Civil Appeal No 1130 of 1976
Appeal by Special Leave from the Judgment and Order dated 24 3 1972 of the Allahabad High Court in Misc
Writ No 806972
AND CIVIL APPEAL NOS 224878 2191 219878 AND 228478
Appeals by Special Leave from the Judgment and Order dated 6 10 1978 of the Allahabad High Court in Special Appeal Nos 356 352 355 357 35975
533 AND CIVIL APPEAL NO 245 of 1979
Appeal by Special Leave from the Judgment and Order dated 17 10 1978 of the Allahabad High Court in Civil Misc
Writ No 1170277
AND CIVIL APPEAL NO
626 of 1979
Appeal by Special Leave from the Judgment and Order dated 17 10 1978 of the High Court of Judicature of Allahabad in Civil Misc
Writ Tax No 82475
AND WRIT PETITION NOS
4663 4664 of 1978  4501 of 1978
Under Article 32 of the Constitution
AND SPECIAL LEAVE PETITION CIVIL NOS
6526 2878 125 126 201 and 2533 of 1979
From the Judgment and Order dated 6 11 1978 and 17 10 78 and 16 11 1978 and 17 10 78 of the Allahabad High Court in Civil Misc
Writ Nos
8977 382273 54075 and 4129 30 of 1976 and CW No 70376 and C Misc
Writ No 4176
Rishi Ram Advocate General for the State of UP G N Dikshit OP Verma section C Verma and Mrs Sadhna Ramchandran for the Appellant in CA No 113076 and respondents in all the matters
F section Nariman Dr L M Singhvi B G Murdeshwar P C Murdeshwar P C Bhartari section P Nayar L K Pandeya N R Khairan Praveen Kumar Miss Beena Gupta Anip Satchthey and Mrs Baby Krishnan for the Appellants and Petitioners in all other matters and respondents in CA 113076
F section Nariman Talat Ansari R Narain and section P Nayar for the Interveners Ms J
K Synthetics and Agarwal Spirit Supply Co The Judgment of the Court was delivered by KAILASAM J
These batches of Civil Appeals Writ Petitions and Special Leave Petitions raise the same question and can be disposed of by a common judgment
CA No 113076 is by the State
The other Appeals Writ Petitions and Special Leave Petitions are by the aggrieved parties
534 For the sake of convenience appellants in Civil Appeals by Special Leave except the State would be referred as the appellants in this judgment
Similarly the petitioners in Writ Petitions and Special Leave Petitions will be referred to as petitioners
The appellants in Civil Appeals by Special Leave filed writ petitions before the High Court of Allahabad praying for quashing the Excise Commissioner s order dated 18th September 1974 whereby it was provided that the vend fee be continued to be charged for the wholesale licence dealer of denatured spirit
They also prayed for a direction to the Excise Commissioner to refund the vend fee actually paid by the appellants for a period of three years prior to the institution of the writ petitions
The appellants have licenses for the wholesale vend of denatured spirit
It was contended that the State was providing no service to the trade of the denatured spirit and therefore the levy of fee is not justified
The State it was submitted was not competent to authorise a levy of excise duty or tax as it was within the jurisdiction of the Parliament
On behalf of the State it was contended that in law the State had exclusive privilege to deal with intoxicating liquor which included denatured spirit and the levy of a licence fee and vend fee constituted consideration for permitting the appellants to carry on wholesale trade of the denatured spirit
The main point that was considered by the High Court was whether the imposition of vend fee on denatured spirit for grant of license for wholesale vend of denatured spirit is within the competence of State Government
This Court in Nashirwar vs State of Madhya Pradesh and Har Shankar vs The Deputy Excise and Taxation Commissioner held that the State has exclusive privilege to deal in intoxicating liquor and therefore the State can auction the right to vend by retail or wholesale foreign liquor
It also found that intoxicating liquor included denatured spirit and the validity of the levy of the vend fee by the State cannot be questioned
Following this view the High Court dismissed the Writ Petitions
Against the decision the appeals have been preferred by special leave
A batch of Writ Petitions have been filed in this Court under article 32 of the Constitution of India challenging the validity of the levy of vend fee
Apart from the grounds taken in the Civil Appeals the Constitutional validity of UP Excise Amendment Act 5 of 1976 has been challenged as unconstitutional and beyond the legislative competence of the State
It is further pleaded that the provisions of the 535 Industries Development and Regulation Act 1951 has taken control of fermentation industry and as such a right to legislate by the State with regard to denatured spirit and industrial alcohol is beyond the competence of the State Legislature
UP Excise Act was enacted in the year 1910
It empowers the State to prohibit the import and export transport manufacture sale and possession of liquor and all intoxicating drugs in the United Provinces
The vend fee was first imposed by the Government of UP on 18 3 1937 on denatured spirit
In 1972 the State Legislature enacted the UP Excise Amendment Act 13 of 1972
By a notification dt 3 11 72 the Government was authorised to sell by auction the right of retail or wholesale vend of foreign liquor
New Rules were framed the effect of which was that a vend fee of Rs 110 p per bulk litre was imposed payable in advance on denatured spirit issued for industrial purposes
The legality of the levy was challenged in the High Court of Allahabad and a Bench of that Court on 24th March 1973 held the notification was ultra vires
After the decision of the Allahabad High Court holding that the levy was illegal this Court in two decisions Nashirwar vs State of Madhya Pradesh supra and Har Shankar vs The Deputy Excise and Taxation Commissioner supra held that the State under its regulatory powers can prohibit every form of activity in relation to intoxicants its manufacture storage export import and sale
The State s power to auction the right to vend by retail or wholesale foreign liquor was upheld
Relying on the two decisions of this Court the UP State Legislature repealed and re enacted the UP Excise Amendment Act No 30 of 1972 by the UP Excise Amendment Re enactment and Validation Act 1976
The validity of the amendment Act 1976 was again challenged in the Allahabad High Court in V P Anand and Sons vs State of UP A Full Bench of the Court held that the State has exclusive privilege of auctioning the right of wholesale or retail vend of intoxicating liquor and upheld the validity of the Act
Mr Nariman learned counsel raised several contentions
The first main contention of the learned counsel was that the levy of vend fee under rule 17 para 680 of the Excise Manual page 200 201 on the denatured spirit is without legislative competence as it does not fall within Entry 8 of List II of the Seventh Schedule
Even if it is held that the exclusive right of the State to grant privilege for the manufacture and sale of intoxicating liquor it was submitted that the right did 536 not extend to denatured spirit used for industrial purposes as it is confined only to potable liquor
