Full Judgment Text
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PETITIONER:
NASHIRWAR ETC. ETC.
Vs.
RESPONDENT:
THE STATE OF MADHYA PRADESH
DATE OF JUDGMENT27/11/1974
BENCH:
RAY, A.N. (CJ)
BENCH:
RAY, A.N. (CJ)
MATHEW, KUTTYIL KURIEN
UNTWALIA, N.L.
CITATION:
1975 AIR 360 1975 SCR (2) 861
1975 SCC (1) 29
CITATOR INFO :
F 1975 SC1121 (52,53)
F 1975 SC2008 (20)
RF 1976 SC 633 (5)
RF 1976 SC1913 (15,19)
R 1977 SC 722 (17,29,32)
R 1978 SC1457 (63,64)
F 1980 SC 614 (6,7,11,15,16,35)
RF 1988 SC 771 (5)
RF 1990 SC1927 (23,28,29)
RF 1992 SC1393 (4)
ACT:
Central Provinces Exercise Act, 1915--S. 18-Whether the
State has the power to grant liquor licences by public
auction-Whether violates fundamental right under Art.
19(1)(g) of the Constitution.
Constitution of India, 1950-Art. 19(1)(g)-Entry 8, List II.
HEADNOTE:
Under the Central Provinces Excise Act, 1915 (which was the
Act applicable to the State of Madhya Pradesh) the excise
authorities granted licences for selling foreign liquor
under a system of fee per bottle. From the year 1964-65 the
State Government decided that licences for foreign liquor
should be disposed of by public auction The appellants
unsuccessfully challenged before the High Court the
authority of the State to hold public auctions for grant of
licences for foreign liquor. In 1964 the Act was amended,
as a result of which the State could grant leases in respect
of both country and foreign liquor. By a notification the
State Government declared that it would grant foreign liquor
licences by public auction. Similarly the impugned Act of
Kerala State places restrictions on the manufacture. sale,
import and export of liquor. The appellants in the Madhya
Pradesh case and the petitioners in the Kerala case have
questioned the constitutional validity of the restrictions
on the ground that they deprive them of the fundamental
right to carry on trade in liquor. It was contended that
the right to trade in liquor was not declared by the
legislature to be a monopoly of the State to exclude trade
in liquor from the operation of Art. 19(1)(g) as a
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fundamental right to trade.
Dismissing the appeals and writ petitions
HELD : 1(a) The State has exclusive right or privilege of
‘manufacturing and selling liquor. The State grants such
right or privilege in the shape of a licence or a lease.
The State has power to hold public auction for grant of such
right or privilege and accept payment of money in
consideration of grant of lease. [872-B]
(b) The State legislature is authorised to make a provision
for public auction by reason of the power contained in Entry
8, List II of the Constitution. That entry empowers the
State Government to legislate with regard to intoxicating
liquor, that is to say, production, manufacture, possession.
transport, purchase and sale of intoxicating liquor. [865-F]
(2) (a) There are three principal reasons to hold that
there is no fundamental right of citizens 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 liquors. Article 47
states that the State shall endeavour to bring about
prohibition of the consumption, except for medical purposes,
of intoxicating drinks and drugs which are injurious to
health. Third, the history of excise law in India shows
that the State has the exclusive right or privilege of
manufacture or sale of liquor. [868E-F]
(b) Trade in liquor has historically stood on a different
footing from other trades. Restrictions which are not
permissible with other ides are lawful and reasonable so
far as the trade in liquor is concerned. That is why even
prohibition of the trade in liquor is not only permissible
but is also reasonable The reasons are public morality
public interest and harmful and dangerous character of the
liquor. The State possesses the right of complete control
over all aspects of intoxicants viz.,, manufacture,
collection. sale and consumption. The State has exclusive
right to manufacture and sell liquor and to sell the said
right in order to raise revenue. [871D-E]
862
(c) The nature of the trade is such that the State confers
right to vend liquor by farming out either in auction or on
private treaty. Rental is the consideration for the
privilege granted by the Government for manufacturing or
vending liquor. Rental is neither a tax nor an excise
dirty. Rental is the consideration for the agreement for
grant of privilege by the Government. [871F]
(d) The grant of a lease either by public auction or for a
sum is a regulation pertaining to liquor. One of the
purposes of regulation is to raise revenue. Revenue is
collected by the grant of contracts to carry on trade in
liquor. These contracts are sold by auction. The grantee
is given licence on payment of auction price. [872A]
Krishna Kumar Narula etc. v. The State of Jammu and Kashmir
and Ors. [1967] 3 S.R. 50; Coovarjee B. Bharucha v. The
Excise Commissioner and the Chief Commissioner,Ajmer [1954]
S.C.R. 873; Crowley v. Christensen 34 L.Ed. 620; State of
Assam v. A N. Kidwai, Commissioner of Hills Division and
Appeals,.Shillong [1957] S.C.R. 295; State of Bombay & Anr.
