# ST ATE OF PUNJAB AND ANR v. MIS. DEV ANS MODERN BREWERIES AND ANR. ETC

- **Citation:** [2003] Supp. 5 S.C.R. 930
- **Court:** Supreme Court of India
- **Decided:** 2003-11-20
- **Bench:** V.N. Khare, R.C. Lahoti, B.N. Agrawal, S.B. Sinha, Dr. Ar. Lakshmanan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/st-ate-of-punjab-and-anr-v-mis-dev-ans-modern-breweries-and-anr-etc-19628
- **Pages:** 156

## Headnote

Constitution of India :
C
Arts. I9(/)(g) and (6) and 47 and Schedule Vll List 11 Entry 8-Trade
or business in intoxicating liquor-Nature of-Held, Is not a fandamental
right-Trade in liquor is considered inherently noxious, pernicious and is res
extra commercium.
D
Arts. 30I, 304-Trade in liquor-Applicability of-Permissive privilege
to deal in liquor not being a right, Aris. 30 I to 304 are rendered inapplicable
lo trade, commerce and intercourse in liquor at the threshold-Freedom to
trade not available to liquor since it is a noxious substance injurious to public
health, public order and morality-Thus trade in liquor is res extra
commercium-Jurisprudence-law and Morality.
E
Art. 30 I-Scope of freedom-Regulations-Regulation for the purpose
of Art. 30I is not confined to regulation which facilitates trade alone but
includes regulation imposed in the interest of public health, public order and
morality.
F
Arts. 305, 30I to 304, 366(IO) and 372-Punjab Excise Act, I9I4Validity of-Held, is an existing law under Art.366(10) and its continued
application is saved by Art. 372-lrrespective of whether or not Arts.30I-304
applicable to trade in liquor, the Act is saved by Art.305.
Arts. 30I to 304, 245, 246, 265, 366(28) and Schedule Vil list 11 Entries
G 8,5I,62 and 66--levy by State for parting with privilege to trade in liquorRegulation of-Mode and Scope-Imposition of a levy in addition to any
counterveiling duty levied under list 11 Entry 5 I, on imports of liquor into a
State-Whether violative of Arts.30I and 304(a)-Held, levy imposed by Stale
for parting with privilege to trade in liquor is neither a tax nor a fee-It is
H
930
ST A TE v. DEY ANS MODERN BREWERIES
931
simply a levy/consideration for the act of granting permission or for exercise A
of power to part with the said privilege-Modalities of the levy of fees or the
quantum thereof has no bearing on its legal pedigree-Trade in liquor is res
extra commercium and regulation of trade in liquor is the hallmark of State
action-Such regulation can be and normally is through the mode of imposition
of levies-State Government has unfettered powers to regulate the export/
import/sale of intoxicants-In addition to levy of excise and counter-veiling B
duties, there is no bar on the State to charge any other fees on account of
consideration for the privilege provided to a licensee to trade in liquorImposition of said import duty is in exercise of the regulatory powers of the
State-Thus it does not attract the bars of Arts. 301 and 304(a) as the imposition
of such import fee does not in any way restrict trade, commerce and intercourse C
among the States-Hence Or 1-D (iiij of the Punjab Excise Fiscal Orders,
1932 constitutionally valid-So also Kera/a Notification dated 31.12.1992
raising import duty on IMFlfrom Rs. 2 to Rs.5 is also constitutionally va/idArts.246,265 and Schedule VII list II Entry 8-lmposition of levy not named
in the parent Act-Validity of-Held, if the levy is actually imposed by delegated
legislation under the parent Act, the same would be valid and not ultra vires D
thereof-Administrative law-Ultra Vi~es-Grounds for plea of
Arts.298, 14, 246, 265 and Schedule VII list //-Entries 8,51,62 and
66-Arbitrariness-liquor licence-Conditions of-Change in on the basis of
excise policy of State Government-Rate of import duty levied on liquor E
increased after grant of licence-Permissibility of-The licensee besides
payment of duty, is to comply with such conditions as the State Government
may impose while formulating the excise policy for the year concernedHaving accepted the contracts/licences and having folly exploited the advantage
flowing from it to the exclusion of others and having reaped rich commercial
benefits from that activity, it is not open to wriggle out from the contract by F
challenging inter alia any particular condition thereof
Arts. 141and13-Stare decis-limils of-Discussed
Art.141-Supreme Court vis-a-vis itself......Coordinate Bench decision to
be followed-In case

## Text

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A
B
ST ATE OF PUNJAB AND ANR.
V.
MIS. DEV ANS MODERN BREWERIES AND ANR. ETC.
NOVEMBER 20, 2003
[V.N. KHARE, CJ., R.C. LAHOTI, B.N. AGRAWAL, S.B. SINHA
AND DR. AR. LAKSHMANAN, JJ.]
Constitution of India :
C
Arts. I9(/)(g) and (6) and 47 and Schedule Vll List 11 Entry 8-Trade
or business in intoxicating liquor-Nature of-Held, Is not a fandamental
right-Trade in liquor is considered inherently noxious, pernicious and is res
extra commercium.
