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TMI Blog2007 (10) TMI 624X X X X Extracts X X X X X X X X Extracts X X X X ..... ? Does the interpretation given in Synthetics and Chemicals Case [1989 (10) TMI 214 - SUPREME COURT OF INDIA] in respect of Section 18-G of the Industries (Development and Regulation) Act, 1951, correctly state the law regarding the States' power to regulate industrial alcohol as a product of the Scheduled industry under Entry 33 of List III of the Seventh Schedule of the Constitution in view of clause(a) thereof? - Appeal (civil) 151 of 2007 - - - Dated:- 25-10-2007 - H.K. SEMA,ALTAMAS KABIR LOKESHWAR SINGH PANTA JUDGMENT With Civil Appeal No. 152 of 2007, Civil Appeal No. 153 of 2007, Civil Appeal No. 154 of 2007, Special Leave Petition (C) No.16505 of 2004 Special Leave Petition (C) No. 26110 of 2004 Special Leave Petition (C) No. 26111 of 2004 and Special Leave Petition (C) No. 19275 of 2004 ALTAMAS KABIR,J. 1. Special Leave Petition No. 16505 of 2004 was filed by the State of Uttar Pradesh and its officers in the Excise Department on 23rd June, 2004 against the Judgment and Order passed by the Division Bench of the Allahabad High Court on 12th February 2004 in Civil Misc. Writ Petition No. 1027 of 1999, which had been filed by Shri R.P. Sharma in his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... declared to be illegal by the High Court. The High Court also directed the respondents to refund the fee collected from the writ petitioners along with interest at the rate of 10% per annum from the date of realization/deposit till the date of refund within two months of production of the certified copy of the judgment before the respondent No. 2. There is further discussion with regard to the direction given regarding interest with which we are not concerned. 6. As mentioned hereinbefore, Special Leave Petition (C) No. 16505 of 2004 was filed against the said judgment and order of the Allahabad High Court and the same was taken up for admission on 22nd August, 2004, when this Court directed notice to issue and also granted interim stay in the meantime. The interim relief as prayed for as indicated in Prayer (a) of the Special Leave Petition reads as follows:- Ad-interim ex-parte stay of the impugned final judgment and order dated 12.02.2004 passed by the Hon'ble High Court of Judicature at Allahabad in Civil Misc. Writ Petition No. 1027 of 1999. 7. Subsequently, several other similar writ petitions were filed by several licence holders holding licences in Form FL No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legal. 12. Mr. Dhruv Agrawal submitted that the case of Somaiya Organic (India) Ltd. should not, therefore, be heard in the light of the decision in R.P. Sharma's case, but should be detached from the other matters and be heard separately. 13. Although, it is true that the respondent, Somaiya Organic (India) Ltd., is the holder of licence in Form FL 39, the case as made out in the writ petition and in particular in paragraphs 16, 17 and 20 thereof, is similar to the cases made out in the other writ petitions. The common challenge in all the matters is that the State had no power to regulate the manufacture and sale of denatured spirit in view of Section 2 and Section 18G of the Industries (Development and Regulation) Act, 1961. 14. It is also the common case in all these matters that by Section 2 of the aforesaid Act of 1961 read with Entry 52 of List I of the Seventh Schedule of the Constitution, the Parliament declared alcohol industry to be an industry, control of which by the Union is expedient in the public interest and consequently the power to legislate in respect thereof is now vested exclusively in Parliament. 15. Furthermore, all the aforesaid matters have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commerce therein by a notified order. It was pointed out that the said Act was amended in 1956 and item No.26 was inserted in the First Schedule of the said Act which, inter alia, empowers the Central Government to control the fermentation industry including alcohol industries. Item No.26 of the First Schedule reads as follows: 26. Fermentation Industries i) 'Alcohol ii) 'Other products of fermentation industries'. 21. While dealing with the aforesaid provisions, the Court noticed the provisions of Entry 8 in List II which empowers the State to legislate in relation to intoxicating liquors i.e. to say the production, manufacture, possession, purchase and sale of intoxicating liquors. The Constitution Bench in Synthetics and Chemicals Ltd. case (supra) in para 63 indicated that there was no necessity to dwell on the question whether the States have police power or not. It was mentioned that the Court must accept the position that the States have the power to regulate the use of alcohol and that power must include the power to make provisions to prevent and/or check industrial alcohol being used as intoxicating liquor. In para 64 of the judgment the Bench s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs to legislate in respect of alcohol: (a) It may pass any legislation in the nature of prohibition of potable liquor referable to Entry 6 of List II and regulating powers. (b) It may lay down regulations to ensure that non-potable alcohol is not diverted and misused as a substitute for potable alcohol. (c) The State may charge excise duty on potable alcohol and sales tax under Entry 52 of List II. However, sales tax cannot be charged on industrial alcohol in the present case, because under the Ethyl Alcohol (Price Control) Orders, sales tax cannot be charged by the State on industrial