Civil Appeal No 533 of 1979
From the judgment and order dated 2nd January 1979 of the High Court of Kerala in original Petition No 4935 of 1974 D and Special Leave Petition No 81 OF 1971
From the judgment and order dated the 27th July 1971 of the Kerala High Court in OP No 4706 of 1969
TS Krishnamoorthy Iyer CJ Balakrishnan K Prabhakaran P Parameswaran and AS Nambiar for the appellant in CA No 53379
P Govindan Nair Mrs Baby Krishnan KR Nambiar and KMK Nair for the respondent in CA No 53379
SB Sahariya and VB Sahariya for the petitioner in SLP No 8172
The Judgment of the Court was delivered by SEN J
This appeal
by special leave is directed against a judgment of the Kerala High Court by which the High Court dismissed the writ petition of the appellants who are manufacturers of medicinal and toilet preparations containing alcohol and upholding the constitutional validity of sections 12A 12B 14e and f and 68A of the Abkari Act 1077 1 of 1077 hereinafter called the Act  introduced by the Abkari Amendment Act 1967 10 of 1967 and rr 13 and 16 of the Kerala Rectified Spirit Rules 1972
The main question in the appeal is as to the legislative competence of the State to enact a law relating to medicinal and toilet preparations containing alcohol under Entry 8 List II of the Seventh Schedule to the Constitution
The appellants by virtue of a licence in Form 25 granted under the and a licence in Form Ll granted under the hereinafter referred to as the Central Act  are entitled to manufacture the drugs specified therein
They filed a writ petition in the High Court complaining that they were entitled to the supply of alcohol free of duty for the manufacture of their medicinal and toilet 525 preparations under r 21 of the Medicinal and Toilet Preparations A Excise Duties Rules 1956 hereinafter referred to as the Central Rules  and r 8 of the Kerala Rectified Spirit Rules 1972 and challenged the validity of the impugned provisions mainly on the ground that the State Legislature has no power to enact the law relating to medicinal and toilet preparations as the topic of legislation is within the exclusive domain of Parliament under Entry 84 List I of the Seventh Schedule to the Constitution
The High Court held that there was no conflict between the impugned provisions and the Central law as they dealt with different subjects
The impugned provisions as introduced by the Abkari Amendment Act 1967 in so far as they are relevant are as follows Section 12A reads 12A
No preparation to which liquor or intoxicating drug is added during the process of its manufacture or in which alcohol is self generated during such process shall be manufactured in excess of the quantity specified by the Commissioner Provided that in specifying the quantity of a medicinal preparation the Commissioner shall have due regard to the total requirement of that preparation for consumption or use in the State
Section 12B provides 12B 1 No person shall utilise liquor or intoxicating drug in the manufacture of any preparation in excess of the quantity specified by the Commissioner and except under and in accordance with the terms and conditions of a licence granted by the Commissioner in that behalf G Provided that where such preparation is a medicinal preparation Commissioner shall in specifying the quantity of liquor or intoxicating drug have due regard to the total requirement of such medicinal preparation for consumption or use in the State
526 Section 14 provides 14
The Commissioner may with the previous approval of the Government    d prescribe the mode of supervision that may be necessary in a  manufactory where preparations containing liquor or intoxicating drugs are manufactured to ensure the proper collection of duties taxes and other dues payable under this Act or the proper utilisation of liquor or intoxicating drugs e prescribe the size and nature of the establishment necessary for such supervision and the cost of the establishment and other incidental charges in connection with such supervision to be realised from the licensees and f prescribe the allowance for wastage of alcohol that may occur in i   ii the process of manufacture of any preparation containing alcohol and iii  
Section 68A provides that the Government shall appoint an Expert Committee consisting of the Drugs Controller the Chemical Examiner to the Government two representatives each one of them shall be a non official of the Allopathic Indigenous and Homoeopathic systems of medicine appointed by the Government and an officer of the Excise Department not below the rank of Deputy Commissioner and the Committee shall advise the Commissioner a as to whether a medicinal preparation is a bona fide medical preparation or not and b as to the total requirements of medicinal preparations containing liquor or intoxicating drugs or in which alcohol is self generated during the process of their manufacture for the whole of the State during one year
Before this Court the constitutional validity of the impugned provisions was mainly challenged on these grounds namely I The State Legislature had no legislative competence to enact the impugned 527 provisions because the field was occupied by the provisions of the A the Central Act and the Medicinal and Toilet Preparations Excise Duties  Rules 1956 the Central Rules and alternatively the impugned provisions are violative of the fundamental right guaranteed in article 191 g of the Constitution
2 The Parliament having made a declaration in section 2 of the Industries Development and Regulation Act 1951 declaring Drugs and Pharmaceuticals to be a scheduled industry being item 22 of the First Schedule thereof the power of the State Legislature to make a law in respect of medicinal and toilet preparations containing alcohol is taken away
3 The provisions made in section 14e of the Act for the collection of supervisory charges was clearly invalid in as much as a they are in conflict with r 45 of the Central Rules and b they could not be sustained as a fee as there was no quid pro quo
4 Rule 13 of the Kerala Rectified Spirit Rules 1972 providing for the levy of excise duty as excess wastage of alcohol in the manufacture of medicinal and toilet preparations cannot be supported in terms of the charging provision contained in section 17 of the Act
We cannot accept any of these contentions With regard to the first ground it was submitted that the conferral of power on the Commissioner under section 12A of the Act to restrict the quantity of medicinal and toilet preparations to which liquor or intoxicating drug is added during the process of its manufacture with the requirement that the Commissioner shall in specifying such quantity have due regard to the total requirements of consumption or use in the State the prohibition contained in section 12B of the Act that no person shall utilise liquor or intoxicating drug in the manufacture of any preparation in excess of the quantity so specified by the Commissioner and the condition that no person shall manufacture any such preparations except under and in accordance with the terms and conditions of a licence granted by him is clearly contrary to the general scheme of the Central law and in particular rr 18 and 21 of the Central Rules
In this respect it was said that under r 18 of the Central Rules rectified spirit ordinarily had to be supplied to a manufacturer from a distillery or a spirit warehouse of the State in which the manufactory is situate and the manufacturer was not precluded from obtaining his requirements of rectified spirit from sources outside the State
Under r 21 rectified spirit had to be issued without previous payment of duty for the manufacture of medicinal and toilet preparations containing alcohol subject to the condition that 528 manufacturer enters into a bond in Form Bl with sufficient security as laid down in r 96 towards due payment of duty and observance of the rules
It is submitted that the State Legislature has no power to make any such law imposing restrictions on a person carrying on the business of manufacture and sale of medicinal and toilet preparations containing alcohol in as much as the matter relates to an occupied field
There is no merit in these contentions
The enactment of the by Parliament under Entry 84 List I of the Seventh Schedule of the Constitution or the framing of the Medicinal and Toilet Preparations Excise Duties Rules 1956 by the Central Government in exercise of their rule making power under section 19 of the Act for the purpose of levying duties of excise on medicinal and toilet preparations containing alcohol etc do not prevent the State Legislature from making a law under Entry 8 List II of the Seventh Schedule to the Constitution with respect to intoxicating liquors  or a law under Entry 51 List II for levying excise duties on alcoholic liquor for human consumption
In order to appreciate the contention regarding the applicability of the doctrine of occupied field  it is necessary to examine the scheme of both the enactments
