TMI Blog2003 (11) TMI 558X X X X Extracts X X X X X X X X Extracts X X X X ..... ional provisions including Article 301 thereof. The freedom guaranteed under Article 301 of the Constitution of India may not be considered in isolation having regard to the expression contained therein that such freedom is subject to Part XIII of the Constitution of India. The right to carry on trade in liquor is a fundamental right within the meaning of Article 19(1)(g) of the Constitution of India and the State may, however, legislate prohibiting such trade either in whole or in part in terms of Clause (6) of thereof. Article 14 is applicable in the matter of grant by the State and, thus, there is no reason as to why grantee would not be entitled to invoke the commerce clause contained in Article 301 of the Constitution of India. (5) In interpreting the constitutional provisions, the court should take into consideration the implication of its decision having regard to the international treaties dealing with countervailing duty, etc. - Civil Appeal Nos. 3017 of 1997 and 2696-2697 of 2003 - - - Dated:- 20-11-2003 - V. N. Khare, B.N. Agrawal, S.B.Sinha and A.C. Lakshmanan, JJ. JUDGMENT 1. I have had the privilege of perusing the judgment proposed by my learned Bro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intercourse among the States. 8. It is well settled by a catena of decisions that the trade in liquor is not a fundamental right. It is a privilege of the State. The State parts with this privilege for revenue consideration. In Punjab, the Excise Policy of the State is formulated every year. It is also made known to the licensees much before their licenses for the year comes to an end. It is also a matter of fact that the licensees have paid the fee on demand. The fee was first levied in the year 1992. The licensee, in the Punjab case, had been holding the licence all through this period and never challenged or protested against levy of the fee. The licensees having paid the fee without any protest all through is not entitled to challenge the same, which does not suit them. The licensee cannot aprobate and reprobate. In Punjab, the grant of licences are governed by the Punjab Excise Act, 1914 (for short "the Act") and various rules and orders framed under it. In the Punjab case, the challenge of the appellant is limited to the imposition of import fee in addition to the countervailing duty on Beer. It is not disputed by the appellant that the State is competent and is entitled to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Statutory Authority for this imposition can be found from the provisions including Section 16 read with Section 32 of the Act. In addition to the excise duty under Rule 5, there is also a provision for grant of licence for sale of intoxicants. To carry on the trade in wholesale, a person has to obtain a L-1 licence for which an annual pre-determined sum is payable. Similarly, in addition there are licences for production and for manufacture each of which licence has its own predetermined fee which has to be paid for obtaining such a licence. The modalities of the levy of fees or the quantum of the fees has no bearing on its legal pedigree which is that of consideration for the permission to carry on an activity in the noxious articles. Thus, if a person wants to carry on a wholesale trade in liquor in Punjab, he will have to (a) obtain a L-1 licence for which he would pay the fees in accordance with the policy carried on for the period; (b) On the liquor purchased by him, he will have to pay duty on all purchases irrespective of the source of the product. This duty is the duty under Rule 5 of the Punjab Excise Fiscal Orders, 1932, in relation to beer read with Rule 1 of the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant of passes for import, export and transport, Section 31 - Duty on excisable articles, Section 32 - Manner in which duty may be levied, Section 33 - Payment for grant of leases. Section 34 - Fees for terms, condition and form of, and duration of licences, permits and passes, Section 35 - Grant of license for sale, Section 58 - Power of State Government to make Rules, Section 59 - Powers of Financial Commissioner to make rules. Along with the additional affidavit, a copy of the Notification No. 5998 called the Punjab Excise Fiscal Orders and prescribed levy of rates of duty etc. was filed and marked as Annexure-A-1. It is seen from the additional affidavit that this notification was republished by the State of Punjab in the year 1965. The State vide notification dated 24.03.1986 introduced amendment to the Punjab Excise Fiscal Orders, 1986 and as per Clause 5 of the notification, Order 1-D was added after Order 1-C levying an import fee of Rs. 3.20 per proof litre on all imports of IMFL and rectified spirit into the State of Punjab. 11. Vide notification dated 31.03.1992, the Government of Punjab made further amendment in the Fiscal Order and issued Punjab Excise Fiscal (10th a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not used in the strict sense to attract the doctrine of quid pro quo. This is the price or consideration which the State Government charges for parting with this privilege and granting the same to the vendors. Therefore, in my opinion, the amount charged is not a fee nor a tax but it is 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. As stated above, it is one of the terms and conditions of the Excise Policy applicable to all L-1 holders including the respondents herein. In my view, respondents cannot be permitted to challenge the terms and conditions of the policy if they want to avail the benefit of the same. 15. This Court, in a number of judgments, has held that the State Government has unfettered powers to regulate the Export/Import sale of intoxicants and in exercise of its regulatory powers, the import fee has been incorporated as one of the terms of the Excise Policy on yearly basis. We will refer to the relevant judgments in the later part of this judgment. 16. The learned counsel f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nos. 2696 and 2697 of 2003. 19. The learned counsel for the licensee/appellant in this case also contended that Part XIII of the Constitution interdicts Parliament and State Legislatures from enacting laws containing discriminatory measures/taxation in respect of inter-state trade and commerce and that the said articles in Part XIII impose a constitutional limitation on the power of the Parliament and the Legislatures of the States and that the said Part XIII of the Constitution enshrines a principle of paramount importance that the economic unity of the country cannot be interfered with by economic protectionism and creation of trade barriers, fiscal or otherwise. He would further submit the restriction in Part XIII of the Constitution also apply to Taxation Laws and the provisions of Part XII of the Constitution are subject to the limitations set out in Part XIII and such regulatory measures also do not impede the freedom of trade, commerce and intercourse and compensatory taxes for the use of trading facilities are not hit by the freedom declared by Article 301. He would also urge that Article 303(1) prohibits Parliament and the Legislature of a State from enacting any law giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Section 24 of the Abkari Act. As a matter of fact, it was submitted that the State has not issued any licence to anybody including the Kerala State Beverages Corporation to import liquor. The Kerala State Beverages Corporation has licence only for wholesale and retail of liquor which will not authorise them to import liquor and that the only licence issued to import liquor into the State is the permit issued on payment of the import fee and, therefore, it is seen that the levy of import fee is authorized by Sections 6 and 24 of the Abkari Act, 1977. It is not excise duty or countervailing duty referable to Entry 51 of List II. It is a collection falling under Entry 8 of List II. It is the price paid to the State for parting with its exclusive privilege of dealing in liquor which includes every fact of it including its import. In my view, the State has the right to prohibit every form of activity in 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, in this case, has granted such permit to the Beverages Corporation on their pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uals to whom licences were granted by auction conducted every year. However, the scheme has been changed and the retail distribution of IMFL in the State is now being carried on by a few shops of the Kerala State Consumer Federation and the rest of the shops by the Kerala State Beverages Corporation. This is apart from the sales in bars, clubs, etc. under licences issued in relevant Forms under the Foreign Liquor Rules. The Kerala State Beverages Corporation gets its supply of IMFL from distributors within the State as also from manufacturers and distributors outside the State. The Kerala State Beverages Corporation calls for tenders fixing a floor price for the supply with a view to ensure quality as also to prevent unhealthy competition and loss of revenue. Based on these tenders, the Kerala State Beverages Corporation enters into contracts with the manufacturers/distributors. After entering into contracts with the manufacturers/distributors, to enable the import of IMFL to the State, the Kerala State Beverages Corporation applies to the authorized officer for grant of permit for import of specified quantity of IMFL after depositing in advance, the countervailing duty and the imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her Articles 301 and 304 at all apply. In the alternative, it was submitted by learned senior counsel for the State of Punjab that compensatory or regulatory levies have always been held to be valid and permissible under Article 301 and 304. In this context, he referred to the decisions in the case of Atiabari Tea Co. Ltd. v. The State of Assam and Ors.,; The Automobile Transport (Rajasthan) Ltd. case (supra), State of Bihar v. Chambers of Commerce (1996) STC 1, Godfrey Ltd. v. State of Rajasthan (2001) (121) STC 54, Jindal Strips Limited and Ors. v. State of Haryana (2002) 19 PHT 299. If that be so, 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 considered 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 of levies which levy is also necessary to regulate by keeping out and excluding persons entering the liquor trade. We have already extracted the provisions of 1914 Act. The contention of the licensee is that once ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been imposed by the Punjab Fiscal Orders as amended from time to time under specific statutory authority to issue such orders under Sections 58 and 59 of the Act, in particular, and other provisions of the Act as itemized in paragraphs supra. 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 itemized in paragraphs above amply delineate that regulatory power and the impugned import fee is nothing but a facet and manifestation of that regulation by the State. Hence, in my view, the levy in question is valid as a regulatory levy which has consistently been held on the touchstone of Article 304. 25. The conduct of the respondent/licensee in attempting to wriggle out of his contractual obligations is contrary to the clear and unequivocal principle laid down in Har Shankar's case (supra). The issuance of liquor licence constitutes a contract between the parties i.e. between Excise Authorities on the one hand and the individual applicant contractor on the other. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in our view, has erred in not appreciating that the impugned demand notice was also in the nature of demanding balance of the price of the exclusive privilege which would become final only on issue of the notification, order under Article 309, the bulk of which has already been recovered in advance, which privilege exclusively vests with the Government considering the effect of provisions especially Section 49 and Section 143 (2)(u) of the Prohibition Act. In our opinion, the establishment charges demanded are in the nature of price for parting with the privilege to permit manufacture and sale or liquor, and the privilege exclusively vests with the Government." 