D
Arts. 30I, 304-Trade in liquor-Applicability of-Permissive privilege
to deal in liquor not being a right, Aris. 30 I to 304 are rendered inapplicable
lo trade, commerce and intercourse in liquor at the threshold-Freedom to
trade not available to liquor since it is a noxious substance injurious to public
health, public order and morality-Thus trade in liquor is res extra
commercium-Jurisprudence-law and Morality.
E
Art. 30 I-Scope of freedom-Regulations-Regulation for the purpose
of Art. 30I is not confined to regulation which facilitates trade alone but
includes regulation imposed in the interest of public health, public order and
morality.
F
Arts. 305, 30I to 304, 366(IO) and 372-Punjab Excise Act, I9I4Validity of-Held, is an existing law under Art.366(10) and its continued
application is saved by Art. 372-lrrespective of whether or not Arts.30I-304
applicable to trade in liquor, the Act is saved by Art.305.
Arts. 30I to 304, 245, 246, 265, 366(28) and Schedule Vil list 11 Entries
G 8,5I,62 and 66--levy by State for parting with privilege to trade in liquorRegulation of-Mode and Scope-Imposition of a levy in addition to any
counterveiling duty levied under list 11 Entry 5 I, on imports of liquor into a
State-Whether violative of Arts.30I and 304(a)-Held, levy imposed by Stale
for parting with privilege to trade in liquor is neither a tax nor a fee-It is
H
930
ST A TE v. DEY ANS MODERN BREWERIES
931
simply a levy/consideration for the act of granting permission or for exercise A
of power to part with the said privilege-Modalities of the levy of fees or the
quantum thereof has no bearing on its legal pedigree-Trade in liquor is res
extra commercium and regulation of trade in liquor is the hallmark of State
action-Such regulation can be and normally is through the mode of imposition
of levies-State Government has unfettered powers to regulate the export/
import/sale of intoxicants-In addition to levy of excise and counter-veiling B
duties, there is no bar on the State to charge any other fees on account of
consideration for the privilege provided to a licensee to trade in liquorImposition of said import duty is in exercise of the regulatory powers of the
State-Thus it does not attract the bars of Arts. 301 and 304(a) as the imposition
of such import fee does not in any way restrict trade, commerce and intercourse C
among the States-Hence Or 1-D (iiij of the Punjab Excise Fiscal Orders,
1932 constitutionally valid-So also Kera/a Notification dated 31.12.1992
raising import duty on IMFlfrom Rs. 2 to Rs.5 is also constitutionally va/idArts.246,265 and Schedule VII list II Entry 8-lmposition of levy not named
in the parent Act-Validity of-Held, if the levy is actually imposed by delegated
legislation under the parent Act, the same would be valid and not ultra vires D
thereof-Administrative law-Ultra Vi~es-Grounds for plea of
Arts.298, 14, 246, 265 and Schedule VII list //-Entries 8,51,62 and
66-Arbitrariness-liquor licence-Conditions of-Change in on the basis of
excise policy of State Government-Rate of import duty levied on liquor E
increased after grant of licence-Permissibility of-The licensee besides
payment of duty, is to comply with such conditions as the State Government
may impose while formulating the excise policy for the year concernedHaving accepted the contracts/licences and having folly exploited the advantage
flowing from it to the exclusion of others and having reaped rich commercial
benefits from that activity, it is not open to wriggle out from the contract by F
challenging inter alia any particular condition thereof
Arts. 141and13-Stare decis-limils of-Discussed
Art.141-Supreme Court vis-a-vis itself......Coordinate Bench decision to
be followed-In case of disagreement, matter to be referred to larger Bench. G
Excise laws :
Punjab Excise Act, 1914-Ss.58, 59, 16 to 19, 31to35 and 3(9), IO and
12-Nature and Scope of-Validity of Or. 1-D(iii) of the Punjab Excise Fiscal
Orders, 1932-Held, Or 1-D (iiij is not ultra vires the .sections of the 1914 H
932
SUPREME COURT REPORTS (2003) SUPP. 5 S.C.R.
A Act-Fee imposed being nothing but a facet and manifestation of the regulation
of liquor trade by the State, it is valid as a regulatory levy under Art.304Punjab Excise Act, 1914-S.34-'Fee'-Meaning of-Hot used in the strict
sense to attract doctrine of quid pro quo---'Fee'-Meaning of-Grant of
licences under s.34 rlw Part A of the 1956 Rules-levy of additional duties
and change in rates of duty levied on liquor after grant of licenceB Permissibility of-Punjab liquor licence Rules, 1956-Part A-Kera/a Akbari
Act,1077-Ss.6 and 24-G.O.(MS) No. 57192/TD dated 31.12.1992 (as
amended)-Validity of-Government Contracts/Tenders.
Kera/a Akbari Act, 1977-Ss.6 and 24-GO(MS) No.57192/TD dated
C 31. 12.1992 (as amended)-Nature and validity of-Held, levy authorized by
Ss.6 and 4 of the 1977 Act-Neither an excise nor countervei/ing duty under
Schedule VI/ list If Entry 51 but a collection falling under list II of Entry 8Jnterpretation of Statutes-Particular statutes or provisions-Provision
empowering delegated/Subordinate legislation-Discussed.
D
Administrative law-Subordinate legislation-Effect ot When, validity
made-same as that of the parent statute.
