Full Judgment Text
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PETITIONER:
STATE OF U.P., ETC. ETC.
Vs.
RESPONDENT:
SYNTHETICS & CHEMICALS LTD. & ORS. ETC. ETC.
DATE OF JUDGMENT19/12/1979
BENCH:
KAILASAM, P.S.
BENCH:
KAILASAM, P.S.
GUPTA, A.C.
CITATION:
1980 AIR 614 1980 SCR (2) 531
1980 SCC (2) 441
CITATOR INFO :
D 1988 SC 850 (4)
O 1990 SC1927 (1,27,30,35,67,74,76,85)
RF 1992 SC2169 (14)
ACT:
Excise laws-"Denatured spirit" if an intoxicating
liquor-Licence fee levied on sale denatured spirit-If within
the competence of the State.
HEADNOTE:
The respondents who were licensees for the whole-sale
vend of denatured spirit in their writ petitions before the
High Court contended that levy of fees on denatured spirit
was not justified because (i) the State was not providing
any service to the trade and (ii) since it is the Parliament
which has the power to levy excise duty or tax on denatured
spirit, the State was incompetent to levy the fees.
Rejecting the contentions, the High Court held that the
State had exclusive privilege to deal with any intoxicating
liquor which included denatured spirit, that it had the
right to vend liquor either in retail or wholesale and that
therefore its power to levy fees cannot be questioned.
In appeal to this Court it was contended on behalf of
the licensees that (1) levy of vend fee on denatured spirit
by the State was without legislative competence (2) with the
enactment of Industrial (Development and Regulation) Act,
1951 the Union had taken under its control industries
including fermentation of industrial alcohol and, therefore,
it is only the Union which could levy the fees on denatured
spirit or industrial alcohol.
Allowing the State’s appeal,
^
HELD: The levy of vend fee is for parting with the
exclusive right of the State with regard to intoxicating
liquors and for conferring a right on the licensees to sell
such liquors. A conspectus of the decisions of this Court
establishes (i) that there is no fundamental right of a
citizen to carry on trade or to do business in liquor
because under its police power, the State can enforce public
morality, prohibit trade in noxious or dangerous goods (ii)
the State has power to enforce an absolute prohibition on
manufacture or sale of intoxicating liquors pursuant to
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Article 47 of the Constitution and (iii) the history of
excise laws in the country shows that the State has the
exclusive right or privilege to manufacture or sell liquors.
[549 F-H]
State of Bombay and Anr. v. F. N. Balsara [1951] S.C.R.
682 referred to.
(iv) The terms "intoxicating liquor" is not confined to
potable liquor alone but would include alliquors which
contain alcohol. [537 G]
Nashirwar v. State of Madhya Pradesh [1975] 2 S.C.R.
861; Har Shankar v. The Deputy Excise and Taxation
Commissioner [1975] 3 S.C.R. 254; State of Bombay and Anr.
v. F. N. Balsara & Ors. [1951] S.C.R. 682; Bhola Prasad v.
The King Emperor [1942] F.C.R. 17 at p. 25 referred to.
(v) The term "liquor" used in Abkari Acts not only
covers alcoholic liquor which is generally used for beverage
purposes and which produces intoxication but would also
include liquids containing alcohols. [537 B-C]
532
Cooverjee B. Bharucha v. The Excise Commissioner and
Chief Commissioner, Ajmer & Anr. [1954] S.C.R. 873; M/s.
Guruswamy & Co. etc. v. State of Mysore & Ors. [1967] 1
S.C.R. 548; State of Orissa & Ors. v. Harinarayan Jaiswal &
Ors. [1972] 3 S.C.R. 784; Amar Chandra Chakraborty v.
Collector of Excise, Government of Tripura and Ors. [1973] 1
S.C.R. 533; Har Shankar & Ors. etc. v. The Dy. Excise &
Taxation Commissioner & Ors. [1975] 3 S.C.R. 254 referred
to.
2(a) The power to regulate the notified industries is
not exclusively within the jurisdiction of Parliament as
Entry 33 in the Concurrent List enables a law to be made
regarding production, supply and distribution of products of
notified industries. The exclusive power of the State to
provide for manufacture, distribution, sale and possession
of intoxicating liquors is vested in the State. The power of
the State Government to levy a fee for parting with its
exclusive right regarding intoxicating liquors has been
recognized as could be seen from the various State Acts
regulating the manufacture, sale, etc. of intoxicating
liquors. [544 C, A-B]
Ch. Tika Ramji and Ors. etc. v. The State of Uttar
Pradesh and Ors. [1956] S.C.R. 393; Baijnath Kedai v. State
of Bihar & Ors. [1970] 2 S.C.R. 100 distinguished.
