9911796707
TMI Blog1993 (10) TMI 354X X X X Extracts X X X X X X X X Extracts X X X X ..... l in the manufacture of potable alcohol including arrack and other liquor such as whisky, brandy, etc. commonly referred as Indian Made Foreign Liquors ('IMFL' for short). In view of the insistence on the part of the respondents, petitioners have obtained licences in respect of the distillery units under Sections 13 to 15 of the Act and the Rules framed thereunder. Thus the licences according to the petitioners are limited to regulate the activities of the distilleries to prevent diversion and misuse of rectified spirit for the purpose of illicit manufacture of potable alcohol. It is stated that Ethyl alcohol Grade-I is the raw material used in the pharmaceutical industries, IMFL and arrack manufacturers as well as in chemical industries. This is 66° OP (over proof). Ethyl alcohol below the said degree cannot be used as a raw material in the manufacture of the articles referred just now. When this Grade-I Ethyl alcohol is treated with certain chemicals it is converted into "de-natured spirit," used for chemical purposes, it cannot be used for the manufacture of the arrack, IMFL, etc. A small quantity of Ethyl alcohol manufactured by the petitioners is permitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. The withdrawal of the control orders is expected to provide a better opportunity for all the sectors dependent on molasses to function optimally in a free market economy. While making the decision to decontrol molasses and alcohol, the government has emphasised the need to ensure that there is no undue diversion of molasses to the potable alcohol sector. Fears have been expressed that molasses in a decontrolled situation may be diverted for potable alcohol production. It has also been alleged that the potable alcohol sector, with its ability to pay higher prices for molasses, may corner a major part of the molasses in the country and this would have a serious impact on the availability of molasses for industrial alcohol. It is, therefore, particularly important that strict vigilance is exercised in this regard. It hardly needs to be emphasised that even after the decontrol of molasses and alcohol, the powers of the State Governments/Union Territories Administration to regulate the potable alcohol sector under their excise regulations and other laws would remain intact." Thereafter the Circular refers to the Decision of the Supreme Court in Second Synthetics case and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as denatured spirit or rectified spirit shall not be distilled at a strength lower than 52° over proof. It further states that the distiller shall sell at the distillery to the Distillery Officer such quantities of country made spirits, rectified spirits and denatured spirits as may be indented for by him, for the supply. Sub-rule (3) of Rule 31: "(3) In case of 2(a) after the issues are made payment shall be made by the Distillery Officer on the instructions of the Commissioner to the Distiller, at such intervals as the Commissioner may prescribe, the value of spirits supplied. In case of 2(b) the distiller shall himself, recover the value of spirits supplied from the person concerned." Another Rule relied upon is called the Karnataka Excise (Manufacture & Bottling of Arrack) Rules, 1987 (hereinafter referred to as 'the Arrack Rules' or the "Rules"). Rule 17 of the Arrack Rules reads as follows: "17. Fixation of price:- The price to be paid by Government to the distillery for the rectified spirit supplied by the distillery to the Warehouse, the price to be paid by the Government to the Warehouse for manufacture and bottling of arrack and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have also requested to increase the price of rectified spirit. The Association had also given representation dated 9.7.1993. A majority of the Sugar Factories in the State are yet to commence their cane-crushing operations for the current season, on account of which there is practically no production of molasses at present. The present price of molasses will fall substantially by about the end of October, by which time almost all the sugar factories in the State would have commenced their crushing operations. Thereafter, the price of molasses may again increase towards the end of April 1993-94 when the crushing operation of the sugar factory comes to a close. Therefore, till the current excise year, it may be assumed that the molasses price will be at the present level for a period of 4 to 5 months and at a substantially lower level for a period of about 5 to 6 months. It is therefore proposed that the price of rectified spirit is fixed for the current excise year taking into account the average cost of molasses throughout the period of the remaining about 101/2 months. There is also proposal before Government to reduce the sales tax of molasses from 40% to 10%. The Government by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution. Above contentions could be broadly formulated as follows:- I. Whether the State has any competence to make a law affecting the industrial alcohol/rectified spirit? II. Whether Rule 17 of the aforesaid Rule is ultravires the Act in so far as it empowers, the State Government to fix the price of rectified spirit sold to arrack manufacturers and whether the Rule to that extent suffers from excessive delegation of legislative power? III. Whether fixation of price, as a fact, is arbitrary, unreasonable and without any basis? RE. CONTENTION NO. 1. 