Words & Phrases: 'Fee'-Meaning of
The appeals relate to the constitutional validity of the imposition of
E import duty levied by the State of Punjab and the State of Kerala on the
import of potable liquor from other States. While the Punjab and Haryana
High Court has quashed the notification imposing such a levy the Kerala
High Court has upheld the notification levying import duty on potable
liquor. Hence the appeals.
F
Before this Court, the following questions arose for consideration.
(i) Whether the impugned notifications issued by the State of Punjab
and that of Kerala are illegal being fraud on the Constitution.
(ii) Whether the import duty can be said to have been validly imposed
G having regard to the doctrine of 'exclusive privilege' of the State to deal
in obnoxious matters?
(iii) Whether dealing in liquor which is said to be 'res extra
commercium' would nonetheless attract Part XIII of the Constitution?
H
Allowing the appeal of the Punjab State and dismissing the appeals
ST A TE v. DEV ANS MODERN BREWERIES
933
of the licensee-appellants from Kerala, the Court
A
HELD : (Per Majority - Dr. AR .. lakshmanan for himself & for V.N.
Khare, CJ. and R.C. lahoti, J).
I.I. The State Government is competent and empowered to regulate
the import and export of liquor. There are 21 types of licences which are B
prescribed and are given. The respondent in this appeal is holding L-1
licence i.e. wholesale and retail vend of foreign liquor to trade only. The
said licence is given on fixed licence fee, which is subject to variation as
per excise policy of the Government based on year to year. The State
Government has incorporated as one of the terms and conditions on the
L-1 holders to pay import fees also at the prescribed rate as per the Punjab C
Excise Fiscal Order, 1996. The respondent has been accepting the terms
and conditions from 1992 onwards and acted on the same and the licence
was renewed on yearly basis. [962-D-E]
1.2. Under the provisions of the Act, the State Government issued D
permit in the case of import and the licensees are liable to pay permit fee
at the prescribed rate. The respondent has mixed up two different imposts.
The respondent has referred to the duty paid under Rule 5 i.e. equivalent
to Excise duty and fees under Rule (1) (D) of the Punjab Fiscal Orders,
1932. On imported goods by L-1 holder, there are two different and
independent imposts in the shape of Excise duty under Rule 5 and import E
fee under Rule (l)(D) of Punjab Excise Fiscal Orders, 1932. In addition
he has to pay licence fee under the Punjab Liquor Licence Rules, 1956,
which is fixed on yearly basis. Thus as per provisions of Section 58(0) as
well as Section 59(D) the State Government has power to regulate the
import and price of any description of bottle and the scale of the fee and F
the manner of the fee payable by any licensee. [962-F-H; 963-A]
1.3. The amount charged is not a fee nor a tax but it is in the nature
of price of a privilege which the purchaser has to pay in any trading and
business in noxious article/goods. The collection of such amount in the
shape of import fee does not form part of the general revenue of the State. G
[963-8-C)
1.4. Articles 302 and 304A of the Constitution of India are not
attracted to the present case as the imposition of import fee does not, in
any way, restrict trade commerce and intercourse among the States. The
permissive privilege to deal in liquor is not a "right" at all. The levy H
934
SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.
A charged for parting with that privilege is neither a tax nor a fee. It is
simply a levy for the act of granting permission or for the exercise of power
to part with the privilege. Dealing in liquor is neither a right nor is the
levy a tax or a fee. Articles 301-304 will be rendereC: inapplicable at the
threshold to the activity in question. Further, there is not even a single
B judgment which upholds the applicability of Articles 301-304 to the liquor
trade. On the contrary, numerous judgments expressly hold these Articles
to be inapplicable to trade, commerce and intercourse in liquor.
1963-G-H; 964-A, BJ
Har Shankar and Ors. etc. etc. v. The Deputy Excise and Taxation
C Commissioner and Ors. etc. etc., AIR (1975) SC 1121; Panna Lal ar.d Ors.
v. State of Rajasthan and Ors., 11975] 2 SCC 633; The State of Bombay v.
R.M.D. Chamarbaugwala, 11957] SCR 874 and Mis. Sat Pal and Co. and
Ors. v. Lt. Governor of Delhi and Ors., 11979] 4 SCC 232, relied on.
2.1. The State has the right to prohibit every form of activity in
D relation to intoxicants including its import. Though it is alleged by the
appellant that the State has discriminated against, the same has not been
substantiated or established by any material. The State of Kerala, has
granted such permit to the Beverages Corporation on their paying the fee
fixed for the purpose as per notification enabling the Corporation to
import liquor from the petitioners/licensees and others. The import fee so
E paid is passed on to the consumers. It is purely a contractual dealing
between the State a;id the importer and, therefore, no question of violation
of Article 301 can arise. The importer had no anterior right to import
liquor and hence cannot complain of any violation of Article 301 at that
stage as right to trade in liquor is not a fundamental right. His right to
p import is referable to the import permit which he acquired on payment
of the import fee. No further impediment has been created in the import
of the liquor so that Article 301 is not attracted in relation to the payment
of the import fee which was prior to getting his privilege of importing.
