TMI Blog1976 (10) TMI 148X X X X Extracts X X X X X X X X Extracts X X X X ..... sive privilege within the meaning of section 22(1) of the Act" and that it has expressly been provided in section 29 that it would be permissible for the State Government to accept payment of a sum in "conSideration" of the exclusive privilege under section 22. The High Court has taken the view that rule 103(1) of the Board’s Excise Rules regarding the manner of fixation and realization of the consideration for the grant of a license for the exclusive privilege of retail vend of country spirit was "incompetent and ultra vires the act." The High Court took that view under the mistaken impression that the State was not entitled to collect a tax "under the garb of a fee" and the "auction price for a license is not duty within the meaning of Entry 51 of List 11 of the Seventh Schedule to the Constitution." But, as has been shown, what was sought to be raised was consideration and not "fee". The use of the expression "fees" in the rule is therefore inaccurate, but that cannot detract from the real nature of the recovery. There can be no doubt therefore that the High Court erred in taking a contrary view. Appeal allowed. - Civil Appeal Nos. 351-359/72 - - - Dated:- 15-10-1976 - SHI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had issued instructions to him not to. issue the licenses. Ajodhya Prasad prayed in his petition for the issue of directions for the issue of licenses and quashing the State Government s instructions to the contrary. Raghunandan Saha also filed a petition (O.J.C. No. 357 of 1970) on April 13, 1970. The Collector issued a notice for reauction on May 1, 1970 and Ajodhya Prasad amended his petition for quashing the notice also. The State Government and the other respondents traversed the claim in Ajodhya Prasad s writ petition and pleaded, inter alia, that the bids at the auction were not satisfactory and, in the interest of the State revenue, the State Government had passed the orders for not accepting Ajodhya Prasad s bids. The High Court examined the questions whether Ajodhya Prasad was entitled to the issue of the licenses for the seven shops and whether the State Government had the authority to direct the withholding and reauctioning of the licenses, and held, inter alia, that the State Government had no power to interfere with the auction held by the Collector after it had become final in appeal and revision , and could not direct a reauction. The High Court examined the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aled. That was followed by the Orissa Excise (Exclusive Privilege) Rules, 1970, which were made under section 89 of the Act. The respondents in Ajodhya Prasad s writ petition No. 850 of 1970 pleaded that the amendments to the Act were valid and that the State Government had the right to grant an exclusive privilege for the purposes mentioned in section 22 of the Act. The money so realised was consideration for the exclusive privilege under section 22 and was neither an excise duty nor a tax nor a fee. It was also pleaded that the tender was in accordance with the rules as the authority to accept the tender was the State Government. The High Court examined Ajodhya Prasad s writ petition (No. 850 of 1970 in its Judgment dated February 3, 1971. It held that the order of the State Government dated August 19, 1970 for inviting tenders was invalid as the authorities for fixing the procedure under the amended section 29(2)(b) had not been specified, the Government had appropriated for itself absolute and naked and arbitrary power to accept any tender or reject any tender for any reason whatsoever or without any rhyme or reason and the order left it to the uncontrolled discreti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Section 22 of the Act for grant to any person of the exclusive privilege of manufacture and sale of country liquor for a sum, the method of determination of which is provided in Section 29, are provisions which are calculated to restrict and control trade in liquor although incidentally revenue is earned for the State thereby and that Entry in List II of the Seventh Schedule confers power on the State Legislature to enact such a regulatory measure and consequently the State Legislature has legislative competence to enact Sections 22 and 29. The High Court accordingly held that section 22 and section 29 without the expression or otherwise in clause (a) of sub-section 2 were valid and constitutional. The High Court then examined the effect of section 6 of the Amending Act of 1970, and held that as retrospective effect was not given to sections 2 to 5 of that Act, the validity of the money realized by the State had to be judged with reference to the unamended provisions, and held as follows,-- It, therefore, follows that by reason of the fact that Sections 2 to 5 of the Amending Act were not made retrospective in operation, the effect of Section 6 is that thereb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nged the vires of sections 22 and 29(2) as amended, and prayed for the consequential reliefs. The High Court held that the case was completely covered by its decision dated January 3, 1974 in O.J.C. No. 1036 of 1971 and dismissed the petition. It will tires appear that these appeals are inter-connected and that is why we have thought it desirable to examine them in a common, judgment. As has been stated, Civil Appeals Nos. 1892 and 1893 of 1971 arise out of O.J. Cs. Nos. 392 and 357 of 1970 which have been decided by the judgment of the High Court dated May 15, 1970. It has been argued by Mr. Govind Das on behalf of the appellants that the High Court erred in holding that the sale notice issued by the Collector was not for the grant of an exclusive .privilege under subsection (1) of section 22 of the Act because the Collector had no authority to issue a notice under that sub-section, as the power of the State Government in that respect had been delegated to the Board of Revenue. Sub-section (1) of section 22 of the Act provides that the State Government may grant to any person, On such conditions and for such periods as it may think fit, the exclusive privilege, inter al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Act of the Kerala State placing restrictions on the manufacture and sale etc. of liquor. After considering all the decided cases including Narula s case (supra) in which it was held that a citizen had a fundamental right to. do business and deal in liquor, this Court referred to its decision in State of Orissa and others v. Harinarayan Jaiswal and others ([1972].3 S.C.R. 784) in which Narula s case was explained, and held as follows,- For these reasons we hold that the State has the exclusive right or privilege of manufacturing and selling liquor. The State grants such right or privilege