enunciated in various decisions of foreign courts is not applicable in the Indian context
In India as the Constitution was enacted or was framed after having the experience of various countries in the world the concept of fundamental rights and rights like life liberty procedure established by law and various legislative functions which were divided between the States and the 640 Union left no scope for any power except which could be derived from any provision in the Constitution coupled with an Entry in one of the three Lists which would indicate that the power vested in either the State or the Centre
Apart from it the scheme of our Constitution is that there are no residuary powers which vest in the State and scheme of our Constitution also reveals that in case of any conflicts it is the Centre which prevails and not the State and there fore applying the doctrine of police powers will only mean to do violence to the scheme of the Constitution
In fact under our Constitution no powers could be conceived for which there is no provision in any one of the entries in the three Lists or which could not be justified under any spe cific Article of the Constitution
Thus even under the concept of the doctrine of police powers the levies imposed by the State on alcohol or alcoholic liquors cannot be justified
689E G H 690A C  ORIGINAL JURISDICTION Writ Petition No 182 of 1980 Etc
Under Article 32 of the Constitution of India
FS Nariman MH Baig AB Divan Rajinder Sacher LM Singhvi RN Banerjee KJ John Harish N Salve SC Sharma SS Shroff Mrs P Shroff Ms section Sharma JB Dadachanji AP Hathi section Ganesh section Sukumaran DN Misra Mrs AK Verma Sandip I Thakore RF Nariman PH Parekh Shishir Sharma Poppat Ms Shalini Soni Sunita Sharma ML Lahoty Shiv Prasad Sharma Himanshu Shekhar DD Gupta Ms M Gupta ATM Sampath Mrs Swaran Mahajan Ms Anuradha Mahajan KK Mohan Laxmi Kant Pandey RB Mehrotra KC Dua KR Nagaraja PD Sharma V Balachandran OP Sharma AK Sangal Anil Kumar D Goburdhan KD Prasad and Mrs Naresh Bakshi for the Peti tioners
K Parasaran Attorney General C Shivalha G Rath VM Tamaskar Altar Ahmed NN Gooptu Dinesh Chandra Swami AS Bobde K Alagiri Swamy VVenkataramaniah Inder Singh Advocate Generals RN Trivedi Additional Adv
Genl Yogeshwar Prasad SK Dholakia PS Poti AK Ganguli Satish Chandra RB Datar GL Sanghi PR Ramasesh RK Mehta SK Bhattacharya HK Purl
Probir Chowdhary NK Sharma MN Shroff Ashok K Srivastava RS Rana AS Bhasme AM Khanwilkar Sunil Gupta TT Kunhikanan V Krishnamurthy P Venugopal TVSN Chari DRK Reddy Jagan M Rao Ms A Subhashini 641 A Subba Rao KC Dua Satish K Agnihotri Ashok Singh Indra Makwana Ms Amrita Sanghi and NK Sharma for the Respondents The following Judgments of the Court were delivered SABYASACHI MUKHARJI J
These writ petitions civil appeals and review petitions relate to the right of the States to levy vend fee or duties in respect of industrial alcohol under different legislations in different States
We will first deal with writ petition No 18280
In Writ Petition No 18280 Synthetics  Chemicals Ltd vs State of UP  Ors we are concerned with the notification dated 31st May 1979 substituting new rule 172 for old rule 172 and providing for a vend fee of Rs 110 per bulk liter for all issues from distillery but in case of FL 39 Licence like the petitioner in this case the vend fee would be so charged that the amount of this fee and purchase tax together does not exceed 25 paise per bulk litre Then there are three review petitions namely Review Petition Nos 202 0480 Synthetics  Chemicals Ltd vs State of UP  and Review Petition No 17 of 1980 Kesar Sugar Works Ltd vs State of UP
These are directed against the judgment and order of this Court dated 19th December 1979 in State of UP etc
vs Synthetics  Chemicals Ltd  Ors
  re agitating the challenge to sections 24A  24B of the UP Excise Act 1910 as amended in 1972 and 1976 declaring exclusive privilege of the Government for manufacture and sale of foreign liquor as defined which includes denatured spirit and industrial alcohol
Then there is Writ Petitions Nos
3163 64 of 1982 All India Alcohol Based Industries Development Association vs State of Maharashtra  which challenges the amendment to section 49 of the Bombay Prohibition Act 1949 treating exclusive privilege for State in liquor trade and imposing a transport fee of Rs 115 per bulk litre
There is Writ Petition No 450178 Chemicals  Plastics India Ltd vs State of Tamil Nadu Writ Petition No 258082 Kolhapur Sugar Mills and Anr
vs SR Hegde  Anr  which challenge the Bombay Prohibition Act 1949 as amended from time to time along with Ordinance No 15 of 1981 which amended the Bombay Prohibition Act 1945 and section 49 added by reason of which the State was granted exclusive privilege of import ing exporting transporting manufacturing bottling selling buying processing or using any intoxicant
There after the Bombay Rectified Spirit Transport in Bond Rules 1951 were amended and transport fee was increased from the rate of 17 paise to the rate of Rs 125 paise
Thereafter the Bombay Rectified Spirit Transport in Bond Amendment Rules 1982 were amended and the transport fee was reduced from Rs 125 per litre to 040 paise per litre
Then there is Writ Peri 642 tion No 189273 Hindustan Polymers Ltd vs State of AP which seeks a declaration that alcohol plant of the peti tioner company is not covered by the AP Excise Act 1968 AP Distillery Rules 1970 and AP Rectified Spirit Rules 1971 and further to declare that the alcohol plant of the company is not a distillery  within the meaning of the said expression under the AP Distillery Rules and therefore the Distillery Rules have no application thereto
It seeks also an order to restrain from interfering with andor regulating and controlling the production distribution movement and supply of alcohol from the alcohol plant of the company and also a writ of prohibition with the appropriate directions
Civil Appeal No 438484 also challenges the AP Excise Act 1968 and AP Distillery Rules
Similar is the position in CAs
466 67 of 1980 which challenge the Tamil Nadu Prohibition Act
The main question that falls for consideration in these matters is whether the vend fee in respect of the industrial alcohol under different legislations and rules in different States is valid
The question is
is the vend fee and impost leviable or extractable by the States under different Acts
The question mainly involved in all these matters is a common question of law but we will have to deal with diverse factual situations as well as the particular provisions of the various Acts
The questions with which we are mainly concerned are the following i whether the power to levy excise duty in case of industrial alcohol was with the State legislature or the Central legisla ture ii what is the scope and ambit of entry 8 of list II of the Seventh Schedule of the Constitution iii whether the State government has exclusive right or privilege of manufacturing selling distributing etc
of alcohols in cluding industrial alcohol
In this connec tion the extent scope and ambit of such right or privilege has also to be examined
It is necessary to bear in mind that in the last four to five decades there has been a tremendous change in the industrial horizon of this country
During the initial stages of the Constitution the only well known industrial sectors in India were iron and steel textiles jute and cement
The rest of the production was raw materials geared to feed and supply the industrial base of the foreign power
After independence an Industrial Policy Resolution was adopted to achieve 643 rapid industrialisation in a big way
In the last few dec ades there has been a great transformation and tremendous upsurge not only in industry and commerce but also in sophisticated technology and industries
The chemical fertilizer plastic and engineering industries are only some of the fields in industrial development
In this background the views expressed previously relating to intoxicating liquor  and alcoholic liquor for human consumption  have to be borne in mind
It is in this connection also necessary to refer to Article 47 of the Constitution
The said Article which deals with the duty of the State to raise the level of nutrition and the standard of living and to improve public health enjoins that the State shall regard the raising of the level of nutrition and the standard of living of its people and the improvement of public health as among its primary duties and in particular the State shall endeavour to bring about prohibition of the consumption except for medicinal purposes of intoxicating drinks and of drugs which are injurious to health
We were invited on behalf of the petitioners by Mr Nariman Mr Divan Mr Banerjee Mr Baig and others that though this direction and this commit ment to improvement of the standard of living must be kept in view but it must be borne in mind that this improvement can be achieved primarily by industrialisation involving increased production and employment and giving priority to the core sectors
Entry 52 of list I of the Seventh Schedule to the Constitution deals with industries the control of which by the Union is declared by Parliament by law to be expedient in the public interest
It is the contention of the petitioners and appellants that the Industries Develop ment  Regulation Act 1951 hereinafter called the IDR Act  was enacted with a view to developing and controlling various important industries
Section 2 of the IDR Act declares that it is expedient in the public interest that Union should take under its control the industries specified in the First Schedule
The cases in this bunch are in re spect of industries which are not concerned with potable alcohol for the purpose of human consumption
These are predominantly and primarily concerned with using ethyl alcohol rectified spirit as an industrial raw material
This industrial alcohol is required as an input for further manufacture of downstream products
For this purpose some of the industries have their captive plants
Reference in this connection may be made and our attention was drawn to the report of the Alcohol Committee 1956
This Report indicates that a that industrial alcohol is an input and should be available at reasonable price
b there should be uniform railway freight
644 c larger capacities of molasses etc
should be available and d uniform taxation policies are essential for the development of these indus tries
In order to appreciate the controversy in these matters it is therefore necessary to keep these objectives in mind
In these matters this Court is concerned with the taxing power of the States to impose and levy excise duty on industrial alcohol andor imposts as vend fees
This has been and as has been noticed hereinbefore claimed as a part of the exclusive privilege of the States to impose a levy as a consideration or price for manufacturing of andor dealing with industrial alcohol
It is essential that there should be uniformity in the industry so that these are free from the vagaries and arbitrary and differential treatment meted out from State to State and even in the same State from time to time
Arbitrary and excessive imposts under the so called privilege are a great disincentive for development of industries in the public interest and for industrial development in general and can render units unviable and sick
In the above background it is necessary to refer to certain facts and as such it would be appropriate to refer to the facts and contentions in writ petition No 18280 ie Synthetics  Chemicals Ltd vs State of UP which is under article 32 of the Constitution filed by Ms Synthetics  Chemicals Ltd a registered Company in Bombay and one Mr AK Roy Director and shareholder of the said company
The respondent therein is the State of Uttar Pradesh and the Excise Commissioner Uttar Pradesh
In the said writ petition a notification of the State of Uttar Pradesh being No 4840EXIII 33079 dated Lucknow May 31 1979 was made in exercise of the power under sub section 1 of section 40 of the UP Excise Act 1910 hereinaf ter referred to as the UP Act  read with clause d of sub section 2 of the said section
However in order to appreciate the position we should bear in mind the history of the legislative powers and different lists in the 7th Schedule regarding impost in respect of industrial alcohol
It appears that local legis latures of Uttar Pradesh had enacted the United Provinces Act 1910 being Act IV of 1910 and it received the assent of the Governor on 18th December 1909 and of the Governor General on 14th February 1910
Before 1920 there was as such no distinct dis 645 tribution of legislative subjects between the Central Legis lature and the State Legislatures
It appears that the local legislatures enacted with the assent of the Governor Gener al Excise Acts imposing duties and regulating production supply and distribution of alcoholic liquors including denatured spirits and methylated spirits
These were done under the Indian Councils Act 1861 and the Indian Councils Act 1909
The provisions of the Indian Council Act 1861 were initially applicable only to the Presidencies of Fort St George and Bombay but were later made applicable to other provinces by virtue of the Indian Councils Act 1892 and 1909
Section 43 of the Indian Councils Act 1861 enjoined that it shall not be lawful for the Governor in Council of either of the Presidencies except with the sanction of the Governor General previously communicated to him to make regulations or take into consideration any law or regulation for any of the purposes mentioned therein and one of the purposes inter alia mentioned was anything affecting the public debt of India or the Customs Duties or any other tax or duty then in force and imposed by the authority of the Govt
of India for the general purposes of such Government
The Government of India Act 1915 was amended from time to time with a view to consolidate and amend the enactment relating to the Govt
of India
The Governor General in Council with the sanction of the Secretary of State in Council made Devolution Rules
Rule 31 thereof provided for distinguishing the functions of the local governments and local legislatures of governors  provinces and of the province of Burma from the functions of the Governor General in Council
It was provided that any matter which is includ ed in the list of provincial subjects set out in Part II of Schedule I of the said Act shall to the extent of such inclusion be excluded from any central subject of which but for such inclusion it would form part
Part II of the Government of India Act 1915 provided that any matter which is included in the provincial subjects set out in Part II of Schedule I shall to the extent of such inclusion be exclud ed from any central subject of which but for such inclu sion it would form part
Part II dealt with provincial subjects
Item 16 of Part II provided as under Excise that is to say the control of pro duction manufacture possession transport purchase and sale of alcoholic liquor and intoxicating drugs and the levying of excise duties and licence fees on or in relation to such articles but excluding in the case of opium control of cultivation manufacture and sale for export
 646 It appears that the Govt
of UP levied a vend fee on denatured spirit for the first time  8 annas per bulk gallon vide notification dated January 18 1937 under section 402 of the UP Excise Act 1910
It was levied as a duty
By this notification Rule 172 was added which enjoined that in case of issues from a distillery a vend fee of annas 8 per bulk gallon shall be payable in advance before the spirit is issued
The fee was not made chargeable in case of issues to hospitals dispensaries and other charitable and educational institutions upto a quantity allowed to be issued by the Excise authorities and also on the issues for export out of the provinces
Thereafter on 1st April 1937 the Govt
of India Act 1935 came into effect
The federal legislative list in the 7th Schedule to the said Act contained entry 45 which in cluded duties of excise on tobacco and other goods manufac tured or produced in India except alcoholic liquors for human consumption
The provincial legislative List being List II of the 7th Schedule