(b) The term "foreign liquor" cannot be given a
restricted meaning because the word consumption cannot be
confined to consumption of beverages only. When liquor is
put to any use such as manufacture of other articles, the
liquor is all the same consumed. The State is empowered to
declare what shall be deemed to be country liquor or foreign
liquor. "Foreign liquor" is defined as meaning all
rectified, perfumed, medicated and denatured spirit wherever
made. Therefore, the plea that the Excise Commissioner had
no right to accept payment in consideration for the grant of
licence for the exclusive privilege for selling in wholesale
or retail, foreign liquor which includes denatured spirit
cannot be accepted. [548 H, 549 A-B]
(c) The definition of "alcohol" includes both ordinary
as well as specially denatured spirit. The specially
denatured spirit for industrial purposes is different from
denatured spirit only because of the 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. Therefore, the
contention that specially denatured spirit for industrial
purposes is different from the ordinary denatured spirit has
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no force. [551 B, 550 H-551 A]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1130 of
1976.
Appeal by Special Leave from the Judgment and Order
dated 24-3-1972 of the Allahabad High Court in Misc. Writ
No. 8069/72.
AND
CIVIL APPEAL NOS 2248/78, 2191-2198/78 AND 2284/78.
Appeals by Special Leave from the Judgment and Order
dated 6-10-1978 of the Allahabad High Court in Special
Appeal Nos. 356, 352-355, 357-359/75.
533
AND
CIVIL APPEAL NO. 245 of 1979.
Appeal by Special Leave from the Judgment and Order
dated 17-10-1978 of the Allahabad High Court in Civil Misc.
Writ No. 11702/77.
AND
CIVIL APPEAL NO. 626 of 1979.
Appeal by Special Leave from the Judgment and Order
dated 17-10-1978 of the High Court of Judicature of
Allahabad in Civil Misc. Writ (Tax) No. 824/75.
AND
WRIT PETITION NOS. 4663-4664 of 1978 & 4501 of 1978.
Under Article 32 of the Constitution.
AND
SPECIAL LEAVE PETITION (CIVIL) NOS. 6526-28/78, 125-126, 201
and 2533 of 1979.
From the Judgment and Order dated 6-11-1978 and 17-10-
78 and 16-11-1978 and 17-10-78 of the Allahabad High Court
in Civil Misc. Writ Nos. 89/77, 3822/73, 540/75 and 4129-30
of 1976 and C.W. No. 703/76 and C. Misc. Writ No. 41/76.
Rishi Ram, Advocate General for the State of U.P., G.
N. Dikshit, O.P. Verma, S. C. Verma and Mrs. Sadhna
Ramchandran, for the Appellant in CA No. 1130/76 and
respondents in all the matters.
F. S. Nariman, Dr. L. M. Singhvi, B. G. Murdeshwar, P.
C. Murdeshwar, P. C. Bhartari, S. P. Nayar, L. K. Pandeya,
N. R. Khairan, Praveen Kumar, Miss Beena Gupta, Anip
Satchthey and Mrs. Baby Krishnan for the Appellants and
Petitioners in all other matters and respondents in CA
1130/76.
F. S. Nariman, Talat Ansari, R. Narain and S. P. Nayar
for the Interveners (M/s J. K. Synthetics and Agarwal Spirit
Supply Co.)
The Judgment of the Court was delivered by
KAILASAM, J.-These batches of Civil Appeals, Writ
Petitions and Special Leave Petitions raise the same
question and can be disposed of by a common judgment.
C.A. No. 1130/76 is by the State. The other Appeals,
Writ Petitions and Special Leave Petitions are by the
aggrieved parties.
534
For the sake of convenience appellants in Civil Appeals
by Special Leave except the State would be referred as the
appellants in this judgment. Similarly the petitioners in
Writ Petitions and Special Leave Petitions will be referred
to as petitioners.
The appellants in Civil Appeals by Special Leave filed
writ petitions before the High Court of Allahabad praying
for quashing the Excise Commissioner’s order dated 18th
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September, 1974 whereby it was provided that the vend fee be
continued to be charged for the wholesale licence dealer of
denatured spirit. They also prayed for a direction to the
Excise Commissioner to refund the vend fee actually paid by
the appellants for a period of three years prior to the
institution of the writ petitions.
The appellants have licenses for the wholesale vend of
denatured spirit. It was contended that the State was
providing no service to the trade of the denatured spirit
and, therefore, the levy of fee is not justified. The State,
it was submitted, was not competent to authorise a levy of
excise duty or tax as it was within the jurisdiction of the
Parliament. On behalf of the State it was contended that in
law the State had exclusive privilege to deal with
intoxicating 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
Constitutional validity of U.P. Excise (Amendment) Act 5 of
1976 has been challenged as unconstitutional and beyond the
legislative competence of the State. It is further pleaded
that the provisions of the
535
Industries (Development and Regulation) Act, 1951 has taken
control of fermentation industry and as such a right to
legislate by the State with regard to denatured spirit and
industrial alcohol is beyond the competence of the State
Legislature.