The scheme of the Act as reflected in the preamble is that it is an Act to consolidate and amend the law relating to the import export transport manufacture sale and possession of intoxicating liquor and all intoxicating drugs in the State of Kerala
It is not necessary to set out all the provisions of the Act in question but reference may be made to the definitions of expressions spirit  liquor  country liquor  foreign liquor and intoxicating liquor  defined in sections 39 10 12 13 and 14
The expression liquor  as defined in section 310 reads 310 Liquor  includes spirits of wine methylated spirits spirits wine toddy beer and all liquid consisting of or containing alcohol
Section 121 provides 121
No liquor or intoxicating drug shall be manufactured except under the authority and subject to the terms and conditions of licence granted by the Commissioner in that behalf or under the provisions of section 21 529 Section 15 provides 151
No liquor or intoxicating drug shall be sold with out a licence from the Commissioner provided that a person having the right to the toddy drawn from any tree may sell the same without a licence to a person licensed to manufacture or sell toddy under this Act
B Section 17 provides 17
A duty of excise or luxury tax or both shall if the Government so direct be levied on all liquor and intoxicating drugs    f issued from a distillery brewery winery or other manufactory or warehouse licensed or established under section 21 or section 14 or The Act is clearly relatable to the State s power to make a law on the topics of legislation covered by Entries 8 and 51 List II of the Seventh Schedule to the Constitution which read as under 8
Intoxicating liquors that is to say the production manufacture possession transport purchase and sale of intoxicating liquors
Duties of excise on the following goods manufactured or produced in the State and countervailing duties at the same or lower rates on similar goods manufactured or produced elsewhere in India a alcoholic liquors for human consumption b opium Indian hemp and other narcotic drugs and narcotics but not including medicinal and toilet preparations containing alcohol or any substance included in sub paragraph b of this entry
The legislative history of the Central Act is well known
Under Entry 40 List II of the Seventh Schedule to the Government of 530 India Act 1935 medicinal and toilet preparations containing alcohol etc were subjected to Provincial excise duties
Under the Constitution the entry relating to the excise duty on medicinal and toilet preparations containing alcohol was transferred to the Union List
In the light of experience gained there was necessity to achieve a synthesis from a vast body of existing rules and regulations in force in the States having regard to the sole object of the measure namely to bring about uniform treatment in excise matters
This was a highly complicated subject because firstly the excise duty was to be collected and retained by the State Governments and secondly a certain amount of flexibility in statutory operations was necessary if spurious medicines were not to defeat the policy of prohibition which is one of the Directive Principles of State Policy under article 47 of the Constitution
Some of the provisions of the Central Act are so designed as to lay down only broad principles
Matters of detail such as classification of the preparations as capable or not capable of being used as ordinary alcoholic beverages regulation for the purpose of the Act of production storage and movement were left to be regulated by rules
Parliament accordingly enacted the  to provide for the levy and collection of duties of excise on medicinal and toilet preparations containing alcohol
The Act is relatable to Entry 84 List I of the Seventh Schedule to the Constitution which reads 84
Duties of excise on tobacco and other goods manufactured or produced in India except a alcoholic liquors for human consumption b opium Indian hemp and other narcotic drugs and narcotics but including medicinal and toilet preparations containing alcohol or any substance included in sub paragraph b of this entry
The scheme of the Central Act is to provide for the levy and collection of duties of excise on medicinal and toilet preparations containing alcohol etc
The Act is entitled as An Act to provide for the levy and collection of duties of excise on medicinal and toilet preparations containing alcohol opium
Indian hemp or other narcotic drug or narcotic
Section 2 is the definition Section and 531 the expression dutiable goods  as defined in section 2c takes in medicinal and toilet preparations specified in the Schedule
The expression medicinal preparation  is defined in section 2g as 2g medicinal preparation  includes all drugs which are a remedy or prescription prepared for internal or external use of human beings or animals and all substances intended to be used for or in the treatment mitigation or prevention of disease in human beings or animals It is not necessary to refer to the definition of toilet  preparation in section 2k as it is not relevant for the present purpose
Section 3 is the charging section which levies duties of excise on all dutiable goods  manufactured in India and also lays down the mode of collection of the said duties
Section 3 1 reads 31
There shall be levied duties of excise at the rates specified in the Schedule on all dutiable goods manufactured in India
Section 6 prohibits any person from engaging in the production or manufacture of any dutiable goods etc except under the authority and in accordance with the terms and conditions of the licence granted under the Central Act
Section 19 1 empowers the Central Government to make rules to carry out the purposes of the Act and sub section
2 thereof specifies the various matters in respect of which such rules may be made
Section 21 provides for the repeal and savings
The Schedule to the Act contains a description of dutiable goods  and the rates of duty payable thereon
In exercise of the powers conferred by section 19 1 of the Central Act the central Government framed the Central Rules which practically deal with all the facets of manufacture and production of medicinal and toilet preparations as required in cls
i to xxi of sub section
2 thereof with the ultimate object of providing a machinery for collection of duty on the said preparations
Chapter IV of the Central Rules deals with Manufacture 
Rule 18 in Chapter IV provides that rectified spirit shall ordinarily be supplied to a manufacturer from a distillery
Of the State in which the manufactory is situated
It further provides that the manufacturer is not precluded from obtaining his requirements of rectified spirit from sources outside the State
Rule 21 provides that rectified spirit H shall be issued without previous payment of duty to a manufacturer of medicinal and toilet preparations containing alcohol
Rule 33 532 provides for taking of samples of the manufactured product for analysis for determining the strength of alcohol and medicaments
Rule 38 provides for wastage in manufacture
Rule 451 enjoins that the officer in charge shall exercise such supervision as is required to ensure that alcohol issued for a certain preparation is added to the materials which go to make that preparation and that no portion of such alcohol is diverted to other purposes
These rules are intended and meant to carry out the main object of the Central Act ie to levy and collect duties of excise on medicinal and toilet preparations containing alcohol etc
It is the charging section which gives the true index to the a real character of a tax
The nature of the machinery by which the tax is to be assessed is not of assistance except in so far as it may throw light on the general character of the tax
The charging section in section 3 of the Central Act clearly shows that it does not seek to levy a duty of excise on alcoholic liquor for human consumption falling within Entry 51 List II of the Seventh Schedule but to levy a duty of excise on medicinal and toilet preparations containing alcohol etc
The topic of legislation under Entry 84 List I of the Seventh Schedule is not duties of excise on alcoholic liquors for human consumption  but duties of excise on medicinal and toilet preparations containing alcohol etc 
There can be little doubt that the Central Act must in pith and substance be attributed to Entry 84 List I
In determining whether an enactment is a legislation with respect to  a given power what is relevant is not the consequences of the enactment on the subject matter or whether it affects it but whether in its pith and substance it is a law upon the subject matter in question
The Central and the State Legislations operate on two different and distinct fields
The Central Rules to some extent trench upon the field reserved to the State Legislature but that is merely incidental to the main purpose that is to levy duties of excise on medicinal and toilet preparations containing alcohol