The second important contention raised by the learned counsel was that after the enactment of Industries Development and Regulation Act 1951 under Entry 52 of List 1 by Parliament the Union had taken under its control in public interest the industries including the fermentation of industrial alcohol and as such the Central Government alone is empowered to provide for regulating by licencepermit or otherwise the distribution transport disposal acquisition possession use or consumption of any article relatable to a schedule industry as for example denatured spirit or industrial alcohol
In State of Bombay and Anr
vs F N Balsara  Ors
the Constitutional validity of the Bombay Prohibition Act XXV of 1949 in so far as it restricted the possession and sale of foreign liquor was impugned on the ground that it was an encroachment on the field assigned to the Dominion Legislature under Entry 19 of List I Under Entry 31 List II to the Seventh Schedule of the Government of India Act 1935 the Provincial Legislature had the power to make laws in respect of intoxicating liquor that is to say the production manufacture possession transport purchase and sale of intoxicating liquors
The corresponding entry in the Constitution of India is List II Entry 8 which is in identical terms
The plea that was taken was that List I Entry 19 conferred the power on the Dominion Legislature to make laws with respect to import export across customs frontiers and as such the State Law restricting possession and sale of foreign liquor encroached upon the field of Dominion Legislature
This Court held that the words possession and sale  occurring in Entry 31 List II must be read without any qualification
In considering the meaning of the words intoxicating liquor  set out in entry 31 of List II Gwyer CJ in Bhola Prasad vs The King Emperor stated as follows A power to legislate with respect to intoxicating liquors could not well be expressed in wider terms Again the Learned Chief Justice observed It is difficult to conceive of legislation with respect to intoxicating liquors and narcotic drugs which did not deal in some way or other with their production manufacture possession transport purchase or sale and these words seem apt to cover the whole field of possible legislation on the subject
 537 The above observations were affirmed by this Court in Balsara s case supra
Dealing with the meaning of word liquor  the Court referred to the various Abkari cases in several provinces and found that all the Provincial Acts of this country have consistently included liquor containing alcohol in the definition of liquor  and intoxicating liquor  and therefore the framers of the Government of India Act 1935 could not have been entirely ignorant of the accepted sense in which the word liquor  has been used in the various excise Acts of this country and concluded that the word liquor  covers not only those alcoholic liquids which are generally used for beverage purposes and produce intoxication but also all liquids containing alcohol
By adopting another method of approach the Court observed that the object of the Prohibition Act was not merely to levy excise duties but also to prohibit the use consumption possession and sale of intoxicating liquor and to enforce the prohibition effectively the wider definition of the word liquor  would have to be adopted so as to include all alcoholic liquids which may be used as substitution of intoxicating drinks to the detriment of the health
In Nashirwar vs The State of Madhya Pradesh supra Chief Justice Ray held that the State Legislature is authorised to make a provision for public auction by reason of power contained in Entry B of List II of the Constitution
The decision negatived the concept of inherent right of citizen to do business in liquor
This Court gave three principal reasons to hold that there is no fundamental right of citizen to carry on trade or to do business in liquor
First there is the police power of the State to enforce public morality to prohibit trades in noxious or dangerous goods
Second there is power of the State to enforce an absolute prohibition of manufacture or sale of intoxicating liquor
Article 47 states that the State shall endeavour to bring about prohibition of the consumption except for medicinal purpose of intoxicating drinks and of drugs which are injurious to health
Third the history of excise laws shows that the State has the exclusive right or privilege of manufacture or sale of liquor
After pointing out the three principal reasons the Court followed the decision in State of Bombay and Anr
vs F N Balsara holding that absolute prohibition of manufacture or sale of liquor is permissible and the only exception can be for medicinal preparations
In the context it is clear that the decisions proceeded on the basis that the word intoxicating liquor  is not confined to potable liquor alone but would include all liquor which contain alcohol
Mr Nariman the learned counsel submitted that the two cases Balsara s case supra and the Nashirwar s case supra cannot be 538 read as to include alcohol manufactured for the purpose of industries such as industrial alcohol
It was submitted that in both the cases the Court was concerned only with legislation relating to prohibition and the decisions should be restricted to liquor which may contain alcohol which is likely to be misused as potable liquor
In support of his contention the learned counsel referred to two decisions A Nageshwara Rao vs State of Madras and Malitlal Chandra vs Emperor and submitted that if the State can exercise any control over intoxicating liquor it can only be restricted for the purpose of preventing subversion of its use for defeating the prohibition policy
We are unable to accept this contention for in Balsara s case after explicitly approving of the definition of word liquor  in various Abkari Acts in the Provinces of India the Court held that liquor would not only cover alcoholic liquor which is generally used for beverage purposes and produce intoxication but would also include liquids containing alcohol
We will now briefly refer to the decisions of the Supreme Court which the learned counsel submitted were confined only to potable liquor
Cooverjee B Bharucha vs The Excise Commissioner and Chief Commissioner Ajmer  Anr
related to an auction sale of liquor shop under the Excise Regulation Act 1915
In Bharucha s case it was held that licence may be restricted that the restriction must be in regard to the sale of liquor and that there may be absolute prohibition of the sale of liquor
The Court also took into account the public expediency and public morality and police power of State to regulate business and mitigate evils
In Ms Guruswamy  Co etc
vs State of Mysore  Ors
the auction related to exclusive privilege of selling toddy from certain shops
The Court held that the auction enabled the licensee to sell the toddy and the licensee paid what he considered to be the equivalent value of the right
State of Orissa  Ors
vs Harinarayan Jaiswal  Ors
related to sale by public auction of the exclusive privilege of selling country liquor in retail shops