contained entry 31 on intoxi cating liquors and narcotic drugs that is to say the production manufacture possession transport purchase and sale of intoxicating liquors opium and other narcotic drugs but subject as respects opium to certain provi sions
It also included entry 40 which was on duties of excise including inter alia all these items and alcoholic liquors opium Indian hemp and medicinal and toilet prepa rations containing alcohol
It was contended on behalf of Ms Synthetic Chemicals Ltd that the duties previously levied by the local legisla tures continued in force by virtue of section 1432 of the Govt
of India Act 1935 only if these were levied before 31st January 1935 and that only these duties were to be so continued until provisions to the contrary were made by the Federal Legislature
The Constituent Assembly which derived from the people all power and authority was convened
On 15th August 1947 the British Parliament passed the Indian Independence Act 1947 making provisions for the setting up in India of two independent dominions
Under section 61 of the said Act the legislature of each of the new dominions was to have full powers to make laws for that dominion including laws having extra territorial operations
Under section 82 read with section 91 of the Indian Independence Act 1947 the Governor General adopted the provisions of the Govt
of India Act 1935
It appears that on 3rd April 1948 the Constituent Assembly acting as the Dominion Legislature passed the which received the assent of Governor General on the same day
By this Act the Central 647 Government took under its control the Power Alcohol Indus try
This was in pursuance of the declaration made by the Dominion Legislature under entry 34 of List I of the 7th Schedule to the Government of India Act 1935
The entry was Development of Industries where development under Dominion control is declared by Dominion Law to be expedient in public interest Power Alcohol was defined as meaning Ethyle Alcohol containing not less than 955 by volume of Ethanol measured at 60 degree F corresponding to 744 over proof strength
It may be mentioned that Rectified Spirit is Ethyl Alcohol or Ethanol with 96 alcohol vv
ON dehydration Ethyl Alcohol with 995 volume of Ethanol is produced
It was suggested that take over by the Dominion of the potable liquor industry was precluded by virtue of entries 29  31 of list II read with entry 34 of list I of the Govt
of India Act 1935
It may be mentioned that the word indus tries  is the analogous provision in the State list under the Constitution of India 1950 hence the meaning given to it in that list must be applied
According to the petition ersappellants the expression industries  has been given a restricted meaning so as not to entrench on the State s power with respect to other industries specifically assigned to the State under other entries in the State list
See Calcutta Gas Co 1962 Suppl 3 SCR 1
By virtue of the Constitution of India which came into effect from 26th January 1950 the powers of legislation in respect of alcohol were distributed between list I and list II of the 7th Schedule to the Constitution
Duties of excise on tobacco and other goods manufactured or produced in India except inter alia alcoholic liquors for human consumption and opium Indian hemp and other narcotic drugs and narcot ics but including medicinal and toilet preparations con taining alcohol or any such substance were given to Parlia ment under entry 84 list 1
But duties of excise on goods manufactured or produced in the State and countervailing duties at the similar rates inter alia alcoholic liquors the State was given power by entry 51 of list II to legis late
By entry 8 of list II States were given power to legislate on liquors that is to say production manufac ture processing transport purchase and sale thereof
On or about 8th May 1952 the Parliament enacted the Industries Development  Regulation Act 1951
Chapter IIIB of the said Act contains section 18G whereby the Central Govt
was empowered for securing equitable distribution and availability at fair prices of any article or 648 class of articles relatable to any scheduled industry to provide for regulating the supply and distribution thereof and trade and commerce therein by a notified order
The notified order was also to provide for controlling the prices at which such article or class of articles could be bought or sold
The said Act was amended in 1956
Item 26 was inserted in the First Schedule to the said Act and empowered the Central Govt
to control the Fermentation Industries including alcohol industries
Item 26 was as follows 26
Fermentation Industries
1 Alcohol 2 Other products of Fermentation Industries The Govt
of India issued licences for the manufacture of alcohol based industries
It is asserted by Ms Synthetics  Chemicals Ltd that one Tulsidas Kilachand who had promoted the said Company was invited by the UP Govt
to set up a synthetic rubber factory in the State of Uttar Pradesh
It is stated that the Govt
of Uttar Pradesh assured the said Tulsidas Kilachand of the supplies of alcohol necessary for the factory upto 20 million gallons on payment only of Rs750 kilo litre as administrative charges
It is the case of Ms Synthetics  Chemicals that there was no assertion or claim or privilege on behalf of the State Govt
in respect or  denatured spirit nor was the said company or its promoters informed that there might be a charge of rental or consideration for parting with any such privilege
On 30th December 1960 the Govt
of UP issued a noti fication under section 42 of the UP Excise Act 1910 by which all rectified perfumed medicated and denatured spirits wherever made was included under the definition of foreign liqour 
Thereafter the said notification was embodied in Rule 12 of the UP Excise Rules
On or about 28th November 1952 the Power Alcohol Au thority and Excise Commissioner of UP issued an order for allotment of alcohol to Ms Synthetics  Chemicals Ltd and also provided a condition that the denatured alcohol meant for supply to Ms Synthetics  Chemicals Ltd is exempted from payment of vend fee
Paragraph 2 of the said order provided that Ms Synthetics  Chemicals Ltd shall pay an administrative charge at the rate of Rs750 per kilo litre of 649 denatued alcohol
The denatured alcohol meant for supply to Ms Synthetics  Chemicals Ltd was exempted from payment of vend fee
It was stipulated that alcohol shall be denatured with 5 Ethyl Ether or 02 crotonaldehyde at distilleries
It appears that in May 1963 Ms Synthetics  Chemicals Ltd established a factory in Bareilly
Industrial alcohol is said to be one of the basic raw materials for the manu facture of synthetic rubber
Accordingly the Govt
of U P on or about 30th July 1963 issued a notification excluding from the levy of vend fee the alcohol issued to industries engaged in the manufacture of synthetic rubber on terms and conditions the State Government might determine
Rule 172 was accordingly modified
On or about 3rd November 1972 the Govt
of UP issued a notification being UP Excise Third Amendment Rules 1972 substituting a new rule 172 which is now embodied in para 6802 of the UP Excise Manual at p 20 1
In the new rule vend fee  Rs 110 per bulk litre was imposed on denatured spirit without examining industries engaged in the manufacture of synthetic rubber
Supplies to the hospitals of certain quantity and exports out of the State were exempted
In December 1972 when a demand was raised for payment of the vend fee it was asserted on behalf of Ms Synthetic  Chemicals that they had to close down their factory and filed a writ petition No 8069 of 1972 in the Allahabad High Court challenging the validity of the notification dated 30th November 1972 whereby vend fee on denatured spirit was introduced for the first time
The Division Bench of the Allahabad High Court vide judgment dated 24th March 1973 struck down the said notification holding that the vend fee could not be justified either as a tax or fee or as excise duty
Relying on the decision of this Court in the case of Nashirwar etc
vs The State of MP  and stating the same in the Preamble to the Act the UP Legislature passed Act No 5 of 1976 being UP Excise Amendment Re enactment and Validation Act 1976 inter alia introducing sections 24A and 24B in the UP Excise Act 1910 and making other amendments with retrospective effect
Sections 24A and 24B are as follows 24 A 1 Subject to the provisions of Sec tion 31 the Excise Commissioner may grant to any person a licence or licence for the exclu sive or other privilege 650 a of manufacturing or of supply by whole sale or of both or b of manufacturing or of supplying by whole sale or both and selling by retail or c of selling by wholesale to wholesale or retail vendors or d of selling by retail at shops for con sumption off  the premises only any foreign liquor in any locality
2 The grant of licence or licences under clause d of sub section 1 in relation to any locality shall be without prejudice to the grant of licences for the retail sale of foreign liquor in the same locality in hotels and restaurants for consumption in their premises
3 Where more licences than one are proposed to be granted under clause d of sub section 1 in relation to any locality for the same period advance intimation of the proposal shall be given to the prospective applicants for every such licence
4 The provisions of section 25 and proviso to section 39 shall apply in relation to grant of a licence for an exclusive or other privi lege under this section as they apply in respect of the grant of a licence for an exclusive privilege under section 24
24 B For the removal of doubts it is hereby declared a that the State Govt
has an exclusive right or privilege of manufacture and sale of country liquor and foreign liquor b that the amount described as licence fee in clause c of section 41 is in its essence the rental or consideration for the grant of such right or privilege by the State Govern ment 651 c that the Excise Commissioner as the head of the Excise Department of the State shall be deemed while determining or realising such fee to act for and on behalf of the State Government
 It is stated that in May 1976 the State of UP filed an appeal against the decision of the Allahabad High Court in writ petition No 806972 and that between 1976 and 1978 relying on the judgment of the Allahabad High Court certain wholesale dealers in denatured spirit filed writ petitions in the High Court of Allahabad claiming refund of vend fee already paid by them
These writ petitions were heard and allowed by the learned Single Judge of the Allaha bad High Court
Against the judgment of the Single Judge special appeals to a Division Bench were preferred by the State of UP and all were allowed on 6th October 1978 relying upon sections 24A and 24B of the said Act
In 1976 the State Government issued the UP Licence for the possession of Denatured Spirit and Special Denatured Spirit Rules 1976 requiring a licence for possession of denatured spirit and specially denatured spirit for indus trial purposes Special Denatured Spirit was defined as Spirit rendered unfit for human consumption
Licences for possession of denatured spirit including Specially Denatured Spirit for industrial purposes were to be of 3 kinds ac cording to the parties
1 Form FL 39 for use in industries in which alcohol is destroyed or converted chemically in the process into other product and the product does not contain alcohol such as Ether Styrene Butadiene Acetone Polythene etc
2 Form FL 40 for use in industries in which alcohol is used only as a solvent or processing agent and the product does not contain alcohol which is generally recovered for re use such as Cellulose and its derivatives Pectin etc
3 Form FL 41 for use in industries in which alcohol is used directly or alcohol is used as solvent or vehicle and ap pears in the final produce to some extent such as Lacquers Varnishes Polishes Adhesives and antifreezers etc
The Allahabad High Court in WP No 8096 of 1972 referred to hereinbefore held that the State did not have the legislative competence to impose a tax under entry 8 of list II of the Seventh Schedule to the Constitution follow ing the decision of Sheopat Rai  Ors
vs State of UP 1972 All LJ 1000
The High Court held that the power of 652 regulation does not carry with it the power of taxation and thus vend fee could not be justified
The High Court also held that the levy could not be justified as a fee as there was no quid pro quo
It appears that in view of the judgment of the High Court a telegram was issued to the distilleries by the Excise Commissioner that vend fee should not be charged from the petitioner
Instead the State Government resorted to imposition of sales tax
It may be mentioned herein that this decision of the Allahabd High Court was set aside by this Court by a Bench of two judges in State of UP vs Synthetics  Chemicals supra
In view of the fact that review petition in respect of the same is pending it may be necessary to refer to the said decision
This Court held that 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 according to the said decision establishes i that there is no fundamental right of a citizen to carry on trade or to do business in liquor be cause 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 Article 47 of the Constitution and iii the history of excise jaws in the country shows that the State has the exclusive right or privilege to manufacture or sell liquors
Reference was made to the decision of this Court in the State of Bombay  Anr
vs FN Balsara 1195 1 SCR 682
This Court further held that the term intoxicating liquor is not confined to potable liquor alone but would include all liquors which contain alcohol
The term liquor ac cording to the said decision 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
It was further held that 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 intoxicat ing 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 recognised as could be seen from the various State Acts regulating the manufacture sale etc
of intoxicating liquors
It was further held that 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 653 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 recti fied perfumed medicated and denatured spirit wherever made
Therefore this Court in that case held that 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
It was further held that the definition of alcohol includes both ordinary as well as specially denatured spirit
The special ly 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 accord ing to their use and denaturants used
Therefore the con tention that specially denatured spirit for industrial purposes is different from the ordinary denatured spirit has no force according to the said decision
Reference was made to the decisions of this Court in Har Shankar  Ors etc
vs The Dy
Excise  Taxation Commissioner  Ors  In this connection it may be necessary to refer to the observations of this Court in Hat Shankar  Ors s case supra where Chandrachud J as the learned Chief Justice then was 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  Anr
vs FN Balsara   Cooverjee B Bharucha vs The Excise Commissioner and the Chief Commissioner Ajmer and Ors  State of Assam vs AM Kidwai Commis sioner of Hills Division and Appeals Shil long 1957 SCR 295 Nagendra Nath Bora and Anr
vs The Commissioner of Hills Division and Appeals Assam and Ors
   Amar Chandra Chakraborty vs Collector of Excise Govt
of Tripura  Ors and State of Bombay vs RMD Chamarbaugwala  as interpreted in State of Orissa  Ors
vs Harinarayan Jaiswal and Ors  and Nashirwar etc
vs 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 654 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 regards auction of country liquor in Balsara s case Nashirwar s case and Har Shankar s case this Court was concerned with the right of the State Govern ment over foreign liquor
After considering all the deci sions of five Constitutional Benches Chandrachud J summed up the position at page 274 of the Report in Har Shankar s case supra as follows These unanimous decisions of five Constitu tional 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 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
 Review Petition has been moved by Synthetics  Chemicals Ltd which was purchaser or user and not manufacturer or dealer