Similarly some of the impugned provisions may be almost similar to some of the provisions of the Central Rules but that that does not imply that the State Legislature had no competence to enact the provisions
It is sufficient to say upon the first ground that the impugned legislation is confined to intoxicating liquor  that is to ensure proper utilisation of rectified spirit in the manufacture of medicinal and toilet preparations and therefore within the powers granted 533 to the State Legislature under Entry 8 List II
It further seeks to regulate the manufacture of bona fide medicinal preparations and prevent misuse of rectified spirit in the manufacture of spurious medicinal and toilet preparations containing alcohol capable of being used as ordinary alcoholic beverages
It was suggested that the provisions are identical with the provisions contained in the Central Rules and in particular to rule 451 and therefore the legislation is in the occupied field
The answer is that the enumeration of intoxicating liquor  in Entry 8 List II confers exclusive power to the State to legislate in respect of medicinal and toilet preparations containing alcohol
In Prafulla Kumar Mukherjee and Ors
vs Bank of Commerce Ltd Khulna1 the Privy Council in dealing with the question or distribution of powers laid down the tests that in order to see whether an Act is in respect of a particular subject one must look to its true nature and character its pith and substance
Lord Porter in delivering the judgment of the Judicial Committee observed As Sir Maurice Gwyer CJ said in the Subramanyam Chettiar Case  It must inevitably happen from time to time that legislation though purporting to deal with a subject in one list touches also on a subject in another list and the different provisions of the enactment may be so closely inter twined that blind observance to a strictly verbal interpretation would result in a large number of statutes being declared invalid because the legislature enacting them may appear to have legislated in a forbidden sphere
Hence the rule which has been evolved by the Judicial Committee whereby the impugned statute is examined to ascertain its pith and substance  or its true nature and character  for the purpose of determining whether it is legislation with respect to matters in this list or in that 
The doctrine of pith and substance  evolved by the Privy Council has been followed by this Court throughout
Thus in State of Bombay vs F N Balsara2 Fazl Ali J followed the decision of the Judicial Committee reiterated 534 If the Act when so viewed substantially falls within the powers expressly conferred upon the Legislature which enacted it then it cannot be held to be invalid merely because it incidentally encroaches on matters which have been assigned to another Legislature
 In such matters of seeming conflict or encroachment of jurisdictions what is more important is the true nature and character of the legislation
A necessary corollary of the doctrine of pith and substance is that once it is found that in pith and substance the impugned Act is a law on a permitted field any incidental encroachment on a forbidden field does not affect the competence of the legislature to enact the law
The main thrust of the argument is the decision of this Court in Hyderabad Chemical and Pharmaceutical Works Ltd vs State of n Andhra Pradesh and Ors1 which we are afraid is clearly distinguishable
There the Court was concerned with the question whether r 36 of the Medical Preparations and Spirituous Rules 1345 Fasli framed under the Hyderabad Abkari Act 136 Fasli which provided that the expenses of the establishment for the supervision of the work shall be borne by the pharmaceutical laboratory licensee as per the decision of the Commissioner of Excise was still enforceable having regard to section 21 of the Central Act and r 143 of the Central Rules
It was held that the effect of section 21 of the Central Act was that so far as the Hyderabad Act applied to the use of alcohol in the manufacture of medicinal and toilet preparations the Act must be deemed to have been repealed and therefore r 36 could not survive
In that case the Court was concerned with the levy of supervisory charge at the stage of manufacture of medicinal and toilet preparations and not with the levy of supervisory charges at the stage of the supply and utilisation of rectified spirit in the manufacture of medicinal and toilet preparations
This is clear from an observation at p 380 of the Report to the effect The supervisory staff which has to be paid for under r 36 therefore is meant for the supervision of the manufacture of medicinal preparations and it is for that purpose only that expenses have to borne by the laboratory con 535 cerned
The purpose of the rule therefore is clearly covered by the Act and the Rules framed thereunder and it cannot survive the Act and the rules in view of section 21 of the Act and r 143 of the 1956 Rules and the proviso to s 21 cannot be availed of by the State
While repelling the contention that r 36 could still be good law as it was meant to carry out the general law relating to alcohol and intoxicating drugs the Court pointed out that the Central Rules make no provision for recovery of supervisory charges the intention being that the duty under the Act would cover all expenses for enforcing it and observed 1 We are of opinion that there is no force hl this contention either
In the first place as we have already indicated the main object of the supervisory staff mentioned in r 36 is to supervise the manufacture of medicinal preparations
In that connection the supervisory staff will certainly see that the alcohol supplied is used for the purpose for which it is supplied and it is not used in any other manner
Rule 36 is only concerned with seeing that the manufacture of medicinal preparations is made properly and is done under the supervision of the establishment attached to each laboratory and it is only incidentally that in that connection the establishment is also to see that the alcohol supplied is not used otherwise than for the purpose of manufacture
Further the Central Act which the Court was considering was a fiscal measure
The whole object and purpose of that Act is to levy a duty of excise on medicinal and toilet preparations containing alcohol
The Central Rules have mainly been framed to achieve this object
Rule 451 on which reliance was placed reads 451
The officer in charge shall exercise such supervision as is required to ensure that alcohol issued for a certain preparation is added to the materials which go to make that preparation and that no portion of such alcohol is diverted to other purposes
The provision is merely incidental to the main purpose ie collection of excise duty on medicinal and toilet preparations containing alcohol
536 There can be no doubt that the impugned Act is relatable to Entry 8 List II of the Seventh Schedule
In Balsara s case1 the Court held that the expression liquor  in Entry 31 List II of the Seventh Schedule to the Government of India Act 1935 took within its sweep all liquids containing alcohol
In dealing with the question Fazal Ali J Observed 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 accordingly I consider the appropriate conclusion to be 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
It may be that the latter meaning is not the meaning which is attributed to the word liquor  in common parlance especially when that word is prefixed by the qualifying word intoxicating  but in my opinion having regard to the numerous statutory definitions of that word such a meaning could not have been intended to be excluded from the scope of the term intoxicating liquor  as used in entry 31 of List II
It is not disputed by the appellants that the impugned Act does not levy a duty of excise on medicinal and toilet preparations containing alcohol but they contend that whatever be the intention the State Legislature had in fact encroached upon an occupied field
The contention is in our opinion wholly misconceived
The main purpose of the impugned Act is to consolidate the law relating to manufacture sale and possession of intoxicating liquor and intoxicating drugs which squarely falls under Entry 8 List II of the Seventh Schedule while the main object of the Central Act is to provide for the levy and collection of duties of excise on medicinal and toilet preparations containing alcohol falling under Entry 84 List I of the Seventh Schedule
When the frame work of the two enactments is examined it would be apparent that the Central and the State Legislations operate in two different and distinct fields
In the matter of making rules or detailed provisions to achieve the object and purpose of a legislation there may be some provisions seemingly overlapping or encroaching upon the forbidden field but 537 that does not warrant the striking down the impugned Act as ultra virus the State Legislature