U.P. Excise Act was enacted in the year 1910. It
empowers the State to prohibit the import and export,
transport manufacture sale and possession of liquor and all
intoxicating drugs in the United Provinces. The vend fee was
first imposed by the Government of U.P. on 18-3-1937 on
denatured spirit. In 1972 the State Legislature enacted the
U.P. Excise Amendment Act 13 of 1972. By a notification dt.
3-11-72 the Government was authorised to sell by auction the
right of retail or wholesale vend of foreign liquor. New
Rules were framed, the effect of which was that a vend fee
of Rs. 1.10 p. per bulk litre was imposed payable in advance
on denatured spirit issued for industrial purposes. The
legality of the levy was challenged in the High Court of
Allahabad and a Bench of that Court on 24th March, 1973 held
the notification was ultra vires. After the decision of the
Allahabad High Court holding that the levy was illegal, this
Court in two decisions Nashirwar v. State of Madhya Pradesh
(supra) and Har Shankar v. The Deputy Excise and Taxation
Commissioner, (supra) held that the State under its
regulatory powers can prohibit every form of activity in
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relation to intoxicants, its manufacture, storage, export,
import and sale. The State’s power to auction the right to
vend by retail or wholesale foreign liquor was upheld.
Relying on the two decisions of this Court, the U.P.
State Legislature repealed and re-enacted the U.P. Excise
(Amendment) Act No. 30 of 1972 by the U.P. Excise
(Amendment) (Re-enactment and Validation) Act, 1976. The
validity of the amendment Act 1976 was again challenged in
the Allahabad High Court in V. P. Anand and Sons v. State of
U.P. A Full Bench of the Court held that the State has
exclusive privilege of auctioning the right of wholesale or
retail vend of intoxicating liquor and upheld the validity
of the Act.
Mr. Nariman learned counsel raised several contentions.
The first main contention of the learned 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
536
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 Prohibition Act (XXV
of 1949) in so far as it restricted the possession and sale
of foreign liquor was impugned on the ground that it was an
encroachment on the field assigned to the Dominion
Legislature under Entry 19 of List I. Under Entry 31, List
II to the Seventh Schedule of the Government of India Act,
1935, the Provincial Legislature had the power to make laws
in respect of intoxicating liquor that is to say the
production, manufacture, possession, transport, purchase and
sale of intoxicating liquors. The corresponding entry in the
Constitution of India is List II Entry 8 which is in
identical terms. The plea that was taken was that List I,
Entry 19 conferred the power on the Dominion Legislature to
make laws with respect to import, export across customs
frontiers and as such the State Law restricting possession
and sale of foreign liquor encroached upon the field of
Dominion Legislature. This Court held that the words
’possession and sale’ occurring in Entry 31 List II must be
read without any qualification. In considering the meaning
of the words ’intoxicating liquor’ set out in entry 31 of
List II, Gwyer C.J., in Bhola Prasad v. The King Emperor,
stated as follows:-
"A power to legislate with respect to intoxicating
liquors could not well be expressed in wider terms."
Again the Learned Chief Justice observed:-
"It is difficult to conceive of legislation with
respect to intoxicating liquors and narcotic drugs
which did not deal in some way or other with their
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production, manufacture, possession, transport,
purchase or sale; and these words seem apt to cover the
whole field of possible legislation on the subject."
537
The above observations were affirmed by this Court in
Balsara’s case (supra). Dealing with the meaning of word
’liquor’, the Court referred to the various Abkari cases in
several provinces and found that all the Provincial Acts of
this country have consistently included liquor containing
alcohol in the definition of ’liquor’ and ’intoxicating
liquor’ and, therefore, the framers of the Government of
India Act, 1935, could not have been entirely ignorant of
the accepted sense in which the word ’liquor’ has been used
in the various excise Acts of this country and concluded
that the word ’liquor’ covers not only those alcoholic
liquids which are generally used for beverage purposes and
produce intoxication, but also 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. 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. After pointing
out the three principal reasons, the Court followed the
decision in State of Bombay and Anr. v. F. N. Balsara
holding that absolute prohibition of manufacture or sale of
liquor is permissible and the only exception can be for
medicinal preparations. In the context it is clear that the
decisions proceeded on the basis that the word ’intoxicating
liquor’ is not confined to potable liquor alone but would
include all liquor which contain alcohol.
Mr. Nariman, the learned counsel, submitted that the
two cases-Balsara’s case (supra) and the Nashirwar’s case
(supra)-cannot be
538
read as to include alcohol manufactured for the purpose of
industries such as industrial alcohol. It was submitted that
in both the cases the Court was concerned only with
legislation relating to prohibition and the decisions should
be restricted to liquor which may contain alcohol which is
likely to be misused as potable liquor. In support of his
contention, the learned counsel referred to two decisions A.
Nageshwara Rao v. State of Madras and Malitlal Chandra v.