Amar Chandra Chakraborty vs Collector of Excise Government of Tripura and Ors also related to the cancellation of the licence by the Excise Collector 539 to establish warehouse for the storage in bond and wholesale vend of country spirit by import and for supply to the excise vendors in the territory of Tripura
The next case that was referred to by the learned counsel was Har Shankar  Ors
vs The Dy
Excise  Taxation Commissioner  Ors
Chandrachud J as he then was speaking for the Court stated In our opinion the true position governing dealings in intoxicants is as stated and reflected in the Constitution Bench decision of this Court in the state of Bombay and Anr
vs F N Balsara 1951 SCR 682 Cooverjee B Bharucha vs The Excise Commissioner and the Chief Commissioner Ajmer and Ors 1954 SCR 875 State of Assam vs A M Kidwai Commissioner of Hills Division and Appeals Shillong 1957 SCR 295 Nagendra Nath Bora and Anr
vs The Commissioner of Hills Division and Appeals Assam and Ors 1958 SCR 1240 Amar Chandra Chakraborty vs Collector of Excise Government of Tripura  Ors 1973 1 SCR 633 and State of Bombay vs RMD Chamarbaugwala 1957 SCR 874 as interpreted in State of Orissa and Ors
vs Harinarayan Jaiswal and Ors 1972 3 SCR 784 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 of activity in relation to intoxicants its manufacture storage export import sale and possession
Though most of the cases dealt with the right of the State Government as regard auction of country liquor in Balsara s case Nashirwar s case and Har Shankar s case the Court was concerned with the right of the State Government over foreign liquor
After considering all the decisions of five Constitutional Benches Chandrachud J as he then was summed up the position at page 274 as follows These unanimous decisions of five Constitutional Benches uniformly emphasised after a careful consideration of the problem involved that the State has the power to prohibit trades which are injurious to the health and welfare of the public is inherent in the nature of liquor business 540 that no person has an absolute right to deal in liquor and that all forms of dealings in liquor have from their inherent nature been treated as a class by themselves by all civilised communities Har Shankar s case related to licensing of retail sale of foreign liquor for consumption on the premises of the licensees
The grant of license for sale of country spirit foreign liquor beer were subject to the provisions of the Punjab Act 1 of 1914
The demand by the Government for payment of large sums of money from hoteliers or barkeepers who supply foreign liquor for consumption were challenged as arbitrary without authority and illegal
The provisions in the Act which provided for a levy on retail vend of foreign liquor was held to be valid
The decisions referred to above make it clear that the power to legislate under List II Entry 8 relating to intoxicating Liquor comprises of liquor which contains alcohol whether it is potable or not
The plea of the State is that the levy is for parting with the exclusive right of the State with regard to intoxicating liquor and the levy was for the purpose of conferring a right on the licensees
That the State has the exclusive right of manufacture or sale of intoxicating liquor which includes liquor containing alcohol has been recognised
The second most important contention raised by Mr Nariman is that after passing of the Industries Development and Regulation Act 1951 the claim by the State to monopoly with regard to production and manufacture and the sale of the denatured spirit or industrial alcohol is unsustainable
In order to appreciate this contention it is necessary to refer to the relevant entries in Lists I and II of the Seventh Schedule of the Constitution
List I Entry 52 runs as follows Industries the control of which by the Union is declared by Parliament by law to be expedient in the public interest
In List II the entry relating to industries is Entry 24 which is as follows Industries subject to the provisions of entries 7 and 52 of List 1
Entry 7 in List I relates to industries to be declared by Parliament by law to be necessary for the purpose of defence or for the prosecution of war
In this case we are not concerned with Entry 7
A reading of Entry 52 in List I and Entry 24 in List II makes it clear 541 that the Parliament will have exclusive jurisdiction to legislate regarding industries the control of which by the Union is declared by Parliament by law to be expedient in the public interest
Connected with these two entries is entry 33 in List III Concurrent List which provides Trade and commerce in and the production supply and distribution of a the products of any industry where the control or such industry by the Union is declared by Parliament by law to be expedient in the public interest and imported goods of the same kind as such products b x x x c x x x d x x x e x x x The subject of trade and commerce in and the production supply and distribution of the products of any industry which has been declared by Parliament under Item 1 Entry 52 is in the Concurrent List on which both Parliament and State can legislate
The Industries Development and Regulation Act 1951 was enacted by Parliament to provide for development and regulation of certain industries
Section 2 declares that it is expedient in the public interest that the Union shall take in its control industries specified in First Schedule
Item 26 in the First Schedule is fermentation industries i Alcohol ii other products and fermentation industries
Chapter II of the Act provides for establishment of Central Advisory Council and Development Council
Chapter III deals with regulation of scheduled industries
Section 10 requires registration of existing industrial undertakings
Section 11 deals with the licensing of new industrial undertakings
Section 12 deals with revocation and amendment of licenses in certain cases
Section 14 deals with the procedure for the grant of license or permission
Section 15 confers power of investigation to be made into scheduled industries and industrial undertakings
Section 18b confers power on the Central Government to control supply distribution price etc
of certain articles
As considerable reliance was placed on Section 18G for the contention that the Central Government has the exclusive power with regard to notified industries to control supply distribution fixation of price etc
it is necessary to set out the material part of the Section in full
Section 18 G 1 runs as follows The Central Government so far as it appears to it to be necessary or expedient for securing the equitable distri 542 bution and availability at fair prices of any article or class of articles relatable to any scheduled industry may notwithstanding anything contained in any other provision of this Act by notified order provide for regulating the supply and distribution thereof and trade and commerce therein
 Sub section 2 of Section 18G confers certain powers without prejudice to the generality of the powers conferred by sub section 1 by a notified order to provide for matters enumerated in it a to h of the sub section
These powers include amongst others the right to control the price