The alternative contention that the impugned provisions are violative of article 191g of the Constitution is wholly devoid of any merit
No citizen has any fundamental right guaranteed under article 191g of the Constitution to carry on trade in any noxious and dangerous goods like intoxicating drugs or intoxicating liquors
The power to legislate with regard to intoxicating liquor carries with it the power to regulate the manufacture sale aud possession of medicinal and toilet preparations containing alcohol not for the purpose of interfering with the right of citizens in the matter of consumption or use for bona fide medicinal and toilet preparations but for preventing intoxicating liquors from being passed on under the guise of medicinal and toilet preparations
It was within the competence of the State Legislature to prevent the noxious use of such preparations ie their use as a substitute for alcoholic beverages
The general test for determining what medicinal preparations containing alcohol are capable of being misused and therefore must be considered intoxicating within the meaning of the term intoxicating liquor  is the capability of the article in question tor use as a beverage
The impugned provisions have been enacted to ensure that rectified spirit is not misused under the pretext of being used for medicinal and toilet preparations containing alcohol
Such regulation is a necessary concomitant of the police power of the State to regulate such trade or business which is inherently dangerous to public health
Section 12A of the Act provides that no preparation to which liquor or intoxicating drug is added during the process of its manufacture or in which alcohol is self generated during such process shall be manufactured in excess of the quantity specified by the Commissioner Provided that in specifying the quantity of a medicinal preparation the Commissioner shall have due regard to the total requirement of that preparation for consumption or use in the State
Section 12 provides that no person shall utilise liquor or intoxicating drug in the manufacture of any preparation in excess of the quantity specified by the Commissioner and except under and in accordance with the terms and conditions of a licence granted by the Commissioner in that behalf Provided that where such preparation is a medicinal preparation the Commissioner shall in 538 specifying the quantity of liquor or intoxicating drug have due regard to the total requirement of such medicinal preparation for consumption or use in the State
Now section 68A provides for the Government to appoint an Expert Committee to advise the Commissioner as to whether a medicinal preparation is a bona fide medicinal preparation or not and as to the total requirement of the medicinal preparations containing alcohol or intoxicating drug or in which alcohol is self generated during the process of their manufacture for the whole of the State during one year
The challenge to the validity of sections 12A and of the Act is mainly based on the words shall have due regard to the total requirement of such medicinal preparations for consumption or use in the State occurring in the provisions thereof
The submission is that the quantity of medicinal preparations manufactured by the appellants would be restricted looking to the total requirements of such preparations for consumption or use in the State
The medicines are in demand not only in the State but throughout the country and to limit consideration by the Commissioner in granting a licence only to the requirements of preparations for consumption or use in the State would be an unreasonable restriction on the fundamental right guaranteed under article 191 g of the Constitution
We do not think that the impugned provisions contained in sections 12A and 12B have that effect
All that the provisions ordain is that the Commissioner shall have regard to the total requirements for use and consumption within the State 
The expression shall have regard to  had been subject to judicial interpretation in Ryots of Garabandho and other villages vs Zamindar of Parlakimidi and Anr1 It only means take into consideration 
Understood in the light of this judicial exposition the Commissioner only has to take into account the total requirements within the State as an element which should enter the assessment and no more
As a necessary corollary it follows that in fixing the quantity of medicinal and toilet preparations to which alcohol is added or in which it is self generated normally the Commissioner shall have regard to larger requirements of the manufacturer if the manufactured product has a market outside the State
As a corollary it must result in the consequence that in the case of medicinal and toilet preparations which are capable of being misused as alcoholic beverages or which are not bona fide medicinal preparations in the opinion of the Expert Committee the Commissioner may totally prohibit the manufacture of such pre 539 parations
The restrictions imposed by section 12B as to the alcoholic content of medicinal and toilet preparations and the requirement that they shall not be manufactured except and in accordance with the terms and conditions of a licence granted by him are nothing but reasonable restrictions within the meaning of article 196
The impugned provisions therefore cannot be struck down as offending article 1 g of the Constitution
As regards the second ground the contention that Parliament having made the requisite declaration in section 2 of the Industries Development and Regulation Act 1951 declaring drugs and pharmaceuticals to be a scheduled industry being item 22 of Schedule I thereof the State Legislature was denuded of its competence to enact the impugned provisions under Entry 8 List II cannot be accepted
In Ishwari Khetan Sugar Mills P Ltd vs State of Uttar Pradesh1 this Court held that the legislative power of the States under Entry 24 List II is eroded only to the extent of control assumed by the Union by reason of a declaration made by Parliament in respect of a declared industry  as spelt out by a legislative enactment under Entry 52 List I and the field occupied by such enactments is the measure of erosion
But subject to such erosion on the remainder the State Legislature will still have power to legislate in respect of a declared industry without in any way trenching upon the occupied field
Now the impugned Act in pith and substance is not a legislation under Entry 24 List II and therefore the question really does not arise
The third ground that the levy of supervisory charges under s14e of the Act and r164 of the Kerala Rectified Spirit Rules 1972 being in conflict with r 451 of the Central Rules is constitutionally impermissible cannot be accepted
The submission rests on a misconception as to the scope and effect of the decision of this Court in the Hyderabad Chemicals and Pharmaceutical s case supra
As we have already explained the Court in that case was concerned with the levy of supervisory charges at the stage of manufacture of medicinal and toilet preparations and not with the levy of supervisory charges at the stage of supply and utilisation of rectified spirit in the manufacture of medicinal and toilet preparations
There can be supervision at both the stages
Merely because the Central Rules made no provision for realisation of supervisory charges at the stage of manufacture of medicinal and toilet preparations does not imply 540 that the State has no power to prescribe the mode of supervision in a manufactory where preparations containing intoxicating liquor or intoxicating drugs are manufactured or to ensure proper collection of duties taxes and other dues payable under the Act or to the proper utilisation of liquor or intoxicating drug
The provision contained in section 14e of the Act is clearly relatable to the State s power to make a law under entry 8 read with Entry 51a List II of the Seventh Schedule
It necessarily follows that section 14e of the Act is valid in so far as it provides that the Commissioner may prescribe the size and nature of the establishment for such supervision and the cost of establishment and other incidental charges in connection with such supervision to be realised from the licensee
There is no f  warrant for the submission that the framing of such an incidental provision like r 451 of the Central Rules takes away the State s power to recover supervisory charges from the licensee
There still remains the question whether the levy of supervisory charges must be regarded as a fee and therefore cannot be sustained there being no quid pro quo
In support of the contention reliance is placed on the decision in Indian Mica Micanite Industries vs The State of Bihar and Ors1 The distinction between a tax  and a fee  is well settled
The question came up for consideration for the first time in this Court in the Commissioner HRE Madras vs Lakshmindra Thirtha Swamiar of Shirur Mutt2 Therein the Court speaking through Mukherjee J quoted with approval the definition of tax  given by Latham CJ in Matthews vs Chickoory Marketing Board3
