ST ATE OF PUNJAB AND ANR. v. MIS. DEV ANS MODERN BREWERIES AND ANR. ETC.

A ST ATE OF PUNJAB AND ANR. V.

MIS. DEV ANS MODERN BREWERIES AND ANR. ETC.

NOVEMBER 20, 2003

B

Constitution of India :

C Arts. I9(/)(g) and (6) and 47 and Schedule Vll List 11 Entry 8-Trade or business in intoxicating liquor-Nature of-Held, Is not a fandamental right-Trade in liquor is considered inherently noxious, pernicious and is res extra commercium.

D Arts. 30I, 304-Trade in liquor-Applicability of-Permissive privilege to deal in liquor not being a right, Aris. 30 I to 304 are rendered inapplicable lo trade, commerce and intercourse in liquor at the threshold-Freedom to trade not available to liquor since it is a noxious substance injurious to public health, public order and morality-Thus trade in liquor is res extra commercium-Jurisprudence-law and Morality. E Art. 30 I-Scope offreedom-Regulations-Regulation for the purpose of Art. 30I is not confined to regulation which facilitates trade alone but includes regulation imposed in the interest ofpublic health, public order and morality.

F Arts. 305, 30I to 304, 366(IO) and 372-Punjab Excise Act, I9I4- Validity of-Held, is an existing law under Art.366(10) and its continued application is saved by Art. 372-lrrespective of whether or not Arts.30I-304 applicable to trade in liquor, the Act is saved by Art.305.

Arts. 30I to 304, 245, 246, 265, 366(28) and Schedule Vil list 11 Entries G 8,5I,62 and 66--levy by State for parting with privilege to trade in liquor- Regulation of-Mode and Scope-Imposition of a levy in addition to any counterveiling duty levied under list 11 Entry 5 I, on imports of liquor into a State-Whether violative ofArts.30I and 304(a)-Held, levy imposed by Stale for parting with privilege to trade in liquor is neither a tax nor a fee-It is H 930 simply a levy/consideration for the act of granting permission or for exercise of power to part with the said privilege-Modalities of the levy offees or the quantum thereof has no bearing on its legal pedigree-Trade in liquor is res extra commercium and regulation of trade in liquor is the hallmark of State action-Such regulation can be and normally is through the mode of imposition of levies-State Government has unfettered powers to regulate the export/ import/sale of intoxicants-In addition to levy of excise and counter-veiling duties, there is no bar on the State to charge any other fees on account of consideration for the privilege provided to a licensee to trade in liquor- Imposition of said import duty is in exercise of the regulatory powers of the State-Thus it does not attract the bars ofArts. 301 and 304(a) as the imposition ofsuch import fee does not in any way restrict trade, commerce and intercourse among the States-Hence Or 1-D (iiij of the Punjab Excise Fiscal Orders, 1932 constitutionally valid-So also Kera/a Notification dated 31.12.1992 raising import duty on IMFlfrom Rs. 2 to Rs.5 is also constitutionally va/id- Arts.246,265 and Schedule VII list II Entry 8-lmposition of levy not named in the parent Act-Validity of-Held, if the levy is actually imposed by delegated legislation under the parent Act, the same would be valid and not ultra vires thereof-Administrative law-Ultra Vi~es-Grounds for plea of

p. 931 Copy page pinpoint

Arts.298, 14, 246, 265 and Schedule VII list //-Entries 8,51,62 and 66-Arbitrariness-liquor licence-Conditions of-Change in on the basis of excise policy of State Government-Rate of import duty levied on liquor increased after grant of licence-Permissibility of-The licensee besides payment of duty, is to comply with such conditions as the State Government may impose while formulating the excise policy for the year concerned- Having accepted the contracts/licences and having folly exploited the advantage flowing from it to the exclusion of others and having reaped rich commercial benefits from that activity, it is not open to wriggle out from the contract by challenging inter alia any particular condition thereof

Arts. 141and13-Stare decis-limils of-Discussed

Art.141-Supreme Court vis-a-vis itself......Coordinate Bench decision to be followed-In case of disagreement, matter to be referred to larger Bench. G Excise laws :

