the quantity and quality of the denaturants. Specially denatured spirit and ordinary denatured spirit are classified according to their use and denaturants used. We are unable to accept the contention of the learned counsel that specially denatured spirit for industrial purpose is different from the ordinary denatured spirit. The definition of alcohol under rule 12 includes both ordinary as well as specially denatured spirit. It was next contended that if the levy of Re. 1.10p per bulk gallon of denatured spirit as vend fee, is upheld it would result in violating the appellants/petitioners fundamental right to carry on their trade and business under Art. 19(1)(g) of the Constitution. According to the learned counsel, the price fixed per gallon of ethyl alcohol under the Ethyl Alcohol (Price Control) order is 59 paise, per gallon. If the levy is not considered as a tax and could not be passed on to the consumer as price fixed under the Ethyl Alcohol Amendment order, is only 59 p., it would be confiscatory in nature. It is seen that the right of the State Government to accept payment of a sum for the grant of its exclusive privilege cannot be questioned. The price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roved dealer for wholesale vend of denatured spirit may be given a licence in Form F.L. 16. The distiller and the approved dealer is to pay a licence fee for the sales at the rate prescribed. But rule (2) speaks of levy of vend fee in case of issued from the distillery which is payable in advance before the spirit is issued. It is admitted that the petitioners and the appellants who claim as purchasers do not have a licence under F.L. 16. Therefore, sub-s. (1) has no application. The levy on persons who are purchasers is for the possession of denatured spirit in excess of the prescribed limit. The permission granted in their favour and the allotment orders of the specially denatured spirit prescribes the terms and conditions under which the allotment is made. The licences are granted to them under form F.L. 39 and they have to abide by those conditions. The notification of the Excise Commissioner of U.P. dated 3-5-1976 provides that the licence for the possession of denatured spirit including the specially denatured spirit of industrial purpose shall be of three kinds. We are concerned with the licences for the possession for use in industries in which alcohol is destroyed or conve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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