Emperor and submitted that if the State can exercise any
control over intoxicating liquor, it can only be restricted
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for the purpose of preventing subversion of its use for
defeating the prohibition policy. We are unable to accept
this contention for in Balsara’s case after explicitly
approving of the definition of word ’liquor’ in various
Abkari Acts in the Provinces of India, the Court held that
liquor would not only cover alcoholic liquor which is
generally used for beverage purposes and produce
intoxication but would also include liquids containing
alcohol.
We will now briefly refer to the decisions of the
Supreme Court which the learned counsel submitted were
confined only to potable liquor.
Cooverjee B. Bharucha v. The Excise Commissioner and
Chief Commissioner, Ajmer & Anr. related to an auction sale
of liquor shop under the Excise Regulation Act, 1915. In
Bharucha’s case it was held that licence may be restricted,
that the restriction must be in regard to the sale of liquor
and that there may be 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
539
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 governing
dealings in intoxicants is as stated and reflected in
the Constitution Bench decision of this Court in the
state of Bombay and Anr. v. F. N. Balsara-[1951] SCR.
682, Cooverjee B. Bharucha v. The Excise Commissioner
and the Chief Commissioner, Ajmer and Ors.-[1954] SCR.
875, State of Assam v. A. M. Kidwai, Commissioner of
Hills Division and Appeals, Shillong-[1957] SCR. 295,
Nagendra Nath Bora and Anr. v. The Commissioner of
Hills Division and Appeals, Assam and Ors.-[1958] SCR.
1240, Amar Chandra Chakraborty v. Collector of Excise,
Government of Tripura & Ors.-[1973] 1 S.C.R. 633 and
State of Bombay v. R.M.D. Chamarbaugwala-[1957] SCR.
874 as interpreted in State of Orissa and Ors. v.
Harinarayan Jaiswal and Ors-[1972] 3 SCR. 784 and
Nashirwar Etc. v. State of Madhya Pradesh and Ors.
Civil Appeals Nos. 1711-1721 and 1723 of 1974 decided
on November 27, 1974. There is no fundamental right to
do trade or business in intoxicants. The State under
its regulatory powers, has the right to prohibit
absolutely every form of activity in relation to
intoxicants-its manufacture, storage, export, import,
sale and possession".
Though most of the cases dealt with the right of the
State Government as regard auction of country liquor, in
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Balsara’s case, Nashirwar’s case and Har Shankar’s case, the
Court was concerned with the right of the State Government
over foreign liquor.
After considering all the decisions of five
Constitutional Benches, Chandrachud, J. as he then was
summed up the position at page 274 as follows:-
"These unanimous decisions of five Constitutional
Benches uniformly emphasised after a careful
consideration of the problem involved that the State
has the power to prohibit trades which are injurious to
the health and welfare of the public is inherent in the
nature of liquor business,
540
that no person has an absolute right to deal in liquor
and that all forms of dealings in liquor have, from
their inherent nature, been treated as a class by
themselves by all civilised communities."
Har Shankar’s case related to licensing of retail sale
of foreign liquor for consumption on the premises of the
licensees. The grant of license for sale of country spirit,
foreign liquor, beer were subject to the provisions of the
Punjab Act 1 of 1914. The demand by the Government for
payment of large sums of money from hoteliers or barkeepers
who supply 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. List I Entry 52
runs as follows:-
"Industries, the control of which by the Union is
declared by Parliament by law to be expedient in the
public interest".
In List II the entry relating to industries is Entry 24
which is as follows:-
"Industries subject to the provisions of (entries
7 and 52 of List 1)".
Entry 7 in List I relates to industries to be declared
by Parliament by law to be necessary for the purpose of
defence or for the prosecution of war. In this case we are
not concerned with Entry 7. A reading of Entry 52 in List I
and Entry 24 in List II makes it clear
541
that the Parliament will have exclusive jurisdiction to
legislate regarding industries, the control of which by the
Union is declared by Parliament by law to be expedient in
the public interest. Connected with these two entries is
entry 33 in List III Concurrent List which provides:-
"Trade and commerce in, and the production, supply
and distribution of-
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(a) the products of any industry where the control
or such industry by the Union is declared by Parliament
by law to be expedient in the public interest, and
imported goods of the same kind as such products:
(b) x x x
(c) x x x
(d) x x x
(e) x x x"
The subject of trade and commerce in, and the
production supply and distribution of the products of any
industry which has been declared by Parliament under Item 1
Entry 52 is in the Concurrent List on which both Parliament
and State can legislate.
The Industries (Development and Regulation) Act, 1951
was enacted by Parliament to provide for development and
regulation of certain industries. Section 2 declares that it
is expedient in the public interest that the Union shall
take in its control industries specified in First Schedule.
Item 26 in the First Schedule is fermentation industries (i)
Alcohol (ii) other products and fermentation industries.