v. F. N. Balsara [1951] S.C.R. 682; M/s Guruswamy & Co.,
etc. v. State of Mysore & Ors. [1967] 1 S.C.R. 548; State of
Orissa & Ors. v. Hari Narayan Jaiswal & Ors. [1972] 3 S.C.R.
748; Amar Chandra Chakraborty v. Collector of Excise
Government of Tripura and Ors. [1973] 1 S.C.R. 533; State of
Bombay v. R. M. D. Chamarbaugwalla [1957] S.C.R. 874 and A.
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B. Abdulkadir v. State of Kerala [1962] 2 Supp. S.C.R. 741
referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 1711 to
1721, 7123, 1699, 1706 & 1744 of 1974.
From the Judgment and Order dated the 24th April, 1974 of
the Madhya Pradesh High Court in Misc. Petitions Nos. 391,
392, 395, 394, 412, 401, 405, 430, 400, 399, 403, 390, 409,
417 and 407 of 1970 respectively.
Civil Appeal No. 1267 of 1970.
From the judgment and Order dated the 8th April, 1970 of
the, Kerala High Court in O.P. No. 995 of 1970.
Writ Petitions Nos. 436 of 1971 and 26 and 133 of 1972.
Petitions under Art. 32 of the Constitution of India.
B. Sen, S. Balakrishnan and N. M. Ghatate, for the
appellants (In CAs. Nos. 1711-1721, 1723/74), for the
appellants.
S. S.Khanduja and S. K. lain (In CAs. Nos. 1699, 1706,
1744 and 1715/74), for the appellants.
S. N. Andley (In CA. 1723/70) R. P. Kapur and I. N.
Shroff, for the respondents in all the appeals.
D. V. Patel (In CA 1267/70) Y. S. Chitale, (WP. 436/71),
N. K. Shreedharan (In WPNo. 133 /72), V. Bhaskaran Nambuar
(CA. 1267/70 and WP. 436/71) P. K. Sreedharan (In WP.
133/72). P. Sankaran Kutty (In WP. 436/71 and 133/72) and
A. S. Nambiar, for the appellants (In CA No. 1267/70) and
petitioners (In WPs. Nos. 436/71 and 133/72).
D. V. Patel and S. Gopalakrishnan, for the petitioner (In
WP 26/72).
863
K. T. Harindernath (In CA No. 1267/70 and WP., 436/71) and
K. M. K. Nair, for the respondents (In CA. No. 1267/70)
and WPs. Nos, 436/71 and 26/72.
Lily Thomas, for the Intervener (K. J, Joseph).
The Judgment of the Court was delivered by-
RAY, C.J. The principal question in these civil appeals and
writ petitions is whether it is permissible for the State
Government to auction licences for carrying on the business
of selling foreign liquor which is neither manufactured nor
imported by the State Government. Some of these appeals
relate to State of Madhya Pradesh and others relate to State
of Kerala.
The Madhya Pradesh appeals are governed by the Central Pro-
vinces and Berar Excise Act 1915 which became applicable to
Madhya Pradesh as the Central Provinces Excise Act, 1915.
