# STATE OF U.P., ETC. ETC v. SYNTHE11CS & CHEMICALS LTD. & ORS. ETC. ETC . •

- **Citation:** [1980] 2 S.C.R. 531
- **Court:** Supreme Court of India
- **Decided:** 1979-12-19
- **Case number:** Civil Appeal No. 1130 of 1976
- **Bench:** A. C. Gupta, P. S. Kailasam
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/state-of-u-p-etc-etc-v-synthe11cs-chemicals-ltd-ors-etc-etc-7908
- **Pages:** 23

## Headnote

Excise laws-"Denatured spirit" if an intoxicating liquor-Licence fee levied
r
011 sale d"latured spirit-If within the competence of the Stdte.
)
The respondents who were licensees for the whole.sale vend of denatured
spirit in their v.Tit petitions before the High Court con.tended that levy of fees
on denatured ~pirit was not justified because (i) the Sta•tci was not proViding
any service to the trade and (ii) since it is. the; Parliament which has the power
C:
to levy excise, duty or tax on denatured spirit, th~ State was incompetent to levy
the fees.
llej~cting the contentions, the fligh Court held that the State had
exclusive privilege to deal with any intoxicating liquor which included dena-tured
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 (I)
})
levy o( vend fee on denatured spirit by thei State was without legislative com·
petence (2) with the ena<:tment 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.
Atowing the State's appeal.
IIELD : 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 surh liquors. A conspectus of the decisions of this
Court
esta·blbhes (i) that there is no fundamental right of a citizen to carry on tfade
E
or to do business in liquor because under its police pov/er, the State can enforce
public morality, prohibit trade in noxious or dangerous goods (ii) the State
F
has pGwer to enforce an absolute prohibition on manufacture or sale of in1oxj,
eating liquors pllfsuant to Atiicle 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 n1anufacture· or sell liquors. [549 F-H]
Stat!! of Bo1nbay and Anr. v. F. N .. Balsara [1951] S.C.R. 1582 referred to.
(iv) The terms "intoxicating liquor" is not confined t'o potable liquor alone
but would include allliquors which contain alcohol. [537 G]
l'lasiiirwar v. State of Nladhya Pradesh [1975] 2 S.C.R. 861; Har Shankar v.
The D~puty Excise and Taxation Co1nmisisoner [1975] 3 S.C.R. 254; State of
Bornbay and Anr. v. F. i\l. Balsara & Ors. (1951] S.C.R. 682; B!zola Prasad v.
The King Emperor [1942] F.C.R. 17 at p. 25 referred to.
G
-,
(v) The torm "liquor" used in Abkari Acts not only covers alcoholic liquor
H
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which is, generally used for beverage purposes and which produces intoxication
but would also include liquids containing alcohols. [537 B-C]
532
SUPREME COURT REPORTS
(1980] 2 S.C.R.
A
Cooverjec B. Bharucha v. The Exci!Je Commissioner and Chief Conzmfasioiier,
B
c
D
Ajn1er & Anr. [1954] S.C.R. 873; Mis. Guruswamy & Co. etc. v. State. of i\Jy.~ore
& Ors. [1967] I S.C.R. 548;Swte of Orissa & Ors. v. Harinarayan laisiral &
Ors. [1972] 3 S.C.R. 784; Anzar Chandra Chakraborty
v.
Collector of Excise,
Gove1nnient of Tripura anti Ors. [1973] 1 S_._C.R. 533; Har Shankar & Ors. etc.
v. The Dy. Excise & 1 axation Conunissioner & Ors. [1975] 3 S.C.R. 254 ·referred
to.
2(a) The power to reguJa_.te the notified industries is not e:LX.clusively within
the jurisdiction of Parliament as Entry 33 in the Concurrent List enables a Jaw
to be made regarding production, supply and distribution o.f products of notified
industries. The exclusive. power of the State to provide for manufacture, distri·
bution, sale nnd 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,

## Text

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531
STATE OF U.P., ETC. ETC.
A
v.
SYNTHE11CS & CHEMICALS LTD. & ORS. ETC. ETC .
•
December 19, 1979
[A. C. GUPTA AND P. S. KAILASAM, JJ.]
Excise laws-"Denatured spirit" if an intoxicating liquor-Licence fee levied
r
011 sale d"latured spirit-If within the competence of the Stdte.