The powers conferred under section 18G1 is exercisable by the Central Government in so far as it considers it to be necessary or expedient
The plea of the learned counsel is that the notification made by the Central Government excludes the power of the State Government to fix the price of denatured spirit and rectified spirit as it has been placed beyond the powers of the State to regulate the distribution of licences permits etc
The notification that is relied on is the Ethyl Alcohol Price Control Amendment Order 1975 dated 31st October 1975
The order reads as follows In exercise of the powers conferred by section 18G of the Industries Development and Regulation Act 1951 65 of 1951 the Central Government hereby makes the following order further to amend the Ethyl Alcohol Price Control order 1971 namely 1
1 This order may be called the Ethyl Alcohol Price Control Amendment order 1975
2 It shall come into force on the date of its publication in the official gazette
In the Ethyl Alcohol Price Control order 1971 hereinafter referred to as the said order in clause 2 for the Table the following Table shall be substituted namely ____________________________________________________________ 1 2 ____________________________________________________________ 1 Absolute Alcohol Conforming to ISI Six hundred and Standard No 321 1952
 names for sixty eight equivalent volume at 100 per cent rupees and vv strength forty one paise per kilo litre
2 Rectified spirit conforming to ISI Six hundred standard No 323 1959 named for and twenty equivalent volume at 100 per cent two rupees vv strength
and twenty paise for kilo litre
3 Rectified spirit conforming to ISI Five hundred standard No 323 1959 named for and eighty nine 9468 per cent vv strength
rupees and ten paise per kilo litre
____________________________________________________________ 543 The table prescribes the price of various types of alcohol and rectified spirit
The price of ethyl alcohol is fixed under the powers conferred on the Central Government under section 18G 1 for securing the equitable distribution and availability at fair price
The Ethyl Alcohol Price Control order 1961 which was made by the Central Government in exercise of the powers conferred on it under section 18G of the Industries Development and Regulation Act 1951 fixed the maximum ex distillery price for industrial alcohol and rectified spirit under cl 1 and 2 of the Order
3 permitted certain additional charges in certain cases of alcohol supplied after denaturation with general or special denaturants the cost of such denaturation being allowed to be charged
Ethyl Alcohol Price Control order 1964 while fixing the maximum ex distillery price of ethyl alcohol under cl 3 permitted additional charges to be levied in certain cases such as for covering costs incurred for transport of molasses to the distillery and any octroi duty paid or payable on molasses and when alcohol is supplied after denaturation to include actual cost of such denaturants plus some octroi charges as specified in the clauses
3a empowered the Excise Commissioner of the State to determine the additional charges leviable under cl 3 in case of any doubt or distillery price of ethyl alcohol provided for fixation of the price after taking into account various factors enumerated in cl
22 a to h
Reading various Ethyl Alcohol Price Control orders passed by the Government from time to time it is clear that the order permitted the adding of the expenses incurred for transportation payment of octroi duty etc
to the price fixed
We are unable to read the Ethyl Alcohol Price Control orders as explicitly or impliedly taking away the power of the State to regulate the distribution of intoxicating liquor by collecting a levy for parting with its exclusive rights
If the powers of Parliament and the State Legislature were confined to entry 52 in List I and entry 24 in List II Parliament would have had exclusive power to legislate in respect of industries notified by Parliament
The power of the State under Entry 24 List II is subject to the provisions of Entry 52 in List I
But we have to take into account Entry 26 in List II and Entry 33 in List III for determining the scope of legislative power of the Parliament and the State
Entry 26 in List II is as follows Trade and Commerce within the State subject to the provisions of entry 33 of List III
 Under Entry 33 List III the Parliament and the State have concurrent powers to legislate regarding the production supply and 544 distribution of the products of industries notified by the Parliament
Furthermore it has to be noted that the exclusive power of the State to provide for manufacture distribution sale and possession etc
of intoxicating liquor is vested with the State
The power of the State Government to levy a fee for parting with its exclusive right regarding intoxicating liquor has also been recognised as is seen from the various State Acts regulating manufacture sale
of intoxicating liquor
A fair scrutiny of the relevant entries makes it clear that the power to regulate the notified industries is not exclusively within the jurisdiction of Parliament as List II Entry 33 in the concurrent list enables a law to be made regarding production supply distribution of products of a notified industry
In Ch
Tika Ramji and ors
vs The State of Uttar Pradesh and Ors
a question arose whether Sugarcane regulation supply and purchase Act passed by the State Legislature and the notification issued therein by the State Government were repugnant to the notifications made under the Industries Development and Regulation Act of 1951
Two notifications were issued by the State Government under the UP Sugarcane Regulations supply and purchase Act 1953 prohibiting the occupier of the factory to which area is assigned from entering into an agreement to purchase cane except through a cane growers Cooperative Society under certain circumstances and assigning different sugarcane factories specified to certain purchase centre for supply to them sugarcane for the crushing season were challenged as ultravires
The plea was that the subject matter of the legislation fell within the exclusive jurisdiction of Parliament and the impugned notifications were repugnant to the notifications made under the Industries Development and Regulation Act 1951
On 31st October 1951 Parliament enacted the Industries Development and Regulation Act 1951 to provide for development and regulation of certain industries
By section 2 of the Act it was declared that it was expedient in public interest that the Union should take in its control the industries specified in the First Schedule which included in Item 8 thereof the industries engaged in the manufacture or production of sugarcane
Industries Development and Regulation Act 1951 was amended by Act 26 of 1953 by adding Chapter IIIA entrusting Central Government with power so far as it appears necessary or expedient for securing the equitable distribution and availability at fair price of any article relatable to scheduled industry to provide by notified order for regulation supply and distribution and trade and commerce thereof