This will be referred to as the Madhya Pradesh Act.
The Kerala Appeals are governed by the Abkari Act (Act No. 1
This will be referred to as the Abkari Act.
Prior to 1 April, 1964 licences for sale of foreign liquor
in Madhya Pradesh were granted by the excise authorities
under the fee per bottle system. In 1964-65 the State
decided that licences for foreign liquor would be disposed
of by public auction to the highest bidder. The appellants
then challenged in the Madhya Pradesh High Court the
authority, of the State Government to hold public auction
for grant of licences for foreign liquor. The appellants
did not succeed because the Act was amended in 1964. The
result of the amendment was that whereas formerly the State
Government could grant lease only in respect of country
liquor, the Amending Act empowered the Government to grant
lease in respect of any liquor which meant both foreign and
country liquor . After the amendment, public auctions were
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held under section 18 of the Madhya Pradesh Act in respect
of foreign liquor is well. In 1956-66 public auctions were
held in respect of foreign liquor. The leases were renewed
up to 1969-70. In 1967-68 prohibition was withdrawn in
certain areas of Madhya Pradesh And new foreign liquor vends
were opened. These vends were disposed of by public
auction. In 1968 the State Government by a notification
dated 29 March, 1968 ordered that with effect from 1 April,
1965 foreign liquor licence shall be disposed of on payment
of extra fee of Rs. 1000 in addition to the payment of a fee
per bottle at specified rates. The notification further
directed that where new shops were required to be opened
licences would be disposed of by public auction in addition
to a fee per bottle. In 1970 there was a notification dated
14 August, 1970 where the State Government would dispose of
foreign liquor licences by public auction. This
notification is the subject matter of the Madhya Pradesh
appeals.
The Madhya Pradesh Act by sections 8 and 9 confers power on
the State to prohibit import, export or transport of any
intoxicant. "Intoxicant" under the Act means any liquor or
intoxicating drug. The State Government has power to impose
restrictions on import, export
864
or transport of intoxicant in the shape of payment of duty
and compliance with other conditions. Chapter IV of the
Madhya Pradesh Act consisting of sections 13 to 24 deal with
manufacture, possession and sale of intoxicants. Section 13
requires licence for manufacture, collection, possession of
intoxicants and materials for manufacturing intoxicants.
Sections, 17 and 18 of the Madhya Pradesh Act are important
for the purposes of these appeals. Section 17 deals with
licences for sale of intoxicants. Section 18 states that
the State Government may lease to any person on such
conditions and for such period as it may think fit the right
(a) of manufacturing or of supplying by wholesale, or of
both, or (b) of selling by wholesale or by retail, or (c) of
manufacturing or of supplying by wholesale, or of both, and
selling by retail any liquor intoxicating drug within any
specified area.
The Abkari Act which governs the Kerala Appeals in sections
6 to 11 deal with import, export and transport of liquor or
intoxicating drugs. Permission of the Government is
required for import, export of liquor. Section 9 of the
Abkari Act confers power on the Government to prohibit,
transport of liquor from any local area to any other local
area. Sections 12 to 15C of the Abkari Act deal with
manufacture, possession and sale of liquor or intoxicating
drug. Manufacture is prohibited except under the provisions
of the Act, viz., licence granted by the Commissioner. The
establishment and control of distilleries, breweries,
warehouse etc. is by grant of a licence. Sections 17 to 23
of the Abkari Act deal with duties taxes and rentals.
Section 17 of the Abkari Act speaks of duty on liquor or
intoxicating drugs. Section 18A of the Abkari Act confers
power on the Government to grant, on such conditions and for
such period as the Government may deem fit the exclusive or
other privilege (i) of manufacturing or supplying by whole-
sale; or (ii) of selling by retail; or (iii) of
manufacturing or supplying by wholesale and selling by
retail any liquor or intoxicating drugs within any local
area on his or their payment to the Government of an amount
as rental in consideration of the grant of such privilege.