3. The petitioners elaborated their contention as follows: The regulation of ethyl alcohol comes solely within the power of the Centre as per the provisions of the IDR Act. The field has been totally occupied by the Centre and has been held to be so by the Supreme Court in Second Synthetics case at para-84 . The Court has further pointed out in para 85 that under the only power that remains with the State it may lay down regulations to ensure that non-potable alcohol is not diverted and misused as a substitute for potable alcohol. The Central power has been assumed under the heading 'Fermentation industry' as found in Entr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the basis on which this doctrine is founded there can be no incongruity in attributing to the later legislation, the same intent which Section 6 of General Clauses Act has and that such implied repeal has the effect of rendering the State legislation void:- T. BARAI v. HENRY AH HOE AND ANR., (para-15). Earlier in ZAVERBHAI AMALDAS v. STATE OF BOMBAY, also, the Supreme Court, in para-7 held that, even where the Central law does not expressly repeal the State law, even then the State law will be void, if the State law conflicts with the Central law with respect to the same matter. Also to the same effect is the Decision in THE HINGIR-RAMPUR COAL CO. LTD AND ORS. v. THE STATE OF ORISSA AND ORS., . A repeal of the repealing law does not revive what was repealed except as provided for under Section 7 of the General Clauses Act is the contention. 4. It is necessary to refer to three Decisions, which dealt with the subject of industrial alcohol/rectified spirit. The first one is THE STATE OF UP. AND ORS. ETC. ETC. v. SYNTHETICS AND CHEMICAL LTD. AND ORS. ETC. ETC., - referred hereinafter as the First Synthetics case'). However, it is unnecessary to refer to it separately, since it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the topic of 'industries, the control of which by the Union is declared by Parliament by law to be expedient in the public interest' and comparing with this, Entry 33 of List III and the effect of inclusion of 'alcohol' and 'other products of fermentation industries' in Item 26 of the First Schedule to IDR Act, Court observed at page 1955; "After 1956 amendment to the IDR Act bringing alcohol industries (under fermentation industries) as item 26 of the First Schedule to IDR Act the control of this industry has vested exclusively in the Union. Thereafter, licences to manufacture both potable and non-potable alcohol is vested in the Central Government. Distilleries are manufacturing alcohol under the Central Licences under IDR Act. No privilege for manufacture even if one existed, has been transferred to the distilleries by the State. The State cannot itself manufacture industrial alcohol without the permission of the Central Government. The States cannot claim to pass a right which these do not possess. Nor can the States claim exclusive right to produce and manufacture industrial alcohol which are manufactured under the grant of licence from the Cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etics case to the extent of State's power to levy sales tax, was per incuriam. In the Third Synthetics case, the scope of the Decision in Second Synthetics case was stated thus, at page 151: "We have extensively quoted from the judgment of the Constitution Bench in Synthetics & Chemicals Ltd. v. State of U.P. with a view to showing that the Court was concerned with only one question, and that was whether the States could levy excise duty or vend fee or transport fee and the like by recourse to Entry 51 or 8 in List II in respect of industrial alcohol. This Court held, as seen above, that the States had no such power under either entry in respect of non-potable or industrial alcohol." Thereafter the Court referred to the First Synthetic case wherein a wider meaning was attributed to the term 'alcohol' to include 'industrial alcohol' and proceeded to say that "this wider understanding of 'intoxicating liquor' so as to comprehend not only potable alcohol, but also industrial alcohol, was disapproved in Synthetics" ('Synthetics' here was a reference to the Second Synthetics case). With regard to the scope of legislative compete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax but general subjects of legislation. No conflict can, therefore, arise between the taxing powers of the Union and the States. Parliament has the power to legislate in respect of a 'controlled' industry falling under Entry 52 of List I and both Parliament and the States have the power to legislate in respect of the trade and commerce in, and the production, supply and distribution of, the products of a 'controlled' industry (Entry 33 of List III). These are not taxing entries and no doubt, therefore, relate to taxes, but powers of regulation and control. The power to control industry being thus vested in Parliament (Entry 52 of List