in the shape of a licence or a lease. The State has the power to hold a public auction for grant of such right or privilege and accept payment of a sum in consideration of grant of lease. While taking this view this Court held that the State Legislature was authorised to make a provision for public auction by reason of the power contained in Entry 8 List II of the Seventh Schedule to the Constitution and that there was no fundamental right of citizens to carry on trade or to do business in liquor. The matter again came up for consideration in Har Shankar s case (supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acceptance of the bid at the auction , even after the announcement of an express condition attached to it that the knocking down of the bid would not really be an acceptance of it by the Government, could be an acceptance of the bid at all. In the peculiar facts and circumstances of the auction, the bids were, apparently, nothing more than offers in response to invitation to make tenders, and such auctions were the mode of ascertaining the highest offers. The basic conditions for the emergence of rights through offers or conditions made and accepted, and acted upon, by paying any specified or agreed price as consideration, were thus wanting in this case. In fact the express and advertised terms of the auction made it clear that the money tendered was to be deemed to be deposited tentatively, pending the acceptance of the bid. So what we have before us are neither offers nor acceptance by the Government. There were only offers by the bidders to purchase the rights, subject expressly to their acceptance or rejection by the State Government. The essentials of any agreement and the mutuality of obligations were thus absent altogether. Moreover it was not an ordinary auction where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price for a license is not duty within the meaning of Entry 51 of List 11 of the Seventh Schedule to the Constitution. But, as has been shown, what was sought to be raised was consideration and not fee . The use of the expression fees in the rule is therefore inaccurate, but that cannot detract from the real nature of the recovery. Mr. S.C.. Agarwal has challenged the validity of rule 103 on another ground, and we shall deal with it when we come to the judgment of the High Court dated April 16, 1971. The next judgment of the High Court is that dated February 3, 1971, in O.J.C. No. 850 of 1970, which has given rise to civil appeal No. 209/of 1972 by the State of Orissa. We have already stated the findings of the High Court in regard to it. It has been argued by Mr. Govind Das that even if the State Government failed to specify the authority which was to determine the mode of determining the sum payable under sub-section (1) of section 29, that could not be said to matter because it was the Collector, who was incharge of the administration of the Excise Department and Collection of the excise-revenue under section 7 of the Act, who took the action to issue the auction noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 10 of 1971) with full retrospective effect. Section 17 of the Act validated both the licenses granted and amounts paid or payable therefor, and its validity has not been challenged before us. It will be remembered that Siba Prasad Saha had filed O.J.C. No. 786 of 1970 after the first judgment of the High Court dated May 15,1970, for refund of the license fee and for non-payment of the fee in future. The State of Orissa feels aggrieved against the decision of the High Court in that case dated April 16,1971 that a citizen has a fundamental right to deal in liquor. In taking that view the High Court relied on this Court s decision in Narula s case (supra). The decision in Narula s case was considered and explained by this Court in Nashirwar s care (supra) and it has been held as follows,-- It is not correct to read in the decision in Narula s case that there is a fundamental right to do business in liquor. The decision is that dealing in liquor is business and a citizen has a right to do business in that commodity and the State can impose reasonable restrictions on the right in public interest. If the State can prohibit bussiness in liquor as is held in State of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nothing but a tax and no such tax was permissible under Entries 45 to 63 of List II of the Seventh Schedule to the Constitution and that it was not excise duty within the meaning of Entry 51 or a fee under Entry 66. It has also been argued that Entry 8 embodying the Police powers of the State could not be invoked to sustain such an imposition. Mr. Bhagat has also argued that the collection was in the nature of a tax and section 29 was therefore ultra vires the Constitution. Mr. Bhagat has also urged that the State was not the owner of the exclusive privilege to manufacture or sell liquor and that the Act did not empower it to part with that right on payment. We have given our reasons already for taking a contrary view, with reference to. the decisions in Nashirwar s case and Har Shankar s case. The State has the exclusive right or privilege to manufacture, store and sell liquor and to grant that right to its license holders on payment of consideration, with such conditions and restrictions for its regulation as may be necessary in the public interest. The argument to the contrary is futile and is rejected. It has been argued by Mr. Agarwal that although the Amending Act of 1970 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason. This takes us to the judgment of the High Court dated March 28, 1974 in O.J.C.No.589 of 1972 which has given rise to civil appeal No. 1802 of 1974. That decision is based on the decision dated January 3,1974 in O.J.C.No. 1036 of 1971. The petitioner in that case was a licensee for the retail sale of country liquor in Mayurbhanj district. He challenged the vires of sections 22 and 29 of the Act and claimed that the monthly consideration for the license was not due from him and that he was entitled to a refund of the money already paid by him. The High Court followed that decision and dismissed the writ petition. In doing so it relied on its decision dated April 16, 1971 in Siba Prasad Saha v. State of Orissa and other (I.L.R. 1971 Cuttack 777) and the decision of this Court in Jaiswal s case (supra) and dismissed the petition. We have already dealt with the points which arise for consideration in this case while examining the earlier cases and we see nothing wrong with the impugned judgment of the High Court by which the writ petition has been dismissed. In the result, we order as follows,- Civil Appeals Nos. 1892 and 1893 of 1971 are allowed, the impugned judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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