The Act further states that the amount of rental may be
settled by auction, negotiation or by any other method as
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may be determined by the Government, from time to time, and
may be collected to the exclusion of, or in addition to, the
duty or tax leviable under sections 17 and 18. No grantee
of any privilege under section 18A of the Act shall exercise
the same until he has received a licence in that behalf from
the Commissioner. Rule 13(1) ’under the Abkari Act states
that the privilege under the licence will be sold in public
auction subject to conditions of the sale notification
published by Government from time to time.
The contention on behalf of the appellants is that it is the
fundamental right of the citizens to carry on trade in
liquor. It is said that the right to trade in liquor is not
declared by the legislature to be a monopoly of the State to
exclude trade in liquor from the operation of Article
19(1)(g) as a fundamental right to trade. The appellants
865
challenge that the State has any right or privilege in the
matter of manufacture or sale of liquor which can be granted
as a right or privilege to the citizens.
On behalf of the State it is said that the State is not
claiming monopoly in foreign liquor. The State does not
contend that the auction of licences is either a fee or a
tax. The State contends that the highest bid represents the
consideration for the lease under section 18 of the Madhya
Pradesh Act or section 18A of the Abkari Act. It is said on
behalf of the State that the State has the exclusive right
or privilege to manufacture, possess and sell intoxicant
liquor and these provisions in the Act confer a right or
privilege on the highest bidder at the auction to vend
foreign liquor in specified areas.
The Madhya Pradesh Act as well as thE Abkari Act states that
ciTizens cannot have the right to carry on trade in liquor
except to the extent and subject to such conditions as may
be imposed by the legislature under its regulatory powers.
The Acts deal with four principal forms of activities
pertaining to liquor. First, the import, export and
transportation of liquor is regulated by providing for
passes on terms and conditions mentioned in the Act. A fee
is also prescribed for such passes. Second, the manufacture
of liquor is dealt with by providing for licences from the
State Government and fees are prescribed for such licences.
Third, the possession of liquor requires a permit from the
Government and a fee therefor. Fourth, the sale of liquor
,is dealt with by sections 17 and 18 of the Madhya Pradesh
Act and section 18A of the Abkari Act. The Acts speak of
the grant of privilege or right to sell liquor by lease.
The Government can hold a public auction to grant lease.
The State Government accepts payment of a sum in
consideration of the grant of any lease. The amount of bid
at a public auction represents the consideration for the
grant of such right or privilege.
The State Legislature is authorised to make a provision for
public auction, by reason of power contained in Entry 8 of
List II of the Constitution. That Entry empowers the State
Government to legislate with regard to intoxicating liquor,
that is to. say production, manufacture, possession,
transport, purchase and sale of intoxicating liquor.
Counsel on behalf of the appellants relied on the decision
of this Court in Krishna Kumar Narula etc. v. The State of
Jammu and Kashmir and Ors. [1967] 3 S.C.R. 50 as an
authority for the proposition that a citizen has a
fundamental right to do business to deal in liquor.
This Court in Cooverjee B. Bharucha v. The Excise
Commissioner and of Chief Commissioner, Ajmer [1954] S.C.R.
873 held that the grant of a lease either by public auction
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or for a sum is a regulation pertaining to liquor. It was
contended on behalf of the citizen in Bharucha’s case
(supra) that every person has an inherent right to carry on
trade in intoxicating liquors and that the State has no
right to create a monopoly in them. In Bharucha’s case
(supra) the auction sale of country liquor shop under Excise
Regulation 1 of 1915 was challenged on the ground that the
provisions of the Excise
866
Regulation and the auction rules were ultra vires because
the same purported to grant monopoly to trade to a few
persons. The Excise Regulation 1915 in that case provided
that the Chief Commissioner might lease to any person the
right of manufacturing or of supplying or of selling by
wholesale or retail any country liquor or intoxicating drug
within any special area. This Court said that laws
prohibiting trades in noxious or dangerous goods cannot be
held to be illegal as enacting a prohibition and not a mere
regulation.