27. Again in para 40, this Court observed thus: "As pointed out by Y.V. Chandrachud, C.J., as he then was, what the respondents agreed to pay was the price of an exclusive privilege which the State parted with in their favour. They cannot, therefore, avoid their liability by contending that the payment which they were called upon to make is truly in the nature of excise duty and no such duty can be imposed on liquor not lifted or purchased by them. The respondents, in our view, must fail in their contention both on acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We reiterate that what we have said hereinabove is in the context of contracts entered into between the State and its citizens pursuant to public auction, floating of tenders or by negotiation. It is not necessary to say more than this for the purpose of these otherwise than by public auction, floating of tenders or negotiation, we need not express any opinion herein." 30. Kalyani Stores v. The State of Orissa and Ors. case was heavily relied on by the respondent/licensee. The Constitution Bench has not in that cases adverted to the issue of liquor trade being res extra commercium and has simply considered whether Articles 301/304 are violated or not. The case, in my opinion, would have no relevance to the instant case. 31. The following judgments can be usefully referred for the proposition that the rights are vested in the State which it may part with for a consideration. 32. In the case of Har Shankar and Ors. etc.etc. v. The Deputy Excise and Taxation Commissioner and Ors. etc. AIR 1975 SC 1121 (paras 44, 46, 47, 50, 51, 53, 55, 57 and 58 dealt with the rights of the State in this regard). 33. In the case of Nashirwar and Ors. v. State of Madhya Pradesh and Ors., , thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the State can prohibit completely trade or business in potable liquor since trade or business in liquor as a beverage is res extra commercium and that the State may also create monopoly in itself for trade or business in such liquor. It is further held that the State can further place restrictions and limitations on such trade or business and such restrictions and limitations can be placed by subordinate legislation as well. It is also further held that the State is not precluded from regulating the trade and business in potable liquor merely because it imposes tax or fee on purchase or sale and income is derived from such liquor. 40. In the case of Solomon Antony and Ors. v. State of Kerala and Ors., (2001) 3 SC 694, the contractors are required to pay the consideration payable to the State for sale of liquor for importing designated quantity of rectified spirit in respect of which the consideration payable is equivalent to excise duty. This Court justified the order passed by the High Court in holding that the contractors are bound to pay the amount which is a measured excise duty payable on the designated quantum of rectified spirit in terms of Rule 8 of the Rules and which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dder cannot wriggle out of the contractual obligations arising out of acceptance of his bid by filing writ petition. 46. In the case of State of Punjab v. Dial Chand Gian Chand and Company, this Court held that a licensee who participates in the auction voluntarily and with full knowledge is bound by the bargain and the writ petition filed under Article 226 by such licensee in an attempt to dictate terms of the licence without paying the licence fee must fail. The highest bidder after acceptance of his bid cannot challenge the second auction on ground of adverse effect on his business. 47. We shall now consider the cases on the freedom guaranteed by Article 301 which is not available to liquor because it is a noxious substance injurious to public health order and morality. The following cases can be usefully referred: 48. In the case of Sat Pal and Co. and Ors. v. Lt. Governor of Delhi and Ors., this Court held that the Ordinance does not infringe any right under Article 19(1)(g) or Article 301 there being no fundamental right to trade in liquor and that the ordinance was both a fiscal measure and one for safeguarding public health and public morals and hence it could validit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... angulates the borrowing community and turns malignant in its repercussions. The former may surely be trade, but the latter - the law may well say - is not trade. This narrow, deleterious pattern of money-lending cannot be classed as 'trade'. Hence Article 301 does not apply." 51. In the case of B.R. Enterprises etc. v. State of U.P. and Ors. etc., this Court held that this case relates to lottery which is gambling in nature. This Court held that merely because a lottery transaction is run by State itself will not change its character as res extra commercium and that merely because lottery tickets are goods, transaction of sale thereof cannot constitute trade and while trade contains skill with no chance, gambling contains the element of chance with no sill and, therefore, ban by any State on the sale of lotteries of other States within its territory does not violate Articles 301 and 303. 52. We have already noticed that the regulation in the interest of public health and order takes the case out of Article 301, and Regulation for the purpose of Article 301 is not confined to regulations which will facilitate the trade. 53. In the case of Bishamber Dayal Chandra Mohan etc.etc. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Even if these requirements are construed to be a 'restriction' on the inter-State or intra-State trade the limitation so imposed on the enjoyment of the right cannot be considered to be arbitrary or of an excessive nature. Nor can it be said that such restrictions do not satisfy the test of reasonableness." 54. The case of State of Tamil Nadu v. Hind Stone etc. etc. reported in AIR 1981 SC 711 relates to non-renewal of mining lease for black granite. It was submitted by the counsel in this case, that the impugned rule offends Articles 301 and 303 of the Constitution. This Court rejected the same as without force. This Court held as under: ".....The Mines Minerals (Regulation and Development) Act is, without doubt a regulatory measure. Parliament having enacted it for the express purpose of "the regulation of mines and the development of minerals". The Act and the rules properly made thereunder are, therefore, outside the purview of Article 301. Even otherwise, Article 302 which enables Parliament, by law, to impose such restrictions on the freedom of trade, commerce or intercourse between one State and another or within any part of the territory of India as may be required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. I am of the view that 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 concerned year. The State, in my view, is competent and entitled to impose excise duty or countervailing 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 comply with the other conditions imposed by the State Government from time to time. As held in many cases referred to supra the levy in dispute under challenge is an import levy. It is neither duty nor countervailing duty. It is part of the consideration money i.e. the price of the privilege given to the licensees for dealing in liquor. The decision of this Court in the case of Kalyani Stores (supra) is not applicable to the facts of the present case and that the Punjab Excise Act, 1914 is an existing law under Clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate of Kerala under Abkari Act, 1077 (hereinafter referred to as "the Abkari Act") is concerned, the Kerala High Court has dismissed the writ application on grounds, inter alia, that such duty, being regulatory in nature, is not ultra vires the Abkari Act. The High Court did not enter into the question of applicability of Article 301 of the Constitution vis- a-vis effect of imposition of such import duty on potable liquor. 62. Mr. P.N. Misra, learned Senior Counsel appearing on behalf of the appellant - State of Punjab in the Punjab matter having regard to several provisions of the Punjab Act submitted that the High Court committed a manifest error in holding that the State has no power to impose such a tax. As regards applicability of Article 301 of the Constitution, the learned counsel contended that as the State has the exclusive privilege to deal in potable liquor in any manner it likes, it has the concomitant requisite power to impose such tax by way of restriction on import. The learned counsel further contended that as no trader can claim any fundamental right in carrying on trade or business in potable liquor, question of applicability of Article 301 of the Constitution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... permitted to achieve the same object indirectly by taking recourse to 'exclusive privilege' theory. 66. Mr. Ashok H. Desai and Mr. R.F. Nariman, learned senior counsel appearing on behalf of the licensees - appellants in the Kerala matter raised the following contentions: (1) Levy of import duty having been expressly conferred by the statute, the State cannot justify such a levy on the spacious ground of having exclusive privilege of dealing in potable liquor. (2) The State of Kerala having specifically raised a plea that such a levy was justified by way of a tee and/or as a regulatory measure cannot now turn round and contend that the levy was imposed by way of a price for parting with the exclusive privilege of the State. As the State of Kerala has not granted any licence to the appellants, the question, of parting of any privilege in their favour does not arise. Pointing out to the admitted fact that Kerala State Beverages Corporation has been granted the monopoly to deal in liquor and the appellants and other traders having been selling liquor to the Corporation, the question of rendition of any service by the State of Kerala to the licensees so as to justify imposition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is a self-contained part. (8) The phraseology, used in Article 301 of the Constitution, namely, trade, commerce and intercourse being of wide amplitude, the right to carry on trade and business as envisaged in Article 19(1)(g) or Article 298 of the Constitution cannot restrict the scope and ambit thereof. 67. In view of the rival contentions, as noticed hereinbefore, the following questions arise 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 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? Re: Question (i) 68. The impugned notifications issued by the State of Punjab and that of Kerala read as under: I "Government of Punjab Department of Excise and Taxation NOTIFICATION The 27th March, 1996 No. G.S.R. 28/P.A.I./14/Sections 31, 32 and 58/Amd. (118)/96 In exercise of powers conferred by Sections 31, 32 and 33 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f import fee Rate of export fee 1. Indian Made Foreign Liquor including beer except those consumed by Defence Service. (1) When exported by distilleries/ Foreign Liquor (compounding, Blending and (Bottling) Units/ Breweries to other State and not re imported into this State, in cases where the following terms and conditions are satisfied namely:- Rs. 5 (Rupees five only) per proof litre in the case of Indian Made Foreign Liquor and Rs. 2 (Rupees two only) per bulk litre in the case of beer (i) The export is under bond to cover the duty at the rate of an amount equal to 200 per cent of the value of Indian Made Foreign Liquor and gallonage fee at the rate of Rs. 3 per bulk litre in the case of beer. (ii) No objection certificate for import certificate from the excise authorities of the importing State is produced by the Distilleries/ Foreign Liquor (Compounding, Blending and Bottling) Units/ breweries. (iii) Excise duty, luxury tax and export fee paid to Kerala Government before export. (iv) The verification certificate from the Excise Authorities of the importing State is produced before the Excise officers in charge of the Distilleries/ Foreign Liquor (Compounding, Blendin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transported except - (a) after payment of any duty to