The impugned notification which required the factories to purchase 545 their sugarcane from the cooperative societies and assigned certain areas as cane purchasing centre for the factories was stated to be ultra vires as they were beyond the State s competence and covered by the notification under the Industries Development and Regulation Act
Justice Bhagwati observed at page 411 When however it came to the products of the controlled industries comprised in Entry 52 of List I trade and commerce in and production supply and distribution of these goods became the subject matter of Entry 33 of List III and both Parliament and the State Legislatures had jurisdiction to legislate in regard thereto
 The learned Judge proceeded to observe That sugarcane being goods which fell directly under entry 27 of List II was within the exclusive jurisdiction of the State Legislature and it was competent to legislate with regard to it and as such the impugned Act was intra vires of the state Legislature
The power to legislate regarding production supply and distribution of goods is subject to provisions entry 33 List III which deals with products and industries notified by Parliament
Entry 33 being in the concurrent List legislative power of the State regarding production supply and distribution of goods cannot be denied
 The Court on the facts of the case found that even assuming that sugarcane was an article or class of articles relating to the notified industries within the meaning of Section 18G of Act 65 of 1951 no order was issued by the Central Government in exercise of its powers vested in it and therefore no question of repugnancy arose
In the case before us it cannot be discerned from the Ethyl Alcohol Control order that the power of the State Government to prescribe a levy for parting with its exclusive rights relating to intoxicating liquor had been taken away
In Baijnath Kedvai vs State of Bihar  Ors
a question arose as to whether the Bihar Legislature had jurisdiction to enact the second proviso to section 102 of the Bihar Land Reforms Act 1950 by which the terms and conditions of the lease of mines and minerals could be substituted for the terms and conditions laid down in the Bihar Mines and Minerals Concession Rules
On the strength of the amended section 102 of the Reforms Act and amended Rules 20 the Bihar Government demanded from the appellant rent contrary to 546 the terms of his lease
It was held that Entry 54 in Union List speaks of requirements of mines and minerals development and Entry 23 in List II is subject to entry 54
Once a declaration was made under entry 54 specifying the extent of vesting the competency was only with Parliament
The attempt of the learned counsel to trace the power to enact the second proviso to section 10 of the Act to Entry 18 of List II was rejected
The plea of the learned counsel was that the modification of the existing lease was a separate topic and not covered by section 15 of Act 67 of 1957
The Court rejected the plea on the ground that the entire legislative field in relation to mines and minerals had been withdrawn from the State Legislature
The decision does not help the appellants for on the facts it is clear that the entire field relating to mines and minerals had been occupied and taken away from the Legislature and as such it was beyond the competence of the State to legislate on mines and minerals
In the case before us the position is different because the power of the State Legislature to legislate in respect of the intoxicating liquor and its exclusive right regarding intoxicating liquor cannot be questioned
The third contention of Mr Nariman is that the vend fee levied by the State is not and was never treated by the State as charge or rental as the consideration for granting exclusive privilege
On the other hand the levy is excise duty or a fee which the State is not entitled to collect
The submission of the learned counsel was that even though it is found that the State is entitled to make laws regarding intoxicating liquor under List II Entry 8 it has no power to impose any tax
The power to tax by the State is confined only to Entry 51 List II which empowers the State to levy duty on alcoholic liquors for human consumption and as denatured spirit is not alcoholic liquor for human consumption a levy of excise duty is not permissible by the State
It was contended that the levy of a fee was also not permissible unless it had some relation to the expenses incurred for that purpose
According to the Solicitor General Mr Kakkar the levy was not a tax or a fee but a levy for parting with the exclusive right of the State in respect of intoxicating liquor
In view of the stand taken by the State it is unnecessary for us to go into the question as to whether the levy is a tax or a fee
For dealing with the contention of Mr Nariman that the levy was never collected in lieu of the State parting with its rights it is necessary to refer to the relevant provisions of the Act
The United Provinces Excise Act 1910 Act 4 of 1910 was passed in 1910
Subsequently it was adapted and modified by the Government of India Adaptation 547 of Indian Laws order 1927 and Adaptation of Laws order 1950 Chapter IV of the Act deals with manufacture possession and sale while Chapter V deals with duties and fees
The Act refers to Excise Revenue Duty fee tax fine and payment as condition for the grant of licence for any exclusive privilege
section 31 defines Excise Revenue as meaning revenue derived or derivable from any duty fee tax fine or confiscation imposed or ordered under the Provisions of the Act or of any law in force relating to alcohol or intoxicating drug
Excise Duty and Countervailing duty is defined under section 3 and 3a as meaning such excise duty or countervailing duty as the case may be as mentioned in entry 51 of List II of the Seventh Schedule of the Constitution
Chapter II relates to establishment and control of the Excise Department
Chapter III prohibits import of intoxicants
Intoxicant means any liquor which in turn includes any liquids containing alcohol
section 12 prohibits import unless permission is obtained and conditions imposed by the State Government are satisfied and any duty imposed under section 28 is paid
section 28 refers to duties and fee and provides that an excise duty or countervailing duty as the case may be directed by the State Government may be imposed on any exciseable article
Under this section a duty on import export transport manufacture is levied in accordance with the provisions of section 121 13 17 and 18
The stand taken by the State before us is that the levy which is being collected is not in the nature of an excise duty or counter veiling duty
Though a duty under section 28 Proviso II on denatured spirit was levied after Proviso II to section 28 was omitted by the Government Adaptation of Indian Law order 1937 no excise duty on denatured spirit was levied
Apart from the duty that is leviable the Excise Commissioner is empowered under section 30 instead of or in addition to any duty to accept payment of a sum in consideration of the grant of licence of any exclusive privilege under section 24