Chapter II of the Act provides for establishment of Central
Advisory Council and Development Council. Chapter III deals
with regulation of scheduled industries. Section 10 requires
registration of existing industrial undertakings. Section 11
deals with the licensing of new industrial undertakings.
Section 12 deals with revocation and amendment of licenses
in certain cases. Section 14 deals with the procedure for
the grant of license or permission. Section 15 confers power
of investigation 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 distri-
542
bution 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 the right to control the
price. The powers conferred under section 18(G)(1) is
exercisable by the Central Government in so far as it
considers it to be necessary or expedient. The plea of the
learned counsel is that the notification made by the Central
Government excludes the power of the State Government to fix
the price of denatured spirit and rectified spirit as it has
been placed beyond the powers of the State to regulate the
distribution of licences, permits etc. The notification that
is relied on is the Ethyl Alcohol (Price Control) Amendment
Order, 1975 dated 31st October, 1975. The order reads as
follows:-
"In exercise of the powers conferred by S. 18(G)
of the Industries (Development and Regulation) Act,
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1951 (65 of 1951), the Central Government hereby makes
the following order further to amend the Ethyl Alcohol
(Price Control) order, 1971 namely:
1. (1) This order may be called the Ethyl Alcohol
(Price Control) Amendment order, 1975.
(2) It shall come into force on the date of its
publication in the official gazette.
2. In the Ethyl Alcohol (Price Control) order, 1971
(hereinafter referred to as the said order), in clause
2, for the Table the following Table shall be
substituted, namely:-
____________________________________________________________
(1) (2)
____________________________________________________________
1 Absolute Alcohol Conforming to ISI Six hundred and
Standard No. 321-1952., names for sixty eight
equivalent volume at 100 per cent rupees and
v/v strength; forty one
paise per kilo
litre.
2 Rectified spirit conforming to ISI Six hundred
standard No. 323-1959 named for and twenty
equivalent volume at 100 per cent two rupees
v/v strength. and twenty
paise for kilo
litre.
3 Rectified spirit conforming to ISI Five hundred
standard No. 323-1959 named for and eighty nine
94.68 per cent v/v strength. rupees and ten
paise per kilo
litre.
____________________________________________________________
543
The table prescribes the price of various types of
alcohol and rectified spirit. The price of ethyl alcohol is
fixed under the powers conferred on the Central Government
under S. 18(G) (1) for securing the equitable distribution
and availability at fair price. The Ethyl Alcohol (Price
Control) order, 1961 which was made by the Central
Government in exercise of the powers conferred on it under
S. 18(G) of the Industries (Development 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
permitted the adding of the expenses incurred for
transportation, payment of octroi duty etc. to the price
fixed. We are unable to read the Ethyl Alcohol (Price
Control) orders as explicitly or impliedly taking away the
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power of the State to regulate the distribution of
intoxicating liquor by collecting a levy for parting with
its exclusive rights. If the powers of Parliament and the
State Legislature were confined to entry 52 in List I and
entry 24 in List II, Parliament would have had exclusive
power to legislate in respect of industries notified by
Parliament. The power of the State under Entry 24, List II
is subject to the provisions of Entry 52 in List I. But we
have to take into account Entry 26 in List II and Entry 33
in List III for determining the scope of legislative power
of the Parliament and the State. Entry 26 in List II is as
follows:-
"Trade and Commerce within the State subject to
the provisions of entry 33 of List III."
Under Entry 33 List III the Parliament and the State
have concurrent powers to legislate regarding the
production, supply and
544
distribution of the products of industries notified by the
Parliament. Furthermore it has to be noted that the
exclusive power of the State to provide for manufacture,
distribution, sale and possession etc. of intoxicating
liquor is vested with the State. The power of the State
Government to levy a fee for parting with its exclusive
right regarding intoxicating liquor has also been recognised
as is seen from the various State Acts regulating
manufacture, sale. etc. of intoxicating liquor. A fair
scrutiny of the relevant entries makes it clear that the
power to regulate the notified industries is not exclusively
within the jurisdiction of Parliament as List II Entry 33 in
the concurrent list enables a law to be made regarding
production, supply, distribution of products of a notified
industry.
In Ch. Tika Ramji and ors. etc. v. The State of Uttar
Pradesh and Ors. a question arose whether Sugarcane
regulation, supply and purchase Act passed by the State
Legislature and the notification issued therein by the State
Government were repugnant to the notifications made under
the Industries (Development and Regulation) Act of 1951. Two
notifications were issued by the State Government under the
U.P. Sugarcane Regulations, supply and purchase Act 1953
prohibiting the occupier of the factory 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 the equitable distribution and
availability at fair price of any article relatable to
scheduled industry to provide by notified order for
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regulation, supply and distribution and trade and commerce
thereof. The impugned notification which required the
factories to purchase
545
their sugarcane from the cooperative societies and assigned
certain areas as cane purchasing centre for the factories
was stated to be ultra vires as they were beyond the State’s
competence and covered by the notification under the
Industries (Development and Regulation) Act. Justice
Bhagwati observed at page 411:-
"When, however, it came to the products of the
controlled industries comprised in Entry 52 of List I,
trade and commerce in, and production, supply and
distribution of, these goods became the subject-matter
of Entry 33 of List III and both Parliament and the
State Legislatures had jurisdiction to legislate in
regard thereto."