It is contended that the Synthetics  Chemicals Ltd were never manufacturers of denatured spirit and they were and have been purchasers of denatured spirit
It is contend ed that this Court in Synthetics  Chemicals Ltd s case supra had proceeded on the basis that State s privilege is with respect to manufacture or sale of foreign liquor or denatured spirit
It is contended that they were not liable to pay the vend fee
The judgment aforesaid had not dealt with that submission and therefore it was claimed that there was an error and that this judgment should be reviewed
It was contended that the fee charged is not a vend fee but fee in respect of licence for possession of denatured spirit
It was contended that the judgment had not held that the pur chasers are liable to pay vend fee
The State s appeal should have been dismissed and the petitioner s appeal should have been allowed it was pleaded in the review petition
There was an error it was contended
It may be at the outset made clear that in these mat ters we will dispose of the contention whether vend fee is leviable in respect of industrial alcohol
If it is so leviable who should actually pay or from 655 whom the same should be realised would not be the subject matter of this adjudication
Whether the manufacturer or the purchaser or the user should pay them must be decided in separate appropriate proceedings if necessary
In order to complete the narration of events however it may be mentioned that Ordinance No 6 of 1973 was promul gated by the Government of UP purporting to amend the UP General Sales Tax Act 1948 so as to authorise the State Govt
to impose sales tax on alcohol at the rate upto Rs2 per litre
By the said notification the first schedule to the Act was amended and the new entry read as follows Spirits and spirituous liquors of all kinds including the rectified spirit methyl alcohol and absolute alcohol but excluding denatured spirit and country liquor
 Ordinance 9 of 1974 being the Uttar Pradesh Sales of Motor Spirit  Diesel Oil Taxation Amendment Ordinance 1974 was promulgated by the Government of UP By virtue of the amendment the definition of alcohol in section 2 was amended as follows aaa Alcohol means ethyl alcohol not being alcoholic liquor for human consumption and includes rectified spirit absolute alcohol
 Notification was issued thereafter by the Government of UP in exercise of power under section 31 of the UP Sales of Motor Spirit and Diesel Oil Taxation Act 1939
Several other notifications were issued
This Ordinance was struck down by the division bench and the Government was made liable to refund
Writ Petition was filed by Synthetics  Chemicals Ltd Thereafter no appeal was filed by the State Government
The other facts are not relevant for the present controversy
There was an application challenging the purchase tax
The State of UP filed an appeal against the judgment and order dated 24th March 1973 of the divi sion bench of the Allahabad High Court in Writ Petition No 806972 striking down the vend fee notification
The appeal was numbered as Civil Appeal No 1130NCL76
After the sales tax levy was struck down the government proposed a purchase tax
Aggrieved by the aforesaid Act writ petition was filed and the hearing of the petition had been stayed by the order of this Court
Meanwhile certain wholesale dealers in denatured spirit filed writ petitions in the High Court of Judicature at Allahabad claiming refund of the vend fee paid by them
Against the judgment of the High 656 Court of Allahabad dated 6th October 1978 appeals were admitted being Civil Appeal Nos 2191 9878
All these have been disposed of by the bench of two learned Judges of this Court as mentioned hereinbefore
It appears that Kesar Sugar Works Ltd filed writ petition challenging the validi ty both of licence fee and vend fee on the ground that the fees charged have all the characteristics of a duty of excise which is beyond the legislative competence of the State and that the alcohol industry is covered by the IDR Act
Writ Petition Nos 4663 4664 of 1978 were also disposed of by the judgment of this Court in Synthetics  Chemicals Ltd supra
Notification was issued thereafter by the Government of UP in 1979 in exercise of powers under section 40 sub section 1 of the UP Excise Act of 1910 read with clause d of sub section 2 of the said section amending the UP Excise Amendment Rules 1979
By virtue of this amendment rule 17 was substituted and in the case of FL 39 licence vend fee was to be so charged that the amount of vend fee and purchase together did not exceed 25 paise per bulk litre
It is not necessary to set out in detail the exact provisions
Another notification was is sued
It was challenged in the High Court
It was kept pending
The other matter herein is writ petition No 3 163 6482 All India Alcohol Based Industries Development Association vs State of Maharashtra which challenges the amendment to section 49 of the Bombay Prohibition Act 1949
It may be rele vant to refer to the said section as amended in 1981
The section is titled Exclusive privilege of Government to import etc intoxicants and fees levied include rent or consideration for grant of such privileges to persons con cerned
 In this connection it is significant to refer to the Statement of Objects for the amendment
The section is as follows 49
Notwithstanding anything contained in this Act the State Government shall have the exclusive right or privilege of importing exporting transporting manufacturing bot tling selling buying possessing or using any intoxicant hemp or toddy and whenever under this Act or any licence permit pass thereunder any fees are levied and collected for any licence permit pass authorisation or other permission given to any person for any such purpose such fees shall be deemed to include the rent or consideration for the grant of such right or privilege to that person by or on behalf of the State Govern ment
 The power was contained in the Prohibition Act 1949 which was 657 an Act to amend and consolidate the law relating to the promotion and enforcement of and carrying into effect the policy of prohibition and also the Abkari law in the State of Bombay
It may be mentioned that the Bombay PrOhibition Act 1940 was brought into force on 25th May 1949
Then there was the  Bombay Rectified Spirit Transport inBond Rules 1951 brought into force
On 23rd October 1981 the amendment was made introducing section 49
The provision of the Andhra Pradesh Act was challenged by impugning the allotment of alcohol under the Andhra Pradesh Excise Act No XVII of 1968
The Andhra Pradesh Act receive the assent of the President on 26th August 1968
This was an Act to consolidate and amend the law relating to production manufacture possession transport purchase and sale of intoxicating liquors and drugs the levy of duties of excise and countervailing duties of alcoholic liquor for human consumption and opium Indian hemp and other narcotic drugs and narcotics and to provide for matters connected therewith in the State of Andhra Pradesh
Writ Petition No 189273 Hindustan Polymers Ltd vs State of Andhra Pradesh challenges the Andhra Pradesh Dis tillery Rules 1970 and Andhra Pradesh Rectified Spirit Rules 1971
The Tamil Nadu Prohibition Act is also chal lenged in CA Nos 466 6780 as well as writ petition No 450178
In all these the point is similar and we have heard learned counsel and respective Advocate Generals
Appearing for the petitioners SShri Nariman Diwan Baig and Banerjee and others have made their submissions
We have also heard Mr Trivedi learned Additional Advocate General of UP Mr Yogeshwar Prasad Dr Singhvi Mr Sanghi learned Advocate Generals of Andhra Pradesh and other States
We had also the advantage of the submissions made by learned Attor ney General on behalf of Union of India
It was submitted in the statement on behalf of Union of India that the legislative competence of the State enactment in the various States will have to be determined by refer ence to following entries in list I of the 7th Schedule entries 7 52 59 84 96 97  entries in list II being 8 24 26 27 51 52 54 56 62 and entries in list III 19  33
It was urged that there is a dichotomy between entry 84 list I and entry 51 of list II but this would not control the interpretation of other entries
There is no such dichotomy in entry 8
It has also been stated on behalf of the Union of India that while opium was in entry 19 of list III and entry 59 of list I of the 7th Schedule it means that Parliament will have power with regard to opium
But the power to levy excise duty on 658 opium is given to the State similarly medicinal and toilet preparations which contained alcohol and are fit for human consumption the power to levy excise duty is given to Parliament and not to the State legislature
Entry 8 of list Il similarly is not subject to entry 52 of list I for the reason that the aspect with regard to subject matters of these two entries are different it was submitted
The aspect in list I entry 52 is industry while that in entry 8 of list II is intoxicating liquor
Entry 8 is therefore to be read on its own terms
The power to levy taxes is to be read from the entry relating to taxes and not from the general entry
Exception in entry 50 of list II where tax on mineral rights is subject to any limitation imposed by Parliament relating to mineral development and this power of Parliament is in general entry ie entry 54 of list I According to Union of India none of the taxing entries in list II is controlled by entry 52 of list I Union of India stated that industry  is a topic of legislation
Certain entries are left to Parliament and certain others are left to State Legislatures
Identifying of entries is by refer ence to a declaration under entry 7 of list I and entry 52 of list I The aspect of legislation with regard to subject matter of entries will be topic industry 
On the other hand the subject matter of legislation under entry 8 of list II will be topic intoxicating liquors 
Therefore there is no conflict according to the Union of India
The only question which has to be determined is whether intoxicating liquor in entry 8 in list II is confined to potable liquor or includes all liquors
According to the Union of India in view of the difference of language in entry 8 and entry 51 of list II it is reasonably possible to take the view that intoxicating liquors include both liquors
It was submitted by the Union of India that there are no grounds for overruling Balsara s case supra decided in 1951 after 38 years particularly when it has been fol lowed and applied in later decisions
In that case it upheld the power of the States to completely prohibit manufacture sell etc
of potable liquor it struck down the provisions of the Bombay Act in so far as it imposed restrictions on medicinal and toilet preparations as violative of article 191f of the Constitution
It is stated that this deci sion had proceeded on the basis that there could not be a complete prohibition in regard to medicinal preparations containing alcohol
Hence it was submitted that so far as alcohol not fit for human consumption is concerned it cannot be held that trade in such an article cannot be considered to be a noxious trade
It will be a noxious trade only where it is produced or manufactured for purposes of human consumption
It was submitted that in Indian Mica  Micanite Industries Ltd vs State of Bihar  Ors this Court was dealing with denatured spirit and had held that the Bihar 659 Orissa Excise Act insofar as it related to denatured spir it was regulating trade and business in public interest and that entry 8 of list II comprehends all liquors contain ing alcohol
The State s privilege to completely prohibit or farm out liquor containing alcohol for human consumption does not comprehend according to the Union of India a similar right of a State with regard to other intoxicating liquids containing alcohol
According to the Union of India to so prohibit or collect fee for farming out would be unconstitutional under article 191g of the Constitution on the same principle on which the provisions of the Bombay Act were struck down in Balsara s case
It was further stated on behalf of Union of India that Parliament has legislative competence with regard to power alcohol providing for levy of central excise duty
See the Central Excises  Salt Act 1944 Schedule I item 6 Motor Spirit
Similarly Parlia ment has legislated the Central Excise Tariff Act 1985 tariff item No 2204
The said item reads Ethyl alcohol of any grade including such alcohol when denatured or otherwise treated which either by itself or in admixture with any other substance is suitable for being used as fuel for spark ignition engines
 It was stated that under article 277 of the Constitution any taxes duties cesses or fees which immediately before the commencement of the Constitution were being lawfully levied by the Govt
of any State or municipality or other local authority or body for the purpose of the State munic ipality district or other local area may notwithstanding that these taxes duties casses or fees are mentioned in the Union list continue to be levied and to be applied for the same purpose until provisions to the contrary are made by Parliament by law
According to the Union of India there was a similar provision in the Govt
of India Act 1935 See section 1432
Reference was made to the decision in Town Municipal Committee Amraoti vs Ramachandra Vasudeo Chimote  Anr  Learned Attorney General drew our attention to the fact that Parliament has exclusive power to levy duties of excise on goods manufactured or produced in India including medici nal and toilet preparations containing alcohol for opium or Indian hemp or other narcotic drugs
But Parliament has no legislative competence to levy excise duty on a alcoholic liquor for human consumption b opium Indian hemp and other narcotic drugs and narcotics entry 84 of list II
The State Legislature has legislative competence to levy excise duty on the following goods manufactured or produced in the State 660 and countervailing duties on similar goods manufactured in India a alcoholic liquor for human consumption b opium Indian hemp and narcotics
But learned Attorney General emphasised that State Legislature has no power to levy excise duty on medicinal and toilet preparations which contain alcohol or opium or Indian hemp and other narcotic drugs in such medicinal and toilet preparations
Under entry 51 of list II State Legislature it was submitted by him had no power to levy excise duty on industrial alcohol as the latter is not fit for human consumption
State Legisla ture has power to levy taxes on entry of goods in local areas for consumption use or sale therein
This will in clude taxes on entry of all alcohol
See entry 52 of list II
The State Legislature has further power to levy taxes on goods carried by road or by inland water
The goods therein will include both alcohol fit for human consumption as well as alcohol not fit for human consumption
See entry 56 of list II of the 7th Schedule
State legislature will have to levy taxes on possession of alcoholic liquors fit for human consumption because these are luxuries
But alcohol not fit for human consumption are not luxuries and as such the State Legislatures according to learned Attorney General will have no power to levy taxes on such alcohol
Parliament will have power to levy on all alcohol taxes not covered by any other entries in lists I and II
See list I entry 97
The State Legislature will have power to levy fee in respect of all alcohol
See entry 66 read with entry 6 of list II
State Legislature has power to legislate on the topic intoxicating liquors  under entry 8 of list 1I
It being a general entry will not comprehend a power of taxa tion but will comprehend a power to levy fee read with entry 66
According to the learned Attorney General with regard to industries the control of which by the Union is declared by Parliament by law to be expedient in public interest Parliament will have exclusive legislative competence
See entry 52 of list I
This power includes the power to declare by Parliament that control by the Union of industries relat ing to all types of alcohol is expedient in public interest
Once Parliament makes such a declaration the State Legisla ture will be denuded of its power under list II entry 24 on the aspect industry  with respect to all subject matters