Section 24 provides that subject to the provisions of section 31 the Excise Commissioner may grant any person a licence for exclusive privilege of manufacturing or supplying or selling wholesale or retail any country liquor or intoxicating drug within any local area
Reading section 30 and 24 together it is clear that the Excise Commissioner may accept payment in consideration for the grant of the licence for any exclusive privilege
The exclusive privilege under section 24 was confined only to country liquor within a local area
Before examining the impact of amended section 24A by UP Act 30 of 1972 it may be mentioned that Chapter VI empowers the collection of fees for licence or permits granted under the Act
A licence fee was only collected under notification dated 22 5 1930 for licence for wholesale vend of denatured spirit
The Excise Department on 23 1 1937 548 introduced rule 172 under section 402d imposing vend fee of Annas 7 per bulk gallon for the issue from the distillery
This fee was not collected regarding denatured spirit issued to industries engaged in the manufacture of synthetic rubber
By notification dated 3rd November 1972 the UP Government amended the Excise Rules and substituted rule 172
The rule is purported to have been issued under section 402 d in exercise of the powers conferred on the Government under section 401
By the notification on the issue of denatured spirit from a distillery a vend fee of Rs 110p
per litre was made payable in advance except regarding the issue to institutions exempted under the rule
The Learned Counsel strenuously contended that this levy does not purport to be in consideration of the grant of licence for any exclusive privilege
On the other hand the learned Counsel pointed out that section 402d refers to the rule making power of the Government for regulating the import export transport or possession of the intoxicants
The power if any is conferred on the Excise Commissioner under section 41 enabling him to make rules prescribing the scale of fees in respect of licence permits or pass or storing any intoxicants
In 1972 UP Act 301972 added section 24A which provides that subject to provisions of section 31 the Excise Commissioner may grant to any person a licence or licences for the exclusive privilege of selling by retail at shops for consumption both on and off the licensed premises or for consumption off the licensed premises only any foreign liquor in any locality
After the introduction of section 24A the Excise Commissioner is empowered to grant any person a licence for the exclusive privilege of selling foreign liquor
Before the amendment section 24 was restricted to country liquor or intoxicating drug
By the amended Sec
24A the Excise Commissioner may accept payment of a sum in consideration for the grant of the licence for any exclusive privilege for selling foreign liquor
section 31 to which section 24A is subject relates to grant of licences and it does not in any way restrict the power thus conferred by section 24A
The plea put forward by the learned counsel is that the word foreign liquor  cannot be understood as including denatured spirit as the Section would itself indicate that the licence is for selling for consumption which would indicate that foreign liquor is meant for human consumption
We are unable to give the words foreign liquor  such a restricted meaning for the word consumption cannot be confined to consumption of beverage alone
When liquor is put to any use such as manufacture of other articles the liquor is all the same consumed
Further section 42 provides that the State may declare what shall be deemed to be country liquor or foreign liquor
The State had under 549 rule 12 issued notification dated 30th December 1960 defining foreign liquor as meaning all rectified perfumed medicated and denatured spirit wherever made
The plea that the Excise Commissioner had no right to accept payment in consideration for the grant of the licence for the exclusive privilege for selling wholesale or retail foreign liquor which includes denatured spirit cannot therefore be accepted
Rule 172 no doubt purports to have been issued under the rule making powers conferred on the Government under section 402d which enables the Government to make rules for regulating the import export transport for possession of any intoxicants
It may be noted that when the amended rule 172 was introduced on 3 11 1972 section 24A had been amended by UP Act 301972 and the power of the Excise Commissioner to accept payment for grant of licence for exclusive privilege cannot be denied
The validity of Act 301972 which authorised the Excise Commissioner to collect a vend fee for the retail or wholesale vend of foreign liquor was challenged
The Allahabad High Court upheld the challenge holding that the State did not have the exclusive privilege to collect the vend fee
This view was not accepted by the Supreme Court in Nashirwar s case supra and Harishankar s case supra which held that under the regulatory power the State had power to auction the right to vend by retail or wholesale foreign liquor
As Act 30 of 1972 was struck down by the Allahabad High Court the State came forward to validate Act 30 of 1972 as it stood when it was passed by introducing the UP Excise Amendment Reenactment and Validation Act 1976 UP Act 5 of 1976
The preamble refers to the passing of UP Amendment Act it being struck down by the Allahabad High Court and the subsequent decision of the Supreme Court in Nashirwar s case and states that it had become necessary to enact the Amendment Re enactment and Validation Act
In the main Act after section 1 sub section
2 was introduced providing that it shall be deemed to have been in force ever since the commencement of the United Provinces Excise Act 1910
After section 24 of the principal Act section 24A was introduced
section 24A1 re enacts section 24A1 added by UP Act 30 of 1972
section 24B was introduced for removal of doubts which declared 1 that the State Government has exclusive privilege for manufacture and sale of country and foreign liquor 2 that the amount described as licence fee in cl
c of section 41 is in its essence rental or consideration for the grant of such right or privilege by the State Government and 3 that the Excise Commissioner as the head of the Excise Department of the State shall be deemed while determining or realising such fee to act for and on 550 behalf of the State Government
section 30 was substituted which specifically mentioned that the Excise Commissioner may accept payment of a sum in consideration of the grant of privilege for any exclusive or other privilege under section 24A section 24A was not specifically mentioned in section 30 as it stood before the re enactment
After the introduction of section 24A the Excise Commissioner had a right to grant the privilege of selling of foreign liquor
The fact that section 30 did not specifically mention section 24A might not have made any difference
But in order to remove all doubts the new Section 30 had been introduced
section 41 cl
3 was re enacted to enable the fixation of fee payable for the grant of exclusive or other privilege under section 24 and 24A section 40 was also amended so as to give retrospective effect