I) and the legislative power in respect of trade and commerce in such industry being concurrently vested in the Union and the States (Entry 33 of List III) any exercise of control by the State must be subject to the legislative power of Parliament and the power conferred on the Central Government by such legislation (Article 246). Any exercise of power by the State which transgresses -upon the power of Parliament or of the Central Government, as its delegate, is to the extent of such transgression null and void." Court pointed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer of the State to levy taxes on the sale or purchase of goods. It is no doubt true that the consumer of the article must in addition to the price, pay purchase tax due in respect of them. But, that is by reason of a valid levy which is within the constitutional power of every State, and is de hors the price, though often referable to it." (vide para-35). In the concurring Judgment, Sahai, J., referred to doctrine of 'per incuriam'; thereafter, as to the scope of Entry 33 of Part III and Entry 24 of List II it was held; "Ethyl alcohol is not fit for human consumption. It is principally used as raw material for manufacture of rubber etc. Since it was of all India importance the activities of which affected the country as a whole, it was declared as of public importance by adding it as Item (1) under Entry 26 of the First Schedule appended to the Industries (Development and Regulation) Act, 1951 (hereinafter referred as IDRA). The effect of this declaration was that it stood removed from Entry 24 of List II and allocated to the Central Legislature. The Control thus vested in the Parliament. But Entry 33 in Concurrent List permits, both the Parliament and the Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Parliament occupies the field of legislation, law enacted by the State which is repugnant to the former cannot be valid. In Second Synthetics case there is an observation that,- "the Union, under Section 18G of the IDR Act, has evinced clear intention to occupy the whole field". The real question before me is, whether this observation is conclusive of the inference to be drawn from the said observation, that the State has lost its competence to fix the price of industrial alcohol under all circumstances. 8. The concept of 'occupied field' has been discussed in several Decisions, some of which I have already referred to and my understanding of thoses cases leads to the conclusion that observations made in Tika Ramji's case are still good law and the general observation found in Tulloch's case does not whittle down the earlier observations in Tika Ramji's case. For the purpose of Second Synthetics case, a discussion on the scope of Entry 33 of List III was not absolutely necessary. As held in the Third Synthetics case the scope of the Second Synthetics case was limited to the concept of 'industrial alcohol' and State's power to levy exci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f List I. In these circumstances, petitioner questioned the competence of the State to make the impugned law. The Supreme Court held that each Entry in the legislative Lists which is category or head of the subject-matter of legislation must not be construed in a narrow or restricted sense but as widely as possible so as to extend to all ancillary or subsidiary matters which can fairly and reasonably be said to be comprehended in it; a harmonious reading of all the Entries is necessary to give due effect to all the Entries. The Court further pointed out that each subject of legislation has several aspects and one of the aspects of a subject matter may fall within one Entry while another be covered by some other Entry. Term 'industry' is a word comprising three aspects. At page 695 the Court observed: "Industry in the wide sense of the term would be capable of comprising three different aspects: (1) raw materials which are an integral part of the industrial process, (2) the process of manufacture or production, and (3) the distribution of the products of the industry. The raw materials would be goods which would be comprised in Entry 27 of List 2. The process of manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a test; there may well be cases of repugnancy where both laws say 'don't' but in different ways. For example, one law may say, 'No person shall sell liquor by retail, that is, in quantities of less than five gallons at a time' and another law may say, 'No person shall sell liquor by retail, that is, in quantities of less than ten gallons at a time'. Here, it is obviously possible to obey both laws, by obeying the more stringent of the two, namely the second one; yet it is equally obvious that the two laws are repugnant, for to the extent to which a citizen is compelled to obey one of them, the other though not actually disobeyed, is nullified," The learned Judge then discussed the various authorities which laid down the test of repugnancy in Australia, Canada and England and concluded at page 634; The principle deducible from the English cases, as from the Canadian cases, seems therefore to be the same as that enunciated by Isaac, J in the Australian 44 hour case [37 CLR 466 (M)] if the dominant law has