The appellant/licensee having entered into a contractual relationship with
the State obtained the privilege and enjoyed the benefit of it. It is not open
G
H
to the petitioners to turn round subsequently and repudiate the obligations
~ubject to which they obtained the privilege. Regulation in the interest of
public health and order takes the case out of Article 301 and regulation
for purpose of Article 301 is not confined to such regulations alone which
will facilitate the trade. 1965-H; 966-A-EJ
ST A TE v. DEY ANS MODERN BREWERIES
935
2.2. As compensatory or regulatory levies have always been held to A
be valid and permissible under Articles 301 and 304, it is undeniable that
regulations deemed necessary and apposite are liable to be imposed on
liquor trade more than any other activity since the former is cons;dered
inherent are noxious, pernicious and res extra commercium. Regulation
is thus the hall-mark of the State action in respect of liquor and that
regulation can be and indeed normally is through the mode of imposition B
of levies which levy is also necessary to regulate by keeping out and
excluding persons entering the liquor trade. [968-B-D)
Har Shankar and Ors. etc. etc. v. The Deputy Excise and Taxation
Commissioner and Ors. etc., AIR (1975) SC 1121, relied on.
C
Atiabari Tea Co., Ltd v. The State of Assam and Ors., [1961) l SCR
809; The Automobile Transport (Rajasthan) Ltd v. The State of Rajasthan and
Ors., (1963) 1 SCR 491; State of Bihar v. Chambers of Commerce, (1996)
103 STC l; Godfrey Ltd. v. State ofRajasthan, (2001) 121STC54 and Jindal
Strips Limited and Ors. v. State of Haryana, (2002) 19 PHT 299, referred D
to.
3.1. The statutory provision in question must be interpreted and read
broadly and not narrowly. The approach must be to uphold the validity
of the impugned delegated legislation by a process of fair and broad
reading of the statutory mandate. Even if the Act does not specifically E
provide for the levy in question by name to provide statutory authority
for its imposition by delegated legislation and the levy is actually imposed
by the delegated legislation made under that Statute, the same r. ould be
valid and not ultra vires. In the instant case, the levy has been imposed by
the Punjab Fiscal Orders as amended from time to time under specific F
statutory authority to issue such orders under Sections 58 and 59 of the
Act, in particular, and other provisions of the Act. Since the rule making
power has not been shown to be bad, the Punjab Fiscal Orders, once made
have the effect of the Statute itself and become part of the Statute since
they have been made under valid rule making power. The statutory
provisions of the Punjab Act and the Rules amply delineate that regulatory G
power and the impugned import fee is nothing but a facet and
manifestation of that regulation by the State. Hence, the levy in question
is valid as a regulatory levy which has consistently been held on the
touchstone of Article 304. [969-B-E]
3.2. The issuance of liquor licence constitutes a contract between the H
936
SUPREME COURT REPORTS (2003] SUPP. 5 S.C.R.
A parties i.e. between Excise Authorities on the one hand and the individual
applicant contractor on the other. The respondent having accepted the
contracts/licences, having fully exploited the advantage flowing from the
contract to the exclusion of others and having reaped rich commercial
benefits from that activity, it is not open to the contractor to wriggle out
B from the contract by challenging, inter alia, any particular condition of
that contract/licence. [969-F-GI
c
Har Shankar and Others etc. etc. v. The Deputy Excise and Taxation
Commissioner and Ors. etc., AIR (1975) SC 1121 and Panna Lal and Ors.
v. State of Rajasthan and Ors., ( 19751 2 SCC 633, relied on.
3.3. The import fee on IMFL on rectified spirit was levied from the
Year 1986 and at no time the respondent challenged the levy of import
fee from 1986 onwards on IMFL and continued to import large quantities
of beer and paid large sums of fee as per the prescribed rates. The writ
petition was filed only in April, 1996. The respondent accepted the burden
D of this contract and obviously did so because he enjoyed the benefits
flowing from this contract. Having done so, he cannot and should not be
allowed to wriggle out of his contractual and licence obligation.
(970-D-E(
Govt. of Maharashtra and Ors. v. Mis. Deokar's Distiller, (20031 5 SCC
E 669 and Asstt.Excise Commissioner and Ors. v. Issac Peter and Ors., [1994)
4 sec 104, relied on.
Kalyani Stores v. The State of Orissa and Ors., (1966) l SCR 865,
distinguished.
F
4. Rights are vested in the State which it may part with for a
consideration. [979-E(
Har Shankar and Ors. etc. etc. v. The Deputy Excise and Taxation
Commissioner and Ors. etc., AIR (1975) SC 1121; Nashirwar and Ors v. State
of Madhya Pradesh and Ors., (1975( l SCC 29; State ofOrissa and Ors. v.
G Harinarayan Jaiswal and Ors., (1972) 2 SCC 36; State of Andhra Pradesh
v. Prabhakara Reddy, AIR (1987) SC 933; State of U.P. and Ors. v. Sheopat
Rai and Ors., (1994( Supp 1 SCC 8; State of Punjab v. Mis. Dial Chand Gian
Chand & Co., AIR (1983) SC 743; Khoday Distilleries Ltd and Ors. v. State
of Karnataka and Ors., [1995( l SCC 574; Solomon Antony and Ors. v. State
H of Kera/a and Ors., 12001( 3 SCC 694 and Kera/a Distilleries and Allied
ST ATE v. DJOV ANS MODERN BREWERIES
937
Products Limitedv. Assistant Commissioner (Assessment)(/), Commercial Tax, A
Special Circle, Palakkad and Ors., (2000) Vol. 117 STC 553, relied on.