The power to collect the lump sum amount by way of auction by any right or otherwise conferring the right to sell alcohol is neither a power to levy tax nor a power to levy fee but it will fail within the legislative competence of the State Legislature under entry 8
But this power will extend only according to learned Attorney General to alcohol for human consumption
He said that there can be complete prohibition with regard to manufacture and sale of alcohol fit for human consumption because there is no funda mental 661 right to carry on business in alcohol even for human con sumption
And that this power to completely prohibit exists in the State as recognised by article 47 of the Constitution
The State can therefore collect an amount called vend fee shop rent etc
for conferring on a citizen the right to manufacture and sell alcoholic liquors if it is for human consumption
This power cannot extend to industrial alcohol or alcohol contained in the medicinal or toilet prepara tions
According to the learned Attorney General there is no power to levy such rent or fee with regard to industrial alcohol because a industrial alcohol and alcoholic liquor for medicinal and toilet preparations cannot be completely prohibited b as there is a right to carry on business in industrial alcohol any prohibition on manufacture of indus trial alcohol would be violative of article 191g of the Constitution
Accordingly in
absence of a power to com pletely prohibit there will be no power to collect sums for conferring rights to manufacture or sell except the levy of taxes and fee
On behalf of the State of UP both the learned Addi tional Advocate General Mr Trivedi as well as Mr Yogesh war Prasad made exhaustive submissions and submitted that in order to appreciate the controversy it is necessary to realise that the real problem arises from the fact that the denaturants can be converted into renaturants in the illicit process
According to the counsel appearing in support of the levy one bottle of spirit of Rs 150 on renaturing yields a profit of Rs25 to 30 at least
In this connection reference was made to the report of Baweja Committee
It was further emphasised that the victims are the weaker section and the sufferers are the wailing workers weeping wives and crying children  not only when the earning member dies but in their lifetime too the alcohol consumes snatches their two morsels their health nutrition and standard of living
Reference was made to the observations of this Court in PN Kaushal etc
vs Union of India  where Mr Justice Krishna 1yet referred to the utterances of George Bernard Shaw that drinking is the chloroform that enables the poor to endure the painful operation of living
It was submitted on behalf of the State that the vend fee on denatured alcohol or Denatured Spirit or what is known as industrial alcohol has been challenged on mainly two grounds namely a States lack legislative competence and b after the enactment of the IDR Act 1961 the States power is completely lost
The contention of the State was that there is no dichotomy between Ethyl Alcohol to be used for beverages and to be used for industrial purposes
In any case the levy is on manufacture according to Mr Yogeshwar Prasad and Mr 662 Trivedi learned Additional Advocate General of UP of the ethyl alcohol use is different and the collection at a later stage
The levy was stipulated jointly or severally both under entries 8 of list II entry 51 of list II entry 33 of list III and what is described as police powers regu latory and other incidental charges according to them
It was submitted that levy was justified being a regulatory power under Article 196 196ii
It was further urged that State has a monopoly in alcohol trade and that article 31C grants immunity to the challenge under Articles 13 14  19 of the Constitution
It was submitted that quid pro quo was not necessary and even if it was necessary the require ments were met
Under article 298 trading powers of the Stare must be recognised it was submitted coupled with century old monopoly of the State in alcohol
It was submitted that vend fee is a pre Constitution levy
The UP Excise Act 1910 and the vend fee levied thereunder were pre Constitution Actlevy by a competent authority and will not cease to continue after the enforce ment of the Constitution merely because the authority lost its legislative competence over the subject matter
It was submitted that the levy was a pre Constitution levy so saved under article 277 of the Constitution
According to the State of UP the law continued under article 277 and is not a law either under article 246 nor under article 254 of the Consti tution so outside the purview of the Central Act
At the outset it may be noted that in view of the subsequent amendment and the additions to the levies it cannot in our opinion be with legitimate force contended that the levies which are sought to be impugned in the present litigation are pre Constitutional levies
So these submissions on behalf of the State do not require any seri ous consideration
It was further submitted that the Union of India has no power to effect the levy as levy was pre Constitutional law and further as the expression alcoholic liquor for human consumption  in list I and the residuary entry 97 of list I of the 7th Schedule will not operate as against its own legislative intent
It was further urged that the IDR Act 1951 does not preclude or eclipse the legislative powers of the State
This Act on its own terms does not apply to the levy these operate on different tracks according to the counsel for the State
It was further urged that review was not maintainable
Reference was made to the distillation process and detailed submissions were made before us ex plaining the same
663 It was submitted that sugarcane is raw material of sugar and manufacture of sugar molasses is the waste product
Molasses when mixed with yeast fermentation starts and alcohol is produced
10 12 strength of alcohol is toxic to yeast hence fermentation stops
According to the State of UP so fermented alcohol has maximum 12 strength of alcohol the products being beer cider champangine and liquor etc
For higher strength above 12 distillation of fermented alcohol is necessary
By distillation process firstly 96 strength of alcohol is produced
It is known as ethyl alcohol or rectified alcohol
Counsel for the State of UP submitted that this ethyl alcohol is potable and used both for beverage and industrial purposes and that it is at this stage of manufacture that the charge of levy is made
It has to be stated in view of the language used in the specific provisions the levy is not on the manufacture of alcohol as such therefore in our opinion these levies cannot in essence be sustained as duty of excise
It was contended on behalf of the State that rectified alcohol is diverted to different warehouses for being used as beverages country liquor foreign liquor and industrial liquor
it was submitted that this potable alcohol can be used for industrial purposes but for public welfare a lower levy is charged and to prevent its misuse denaturants are added and for denaturing in public interest the State has to incur expenses cost of denaturants process and regulation etc
However this submission by itself does not help the controversy herein in essence
No attempt had been made on behalf of the State to indicate that the levy has any element of quid pro quo or certain element which can possibly have some correlation with the expenses incurred in that connection
It was submitted that ethyl alcohol is diluted to the requisite concentration for the concerned beverage and subjected to other processes like reduction blending and flavouring etc
and ethyl alcohol is further distilled for higher concentration 994 power alcohol and 100 absolute alcohol
It was submitted that no alcohol as such is fit for human consumption
It was contended that the effect is ultimate consumption whether delayed or instanta neous
The effect of alcohol is fatal it was stated may be spread out on long span or instant depending upon the concentration dose and the person drinking it
Sleeping pills are illustrative overdose puts the man to eternal sleep
It is in this background that we were reminded that the State being a welfare State would be guilty in levying a lower levy on the alcohol
It is the duty of the State for being a welfare State to denature by incurring extra cost and effort
The industry does not need the denaturing
664 Our attention was drawn to various observations of Krishna Iyer J in PN Kaushal s case supra
There is indeed great deal of attempt made by some for wrong utilisa tion of alcohol and thereby endangering the community and people at large but the need to protect the community from the evil effects of drinking does not by itself empower the State to levy duty or impost of fee not warranted by the Constitution nor sanctioned by the specific provisions of the Constitution and the laws
It was submitted that indus trial alcohol and denatured spirit are intoxicating liquor and or alcoholic liquor for human consumption
These submis sions were supported by reference to the Dictionary meaning Organic Chemistry the definition in UP Excise Act 1910 and various case laws
It is used as being consumed by humanity
The industry needs potable alcohol and the dena turants are not required by it rather some of them are avoided according to the State of UP
In particular indus try they hamper the manufacture of the final product
Dena tured spirit or industrial alcohol is basically potable alcohol it is denatured in public interest to prevent its use as potable alcohol according to the State of UP
This alcohol cannot be treated differently from other alcohols only because some denaturants are added in public interest and welfare
It was submitted that the State has legislative competence to impose the levy since the impugned levy is both on its language and in pith and substance legislation failing under according to the State of UP entry 8 list II intoxicating liquor entry 51 list II alcoholic liquor for human consumption
Counsel for the State emphasised the significant omission of the expression fit for
What is required is intoxicating liquor andor alcoholic liquor for human consumption according to counsel for the State of UP Entry 33 list Ill trade and commerce in and the production supply and distribution of the products of any industry where the control of such industry by the Union is declared by Parliament by law to be expedient in public interest and imported goods of the same kind as such products
Under its police powers the State has to regulate health morality welfare of society and incidental pauper ism and crime it was submitted
It was further submitted by the State that the State has exclusive right to deal in liquor
This power according to the counsel for the State is reserved by andor derived under articles 196 and 196ii of the Constitution
For parting with that right a charge is levied
It was empha sised that in a series of decisions some of which have been referred to hereinbefore it has been ruled that the charge is neither a fee nor a tax and termed it as privilege
The levy is on the manufacture possession of alcohol
The rate of levy differs on its use accord 665 ing to the State of UP
The impost is also stipulated under the trading powers of the State under article 298 and it was contended that the petitioners andor appellants were bound by the terms of their licence
It was submitted that the Parliament has no power to legislate on industrial alcohol since industrial alcohol was also alcoholic liquor for human consumption
Entry 84 in list I expressly excludes alcoholic liquor for human consumption and due to express exclusion of alcoholic liquor for human consumption from list I the residuary entry 97 in list I will not operate as against its own legislative interest
These submissions have been made on the assumption that industrial liquor or ethyl alcohol is for human consumption
It is important to emphasise that the expression of a Constitution must be understood in its common and normal sense
Industrial alcohol as it is is incapable of being consumed by a normal human being
The expression consumption  must also be understood in the sense of direct physical intake by human beings in this context
It is true that utilisation in some form or the other is consumption for the benefit of human beings if industrial alcohol is utilised for production of rubber tyres used
The utilisation of those tyres in the vehicle of man cannot in the context in which the expression has been used in the Constitution be understood to mean that the alcohol has been for human consumption
We have no doubt that the framers of the Constitution when they used the expression alcoholic liquor for human consumption  they meant at that time and still the expres sion means that liquor which as it is consumable in the sense capable of being taken by human beings as such as beverage of drinks
Hence the expression under entry 84 list I must be understood in that light
We were taken through various dictionary and other meanings and also invited to the process of manufacture of alcohol in order to induce us to accept the position that Denatured Spirit can also be by appropriate cultivation or application or admix ture with water or with others be transformed into alco holic liquor for human consumption  and as such transforma tion would not entail any process of manufacture as such
There will not be any organic or fundamental change in this transformation we were told
We are however unable to enter into this examination
Constitutional provisions specially dealing with the delimitation of powers in a federal polity must be understood in a broad commonsense point of view as understood by common people for whom the Constitution is made
In terminology as understood by the framers of the Constitution and also as viewed at the relevant time of its interpretation it is not possible to proceed otherwise Alcoholic or intoxicating liquors must be understood as these are not what these are capable of or able 666 to become
It is also not possible to accept the submission that vend fee in UP is a pre Constitution imposition and would not be subject to article 245 of the Constitution
The present extent of imposition of vend fee is not a pre Con stitution imposition as we noticed from the change of rate from time to time
On behalf of the State of Maharashtra Mr Dholakia submitted that the first issue is whether entry 8 in list II of the 7th Schedule of the Constitution covers alcohol unfit for human consumption
The second issue according to him is whether assuming that the entry does not include alcohol unfit for human consumption its scope in that respect is curtailed because of item 26 of the Schedule to the IDR Act 1951
The third issue according to him is whether having regard to entry 51 in list II the State can a impose regulations by creating economic disincentives for consumption of drinkable alcohol and b prevention of misuse of non drinkable alcohol for consumption
On behalf of the State both Mr Trivedi and Mr Yogesh war Prasad contended that regulatory power of the State was there and in order to regulate it was possible to impose certain disincentives in the form of fees or levies
Imposi tion of these imposts as part of regulatory process is permissible it was submitted
Our attention was drawn to the various decisions where by virtue of Police Power in respect of alcohol the State has imposed such impositions
Though one would not be justified in adverting to any police power it is possible to conceive sovereign power and on that sovereign power to have the power of regulation to impose such conditions so as to ensure that the regulations are obeyed and complied with
We would not like however to embark upon any theory of police power because the Indian Constitution does not recognise police power as such
But we must recognise the exercise of sovereign power which gives the State sufficient authority to enact any law subject to the limitations of the Constitution to discharge its func tions
Hence the Indian Constitution as a sovereign State has power to legislate on all branches except to the limita tion as to the division of powers between the Centre and the States and also subject to the fundamental rights guaranteed under the Constitution