In that case the learned Chief Justice observed A tax is a compulsory exaction of money by public authority for public purposes enforceable by law and is not payment for services rendered
Dealing with the distinction between tax  and fee  the learned Judge observed 4 It is said that the essence of taxation is compulsion that is to say it is imposed under statutory power without 541 the tax payer s consent and the payment is enforced by law
A The second characteristic of tax is that it is an imposition made for public purpose without reference to any special benefit to be conferred on the payer of the tax
This is expressed by saying that the levy of tax is for the purposes of general revenue which when collected forms part of the public revenues of the State
As the object of a tax is not to confer any special benefit upon any particular individual there is as it is said no element of quid pro quo between the tax payer and the public authority
Another feature of taxation is that as it is a part of the common burden the quantum of imposition upon the tax payer depends gene rally upon his capacity to pay
Coming now to fees a fee  is generally defined to be a charge for a special service rendered to individuals by some Governmental agency
The amount of fee levied is supposed to be based on the expenses incurred by the Government in rendering the service though in many cases the costs are arbitrarily assessed
Ordinarily the fees are uniform and no account is taken of the varying abilities of different recipients to pay
These are undoubtedly some of the general characteristics but as there may be various kinds of fees it is not possible to formulate a definition that would be applicable to all cases 
If as we hold a fee is regarded as a sort of return or consideration for services rendered it is absolutely necessary that the levy of fees should on the face of the legislative provision be co related to the expenses incurred by Government in rendering the services
The same view was reiterated by this Court in Mahant Sri Jagannath Ramanuj Das vs The State of Orissa1 and in Ratilal Pannchand Gandhi vs The State of Bombay
2 Fees  are the amounts paid for a privilege and are not an obligation but the payment is voluntary
Fees are distinguished 542 from taxes in that the chief purpose of a tax is to raise funds for the support of the Government or for a public purpose while a fee may be charged for the privilege or benefit conferred or service rendered or to meet the expenses connected therewith
Thus fees are nothing but payment for some special privilege granted or service rendered
Taxes and taxation are therefore distinguishable from various other contributions charges or burdens paid or imposed for particular purposes and under particular powers or functions of the Government
It is now increasingly realised that merely because the collections for the services rendered or grant of a privilege or licence are taken to the consolidated fund of the State and are not separately appropriated towards the expenditure for rendering the service is not by itself decisive
That is because the Constitution did not contemplate it to be an essential element of a fee that it should be credited to J a separate fund and not to the consolidated fund
It is also increasingly realised that the element of quid pro quo stricto senso is not always a sine qua non of a fee
It is needless to stress that the element of quid pro quo is not necessarily absent in every tax
We may Din this connection refer with profit to the observations of Seervai in his Costitutional Law to the effect 1 It is submitted that as recognised by Mukherjee J him self the fact that the collections are not merged in the consolidated fund is not conclusive though that fact may enable a court to say that very important feature of a fee was present
But the attention of the Supreme Court does not appear to have been called to article 266 which requires that all revenues of the Union of India and the States must go into their respective consolidated funds and all other public moneys must go into the respective public accounts of the Union and the States
It is submitted that if the services rendered are not by a separate body like the Charity Com missioner but by a government department the character of imposition would not change because under article 266 the moneys collected for the services must be credited to the consolidated fund
It may be mentioned that the element of quid pro quo is not necessarily absent in every tax
emphasis added Our attention has been drawn to the observations in Kewal Krishan Puri  Anr vs State of Punjab and Ors
2 543 The element of quid pro quo must be established A between the payer of the fee and the authority charging it
It may not be exact equivalent of the fee by a mathematical precision yet by and large or predominantly the authority collecting the fee must show that the service which they are rendering in lieu of fee is for some special benefit of the payer of the fee
To our mind these observations are not intended and meant as laying down a rule of universal application
The Court was considering the rate of a market fee and the question was whether there was any justification for the increase in rate from Rs 2 per every hundred rupees to Rs 31 
There was no material placed to justify the increase in rate of the fee and therefore it partook the nature of a tax
It seems that the Court proceeded on the assumption that the element of quid pro quo must always be present in a fee
The traditional concept of quid pro quo is undergoing a transformation
It seems obvious that
in the case of a manufacturer of medicinal and toilet preparations containing alcohol in a bonded manufactory the imposition of the cost of establishment under section 14e of the Act calculated in accordance with the nature and extent of that establishment could not be said to be an imposition of a duty of excise but is a price for his franchise to carry on the business
If an exaction is to be classed as a duty of excise it must of course be a tax its essential distinguishing feature is that it is a tax imposed upon or in respect of  or in relation to goods Matthews vs Chickory Marketing Board l
The exaction is in truth as it purports to be simply a fee payable as a condition of a right to carry on a business
No one has a fundamental right to the supply of rectified spirit which is an intoxicating liquor
It is up to the State to control and regulate its supply from a distillery or a spirit warehouse in the State under and in accordance with terms and conditions of a licence or permit its import from outside by grant of a privilege and charge a fee for the same
A fee may be charged for the privilege or benefit conferred or service rendered or to meet the expenses connected therewith
A fee may be levided to meet the cost of supervision and maybe something more
It is in consideration for the privilege licence or service
The State is undoubtedly entitled to levy H 544 excise duty on the rectified spirit issued from a distillery under section 17f of the Act read with r 13 of the Kerala Rectified Spirit Rules 1972 but it refrained from making any such levy by reason of r 21 of the Central Rules and has therefore by proviso to r 8 allowed a manufacturer of medicinal and toilet preparations to draw rectified spirit from a distillery without payment of duty
It is thus a privilege conferred on the licensee
To claim the privilege he must comply with the conditions prescribed
If one of the condition is the payment of cost of establishment under section 14e of the Act read with r 164 of the Central Rules the manufacturer of such preparations must necessarily bear the burden as the licensee gets services in return in lieu of such payment
The decision in the Indian Mica Micanite Industries case supra on which reliance is placed furnishes a complete answer to the appellant s contention
The Court there was concerned with the validity of supervisory charges of the excise establishment from a consumer and not from the manufacturer under the Bihar and Orissa Excise Act 1915
It was clearly indicated that the burden of the cost of supervisory charges must fall on the manufacturer and not on the consumer because there was no co relationship between the levy of fee and the services rendered
Further though there was a double duty on the manufacturer as well as the consumer the Court did not strike down the levy on the consumer because it was observed that the question of co relationship between the services rendered and the fee levied is essentially a question of fact
In dealing with the question whether the impugned levy could be justified as a fee on the basis of the law as enunciated by this Court it was observed  1 According to the finding of the High Court the only services rendered by the Government to the appellant and to other similar licensees is that the Excise Department have to maintain an elaborate staff not only for the purposes of ensuring that denaturing is done properly by the manufacturer but also for the purpose of seeing that the subsequent possession of