)
The respondents who were licensees for the whole.sale vend of denatured
spirit in their v.Tit petitions before the High Court con.tended that levy of fees
on denatured ~pirit was not justified because (i) the Sta•tci was not proViding
any service to the trade and (ii) since it is. the; Parliament which has the power
C:
to levy excise, duty or tax on denatured spirit, th~ State was incompetent to levy
the fees.
llej~cting the contentions, the fligh Court held that the State had
exclusive privilege to deal with any intoxicating liquor which included dena-tured
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 (I)
})
levy o( vend fee on denatured spirit by thei State was without legislative com·
petence (2) with the ena<:tment 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.
Atowing the State's appeal.
IIELD : 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 surh liquors. A conspectus of the decisions of this
Court
esta·blbhes (i) that there is no fundamental right of a citizen to carry on tfade
E
or to do business in liquor because under its police pov/er, the State can enforce
public morality, prohibit trade in noxious or dangerous goods (ii) the State
F
has pGwer to enforce an absolute prohibition on manufacture or sale of in1oxj,
eating liquors pllfsuant to Atiicle 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 n1anufacture· or sell liquors. [549 F-H]
Stat!! of Bo1nbay and Anr. v. F. N .. Balsara [1951] S.C.R. 1582 referred to.
(iv) The terms "intoxicating liquor" is not confined t'o potable liquor alone
but would include allliquors which contain alcohol. [537 G]
l'lasiiirwar v. State of Nladhya Pradesh [1975] 2 S.C.R. 861; Har Shankar v.
The D~puty Excise and Taxation Co1nmisisoner [1975] 3 S.C.R. 254; State of
Bornbay and Anr. v. F. i\l. Balsara & Ors. (1951] S.C.R. 682; B!zola Prasad v.
The King Emperor [1942] F.C.R. 17 at p. 25 referred to.
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-,
(v) The torm "liquor" used in Abkari Acts not only covers alcoholic liquor
H
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which is, generally used for beverage purposes and which produces intoxication
but would also include liquids containing alcohols. [537 B-C]
532
SUPREME COURT REPORTS
(1980] 2 S.C.R.
A
Cooverjec B. Bharucha v. The Exci!Je Commissioner and Chief Conzmfasioiier,
B
c
D
Ajn1er & Anr. [1954] S.C.R. 873; Mis. Guruswamy & Co. etc. v. State. of i\Jy.~ore
& Ors. [1967] I S.C.R. 548;Swte of Orissa & Ors. v. Harinarayan laisiral &
Ors. [1972] 3 S.C.R. 784; Anzar Chandra Chakraborty
v.
Collector of Excise,
Gove1nnient of Tripura anti Ors. [1973] 1 S_._C.R. 533; Har Shankar & Ors. etc.
v. The Dy. Excise & 1 axation Conunissioner & Ors. [1975] 3 S.C.R. 254 ·referred
to.
2(a) The power to reguJa_.te the notified industries is not e:LX.clusively within
the jurisdiction of Parliament as Entry 33 in the Concurrent List enables a Jaw
to be made regarding production, supply and distribution o.f products of notified
industries. The exclusive. power of the State to provide for manufacture, distri·
bution, sale nnd 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-Bl
Ch. Tika J?an1ji and Ors. etc. v. The State of Uttar Pradesh and Ors. [1956]
S.C.R. 393; Baijnath Kedai v. State of Bihar & Ors. [1970] 2 S.C.R. 100 dlstin·
guished.
(b) The term "foreign liquor" cannot be given a restricted mooning because
the \\'ord consu1nption cannot be confined to consumption of beverages oilly.
When liquor is put to any use1 such as manufacture of other articles, the liquor
is al! the same consun1ed. The State is empowered to declare v.;hat sbaTI be
deemed to be country liquor or foreign liquor.
"Foreign liquor" is defiried as
meaning all rectified, perfumed, medicated and denatured spirit wh(!rever made.
E
Therefore, the plea that the· Excise; Commissioner had no right to accept paoyment
in consideration for the grant of licence for the exclusive privilege for selling
in \Vholesale or retail, foreign liquor \Vhich incJpdes denatured spirit cannot be
accepted. [548 H, 549 A-Bl
-
1 ,
( c) The definition of "alcohol" includes both ordinary as
well as specially
denatured spirit.
The specially denatured spirit
for
industrial purposes
is
F
different from denatured spirit only because of the difference in the quantity and
quality of the denaturants.
Specially dem.atured 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 AJ
CIVIL APPELLATE JURISDICTION : 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. 8069/72.
AND
CIVIL APPEAL NOS 2248/78, 2191-2198/78 A.VD 2284/78.
H
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, 357-359/'75.
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U.P. STATE v. SYNTHETICS CHEMICALS (Kailasam, J.)
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.
11702/77.
AND
CIVIL APPEAL NO. 626 of 1979.'
Appeal by Speciai Leave from the Judgment and
Order cfated
17-10-1978 of the High Court of Judicature. of Allahabad in Civil Misc.