The learned Judge proceeded to observe:-
"That sugarcane being goods which fell directly
under entry 27 of List II was within the exclusive
jurisdiction of the State Legislature and it was
competent to legislate with regard to it and as such
the impugned Act was intra vires of the state
Legislature. The power to legislate regarding
production, supply and distribution of goods is subject
to provisions entry 33 List III which deals with
products and industries notified by Parliament. Entry
33 being in the concurrent List, legislative power of
the State regarding production, supply and distribution
of goods cannot be denied."
The Court on the facts of the case found that even
assuming that sugarcane was an article or class of articles
relating to the notified industries within the meaning of
Section 18(G) of Act 65 of 1951, no order was issued by the
Central Government in exercise of its powers vested in it
and, therefore, no question of repugnancy arose. In the case
before us it cannot be discerned from the Ethyl Alcohol
Control order that the power of the State Government to
prescribe a levy for parting with its exclusive rights
relating to intoxicating liquor had been taken away.
In Baijnath Kedvai v. State of Bihar & Ors. a question
arose as to whether the Bihar Legislature had jurisdiction
to enact the second proviso to section 10(2) of the Bihar
Land Reforms Act, 1950 by which the terms and conditions of
the lease of 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
546
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
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that the entire field relating to mines and minerals had
been occupied and taken away from the Legislature and as
such it was beyond the competence of the State to legislate
on mines and minerals. In the case before us the position is
different because the power of the State Legislature to
legislate in respect of the intoxicating liquor and its
exclusive right regarding intoxicating liquor cannot be
questioned.
The third contention of Mr. Nariman, is that the vend
fee levied by the State is not and was never treated by the
State as charge or rental as the consideration for granting
exclusive privilege. On the other hand the levy is excise
duty or a fee which the State is not entitled to collect.
The submission of the learned counsel was that even though
it is found that the State is entitled to make laws
regarding intoxicating liquor under List II, Entry 8, it has
no power to impose any tax. The power to tax by the State is
confined only to Entry 51, List II which empowers the State
to levy duty on alcoholic liquors for human consumption and
as denatured spirit is not alcoholic liquor for human
consumption, a levy of excise duty is not permissible by the
State. It was contended that the levy of a fee was also not
permissible unless it had some relation to the expenses
incurred for that purpose. According to the Solicitor-
General, Mr. Kakkar, the levy was not a tax or a fee but a
levy for parting with the exclusive right of the State in
respect of intoxicating liquor. In view of the stand taken
by the State, it is unnecessary for us to go into the
question as to whether the levy is a tax or a fee.
For dealing with the contention of Mr. Nariman that the
levy was never collected in lieu of the State parting with
its rights, it is necessary to refer to the relevant
provisions of the Act. The United Provinces Excise Act, 1910
(Act 4 of 1910) was passed in 1910. Subsequently, it was
adapted and modified by the Government of India (Adaptation
547
of Indian Laws) order, 1927 and Adaptation of Laws order,
1950 Chapter IV of the Act deals with manufacture,
possession and sale while Chapter V deals with duties and
fees. The Act refers to Excise Revenue, Duty, fee, tax, fine
and payment as condition for the grant of licence for any
exclusive privilege. S. 3(1) defines Excise Revenue as
meaning revenue derived or derivable from any duty, fee,
tax, fine or confiscation imposed or ordered under the
Provisions of the Act or of any law in force relating to
alcohol or intoxicating 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
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after Proviso II to S. 28 was omitted by the Government
(Adaptation of Indian Law) order, 1937, no excise duty on
denatured spirit was levied.
Apart from the duty that is leviable, the Excise
Commissioner is empowered under S. 30 instead of or in
addition to any duty to accept payment of a sum in
consideration of the grant of licence of any exclusive
privilege under s. 24. Section 24 provides that subject to
the provisions of S. 31, the Excise Commissioner may grant
any person a licence for exclusive privilege of
manufacturing or supplying or selling wholesale or retail,
any country liquor or intoxicating drug within any local
area. Reading S. 30 and 24 together, it is clear that the
Excise Commissioner may accept payment in consideration for
the grant of the licence for any exclusive privilege. The
exclusive privilege under S. 24 was confined only to country
liquor within a local area. Before examining the impact of
amended S. 24A by U.P. Act 30 of 1972, it may be mentioned
that Chapter VI empowers the collection of fees for licence
or permits granted under the Act. A licence fee was only
collected under notification dated 22-5-1930 for licence for
wholesale vend of denatured spirit. The Excise Department on
23-1-1937
548
introduced rule 17(2) under S. 40(2)(d) imposing vend fee of
Annas 7 per bulk gallon for the issue from the distillery.