5. In contractual relationship between the State and the licensee
whereunder the licensee having obtained a privilege and enjoyed the
benefit of it, it is not open to the licensees to turn round subsequently and
repudiate the obligations attaching with the obtained privilege.
B
State of Haryana and Ors. v. Jage Ram and Ors., AIR (1980) SC 2018;
State of Haryana and Ors. v. Lal Chand and Ors., [1984] 3 SCC 634 and
State (If Punjab v. Mis Dial Chand Gian Chand and Company, (1983] 2 SCC
503, relied on.
6. The freedom guaranteed by Article 301 is not available in liquor
because it is a noxious substance injurious to public health, order and
morality. Regulations for the purpose of Article 301 is not confined to
regulations which will facilitate the trade. (974-F]
c
The State of Bombay v. R.MD. Chamarbaugwala, (1957] SCR 874; D
Mis Fatehchand Himmatlal and Ors. etc. v. State of Maharashtra, (1977] 2
SCC ~70; B.R. Enterprises etc. v. State of U.P. and Ors. etc., [1999] 9 SCC
700; Mis. Bishamber Dayal Chandra Mohan etc. etc. v. State of U. P. and Ors.
etc. etc., AIR (1982) SC 33, State of Tamil Nadu v. Mis. Hind Stone etc. etc.,
AIR (1981) SC 711; State of Tamil Nadu and Ors. v. Mis. Sanjeetha Trading E
Co. and Ors., (1993] 1 SCC 236 and State of Bihar and Ors. v. Harihar
Prasad Debuka etc., AIR (1989) SC 1119, relied on.
7. High Court of Punjab proceeded to decide the case on a total
wrong assumption that the import fee levied is in the nature of duty which
cannot be imposed under the Excise Act, 1984 when, in fact, the import F
fee· levied is the price for parting with the privilege given to the licensee
to import beer into the State and, therefore, the same is within the
competence of the State to impose import fee. The licensee besides the
payment of duty etc. is to comply with such conditions as the State
Government may impose while formulating the excise policy for the G
concerned year. The State, is competent and entitled to impose excise duty
or counterveiling duty. Besides there is no bar on the State to charge any
other fees on account of consideration for the privilege provided to the
licensee to trade in liquor which privilege he did not otherwise have.
Therefore, the licensee is liable to com ply with the other conditions
imposed by the State Government from time to time. The levy in dispute H
938
SUPREME COURT REPORTS [2003) SUPP. 5 S.C.R.
A under challenge is an import levy. It is neither duty nor counterveiling
duty. It is part of the consideration money i.e. the price oi the privilege
given to the licensees for dealing in liquor. (979-D-FI
B
Ka!yani Stores v. The State of Orissa and Ors., ( 196611 SCR 865, held
inapplicable.
8. Punjab Excise Act, 1914 is an existing law under Clause 10 of
Article 366 of the Constitu~ion of India and its continued application is
saved by Article 372 of the Constitution of India. It is also saved by Article
305 of the Constitution from attark under Articles 301 and 303 of the
C Constitution. It is well within the legislative competence of the State.
(979-G-HI
D
Ka/yani Stores v. The State of Orissa and Ors., (196611SCR865, held
inapplicable.
B.N. Agrawal, J (Dissenting) :
I. An excise duty can be imposed on manufacturer of goods only in
terms of statute made by the Parliament. An exception thereto has been
made in the case of liquor in terms whereof the State Legislature has been
empowered to levy excise duty by reason of Entries 8 and 51 of List II of
E the Seventh Schedule to the Constitution. Legislative competence of the
State to levy any fee is, limited to levy of counterveiling duty. The State,
cannot levy any duty in addition to the counterveiling duty. The
notification refers to excise duty and counterveiling duty, which in terms
of Section 3(6-8) of the Punjab Act mean any such excise duty or
counterveiling duty as the case may be, as is mentioned in Entry 51 of
F List II of the Seventh Schedule to the Constitution. The State, therefore,
cannot levy any import fee over and above the excise duty/counterveiling
duty, having regard to the said definition. Sections 17 and 18 of the Abkari
Act, which are in pari materia with Sections 31 and 32 of the Punjab Act,
are referable to Entry SI alone. As Entry 51 puts an embargo on the State
G to make a legislation, there cannot be any gainsaying that any levy in terms
of Sections 17 and 18 of the Abkari Act would be subject thereto.
(997-G, H; 998-A-EI
2. In view of Article 366(28) of the Constitution, a regulatory impost
would, come within the purview of the tax. A fee in terms of the
H constitutional schemes may be either a regulatory licence fees or a fee in
,
STA TE v. DEY ANS MODERN BREWERIES
939
lieu of rendition of service. When no service is rendered a fee can be A
justified only by way of licence fees. Such impost, however, would be a
tax and, thus, would clearly be referable to Entry 51 of Lis.t II to the
Constitution and not Entry 66 thereof. 1998-G, HI
Corporation of Calcutta and Anr. v. liberty Cinema; 1196512 SCR 477;
D.C. Gouse & Co. etc. v. State of Kera/a and Anr. etc., (1980) l SCR 804 B
and Hindustan Times and Or.s. v. State of U.P. and Anr., JT (2002) 9 SC
317, relied on.