Writ (Tax) No. 824/75.
AND
WRIT PETITION NOS. 4663-4664 of 1978 & 4501 of 1978.
Under Article 32 of the Constitution.
AND
SPECIAL LEAVE PETITION (CIVIL) NOS. 6526-28/78, 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. 89/77, 3822/73, 540/75 and 4129-30 of 1976 and C.W.
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No. 703 /76 and C. Misc. Writ No. 41 /76.
E
Rishi Ram, Advocate General for the State of U.P., G. N. Dikshit,
0. P. Verma, S. C. Verma and Mrs. Sadhna Ramchandran, for the
-~
Appellant in CA No. 1130/76 and respondents in all the matters.
F. S. Nariman, Dr. L. M. Singhvi, B. G. Murdeslnvar, P. C. Murdeshwar, P. C. Bhartari, S. P. Nayar, L. K. Pandeya, N. R. Khairan,
Praveen Kumar, Miss Reena Gupta, Anip Satchthey and Mrs. Baby
Krishnan for the Appellants and Petitioners in all other matters and
respondents in CA 1130/76.
F. S. Nariman, Talat Ansari, R. Narain and S. p. Nayar for the
Intervene.rs (M/s .T. 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
Speci,U Leave Petitions raise the samei question and can be disposed of
by a common judgment.
C.A. No. 1130/76 is by the. State.
The other Appeals, Writ Petitions and Special Leave Petitions are by the aggrieved parties.
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534
SUPREME COURr REPORTS
[19<D! 2 s.c.R.
For thu 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 Petition~ 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 tho writ
petitions.
The appellants have licenses for the wholes.ale 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 tliat 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 o[ the denatured spirit.
The main point that was considered by the High Court was whetheJ:
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 Nashinvar v. State of Madhya Pradesh(')
and Har Shankar v. Ihe Deputy Excise and Taxation Commissionei·('),
held that the State has exclusive privilege to deal in intoxicating liquor
and, therefore, the Stato 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 thel 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 Art. 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 U.P. Excise (Amendment) Act 5 of 1976
has been challenged as unconstitutional and beyond the legislative competence of thel State.
It is further pleaded that the provisions of the
(I) [1975] 2 S.C.R. 861.
(2) [1975] 3 S.C.R. 254.
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U.P. STATE v. SYNTHETICS CHEMICALS (Kailasam, J.)
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 0f the State Legislature.
U.P. Excise Act was enacted in the year 1910. It empowers the
State to prohibit the import and export, transport manufacture sale and
possc'5ion of liquor and all intoxicating drugs in the United Prnvinces.
The vend fee was first imposed by the Government of U.P. on J 8-3-193 7
on denatured spirit.
In 1972 the State Legislature enacted the U.P.
Excis.: Amendment Act l3 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 eliect
of which was that a vend fee of Rs. 1.10 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 CourB 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 v. State
of Madhya Pradesh (supra) and Har Shankar v. The Deputy Excise,
und Taxation Com'11issioner, (supra) held that the State under its
regulatory powef5 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 retai~ or wholesale foreign
liquor was upheld.
Relying on the two decisions of this Court, the u.P. State Legislature repealed and re-enacted the U.P. Excise (Amendment) Act No.
30 of 1972 by the U.P. Excise (Amendment) (Re-enactment and Validation) Act, 1976. The validity of the amendment Act 1976 was aga'n
challenged in the Allahabad High Court in V. P. Anand and Sons v.
State of U.P. ('). 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.
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Mr. Nariman learned counsel raised several contentions.
The first
G
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 Stllte to grant privilege for t!Je manufacture and sale of intoxicating liquor, it was submitted that the right did
(I
1976 A. L. J. 436-F.B.
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536
SUPREME COURT REPORTS
(1980] 2 S.C.R.
not extend to denatured spirit used for industrial purposes as it is confined only to potable liquor.
The second important cqutention raised
by the learned counsel was that after the enactment of Industries
(Development; and Regulation) Act, 1951 unde~ 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 licence/permit or otherwise the distribution,
transport,
disposal,
acquisition, possession, use or consumption of any ,article relatable fo a
schedule industry as for example denatured spirit or industrial alcohol.
In State of Bombay and An1'. v. 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 intoxicatimg liquor that is to say the production, manufacture,
i:ossession, transport, purchase and sale of intqxicating liquors. ·The
corresponding entry in the Constitution of ln;dia is List II Entry 8
which is in identical terms.
The plea that wa~ 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
worcjs '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 C.J., in mwla
Prni,od v. 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 C11ief Justice observed :-
"It is difficult to conceive of legislation with respect to
intoxicating liquors and narcotic drugs which did not deal iii
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."