expressly or impliedly evinced its intention to cover the whole field; then a subordinate law in the same field is repugnant and therefore inope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ballast boulders and chips. By virtue of the Land Reforms Act, landlord's interest vested in the State; the Act provided for the continuation of the mining leases. However, the State contended that the terms of the lease were substituted statutorily and the new conditions are prescribed by the Bihar Mineral Concessional Rules. Appellant challenged the validity of the relevant provisions of the Land Reforms Act and of the Rules. The Parliament had enacted a law declaring it to be necessary to take under the control of the Union the regulation of mines and development of minerals to the extent stated in the Act. This was under Entry 54 of List I. To that extent State's power under Entry 23 List II was taken away to make a law. In view of this, appellant contended that amendments to the Land Reforms Act made thereafter, affecting the mining leases were made without competence. While considering this contention of the appellant, the Supreme Court held at page 1443: "Entry 54 of the Union List speaks both of Regulation of mines and minerals development and Entry 23 is subject to Entry 54. It is open to Parliament to declare that it is expedient in the public interest that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainly, under the impugned provisions of the Abkari Act and the Rules, the maximum quantify to be manufactured was prescribed, even though the manufactured article was covered by the Central Law; the maximum quantity of intoxicants or liquor that could be used in the manufacture of those drugs was also prescribed by the State, it was contended inter alia that (i) field was occupied by the Central law; (ii) 'Drugs and Pharmaceutical' was a declared industry under Section 7 of IDR Act and therefore State had no competence to legislate in respect of this subject matter. Both these contentions failed. Supreme Court held that the impugned law was covered by Entries 8 and 51 List II ('Intoxicating liquors' etc. and 'duties of Excise'). The Supreme Court held that the real test is to find out the pith and substance of the impugned law or its true nature and character to determine whether it is a legislation with respect to matters in the relevant List. At page 1869, the Court held: "In determining whether an enactment is a legislation 'with respect to' a given power, what is relevant is not the consequences of the enactment on this subject matter or wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... toilet preparations. It was within the competence of the State Legislature to prevent the noxious use of such preparations, that is, their use as a substitute for alcoholic brewerages." 12. The above observation also leads to the principle that State can prevent misuse of any article from being diverted to or used as an intoxicant liquor and this preventive measure is traceable to Entry 8 of List II. 13. As to the second contention that State's legislative power was eroded by the declaration of the Parliament made under Entry 52 List I, it was held, that the State is not entirely denuded of its power, and only partially to the extent of the declaration, the State's power under Entry 24 of List II ('Industries....') was taken away. Since the impugned law in pith and substance was not a law under Entry 24 of List II, question of occupied field did not arise. It follows from the above that the Doctrine of occupied field is to be considered only when Parliament and State legislatures have competence to enact a law and in such a situation, Court has to examine whether the field of legislation is already occupied by one or the other. If the field is occupied by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o make and has made," Above observation is a clear indication of the difference that exists between a total lack of competence to enact a law and a repugnancy between the Central and State legislations. The legislative competence has to be found out by reference to the 'extent to which regulations and development under the control of the Union has been declared by Parliament to be expedient in the public interest' (as stated in Entry 54 of List I. in the said case); this is to be found out by reference to the purpose, width the scope and the area of the operation of the State law and then consider to what "extent" the Central Act cuts into it or trenches on it." Tika Ramji's case was referred at page 1291 while considering the argument that the Central Act provided for the Rules to be on the lines of the State Act and therefore, subject was occupied by the Central law; the State contended that until the Rules were made under the Central Act there was no repugnancy and in support of this proposition Tika Ramji's case was relied to point out that repugnancy must exist in fact and not depend merely on a possibility. This contention of the State wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to operate its law on the subject matter covered by the Central law. Actually, it was not a case for the application of the Doctrine of occupied field. Therefore, any observation made touching