The Indian State between the Centre and the States has sovereign power
The sovereign power is plenary and inherent in every sovereign State to do all things which promote the health peace morals education and good order of the people
Sovereignty is difficult to define
This power of sovereignty is however subject to Constitutional limitations
This power according to some constitutional authorities is to the public what necessity is to the individual
Right to tax or levy 667 imposts must be in accordance with the provisions of the Constitution
It was contended that the question necessarily arises as to whether these regulations under the Bombay Prohibition Act 1949 are intended as measures of revenue or as measures to advance the cause of prohibition
Mr Dholakia invited us to the phrase intoxicating liquor which has been the subject matter of interpretation by the Federal Court this Court and the United States Supreme Court
It has been held that the expression is of widest import and must be given liberal interpretation
According to him this Court in Balsara s case supra held that even toilet articles con taining alcohol as such would be intoxicating liquors
Mr Dholakia suggests that United States Supreme Court has expressly held that Denatured Spirit is intoxicating liquor because of necessity to prevent its misuse
It was further contended that the IDR Act was made by the Parliament and it is traceable to entry 52 list I This entry enables the Union Legislature to legislate in respect or  an industry the control of which is declared by Parlia ment to be expedient in public interest
Entry 52 according to him speaks of control of an industry in its establish ment
Ordinarily States have the authority to allow or not to allow any industry to be established under entry 24 of list I1
This power is not taken away by the IDR Act
According to Mr Dholakia if industry is allowed to be established by law within the policy of the State then its control thereafter would vest with the State
Ordinarily a citizen has fundamental right to establish an industry and only reasonable restrictions can be placed on these
Howev er the case of intoxicating liquor is different
By virtue of article 47 of the Constitution the State may impose absolute prohibition in respect of intoxicating liquor
In such a case the State is authorised to deny a citizen the right to establish an industry in intoxicating liquor
No person can claim that he is entitled to establish an industry for manufacturing whisky in any particular State
The true test according to Mr Dholakia is to ascertain if there was no IDR Act to which entry of the State List various regula tions in respect of alcohol industry would be traced
It was submitted that the regulations would have to be traced to entry 24 of list 11 and not to entry 8
It was submitted that in case of alcohol ordinarily used for human consump tion the extent of regulation may go to the extent of complete prohibition
It may go to a lesser extent of par tial prohibition
It may assume a variety of forms including one of imposing economic disincentives
If the price of drinkable alcohol becomes higher and higher the person given to drinking might think it better to give it up according to Mr Dholakia
The price fixation is a valid method in regulation of consumption and if the above analy sis is fully 668 valid for drinkable alcohol it is equally valid for the non drinkable alcohol for the following reasons according to Mr Dholakia the major difference in non drinkable alcohol and drinkable one is that the former is often the legitimate activity while in the latter no such claim can be made
The distinction is important for the purpose of deter mining the extent of regulations but it is of no assistance for deciding the nature of the regulation
It is true he says that a State may not be entitled to prohibit the business of non drinkable alcohol but the State can impose regulation by which it can make nondrinkable alcohol more expensive to ensure that it is not available cheaply to a would be bootlegger
Mr Dholakia invites us to hold that Denatured Spirit is made by addition of malodorous or nox ious substance to alcohol in order to make it unfit for human consumption
Denaturing is not done for making such alcohol fit for machine it is done for the purpose of ensuring that such alcohol is avoided by would be drinkers
Even so lacking the easy availability of drinkable alcohol those given to drinking would make an attempt to drink denatured spirit after distillation
Such process of distil lation is what the bootleggers undertake
The process is a simple one according to Mr Dholakia
We need not detain ourselves in examining the process as suggested by him
He insisted that the dividing line between relative importance of prohibition and industry should be left to each individual State because the conditions in all States are not identical
He suggested that Gujarat attaches great importance to the cause of prohibition
There are historical and social factors responsible for this policy
According to Mr Dholakia the Govt
of that State is prepared to sacri fice revenue running into hundreds of crores of rupees but the same may not be true of a State like Punjab
According to him the historical and social conditions there are quite different
The power of the State Govt
with regard to potable liquor was sustained in the dissenting judgment of Justice Hidayatullah in the case of Ms Guruswamy  Co etc
vs State of Mysore  Ors 1t was howev er suggested that levies in the instant case are not duties of excise as understood in the said decision
For these reasons Mr Dholakia submitted that the Bombay Prohibition Act cannot be challenged
According to him the relevant section of the said Act and the Denatured Spirit Rules 1959 have to impose and advance the cause of prohibition while at the same time assuring a reasonable availability of Dena tured Spirit and Rectified Spirit at reasonable prices
Learned Advocate General of the State of Andhra Pradesh has 669 also submitted in support of the imposition made under the AP Excise Act
He has referred us to the relevant defini tions and sections contending that the Act falls within the legislative competence of the Andhra Pradesh State Legisla ture by virtue of entries 8 and 51 of list II and entry 33 of list III of the 7th Schedule
He contended that the levy of excise duty falls within entry 51 of list II of the 7th Schedule to the Constitution inasmuch as the Andhra Pradesh Act received the assent of the President and is a later enactment than the IDR Act
The provisions of the Andhra Pradesh Act according to him will prevail over any earlier Central Law under article 254 of the Constitution
The said Central legislation is enacted under entry 52 of list I Learned Advocate General also insisted that there is no fundamental right in the business of liquor and that Recti fied Spirit is nothing but alcohol which can be diluted and rendered fit for human consumption by additions of certain substances
It can also be utilised for industrial purposes as raw material for manufacturing other products
This multifarious user does not bring about any change in the essential character of alcohol after distillation
In re spect of these legislations learned Advocate General sub mitted that even if such an assumption were to be regarded as conceivable State legislation has the predominant effect prevailing over the Central Legislature in respect of the State of AP in view of the assent by the President and the enactment being later in point of time in accordance with article 254 of the Constitution of India
It was submitted that the dichotomy attempted to be drawn in entry 84 of list I of the 7th Schedule to the Constitution on the basis of the development of the concept of industrial alcohol and the inapplicability of the concept of potable liquor to the industry of alcohol is not valid
There is no question of fundamental right to trade in dan gerous or hazardous alcohol
It was submitted that it is consistent with wider interpretation of alcoholic liquor based on pre existing legislative history
It was further submitted that the test of potability of liquor is in no way rendered invalid in relation to industrial alcohol as it still permits of conversion to potability by addition of flavours and dilution
When two interpretations are possi ble it was submitted that the choice must fall on that interpretation which validates existing State legislations designed to raise revenues and rejection of the other inter pretation which is destructive of the scheme of distribution of powers
According to him the words alcoholic liquor  in lists I  II of the 7th Schedule to the Constitution must be interpreted so as to mean and take within its sweep alcohol as first obtained in the process of or as a product of fermentation industry
At this stage it is capable of 670 being rendered potable
The fact that it may be rendered unfit for human consumption does not render the substance any less liable for taxation
Learned Advocates General for the States of Gujarat and Kerala have also made their submissions and referred to several decisions and the concept of police power and contended that imposition of a fee would be the most effec tive method of regulating intoxicating liquor other than alcohol
According to the Advocate General of Kerala that would be justified as the reasonable measure in regard to intoxicating liquor
According to him it has been accepted by courts all along that the police power  of the State enables regulations to be made regarding manufacture trans port possession and sale of intoxicating liquor
Such police power could be exercised as to impose reasonable restrictions as to effectuate the power
He referred to the observations of this Court in Cooverjee B Bharucha vs The Excise Commissioner and the Chief Commissioner Ajmer  Ors  which quoted the passage from Crowley vs Christensen 1890 34 Lawyers  Edn 620
Reference was also made to Hari Shankar s case supra where this Court quoted Vol
38 of the American Jurisprudence where it was stated that the higher the fee is imposed for a licence better is the regulation
Reliance was also placed on PN Kaushal s case supra
It was contended that it has been accepted by this Court that the police power is exercisable for regulation of an activity of a legislature within the permissible field or impost as regulatory measure
It may be valid though it may neither be fee nor a tax in the limited sense of the term
See the observations of this Court in Southern Pharmaceuticals  Chemicals Trichur  Ors etc
vs State of Kerala  Ors etc
  at 537
Re garding regulatory measures in connection with medicinal preparations containing alcohol it was observed by this Court that the impugned provisions had to be enacted to ensure that the Rectified Spirit is not misused under the pretext of being used for toilet and medicinal preparations containing alcohol
Such a regulation is a necessary concom itant of the police power of the State to regulate such trade or business which is inherently dangerous to public health
The American doctrine of police power is not perhaps applicable as such in India but powers of the sovereignty to regulate as part of the power of the competent legisla ture to effectuate its aim are there
It is true that in the State of West Bengal vs Subodh Gopal Bose  Ors 1954 V SCR 587 at 601 604 and Kameshwar Prasad  Ors
v The State of Bihar  Anr
  the concept of 671 poliCe power was accepted as such but this doctrine was not accepted in India as an independent power but was recognised as part of the power of the State to legislate with respect to the matters enumerated in the State and Concurrent Lists subject to Constitutional limitations
It was stated that the American jurisprudence of police power as distinguished from specific legislative power is not recognised in our Constitution and is therefore contrary to the scheme of the Constitution
In interpreting the provisions of our Constitution we should go by the plain words used by the Constitution makers and the importing of expression like police power  which is a term of variable and indefinite connotation can only make the task of interpretation more difficult
It was contended that in enacting a law with respect to intoxicating liquor as part of the legislative power measures of social control and regulation of private rights are permissible and as such may even amount to prohi bition
We are of the opinion that we need not detain ourselves on the question whether the States have police power or not
We must accept the position that the States have the power to regulate the use of alcohol and that power must include power to make provisions to prevent andor check industrial alcohol being used as intoxicating or drinkable alcohol
The question is whether in the garb of regulations a legislation which is in pith and substance as we look upon the instant legislation fee or levy which has no connection with the cost or expenses administering the regulation can be im posed purely as regulatory measure
Judged by the pith and substance of the impugned legislation we are definitely of the opinion that these levies cannot be treated as part of regulatory measures
In this view of the matter we do not detain ourselves with examining the numerous American deci sions to which our attention was drawn by learned counsel very elaborately and thoroughly
We recognise power of the State to regulate though perhaps not as emanation of police power but as an expres sion of the sovereign power of the State
But that power has its limitations
We have noted the submissions made to this effect by the learned Advocates General of different States including the State of Gujarat
Some of the interveners have also made the submissions
We have considered the submis sions made by Ms Kantilal  Co as interveners in respect of the Constitutional validity of the Bombay Prohibition Act as amended by the Bombay Prohibition Gujarat Amendment Act 1978
We have also the advantage of the submissions made on behalf of Advocate General of Madhya Pradesh by Mr RB Datar
He submit 672 ted that the substance of the case put forward by the peti tioners andor appellants is that the vend fee in respect of industrial alcohol is not a fee for any services ren dered it is a compulsory exaction of money
The answer to the question posed lies not in the labels used according to Mr Datar for describing the commodity in question
It lies in the examination of the chemical reality of the substance
He says that no process of interpretation can alter the law of chemistry or the chemical structure of the substance described in common parlance as industrial alcohol or pota ble alcohol or alcohol for human consumption
He referred us to Organic Chemistry and other books but as mentioned before the meanings must be found but in the conditions as these are
On behalf of State of UP Mr Trivedi learned Addi tional Advocate General further submitted that entry 52 of list I is an exceptional entry
It not only prescribes the field of legislation but also enables and empowers the Parliament to make laws to the exclusion of the State
According to him being exclusionary in nature unlike en tries merely delineating fields of legislation entry 52 has to be strictly and therefore narrowly construed
The other question that has to be judged according to him is that whenever the Constitution intended the Parliament to assume legislative competence in respect of the entire field a declaration of an unqualified nature is provided for unlike a qualified provision like entry 52 of list I The words control  and regulation  are at times held to be inter changeable or used synonymously their use in the various entries either singly or jointly indicates that they are sought to convey a different sense
The word control  has in the context a narrower meaning excluding details of regulatory nature by the State
According to him comparing entries 7 23 24 27 62 64  67 of list I with entry 52 would demonstrate that under entry 52 it is not the entire field which is sought to be covered but only the control of industries and that the absence of inclusion of qualifying words like the control of which  cannot be brushed aside