In Bharucha’s case (supra) this Court concurred with the
observations in Crowely v. Christensen 34 L.Ed. 620. Those
observations indicate that the sale of liquor has been at
all times considered as the proper subject of legislative
regulation. A licence may be exacted and restrictions may
be imposed as to sale of liquor. There may be absolute
prohibition of sale of liquor. At the root lies public
expediency and public morality. The sanction is the police
power of the State to regulate business and to mitigate
evils.
The observations in Crowely’s case (supra) which were laid
down as a ruling of this Court in Bharucha’s case (supra)
are these. "There is no inherent right in a citizen to sell
intoxicating liquors by retail; it is not a privilege of a
citizen of the State or of a citizen of the United States.
As it is a business attended with danger to the community,
it may, as already said, be entirely prohibited, or be per-
mitted under such conditions as will limit to the utmost its
evil. The manner and extent of regulation rest in the
discretion of the governing authority". Bharucha’s case
(supra) negatived the contention of inherent right of
citizens to carry on trade in intoxicating liquors.
Bharucha’s case (supra) lays down three propositions.
First, that there is no inherent right of citizens to carry
on trade in intoxicating liquors. Second, the auction sale
of liquor shop is a method by which carrying on particular
trade in liquor is regulated and one of the purposes of
regulating is to raise revenue. Third, there can be a
monopoly only when a trade which could be carried on by all
persons is entrusted to one or more persons to the exclusion
of the general public. That is not the case with the
business of liquor.
This Court in Narula’s case (supra) referred to the decision
in Bharucha’s case (supra) and the concurrence of this Court
in Bharucha’s case (supra) with Crowley’s case (supra) that
there is no inherent right in a citizen to sell intoxicating
liquor. In Narula’s case (supra) this Court read the
observations of this Court in Bharucha’s case (supra) to
have conceded the inherent and fundamental right of a
citizen to carry on business in sale of intoxicating liquor.
Bharucha’s case (supra) in no uncertain terms repelled the
citizens contention of inherent right to sell intoxicating
liquor. Bharucha’s case (supra) is a Constitution Bench
decision. Narula’s case is also a Constitution Bench
decision. Narula’s case (supra) cannot be said to have
overruled Bharuchas case (supra).
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There is an earlier decision of this Court in State of Assam
v. A. N. Kidwai, Commissioner of Hills Division and
Appeals, Shillong
867
[1957] S.C.R. 295 where it is said that no person has any
absolute, right to sell liquor. In Kidwai’s case (supra)
this Court said that the purpose of the Act and the Rules is
to control and restrict the consumption of intoxicating
liquor. Such control and restriction is said by this Court
to be necessary for the preservation of public health and
morals and to raise revenue.
In Narula’s case (supra) it was held that dealing in liquor
is business and a citizen has a right to do business and
that a State can make a law imposing restrictions on the
rights in public interest. In Narula’s case (supra) it was
also said that unless dealing in liquor is not trade or
business a citizen has a fundamental right to deal in that
commodity. It is not correct to read the decision in
Narula’s case (supra) that there is a fundamental right to
do business in liquor The decision is that dealing in liquor
is business and a citizen has a. right to do business in
that commodity and the State can impose reasonable
restrictions on the right in public interest. If the State
can prohibit business in liquor as is held in State of
Bombay and Anr. v. F. N. Balsara [1951] S.C.R. 682 this
establishes that the State has exclusive right of privilege
of manufacture, possession, sale of intoxicating liquor and
therefore the State grants such a right of privilege to
persons in the shape of licence or lease.
The auction of the privilege of selling liquor was upheld by
this Court in M/s. Guruswamy & Co. etc. v. State of Mysore
and Ors. [1957] 1 S.C.R. 548. This Court said that the
licensee pays for the exclusive privilege of selling toddy
from certain shops. The licensee pays what be considers to
be equivalent to the value of the right. It has no relation
to the production or manufacture of toddy. The only
relation it has to the production or manufacture of toddy,
is that it enables the licensee to sell it. The privilege
of selling is auctioned welt before the goods come into
existence. The levy is in respect of the business of
carrying on the sale of toddy.