which it may be liable under this Act or execution of a bond for such payment and (b) in compliance with such condition as the State Government may impose. Section 17. Power of State Government to prohibit import, export and transport of intoxicants:- The State Government may by notification:- (a) prohibit the import or export of any intoxicant into or from Punjab, Haryana or any part thereof; or (b) prohibit the transport of any intoxicant. Section 18. Pass necessary for import, export and transport:- Except as otherwise provided by any rule made under this Act, no intoxicants exceeding such quantity as the State Government may prescribe by notification shall be imported or transported except under a pass issued under the provision of the next following section; Provided that in the case of duty paid foreign liquor such parses shall be dispensed with unless the State Government shall by notification otherwise direct Provided further, that no such conditions as may be determined by the Financial Commissioner, a pass granted under the excise law in force in another State may be deemed to be a pass granted under this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e State Government by notification so directs, at the rate of duty which was in force at the date of import of that article; or (b) In the absence of such direction by the State Government at the rate of duty which is in force on that article on the date when it is issued from the warehouse. Section 33. Payment for grant of leases: - Instead of or in addition to any duty leviable under this chapter the State Government may accept payment of a sum in consideration of the lease of any right under Section 27. Section 33-A. Saving for duties being levied at commencement of the Constitution:- (1) Until provision to the contrary is made by Parliament, the State Government may continue to levy any duty which it was lawfully levying immediately before the commencement of the Constitution under this Chapter as then in force. (2) The duties to which this section applies are:- (a) any duty on intoxicants which are not exciseable articles within the meaning of this Act; and (b) any duty on exciseable article produced outside India and imported into Punjab/Haryana whether across a customs frontier as defined by the Central Government or not. (3) Nothing in this section shall authorize ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excise or luxury tax or both shall, if the Government so direct be levied on all liquor and intoxicating drugs: (a) permitted to be imported under Section 6; or (b) permitted to be exported under Section 7; or (c) permitted under Section 11 to be transported; or (d) manufactured under any licence granted under Section 12; or (e) manufactured at any distillery, brewery, winery or other manufactory established under Section 14; or (f) issued from a distillery, brewery, winery or other manufactory or warehouse licensed or established under Section 12 or Section 14; or (g) sold in any part of the State; Provided that no duty or gallonage fee or vend fee or other taxes shall be levied under this Act on rectified spirit including absolute alcohol which is not intended to be used for the manufacture of potable liquor meant for human consumption. Explanation:- For the purpose of this section and Section 18, the expression "duty of excise", with reference to liquor or intoxicating drugs, include countervailing duty on such goods manufactured or produced elsewhere in India and brought into the State. 18. How duty may be imposed:- (1) Such duty of excise may be levied: (a) in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levied in the form of gallonage fee Rs. 10 per bulk litre or Rs. 45.46 per bulk gallon (c) When levied in the form of a fee for licence for the sale of foreign liquor (Foreign made) (i) In wholesale Rs. 25,00,000 (Rupees Twenty Five lakhs) for a year or part thereof (ii) In retail Rs. 10,00,000 (Rupees Ten lakhs) for a year or part thereof (iii) In hotels or restaurants Rs. 25,00,000 (Rupees Twenty Five lakhs )for a year or part thereof , (iv) In non-proprietory clubs to its members Rs. 10,00,000 (Rupees Ten lakhs) for a year or part thereof (v) In Seamen's and Marine Officer's clubs to its members Rs. 10,00,000 (Rupees Ten lakhs) for a year or part thereof (d) When levied in the form of gallonage fee (i) Foreign Liquor (Foreign made) other than beer and wine Rs. 200 (Rupees Two hundred) per bulk litre (ii) For foreign made beer and wine Rs. 25 (Rupees Twenty Five) per bulk litre Provided that where there is a difference of duty of excise or luxury tax as between two licence periods, such difference may be collected in respect of all stocks of Indian made foreign liquor or intoxicating drugs held by licensees at the close of the former period. Note: The expressi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s created by reason of the aforementioned Acts, after coming into force of the Constitution, would, therefore, be subject to the extent saved by the Constitution itself and, thus, the provisions thereof, the rules made thereunder and actions taken must conform to the limitations imposed thereby. The said Acts, therefore, must be construed keeping in view Entries 8 and 51 of List II of the Seventh Schedule to the Constitution. Before dealing with the matter further, it may be noticed that in the instant case I am not concerned with validity or the interpretation of a pre-constitutional law but a post-constitutional one. The impugned levy, therefore, must be justified having regard to the relevant entries made in List II of the Seventh Schedule to the Constitution. Section 6 of the Abkari Act permits import of liquor on payment of duties, taxes, tees and such other sums as are due to the government and Section 7 thereof provides for export. Section 17 provides for levy of a duty of excise or luxury tax or both on liquor permitted to be imported under Section 6 thereof. Section 18 deals with the manner in which such duty should be imposed. Sections 31 and 32 of the Punjab Act are in p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, and "tax" shall be construed accordingly; 79. A regulatory impost would, thus, come within the purview of the tax. A fee in terms of the constitutional schemes may be either a regulatory licence fees or a fee in lieu of rendition of service. When no service is rendered a fee can be justified only by way of licence fees. Such impost, however, would be a tax and, thus, would clearly be referable to Entry 51 of List II to the Constitution and not Entry 66 thereof. (See Liberty Cinema (supra), D.C. Gouse Co. (supra) and Hindustan Times and Ors. v. State of U.P. and Anr., JT 2002 (9) SC 317). 80. Indisputably, the State while imposing import duty has exercised its power under the statute. The impugned notifications in no uncertain terms and unequivocally refer to the source of power therefore. 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, would it still be pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith Article 304 of the Constitution. If by reason of a statute an embargo has been 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. 82. It is trite that even a term of the contract cannot be in violation of an express provision contained in a statute. 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 and above the excise duty/countervailing duty. It is not disputed that such countervailing 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 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, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, Fourth Edition, 'Extra Commercium' is stated as "Beyond Commerce. This is said of things which cannot be bought or sold, such as public roads, rivers, titles of honour, etc." 88. In Words and Phrases, Volume 15 A, it has been stated: "Property once dedicated to public use is "extra commercia", and inalienable by seizure and sale under execution against a municipal corporation, unless it is made affirmatively and clearly to appear that its use had been abandoned or lost by nonuser." 89. In Bouvier's Law Dictionary, Volume I, Third Edition, at page 531, it is stated: "It has been frequently said by the Supreme Court that commerce includes intercourse, though usually the term is qualified as "commercial intercourse"; Gibbons v. Ogden. 9 Wheat. (U.S.) 1, 6 L. Ed 23; U.S. v. E.C. Knight Co., 156 U.S. 1, 15 Sup. Ct 249, 39 L. Ed. 325; Welton v. Missouri, 91 U.S. 275, 280, 23 L.Ed. 347; Pensacola Telegraph Co. v. Western Telegraph Co., 96 U.S. 1, 9, 24 L.Ed. 708; Mobile County v. Kimball, 102 U.S. 691, 702, 26 L.Ed. 238 (where the phrase is "intercourse and traffic"); Addyston Pipe Steel Co. v. U.S., 175 U.S. 211, 241, 20 Sup. Ct. 96, 44 L.Ed. 136; Lindsay P. Co. V. Mullen 17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Constitution empowers the State to impose prohibition. Once a prohibition is imposed by any State in exercise of said, powers, indisputably no person will have any right to deal in potable liquor. 91. 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 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 therefore that it has not retained unto itself a right to deal with a part of the trade itself or through its agency. As has been noticed 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt any mode with a view to maximize its revenue but while doing so it must, having regard to a large number of decisions of this Court, not act arbitrarily. The State while carrying on business by way of parting with its privilege or distribution of largess must conform to the equality clause enshrined in Article 14 of the Constitution. It has been so held in Nandlal Jaiswal (supra) at pages 604-605 in the following terms: "But, before we do so, we may at this stage conveniently refer to a contention of a preliminary nature advanced on behalf of the State Government and respondents 5 to 11 against the applicability of Article 14 in a case dealing with the grant of liquor licences. The contention was that trade or business in liquor is so inherently pernicious that no one can claim any fundamental right in respect of it and Article 14 cannot therefore be invoked by the petitioners. Now, it is true, and it is well settled by several decisions of this Court including the decision in Har Shanker v. Deputy Excise Taxation Commissioner that there is no fundamental right in a citizen to carry on trade or business in liquor. The State under its regulatory power has the power to prohibit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the prohibition Act prevents the possession, use and consumption of non-beverages and medicinal and toilet preparations containing alcohol for legitimate purposes the provisions are void as offending against Article 19(1)(f) of the Constitution even if they may be within the legislative competence of the provincial legislature," 97. But in Cooverjee B. Bharucha (supra) a Constitution Bench of this Court held that there is no inherent right in a citizen to sell intoxicating liquors. This decision was rendered relying on P. Crowley, Chief of Police of the City and County of San Fancisco, California v. Henry Christenses [(1890) 34 Law. Ed.620(A)]. 