This fee was not collected regarding denatured spirit issued
to industries engaged in the manufacture of synthetic
rubber.
By notification dated 3rd November, 1972 the U.P.
Government amended the Excise Rules and substituted rule
17(2). The rule is purported to have been issued under S.
40(2) (d) in exercise of the powers conferred on the
Government under S. 40(1). By the notification on the issue
of denatured spirit from a distillery a vend fee of Rs.
1.10p. per litre was made payable in advance except
regarding the issue to institutions exempted under the rule.
The Learned Counsel strenuously contended that this levy
does not purport to be in consideration of the grant of
licence for any exclusive privilege. On the other hand, the
learned Counsel pointed out that S. 40(2)(d) refers to the
rule making power of the Government for regulating the
import, export, transport or possession of the intoxicants.
The power, if any, is conferred on the Excise Commissioner
under S. 41 enabling him to make rules prescribing the scale
of fees in respect of licence, permits or pass or storing
any intoxicants. 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
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is for selling for consumption which would indicate that
foreign liquor is meant for human consumption. We are unable
to give the words ’foreign liquor’ such a restricted meaning
for the word consumption cannot be confined to consumption
of beverage alone. When liquor is put to any use such as
manufacture of other articles, the liquor is all the same
consumed. Further, S. 4(2) provides that the State may
declare what shall be deemed to be country liquor or foreign
liquor. The State had under
549
rule 12 issued notification dated 30th December, 1960
defining foreign liquor as meaning all rectified, perfumed,
medicated and denatured spirit, wherever made. The plea that
the Excise Commissioner had no right to accept payment in
consideration for the grant of the licence for the exclusive
privilege for selling wholesale or retail foreign liquor
which includes denatured spirit, cannot, therefore be
accepted. Rule 17(2) no doubt purports to have been issued
under the rule making powers conferred on the Government
under S. 40(2)(d) which enables the Government to make rules
for regulating the import, export, transport for possession
of any intoxicants. It may be noted that when the amended
rule 17(2) was introduced on 3-11-1972, S. 24A had been
amended by U.P. Act, 30/1972 and the power of the Excise
Commissioner to accept payment for grant of licence for
exclusive privilege cannot be denied.
The validity of Act 30/1972 which authorised the Excise
Commissioner to collect a vend fee for the retail or
wholesale vend of foreign liquor was challenged. The
Allahabad High Court upheld the challenge holding that the
State did not have the exclusive privilege to collect the
vend fee. This view was not accepted by the Supreme Court in
Nashirwar’s case (supra) and Harishankar’s case (supra)
which held that under the regulatory power, the State had
power to auction the right to vend by retail or wholesale
foreign liquor. As Act 30 of 1972 was struck down by the
Allahabad High Court the State came forward to validate Act
30 of 1972 as it stood when it was passed by introducing the
U.P. Excise (Amendment) (Reenactment and Validation) Act,
1976 (U.P. Act 5 of 1976). The preamble refers to the
passing of U.P. Amendment Act, it being struck down by the
Allahabad High Court and the subsequent decision of the
Supreme Court in Nashirwar’s case, and states that it had
become necessary to enact the (Amendment) (Re-enactment and
Validation) Act. In the main Act, after S. 1, sub-s. (2) 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
550
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,
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the Excise Commissioner had a right to grant the privilege
of selling of foreign liquor. The fact that S. 30 did not
specifically mention S. 24A might not have made any
difference. But in order to remove all doubts, the new
Section 30 had been introduced. S. 41, cl. (3) was re-
enacted to enable the fixation of fee payable for the grant
of exclusive or other privilege under S. 24 and 24A. S. 40
was also amended so as to give retrospective effect. S. 4 of
the Act 5 of 1976 also provides that the U.P. Excise
(Amendment) Act, 1972 shall be deemed to be and always to
have been as valid as if the provisions of this Act were in
force at all material times. In short the purpose of
introduction of Act 5 of 1976 was to make it clear that U.P.
Excise (Amendment) Act, 1972 shall be deemed to and always
to have been valid. In view of our findings that U.P. Excise
(Amendment) Act, 1972 was valid, the effect of U.P. Act 5 of
1976 is to remove all doubts and to give retrospective
effect.
