Case: M/s. Gujchem Distillers India Limited Vs. State of Gujarat and Another

2. The facts leading to this appeal are briefly asappellant is a company registered under the Indian Companies Act. It is engaged in the business of manufacturing resins, chemicals, sodium carboxy methyl, cellulose and certain other chemicals. Industrial alcohol is one of the raw materials used by the appellantThough, till the year 1969, the appellant was purchasing industrial alcohol from the market, it installed its own distillery from May 1970 at Bilimora, within the State of Gujarat. This was for the purpose of manufacturing industrial alcohol fromOn July 3, 1969 respondent 2, the Director of Prohibition and Excise, Gujarat State, Ahmedabad issued a licence to the appellant for manufacturing spirit. In accordance with the condition Nos. 2 and 3 of the licence, respondent 2 appointed a staff of 9 persons. The said staff consisted of one Inspector, one Sub-Inspector, one Nayak, one Jamadar and five constables to supervise the manufacture of spirit in the appellants distillery plant. The appellant was also required to provide residential accommodation to the supervisory staff within the factory premises. On July 3, 1969 respondent 2 asked the appellant to deposit the supervisory charges. From time to time, these supervisory charges were also deposited in accordance with the directions of respondentIt requires to be stated at this stage that the levy of supervisory charges, is traceable to Section 58-A of the Bombay Prohibition Act of 1949. The sectionSupervision over manufacture, etc. - The State Government may by general or special order direct that the manufacture, import, export, transport, storage, sale, purchase, use, collection, or cultivation of any intoxicant, denatured spirituous preparation, hemp, mhowra flowers, or molasses shall be under the supervision of such Prohibition and Excise or Police staff as it may deem proper to appoint, and that the cost of such staff shall be paid to the State Government by person manufacturing, importing, exporting, transporting, storing, selling, purchasing, using, collecting or cultivating the intoxicant, denatured spirituous preparation, hemp, mhowra flowers or molassesProvided that the State Government may exempt any class of persons or institutions from paying the whole or any part of the cost of such staff."143 of the Act confers power making rules. Rules have been framed called Bombay Prohibition (Manufacture of Spirit) (Gujarat) Rules, 1963. These rules inter alia regulate the working of distilleries, manufacturing spirit. Rule 2 provides for the licence. Condition Nos. 2 and 3 of the licence require payment of the supervisory staff and for provision of quarters for the residential accommodation of the staffThe appellant filed Civil Application No. 163 of 1973 in the High Court of Gujarat challenging the constitutional validity of Section 58-A of the Act. By the impugned judgment, the said petition was dismissed. Hence, the present civil appeal

Court's reasoning:
11. We are relived of the necessity of deciding the correctness of these submissions by a detailed judgment, since identical points were raised in Civil Appeal No. 503 of 1974 (Bileshwar Khand Udyog Khedut Sahakari Mandali Ltd. v. State of Gujarat) ( 1992 (2) SCC 42 ) to which one of us (Mohan, J.) was a party. The said civil appeal has been dismissed considering these aspects and upholding the validity of Section 58-A. The said judgment will squarely cover this case as well. We fully concur with the reasons contained therein.In dealing with Synthetics and Chemicals case ( 1990 (1) SCC 109 : 1989 (S1) SCR 623) the following observations were made : (SCC pp. 147-49, parasAdvocates-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 effective 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, transport, 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 v. Excise Commissioner and the Chief Commissioner, Ajmer ( 1954 SCR 873 : 1954 AIR(SC) 220) which quoted the passage from Crowley v. Christensen ((1890) 4 L Ed 620 : 137 US 86). Reference was also made to Har Shankar case (Har Shankar v. Dy. Excise & Taxation Commissioner, 1957 (1) SCC 737) 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 P. N. Kaushal case (P. N. Kaushal v. Union Of India, 1978 (3) SCC 558 ).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 v. State of Kerala ( 1981 (4) SCC 391 : 1981 SCC(Tax) 320 : 1981 AIR(SC) 1863). Regarding 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 concomitant 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 legislature to effectuate its aim areis true that in State of W. B. v. Subodh Gopal Bose ( 1954 SCR 587 , 601-604 : 1954 AIR(SC) 92 : 1954 (1) MLJ 314 ) and Kameshwar Prasad v. State of Bihar ( 1962 (S3) SCR 369 : 1962 AIR(SC) 1166 : 1962 (1) LLJ 294 ) the concept of 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 prohibitionWe 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 and/or 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 imposed 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 decisions to which our attention was drawn by learned counsel very elaborately and thoroughly.This is an added reasoning to uphold the validity of SectionTurning to the second argument about the absence of quid pro quo, we need only extract the following from the judgment of the High58-A of the Bombay Prohibition Act creates a statutory duty of supervision and incidentally provides for recovering from a manufacturer or a businessman the cost of supervision which is primarily necessitated by the manufacturer or businessman having been permitted under a licence to carry on lawfully a business or industrial activity which would otherwise have been unlawful. We need not go into the details of this aspect because it has not been contended before us that if the levy under Section 58-A is held to be a fee, there is no sufficient quid pro quo between the quantum of the impost and the services rendered to the manufacturer or businessman."