Punjab Excise Act, 1914-Ss.⁵⁸, 59, 16 to 19, 31to35 and 3(9), IO and 12-Nature and Scope of-Validity of Or. 1-D(iii) of the Punjab Excise Fiscal Orders, 1932-Held, Or 1-D (iiij is not ultra vires the .sections of the 1914 H

p. 932 Copy page pinpoint

A Act-Fee imposed being nothing but a facet and manifestation ofthe regulation of liquor trade by the State, it is valid as a regulatory levy under Art.304- Punjab Excise Act, 1914-S.34-'Fee'-Meaning of-Hot used in the strict sense to attract doctrine of quid pro quo---'Fee'-Meaning of-Grant of licences under s.34 rlw Part A of the 1956 Rules-levy of additional duties and change in rates of duty levied on liquor after grant of licence- B Permissibility of-Punjab liquor licence Rules, 1956-Part A-Kera/a Akbari Act,1077-Ss.6 and 24-G.O.(MS) No. 57192/TD dated 31.12.1992 (as amended)-Validity of-Government Contracts/Tenders.

Kera/a Akbari Act, 1977-Ss.6 and 24-GO(MS) No.57192/TD dated

C 31. 12.1992 (as amended)-Nature and validity of-Held, levy authorized by Ss.6 and 4 of the 1977 Act-Neither an excise nor countervei/ing duty under Schedule VI/ list If Entry 51 but a collection falling under list II ofEntry 8- Jnterpretation of Statutes-Particular statutes or provisions-Provision empowering delegated/Subordinate legislation-Discussed.

D Administrative law-Subordinate legislation-Effect ot When, validity made-same as that of the parent statute.

Words & Phrases: 'Fee'-Meaning of

The appeals relate to the constitutional validity of the imposition of E import duty levied by the State of Punjab and the State of Kerala on the import of potable liquor from other States. While the Punjab and Haryana High Court has quashed the notification imposing such a levy the Kerala High Court has upheld the notification levying import duty on potable liquor. Hence the appeals.

F Before this Court, the following questions arose 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 G 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?

p. 933 Copy page pinpoint

I.I. The State Government is competent and empowered to regulate the import and export of liquor. There are 21 types of licences which are B prescribed and are given. The respondent in this appeal is holding L-1 licence i.e. wholesale and retail vend of foreign liquor to trade only. The said licence is given on fixed licence fee, which is subject to variation as per excise policy of the Government based on year to year. The State Government has incorporated as one of the terms and conditions on the L-1 holders to pay import fees also at the prescribed rate as per the Punjab C Excise Fiscal Order, 1996. The respondent has been accepting the terms and conditions from 1992 onwards and acted on the same and the licence was renewed on yearly basis. [962-D-E]

1.². Under the provisions of the Act, the State Government issued permit in the case of import and the licensees are liable to pay permit fee at the prescribed rate. The respondent has mixed up two different imposts. The respondent has referred to the duty paid under Rule 5 i.e. equivalent to Excise duty and fees under Rule (1) (D) of the Punjab Fiscal Orders,

1932. On imported goods by L-1 holder, there are two different and independent imposts in the shape of Excise duty under Rule 5 and import fee under Rule (l)(D) of Punjab Excise Fiscal Orders, 1932. In addition he has to pay licence fee under the Punjab Liquor Licence Rules, 1956, which is fixed on yearly basis. Thus as per provisions of Section 58(0) as well as Section 59(D) the State Government has power to regulate the import and price of any description of bottle and the scale of the fee and the manner of the fee payable by any licensee. [962-F-H; 963-A]

1.³. The amount charged is not a fee nor a tax but it is in 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. G [963-8-C) 1.⁴. Articles 302 and 304A of the Constitution of India are not attracted to the present case as the imposition of import fee does not, in any way, restrict trade commerce and intercourse among the States. The permissive privilege to deal in liquor is not a "right" at all. The levy H

p. 934 Copy page pinpoint

A charged for parting with that privilege is neither a tax nor a fee. It is simply a levy for the act of granting permission or for the exercise of power to part with the privilege. Dealing in liquor is neither a right nor is the levy a tax or a fee. Articles 301-304 will be rendereC: inapplicable at the threshold to the activity in question. Further, there is not even a single B judgment which upholds the applicability of Articles 301-304 to the liquor trade. On the contrary, numerous judgments expressly hold these Articles to be inapplicable to trade, commerce and intercourse in liquor. 1963-G-H; 964-A, BJ