It was next contended that foreign liquor which is
defined under rule 12, as including denatured spirit, cannot
apply to specially denatured spirit. Foreign liquor was
defined as including specially denatured spirit. By a
notification the Excise Commissioner of U.P. on 3-5-1976
framed U.P. Licences for the possession of denatured spirit
and specially denatured spirit Rules, 1976. In the preamble
to the rules, it is stated that the Excise Commissioner with
the previous sanction of the State Government was making the
rules relating to licence for possession of denatured spirit
including specially denatured spirit for industrial
purposes. Rule 1 (iii) provides that specially denatured
spirit means rendered unfit for human consumption in such
manner as may be prescribed by the Excise Commissioner by
notification in this behalf and does not include ordinary
denatured spirit for general use. Rule 2 provides that
licences for the possession of the denatured spirit
including specially denatured spirit for industrial purpose
shall be of three kinds. The learned counsel contended that
though foreign liquor is defined as including denatured
spirit, it cannot be held to include specially denatured
spirit. Denatured spirit mentioned in the rules is treated
as including specially denatured spirit for industrial
purpose. Denatured spirit has ethyl alcohol as one of its
constituents. The specially denatured spirit for industrial
purpose is different from denatured spirit only because of
the difference in the
551
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
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State Government to accept payment of a sum for the grant of
its exclusive privilege cannot be questioned. The price
fixed for ethyl alcohol is ex-distillery price and we see no
impediment for the addition of Re. 1.10 as vend fee by the
State Government
Dr. L. N. Singhvi, who appeared as intervener in Civil
Appeal Nos. 2191 to 2198 of 1978 for the appellants and for
petitioners in Special Leave Petitions Nos. 125 to 126/79
while adopting the contentions of Mr. Nariman submitted that
the stand taken by the U.P. Government in earlier
proceedings in the High Court was that the levy was in the
nature of Excise Duty or a fee while the present stand is
that it is neither a duty nor fee but only a levy for the
conferment of the exclusive privilege. 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 learned counsel submitted that so far as his clients
M/s. Rallis Chemicals, Kanpur and M/s. Rallis India,
petitioners in Special Leave Petitions Nos. 125 to 126 of
1979 are concerned they are only holders of licences for
possession and are not licencees under F.L. 16. In the same
class fall the appellants in Civil Appeal No. 2248 of 1978,
M/s. Synthetic and Chemicals who are only purchasers of
denatured spirit. It was submitted that for this class of
persons if the vend fee is
552
for the grant of exclusive privilege of the State for sale
of liquor, it cannot be recovered from the purchasers. Rule
17(1) relates to vend of denatured spirit. It empowers the
Collector (1) to grant to a distiller a licence for
manufacture of denatured spirit (2) to grant to approved
dealers of denatured spirit a licence in form F.L. 16 for
the wholesale vend of denatured spirit. Scale of fee is
given in the rule which prescribes that for sales not
exceeding 10,000 litres per annum a fee will be of Rs. 100/-
and for sales exceeding 10,000 litres, the fee shall be
increased by Rs. 500/- for every 5000 litres or fraction
thereof. Subrule (2) provides that in case of issue from a
distillery, a vend fee of rupee one and ten paise per bulk
gallon will be payable before the spirit is issued. The fee
charged is very different from the one in Rule 17(1) which
provides that the distillery or an approved 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
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possession for use in industries in which alcohol is
destroyed or converted chemically in the process into other
products and the product does not contain alcohol such as,
Ethel, Styrene, Butadiene, Acetone and Polythene etc. The
licence granted for this purpose is in form F.L. 39. Rule
3(a) provides that the fee for the licence in Form F.L. 39
shall be at a rate prescribed for industry to industry by
the Excise Commissioner per litre, payable on the quantity
of specially denatured spirit obtained from any distillery
in Uttar Pradesh and that fee shall be realised by the
Excise Inspector incharge Distillery from the licensee
before issue of the specially denatured spirit from the
distillery. 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
553
for and obtained licences in form F.L. 39 are bound to
comply with the conditions.
Lastly, it was contended that the provisions of Uttar
Pradesh Excise (Amendment) (Re-enactment and Validation)
Act, 1976 is invalid and confiscatory as its retrospective
operation imposes an unbearable burden on the
appellants/petitioners. It was stated that the licence under
F.L. 39 was issued only in the year 1979 and no levy could
be made regarding denatured spirit that was supplied before
that date. The answer of the State is that the levy was
imposed for permission granted in their favour and allotment
orders of denatured spirit issued to them from the various
distilleries. The parties after having paid the fee had
taken possession of the denatured spirit from the
distillery. 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 of 1972.
Reliance was placed on the decision of this Court in A.
B. Abdul Kadir & ors etc. v. State of Kerala for the
contention that retrospective operation of an Act when it
harshly operates is liable to be held as invalid. At page
706 this Court observed that the power to make a valid law’
would enable providing for prospective and retrospective
operation of the provisions. It was observed that in judging
the reasonableness of the retrospective operation of law,
the test of length of time covered by the retrospective
operation could not by itself be treated as decisive. On the
facts of the case there could be no complaint because what
is sought to be collected is levy which was legally made.
The result is, all the contentions raised by the
learned counsel for the appellants/petitioners fail and
appeals and the petitions are dismissed with costs one set
of hearing fee. The State Appeal C.A. No. 1130/76 is allowed
but there will be no order as to costs.
P.B.R. State appeals allowed.
554