98. However, this exclusive privilege theory was rejected by a Constitution Bench of this Court in Saghir Ahmad and Anr. v. State of U.P. and Ors. [AIR 1954 SC 728] stating that this doctrine has no place under Indian Constitution. It was observed that establishment of a monopoly does not create a reasonable restriction. The observations made in Cooverjee B. Bharucha (supra) stating that the general observations occurring in the judgment have to be taken with reference to the facts of that case were duly explained. It was reiterate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nkar (supra) Chandrachud, J. (as the learned Chief Justice then was) held that the right to trade in liquor is not absolute and it is to be treated as a separate class. But therein also it has not been held that despite fulfilling the regulatory measures, the trade would be illegal. The point that arose for consideration therein was the State's power to prohibit trade. In that case, this Court had no occasion to consider the question involved in the present one. 103. A large number of decisions, as noticed hereinbefore, have been cited at the Bar for the proposition that by reason of grant of licence, the licensee is merely granted a permissive privilege subject to the degree of regulatory control as may be deemed necessary and appropriate having regard to the fact that: nobody has any constitutional right to trade in liquor in view of its inherently pernicious and noxious nature. I may deal with some of the decisions cited at the bar a little later but the principles which emerge from the various decisions of this Court and particularly by Constitution Benches of this Court are: (i) Trade in liquor is against public morality and thus res extra commercium. No citizen has any Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are immoral and criminal and in articles or goods which arc obnoxious and injurious to health, safety and, welfare of the general public, i.e., res extra commercium, (outside commerce). There cannot be business in crime. (e) For the same reason, the State can create a monopoly either in itself or in the agency created by it for the manufacture, possession, sale and distribution of the liquor as a beverage and also sell the licences to the citizens for the said purpose by charging tees. This can be done under Article 19(6) or even otherwise. (f) For the same reason, again, the State can impose limitations and restrictions on the trade or business in potable liquor as a beverage which restrictions are in nature different from those imposed on the trade or business in legitimate activities and goods and articles which are res commercium. The restrictions and limitations on the trade or business in potable liquor can again be both under Article 19(6) or otherwise. The restrictions and limitations can extend to the State carrying on the trade or business itself to the exclusion of and elimination of others and/or to preserving to itself the right to sell licences to do trade or busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by sufficient measures are to be taken in relation to health, safety and welfare of the general public. The courts while interpreting a statute would not take recourse to such interpretation whereby a person can be said to have committed a crime although the same is not a crime in terms of the statutory enactment. Whether dealing in a commodity by a person constitutes a crime or not can only be subject matter of a statutory enactment. 107. The Excise Acts enacted by the States mandate the licensees to carry on their activities in terms of the conditions of licence and the provisions contained therein. So long as the business activities of the licensees are within the four-corners of the conditions of the licence and the provisions of the Licensing Act, they, without any obstruction whatsoever, are entitled to carry on their trade, business or commerce. They would be liable to be proceeded against for commission of an offence only in the event they violate the statutory provisions wherefor the statute itself provides for imposition of penalty. 108. Thus, when a person has been granted a licence strictly in conformity with the Excise Act to carry on his business activities in ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elation thereto. The doctrine of res extra commercium, thus, would not be attracted, whence a person carries on business under a licence granted in terms of the provisions of the regulatory statutes. 110. No case and in particular the decisions relied upon by the learned counsel appearing on behalf of the State of Punjab and that of Kerala had evolved a principle that despite paying a large amount of licence tees and despite fulfillment 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, which may at any point of time be determinated or a new tax imposed or they be proceeded against at the whims or caprice of the 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 constitutional anvil of the legislative competence and not on any other basis. The decisions of this Court which had no occasi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titutional limitations provided therefore. Article 301 confers freedom but not a licence. The protection from discrimination as envisaged in Khoday Distilleries (supra) [para 60(g)] 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 in Article 301, must be extended to another State which seeks to impose restrictions on import. 114. Let me raise a hypothetical question. If some States intend to exercise their right/ privilege/ monopoly in the trade in potable liquor - can such imposition of tax be still justified? Answer thereto must be rendered in the negative. Now the question is with regard to the applicability of Article 301 of the Constitution in the matter of trade, commerce and intercourse in potable liquor. The preamble to the Constitution speaks of unity and integrity of India in terms whereof India is required to be treated country as a whole. This theory of unity and integrity of India may have to be found out while considering the economic integrity of the country vis--vis the economic barriers which may be put by the States. For the purpose of considering the ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny preference to one State over the other. Article 301 of the Constitution in no uncertain terms provides for a freedom in the matter of trade, commerce and intercourse. Such trade, commerce and intercourse are 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 of India 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 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 Lists of Seventh Schedule to the Constitution. The limitation of power as regards legislative competence of the State and the Parliament having regard to clause 2 of Article 303 and Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dangerous or obnoxious subjects but is permitted in law and subject to the regulatory statute. For the purpose of invoking Part XIII of the Constitution, one may safely proceed on the assumption that a citizen of India may not have a Fundamental Right in terms of Article 19(1)(g) of the Constitution to carry on a trade or business but there could be little difficulty in upholding the right to carry on such trade on the ground that the same has been permitted by the State, although a citizen but for such permission would not have a right to deal in the commodity in question. It may be noticed that in Article 303 of the Constitution the terminology used is "relating to". These words are of wide amplitude. These expressions relate to all entries relating to trade or commerce and not one entry in one of the Lists. It, thus, refers to all such entries which are referable to trade and commerce occurring in any of the three lists. 120. Tobacco is one of the goods which would otherwise come within the purview of the doctrine of "Res extra commereium", if the meaning thereof as judicially defined is held to be good. Dealing in tobacco is regulated by the Tobacco Act, a Parliamentary Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and improving living standards of the country. The provision contained in Article 301 guaranteeing the freedom of trade, commerce and intercourse is not a declaration of a mere platitude, or the expression of a pious hope of a declaratory character; it is not also a mere statement of a directive principle of state policy; it embodies and enshrines a principle of paramount importance that the economic unity of the country will provide the main sustaining force for the stability and progress of the political and cultural unity of the country." 122. In Automobile Transport (Rajasthan) Ltd. (supra), the validity of the tax impugned therein was upheld only on the ground that it was compensatory in nature. There had been a cleavage of opinion amongst the Hon'ble Judges in the said matter; three Hon'ble Judges holding that such impost was ultra vires and three Hon'ble Judges holding the same to be intra vires. Subba Rao, J. upheld the constitutionality of the impost by agreeing with other three Hon'ble Judges on the ground that the impost was compensatory in nature. The Bench not only accepted the constitutional principles laid down by this Court in Atiabari (supra) but made a clear di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emarcates the extensive field of operation of the said freedom. The said intercourse shall be free throughout the territory of India. The use of the words 'territory of India" instead of 'among the several States" found in the American Constitution or "among the States" found in the Australian Constitution, removes all inter-State or intra- State barriers and brings out the idea that for the purpose of the freedom declared, the whole country is one unit. Trade cannot be free through-out the territory of India, if there are barriers in any part of India, be it inter-State or intra-State. So long as there is impediment to that freedom, its nature or extent is irrelevant. The difference will be in degree and not in quality. The freedom declared under Article 301 may be defined as a right to free movement of persons or things, tangible or intangible, commercial or non-commercial, unobstructed by barriers inter-State or intra-State or any other impediment operating as such barriers. To State it differently all obstructions or impediments whatever shape they may take, to the free flow or movement of trade, or non-commercial intercourse, offend Article 301 of the Constitution except in so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate Legislature but not Congress and the freedom is confined to the inter-State aspect. 129. In Southern Pacific Co. v. State of Arizona (1945) 325 US 761, it is stated: "For a hundred years it has been accepted constitutional doctrine that the commerce clause, without the aid of congressional legislation, thus affords some protection from state legislation inimical to the national commerce, and that in such cases, where Congress has not acted, this Court, and not the State legislature, is under the commerce clause the final arbiter of the competing demands of state and national interests". It is further stated: "The Commerce Clause is a grant of authority to Congress, and not a restriction on the authority of that body." 130. In the United States, the inter-State restraint trade as such is prohibited but a State is not denuded of its power imposing general taxes under its taxing power. The state has also the power to regulate such aspects of commerce which do not require a new form of national control, (See BobLo Excursion Company v. People of the State of Michigan, (1948) 333 US 28). Furthermore, in United States a complete prohibition was imposed. The said prohibition w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion." 134. The Court noticed: "(4a, 5) Much of the State's argument centers on its contention that okolehao and pineapple wine do not compete with the other products sold by the wholesalers. The State relies in part on statistics showing that for the years in question sales of okolehao and pineapple wine constituted well under one percent of the total liquor sales in Hawaii. It also relies on the statement by the Hawaii Supreme Court that "we believe we can safely assume these products pose no competitive threat to other liquors produced elsewhere and consumed in Hawaii," In re Bacchus Imports, Ltd., 65 Haw, at 582, n 21, 656 P2d, at 735, n 21, as well as the court's comment that it had "good reason to believe neither okolehao nor pineapple wine is produced elsewhere." Id., at 582, n 20, 656 P 2d, at 735, n 20. However, neither the small volume of sales of exempted liquor nor the fact that the exempted liquors do not constitute a present "competitive threat" to other liquors is dispositive of the question whether competition exists between the locally produced beverages and foreign beverages; instead, they go only to the extent of such competition. It is well settled that "we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . supra at 573-574, 656 P2d, at 730. Thus, we need not guess at the legislature's motivation, for it is undisputed that the purpose of the exemption was to aid Hawaiian industry. Likewise, the effect of the exemption is clearly discriminatory, in that it applies only to locally produced beverages, even though it does not apply to all such products. Consequently, as long as there is some competition between the locally produced exempt products and non-exempt products from outside the State, there is a discriminatory effect," 136. The Learned Judge proceeded to observe: "No one disputes that a State may enact laws pursuant to its police powers that have the purpose and effect of encouraging domestic industry. However, the Commerce Clause stands as a limitation on the means by which a State can constitutionally seek to achieve that goal. One of the fundamental purposes of the Clause "was to insure ...against discriminating State legislation." Welton v Missouri, 91 US 275, 280, 23 L Ed 347 (1876). In Welton, the Court struck down a Missouri statute that "discriminated in favor of goods, wares, and merchandise which are the growth, product, or manufacture of the State, and against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iminatory tax cannot stand. Doubts about the scope of the Amendment's authorization notwithstanding, one thing is certain: The central purpose of the provision was not to empower States to favor local liquor industries by erecting barriers to competition. It is also beyond doubt that the Commerce Clause itself furthers strong federal interests in preventing economic Balkanization. South-Central Timber, Development, Inc. v Wunnicke, 467 US 82, 81 L Ed 2d 71. 