2.¹. 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 of Kerala, has granted such permit to the Beverages Corporation on their paying the fee fixed for the purpose as per notification enabling the Corporation to import liquor from the petitioners/licensees and others. The import fee so paid is passed on to the consumers. It is purely a contractual dealing between the State a;id the importer and, therefore, no question of violation of Article 301 can arise. The importer had no anterior right to import liquor and hence cannot complain of any violation of Article 301 at that stage as right to trade in liquor is not a fundamental right. His right to p import is referable to the import permit which he acquired on payment of the import fee. No further impediment has been created in the import of the liquor so that Article 301 is not attracted in relation to the payment of the import fee which was prior to getting his privilege of importing. The appellant/licensee having entered into a contractual relationship with the State obtained the privilege and enjoyed the benefit of it. It is not open G to the petitioners to turn round subsequently and repudiate the obligations ~ubject to which they obtained the privilege. Regulation in the interest of public health and order takes the case out of Article 301 and regulation for purpose of Article 301 is not confined to such regulations alone which will facilitate the trade. 1965-H; 966-A-EJ H

p. 935 Copy page pinpoint

2.². As compensatory or regulatory levies have always been held to be valid and permissible under Articles 301 and 304, 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 cons;dered 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. [968-B-D)

3.¹. The statutory provision in question must be interpreted and read broadly and not narrowly. The approach must be to uphold the validity of the impugned delegated legislation by a process of fair and broad reading of the statutory mandate. Even if the Act does not specifically provide for the levy in question by name to provide statutory authority for its imposition by delegated legislation and the levy is actually imposed by the delegated legislation made under that Statute, the same r. ould be valid and not ultra vires. In the instant case, the levy has 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. 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 amply delineate that regulatory power and the impugned import fee is nothing but a facet and manifestation of that regulation by the State. Hence, the levy in question is valid as a regulatory levy which has consistently been held on the touchstone of Article 304. [969-B-E]

3.². The issuance of liquor licence constitutes a contract between the H

p. 936 Copy page pinpoint

A parties i.e. between Excise Authorities on the one hand and the individual applicant contractor on the other. The respondent having accepted the contracts/licences, having fully exploited the advantage flowing from the contract to the exclusion of others and having reaped rich commercial benefits from that activity, it is not open to the contractor to wriggle out B from the contract by challenging, inter alia, any particular condition of that contract/licence. [969-F-GI

Har Shankar and Others etc. etc. v. The Deputy Excise and Taxation Commissioner and Ors. etc., AIR (1975) SC 1121 and Panna Lal and Ors. v. State of Rajasthan and Ors., (19751 2 SCC 633, relied on. c 3.³. The import fee on IMFL on rectified spirit was levied from the Year 1986 and at no time the respondent challenged the levy of import fee from 1986 onwards on IMFL and continued to import large quantities of beer and paid large sums of fee as per the prescribed rates. The writ petition was filed only in April, 1996. The respondent accepted the burden D of this contract and obviously did so because he enjoyed the benefits flowing from this contract. Having done so, he cannot and should not be allowed to wriggle out of his contractual and licence obligation. (970-D-E(

Govt. of Maharashtra and Ors. v. Mis. Deokar's Distiller, (20031 5 SCC E 669 and Asstt.Excise Commissioner and Ors. v. Issac Peter and Ors., [1994) 4 sec 104, relied on.

Kalyani Stores v. The State of Orissa and Ors., (1966) l SCR 865, distinguished.

F 4. Rights are vested in the State which it may part with for a consideration. [979-E(

Har Shankar and Ors. etc. etc. v. The Deputy Excise and Taxation Commissioner and Ors. etc., AIR (1975) SC 1121; Nashirwar and Ors v. State of Madhya Pradesh and Ors., (1975( l SCC 29; State ofOrissa and Ors. v. G Harinarayan Jaiswal and Ors., (1972) 2 SCC 36; State of Andhra Pradesh v. Prabhakara Reddy, AIR (1987) SC 933; State of U.P. and Ors. v. Sheopat Rai and Ors., (1994( Supp 1 SCC 8; State of Punjab v. Mis. Dial Chand Gian Chand & Co., AIR (1983) SC 743; Khoday Distilleries Ltd and Ors. v. State of Karnataka and Ors., [1995( l SCC 574; Solomon Antony and Ors. v. State H of Kera/a and Ors., 12001( 3 SCC 694 and Kera/a Distilleries and Allied

p. 937 Copy page pinpoint

Products Limitedv. Assistant Commissioner (Assessment)(/), Commercial Tax, A Special Circle, Palakkad and Ors., (2000) Vol. 117 STC 553, relied on.