By referring to the several decisions he contended that in view of the declaration made in section 2 of the IDR Act and the provisions made therein the entire field was not occu pied and the vend fee or other impost by the State Legisla tures were not infringing in the field treaded by the Cen tral Legislature
Before we deal with the contentions of the petitionersappellants it is necessary to reiterate the principles by which these questions will have to be judged
It is well to remember that the meaning of the expressions used 673 in the Constitution must be found from the language used
We should interpret the words of the Constitution on the same principle of interpretation as one applies to an ordinary law but these very principles of interpretation compel one to take into account the nature and scope of the Act which requires interpretation
A Constitution is the mechanism under which laws are to be made and not merely an Act which declares what the law is to be
It is also well settled that a Constitution must not be construed in any narrow or pedan tic sense and that construction which is most beneficial to the widest possible amplitude of its power must be adopted
An exclusionary clause in any of the entries should be strictly and therefore narrowly construed
No entry should however be so read as not to rob it of entire content
A broad and liberal spirit should therefore inspire those whose duty it is to interpret the Constitu tion and the courts are not free to stretch or to pervert the language of an enactment in the interest of any legal or constitutional theory
Constitutional adjudication is not strengthened by such an attempt but it must seek to declare the law but it must not try to give meaning on the theory of what the law should be but it must so look upon a Constitu tion that it is a living and organic thing and must adapt itself to the changing situations and pattern in which it has to be interpreted
It has also to be borne in mind that where division of powers and jurisdiction in a federal Constitution is the scheme it is desirable to read the Constitution in harmonious way
It is also necessary that in deciding whether any particular enactment is within the purview of one Legislature or the other it is the pith and substance of the legislation in question that has to be looked into
It is well settled that the various entries in the three lists of the Indian Constitution are not powers but fields of legislation
The power to legislate is given by article 246 and other Articles of the Constitution
The three lists of the 7th Schedule to the Constitution are legislative heads or fields of legislation
These demarcate the area over which the appropriate legislatures can oper ate
It is well settled that widest amplitude should be given to the language of the entries in three lists but some of these entries in different fists or in the same list may override and sometimes may appear to be in direct conflict with each other then and then only comes the duty of the court to find the true intent and purpose and to examine the particular Legislation in question
Each general word would be held to extend to all ancillary or subsidiary matters which can fairly and reasonably be comprehended in it
In interpreting an entry it would not be reasonable to import any limitation by comparing or contrasting that entry with any other in the same list
It has to be interpreted as the Constitution must be interpreted as an organic document in the light of the experience 674 gathered
In the Constitutional scheme of division of powers under the legislative lists there are separate entries pertaining to taxation and other laws
The aforesaid princi ples are fairly well settled by various decisions of this Court and other courts
Some of these decisions have been referred to in the decision of this Court in civil appeal No 62N 70 The India Cement Ltd etc
vs The State of Tamil Nadu etc
 The Balsara s case supra was in the context of the business of potable alcohol
Problems arose with regard to auctions vends licences and the business of manufacturing selling etc
of potable alcohol
Until the case of Synthet ics  Chemicals supra which is under challange here all other cases since then have dealt with potable alcohol
The only case which has dealt with alcohol used for industrial purposes was the case of Indian Mica and Micanite Industries Ltd vs State of Bihar  Ors supra
The Constitution of India it has to be borne in mind like most other Constitu tions is an organic document
It should be interpreted in the light of the experience
It has to be flexible and dynamic so that it adapts itself to the changing conditions and accommodates itself in a pragmatic way to the goals of national development and the industrialisation of the coun try
This Court should therefore endeavour to interpret the entries and the powers in the Constitution in such a way that it helps to the attainment of indisputed national goals as permitted by the Constitution
As mentioned here inbefore the relevant entries in the Seventh Schedule to the Constitution demarcate legislative fields and are close ly linked and supplement one another
In this connection reference may be made to entry 84 of fist I which deals with the duties of excise on tobacco and other goods manufactured or produced in India except inter alia alcoholic liquors for human consumption
Similarly entry 51 fist II is the counterpart of entry 84 of fist I so far as the State List is concerned
It authorises the State to impose duties of excise on alcoholic liquors for human consumption and opium etc
manufactured or produced in the State and the counter vailing duties at the same or lower rates on similar goods produced or manufactured elsewhere in India
It is clear that all duties of excise save and except the items specifi cally excepted in entry 84 of list 1 are generally within the taxing power of the Central Legislature
The State Legislature has power though limited it is in imposing duties of excise
That power is circumscribed under entry 51 of list II of the Seventh Schedule to the Constitution
As we have noted hereinbefore the correct principles of harmo nious interpretation of legislative entries have been laid down in several cases
We have mentioned hereinbefore some of the decisions as noted in the decision of this Court in India Cement supra
In MPV Sundarara 675 mier  Co vs State of AP  at pages 1480 82 this Court has laid down that i legislative entries are to be fiber ally construed
But when a topic is governed by two entries then they have to be recon ciled
It cannot be that one entry is to be fiberally construed and the other entry is not to be liberally construed
ii under the Constitutional scheme of division of powers under legislative lists there are separate entries pertaining to taxation and other laws
A tax cannot be levied under a general entry
iii a Constitution is an organic document and has to be so treated and con strued
iv if there is a conflict between the entries the first principle is to reconcile them
But the Union power will prevail by virtue of Article 2461  3
The words notwithstanding and subject to are impor tant and give primacy to the central legisla tive power
In the Central Provinces and Berar Sales of Motor Spirit and LubriCants Taxation Act 1938 at 37 38 the Federal Court had emphasised that Constitution of a Government is a living and organic thing which of all in struments has the greatest claim to be so construed as to make it live
In Indian Mica  Micanite India vs State of Bihar supra a bench of five Hon ble Judges stated as under Under the 1935 Act as under our present Constitution the power to levy duties on alcoholic liquor fit for human consumption was allocated to the provincial legislature where as the power to levy duty on alcoholic liquor not fit for human consumption was allocated to the central legislature
 In the aforesaid case an impost was sought to be placed on denatured spirit which was used in the manufacture of micanite
It was held that the impost could not be justified as a tax under the taxing power and therefore an enquiry was ordered to find out whether it was justified as a fee
In Adhyaksha Mathur Babu s Sakti Oushadhalaya Dacca P 676 Ltd and Ors
vs Union of India  at pages 966 969 975 976 of the report it was observed by this Court that only the Central Government has the power to tax liquids containing liquor which was an ayurvedic medicine even though such medicines were capable of being used as intoxicating things
In Ms Guruswamy  Co etc
vs State of Mysore  Ors at pages 549 556 557 564 571572 of the report it was held that it is clear that imposts which were not in the nature of excise duty were held to be ultra vires entry 51 of list II of the Seventh Schedule to the Constitution
In State of Mysore vs SD Cawasji  Co  Ors  at pp 804 805 and 806 of the report this Court rejected the contention that under entry 8 of list II of the Seventh Scheduly to the Constitution the State was competent to legislate for levy of cess in respect of intoxicating liquor that is to say the production manufacture transport purchase and sale of intoxicating liquors
Legislative power normally includes all incidental and subsidiary powers but the power to tax is neither incidental nor subsidiary to the power to legis late on a matter or topic
Reference was made to MPV Sundararamier s case supra
Entries in lists I and II dealing with certain specific topics it was held do not grant power to levy tax on transactions relating to those topics
Power to tax must be derived from a specific taxing entry
Tax could not therefore be levied it was held on intoxicating liquors relying upon entry 8 of list II of the 7th Schedule
It was further held that the taxing power in respect of alcoholic liquors for human consumption is therefore circumscribed and it might only be levied as excise duty that is a duty levied on the production and manufacture of alcoholic liquors
Reliance was placed on RC I all vs Union of India 1962 Supp 3 SCR 436
In Om Prakash vs Giriraj Kishore  at pages 158 and 163 of the report Venkataramiah J as the learned Chief Justice then was held that no tax can be levied in the guise of a fee
It was held at p 158 of the report as follows As observed in MPV Sundararamier  Co vs The State of Andhra Pradesh  Anr   in list II of the Seventh Schedule to the Constitution Entries 1 to 44 form one group mentioning the subjects on which the States can legislate and entries 45 to 63 in that list form another group dealing with taxes that may be levied by States
Entry 64 refers to offences against laws with respect to any of the matters in List II and Entry 65 refers to jurisdiction of Courts
Entry 66 empowers the State to levy 677 fees in respect of any of the matters in List I1
Unless the cess in question can be brought under any of the Entries from 45 to 63 it cannot be levied as a tax at all
 It was further observed at p 163 of the report as follows It is constitutionally by impermissible for any State Government to collect any amount which is not strictly of the nature of a fee in the guise of a fee
If in the guise of a fee the legislation imposes a tax it is for the Court on scrutiny of the scheme of the levy to determine its real character
If on a true analysis of the provisions levying the amount the Court comes to the conclusion that it is in fact in the nature of a tax and not a fee its validity can be justified only by bringing it under any one of the entries in list II of the Seventh Schedule to the Consti tution under which the State can levy a tax
 It has to be borne in mind that by common standards ethyl alcohol which has 95 is an industrial alcohol and is not fit for human consumption
The petitioner and the appellants were manufacturing ethyl alcohol 95 also known as rectified spirit which is an industrial alcohol
ISI specification has divided ethyl alcohol as known in the trade into several kinds of alcohol
Beverage and industri al alcohols are clearly and differently treated
Rectified spirit for Industrial purposes is defined as spirit puri fied by distillation having a strength not less than 95 of volume by ethyl alcohol
Dictionaries and technical books would show that rectified spirit 95 is an industrial alcohol and is not potable as such
It appears therefore that industrial alcohol which is ethyl alcohol 95 by itself is not only non potable but is highly toxic
The range of spirit of potable alcohol is from country spirit to whisky and the Ethyl Alcohol content varies between 19 to about 43 per cent
These standards are according to the ISI specifications
In other words ethyl alcohol 95 is not alcoholic liquor for human consumption but can be used as raw material input after processing and substantial dilution in the production of Whisky Gin Country Liquor etc
In many decisions it was held that rectified spirit is not alcohol fit for human consumption
Reference may be made in this connection to Delhi Cloth and General Mills Co Ltd vs The Excise Commissioner UP Allahabad and Anr
Special Appeal No 177 of 1970 decided on 29th March 1973
In this connection it is important to bear in mind the actual provision of entry 8 of list II
Entry 8 of list II cannot support a tax
The above entry contains the 678 words intoxicating liquor
The meaning of the expression intoxicating liquor has been tightly interpreted by the Bombay High Court in the Balsara s case supra
The deci sion of the Bombay High Court is reported in AIR 1951 Bombay 210 at p 214
In that light perhaps the observations of Fazal Ali J in Balsara s case supra requires considera tion
It appears that in the light of the new experience and development it is necessary to state that intoxicating liquor must mean liquor which is consumable by human being as it is and as such when the word liquor was used by Fazal Aft J they did not have the awareness of full use of alcohol as industrial alcohol
It is true that alcohol was used for industrial purposes then also but the full potentiality of that user was not then comprehended or understood
With the passage of time meanings do not change but new experiences give new colour to the meaning
In Har Shankar s case supra a bench of five judges have surveyed the previous authorities
That case dealt with the auction of the right to sell potable liquor
The position laid down in that case was that the State had the exclusive privilege or right of manufacturing and selling liquor and it had the power to hold public auctions for granting the right or privilege to sell liquor and that traditionally intoxicating liquors were the subject matters of State monopoly and that there was no fundamental right in a citizen to carry on trade or business in liquor
All the authorities from Coo verji Barucha s case to Har Shankar s case supra dealt with the problems or disputes arising in connection with the sale auction licensing or use of potable liquor
Only in two cases the question of industrial alcohol had come up for consideration before this Court
One is the present decision which is under challenge and the other is the decision in Indian Mica  Micanite Industries s case supra
In the latter case in spite of the earlier judg ments including Bharucha s case denatured spirit required for the manufacture of micanite was not regarded as being within the exclusive privilege of the State
It appears that in that decision at p 321 of the report it was specifical ly held that the power of taxation with regard to alcoholic liquor not fit for human consumption was within the legis lative competence of central legislature
The impost by the State was held to be justifiable only if it was a fee there by impliedly and clearly denying any consideration or price for any privilege
For the first time in the Synthetics  Chemicals Ltd s case supra the concept of exclusive privilege was introduced into the area of industrial alcohol not fit for human consumption
Balsara s case supra deal with the question of reasonable restr 679 iction on medicinal and toilet preparations
In fact it can safely be said that it impliedly and sub silentio clearly held that medicinal and toilet preparations would not fall within the exclusive privilege of the State
If they did there was no question of striking down of section 12 c  d and section 13b of the Bombay Prohibition Act 1949 as unreasonable under Article 191f of the Constitution because total prohibition of the same would be permissible