denatured spirit in the hands either of a wholesale dealer or retail seller or any other licensee or permit holder is not misused by coverting the denatured spirit into alcohol fit for human consumption and thereby 545 evade payment of heavy duty
So far as the manufacturing A process is concerned the appellant or other similar licensees have nothing to do with it
They are only the purchasers of manufactured denatured spirit
Hence the cost of super vising the manufacturing process or any assistance rendered to the manufacturers cannot be recovered from the consumers like the appellant
Further under Rule 9 of the Board s rules the actual cost of supervision of the manufacturing process by the Excise Department is required to be borne by the manufacturer There cannot be a double levy in that regard
emphasis added The Court then went into the question whether there was any corelationship between the services rendered and the fee levied and whether the levy in question was not disproportionate to the value of the services rendered by the State and observed D In the opinion of the High Court the subsequent transfer of denatured spirit and possession of the same in the hands of various persons such as whole sale dealer retail dealer or other manufacturers also requires close and effective supervision because of the risk of the denatured spirit being converted into palatable liquor and thus evading heavy duty
Assuming this conclusion to be correct by doing so the State is rendering no service to the consumer
It is merely protecting its own rights
Further in this case the State which was in a position to place material before the Court to show what services had been rendered by it to the appellant and other similar licensees the costs or at any rate the probable costs that can be said to have been incurred for rendering those services and the amount realised as fees has failed to do so
On the side of the appellant it is alleged that the State is collecting huge amounts as fees and that it is rendering little or no service in return
The co relationship between the services rendered and the fee levied is essentially a question of fact
Prima facie the levy appears to be excessive even if the State can be said to be rendering some service to the licensees
The State ought to be in possession of the material from which the co relationship between the levy and the services 546 rendered can be established at least in a general way
But the State has not chosen to place those materials before the Court
Therefore the levy under the impugned Rule can not be justified
Nevertheless the Court remitted the matter to the High Court with a direction that opportunity be given to the State to place material to show that the value of the services rendered has reasonable co relationship with the fee charged
We fail to see how the decision in the Indian Mica Micanite case supra can be of any help to the appellants
The portions extracted above clearly show that the levy of service charges on the manufacturer are valid
There is a broad co relationship between the fee collected and the cost of the establishment
Under section 14e of the Act it is provided that the Commissioner with the previous approval of the Government may prescribe the size and nature of the establishment necessary for supervision of a manufactory and the cost of the establishment and other incidental charges in connection with such supervision be realised from the licence
There can be no doubt that the supervisory staff is deployed in a bonded manufactory by the Government for its own protection to prevent the leakage of revenue but there is no denying the fact that a licensee undoubtedly receives a service in return
The cost of the establishment levied under section 14e of the Act is to be collected from the licensee in the manner provided by r 164 of the Kerala Rectified Spirit Rules 1972 relevant part of which reads 4 All the transactions in the spirit store shall be conducted only in the presence of an Excise officer not below the rank of an Excise Inspector
Such officer shall be assisted by at least two Excise Guards
The cost of establishment of such officer and the guards shall be payable by the licensee in advance in the first week of every month as per countersigned chalan to be obtained from such officer
The rate at which the cost of establishment is to be paid by the licensee shall be fixed by the Commissioner from time to time and intimated to the licensee in writing There is admittedly no provision made in the Central Rules for the recover of supervisor charges perhaps because as the Court 547 Observed in the Hyderabad Chemicals and Pharmaceutical s case A supra it was felt that the duty on medicinal and toilet preparations containing alcohol would be sufficient to defray the cost of such supervision
But the absence of such a provision in the Central Rules as we have already indicated does not deprive the State from making a provision in that behalf
It is true that the supervisory charges are in the nature of a compulsory exaction from a licensee and the collections are not credited to a separate fund but are taken to the consolidated fund of the State and are not separately appropriated towards the expenditure incurred in rendering the service
However as observed in Government of Madras vs Zenith Lamp and Electricals Ltd 1 followed in State of Rajasthan vs Sajjanlal Panjawat and Ors
2 that by itself is not decisive by reason of article 266 of the Constitution
lt is equally true that normally a fee is uniform and no account is taken of the paying capacity of the recipient of the service but absence of uniformity will not make it a tax if co relationship is established see Commissioner HRE Madras vs Lakshmindra Thirtha Swamiar of Shirur Mutt and Government of Madras vs Zenith Lamp and chemicals Ltd supra
The cost of supervisory charges can be sustained even if they are regarded as a fee for services rendered by the State or its instrumentalities
The last ground on which the appellants took their stand is even less tenable
It is urged that r 13 of the Kerala Rectified Spirit Rules 1972 providing for the levy of excise duty on excess wastage of alcohol in the manufacture of medicinal and toilet preparations cannot be supported in terms of the charging provision contained in section 17 of the Act
Rule 13 reads as follows 131 If the rectified spirit imported or purchased P under these rules is used for the manufacture of medicinal and toilet preparations which duty of excise is leviable under the Central Act 16 of 1955 no duty shall be collected under the Abkari Act 1 of 1077 on so much quantity of alcohol as is present in the finished product
2 The assessment of duty under the Medicinal and Toilet Preparations Excise Duties Act 1955 Central Act 548 16 of 1955 being applicable only to the quantity of spirit existing in the finished product all spirit wasted during the course of manufacture of any medicinal or toilet preparation shall be assessable to duty under the Abkari Act 1 of 1077
Provided that the Government may in consultation with the Drugs Controller and the Chemical Examiner by notification in the Gazette
permit such allowance as they think fit for such wastages occurring during the manufacture
No exception is taken to r 131 which provides that no duty shall be collected under the Act on so much quantity of alcohol as is present in the finished product
The objection is to the validity of r 132 in so far as it enables the levy of duty on excess wastage of alcohol
We find it difficult to appreciate the contention that r 132 cannot be supported in terms of the charging provision in section 17f
Rule 132 is nothing but a corollary of r 131
On a combined reading of section 17f and r 8 read with the proviso thereof no duty is chargeable on alcohol actually used in the manufacture of medicinal and toilet preparations
The Government fully realised that some margin for wastage should be allowed and therefore inserted the proviso to r 131
It provides that the Government may in consultation with the Drugs Controller and the Chemical Examiner by notification in the Gazette permit such allowance as they think fit for such wastages occurring during the manufacture
Beyond the permissible limit the State has the right to levy a duty on excess wastage of alcohol ie On alcohol not accounted for
In the connected Special Leave Petition the petitioner P Krishna Wariyar Managing Trustee Arya Vaidyasala Kottakkal who is engaged in the business of manufacture for sale of ayurvedic medicinal preparations challenges the validity of sections 12A 56A and 68A of the Act and rr 5 6 and 7 of the Kerala Spirituous Preparations Rules