5. In contractual relationship between the State and the licensee whereunder the licensee having obtained a privilege and enjoyed the benefit of it, it is not open to the licensees to turn round subsequently and repudiate the obligations attaching with the obtained privilege. B State of Haryana and Ors. v. Jage Ram and Ors., AIR (1980) SC 2018; State of Haryana and Ors. v. Lal Chand and Ors., [1984] 3 SCC 634 and State (If Punjab v. Mis Dial Chand Gian Chand and Company, (1983] 2 SCC 503, relied on. c

6. The freedom guaranteed by Article 301 is not available in liquor because it is a noxious substance injurious to public health, order and morality. Regulations for the purpose of Article 301 is not confined to regulations which will facilitate the trade. (974-F]

The State of Bombay v. R.MD. Chamarbaugwala, (1957] SCR 874; D Mis Fatehchand Himmatlal and Ors. etc. v. State of Maharashtra, (1977] 2 SCC ~70; B.R. Enterprises etc. v. State of U.P. and Ors. etc., [1999] 9 SCC 700; Mis. Bishamber Dayal Chandra Mohan etc. etc. v. State of U. P. and Ors. etc. etc., AIR (1982) SC 33, State of Tamil Nadu v. Mis. Hind Stone etc. etc., AIR (1981) SC 711; State of Tamil Nadu and Ors. v. Mis. Sanjeetha Trading E Co. and Ors., (1993] 1 SCC 236 and State of Bihar and Ors. v. Harihar Prasad Debuka etc., AIR (1989) SC 1119, relied on.

7. High Court of Punjab proceeded to decide the case on a total wrong assumption that the import fee levied is in the nature of duty which cannot be imposed under the Excise Act, 1984 when, in fact, the import fee· levied is the price for parting with 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. 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, is competent and entitled to impose excise duty or counterveiling 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 com ply with the other conditions imposed by the State Government from time to time. The levy in dispute H

p. 938 Copy page pinpoint

A under challenge is an import levy. It is neither duty nor counterveiling duty. It is part of the consideration money i.e. the price oi the privilege given to the licensees for dealing in liquor. (979-D-FI

Ka!yani Stores v. The State of Orissa and Ors., (196611 SCR 865, held inapplicable. B

8. Punjab Excise Act, 1914 is an existing law under Clause 10 of Article 366 of the Constitu~ion of India and its continued application is saved by Article 372 of the Constitution of India. It is also saved by Article 305 of the Constitution from attark under Articles 301 and 303 of the C Constitution. It is well within the legislative competence of the State. (979-G-HI

Ka/yani Stores v. The State of Orissa and Ors., (196611SCR865, held inapplicable.

B.N. Agrawal, J (Dissenting) : D I. An excise duty can be imposed on manufacturer of goods only in terms of statute made by the Parliament. An exception thereto has been made in the case of liquor in terms whereof the State Legislature has been empowered to levy excise duty by reason of Entries 8 and 51 of List II of E the Seventh Schedule to the Constitution. Legislative competence of the State to levy any fee is, limited to levy of counterveiling duty. The State, cannot levy any duty in addition to the counterveiling duty. The notification refers to excise duty and counterveiling duty, which in terms of Section 3(6-8) of the Punjab Act mean any such excise duty or counterveiling duty as the case may be, as is mentioned in Entry 51 of F List II of the Seventh Schedule to the Constitution. The State, therefore, cannot levy any import fee over and above the excise duty/counterveiling duty, having regard to the said definition. Sections 17 and 18 of the Abkari Act, which are in pari materia with Sections 31 and 32 of the Punjab Act, are referable to Entry SI alone. As Entry 51 puts an embargo on the State G to make a legislation, there cannot be any gainsaying that any levy in terms of Sections 17 and 18 of the Abkari Act would be subject thereto. (997-G, H; 998-A-EI

2. In view of Article 366(28) of the Constitution, a regulatory impost would, come within the purview of the tax. A fee in terms of the H 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 A justified only by way of licence fees. Such impost, however, would be a tax and, thus, would clearly be referable to Entry 51 of Lis.t II to the Constitution and not Entry 66 thereof. 1998-G, HI

p. 939 Copy page pinpoint

Corporation ofCalcutta and Anr. v. liberty Cinema; 1196512 SCR 477; D.C. Gouse & Co. etc. v. State of Kera/a and Anr. etc., (1980) l SCR 804 B and Hindustan Times and Or.s. v. State of U.P. and Anr., JT (2002) 9 SC 317, relied on.