(I) [195lj 2 S.C.R. 682.
(2) [1942] F.C.R. 17" p. 25.
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U;P. STATE v. SYNTHETICS CHEMICALS (Kailasam, J.)
537
The above observations were affirmed by this Court in Balsara's
A
case (supra), Dealing with the meaning of word 'liquor', the Court
referoxl 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,
B
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 conCiuded that the word 'liquor' covers not only those
alcoholic liquids which are generally used for beverage purposes and
produc~ intoxication, but also nll liquids containing alcohol.
By
adopting another method of npproach, the Court observed that th~ c
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 delfnition
of the word 'liquor' would have to be adopted so a~ to include all alcoholic liquids which may be used as substitution of intoxicating drinks
to the detriment of the health.
In Nashirwar v. The State ol Madhya
D
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 tbnt there is no
fundamental right of citizen to carry on trade or to do business in
E
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 4 7 states that the State
shall endeavour to bring about prohibition of the consumption except
F
for medicinal purpose of intoxicating drinks and of drugs which are
injuriows to health. Third, the history of excise laws shows that the
State has tbe exclusive right or priyjlege of manufacture or sale of
liquor.
After pointing out the three principal reasons, the Court
followed. the decision in SlcJI~ of Bombay and Anr. v. F. N. Balsara(')
holding that absolute prohibition of manufacture or sale of liquor is
G
permissible and the only exception can be for medicinal preparations.
In the context. it is clear that the decisions proceeded on the basis that
tbe word 'intoxicating liquor' is not confined to p0table liquor alone
but would include all liquor which C-Ontain alcohol.
Mr. Nariman, the learned counsel, submitted that the two casesBa/sara's case (supra) and the Nashlrwar's case (supra)-cannot be
------
(!) [1951] S.C.R. 682.
13-21 SCI/80
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SUPREME COURT REPORTS
[1980] 2 S.C.R.
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 re!a,ting to prohibition
and the decisions should be restricted to liquor which may contain
alcohol which is likely to be misused as potable liquor.
In suppo1t
of his contention, the learned counsel referred to two decisions A.
Nageshwara Rao v. State of Madras(') and Malit/al Chandra v. 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 us'ed 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 v. The Excise Commissioner and Chief
Colllmissioner, 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 M/s. Guruswamy & Co. etc. v. State of Mysore & Ors.(4) 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. v. Harinarayan Jaiswal
& Ors.(•) related to sale by public auction of the exclusive privilege
of selling country liquor in retail shops.
Amar Chandra
Chakraborty v. Collector of Excise, Government of Tripura
and Ors,, (')
also related to the cancellation of the licence by the Excise Collector
(1) A.1.R. 1954 (Mad) 643.
(2) I.L.R. 39 Cd. 1053.
(3) [1954] S.C.R. 873
(4) [1967] I S.C.R. 548.
(5) [1972] 3 S.C.R. 784.
(6) [1973] 1 S.C.R. 533.
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U.P. STATE v. SYNTHETICS CHEMICALS (Kailasam, !.)
5 3 9
to establish warehouse for the stornge 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. etc. v. Tile 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 a11d
Anr. v. F. N. Balsara-[1951] SCR. 682, Cooverjee B.
Bharucha v. The Excise Cpmmissioner and the Chief Commi.lsioner, Ajmer and Ors.-[1954] SCR.
875,
State of
Assam v. A. M. Kidwai, Commissioner of Hills Division and
Appeals, Shillong-{1957] SCR.
295,
Nagendra
Nath
Bora and Anr. v. 1'he Commissioner of Hills Division and
Appeals, Assam.and Ors.-[1958] SCR. 1240, Amar Chandra
Chakraborty v. Collector of Excise, Government of Tripura
& Ors.-[1973] 1 S.C.R.
633
and
State of Bombay
v. ,R.M.D. Chamarbaugwala-[1957] SCR. 874 as interpreted in State o~ Orissa and Ors. v. Harbzarayan Jaiswal
and Ors-[1972] 3 SCR. 784 and Nashirwar Etc. v. State
of Madhya Pradesh and Ors. Civil Appeals Nos. 17111721 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 0f 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 be 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,
(4) (197'] 3 S. C. R. 254.
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SUPREME COURT REPORTS
[1980] 2 S.C.R.
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 clas·s 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 af 1914. Th~ 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
~e 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
liqnor which includes liquor contnining alcohpl 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 monoply 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 ll of the
Seventh Schedule of the Constitution.
List I Entry 52 runs as folc
lows:-
"Industries, the control of which by the Union is declared by Parliament by Jaw to be expedient in the pnblk
interest".
