TMI Blog1974 (11) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... 1974 - RAY, A.N. (CJ), MATHEW, KUTTYIL KURIEN AND UNTWALIA, N.L., JJ. For the Appellant : B. Sen, S. Balakrishnan and N. M. Ghatate, S. S.Khanduja and S. K. lain, S. N. Andley, R. P. Kapur and I. N. Shroff, D. V. Patel, Y. S. Chitale, N. K. Shreedharan,V. Bhaskaran Nambuar, P. K. Sreedharan, P. Sankaran Kutty and A. S. Nambiar, D. V. Patel and S. Gopalakrishnan For the Respondent : K. T. Harindernath, K. M. K. Nair, Lily Thomas, (K. J, Joseph) JUDGMENT: RAY, C.J. The principal question in these civil appeals and writ petitions is whether it is permissible for the State Government to auction licences for carrying on the business of selling foreign liquor which is neither manufactured nor imported by the State Government. Some of these appeals relate to State of Madhya Pradesh and others relate to State of Kerala. The Madhya Pradesh appeals are governed by the Central Pro- vinces and Berar Excise Act 1915 which became applicable to Madhya Pradesh as the Central Provinces Excise Act, 1915. This will be referred to as the Madhya Pradesh Act. The Kerala Appeals are governed by the Abkari Act (Act No. 1. This will be referred to as the Abkari Act. Prior to 1 Apr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts. Sections, 17 and 18 of the Madhya Pradesh Act are important for the purposes of these appeals. Section 17 deals with licences for sale of intoxicants. Section 18 states that the State Government may lease to any person on such conditions and for such period as it may think fit the right (a) of manufacturing or of supplying by wholesale, or of both, or (b) of selling by wholesale or by retail, or (c) of manufacturing or of supplying by wholesale, or of both, and selling by retail any liquor intoxicating drug within any specified area. The Abkari Act which governs the Kerala Appeals in sections 6 to 11 deal with import, export and transport of liquor or intoxicating drugs. Permission of the Government is required for import, export of liquor. Section 9 of the Abkari Act confers power on the Government to prohibit, transport of liquor from any local area to any other local area. Sections 12 to 15C of the Abkari Act deal with manufacture, possession and sale of liquor or intoxicating drug. Manufacture is prohibited except under the provisions of the Act, viz., licence granted by the Commissioner. The establishment and control of distilleries, breweries, warehouse etc. is by grant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specified areas. The Madhya Pradesh Act as well as thE Abkari Act states that ciTizens cannot have the right to carry on trade in liquor except to the extent and subject to such conditions as may be imposed by the legislature under its regulatory powers. The Acts deal with four principal forms of activities pertaining to liquor. First, the import, export and transportation of liquor is regulated by providing for passes on terms and conditions mentioned in the Act. A fee is also prescribed for such passes. Second, the manufacture of liquor is dealt with by providing for licences from the State Government and fees are prescribed for such licences. Third, the possession of liquor requires a permit from the Government and a fee therefor. Fourth, the sale of liquor ,is dealt with by sections 17 and 18 of the Madhya Pradesh Act and section 18A of the Abkari Act. The Acts speak of the grant of privilege or right to sell liquor by lease. The Government can hold a public auction to grant lease. The State Government accepts payment of a sum in consideration of the grant of any lease. The amount of bid at a public auction represents the consideration for the grant of such right or privileg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "There is no inherent right in a citizen to sell intoxicating liquors by retail; it is not a privilege of a citizen of the State or of a citizen of the United States. As it is a business attended with danger to the community, it may, as already said, be entirely prohibited, or be per- mitted under such conditions as will limit to the utmost its evil. The manner and extent of regulation rest in the discretion of the governing authority". Bharucha's case (supra) negatived the contention of inherent right of citizens to carry on trade in intoxicating liquors. Bharucha's case (supra) lays down three propositions. First, that there is no inherent right of citizens to carry on trade in intoxicating liquors. Second, the auction sale of liquor shop is a method by which carrying on particular trade in liquor is regulated and one of the purposes of regulating is to raise revenue. Third, there can be a monopoly only when a trade which could be carried on by all persons is entrusted to one or more persons to the exclusion of the general public. That is not the case with the business of liquor. This Court in Narula's case (supra) referred to the decision in Bharucha's case (supra) and the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e