3.¹. 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 therefor. 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, it would not be permissible for the State to turn round and contend that such imposts are not being levied in exercise of its taxation power but attributable to its regulatory power is a well-settled principle of law that a thing which cannot be done directly cannot be done indirectly. [999-B-DI

Priyanka Overseas Pvt. Ltd. and Anr. v. Union ofIndia and Ors., [1991] E Supp 1 SCC 102, referred to.

3.². In relation to an administrative act, it is well settled that a statutory authority is not permitted to support its decision on a ground d'hors the ground stated in the order. On the same analogy, a legislation which is found to be fraud on the Constitution, cannot, inter alia, be upheld on any other ground. Entry 8 of List II of the Seventh Schedule to the Constitution does not permit the State to levy a fee on import of liquor. It deals only with production, manufacture, possession, transport, purchase and sale of intoxicating liquors and nothing else. Entry 8 of List II, thus, does not speak of import or export. Its purpose is to regulate and not impose any statutory impost. The State in exercise of its delegated powers cannot do what would constitutionally be impermissible. 1999-D-Fl

Commissioner of Police, Bombay v. Gordhandas Bhanji, AIR (1952) SC 16 and Mohinder Singh Gill and Anr. v. The Chief Election Commissioner, New Delhi and Ors., AIR (1978) SC 851, relied on. H

p. 940 Copy page pinpoint

A 4. In Sub-Section (I) ofSeotion 33A of the Punjab Act, provision has been made permitting the State to continue to levy any duty which it had lawfully been levying immediately before the commencement of the Constitution. The said provision is in tune with Article 305 of the Constitution, therefore, the same calls for a strict construction. Sub-section B (3) of Section 33A is couched in negative language by reason whereof power of the State to levy any duty has been taken away in the event thereby any discrimination is made in favour of goods manufactured or produced in the State and similar goods manufactured or produced in another locality. Clearly such a provision is in consonance with Article 304 of the Constitution. If by reason of a statute an embargo ha~ 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. [999-G, H; 1000-A, B]

5. 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 dutylcounterveiling duty. It is not disputed that such counterveiling 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, the State cannot be said to have any jurisdiction thereover, particularly, in the matter of levy of import fee which clearly is referable to Chapter V of the Punjab Act and has nothing to do with grant of licence occurring in Chapter VI. (1000-C-E)

6. Having regard to Article 265 of the Constitution a tax must be imposed by a statute. Even such impost is impermissible by any bye-law or rule. [1000-FI G Bimal Chandra Banerjee v. State of Madhya Pradesh etc., [1970[ 2 SCC 467 and A Venkata Subba Rao v. State of Andhra Pradesh, [19651 2 SCR 577, referred to.

Allorney General v. Wilts United Dairies, (1922) 91 Law Jourual, KB H 897, referred to.

p. 941 Copy page pinpoint

7. Excise duty has been equated with the price for privileges. A [1000-GI

Synthetics and Chemicals Limited and Ors. v. State of UP and Ors., [199011SCC109 and Welfare Assocn. A.R.P. Maharashtra and Anr. v. Ranjit P. Gohil and Ors., JT (2003) 2 SC 335, followed. B

8. Dealing in liquor or for that matter in lottery, tobacco is not prohibited under the Constitution. On the other hand, in the constitutional schemes itself Parliament or the State Legislature has been conferred power to regulate the said trade like any other trade. In fact India has entered into trade agreements to deal in liquor with other sovereign countries. India has entered into International treaties in the matter of foreign investment in liquor. Trade in liquor finds place in World Trade Organization (WTO) and General Agreement on Trade and Tariff (GAfr>· In terms of the WTO and GATT guidelines have been laid down as regards import and export of potable liquor. India, as a signatory to WTO and GATT, is expected to follow the said guidelines. It is expected to remove all trade barriers subject to the other provisions contained therein. It is also supposed to levy taxes/ counterveiling duties in terms of such international treaties. No constitutional provision or statute prohibits trade in liquor. Article 47 of the 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. [1002-F-H; 1003-A, BJ