the said Doctrine, cannot override the observations made by the Supreme Court in other Decisions, wherein directly the question was considered. With full awareness of my limitations, I venture to observe that Tulloch's case is not an authority reversing or overruling the observations found in Tika Ramji's case; in Tulloch's case the fact situation did not attract a consideration of the Entries in List III of Schedule VII to the Constitution at all. The extent of the control envisaged by the IDR Act is not exhaustive of all the fields of legislation relatable to industrial alcohol. This is quite clear from SH. BILESHWAR KHAND UDYOG KHEDUT SAHKARI MANDALI LTD. v. STATE OF GUJARAT AND ANR., AIR 1992 SC 872. Bombay Prohibition Act provided for the levy of supervision charges to meet the supervision cost by the State officials over the manufacture, input, export, transport, sale, etc., of any intoxicant, denatured spirituous preparations and other articles. Petitioners relied on the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 33. Trade and commerce in and the production supply and distribution of, -- (a) the products of any industry where the control of such industry by the Union is.declared by Parliament by law to be expedient in the public interest, and imported goods of the same kind as such products; (b) to (e) ........ Trade and Commerce and supply and distribution of goods are exclusive State subjects under Entries 26 and 27 of List II of VII Schedule. But both are subject of Entry 33 of List III. That is what is covered in Entry 33 is excluded from List II. And the power to legislate in respect of what is covered by List III is enjoyed both by Central and State subject to Article 246 of the Constitution. Since Section 58A can be traced to regulatory power of the State exercisable under Entry 33 the challenge to its validity is liable to fail." Court relied on Second Synthetics case and reiterated that the State may lay down regulations to ensure that non-potable alcohol is not diverted and misused as a substitute for potable alcohol; State also had other two powers left (as stated in para-85 of Second Synthetics case). Entry 33 of List III is still available to the State regarding many o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Country are as manifold as the diversities of its people; the needs of this Country are peculiar. Indian Constitution is the result of a serious exercise to meet its peculiar needs. Granville Austin in his "The Indian Constitution, Cornerstone of a Nation" (1972 Edition) said, at page 186: "The political structure of the Indian Constitution is so unusual that it is impossible to describe it briefly. Characterization such as 'quasi-federal' and 'statutory decentralization' are interesting, but not particularly illuminating. The members of the Assembly themselves refused to adhere to any theory or dogma about federalism. India had unique problems, they believed, problems that had not 'confronted other federations in history'. These could not be solved by recourse to theory because federalism was 'not a definite concept' and lacked 'stable meaning'. Therefore, Assembly members, drawing on the experience of the great federations like the United States, Cananda, Switzerland and Australia pursued 'the policy of pick and choose to see (what) would suit (them) best, (what) would suit the genius of the nation best....' This p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny infirmity affecting its vires either on the score of legislative competence or for offending Articles 19(1)(g) or Article 14 of the Constitution. It appears that the High Court has given cogent reason for upholding the vires of the amending Act and for dispelling the contentions raised by the Writ Petitioners and we endorse the view taken by the High Court. We may only indicate here that in deciding the question of legislative competence one must bear in mind that the Constitution is not to be construed with a narrow or pedantic approach and it is not to be construed as a mere law but as a machinary by which laws are made. Such interpretation should be made broadly and liberally. The entries in the Constitution only demarcate the legislative fields of the respective legislature and do not confer legislative power as such." 22. The relevant principles are again found in B. VISWANATHAIAH & COMPANY v. STATE OF KARNATAKA AND ORS., certain amendments made in the year 1979, to the Mysore Silkworm Seed & Cocoon (Regulation of Production, Supply & Distribution) Act 1959 were challenged in the said case. These amendments "imposed on the production, supply distribution and sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealing in rectified spirit to prevent its diversion or misuse. (2) The observation of the Supreme Court in para 84 of the II Synthetics case that State cannot exercise its power to regulate under Entry 33 of List III, because the said field of regulation is occupied by Section 18-G of IDR Act was purely obiter and cannot be followed as a binding precedent in view of Third Synthetics case. The principle of occupied field enunciated in Tika Ramji's case is still good law governing the scope of Entry 33 of List III. (3) Under Entry 33 List Ml, the State has the requisite power to fix the price of rectified spirit so long as the Centre has not fixed the price by recourse to Section 18-G of IDR Act. (4) The State has no exclusive right to produce and manufacture industrial alcohol which are manufactured under the grant of licence from the Central Government. 