section 4 of the Act 5 of 1976 also provides that the UP Excise Amendment Act 1972 shall be deemed to be and always to have been as valid as if the provisions of this Act were in force at all material times
In short the purpose of introduction of Act 5 of 1976 was to make it clear that UP Excise Amendment Act 1972 shall be deemed to and always to have been valid
In view of our findings that UP Excise Amendment Act 1972 was valid the effect of UP Act 5 of 1976 is to remove all doubts and to give retrospective effect
It was next contended that foreign liquor which is defined under rule 12 as including denatured spirit cannot apply to specially denatured spirit
Foreign liquor was defined as including specially denatured spirit
By a notification the Excise Commissioner of UP on 3 5 1976 framed UP Licences for the possession of denatured spirit and specially denatured spirit Rules 1976
In the preamble to the rules it is stated that the Excise Commissioner with the previous sanction of the State Government was making the rules relating to licence for possession of denatured spirit including specially denatured spirit for industrial purposes
Rule 1 iii provides that specially denatured spirit means rendered unfit for human consumption in such manner as may be prescribed by the Excise Commissioner by notification in this behalf and does not include ordinary denatured spirit for general use
Rule 2 provides that licences for the possession of the denatured spirit including specially denatured spirit for industrial purpose shall be of three kinds
The learned counsel contended that though foreign liquor is defined as including denatured spirit it cannot be held to include specially denatured spirit
Denatured spirit mentioned in the rules is treated as including specially denatured spirit for industrial purpose
Denatured spirit has ethyl alcohol as one of its constituents
The specially denatured spirit for industrial purpose is different from denatured spirit only because of the difference in the 551 quantity and quality of the denaturants
Specially denatured spirit and ordinary denatured spirit are classified according to their use and denaturants used
We are unable to accept the contention of the learned counsel that specially denatured spirit for industrial purpose is different from the ordinary denatured spirit
The definition of alcohol under rule 12 includes both ordinary as well as specially denatured spirit
It was next contended that if the levy of Re 110p per bulk gallon of denatured spirit as vend fee is upheld it would result in violating the appellantspetitioners fundamental right to carry on their trade and business under article 191g of the Constitution
According to the learned counsel the price fixed per gallon of ethyl alcohol under the Ethyl Alcohol Price Control order is 59 paise per gallon
If the levy is not considered as a tax and could not be passed on to the consumer as price fixed under the Ethyl Alcohol Amendment order is only 59 p it would be confiscatory in nature
It is seen that the right of the State Government to accept payment of a sum for the grant of its exclusive privilege cannot be questioned
The price fixed for ethyl alcohol is ex distillery price and we see no impediment for the addition of Re 110 as vend fee by the State Government Dr L N Singhvi who appeared as intervener in Civil Appeal Nos
2191 to 2198 of 1978 for the appellants and for petitioners in Special Leave Petitions Nos 125 to 12679 while adopting the contentions of Mr Nariman submitted that the stand taken by the UP Government in earlier proceedings in the High Court was that the levy was in the nature of Excise Duty or a fee while the present stand is that it is neither a duty nor fee but only a levy for the conferment of the exclusive privilege
It is true that the stand taken by the Government in the earlier proceedings was different but that would not make any difference so long as the Government had a right to impose the levy
It has been found that after the addition of section 24A by Act 30 of 1972 the Commissioner was entitled to accept payment for conferring the privilege which the State owned exclusively
The learned counsel submitted that so far as his clients Ms Rallis Chemicals Kanpur and Ms Rallis India petitioners in Special Leave Petitions Nos 125 to 126 of 1979 are concerned they are only holders of licences for possession and are not licencees under FL 16
In the same class fall the appellants in Civil Appeal No 2248 of 1978 Ms Synthetic and Chemicals who are only purchasers of denatured spirit
It was submitted that for this class of persons if the vend fee is 552 for the grant of exclusive privilege of the State for sale of liquor it cannot be recovered from the purchasers
Rule 171 relates to vend of denatured spirit
It empowers the Collector 1 to grant to a distiller a licence for manufacture of denatured spirit 2 to grant to approved dealers of denatured spirit a licence in form FL 16 for the wholesale vend of denatured spirit
Scale of fee is given in the rule which prescribes that for sales not exceeding 10000 litres per annum a fee will be of Rs 100 and for sales exceeding 10000 litres the fee shall be increased by Rs 500 for every 5000 litres or fraction thereof
Subrule 2 provides that in case of issue from a distillery a vend fee of rupee one and ten paise per bulk gallon will be payable before the spirit is issued
The fee charged is very different from the one in Rule 171 which provides that the distillery or an approved dealer for wholesale vend of denatured spirit may be given a licence in Form FL 16
The distiller and the approved dealer is to pay a licence fee for the sales at the rate prescribed
But rule 2 speaks of levy of vend fee in case of issued from the distillery which is payable in advance before the spirit is issued
It is admitted that the petitioners and the appellants who claim as purchasers do not have a licence under FL 16
Therefore sub section
1 has no application
The levy on persons who are purchasers is for the possession of denatured spirit in excess of the prescribed limit
The permission granted in their favour and the allotment orders of the specially denatured spirit prescribes the terms and conditions under which the allotment is made
The licences are granted to them under form FL 39 and they have to abide by those conditions
The notification of the Excise Commissioner of UP dated 3 5 1976 provides that the licence for the possession of denatured spirit including the specially denatured spirit of industrial purpose shall be of three kinds
We are concerned with the licences for the possession for use in industries in which alcohol is destroyed or converted chemically in the process into other products and the product does not contain alcohol such as Ethel Styrene Butadiene Acetone and Polythene etc
The licence granted for this purpose is in form FL 39
Rule 3a provides that the fee for the licence in Form FL 39 shall be at a rate prescribed for industry to industry by the Excise Commissioner per litre payable on the quantity of specially denatured spirit obtained from any distillery in Uttar Pradesh and that fee shall be realised by the Excise Inspector incharge Distillery from the licensee before issue of the specially denatured spirit from the distillery