alcohol. (d) However, in case State is rendering any service, as distinct from its claim of so- called grant of privilege, it may charge fees based on quid pro quo. See in this connection, the observations of Indian Mica case. 23. The aforesaid paragraphs seem to indicate that under Entry 33 of List III the State cannot regulate industrial alcohol as a product of the industry, because the Union under Section 18-G of the Act had evinced a clear intention to occupy the whole field. It was submitted by Mr. Dwivedi that the aforesaid observations have to be read in the context in which th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... try 52 of List I would also affect the concurrent powers vested in the State by way of Entry 33 in List III of the Seventh Schedule to the Constitution. Although, the said judgment was rendered in the context of the U.P. Sugar Factories Control Act, 1938 (U.P. At 1 of 1938) to provide for the licensing of sugar factories and for regulating the supply of sugarcane intended to be used in such factories and the price at which it could be purchased and for other incidental matters, the provisions of both Section 2 as well as Section 18 G of the Industrial (Development and Regulation) Act, 1951 fell for consideration in the said case. This Court while dealing with the said provisions held that the provisions of Section 18G of the 1951 Act did not cover sugarcane, nor did it indicate the intention of the Parliament to cover the entire field of such legislation. It was also held that the expression any article or class of articles related to any scheduled industry used in Section 18G, 15 and 16 of the Act did not refer to raw material but only to finished products of the scheduled industries the supply and distribution of which Section 18-G was intended to regulate, its whole object bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entral Government under Section 18-G of the 1951 Act, the said order was never brought into operation in the State of U.P., and accordingly, the power of the State of U.P. under Entry 33 of List III to legislate in relation to trade and commerce or supply and distribution of Molasses in the State was not taken away, in any event, irrespective of Article 254. It was held that since the aforesaid 1961 order had not been extended to the State of U.P. at any point of time, the question of repugnancy between the Molasses Control Order 1961 and the U.P. Sheera Niyantran Adhiniyam, 1964 which was enacted in legitimate exercise of power of legislation under Entry 33 of List III, did not arise and the same was within the legislative competence of the State Government. 28. Yet another case referred to by Mr. Dwivedi was the decision of a Constitution Bench of 5 Judges of this Court in Belsund Sugar Co. Ltd. vs. State of Bihar (1999) 9 SCC 620, wherein while discussing Section 18-G of the 1951 Act it was held that since 'flour industry' was listed as one of the scheduled industries as Item 27(4), the production of wheat as a raw material or its sale was not covered by the said Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id pro quo. It also held that the State Government was competent to levy a fee for the purpose of ensuring that industrial alcohol was not converted into potable alcohol so as to deprive the State of its revenue on the sale of such alcohol and the public was protected from consuming illicit liquor. But the powers stopped with the denaturing of industrial alcohol, since denatured rectified spirit was wholly and exclusively industrial alcohol. 31. The sum and substance of Mr. Dwivedi's submission was that the mere existence of Section 18-G in the Statute book could not oust the competence of the State legislature to enact legislation in respect of matters falling under Entry 33 of List III of the Seventh Schedule to the Constitution. The further contention of Mr. Dwivedi was that even if a notified order had been issued under Section 18-G the effects of the same had been nullified by clause (a) of Entry 33 which reads as follows: 33.Trade and commerce in, and the production, supply and distribution of (a) the products of any industry where the control of such industry by the Union is declared by Parliament by law to be expedient in the public interest, and imported good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I have been ousted, except to the extent as explained in the Synthetics and Chemicals case in paragraphs 63-64 of the judgment, where the State's power to regulate, as far as regulating the use of alcohol, which would include the power to make provisions to prevent and/or check industrial alcohol being used as intoxicant liquor, had been accepted. It was also stated in paragraph 64 of the judgment that the Bench recognised the power of the State to regulate not as an emanation of police power but as an expression of the sovereign power of the State. As submitted by Mr. Dwivedi, the 7 Judge Bench did not have the benefit of the views expressed by this Court earlier in Ch. Tikaramji case (supra) where the State's power to legislate under the Concurrent List stood ousted by legislation by the Central Government under Entry 52 of List I and also in view of Section 18-G of the Industries (Development and Regulation) Act, 1951. 36. In our view, if the decision in the Synthetics and Chemicals case (supra) with regard to the interpretation of Section 18-G of the 1951 Act is allowed to stand, it would render the provisions of Entry 33 (a) of List III nugatory or otiose. 37. We ..... X X X X Extracts X X X X X X X X Extracts X X X X
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