25. It is unnecessary to go into the contention that consequent of earlier Molasses Control order and Ethyl Alchol (Price Control) Order 1971, State's power if any stood abrogated, because, impugned order under which the State fixed the price is after the aforesaid orders were withdrawn and the field was left unoccupie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act and the relevant Rules were in the purported exercise of the power under Entry 33 of List ill, or whether the power to fix the price under Rule 17 of the State Rules was traceable to the exclusive privilege the State allegedly had in dealing in 'intoxicating liquors'. If the pith and substance of the law takes it to any of the Entries in List II, can Rule 17 be now justified by tracing the source to Entry 33 of List III? The normal principle is that when the Legislature delegates its power, it must lay down policy, principle or standard for the Rule making authority. Vast latitude is recognised in the matter of delegation because of the complex nature of administration and imponderables that may have to be overcome while administering the law. So long as the law enacted by the Legislature spells out a clear purpose to be achieved or policy to be implemented, manner of realising it is left to the Rule making authority. Guidance may be found anywhere in the Act such as, an express provision empowering a delegation, or the preamble, the scheme or even the very subject matter of the statute. But the liberal and generous power recognised as vested in the Legislature to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ol over its delegate by exercising its power of repeal. A point of distinction between the facts of Papaiah's case and the present case may straightaway be noted. The excise duty is leviable and rates etc. are prescribed by making Rule or Rules. But the price to be fixed under Rule 17 is by an executive order of the Excise Commissioner. Rule 17 by itself does not lay down the mode of fixing the price; therefore even if the Rule 17 had the blessing of the Legislature, it cannot be assumed that the price fixed thereunder had the benefit of legislative scrutiny. The only control over the price fixation is the requirement, as stated in Rule 17, that it should get the prior approval of the State Government. 29. While examining the scope, scheme and purpose of Karnataka Excise Act, the understanding as to the legislative competence of the State in respect of the subject matter during the relevant time is not irrelevant. States believed that they had the exclusive privilege to deal in respect of all aspects of rectified spirit and this belief stood Judicial scrutiny in the year 1980 when first Synthetics case was decided; levy of vend tee on denatured spirit by the State was upheld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act. The several definitions in Section 2, clearly brought in rectified spirit within the terms "liquor", "intoxicating liquor" and "excisable article". Vast and absolute powers are shown as vesting in the State with regard to every aspect of these articles in Chapter IV (Sections 13 to 21) of the Act. Excise duty was levied on rectified spirit under Chapter V (Section 22 etc.). Not a direct, specific, clear provision is found in the Act guiding the exercise of power to fix the price of these articles, obviously, on the assumption that since the State had an exclusive privilege, specific guidance on this aspect is unnecessary, and no person has a fundamental right to manufacture, process or sell intoxicating liquors (including rectified spirit). Even Section 71 does not refer to price fixation in specific terms. The scheme of the Act is to lay down broadly, the manner of exercising the State's privilege. Even, under Rule 17, no guidance is prescribed to fix the price, unlike the Ethyl Order, where, clear guidelines were prescribed to fix the price of ethyl alcohol. A comparison with Essential Commodities Act and several statutory orders issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis formulated in Sugar Price Control Order or the Drug Price Control Order or other Orders issued under the Essential Commodities Act. Supreme Court held, at page 1869, that: "While the cost plus basis is a recognised basis for fixation of prices of essential commodities or for the service rendered by a public utility undertaking, it would not, in our view, be correct to treat it as the only permissible basis in all situations. On behalf of the ONGC it has been pointed out that even in the fixation of prices of essential commodities like levy sugar, the concept of cost plus is not necessarily the only method of fixing the price for the commodity." An earlier Decision rendered in connection with the challenge to the price fixed, governing sugar under the provisions of Section 3(3C) of the Essential Commodities Act, 1955 in ANAKAPALLE'S CASE, was referred to in this connection. Thereafter, again