Apart from the question of legislative competence two other grounds were raised 1 the power to restrict the quantity of medicinal preparations to be manufactured by the Commissioner under section 12 cannot be exercised in relation to ayurvedic preparations as alcohol is self generated in the process of manufac 549 ture and 2 the impugned provisions offend against article 301 of the Constitution
As regards the Rules it was generally said that they constitute unreasonable restrictions on the fundamental right guaranteed under article 191 g of the Constitution
None of these contentions can prevail
It is to be observed that restriction imposed by section 12A of the Act as to the quantity of medicinal preparations to be manufactured relates not only to such preparations to which alcohol is added but also to medicinal preparations in which alcohol is self generated
There can be no doubt that ayurvedic asavas and aristhas which are capable of being misused as alcoholic beverages can come within the purview of the definition of liquor  contained in section 310 of the Act being of the Spirituous Preparations Control Rules 1969 liquids containing alcohol The contention that Note to r 31 is an unreasonable restriction on the freedom of trade guaranteed under article 191 g of the Constitution has no substance
It provides that unless otherwise declared by the Expert Committee asavas and aristas and other preparations containing alcohal are deemed to be spurious if their self generated alcohol content exceeds 12 by volume
It is a matter of common knowledge that such preparations are always likely to be misused as a substitute for alcoholic beverages and therefore the restriction imposed by section 12A is a reasonable restriction within the meaning of s 196 of the Constitution So far as the contention based on article 301 of the constitution is concerned it is urged that there is demand for the petitioner s medicinal preparations not only in the State but throughout the country and to limit the quantity to be manufactured taking into account the requirements of the State alone is but an abridgment on the freedom of inter State trade and commerce
In our opinion section 12A has no such effect
As already stated the expression shall have regard to  as interpreted by the Judicial Committee in the Ryots of Garobandho s case supra means shall take into consideration 
All that the provision enjoins is that the Commissioner shall have regard to the total requirements for consumption and use in the State while fixing the quantity of the medicinal preparations to be manufactured
Furthermore the challenge with regard to article 301 does not arise as admittedly the Bill was reserved for the assent of the President and 550 is therefore protected by article 304b of the Constitution
It is not disputed that the provisions are regulatory in nature and they impose reasonable restrictions on the freedom of trade
For these reasons both the Appeal and the Special Leave Petition must fail and are dismissed with costs


Summary:
The appellants who were manufacturers of medicinal and toilet preparations containing alcohol challenged the constitutional validity in their writ petitions under article 226 of the Constitution of the provisions of sections 12A 12B 14e and f  56A and section 68A of the Kerala Abkari Act 1967 Act No X of 1967 and Rules 13 and 16 of the Kerala Rectified Spirit Rules 1973 and rr
5 6 and 7 of the Kerala Spiritious Preparations Rules 1969 on the ground that the State Legislature had no power to enact a law relating to medicinal and toilet preparations as the topic of the legislation was within the exclusive domain of Parliament under Entry 84 List I of the Seventh Schedule of the Constitution and also on the ground that they were violative of article 191 g read with article 301 of the Constitution
The High Court dismissed the writ petition holding that there was no conflict between the impugned provisions and the Central law ie the or the Medicinal and Toilet Preparations Excise Duties Rules 1956 framed thereunder as they dealt with different subjects
The High Court further held that the impugned provisions do not offend against article 191 g or article 301 of the Constitution
In the appeal and the special leave petition to this Court it was contended on behalf of the appellants t The State Legislature had no legislative competence 520 to enact the impugned provisions because the field was occupied by the provisions of The The Central Act and the Medicinal and Toilet Preparations Excise Duties Rules 1956 the Central Rules and alternatively the impugned provisions are violative of the fundamental right guaranteed in article 191 g of the Constitution
2 Drugs and Pharmaceuticals having been declared by Parliament under section 2 of the Industries Development and Regulation Act 1951 to be a scheduled industry being item 22 of the First Schedule thereof the power of the State Legislature to make a law in respect of medicinal and toilet preparations containing alcohol was taken away
3 The provisions made in section 14e of the Act for the collection of supervisory charges was clearly invalid in as much as a they are in conflict with r 45 of the Central Rules and b they could not be sustained as a fee as there was no quid pro quo
4 Rule 13 of the Kerala Rectified Spirit Rules 1972 providing for the levy of excise duty as excess wastage of alcohol in the manufacture of medicinal and toilet preparations cannot be supported in terms of the charging provision contained in section 17 of the Act
S The power to restrict the quantity of ayurvedic asavas and arishtas in which alcohol is self generated in the process of manufacture having regard to the total requirement of such medicinal preparations for consumption or use in the State is an unreasonable restriction on The fundamental right to carry on trade or business guaranteed under An
191 g and was also violative of article 301 as there was demand for such medicinal preparations not only in The Slate but throughout the country
Dismissing The Appeal and Special Leave Petition  HELD l The Central and State Acts operate in two separate and distinct fields and are not in conflict with each other
While the main purpose of the impugned Act is to consolidate the law relating to manufacture sale and possession of intoxicating liquors and intoxicating drugs a subject which falls under Entry 8 of List II of the Seventh Schedule the main object of the Central Act is lo provide for the levy and collection of duties of excise on medicinal and toilet preparations containing alcohol falling under Entry 84 List I 536 G F 2i
The enactment of the by Parliament under Entry 84 List I of the Seventh Schedule of the Constitution or the framing of the Medicinal and Toilet Preparations Excise Duties Rules 1956 by the Central Government in exercise of their rule making power under section 19 of the Act for the purpose of levying duties of excise on medicinal and toilet preparations containing alcohol etc do not pre vent the State Legislature from making a law under Entry 8 List II of the Seventh Schedule to the Constitution with respect to intoxicating liquors  or a law under Entry 51 List II for levying excise duties on alcoholic requirements for human consumption
528 C D ii It is the charging section which gives the true index to the real character of a tax
The nature of the machinery by which the tax is to be assessed is not of assistance except in so far as it may throw light on the general character of the tax
The charging section in section 3 of the Central Act clearly shows that it does not seek to levy a duty of excise on alcohol liquor for human consumption falling within Entry 51 List II of the Seventh Schedule but to levy a duty of 521 excise on medicinal and toilet preparations containing alcohol etc
The topic of legislation under Entry 84 List I of the Seventh Schedule is duties of excise on medicinal and toilet preparations containing alcohol etc
The Central Act must in pith and substance be attributed to Entry 84 List
532 C E iii The Central and the State Legislations operate on two different and distinct fields
The Central Rules to some extent trench upon the field reserved to the State Legislature but that is merely incidental to the main purpose that is to levy duties of excise on medicinal and toilet preparation containing alcohol
Some of the impugned provisions may be almost similar to some of the provisions of the Central Rules but that does not imply that the State Legislature had no competence to enact the provisions
The State Legislation is confined to intoxicating liquor  that is to ensure proper utilisation of rectified spirit in the manufacture of medicinal and toilet preparations and therefore within the powers granted to the State Legislature under Entry 8 List II
It further seeks to regulate the manufacture of bona fide medicinal preparations and prevent misuse of rectified spirit in the manufacture of spurious medicinal and toilet preparations containing alcohol capable of being used as ordinary alcoholic beverages