3.1. The State while imposing import duty has exercised its power
under the statute. The impugned notifications in no uncertain terms and C
unequivocally refer to the source of power therefor. The functions of the
State to impose a fee or tax in terms of the provisions of the statute is a
legislative function. Such legislative function must be attributed to the
source of the State's power in terms of Entry 51 of List II to the
Constitution and not otherwise. If the legislations in question are found
to be unreasonable in nature or fraud on the Constitution, it would not D
be permissible for the State to turn round and contend that such imposts
are not being levied in exercise of its taxation power but attributable to
its regulatory power is a well-settled principle of law that a thing which
cannot be done directly cannot be done indirectly. [999-B-DI
Priyanka Overseas Pvt. Ltd. and Anr. v. Union of India and Ors., [1991] E
Supp 1 SCC 102, referred to.
3.2. In relation to an administrative act, it is well settled that a
statutory authority is not permitted to support its decision on a ground
d'hors the ground stated in the order. On the same analogy, a legislation
which is found to be fraud on the Constitution, cannot, inter alia, be upheld
on any other ground. Entry 8 of List II of the Seventh Schedule to the
Constitution does not permit the State to levy a fee on import of liquor. It
deals only with production, manufacture, possession, transport, purchase
F
and sale of intoxicating liquors and nothing else. Entry 8 of List II, thus,
does not speak of import or export. Its purpose is to regulate and not G
impose any statutory impost. The State in exercise of its delegated powers
cannot do what would constitutionally be impermissible. 1999-D-Fl
Commissioner of Police, Bombay v. Gordhandas Bhanji, AIR (1952)
SC 16 and Mohinder Singh Gill and Anr. v. The Chief Election Commissioner,
New Delhi and Ors., AIR (1978) SC 851, relied on.
H
940
SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.
A
4. In Sub-Section (I) ofSeotion 33A of the Punjab Act, provision has
been made permitting the State to continue to levy any duty which it had
lawfully been levying immediately before the commencement of the
Constitution. The said provision is in tune with Article 305 of the
Constitution, therefore, the same calls for a strict construction. Sub-section
B (3) of Section 33A is couched in negative language by reason whereof
power of the State to levy any duty has been taken away in the event
thereby any discrimination is made in favour of goods manufactured or
produced in the State and similar goods manufactured or produced in
another locality. Clearly such a provision is in consonance with Article
304 of the Constitution. If by reason of a statute an embargo ha~ been
C placed on the State's power to levy any fee, it is beyond any cavil of doubt
that such a levy cannot be held to be justified by reason of an executive
action or otherwise. [999-G, H; 1000-A, B]
5. By reason of provisions of the Abkari Act or the Punjab Act, no
power has been conferred upon the State to impose any import fee over
D and above the excise dutylcounterveiling duty. It is not disputed that such
counterveiling duty has been levied and the licensees pay the same. The
power to levy fee and the power to grant licences, permits and passes occur
in different chapters of the Acts. The powers under different chapters are
required to be exercised for different purposes. One is legislative in
E character and the other refers to executive action. Furthermore, under
the Punjab Act fees for grant of licences, permits and passes are required
to be paid on the terms as the Financial Commissioner may direct. Having
regard to the fact that the Financial Commissioner is the statutory
authority in relation thereto, the State cannot be said to have any
jurisdiction thereover, particularly, in the matter of levy of import fee
F which clearly is referable to Chapter V of the Punjab Act and has nothing
to do with grant of licence occurring in Chapter VI. (1000-C-E)
G
6. Having regard to Article 265 of the Constitution a tax must be
imposed by a statute. Even such impost is impermissible by any bye-law
or rule. [1000-FI
Bimal Chandra Banerjee v. State of Madhya Pradesh etc., [1970[ 2 SCC
467 and A Venkata Subba Rao v. State of Andhra Pradesh, [19651 2 SCR
577, referred to.
Allorney General v. Wilts United Dairies, (1922) 91 Law Jourual, KB
H 897, referred to.