Narula’s case (supra) was explained by this Court in a Bench
decision in State of Orissa & Ors. v. Hari Narayan Jaiswal
and Ors. [1972] 3 S.C.R. 784 with considered whether the
sale by public auction of the exclusive privilege of selling
by retail country liquor in 8 shops was valid. The
respondent was the highest bidder there. His bid was
rejected. The Government was of the view that inadequate
prices had been offered because of collusion between the
bidders. Fresh tenders were called for. The State accepted
the tender in respect of one shop and rejected the others.
The remaining seven shops were sold by private negotiation
for substantially higher prices. The respondent whose
highest bid was rejected applied to the High Court for a
direction to the Government to confirm his bid. Section 22
of the Orissa Excise Act which governed that case stated
that "the State Government may grant to any person, on such
conditions and for such period as it may think fit, the
exclusive privilege (e) of manufacturing and supplying
wholesale and selling retail, any country liquor or in-
toxicating drug within any specified local area". Section
29(2) of the Orissa Excise Act dealt with the payment for
grant of exclusive privilege. Section 29(2) of the Act
stated that the sum payable shall be-
868
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determined by calling tenders or by auction or otherwise.
In Hari Naryana’s case (supra) this Court held that the
right to trade in intoxicating liquor is subject to
regulations and restrictions and upheld the public auction
of the right or privilege of selling liquor ’as an attribute
of collection of State revenue.
In the recent decision in Amar Chandra Chakraborty v.
Collector of Excise, Government of Tripura & Ors. [1973] 1
S.C.R. 533 under the Tripura Excise Rules fees for licence
for the wholesale vend of country spirit were required to be
fixed by tender-cum-auction. Section 22 of the Bengal
Excise Act 1909 conferred power on the Chief Commissioner to
grant exclusive privilege of manufacturing and supplying
country liquor. No grantee of any privilege could exercise
the same without a licence. The Constitution Bench in
Chakraborty’s case (supra) held that trade or business in
country liquor has from its inherent nature been treated by
the State and the society as a special category requiring
legislative control. This trade or business is treated as a
class by itself and cannot be treated on the same basis as
other trades while considering Article 14. A contention was
raised in Chakraborty’s case (supra) that the business of
selling liquor is protected under Article 19 as a
fundamental right and reliance was placed on the decision in
Narula’s case (supra). This Court held that the State can
make a law imposing reasonable restrictions in public
interest on the right to deal in liquor by public auction of
the right of selling liquor.
There are three principal reasons to hold that there is no
fundamental right of citizens 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. Article 47 states that the
State shall endeavour to bring about prohibition of the
consumption except for medicinal purpose of intoxicating
drinks and of drugs which are injurious to health. Third,
the history of excise laws shows that the State has the
exclusive right or privilege of manufacture or sale of
liquor.
In Balsara’s case (supra) this Court referred to Article 47
and said that the idea of prohibition was connected with
public health. The challenge to a prohibition law under our
Constitution was made under Article 14 and 19 in Balsara’s
case. This Court held that absolute prohibition of
manufacture or gale of liquor is permissible and the only
exception can be for’ medicinal preparations. The concept
of inherent right of citizens to do business in liquor is
antithetical to the power of the State to enforce
prohibition laws in respect of liquor.
Das, C. J. in State of Bombay v. R. M. D. Chamarbaugwalla
[1957] 874 said that gambling could not be regarded as trade
or business within the meaning of Article 19 (1) (f) and (g)
and Article 301. ’Inherently vicious activities cannot be
treated as entitling citizens to do business or trade in
such activities. No one can deal in
869
counterfeit coins or currency notes, Das, C. J. held that
activities. which are criminal, or dealing in articles or
goods which are res extra co commercium could not have been
intended to be permitted by Article 19(1)(f) and (g)
relating to fundamental rights to trade or business.