pays for the exclusive privilege of selling toddy from certain shops. The licensee pays what be considers to be equivalent to the value of the right. It has no relation to the production or manufacture of toddy. The only relation it has to the production or manufacture of toddy, is that it enables the licensee to sell it. The privilege of selling is auctioned welt before the goods come into existence. The levy is in respect of the business of carrying on the sale of toddy. Narula's case (supra) was explained by this Court in a Bench decision in State of Orissa Ors. v. Hari Narayan Jaiswal and Ors. [1972] 3 S.C.R. 784 with considered whether the sale by public auction of the exclusive privilege of selling by retail country liquor in 8 shops was valid. The respondent was the highest bidder there. His bid was rejected. The Government was of the view that inadequate prices had been offered because of collusion between the bidders. Fresh tenders were called for. The State accepted the tender in respect of one shop and rejected the others. The remaining seven shops were sold by private negotiation for substantially higher prices. The respondent whose highest bid was rejected applie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Second, there is power of the State to enforce an absolute prohibition of manufacture or sale of intoxicating liquor. Article 47 states that the State shall endeavour to bring about prohibition of the consumption except for medicinal purpose of intoxicating drinks and of drugs which are injurious to health. Third, the history of excise laws shows that the State has the exclusive right or privilege of manufacture or sale of liquor. In Balsara's case (supra) this Court referred to Article 47 and said that the idea of prohibition was connected with public health. The challenge to a prohibition law under our Constitution was made under Article 14 and 19 in Balsara's case. This Court held that absolute prohibition of manufacture or gale of liquor is permissible and the only exception can be for' medicinal preparations. The concept of inherent right of citizens to do business in liquor is antithetical to the power of the State to enforce prohibition laws in respect of liquor. Das, C. J. in State of Bombay v. R. M. D. Chamarbaugwalla [1957] 874 said that gambling could not be regarded as trade or business within the meaning of Article 19 (1) (f) and (g) and Article 301. 'Inherently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and privilege of sale. The Government of India appointed an Excise Committee in 1905. The measures recommended- by the Committee were the advances of taxation, the concentration of distillation, the extended adoption of the contract distillery system. The Committee suggested among other things the replacement of the then existing excise law by fresh legislation on the lines of the Madras Abkari Act. (See Dr. Pramatha Nath Banerjee : History of Indian Taxation p. 470 seq.). Reference may be made to the Taxation Enquiry Commissioner Report 1953-54 Vol. 3. At page 130 following there is a discussion of State excises. Among the major sources of revenue which are available to the State Government there is a duty on alcoholic liquors for human consumption. At page 132 of the Report it is stated that in addition to the excise duties, licence fees are charged for manufacture or sale of liquor or for tapping toddy trees etc. Similarly, several it fees, vend fees, outstill duties are also levied.Manufacture or sale of liquor is forbidden except under licences which are generally granted by auction to the highest bidders. The manufacture of country spirit is done in Government distilleries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intly or separately, for such periods as may be deemed eligible. The Board of Revenue is aforesaid was also authorised to alter, amend and enlarge rules for regulating the exclusive manufacture and sale of country arrack, toddy and other fermented liquors, and the exclusive sale of foreign spirits. The other provisions were that licences for renting out the exclusive privilege of manufacturing of country, arrack, toddy or other fermented liquor, and of retailing spirituous liquors would be prepared by the Board of Revenue. Act XXIII of 1841 of the Madras Presidency, Act XXXII of 1845 of the Madras Presidency, Sections XLIII to XLVII of Regulation VII of 1932 of the Madras Presidency all indicate that it is the right and privilege of/ the State Government to manufacture, sell intoxicant liquors and the State grants lease of such rights by public auction on rental in consideration of the grant of such right. The excise revenue arising out of manufacture and sale of intoxicating liquors is one of the sources of the State Exchequer. One of the principal sources of State revenue is customs and excise. In England sale of intoxicating liquors although perfectly lawful at common law is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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