532 F 533 A iv The enumeration of intoxicating liqour  in Entry 8 List II confers exclusive power to the State to legislate in respect of medicinal and toilet preparations containing alcohol
533 B v In matters of seeming conflict or encroachment of jurisdictions what is more important is the true nature and character of the legislation
A necessary corollary of the doctrine of pith and substance is that once it is found that in pith and substance the impugned Act is a law on a permitted field any incidental encroachment on a forbidden field does not affect the competence of the legislature to enact the law
534 B C Prafulla Kumar Mukherjee and Ors
vs Bank of Commerce Ltd Khulna AIR 1947 PC 60 at 65 and State of Bombay vs F N Balsara  at 694 5 referred to
vi There can be no doubt that the impugned Act is relatable to Entry 8 List II of the Seventh Schedule
536 A vii When the frame work of the two enactments is examined it would be apparent that the Central and the State Legislature operate in two different and distinct fields
In the matter of making rules or detailed provisions to achieve the object and purpose of a legislation there may be some provisions seemingly overlapping or encroaching upon the forbidden field but that does not warrant the striking down of the impugned Act as ultra vires the State Legislature
536 G 537 A Hyderabad Chemical and Pharmaceutical Works Ltd vs State of Andhra Pradesh and Ors
 distinguished
viii No citizen has any fundamental right guaranteed under article 191 g of the Constitution to carry on trade in any noxious and dangerous goods like intoxicating drugs or intoxicating liquors The power to legislate with regard to intoxicating liqour carries with it the power to regulate the manufacture sale and possession of medicinal and toilet preparations containing alcohol not for the 522 purpose of interfering with the right of citizens in the matter of consumption or use for bonafide medicinal and toilet preparations but for preventing intoxicating liquors from being passed on under the guise of medicinal and toilet preparations
It was within the competence of the State Legislature to prevent the noxious use of such preparations ie their use as a substitute for alcoholic beverages
537B D In the instant case the provisions have been enacted to ensure that rectified spirit is not misused under the pretext of being used for medicinal and toilet preparations containing alcohol
Such regulation is a necessary concomitant of the police power of the State to regulate such trade or business which is inherently dangerous to public health
537 E ix All that the provisions of sections 12A and 12B ordain is that the Commissioner shall have due regard to the total requirement of such medicinal preparations for consumption or use in the State
The Commissioner has therefore only to take into account the total requirements within the State as an element which should enter the assessment and no more
As a necessary corollary it follows that in fixing the quantity of medicinal and toilet preparations to which alcohol is added or in which it is self generated normally the Commissioner shall have regard to larger requirements of the manufacture if the manufactured product has a market outside the State
The restrictions imposed by section 12B as to the alcoholic content of medicinal and toilet preparations and the requirement that they shall not be manufactured except and in accordance with the terms and conditions of a licence granted by him are nothing but reasonable restrictions within the meaning of article 196
The impugned provisions therefore cannot be struck down as offending article 191 g of the Constitution
538 E 539 B 3
The State Act in pith and substance is not a legislation under Entry 24 List 11 and therefore the question does not arise
539 E 539 B 4i a The provision contained in section 14e of the Act is clearly relatable to the State s power to make a law under Entry read with Entry 51a List II of the Seventh Schedule
section 14e of the Act is valid in so far as it provides that the Commissioner may prescribe the size and nature of the establishment for such supervision and the cost of establishment and other incidental charges in connection with such supervision to be realised from the licensee
There is no warrant for the submission that the framing of such an incidental provision like r 451 of the Central Rules takes away the State s power to recover supervisory charges from the licensee
540 B C b Fees  are the amounts paid for a privilege and are not an obligation
Fees are distinguished from taxes in that the chief purpose of a tax is to raise funds for the support of the Government or for a public purpose while a fee may be charged for the privilege or benefit conferred or service rendered or to meet the expenses connected therewith
Thus fees are nothing but payment for some special privilege granted or service rendered
Taxes and taxation are therefore distinguishable from various other contributions charges or burdens paid or imposed for particular purposes and under particular powers or functions of the Government
It is now increasingly realised that merely because the collections for the services rendered or grant of a privilege or licence are taken to the Consolidated Fund of the State and are not separately appropriated towards the expenditure for rendering the service is not by itself decisive
It is also increasingly realised that the element of quid pro quo stricto sensu is not 523 always a sine qua non of a fee
It is needless to stress that the element of quid A pro quo is not necessarily absent in every tax 541 G 542 D Mahant Shri Jagannath Ramanuj Das vs The State of Orissa   Ratilal Panachand Gandhi vs The State of Bombay 1954 SCR 1055 Constitutional Law of India by HM Seervai 2nd Edn
Vol 2 p 1252 para 2239  Kewal Krishan Puri  Anr
vs State of Punjab  Ors
at 1230 referred to
ii In the case of a manufacturer of medicinal and toilet preparations containing alcohol in a bonded manufactory the imposition of the cost of establishment under section 14e of the Act calculated in accordance with the nature and extent of that establishment could not be said to be an imposition of a duty of excise but is a price for his franchise to carry on the business
543 D E iii No one has a fundamental right to the supply of rectified spirit which is an intoxicating liquor
It is upto the State to control and regulate its supply from a distillery or a spirit warehouse in the State under and in accordance with the terms and conditions of a licence or permit its import from outside by grant of a privilege and charge a fee for the same
A fee may be charged for the privilege or benefit conferred or service rendered or to meet the expenses connected therewith
A fee may be levied to meet the cost of supervision and may be something more
It is in consideration for the privilege licence or service
The State is undoubtedly entitled to levy excise duty on the rectified spirit issued from a distillery under section 17f of the Act read with r 13 of the Kerala Rectified Spirit Rules 1972 but it refrained from making any such levy by reason of rule 21 of the Central Rules and has therefore by proviso tc rule 8 allowed a manufacturer of medicinal and toilet preparations to draw rectified spirit from a distillery without payment of duty
It is thus a privilege conferred on the licensee
To claim the privilege he must comply with the conditions prescribed If one of the conditions is the payment of cost of establishment under section 14e of the Act read with rule 164 of the Central Rules the manufacturer of such preparations must necessarily bear the burden s the licensee gets services in return in lieu of such payment
543 G 544 C 5
Rule 132 is nothing but a corollary of rule 131
On a combined reading of section 17f and rule 8 read with the proviso thereof no duty is chargeable on alcohol actually used in the manufacture of medicinal and toilet preparations
The Government realised that some margin for wastage should be allowed and therefore inserted the proviso to rule 132 which provides that the Government may in consultation with the Drugs Controller and the Chemical Examiner by notification in the Gazette permit allowance for wastage occurring during the manufacture
Beyond the permissible limit the State has the right to levy a duty on excess wastage of alcohol ie on alcohol not accounted for
548 D F 6
The restriction imposed by section 12A of the Act as to the quantity of medicinal preparations to be manufactured relate not only to preparations to which alcohol is added but also to medicinal preparations in which alcohol is self generated
There can be no doubt that ayurvedic asavas and aristhas which are capable of being misused as alcoholic beverage and come within the purview of the definition of liquor  contained in section 310 of the Act being liquid containing alcohol
The contention that Note to rule 31 is an unreasonable restriction on the freedom of trade guaranteed under
Article 191 g of the Constitution has no substance
549 B D 524