9.¹. 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 therefor that it has not retained unto itself a right to deal with a part of the trade itself or through its agency. 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 on trade or business in potable liquor. As soon H

p. 942 Copy page pinpoint

A as a licence is granted upon receipt of a fee fixed by it, the State would be presumed to part with its entire privilege. To say that while exercising its ·regulatory power for the purpose of controlling the trade and business in potable liquor, it has reserved unto itself a part of its exclusive privilege, would not be correct unless the same is explicitly pleaded and proved. 11003-B-Fl B 9.². Regulatory measures in the matter of trade and business in potable liquor have been taken by reason of.a statute. All regulations on the trade, thus, must be governed by the statutes operating in the field and not by way of executive action. The provisions of the statute or the contracts made thereunder must scrupulously be followed by all concerned as they are bound by the same. When a legislation referable to Entries 8, 51 and 66 etc. had occupied the field, the State, in absence of any provision contained in the statute, cannot turn round and contend that it will exercise its power of exclusive privilege even though it had granted licence in terms of the statute. Having regard to the constitutional scheme the power of the State to undertake trade and business is referable to Article 298 of the Constitution. The State while exercising its constitutional power under Article 298 of the Constitution cannot itself be an extra constitutional authority so as to violate the constitutional provisions. It like any other trader must confine itself within the four corners of the statutes governing the field which are enacted in terms of one entry or the other made in any of the three lists to the Seventh Schedule of the Constitution. (1003-F-H; 1004-A-CJ

9.³. A State may be entitled to either completely prohibit a trade or business in liquor and create monopoly either in itself or in any other agency and furthermore it can for the purpose of selling the licence adopt any mode with a view to maximize its revenue but while doing so it must, not act arbitrarily. The State while carrying on business by way of parting with its privilege or distribution of largesse must conform to the equality clause enshrined in Article 14 of the Constitution. 11004-C, DJ

G 9.⁴. Privilege, thus, can be claimed by a State in a 'no right' situation, namely, when citizen is not permitted to carry on trade. But once the State takes a decision to part with its privilege, it cannot make any discrimination whatsoever. Dealing in liquor by the persons in whose favour licences have been granted in terms of the statutory enactments derive a right therefor which cannot be said to be "Res-Extra Commercium" H 110os-q

p. 943 Copy page pinpoint

State of MP. and Ors. v. Nandlal Jaiswal and Ors., 119861 4 SCC 566, A relied on. Black's Law Dictionary; Trayner's Latin Maxims, Fourth Edn.; Words and Phrases, Volume l /5A and Bouvier's Law Dictionary, Vol.I, Third Edn.; referred to. 10.¹. Article 19(l)(g) guarantees that all citizens shall have the right to practice any profession or to carry on any occupation, trade or business. However, in terms of Article 19(6) this right can be restricted by a statute imposing reasonable restrictions. A combined reading of clauses (1) and (6) of Article 19 makes it clear that a citizen has a fundamental right to carry on any trade or business and the State can make a law imposing reasonable restrictions on the said right in the interest of the general public. It is, therefore, obvious that unless dealing in liquor is excluded from 'trade or business', a citizen has a fundamental right to deal in that commodity. (1005-D-F) The State of Bombay and Anr. v. F.N. Balsara, 11951) SCR 682; D Cooverjee B. Bharucha v. The Excise Commissioner, Ajmer and Ors., (1954) SCR 873; Saghir Ahmad and Anr. v. State of UP. and Ors., AIR 1954 SC 728; State of Kera/a and Ors. v. P.J. Joseph, AIR (1958) SC 296; Krishna Kumar Narula v. State of Jammu and Kashmir and Ors., (1967) 3 SCR 50; The State of Bombay v. R.M.D. Chamarbangwa/a, (1954) SCR 873 and Har Shankar and Ors. v. The.Deputy Excise Taxation Commissioner and Ors., E (1975) 1 sec 837, referred to. P. Crowley, Chief of Police of the City and County of San Fancisco, California v. Henry Christenses, (1890) 34 Law. Ed. 620(A), referred to. • 10.². A person cannot claim any right to deal in any obnoxious substance on the ground of public morality. The State, therefore, is entitled to completely prohibit any trade or commerce in potable liquor. When it is not a crime to carry on such business having regard to the fact that a person has been permitted to do so by the State in compliance with the provisions of the existing laws, indisputably he acquires a right to carry on business. Even in respect to trade in food articles or other essential commodities either complete prohibition or restrictions are imposed in the matter of carrying on any trade or business, except in .terms of a licence granted in that behalf by the authorities specified in that behalf. The distinction between a trade or business being carried out legally or illegally having regard to the restrictions imposed by a statute would have, therefore, to be judged by the fact as to whether such business is being H