104 S Ct 2237 (1934); Hughes v Oklahoma, 441 US 322, 60 L Ed 2d 250, 99 S Ct 1727 (1979); Baldwin v G.A.F. Seelig, Inc., 294 US 511, 79 L Ed 1032, 55 S Ct 497, 101 ALR 55 (1935). State laws that constitute mere economic protectionism are therefore not entitled to the same deference as laws enacted to combat the perceived evils of an unrestricted traffic in liquor. Here, the State does not seek to justify its tax on the ground that it was designed to promote temperance or to carry out any other purpose of the Twenty-first Amendment, but instead acknowledges that the purpose was "to promote a local industry." Brief for Appellee Dias 40. Consequently, because the tax violates a central tenet of the Commerce Clause but is not suppor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate that in these countries, although States have more constitutional freedom but despite the same Commerce Clause received ample protection at the hands of the Judiciary. 143. Subba Rao, J. in Automobile case (supra) observed: "The freedom declared under Article 301 may be defined as a right to free movement of persons or things, tangible or intangible, commercial or noncommercial, unobstructed by barriers, inter-State or infra-State or any other impediment operating as such barriers. To state it differently, all obstructions or impediments, whatever shape they may take, to the free flow or movement of trade, or non-commercial intercourse, offend Article 301 of the Constitution except in so far as they are saved by the succeeding provisions." 144. The public character theory although is an important, but has a limitation on the individual right which is guaranteed; having regard to the fact that legislative restriction ultimately permits the individual State to go ahead, only subject to the reasonable restriction. The rule against enacting protectionist measures has also been noticed by the High Court of Australia in Cole v. Whitfield and Anr. (1987-1988) 165 CLR 360, settlin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate trade or commerce will not stand the test of Article 301. The scheme of compensatory taxes, operate in an entirely different sphere. They cannot be confused with measures which are both in form and substance protectionist impositions. 147. In Brown v. Maryland (1827) 12 Wheat 419, the US Supreme Court in the context of the competence of the States to enact and impose a duty on imports or exports has held that the power to regulate inter state commerce in non-discriminatory fashion and "to break down or to eliminate barriers to trade amongst the States" is an essential federal power. It has, therefore, been said that in the absence of such a power "local interest exerting powerful influences in State Legislatures would, in the long run prefer home industries over those that are out of state, establish tariff barriers, or employ other means tending to Balkanize the nation into hostile trade areas," [See also William O, Doughlas J; From Marshall to Mukherjea: Tagore Law Lectures 1956 P. 169]. 148. In James v. Commonwealth of Australia 1936 AC 578, referring to McArthur's case 28 CLR 530 it was held: "It is now convenient to examine the actual language of the Constitution so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 92 though it operates in restriction both of intra-State and of inter-State trade." 149. However, in India Part XIII of the Constitution relates both to inter- State trade and commerce as also intra-State trade. 150. In Fox v. Robbins [8 CLR 115], It was held: "Section 92 of the Constitution does not reframe State Acts by making new affirmative legislation not contemplated by the State Parliament. It prevents adverse discrimination from being lawful; so far as the Act can be effectively worked in conformity with the constitutional requirement it still stands; so far as it cannot it simply ceases to operate." 151. Once it is held that the principle of res-extra commercium is not applicable, the decisions in Kalyani Stores (supra), H. Anraj (supra) and Bheilal Bhai (supra) having been rendered by a Constitution Bench would constitute binding precedents Once it is held that the Legislature has no power to levy any excise duty on imported liquor in excess of the countervailing duty within the State, having regard to the constitutional limitation imposed in terms of Entry 51, List II of Seventh Schedule to the Constitution, such discriminatory levy must be held to be violat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed and impugned judgment rendered by the Punjab and Haryana High Court quashing the Notification impugned before it is upheld. On 23.7.1998 when prayer for grant of interim relief was being considered, a prayer was made by Shri Harish N. Salve, learned Senior Counsel, appearing on behalf of the State of Punjab, to the effect that operation of impugned judgment rendered by the High Court may be stayed as the State was ready to undertake before this Court to refund the amount that would be realized by way of import duty together with interest thereon @ 15% per annum to the respondents in the event of dismissal of State's appeal by this Court and the said prayer having been acceded to, this Court stayed the operation of the judgment rendered by the High Court upon the aforesaid undertaking. In view of this, the State of Punjab is hereby directed to refund the amount that has been realized by it by way of import duty to the respondents together with interest thereon @ 15% per annum from the date of its realization till payment, which must be made within a period of three months. 154. Civil Appeal Nos. 2696-2697 are allowed and the Notification impugned before the Kerala High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l with the questions involved herein. LEGISLATIVE COMPETENCE: 159. The Acts are pre-constitutional ones but the impugned amendments thereto and/or notifications issued thereunder are post-constitutional. Such legislative power of the State admittedly must be traceable to any of the three Entries, viz., 8, 51 and 66 of List II of the Seventh Schedule of the Constitution of India, which read as under : "8. Intoxicating liquors, that is to say, the production, manufacture, possession, transport, purchase and sale of intoxicating liquors. 51. Duties of excise on the following goods manufactured or produced in the State and countervailing duties at the same or lower rates on similar goods manufactured or produced elsewhere in India :- (a) alcoholic liquors for human consumption; (b) opium, Indian hemp and other, narcotic drugs and narcotics; but not including medicinal and toilet preparations containing alcohol or any substance included in sub-paragraph (b) of this entry.; 66. Fees in respect of any of the matters in this List, but not including fees taken in any court." 160. Laws relating to imposition of duty of excise is within the legislative competence of the Parliam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clusive privilege must be traced to Article 298 of the Constitution of India. [See Kapila Hingorani v. State of Bihar]. 168. While granting largess or licence in such trade, the State must exercise its functions under Article 298 within the parameters of the constitutional scheme, which would include imposition of such regulation and would not be violative of Article 301 of the Constitution of India. RES EXTRA COMMERCIUM: 169. In R.M.D. Chamarbaugwala (supra), Har Shankar (supra) and Khoday Distilleries Ltd. (supra), this Court relying on or on the basis of a maxim 'res extra commercium' observed that trade in liquor is not a fundamental right within the meaning of Article 19(1)(g) of the Constitution of India. 170. The Constitution Bench of this Court in those decisions had neither referred to nor discussed the dictionary or legal meaning of 'res extra commercium' which means those things which had been dedicated to the public, such as public roads, rivers, title of owners etc. The question, therefore, is whether the said maxim can be applied in relation to a trade the field whereof is covered by legislative enactments? Answer to the said question, as would appear from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant statutes do not prohibit carrying out a trade/business, the courts cannot do so by taking recourse to interpretive process or on the supposed grounds of public morality. 176. Whereas lottery was looked down upon in Chambarbaugwala (supra) and B.R. Enterprises etc. v. State of UP and Ors. etc. with reference to scriptures which are thousands years old, the Court did not make a similar attempt in case of Indian Made Foreign Liquor or Imported Liquor nor considered that sacramental wine has received statutory protection under the laws validly enacted. [As for example see Bombay Sacramental Wine Manufacturing Rules, 1950 framed under the Bombay Prohibition Act, 1949. Sacramental wine refers both to Christian and Hindu tenets.] 177. In India Handicrafts Emporium and Ors. v. Union of India and Ors., a three-Judge Bench of this Court had noticed how education was held to be outside the purview of 'occupation' within the meaning of Article 19(1)(g) of the Constitution of India in Unni Krishnan, JP and Ors. v. State of Andhra Pradesh but stood overruled by an eleven-Judge Bench of this Court in T.M.A. Pai Foundation and Ors. v. State of Karnataka and Ors. following Sodan Singh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther relevant factors before arriving at a decision that it is necessarily a 'social evil'. Law is not to be laid down having regard to the perceptions of a Judge but on premises having a solid foundation therefore, both on facts as well as in law. 182. The question is required to be considered in today's scenario (which would be discussed a little later), but is suffice it to point out at this stage that what was frowned upon a few decades back, has received the acceptance of society today. 183. In R.M.D. Chambarbaugwala (supra), with highest respect, a wrong approach was adopted holding that the Constitution-makers of India, out to create a welfare State, could never have intended to raise betting and gambling to the status of trade, commerce or intercourse without taking into consideration the fact that there exists legislative entries therefore and thus the field is covered by Article 245 of the Constitution. 184. In Fatehchand Himmatlal and Ors. v. State of Maharashtra, this Court upheld the validity of the Maharashtra Debt Relief Act, 1976 holding that every systematic, profit-oriented activity, however, sinister, suppressive or socially diabolic, cannot, ipso facto, ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the provision of Motor Vehicles Act, 1988. 