STA TE v. DEV ANS MODERN BREWERIES
941
7. Excise duty has been equated with the price for privileges.
[1000-GI
Synthetics and Chemicals Limited and Ors. v. State of UP and Ors.,
[199011SCC109 and Welfare Assocn. A.R.P. Maharashtra and Anr. v. Ranjit
P. Gohil and Ors., JT (2003) 2 SC 335, followed.
A
B
8. Dealing in liquor or for that matter in lottery, tobacco is not
prohibited under the Constitution. On the other hand, in the constitutional
schemes itself Parliament or the State Legislature has been conferred
power to regulate the said trade like any other trade. In fact India has
entered into trade agreements to deal in liquor with other sovereign C
countries. India has entered into International treaties in the matter of
foreign investment in liquor. Trade in liquor finds place in World Trade
Organization (WTO) and General Agreement on Trade and Tariff
(GAfr>· In terms of the WTO and GATT guidelines have been laid down
as regards import and export of potable liquor. India, as a signatory to
WTO and GATT, is expected to follow the said guidelines. It is expected D
to remove all trade barriers subject to the other provisions contained
therein. It is also supposed to levy taxes/ counterveiling duties in terms of
such international treaties. No constitutional provision or statute prohibits
trade in liquor. Article 47 of the Constitution empowers the State to impose
prohibition. Once a prohibition is imposed by any State in exercise of said E
powers, indisputably no person will have any right to deal in potable
liquor. [1002-F-H; 1003-A, BJ
9.1. Applicability of Res-extra commercium is a judge made law.
Constitution does not provide for it. Even if Entries 8, 51 and 54 of List
II, on the other hand, lead to the conclusion that the State has the F
legislative power to make regulatory enactment in the spheres provided
for them, the State indisputably may exercise its right to prohibit dealings
in liquor either wholly or partially but if it allows trade and business in
liquor by parting with its exclusive privilege a presumption will arise unless
contrary intention is shown in the statute or licence granted therefor that
it has not retained unto itself a right to deal with a part of the trade itself G
or through its agency. In the Kerala matter the State has given the
monopoly to trade in liquor in favour of the Kerala State Beverages
Corporation. Nowhere it is stated either by way of counter-affidavit or
under the statute that the State has reserved unto itself any right in the
matter relating to carrying on trade or business in potable liquor. As soon H
942
SUPREME COURT REPORTS (2003) SUPP. 5 S.C.R.
A as a licence is granted upon receipt of a fee fixed by it, the State would be
presumed to part with its entire privilege. To say that while exercising its
·regulatory power for the purpose of controlling the trade and business in
potable liquor, it has reserved unto itself a part of its exclusive privilege,
would not be correct unless the same is explicitly pleaded and proved.
B
11003-B-Fl
9.2. Regulatory measures in the matter of trade and business in
potable liquor have been taken by reason of.a statute. All regulations on
the trade, thus, must be governed by the statutes operating in the field
and not by way of executive action. The provisions of the statute or the
C contracts made thereunder must scrupulously be followed by all concerned
as they are bound by the same. When a legislation referable to Entries 8,
51 and 66 etc. had occupied the field, the State, in absence of any provision
contained in the statute, cannot turn round and contend that it will exercise
its power of exclusive privilege even though it had granted licence in terms
of the statute. Having regard to the constitutional scheme the power of
D the State to undertake trade and business is referable to Article 298 of
the Constitution. The State while exercising its constitutional power under
Article 298 of the Constitution cannot itself be an extra constitutional
authority so as to violate the constitutional provisions. It like any other
trader must confine itself within the four corners of the statutes governing
E the field which are enacted in terms of one entry or the other made in
any of the three lists to the Seventh Schedule of the Constitution.
(1003-F-H; 1004-A-CJ
9.3. A State may be entitled to either completely prohibit a trade or
business in liquor and create monopoly either in itself or in any other
F agency and furthermore it can for the purpose of selling the licence adopt
any mode with a view to maximize its revenue but while doing so it must,
not act arbitrarily. The State while carrying on business by way of parting
with its privilege or distribution of largesse must conform to the equality
clause enshrined in Article 14 of the Constitution. 11004-C, DJ
G
9.4. Privilege, thus, can be claimed by a State in a 'no right' situation,
namely, when citizen is not permitted to carry on trade. But once the State
takes a decision to part with its privilege, it cannot make any
discrimination whatsoever. Dealing in liquor by the persons in whose
favour licences have been granted in terms of the statutory enactments
derive a right therefor which cannot be said to be "Res-Extra Commercium"
H
110os-q
STATE v. DEV ANS MODERN BREWERIES
943
State of MP. and Ors. v. Nandlal Jaiswal and Ors., 119861 4 SCC 566, A
relied on.
Black's Law Dictionary; Trayner's Latin Maxims, Fourth Edn.; Words
and Phrases, Volume l /5A and Bouvier's Law Dictionary, Vol.I, Third Edn.;
referred to.
10.1. Article 19(l)(g) guarantees that all citizens shall have the right B
to practice any profession or to carry on any occupation, trade or business.
However, in terms of Article 19(6) this right can be restricted by a statute
imposing reasonable restrictions. A combined reading of clauses (1) and
(6) of Article 19 makes it clear that a citizen has a fundamental right to
carry on any trade or business and the State can make a law imposing C
reasonable restrictions on the said right in the interest of the general
public. It is, therefore, obvious that unless dealing in liquor is excluded
from 'trade or business', a citizen has a fundamental right to deal in that
commodity. (1005-D-F)
The State of Bombay and Anr. v. F.N. Balsara, 11951) SCR 682; D
Cooverjee B. Bharucha v. The Excise Commissioner, Ajmer and Ors., (1954)
SCR 873; Saghir Ahmad and Anr. v. State of UP. and Ors., AIR 1954 SC
728; State of Kera/a and Ors. v. P.J. Joseph, AIR (1958) SC 296; Krishna
Kumar Narula v. State of Jammu and Kashmir and Ors., (1967) 3 SCR 50;
The State of Bombay v. R.M.D. Chamarbangwa/a, (1954) SCR 873 and Har
Shankar and Ors. v. The.Deputy Excise Taxation Commissioner and Ors., E
(1975) 1 sec 837, referred to.
P. Crowley, Chief of Police of the City and County of San Fancisco,
California v. Henry Christenses, (1890) 34 Law. Ed. 620(A), referred to.