In KK Narula s case   it was held that there was right to do business even in potable liquor
It is not necessary to say whether it is good law or not
But this must be held that the reasoning therein would apply with greater force to industrial alcohol
Article 47 of the Constitution imposes upon the State the duty to endeavour to bring about prohibition of the consumption except for medicinal purpose of intoxicating drinks and products which are injurious to health
If the meaning of the expression intoxicating liquor is taken in the wide sense adopted in Balsara s case it would lead to an anamolous result
Does Article 47 oblige the State to prohibit even such industries as are licensed under the IDR Act but which manufacture industrial alcohol This was never intended by the above judgments or the Constitution
It appears to us that the decision in the Synthetics  Chemi cals Ltd s case supra was not correct on this aspect
Reference in this connection may be made to the decision in Inspector of Taxes vs Australian Mutual Provident Socie ty 1959 3 All England Law Report 245 at p 256 of the report Lord Denning in his dissenting judgment observed as follows My Lords I ask myself What authority is to be given in these circumstances to the deci sion of this House in 1947 Is it to be fol lowed from step to step regardless of conse quences Are we to hold that the tax under r 3 is a tax on the profits of the business for all purposes including the purposes of the Double Taxation Agreement which this House never had in mind at all I think not
The doctrine of precedent does not compel your Lordships to follow the wrong path until you fall over the edge of the cliff
As soon as you find that you are going in the wrong direction you must at least be permitted to strike off in the right direction even if you are not allowed to retrace your steps
And that is that I would ask your Lordships to do
I would invite your Lordships to say that the decision of this House in 680 1947 has no application to the meaning of the word profits in the Double Taxation Agree ment Justice Jackson in his dissent in the case of Common wealth of Massachusetts Et AI vs USA 92 Lawyers Edition p 968 also upheld the right to set right what was said wrongly in the past
It was submitted that the activity in potable liquor which was regarded safe and exclusive right of the state in the earlier judgments dealing with the potable liquor were sought to be justifiable under the police power of the State ie the power to preserve public health morals etc
This reasoning can never apply to industrial alcohol manufactured by industries which are to be developed in the public interest and which are being encouraged by the State
In a situation of this nature it is essential to strike a balance and in striking the balance it is difficult to find any justification for any theory of any exclusive fight of a State to deal with industrial alcohol
Restriction valid under one circumstance may become invalid in changing cir cumstances
Reference may be made to the observations of Justice Brandeis in Nashiville Chattangooga  St Louis Railway vs Herbert section Waiters 79 Lawyers Edition 949
See also Leo Nebbia vs People of the State of New York 78 Lawyers  Edn 940 at p 941
Similar is the effect of the approach of this Court in Motor General Traders  Anr
vs State of Andhra Pradesh  Ors etc
  It is not necessary for us here to say anything on the imposts on potable alcohol as commonly understood
These are justified by the lists of our legislature practised in this country see the observations of Hidayatullah J as the Chief Justice then was in Ms Guruswamy vs State of My sore at p 573 574 and other decisions mentioned hereinbefore
In that view of the matter it appears to us that the relevant provisions of the UP Act AP Act Tamil Nadu Act Bombay Prohibition Act as mentioned hereinbefore are unconstitutional in so far as these purport to levy a tax or charges imposts upon industrial alcohol namely alcohol used and usable for industrial purposes
Having regard to the principles of interpretation and the Constitutional provisions in the light of the language used and having considered the impost and the composition of industrial alcohol and the legislative practice of this country we are of the opinion that the impost in question cannot be justified as State imposts as these have 681 been done
We have examined the different provisions
These are not merely regulatory
These are much more than that
These seek to levy imposition in their pith and substance not as incidental or as merely disincentives but as attempts to raise revenue for States  purposes
There is no taxing provision permitting these in the lists in the field of industrial alcohol for the State to legislate
Furthermore in view of the occupation of the field by the IDR Act it was not possible to levy this impost
After 1956 amendment to the IDR Act bringing alcohol industries under fermentation industries as item 26 of the First Schedule to IDR Act the control of this industry has vested exclusively in the Union
Thereafter licences to manufacture both potable and nonpotable alcohol is vested in the Central Government
Distilleries are manufacturing alcohol under the Central Licences under IDR Act
No privi lege for manufacture even ii one existed has been trans ferred to the distilleries by the State
The State cannot itself manufacture industrial alcohol without the permission of the Central Government
The States cannot claim to pass a right which these do not possess
Nor can the States claim exclusive right to produce and manufacture industrial alco hol which are manufactured under the grant of licence from the Central Government
Industrial alcohol cannot upon coming into existence under such grant be amenable to States  claim of exclusive possession of privilege
The State can neither rely on entry 8 of list I1 nor entry 33 of list III as a basis for such a claim
The State cannot claim that under entry 33 of list III it can regulate industrial alcohol as a product of the scheduled industry because the Union under section 18G of the IDR Act has evinced clear intention to occupy the whole field
Even otherwise sections like section 24A and 24B of the UP Act do not constitute any regulation in respect of the industrial alcohol as product of the scheduled industry On the contrary these purport to deal with the so called transfer of privilege regarding manufacturing and sale
This power admittedly has been exercised by the State purporting to act under entry 8 of list II and not under entry 33 of list III
The position with regard to the control of alcohol industry has undergone material and significant change after the amendment of 1956 to the IDR Act
After the amendment the State is left with only the following powers to legis late in respect of alcohol a it may pass any legislation in the nature of prohibition 682 of potable liquor referable to entry 6o of list II and regulating powers
b it may lay down regulations to ensure that non potable alcohol is not divert ed and misused as a substitute for potable alcohol
c the state may charge excise duty on potable alcohol and sales tax under entry 52 of list II
However sales tax cannot be charged on industrial alcohol in the present case because under the Ethyl Alcohol Price Control Orders sales tax cannot be charged by the state on industrial alcohol
d however in case State is rendering any service as distinct from its claim of so called grant of privilege it may charge fees based on quid pro quo
See in this con nection the observations of India Mica s case supra
On an analysis of the various Abkari Acts and Excise Acts it appears that various ProvincesStates reserve to themselves in their respective States the right to transfer exclusive or other privileges only in respect of manufacture and sale of alcohol and not in respect of possession and use
Not all but some of States have provided such reservation in their favour
The price charged as a con sideration for the grant of exclusive and other privileges was generally regarded as an excise duty
In other words excise duty and price for privileges were regarded as one and the same thing
So called privilege was re served by the State mostly in respect of country liquor and not foreign liquor which included denatured spirit
On an analysis of the aforesaid decisions and practice we are clearly of the opinion that in respect of industrial alcohol the States are not authorised to impose the impost they have purported to do
In that view of the matter the contentions of the petitioners must succeed and such imposi tions and imposts must go as being invalid in law so far as industrial alcohol is concerned
We make it clear that this will not affect any impost so far as potable alcohol as commonly understood is concerned
It will also not affect any imposition of levy on industrial alcohol fee where there are circumstances to establish that there was quid pro quo for the fee sought to be imposed
This will not affect any regulating measure as such
We must however observe that these imposts and levies have 683 been imposed by virtue of the decision of this Court in Synthetics  Chemicals Ltd s case supra
The States as well as the petitioners and manufacturers have adjusted their rights and their position on that basis except in the case of State of Tamil Nadu
In that view of the matter it would be necessary to state that these provisions are de clared to be illegal prospectively
In other words the respondents states are restrained from enforcing the said levy any further but the respondents will not be liable for any refund and the tax already collected and paid will not be refunded
We prospectively declare these imposts to be illegal and invalid but do not affect any realisations already made
The writ petitions and the appeals are dis posed of accordingly
The review petitions accordingly succeed though strictly no grounds as such have been made out but in the view we have taken the decision in the Synthetics  Chemicals Ltd s supra cannot be upheld
In the view we have taken also it is not necessary to decide or to adjudicate if the levy is valid as to who would be liable that is to say the manufacturer or the producer or the dealer
With regard to writ petition No 405 178 Chemicals  Plastics India Ltd vs State of Tamil Nadu certain orders were passed by this Court on 1st November 1978 1st Septem ber 1986 1st October 1986 and 10th October 1986
It is stated that the present demand of the Central Excise Depart ment from 1st March 1986 on alcohol manufactured by the company in their captive distillery is over Rs4 crores
This Court by its order dated 1st October 1986 as confirmed on the 16th October 1986 had permitted the State Government to collect the levy on alcohol manufactured in company s captive distillery subject to adjustment of equities and restrained the central excise authorities from collecting any excise duty on such alcohol
It is therefore necessary to declare that in future no further realisation will be made in respect of this by the State Government from the petitioners
So far as the past realisations made are con cerned we direct that this application for that part of the direction should in accordance with our decision herein be placed before a division bench for disposal upon notice both to the State Government and the Central Government
In the facts and the circumstances of the case the parties will bear and pay their own costs
OZA J
While I agree with my learned brother Hon
Mukharji J as regards the conclusions but I would like to add the following reasons
In these matters the main question that arise for considera tion is 684 about the validity of the levies made by the respondent States on Alcohol which is utilised by the industries for manufacturing the products where Alcohol is the raw materi al
Some of these industries themselves manufacture Alcohol as they have their own distilleries and from their distill eries through pipelines it goes to their industrial units where this is used as a raw material whereas some are indus tries which purchase Alcohol or denatured spirit on being allotted by the Government
It is alleged that in addition to excise duty levied by the Central Government excise duty and various levies in various names like vend fee transport fee and others numbering about eight levies are imposed by the State Government
The main contention on behalf of the industries is that the State Legislature has no authority in view of Entry 84 of List I read with Entry 51 of List II to impose such levies
This being Alcohol which does not fall within the ambit of Alcoholic liquors for human consump tion
It is only the Centre which has the authority under Entry 84 of List I to tax
Entry 51 of List II authorises the State Legislature to impose a tax on Alcoholic liquors for human consumption
 It is further contended that Entry 8 in List II which talks of intoxicating liquors only authorises the State Legislature to enact laws to regulate but does not empower the State Legislature to impose any levy and the various levies which have been imposed by the State Legislature on industrial alcohol and even Mithylated spirit could not be brought within the ambit of regulatory duties for purposes of regulation only and therefore could not be justified under Item 8 of List II
It was also contended that the State ultimately falls back on the consideration for parting with the privilege to sell alcoholic liquors which has been the basis of series of decisions of this Court based on English and American deci sions but according to the learned counsel for the petition ers this doctrine of privilege and consideration for sale of privilege also could be available to the State only in respect of alcohol or alcoholic liquors which are for human consumption
According to the learned counsel by merely widening the definition of intoxicating liquors in respec tive excise laws enacted by the State the ambit of authority of taxation could not be enlarged by the State Legislature when in List II Item 51 the words used are Alcoholic liquors for human consumption
Entry 84 in List I reads 84
Duties of excise on tobacco and other goods manufactured or produced in India ex cept 685 a alcoholic liquors for human consumption
b opium Indian hemp and other narcotic drugs and narcotics but including medicinal and toilet prepara tions containing alcohol or any substance included in sub paragraph b of this entry
 Entry 51 in List 11 reads 51
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 pro duced 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 prepa rations containing alcohol or any substance included in sub paragraph b of this entry
 A comparison of the language of these two entries clear ly demonstrates that the powers of taxation on alcoholic liquors have been based on the way in which they are used as admittedly alcoholic liquor is a very wide term and may include variety of types of alcoholic liquors but our Con stitution makers distributed them into two heads a for human consumption b other than for human consumption Alcoholic liquors which are for human consumption were put in Entry 51 List II authorising the State Legislature to levy tax on them whereas alcoholic liquors other than for human consumption have been left to the Central Legislature under Entry 84 for levy of duty of exise
This scheme of these two entries in List I and II is clear enough to indi cate the line of demarcation for purposes of taxation of alcoholic liquors
What has been excluded in Entry 84 has specifically been put within the authority of the State for purposes of taxation
686 Entry 8 in List 2 reads 8
Intoxicating liquors that is to say the production manufacture possession trans port purchase and sale of intoxicating liq uors
 This Entry talks of intoxicating liquors and further on refers to production manufacture possession transport purchase and sale of these liquors
It appears that the State has levied some kind of duties in various names at each of these stages used in this Entry ie production manufacture possession transport purchase and sale
But from the scheme of entries in the three lists it is clear that taxing entries have been specifically enacted confer ring powers of taxation whereas other entries pertain to the authority of the Legislature to enact laws for purposes of regulation