it is pointed out at page 1870: "These passages indicate that cost plus is not a satisfactory basis in all situations. The basis may need to be more stringent in some situations and more broad based in others. May be the cost plus is an ideal basis where the comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontrol orders and the modalities of fixation of fair prices thereunder have also come up for consideration of the Courts. There has also been such fixation of price under the industries (Development & Regulation) Act, 1951, vide: Premier Automobiles v. Union of India (1972) 2 SCR 526: (AIR 1972 SC 1690). In all these cases, the primary concern of the Government and Parliament has been that the articles in question should be available to the members of the consumer public at the minimum prices possible and, in that context, these legislations no doubt adopt the 'cost plus reasonable return on investment' test in the fixation of prices. That, even in respect of such commodities, the 'cost plus' method is not the only reasonable method has been recognised in judicial decisions. The cases on this topic have been reviewed and the limitations on judicial review of price fixations fully discussed recently by a Constitution Bench of this Court in Shri Sitaram Sugar Company Ltd., v. Union of India , it is, however, not necessary here to enter into a discussion of this and the earlier cases because those cases were primarily concerned with the question whether the price fixat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment to decide whether it would be, an adoption of a system of partial control, in the best economic interest of the sugar industry and the general public that the sugar factories are grouped together with reference to geographical-cum-agro-economic factors for the purpose of determining the price of levy sugar. Sufficient power has been delegated to the Central Government to formulate and implement its policy decision by means of statutory instruments and executive orders." 36. The two Decisions of the Supreme Court reflect two different sets of fact-situations. In ONGC case, ONGC fixed the price for the supply of its goods on the basis of 'alternative fuel cost', while in the case of sugar, price Tixation was guided by Section 3(3C) of the Essential Commodities Act. ONGC case was not concerned with any legislative policy, while, in the second case statutory power of fixing the price, which was a matter of legislative policy, was involved. ONGC was the 'owner' of the goods to be sold; as an instrumentality of the State, it has to price its commodity by applying a fair principle. In the latter case (Sitaram Sugar Co. Ltd.) State was exercising a regulatory fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n) Order 1941 read with Section 7 of Essential Supplies (Temporary Powers) Act 1946 was the subject matter in issue in the said case. Guidance was found in the very Act which created the power. The Statutory order also indicated the principle to be considered while fixing the price. There was no unguided, absolute power given to the Central Government in the said case. The case is similar to other cases under the provisions of the Essential Commodities Act. 42. Rule 17 of the Rules, invoked in the present case, nowhere lays down nor indicates the principles or factors to be considered while the Excise Commissioner fixes the price with the prior approval of the State Government. The cases of other liquors may be different, because, in those cases, the State has exclusive privilege to deal with those liquors/intoxicants; unlike the case of rectified spirit. 43. The permissible limits of delegation of legislative function cannot be stretched so as to make it notional. It cannot be said that the limitation on the delegation of legislative function has reached a vanishing point. Limitation is needed to prevent any possible dictatorial power being vested in the executive by the Legisla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustries. Having regard to the need to curb consumption of alcohol/arrack, attempt should be to have its cost increased. Therefore, it cannot be said that, by the low price for the recitifed spirit when sold for arrack manufacture, loss caused, if any, can be compensated by charging a higher price elsewhere. Such an approach would be opposed to the very basis on which the Central Government withdrew the Price Control Orders; such an approach, I am of the view is not in the public interest. In the circumstances, I am constrained to hold that the price fixed at ₹ 8.50 per litre of rectified spirit under Rule 17 of the Rules is unreasonable, unfair and arbitrary. 45. For the reasons stated above, these Writ Petitions are allowed. It is declared that Rule 17 of the Karnataka Excise (Manufacture and Bottling of Arrack) Rules 1987, in so far as it governs the rectified spirit, is unconstitutional and consequently to that extent it is unenforceable. It is also declared that the price fixed by the State Government for the sale of rectified spirit for the manufacture of arrack, at ₹ 8.50 per litre is arbitrary, unreasonable and unfair and consequently it is void as offending Ar ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