p. 944 Copy page pinpoint

A carried out in compliance of the provisions of the statute(s) operating in the field or not. The doctrine of res extra commercium, thus, would not be attracted, when a person carries on business under a licence granted in terms of the provisions of the regulatory statutes. (1010-G-H; lOll-A-DJ " io.³. No case and in particular the decisions relied upon by the counsel appearing .on behalf of the State of Punjab and that of Kera la had evolved a principle that despite paying a large amount of licence fees and despite fulfilment 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, wllich may at any point of time be determinated or a new tax imposed or thtj. 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 occasion to consider these aspects of the matter can be of no assistance and would not constitute binding precedents. [1011-D-GJ Bhavnagar University v. Palitana Sugar Mill (P) ltd. and Ors., [2003) E 2 sec lll, relied on. 10.⁴. The right of the State to carry on trade or business under Article 298 of the Constitution would be subject to the same constitutional limitations in the matter of carrying on trade or business in liquor as in other cases, the distinction being only that the State has a monopoly to do so. Once the State does not exercise the said right and considers it expedient to allow the citizens to carry on the business or trade, it cannot be said that the licensees do not derive any right whatsoever. Even when the State exercises such right by creating a monopoly in itself, it would be subject to the same constitutional limitations as envisaged, inter alia, under Articles 14 and 301 of the Constitution, which protect from the maladies of discrimination. Such discrimination may be in between persons and persons, persons and State and State and State. [IOll-G-H; 1012-A, BJ

10.5. Once the regulations restricting the right to carry on business in potable liquor is attributed to reasonable restrictions and public interest clause, contained in clause (6) of Article 19 of the Constitution, the fundamental right to carry on trade under Article 19 is conceded. Once such a right is conceded, it cannot be said that although a person has a A Fundamental Right to carry on trade or business for the purpose of Article 19(1)(g), subject to imposition of reasonable restrictions by a law made in terms of clause (6) of Article 19, he does not have such a right in terms of Article 301 of the Constitution or for that matter Article 14 thereof. Articles 303 and 304 of the Constitution also provide for imposition of restrictions and thus even a freedom guaranteed to a person under Article 301 is not an absolute one, but subject to the constitutional limitations provided therefor. Article 301 confers freedom but not a licence. The protection from discrimination as envisaged in Khoday Distilleries 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. [1012-D-G)

p. 945 Copy page pinpoint

Khoday Distilleries Ltd. and Ors. v. State of Karnataka and Ors., (1995) 1 sec 574, referred to.

10.6. An inhibition by Article 301 has been provided to the effect that the Legislature shall not interfere in the commerce between the State and State as also to the effect that the Legislature of a State shall not give any preference to one State over the other. Article 301 of the Constitution in no uncertain terms provides for 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 oflndia 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 F 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 G Lists of Seventh Schedule to the Constitution. (1014-8-E)

10. 7. The limitation of power as regards legislative competence of the State and the Parliament having regard to clause 2 of Article 303 and sub-clauses (a) and (b) of Clause (1) of Article 304 is clear pointer of the new dimension given to Article 301 of the Constitution. Even if a H

p. 946 Copy page pinpoint

A comparison is made between the terminologies used in Article 301 on the one hand and Articles 19 and 298 on the other, it would be evident that whereas in the former 'trade, commerce and intercourse' have been used but in the latter only the words 'trade or business' have been used. Such trade, commerce and intercourse is in relation to entire territory of India ·B whether inter-State or intra-State unlike Section 297 of the Government of India Act. Article 301 makes a declaration that 'trade, commerce and intercourse throughout the territory of India shall be free', which in turn must mean that it shall be free from control of Executive and Legislature. By reason thereof although a liberty has been granted but such liberty cannot be equated with a licence inasmuch it would be subject to restrictions. Articles 302 and 303 categorically state that there shall be no discrimination between one State and the other but restrictions inhere in such liberty as would appear from clause 2 of Article 303 of the Constitution, if a situation stipulated therein arises for consideration. By reason of the said provision, the State is prohibited from imposing a tax without making any discrimination whatsoever so as to impede free flow of inter-State or intra-State trade. The State, however, is entitled to impose reasonable restrictions as also levy tax in public interest. But the same indisputably would be subject to the conditions laid down in Articles 303 and 304 of the Constitution. (1014-E-H; 1015-A, Bl • United States v. Patterson, 55 Fed. Rep. 605, referred to. E