The conditions relating to grant of a licence for issue of denatured spirit for industrial purpose are laid down in rule 4
Special conditions regarding licence in form FL 39 40 and 41 are prescribed in rule 5
The appellantspetitioners having applied 553 for and obtained licences in form FL 39 are bound to comply with the conditions
Lastly it was contended that the provisions of Uttar Pradesh Excise Amendment Re enactment and Validation Act 1976 is invalid and confiscatory as its retrospective operation imposes an unbearable burden on the appellantspetitioners
It was stated that the licence under FL 39 was issued only in the year 1979 and no levy could be made regarding denatured spirit that was supplied before that date
The answer of the State is that the levy was imposed for permission granted in their favour and allotment orders of denatured spirit issued to them from the various distilleries
The parties after having paid the fee had taken possession of the denatured spirit from the distillery
Act 5 of 1976 has been given retrospective effect as the levy imposed under Act 30 of 1972 was found to be illegal and unsustainable by the Allahabad High Court which was reversed by this Court by giving retrospective effect the State has only restored the status quo enabling the collection of the levy validly made by Act 30 of 1972
Reliance was placed on the decision of this Court in A B Abdul Kadir  ors etc
vs State of Kerala for the contention that retrospective operation of an Act when it harshly operates is liable to be held as invalid
At page 706 this Court observed that the power to make a valid law  would enable providing for prospective and retrospective operation of the provisions
It was observed that in judging the reasonableness of the retrospective operation of law the test of length of time covered by the retrospective operation could not by itself be treated as decisive
On the facts of the case there could be no complaint because what is sought to be collected is levy which was legally made
The result is all the contentions raised by the learned counsel for the appellantspetitioners fail and appeals and the petitions are dismissed with costs one set of hearing fee
The State Appeal CA No 113076 is allowed but there will be no order as to costs
PBR State appeals allowed


Summary:
The respondents who were licensees for the whole sale vend of denatured spirit in their writ petitions before the High Court contended that levy of fees on denatured spirit was not justified because i the State was not providing any service to the trade and ii since it is the Parliament which has the power to levy excise duty or tax on denatured spirit the State was incompetent to levy the fees
Rejecting the contentions the High Court held that the State had exclusive privilege to deal with any intoxicating liquor which included denatured spirit that it had the right to vend liquor either in retail or wholesale and that therefore its power to levy fees cannot be questioned
In appeal to this Court it was contended on behalf of the licensees that 1 levy of vend fee on denatured spirit by the State was without legislative competence 2 with the enactment of Industrial Development and Regulation Act 1951 the Union had taken under its control industries including fermentation of industrial alcohol and therefore it is only the Union which could levy the fees on denatured spirit or industrial alcohol
Allowing the State s appeal  HELD The levy of vend fee is for parting with the exclusive right of the State with regard to intoxicating liquors and for conferring a right on the licensees to sell such liquors
A conspectus of the decisions of this Court establishes i that there is no fundamental right of a citizen to carry on trade or to do business in liquor because under its police power the State can enforce public morality prohibit trade in noxious or dangerous goods ii the State has power to enforce an absolute prohibition on manufacture or sale of intoxicating liquors pursuant to Article 47 of the Constitution and iii the history of excise laws in the country shows that the State has the exclusive right or privilege to manufacture or sell liquors
549 F H State of Bombay and Anr
vs F N Balsara 1951 SCR 682 referred to
iv The terms intoxicating liquor is not confined to potable liquor alone but would include alliquors which contain alcohol
537 G Nashirwar vs State of Madhya Pradesh 1975 2 SCR 861 Har Shankar vs The Deputy Excise and Taxation Commissioner   State of Bombay and Anr
vs F N Balsara  Ors   Bhola Prasad vs The King Emperor at p 25 referred to
v The term liquor used in Abkari Acts not only covers alcoholic liquor which is generally used for beverage purposes and which produces intoxication but would also include liquids containing alcohols
537 B C 532 Cooverjee B Bharucha vs The Excise Commissioner and Chief Commissioner Ajmer  Anr   Ms Guruswamy  Co etc
vs State of Mysore  Ors
 State of Orissa  Ors
vs Harinarayan Jaiswal  Ors
  Amar Chandra Chakraborty vs Collector of Excise Government of Tripura and Ors   Har Shankar  Ors
vs The Dy
Excise  Taxation Commissioner  Ors  referred to 2a The power to regulate the notified industries is not exclusively within the jurisdiction of Parliament as Entry 33 in the Concurrent List enables a law to be made regarding production supply and distribution of products of notified industries
The exclusive power of the State to provide for manufacture distribution sale and possession of intoxicating liquors is vested in the State
The power of the State Government to levy a fee for parting with its exclusive right regarding intoxicating liquors has been recognized as could be seen from the various State Acts regulating the manufacture sale etc
of intoxicating liquors
544 C A B Ch
Tika Ramji and Ors
vs The State of Uttar Pradesh and Ors   Baijnath Kedai vs State of Bihar  Ors
 distinguished
b The term foreign liquor cannot be given a restricted meaning because the word consumption cannot be confined to consumption of beverages only
When liquor is put to any use such as manufacture of other articles the liquor is all the same consumed
The State is empowered to declare what shall be deemed to be country liquor or foreign liquor
Foreign liquor is defined as meaning all rectified perfumed medicated and denatured spirit wherever made
Therefore the plea that the Excise Commissioner had no right to accept payment in consideration for the grant of licence for the exclusive privilege for selling in wholesale or retail foreign liquor which includes denatured spirit cannot be accepted
548 H 549 A B c The definition of alcohol includes both ordinary as well as specially denatured spirit
The specially denatured spirit for industrial purposes is different from denatured spirit only because of the difference in the quantity and quality of the denaturants
Specially denatured spirit and ordinary denatured spirit are classified according to their use and denaturants used
Therefore the contention that specially denatured spirit for industrial purposes is different from the ordinary denatured spirit has no force
551 B 550 H 551 A