In our country the history of excise shows that the
regulations issued between 1790-1800 prohibited manufacture
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or sale of liquors without a licence from a Collector.. In
1808 a regulation was introduced in the Madras Presidency
which provided that the exclusive privilege of manufacturing
and selling arrack should be farmed in each district. in
1820 the law was amended to authorise the treatment of toddy
and other fermented liquors in the same way as spirits by
allowing Collectors to retain the manufacture and sale under
direct management if deemed preferable to farming. In 1884
a Committee was appointed to investigate the excise system.
The recommendations of the Committee were adopted. Under
the new system the monopoly of manufacture was let
separately from that of sale. The former was granted on
condition of payment of a fixed duty per gallon. The right
of sale was given on payment of a fee per shop or a number
of shops, or on payment of a fee determined by auction. In
the Bombay Presidency the monopoly of the retail sale of
spirits and the right to purchase spirits was farmed. In
1857 the Government declared its future policy to be the
letting by auction of each shop, with its still, separately.
In 1870-71 a change was made. The rule at that time was
that the Collector would fix the number and locality of the
different shops and determine their letting value according
to the advantages possessed by each. It was not intended
that they should, as a rule, be put up to public
competition; but competition might be resorted to by the
Collector and taken into account in determining the sum at
which each would be leased. This rule remained in force for
many years. The practice of putting the shops up to auction
was, thereafter followed. The history of excise
administration in our country before the Independence shows
that there was originally the farming system and thereafter
the central distillery system for manufacture. The retail
sale was by auction of the right and privilege of sale. The
Government of India appointed an Excise Committee in 1905.
The measures recommended- by the Committee were the advances
of taxation, the concentration of distillation, the extended
adoption of the contract distillery system. The Committee
suggested among other things the replacement of the then
existing excise law by fresh legislation on the lines of the
Madras Abkari Act. (See Dr. Pramatha Nath Banerjee : History
of Indian Taxation p. 470 seq.).
Reference may be made to the Taxation Enquiry Commissioner
Report 1953-54 Vol. 3. At page 130 following there is a
discussion of State excises. Among the major sources of
revenue which are available to the State Government there is
a duty on alcoholic liquors for human consumption. At page
132 of the Report it is stated that in addition to the
excise duties, licence fees are charged for manufacture or
sale of liquor or for tapping toddy trees etc. Similarly,
870
several it fees, vend fees, outstill duties are also
levied.Manufacture or sale of liquor is forbidden except
under licences which are generally granted by auction to the
highest bidders. The manufacture of country spirit is done
in Government distilleries or under the direct supervision
of the excise staff. All supplies are drawn from Government
warehouses which ensures that the liquor is not more than of
the prescribed strength. The licensed sellers have to sell
the country spirit between fixed hours and at fixed selling
rates. As in the case of country spirit, the right of
tapping and selling toddy is also auctioned. In addition to
the licence, in some States the licensee has to pay a tree
tax to Government.
Traditionally tobacco, opium and intoxicating liquors have
been the subject matter of State monopoly. (See section IV
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of the Madras Regulation XXV of 1802 relating to permanent
settlement of land revenue). Section IV states that the
Government having reserved to itself the entire exercise of
its discretion in continuing or abolishing, temporarily or
permanently, the articles of revenue included, according to
the custom and practice of the country, under the several
heads inter alia of the abkary, or tax on the sale of
spirituous liquors and intoxicating drugs, of the excise on
articles of consumption, of all taxes personal and
professional, as well as those derived from markets, fairs,
or bazais, of lakhiraj lands (or lands exempt from the
payment of public revenue), and of all other lands paying
only favo urable quit rents, the permanent assessment of the
land-tax shall be made exclusively of the said articles now
recited.
This was followed by section XXXII of Regulation II of 1803
in the Madras Presidency. That section provided that
Collectors shall collect the reyenue arising from sayer,
salt, spirituous liquors or from other sources, in the
manner prescribed by the regulations.