If we compare Entry 8 in List II with entry 51 it is clear that when Entry 51 authorises the State Legisla ture to levy tax and duties on alcoholic liquors falling in Entry 51 Entry 8 confers authority on the State Legislature to enact laws for regulation
Similarly are Entries in List I As regards regulation or regulatory fees it was contended that Entry 52 in List I empowers the Parliament to declare the industries which the Union proposes to control in public interest under Industries Development and Regulation Act
Entry 52 List I reads as under 52
Industries the control of which by the Union is declared by Parliament by law to be expedient in the public interest
 Such a declaration is made by the Parliament and this industry ie industry based on fermentation and alcohol has been declared to be an industry under that Act and therefore is directly under the control of the Centre and therefore even in respect of regulation the authority of the State Legislature in Entry 8 List II could only be subject to the Industries Development and Regulation Act or Rules made by the Centre
Under these circumstances therefore it is clear that the State Legislature had no authority to levy duty or tax on alcohol which is not for human consumption as that could only be levied by the Centre
The main emphasis it appears is that this duty on alco hol and alcoholic liquors is a substantial revenue of State and it appears that it 687 was this obsession which was reflected and demonstrated when this concept of consideration for parting with privilege was invented by our courts on the basis of some judgments from United States based on some judgments from England and it is on this basis that all through the States have been justify ing their respective levies and duties on alcohol and alco holic beverages and overcome the test of reasonableness double taxation and of limitation as it being a considera tion for transfer of privilege it could be anything and no limits could be placed thereupon
The main edifice of the argument on behalf of the State is that the State has the sole privilege to deal with in Alcohol and alcoholic substances
This according to the arguments is equally applicable to alcohol for human con sumption and also for denatured spirit or other categories of alcoholic liquors which though may be described as not for human consumption but are potential substances which easily could be converted as intoxicating liquors fit for human consumption
It is on this basis that the learned counsel appearing for the States and the Advocate General of the States drew our attention to various extracts of the text books on organic chemistry as it was contended that there are so many types of alcohol known in the organic chemistry of which ethyl alcohol is one which is used as a beverage when dilut ed upto a particular percentage and also is used for indus trial purposes in high concentration or sometimes denatured
The main theme of the argument was that ethyl alcohol which is a product of distillation after fermentation is extracted in various concentrations and can also be extracted in a very high concentration above 90 percent which generally is termed as rectified spirit
It is not in dispute that this high concentration of ethyl alcohol is a raw material for various industries
Sometimes it is supplied after being mixed by Mithylated alcohol or being denatured by other processes only to safeguard against its use for conversion into alcoholic beverages for human consumption
As it is well known that when the ethyl alcohol is diluted by water and its percentage is brought to 40 or 45 or below then it become fit for human consumption and it was therefore argued that various duties for purposes of regulation are imposed by the State itself to prevent the conversion of rectified spirit or mithylated alcohol to be diverted from industrial to portable use
The basis of the privilege doctrine appears to be that alcoholic drinks or intoxicating drinks are expected to be injurious to health and therefore the trade in these commod ities is described as obnoxious and 688 therefore a citizen has no fundamental right under Article 191g of the Constitution and therefore the trade in alcoholic drinks which is expected to be injurious to health and obnoxious is the privilege of the State alone and the State can part with this privilege on receipt of the consid eration
This basis of the privilege doctrine has to be examined in the context of our Constitution especially Article 21 and Article 47
The concept of royal privilege has been derived histori cally from England as Great Britain continues to be a Monar chy with democracy
The Head of the State is the Crown
It was on these bases that what has not been provided for was supposed to be the privilege of the Crown but under Indian Constitution the Head of the State and the three function aries of the State the Executive the Legislature and the Judiciary have their powers defined under the Constitution
There is nothing like privilege vested in any one of the functionaries of the State and in the background of this basic feature of our Constitution the doctrine of privilege is difficult to reconcile with
If we examine this privilege of trading in commodities injurious to health and dangerous to life in the context of Article 21 and Article 47 of our Constitution
Article 21 of the Constitution reads 21
Protection of life and personal liberty No person shall be deprived of his life or personal liberty except according to procedure established by law This Article casts a duty on the State to protect the life of every citizen except as is provided under Article 21
If we compare this duty of the State with the scheme of privi lege which means that the State has a privilege to endanger human life the life of a citizen such a privilege runs contrary to Article 21
Another significant article of our Constitution is Article 47
It reads as under 47
Duty of the State to raise the level of nutrition and the standard of living and to improve public health The State shall regard the raising of the level of nutrition and the standard of living of its people and the improvement of public health as among its primary duties and in particular the State shall endeavour to bring about prohibition of the consumption except for medicinal purposes of intoxicating drinks and of drugs which are injurious to health
 This Article appears in the Chapter of Directive Principles of State 689 Policy
Inclusion of this Article in this Chapter clearly goes to show that it is the duty of the State to do what has been enacted in Article 47 and in fact this Article starts with the phrase Duty of the State and the duty is to improve public health and it is further provided that this duty to improve public health will be discharged by the State by endeavouring to bring about prohibition
It sounds contradictory for a State which is duty bound to protect human life which is duty bound to improve public health and for that purpose is expected to move towards prohibition claims that it has the privilege of manufacture and sale of alcoholic beverages
which are expected to be dangerous to human life and injurious to human health transferring this privilege of selling this privilege on consideration to earn huge revenue without thinking that this trade in liquor ultimately results in degradation of human life even endan gering human life and is nothing but moving contrary to the duty cast under Articles 21 and 47 and ideal of prohibition enshrined in Article 47
In view of articles 21 and 47 with all respect to the learned Judges who so far accepted the privilege doctrine it is not possible to accept any privi lege of the State having the right to trade in goods obnox ious and injurious to health
The other stand of States to justify these levies is based on the doctrine of police powers
The doctrine of police powers enunciated in number of decisions of the American Courts and which has been the subject matter of discussion by various authors in texts on jurisprudence as referred to in Indian context under our Constitution does not appear to be applicable
In the Constitution of USA basic factor which must be kept in mind is that various States after getting independence from their European Mas ters came together to form a Federal State and therefore what was not conceded to the Federal State ie the residu ary powers vested in the State and as it was not conceded to the Federal Government that this residuary power of mainte nance of law and order peace so essential for the develop ment in a civilised society was evolved as a doctrine of police powers vested in the State
In India as the Constitu tion was enacted or was framed after having the experience of various countries in the World the concept of fundamen tal rights and rights like life liberty procedure estab lished by law and various legislative functions which were divided between the States and the Union left no scope for any power except which could be derived from any provision in the Constitution coupled with an Entry in one of the three Lists which would indicate the power vested in either the State or the Centre
Apart from it the scheme of our Constitution is that there are no residuary powers which vest in the State and the scheme of our Constitution also reveals that in case of 690 any conflicts it is the Centre which prevails and not the State and therefore trying to apply the doctrine of police powers which has been conceived of in the American decisions which the Government of a State in the United States and to apply it to a State under Indian Constitution will only mean to do violence to the scheme of our Constitution
What police powers have been enunciated under the American Con stitution clearly will fall within the ambit of Articles 19 21 22 and respective entries in the Schedule of the Consti tution
In fact under our Constitution no powers could be conceived for which there is no provision in any one of the entries in the three Lists or which could not be justified under any specific Article of the Constitution
Thus even this concept of the doctrine of police powers could not be of any help to justify the levies imposed by the State on alcohol or alcoholic liquors
These questions about the privilege and the doctrine of police powers in fact would be material to be considered when the question about the various levies imposed by the State in respect of alcoholic beverages is considered and so far as the present cases are concerned which pertain to only alcoholic liquors which are not for human consumption ie which are meant for industrial use
The only question will be as to whether the State could justify the respective levies under any of the entries in List II
The main theme of the argument on behalf of the States has been that they have imposed levies because the alcohol which is not for human consumption is a commodity which could be easily converted into alcoholic liquors for human consumption and therefore the levies have been imposed assuming that it is for human consumption or in other words the contention has been that these levies have been imposed in order to prevent the conversion of alcoholic liquors which are not for human consumption to those which are for human consumption
A contention therefore was suggested that these levies could be justified as regulatory fees although it was frankly conceded that although the revenue earned out of it is substantial and may not be justifiable as fees but have been imposed and it was therefore that the main theme on behalf of the respondents has been based on the doctrine of the privilege of the State to trade in these commodities as that trade is considered to be obnoxious and injurious to public health
In our opinion therefore as far as the present case is concerned the State in exercise of powers under Entry 8 of List II and by appropriate law regulate and that regulation could be to prevent the conversion of alcoholic liquors for industrial use to one for human 691 consumption and for purpose of regulation the regulatory fees only could be justified
In fact the regulation should be the main purpose the fee or earning out of it has to be incidental and that is why the learned counsel appearing for the State attempted to use this terminiology by saying that the purpose is regulation the earnings are incidental but frankly conceded that in fact the earnings are substantial
In fact in some of the excise laws in the States they have even used terminiology relying on the doctrine of privilege and parting with privilege but in my opinion it is not necessary for us to go into those questions in greater detail as we are not here concerned with the trade in alco holic liquors meant for human consumption and therefore in view of clear demarcation of authority under various items in the three Lists Entry 8 List II could not be invoked to justify the levies which have been imposed by the State in respect of alcoholic liquors which are not meant of human consumption
NPV Petitions  Appeals allowed


Summary:
Rule 8 of the Punjab Civil Services Judicial Branch Rules 1951 as adapted by the State of Haryana lays down that no candidate shall be considered to have qualified in the examination unless he obtains at least 55 marks in the aggregate of all papers including the viva voce test
The petitioners assailed the said provision on the ground that fixation of 55 marks has resulted in denial of equality of opportunity to the scheduled castes and sched uled tribes segments of the community vis a vis general candidates for determining their suitability andor eligi bility for appointment in the judicial branch of the Haryana Civil Services in the absence of lower percentage having been prescribed for them as in other States
Disposing of the writ petition and the appeal the Court HELD 1
Public services and public employment do not exist for providing jobs in terms of equality or otherwise to all
Only public services and public employment must serve public purpose and nothing that hampers or impairs the efficiency or efficacy of public services should be permit ted in ensuring conditions of constitutional equality
These should be done objectively rationally and reasonably
329 2
Scheduled castes and scheduled tribes for reasons historical or otherwise are unequal with the general mem bers of the community in respect of ability and qualifica tion for public employment
They are unable to compete in terms of absolute equality with the members of other commu nities or groups in the society
Hence in order to make them compete on conditions of equality with others in re spect of jobs and employments of the State certain relaxa tions and other factors ensuring equality are imperative
Our Constitution so enjoins it
Article 38 of the Constitu tion read with Article 14 15 and 16 so mandates it
332D E C 3
In the instant case high efficiency is required because the recruitment is in the judicial branch that is to say for prospective judicial officers who will be in charge of administration of justice in the country
But at the same time if possible in order to ensure that there is equality of opportunity a percentage should be fixed which without in any way compromising with the efficiency re quired for the job which will be attainable by backward communities that is to say scheduled castes and scheduled tribes
Unless such a percentage is fixed on the aforesaid basis and a percentage is fixed for qualification which would normally be unattainable by the scheduled castes and scheduled tribes determined on an objective basis it would not be possible to ensure equality of opportunity
333D F 41 The Government is directed to make a conscious decision objectively before the next selections take place and determine a minimum percentage of marks consistent with efficiency and the need for ensuring equality of opportunity to scheduled castes and scheduled tribes
334B 42 The Government should also consider whether further relaxation in age in favour of scheduled castes and sched uled tribes can be made and if so to what extent without hampering efficiency of the administration
This should also be considered before the next selections for appointment to the post are made
334C