191. In State of Tamil Nadu and Ors. v. Sanjeetha Trading Co. and Ors., a complete prohibition was issued on export of certain items from the concerned States. The question which arose for consideration of the Court was whether such a complete prohibition on export was permissible. It was held: "The framers of the Constitution neither wanted to ensure the freedom of trade and commerce on the pattern of the freedom guaranteed by Section 92 of the Australian Constitution nor they thought it proper that the different States should have unfettered and unrestricted power while imposing prohibitions on inter-State trade. In the larger interest of the nation, there must be free flow of trade, commerce and intercourse both inter-State and intra-State but at the same time the regional problems cannot be Ignored altogether. Whenever there is a clash between the national interest and the interest of the State because of which any crisis is created, the Union has power of intervention. According to us, the expression "free trade" cannot be interpreted in an unqualified manner. Any prohibition on movement of any article from one State to another ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quor is business and a citizen has a right to do business in that commodity; but the State can make a law imposing reasonable restrictions on the said right, in public interests. It is significant that the judgment in Krishna Kumar Narula's case does not negate the right of the State to prohibit absolutely all forms of activities in relation to intoxicants. The wider right to prohibit absolutely would include the narrower right to permit dealings in intoxicants on such terms of general application as the State deems expedient." 195. It is relevant to note that in Har Shankar (supra) itself, it was stated.: "Since rights in regard to intoxicants belong to the State, it is open to the Government to part with those rights for a consideration. By Article 298 of the Constitution, the executive power of the State extends to the carrying on of any trade or business and to the making of contracts for any purpose." 196. In State of Bihar and Ors. v. Harihar Prasad Debuka etc. [AIR 1989 SC 1119] the question was answered again on the anvil of Article 304(b) of the Constitution of India. 197. Government of Maharashtra and Ors. v. Deokar's Distillery has no application in the present c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lleries (supra), which was neither in fact done nor could be done as both of the judgments were rendered by coordinate benches. K.K. Narula (supra) was only sought to be explained in Khoday Distilleries (supra). 202. In Sat Pal and Co. and Ors. v. Lt. Governor of Delhi and Ors. the question which arose for consideration was as to whether the Parliament's power to legislate in respect of Union Territory was plenary and unfettered by entries in the Lists of the Seventh Schedule of the Constitution of India having regard to Entry 97, List I of the Seventh Schedule of the Constitution. It was held : "Accordingly, if excise or countervailing duty could be levied on country liquor manufactured or imported into Delhi, albeit other conditions for the levy of such duty being fulfilled, Parliament would not lack competence to levy the same only because levy of such duty on alcoholic liquors for human consumption is within the competence of a State. But it must be confessed that as country liquor is not manufactured in Delhi, the Parliament could not under Entry 51 of the State List levy either excise or countervailing duty on it. Merely because Parliament could not levy countervailing du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . To contend that merely because some activities and trafficking in some goods can be organised as a trade or business, right to carry on trade or business in the same should be considered a fundamental right is to beg the question. The correct interpretation to be placed on the expression "the right to practise any profession, or to carry on any occupation, trade or business" is to interpret it to mean the right to practise any profession or to carry on any occupation, trade or business which can be legitimately pursued in a civilised society being not abhorrent to the generally accepted standards of its morality. Human perversity knows no limits and it is not possible to enumerate all professions, occupations, trades and businesses which may be obnoxious to decency, morals, health, safety and welfare of the society. This is apart from the fact that under our Constitution the implied restrictions on the right to practise any profession or to carry on any occupation, trade or business are made explicit in Clauses (2) to (6) of Article 19 of the Constitution and the State is permitted to make law for imposing the said restrictions. In the present case, it will be Clause (6) of Artic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said Doctrine was not applied : 210. In H. Anraj v. State of Tamil Nadu (2 Hon'ble Judges) firstly this Court held (i) lotteries were "goods" in part and could be amenable to levy of Sales Tax; and (ii) quashed and struck down the notification of the State of Tamil Nadu exempting the lotteries organized by the State of Tamil Nadu from levy of sales tax as violative of Articles 14, 301 and 304 since by such discrimination it affected the free flow of trade and commerce. It was held that the lotteries would be covered under Articles 301 to 304 of the Constitution of India. 211. Secondly, this Court in the case of H. Anaraj v. State of Maharashtra reported in held that the subject "lotteries organized by the Government of India or the Government of State" is carved out the subject "betting and gambling" in Entry 34 List II to the 7th Schedule to the Constitution of India and placed in Entry 40 List 1 to the 7th Schedule of the Constitution of India and as such Parliament alone can make law in respect of lotteries covered by Entry. 40. Thus if the legislative power relating to the lotteries organized by the Government of India or the government of State are especially carved out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as pressed against the respondents. The matter was not even examined as to what was the reason for shortfall in the production of rectified spirit. The Molasses Act does not provide for imposition of such penalty in the event of shortfall of spirit. It must, therefore, necessary be held that the imposition of the impugned penalty being against the principles of natural justice is illegal and void. The statutory authorities must act within the four-corners of a statute. They could take recourse to the proceedings for levy of penalty and the recovery thereof from the respondents only in the event there existed any agreement or statutory provision therefore. Such a power did not exist in the Commissioner of Excise or the superintendents of Excise who had issued the impugned demand notices." 217. In that case, therefore, it was laid down that the executive authorities of the State in exercise of their purported regulatory power cannot hold the people who are legally carrying on their business in liquor in ransom. They, on the ground of contractual power or otherwise, cannot be permitted to travel beyond the four-corners of a statute by levying any penalty or any other amount which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discussed by B.N. Agrawal, J. in some details, it is not necessary to notice other judgments herein. APPLICATION OF THE CONSTITUTIONAL PROVISIONS: 223. Part III of the Constitution of India, in general, and Articles 14 and 19, in particular, not only intend to confer very valuable rights to the citizens but also provides for protection from the legislative and executive vagaries. The legislature as also the executive in terms of the provisions of the Constitution of India must not only act within the constitutional parameters but also act reasonably and in public interest. I may, however, hasten to add that the rights under Articles 14 and 19 are not absolute. Article 19 provides for reasonable restrictions. 224. What is the meaning of 'reasonable restriction' is the question. Article 19(1)(g) of the Constitution guarantees to all citizens to practice any profession, or to carry on any occupation, trade or business. Clause (6) of Article 19 empowers the State to make laws imposing reasonable restrictions on the exercise of the right in the interest of general public. Freedom under Article 19(1)(g), however, can be completely curtailed in certain circumstances but it would dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e unreasonable and no person may claim a licence or a permit to do that act as of right..." 229. It was observed: "Where, however, power is entrusted to an administrative agency to grant or withhold a permit or licence in its uncontrolled discretion the law ex facie infringes the fundamental right under Article 19(1)(g). Imposition of restriction on the exercise of a fundamental right may be in the form of control or prohibition. "20. The tests of reasonableness have to be viewed in the context of the issues which faced the legislature. In the construction of such laws and in judging their validity, courts must approach the problem from the point of view of furthering the social interest which it is the purpose of the legislation to promote. They are not in these matters functioning in vacuo but as part of society which is trying, by the enacted law, to solve its problems and furthering the moral and material progress of the community as a whole..." 230. The matter has also received the attention of a two-Judge Bench of this Court in B.P. Sharma v. Union of India [2003 [6) SCALE 498] wherein this Court upon noticing a catena of decisions observed : "...On consideration of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clude cases of "prohibition" also. The contention that a law prohibiting the exercise of a fundamental right is in no case saved, cannot therefore be accepted." (See also State of Maharashtra v. Mumbai Upnagar Gramodyog Sang. 232. In Saurabh Chaudhri (supra), V.N. Khare, CJI speaking for the majority stated: "Constitutional interpretation is a difficult task. Its concept varies from statute to statute, fact to fact, situation to situation and subject matter to subject matter..." 233. It was observed: "...The courts shall all along strive hard for maintaining a balance. While interpreting the Constitution, we must notice the following view of Justice Holmes expressed in Missouri v. Holland [252 US 416 (433)] : "When we are dealing with Words that also are a constituent act, like the Constitution of the United States, we must realise that they have called into life a being the development of which could not have been foreseen completely by the most gifted of its begetters. It was enough for them to realise or to hope that they had created an organism, it has taken a century and has cost their successors much sweat and blood to prove that they created a nation. The case before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stitution of India which is itself an indication of the fact that there exists a right to carry on the trade in terms of Article 19(1)(g) of the Constitution of India. While making such a legislation the Parliament or the State Legislatures, as the case may be, impose prohibition either in whole or in part or may only provide for regulatory measures. 237. There are decisions of this Court which have held that Article 19(1) (g) will not apply so long as the trade in liquor is prohibited. The Constitution Bench of this Court in Khoday Distilleries (supra) clearly held that a citizen will have no fundamental right to carry on such trade which is illegal and would lead to commission of penal offences. The logical corollary of the said decision would be that a citizen will have a right including a fundamental right to carry on the said trade or business when the same would not lead to a penal or criminal offence or has not declared the same to be otherwise illegal. REGULATORY POWER OF THE STATE: 238. In Synthetics and Chemicals Ltd. (supra), this Court held: "76. Balsara case (1951 SCR 682) dealt with the question of reasonable restriction on medicinal and toilet preparations. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. In all their manifestations, these rights are vested in the State and indeed without such vesting there can be no effective regulation of various forms of activities in relation to intoxicants. In American Jurisprudence", Volume 30 it is stated that while engaging in liquor traffic is not inherently lawful, nevertheless it is a privilege and not a right, subject to governmental control (page 538). This power of control is an incident of the society's right to self-protection and it rests upon the right of the state to care for the health, morals and welfare of the people. Liquor traffic is a source of pauperism and crime (pp. 539, 540, 541)." 242. In order to determine whether total prohibition would be reasonable the Court has to balance the direct impact on the fundamental right of the citizens thereby against the greater public or social interest sought to be ensured. Implementation of Directive Principles contained in Part IV is within the expression of restrictions in the interest of the general p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Article 14 of the Constitution of India recognizes that reasonable classification is permissible. Article 14 has been held to be applicable at all stages for grant of a contract. 249. It is interesting to note that Rule 39 of the Maharashtra Country Liquor Rules, 1973 and Rule 17 of the Maharashta Foreign Liquor (Sale on Cash, Register of Sales etc.) Rules, 1969 prohibits the vendors from selling foreign liquor or the country liquor : 250. Rule 17 of the Maharashtra Foreign Liquor (Sale on Cash, Register of Sales etc.) Rules, 1969 prescribes that no vendor is to sell foreign liquor to the following class of persons : A Police Officer in uniform; A Prohibition and Excise Officer on duty; A Railway servant on duty; An insane person; or A person who is intoxicated. 251. Rule 39 of the Maharashtra Country Rules, 1973 provides that a retail license shall not sell country liquor to the following categories of persons, namely : A lunatic insane person; Person who is in an intoxicated State; Person known or suspected to be participating in any rioting or disturbance of peace; and The Armed Forces of the Union, Member of the Police Force, the Prohibition and the Exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard to the Directive Principles in Article 47. 255. In Fatehchand (supra), also a distinction was made between money- lending amongst commercial community as integral to trade which was held to be trade and a narrow noxious category of money-lending where there is no flow of trade, no movement of commerce, no promotion of intercourse, no servicing of business, but merely stagnates rural economy, strangulates the borrowing community and turns malignant in its repercussions. [Italics is mine for emphasis] 256. A similar distinction was noticed in Synthetics and Chemicals Ltd. v. State of UP in the following terms: "...In other words, excise duty and price for privileges were regarded as one and the same thing. So-called privilege was reserved by the State mostly in respect of country liquor and not foreign liquor which included denatured spirit." 257. The seven-Judge Bench, therefore, made a distinction between a country liquor and a foreign liquor. ARTICLE 301: (A) The Constitutional Assembly Debates: 258. It is trite that in interpreting constitutional provisions, reference to constitutional debates is permissible. [See T.M.A. Pai Foundation (supra)] 259. This Artic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f direction by the government." He realized that the restrictions cannot be whittled down, if there is to be economic progress, when he stated, "A certain amount of freedom of trade and commerce has to be permitted. No doubt restrictions by the State have to be prevented so that particular idiosyncrasies of some people in power or narrow provincial policies of certain states should not be allowed to come into play and effect the general economy of the country. That I think is amply covered... certain amount of powers in regard to restriction on trade is necessary and has been provided for. " [See Constitutional Assembly Debates, 8th September, 1949, Vol.9, p. 1139] 262. He also believed that the State should be given the right and the Centre should only interfere if the economic and fiscal policy of the Centre is unduly interfered with. 263. While justifying why a certain level of restrictions were required, T.T. Krishnamachari drew largely from the Australian experience wherein it was believed that absolute freedom of trade and commerce was running contrary to the purpose of the State and in turn the citizens. 264. However, in sharp contrast to these views, Pandit Thakur D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guarantee an omnibus right of interstate trade and commerce. Being so absolute, they acted as barriers to many measures of economic reform undertaken by the government. 269. The Commerce Clause in the American Constitution is in sharp contrast. Referred to as the 'dormant' clause it simply states that, "the Congress Shall have power... to regulate commerce among the several states." [See U.S. Constitution, Article 1, p.8 Clause 3]. 270. The interpretation of this ambiguous clause has been equally varied. The courts have held that the 'very silence' in these words delimits an implied negative against unduly burdensome or discriminatory state or local interferences with free trade across state lines. [See Tribe, Lawrence H. "Constitutional Choices", p.34]. This was primarily the view taken in Leisy v. Hardin [See 135 US 100 at pp 109-110] by Justice Fuller who was in the majority while striking down an Iowa statute prohibiting sale of intoxicating liquor. He said that, "the Congress' silence with respect to an area of interstate commerce-that is, its non-enactment of any law either regulating that area or allowing states to do so -indicates its will that such commerce shall be f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctive wars on each other. A common diagnosis was that state governments had been too responsive to local economic interests; with the result that interstate economic competition was more through political processes than through the marketplace. 276. So while one set of views asked for complete state freedom to regulate (successors of Marshall), others asked for the Central power instead. Soon evolved a new dichotomy of 'local' and 'national'. This came about in Cooley v. Board of Wardens of the Port of Philadelphia, [See 53 US (12 How) 299 (1851).] which claimed that even though the Pennsylvania statute concerned manifestly and predictably affected interstate commerce, the subject being regulated was 'local' and not 'national'. 277. Later the debate moved from here to the test of 'direct' and 'indirect' - State regulations affecting interstate commerce were struck down by the Court if the regulatory impact upon interstate commerce was deemed so substantial to be a 'direct' burden. 278. Thus, from an overview of all the above views in the American and Australian Constitutions one can conclude that the Indian provisions for free trade and commerce are more explicit. While the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nger behind the taking such and absolute view. (C) Constitutional Intent Behind Article 301: 283. Article 301 of the Constitution of India provides that trade, commerce and intercourse throughout India shall be free and subject only to the provisions of Part XIII of the Constitution. This Article seeks to limit the legislative powers of the State in matters relating to interstate commerce, trade and intercourse. 284. The object behind Article 301 is to ensure that the economic unity of India may not be broken up by internal barriers. [See Atiabari Tea Co. v. State of Assam - AIR 1961 SC 232] Further, unlike the Fundamental right provided to citizens only under Article 19(1)(g), Article 301 seeks to extend its benefits to all individuals. 285. This is the basis of operation of Article 301. The essence of Article 301 is a right of free movement of trade without any barrier whether inter- State or intra-State. It is also not in dispute that the taxes which have direct impact on the flow of trade and commerce constitute a violation of Article 301 unless the legislation is brought within the scope of Article 302, 304 and 305. [See Jindal Strips Ltd. and Ors. v. State of Haryana an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dents do not place any materials before the Court to establish that the legislation comes within the permissible limits of Clause (6), it is surely not for the appellants to prove negatively that the legislation was not reasonable and was not conducive to the welfare of the community. " 290. The Court clearly held that impost not authorized by law cannot be a reasonable regulation. 291. The submission of Mr. P.N. Mishra and Mr. Iyer could have been appreciated had the State in terms of Article 47 of the Constitution of India imposed a total prohibition or even a partial prohibition. The State of Punjab and Kerala have not only imposed no prohibition, they, not only, with a view to encourage industrial development had been encouraging establishment of all types of industries including those producing Indian- Made Foreign Liquors. India is also importing liquor manufactured in other countries. 292. It will appear from the order dated 31.1.2002 passed by his Court that on a query made by this Court, Mr. K.K. Venugopal for the State of Punjab categorically stated that the source of power for imposition of the import fee was Sections 18, 19, 34, 58 and 59 of the Punjab Excise Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "Excise Duty", "Countervailing Duty", "import duty" are not terms of art. They are made part of the interpretation section contained in the respective Excise Acts. 304. Similarly, "Licence Fee" and "Fixed Fee" are also defined. Each term must be held to have been used by the Legislature with a view to achieve a definite purpose. One term should not be read as supplement to other. In that view of the matter, import duty cannot be held to be a part of exclusive privilege and, thus, part of a licence fee. If this distinction is borne in mind the statutory injunction contained in Article 301 of the Constitution of India as also Section 33A of the Punjab Excise Act can be given an economic, purposive and textual meaning. Import duty which is levied under Section 17 of the Kerala Abkari Act and Section 34 of the Punjab Excise Act cannot be read to be a part of the licence fee which is collected at the time of grant of licence that is by way of parting of its right of exclusive privilege. (See Harinarayan Jaiswal (supra) and State of U.P. v. Sheopat Rai, 1994 Supp (1) SCC 8) PRINCIPLES GOVERNING INTERPRETATION OF CONSTITUTION: 305. Constitution being the most important legal documen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "a Constitutional provision will not be interpreted in the attitude of a lexicographer, with one eye on the provision and the other on the lexicon. The meaning of the word or expression used in the Constitution often is coloured by the context in which it occurs, the simpler and more common the word or expression, the more meanings and shades of meanings it has, It is the duty of the Court to determine in what particular meaning and particular shade of meaning the word or expression was Used by the Constitution makers and in discharging the duty the Court will take into account the context in which it occurs, the object to serve which in war used, its collocation, the general congruity with the concept or object it was intended to articulate and a host of other consideration. 309. The interpretative changes in the Constitution must not only be considered from its plain language for the purport and object it seeks to achieve but also having regard to the international treaties and conventions but also principles of interpretation governing the same. 310. The necessity of interpretative changes having regard to the changing scenario has recently been noticed by this Court in its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... students, having better merit will, thus, have a direct nexus with the economic and consequently the national interests of the country. The right of development from the human right point of view must be construed liberally." 