• 10.2. A person cannot claim any right to deal in any obnoxious
substance on the ground of public morality. The State, therefore, is entitled F
to completely prohibit any trade or commerce in potable liquor. When it
is not a crime to carry on such business having regard to the fact that a
person has been permitted to do so by the State in compliance with the
provisions of the existing laws, indisputably he acquires a right to carry
on business. Even in respect to trade in food articles or other essential G
commodities either complete prohibition or restrictions are imposed in the
matter of carrying on any trade or business, except in .terms of a licence
granted in that behalf by the authorities specified in that behalf. The
distinction between a trade or business being carried out legally or illegally
having regard to the restrictions imposed by a statute would have,
therefore, to be judged by the fact as to whether such business is being H
944
SUPREME COURT REPORTS [2003) SUPP. 5 S.C.R.
A carried out in compliance of the provisions of the statute(s) operating in
the field or not. The doctrine of res extra commercium, thus, would not be
attracted, when a person carries on business under a licence granted in
terms of the provisions of the regulatory statutes. (1010-G-H; lOll-A-DJ
" io.3. No case and in particular the decisions relied upon by the
B counsel appearing .on behalf of the State of Punjab and that of Kera la had
evolved a principle that despite paying a large amount of licence fees and
despite fulfilment of terms and conditions of licence and other statutory
provisions, the trade or business carried out by the licensee shall be at an
eternal peril, wllich may at any point of time be determinated or a new
tax imposed or thtj. be proceeded against at the whims or caprice of the
C executive wing of the State. In our constitutional scheme such a situation
is unthinkable. The country is governed by rule of law and despite
existence of a valid legislation operating in the field, executive whims or
caprice cannot be permitted to have any role to play. Validity of a tax
imposed by the State Legislature, thus, must be determined on the
D constitutional anvil of the legislative competence and not on any other
basis. The decisions of this Court which had no occasion to consider these
aspects of the matter can be of no assistance and would not constitute
binding precedents. [1011-D-GJ
Bhavnagar University v. Palitana Sugar Mill (P) ltd. and Ors., [2003)
E 2 sec lll, relied on.
10.4. The right of the State to carry on trade or business under
Article 298 of the Constitution would be subject to the same constitutional
limitations in the matter of carrying on trade or business in liquor as in
other cases, the distinction being only that the State has a monopoly to
do so. Once the State does not exercise the said right and considers it
F expedient to allow the citizens to carry on the business or trade, it cannot
be said that the licensees do not derive any right whatsoever. Even when
the State exercises such right by creating a monopoly in itself, it would be
subject to the same constitutional limitations as envisaged, inter alia, under
Articles 14 and 301 of the Constitution, which protect from the maladies
G of discrimination. Such discrimination may be in between persons and
persons, persons and State and State and State. [IOll-G-H; 1012-A, BJ
10.5. Once the regulations restricting the right to carry on business
in potable liquor is attributed to reasonable restrictions and public interest
clause, contained in clause (6) of Article 19 of the Constitution, the
H fundamental right to carry on trade under Article 19 is conceded. Once
STATE v. DEV ANS MODERN BREWERIES
945
such a right is conceded, it cannot be said that although a person has a A
Fundamental Right to carry on trade or business for the purpose of Article
19(1)(g), subject to imposition of reasonable restrictions by a law made
in terms of clause (6) of Article 19, he does not have such a right in terms
of Article 301 of the Constitution or for that matter Article 14 thereof.
Articles 303 and 304 of the Constitution also provide for imposition of B
restrictions and thus even a freedom guaranteed to a person under Article
301 is not an absolute one, but subject to the constitutional limitations
provided therefor. Article 301 confers freedom but not a licence. The
protection from discrimination as envisaged in Khoday Distilleries would
not only operate against the State which is the licensor but having regard
to the constitutional goals to be achieved by the commerce clause contained C
in Article 301, must be extended to another State which seeks to impose
restrictions on import. [1012-D-G)
Khoday Distilleries Ltd. and Ors. v. State of Karnataka and Ors., (1995)
1 sec 574, referred to.
10.6. An inhibition by Article 301 has been provided to the effect D
that the Legislature shall not interfere in the commerce between the State
and State as also to the effect that the Legislature of a State shall not give
any preference to one State over the other. Article 301 of the Constitution
in no uncertain terms provides for freedom in the matter of trade,
commerce and intercourse. Such trade, commerce and intercourse are E
inter-State as also intra-State. By reason of Part XIII of the Constitution,
the Constitution makers sought to evolve a high policy. On a comparison
made between Section 297 of the Government oflndia Act, 1935 with Part
XIII of the Constitution, it will be found that the latter is wider than the
former. The said part of the Constitution is a self-contained part. Several
improvements made in Part XIII of the Constitution as compared to F
Section 297 are worth taking note of. By reason of the said provisions,
the entire country has been considered to be one economic unit. It now
embraces within its fold both 'commerce and trade' and not 'trade' alone.
'Commerce' was provided for in Entry 27 of List II only under the 1935
Act. Part XIII, however, refers to the relevant entries contained in all the G
Lists of Seventh Schedule to the Constitution. (1014-8-E)
10. 7. The limitation of power as regards legislative competence of
the State and the Parliament having regard to clause 2 of Article 303 and
sub-clauses (a) and (b) of Clause (1) of Article 304 is clear pointer of the
new dimension given to Article 301 of the Constitution. Even if a H
946
SUPREME COURT REPORTS [2003) SUPP.