Regulation I of 1813 in the Madras Presidency provided that
the licensed retail dealer shall be supplied exclusively by
the Collector of Madras with the quantity of liquor which
they may require, at such price as may be from time to time
determined.
Regulation 1 of 1820 of the Madras Presidency inter alia
provided that the Board of Revenue was authorised to empower
the Collectors either to retain the exclusive privilege of
manufacturing country arrack, toddy, and other fermented
liquors, as well as the retail sale of foreign or country
manufactured spirits, toddy and other fermented liquors in
their respective districts, under their own immediate rmana
gement, on account of Government; or to rent out those
privilges, jointly or separately, for such periods as may be
deemed eligible.
The Board of Revenue is aforesaid was also authorised to
alter, amend and enlarge rules for regulating the exclusive
manufacture and sale of country arrack, toddy and other
fermented liquors, and the exclusive sale of foreign
spirits. The other provisions were that licences for
renting out the exclusive privilege of manufacturing of
country, arrack, toddy or other fermented liquor, and of
retailing spirituous liquors would be prepared by the Board
of Revenue.
871
Act XXIII of 1841 of the Madras Presidency, Act XXXII of
1845 of the Madras Presidency, Sections XLIII to XLVII of
Regulation VII of 1932 of the Madras Presidency all indicate
that it is the right and privilege of/ the State Government
to manufacture, sell intoxicant liquors and the State grants
lease of such rights by public auction on rental in
consideration of the grant of such right.
The excise revenue arising out of manufacture and sale of
intoxicating liquors is one of the sources of the State
Exchequer. One of the principal sources of State revenue is
customs and excise. In England sale of intoxicating liquors
although perfectly lawful at common law is subject to
certain statutory restrictions. These restrictions are
primarily of two kinds; those designed for the orderly
conduct of the retail trade and those designed to obtain
revenue from the trade whether wholesale or retail.
Trade in liquor has historically stood on a different
footing from other trades. Restrictions which are not
permissible with other trades are lawful and reasonable so
far as the trade in liquor is concerned. That is why even
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prohibition of the trade in liquor is not only permissible
but is also reasonable. The reasons are public morality,
public interest and harmful and dangerous character of the
liquor. The State possesses the right of complete control
over all aspects of intoxicants, viz., manufacture,
collection, sale and consumption. The State has exclusive
right to manufacture and sell liquor and to sell the said
right in order to raise revenue-. That is the view of this
Court in Bharucha’s case (supra) and Jaiswal’s case (supra).
The nature of the trade is such that the State confers the
right to vend liquor by farming out either in auction or on
private treaty. Rental is the consideration for the
privilege granted by the Government for manufacturing or
vending liquor. Rental is neither a tax nor an excise duty.
Rental is the consideration for the agreement for grant of
privilege by the Government.
This Court in A. B. Abdulkadir v. State of Kerala [1962] 2
Supp. S.C.R. 741 said that in British India there used to
be public auction of the right to possess and sell
exciseable goods like country liquor, ganja and bhang and
the amount realised was excise revenue. The auction system
which was in force was said by this Court in Abdulkadir’s
case (supra) to be only a method of realising duty from the
grant of licences to those who made the highest bid at the
auctions.
The grant of a lease either by public auction or for a sum
is a regulation pertaining to liquor One of the purposes of
regulation
872
is to raise revenue. Revenue is collected by the grant of
contracts to carry on trade in liquor. These contracts are
sold by auction. The grantee is given a licence on payment
of auction price. [See Bharucha’s case (supra)].
For these reasons we hold that the State has the exclusive
right or privilege of manufacturing and selling liquor. The
State grants such right or privilege in the shape of a
licence or a lease. The State has the power to hold a
public auction for grant of such right or privilege and
accept payment of a sum in consideration of grant of lease.
The appeals and the writ petitions are, therefore,
dismissed. Parties will pay and bear their own costs.
P.B.R. Appeals and petitions dismissed.
873