316. It was further observed : "Having regard to globalisation and opening up of the market, the State expects various medical colleges and educational institutions and universities to move in. Under WTO and GATT human development has taken its firm root. A decent life to the persons living in the society in general is perceived." GLOBALISATION: 317. Globalisation has brought a radical change in the economic and social landscape of the country. Its impact on Constitution and constitutionalism is significant. As and when occasion arises the interface between the globalisation and constitutionalism whether from economic perspective or human rights perspective is required to be seriously gone into. Often the economic changes in the country relating to regulation of markets brought about competition law leading to substantial erosion of administrative law by private law are matters which eventually would fall for our decisions. The Court will have to take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ushita, Thomas J. Schoenbaum Petros C. Mavroidis P.279]. 325. We need not go into the question in details as regard the provisions of subsidies as found placed in GATT. But it may be relevant to note the impact of subsidies on international trade. (See Jackson, John J., in "The Jurisprudence of GATT and WTO" pp 434-5.) CHANGING SCENARIO: 326. Socialism might have been a catchword from our history. It may be present in the Preamble of our Constitution. However, due to the liberalization policy adopted by the Central Government from the early nineties, this view that the Indian society is essentially wedded to socialism is definitely withering away. 327. Although, the United States is guided by a capitalist philosophy unlike the socialist policy laid down in the Indian Constitution, the very fact that changes in society have to be reflected in the interpretation of the Constitution, while still preserving the core constitutional intent of the Constitutional makers is a factor to be reckoned with. This has never been more important than in the age of globalization when vast changes are taking place both at the social and political levels. Constitution: How should be interpre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any way whatsoever and we feel it expedient to record that there exists sufficient reasons and justification in the submission of Mr. Desai as regards the invocation of jurisdiction under Section 44-A of the Code upon reliance on the two decisions of the New Zealand and Australian Courts." 332. There cannot be any doubt whatsoever that a law which was at one point of time was constitutional may be rendered unconstitutional because of passage of time. (See Kapila Hingorani (supra) and John Vallamattom and Anr. v. Union of India [JT 2003 (6) SC 37]). 333. In R v. Hughes [[12 BHRC 243 = (2002) UKPC 12], the Privy Council observed: "Under the constitution the people of St. Lucia enjoy certain fundamental rights and freedoms. The supremacy of those constitutional rights and freedoms is secured by Section 120 of the constitution : "This Constitution is the supreme law of Saint Lucia and, subject to the provisions--of Section 41 of this Constitution, if any other law is inconsistent with this Constitution, this Constitution shall prevail and the other law shall, to the extent of the inconsistency, be void." The constitution controls not only the statute law but any law in force in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. When a statute permits a trade, morality takes a back seat as 'legislature' as contra distinguished from 'judiciary' is supposed to be the authority to consider the morality or otherwise of certain things prevailing in the society. 338. This Court in Murlidhar Agarwal and Anr. v. State of U.P. and Ors. while dealing with the concept of 'public policy' observed thus:- "...Public policy does not remain static in any given community. It may vary from generation to generation and even in the same generation. Public policy would be almost useless if it were to remain in fixed moulds for all time. ... The difficulty of discovering what public policy is at any given moment certainly does not absolve the judges from the duty of doing so. In conducting an enquiry, as already stated, Judges are not hide-bound by precedent. The Judges must look beyond the narrow field of past precedents, though this still leaves open the question, in which direction they must cast their gaze. The judges are to base their decision on the opinions of men of the world, as distinguished from opinions based on legal learning. In other words, the judges will have to look beyond the jurisprudence and that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etation of the provisions of the Constitution especially those provisions dealing with the regulation of economy of the nation must receive such interpretation which fosters economic growth. The stagnatic economy of any nation has a bane for the world economy. Keeping this in view the interpretation, of the Constitution should receive such a treatment which would be in tune with the original intention of the Constitution makers. 343. The ultimate duty to achieve and maintain integrity of the nation vis- -vis life lies on the Union. It is for this reason though law and order is included in the List II of the Seventh Schedule of the Constitution of India, national security, internal security and policy powers to regulate various aspects of social, political and economic conduct of human beings vested in the Union Parliament. Further by reason of Article 352, it is the parliament which can take over the administration of any state. These are intended to maintain integrity and push economy forward. A growing economy results in more industries and more jobs. When people are employed the purchasing power will go up the per capita income will go up resulting in more payment for goods. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd itself unable, after all, to effectuate any substantive limits on Congress' commerce power - unless the Court takes the truly dramatic step of rejecting entirely the substantial effects test and the aggregation principle that is its companion, as Justice Thomas urged in his solo concurrence, advocating the overruling of such foundational landmarks as Wickard v. Filburn, NLRB v. Jones Laughlin Steel Corp., and Katzenbach v. McClung." 347. The history of commerce power of the United States vis--vis the decisions of the Supreme Court is stated in 'The Oxford Companion to the Supreme Court of the United States' edited by Kermit L. Hall, 1992 edition wherein under the heading 'Commerce Power Today' it is stated: "Commerce Power Today: During the fifty years following the post-New Deal era Congress expanded national regulation into myriad aspects of the national life, using the Commerce Clause as the constitutional base, all with the Supreme Court's approval. One of the most significant areas of national intervention was that of racial discrimination. In 1964 Congress enacted a Civil Rights Act banning racial discrimination in hotels, motels, restaurants, theaters, and motion pict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1937) and Katzenbach v. McClung [379 US 294 (1964)] as to whether the Congress should be the sole authority to control the commerce clause or not. [See 'A Book of Legal Lists' by Bernard Schwartz, 'A History of the Supreme Court' by Bernard Schwartz and 'American Constitutional Law' by Lawrence H. Tribe] 350. In Joseph Lochner v. People of the State of New York [1908 US 937] a question arose as to whether a legislation in limiting of employment in bakeries to sixty hours a week and ten hours a day is constitutional. The law was struck down stating: "It is also urged, pursuing the same line of argument, that it is to the interest of the state that its population should be strong and robust, and therefore any legislation which may be said to tend to make people healthy must be valid as health laws, enacted under the police power. If this be a valid argument and a justification for this kind of legislation, it follows that the protection of the Federal Constitution from undue interference with liberty of person and freedom of contract is visionary, wherever the law is sought to be justified as a valid exercise of the police power. Scarcely any law but might find shelter under suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r can anyone seek to fix the meaning of words for others, so the interpretation of the rule remains flexible and open-ended. (See Dias Jurisprudence, 5th Edition, page 136)" 356. However, although a decision has neither been reversed nor overruled, it may cease to be 'law' owing to changed conditions and changed law. This is reflected by the principle 'cessante ratione cessat ipsa lex'. "...It is not easy to detect when such situations occur, for as long as the traditional theory prevails that judges never make law, but only declare it, two situations need to be carefully distinguished. One is where a case is rejected as being no longer law on the ground that it is now thought never to have represented the law; the other is where a case, which is acknowledged to have been the law at the time, has ceased to have that character owing to altered circumstances. (See Dias Jurisprudence, 5th Edition, page 146-147)" 357. It is the latter situation which is often of relevance. With changes that are bound to occur in an evolving society, the judiciary must also keep abreast of these changes in order that the law is considered to be good law. This is extremely pertinent especially in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is given in ignorance of the terms of a statute or rule having statutory force Young v. Bristol Aeroplane Co. Ltd (1944) 1 KB 718 at 729 (1944) 2 All ER 293 at 300. See also Lancaster Motor Col. (London Ltd. v. Bremith Ltd. (1941) 1 KB 675 For a Divisional Court decision disregarded by that court as being per incuriam, See Nicholas v. Penny (1950) 2KB 466, 1950 2 All ER 89. A decision should not be treated as given per incuriam, however, simply because of a deficiency of parties, Morvelle ltd. v. Wakeling (1955) 2 QB 379 (1955) 1 ALL ER 708 C. or because the court had not the benefit of the best argument, Bryers v. Candadian Pacific Streampships ltd. (1957) 1 QB 134, (1956) 3 All ER 560 CA Per Singleton LJ, affd Sub nom. Candadian Pacific Streampship Ltd. v. Bryers (1958) AC 485, (1957) 3 ALL ER 572. and, as a general rule, the only cases in which decision should be held to be given per incuriam are those given in ignorance of some inconsistent statute or binding authority A. and J. Mukclow Ltd. v. IRC (1954) Ch. 615. (1954) 2 All ER; 508 CA, morelle Ltd. v. Wakeling (1955) 2 QB 379, (1955) 1 All ER 708 CA, See also Bonsor v. Musicians Union (1954) Ch. 479 (1954) 1 ALL ER 822 CA, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier decision is not correct on merits." 365. It is also trite that the binding precedents which are authoritative in nature and are meant to be applied should not be ignored on application of the doctrine of sub silentio or per incurium without assigning specific reasons therefore. I, for one, do not as to how Kalyani Stores (supra) and K.K. Narula (supra) read together can be said to have been passed sub silentio or rendered per incurium. CONCLUSION: 366. The propositions of law which emerge from the discussions made hereinbefore are : (1) The maxim 'res extra commercium' has no role to play in determining the constitutional validity of a statute. The State, in its discretion having regard to the provisions contained in Article 47 of the Constitution of India may part with its right of exclusive privilege but once it does so, the grant being subject to the terms and conditions of a statute, the common law principle based on the maxim 'res extra commercium' shall have no application in relation thereto. (2) When the constitutionality of a taxing statute is questioned, the same has to be judged on the touchstone of the constitutional provisions including Article 301 t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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