In List II the entry relating to industries is Entry 24 which is as
follows:-
"Industries mbject to the provisions of (entries 7 and
52 of List 1)".
Entry 7 in List I relates to industries to be declared by Parliament
H
by law to be necessary for the purpose of defence or for the prosecution of war.
In this case we arei not concerned with Entry 7. A
reading of Entry 52 in List I and Entry 24 in List II makes it clear
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U.P. STATE v. SYNTHETICS CHEMICALS (Kailasam, J.)
541
that the Parliament will have exclusive jurisdiction to legislate regardA
ing 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 ID 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 ornducts :
(b) x x x
(c)
x
x
x
( d)
x x x
(e)
x x x"
The subject of trade and comme.rce in, and the production supply
and distribution of the products of any industry which has been declared by Parliament under Item I Entry 52 is in the Concurrent List
on which both Parltament and State can legislate.
The Industries (Development and Regulation) Act, 1951 was
enacted by Parliament to provide for development and regulation of
certain indv~tries. Section 2 declares that it is expedient in the public
intere3t 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 prodm;ts 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 amend·
ment 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 18 (b) confers power on the Central Government to control, supply, distribution, price, etc. of certain articles. As
considerable reliance was placed on Section 18(G) 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)(l) runs as follows:-
"'I'be Central Government, so far as it appears to it to
be necessary or expedient for securing the equitable distriB
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[l980J 2 s.c.R •
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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."
B
Sub-section 2 of Section 18(G) 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
18(G) (1)
~ is exercisable by the Central Government in so far as it considers it
C
to be necessary or expedient.
TI1e 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 not.ification that
is relied on is the Ethyl Alcohol (PT<ce Control) Amendment Order,
n
1975 dated 31st October, 1975.
The order reads as follows :-
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"In exercise of the powers conferred by S. 18(G) of the
Industries (Development and Regulation) Act, 1951
(115
of 1951), the Central Government hereby makes the following order further to amend the Ethyl Alcohol (Price Control) Order, 1971 namely :
I. (l) 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.
2. 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 :-
(2)
1.
Absolute Alcohol Conforming to TSI
Six hundred and sixty eight rupees and
Standard No. 321-1952., names for
forty one paise per kilo litre.
equivalent volume at 100 per cent v/v.
strength;.
2.
Rectified spirit conforming to ISI Six hundred and twenty two rupees
stanGard No.
323~1959 named for
and twenty paise for kilo litre.
equivalent volume at 100 per cent v/v
strength.
3.
Rectified spirit conforming to ISi Five hundred and eighty nine rupees
standard No. 323-1959 named for
and ten paise per kilo litre.
94 ·68 per cent v/v strength.
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U.P. STATE v. SYNTHETICS CHEMICALS (Kailasam, !.)
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 S. 18(G) (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 S. 18(G)
of the Industries (Development and Regulation) Act, 1951 fixed the
maximum ex-distillery price for industrial alcohol and rectified spirit
under d. 1 and 2 of the Order. Cl. 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 p:rmitted 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
denatur:mts plus some octroi charges as specified in the clauses. Cl.
3(a) empowered the Excise Co=issioner 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.
2(2) (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 o! 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 Co=erce within the State subject to the
provisions of entry 33 of List III."
Und1:r Entry 33 List III the Parliament and the State have concurrent powers to legislate regarding the production,
supply
and
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~llPREME COURT REPORTS
[1980] 2 S C.R.
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. etc. 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. etc. v. The State of Uttar Pradesh and
Ors.( 1) 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 wre issued by the State
Government
under the U.P. Sugarcane Regulations, supply and purchase Act 1953
prohibiting the occupier of the factory to w!iich 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 11\atter 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 IHA 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
(1) .[1956] S.C.R. 393.
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U.P. STATE v. SYNTHETICS CHEMICALS (Kailasam, J.)
545
their sugarcane from the cooperative societies and assigned certain
A
areas as cane purchasing centre for the factories was stated to be ultra
vlres 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
Ill and both Parliament and the State Legislatures bad
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
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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."
E
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 meanin11 of Section 18(G) 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.
F
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 takei:i away.
In Baijnath Kedvai v. State of Bilwr & Ors.(') a question arose as
G
to whether the Bihar Legislature. had jurisdiction to enact the second
proviso to section 10(2) of the Bihar Land Refotms 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 >trength of the
amended section 10(2) of the Reforms Act and amended Rules 20
H
the Bihar Government demanded from the appellant rent contrary to
(1) [1970] 2 S.C.R. 100.
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[1980] 2 S.C.R.
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.