11. It is beyond any cavil of doubt that Part XIII of the Constitution contains a principle of importance as regards economic sovereignty and integrity of India by doing away the trade barriers as also an attempt by the State to provide economic protection to the States. Once, it is held that the limitation upon the legislative power stipulated in Article 303(1), 304(a) F would apply to trade in liquor, there cannot be any doubt in view of several Constitution Bench decisions of this Court that Article 301 will also apply thereto. [1018-F, GI Kalyani Stores v. The State of Orissa & Ors., 119661 I SCR 865 and H. Anraj v. Govt. of Tamil Nadu, 1198611 SCC 414, relied on. G Atiabari Tea Company Limited v. The State of Assam and Ors., (1961) I SCR 809 and The Automobile Transport (Rajasthan) Ltd v. The State of Rajasthan and Ors., [196311 SCR 491, referred to. 12.¹. In India, the constitutional guarantee under Article 301 of the Constitution is more extensive than either in United States or Australia. H The decisions of United States Supreme Court and Australian Supreme

STATE~. DEV ANS MODERN BREWERIES 947 Court as also the Privy Council, clearly demonstrate that in these countries, altho!lgh States have more constitutional freedom but despite the same Commerce Clause received ample protection at the hands of the Judiciary. (1025-G-H; i026-AI

12.². Any manner of extension of protection to trade or business within the frontiers of State, at the cost of free inter-State 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. (1027-D, E)

A.B. Abdul Kadir and Ors. v. State of Kera/a, AIR (1976) SC 182; H. C Anraj v. Government of Tamil Nadu, (1986) 1SCC414; Mis. Maruti Agencies, Bangalore rep. by its Proprietor v. The State of Tamil Nadu and Ors., (1997) 1 MLJ 589; Atiabari Tea Company Limited v. The State of Assam and Ors., (1961) 1 SCR 809 and Shree Mahavir Oil Mills and Anr. v. State of J &K and Ors., (1996] 11 sec 39, referred to. D Southern Pacific Co. v. State of Arizona, (1945) 325 US 761; Fox v. Robbins, 8 CLR 115; Bob-Lo Excursion Company v. People of the State of Michigan, (1948) 333 US 28; James v. Commonwealth of Australia, (1936) A.C.578; North Eastern Dairy Co. Ltd. v. Dairy Industry Authority of New South Wales, (1974-1975) 134 C.L.R. 559; The Commonwealth and Ors. v. E Bank ofNew South Wales & Ors., (1949) 79 C.LR. 497; Pilkington v. Frank Hammond Pty. Ltd., (1974) 131 C.L.R. 124; Cole v. Whitfield & Anr., (1987- 1988) 165 CLR 360 and Brown v. Maryland, (1827) 12 Wheat 419 and Fox v. Robbins, 8 CLR 115, referred to.

13. Once it is held that the principle of res-extra commercium is not applicable, the decisions in Kalyani Stores, H. Anraj and Bhailal Bhai 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 counterveiling 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 violative of Article 303(1) and 304(a) of the Constitution. As import fee is an impost, thus, levy thereof in addition to counterveiling duty would clearly attract the wrath of Article 304(a) of the Constitution. It has not been and could not have been contended that the tax is compensatory in nature as was the case in H

p. 948 Copy page pinpoint

A Automobile Association. Thus, the impugned impost cannot be upheld. (1029-C-EI

Kalyani Stores v. The State of Orissa and Ors, [196611 SCR 865; H Anraj v. Government a/Tamil Nadu, (198611SCC414 and State of Madhya Pradesh v. Bhailal Bhai and Ors., (1964] 6 SCR 261, relied on. B Har Shankar and Ors. v. The Deputy Excise & Taxation Commissioner and Ors., (19751 1 SCC 737; State of Haryana and Ors v. Lal Chand and Ors, (1984] 3 SCC 634 and State of Purijab v. Mis. Dial Chand Gian Chand and Company, (19831 2 SCC 503; held inapplicable.

C 14. The writ petitioners before the High Court had not questioned any of the terms and conditions of the licence. In Kera/a case they are not even licensees at all. They are manufacturers of potable liquor, licences wherefor had been granted by other States. The State of Kerala has not parted any privilege in their favour. Even otherwise when the legislative D competence of a State is in question, the same goes to the root of the jurisdiction. Once it is found that the State Legislature has exceeded its jurisdiction in imposing the impugned levy, the same being a fraud on the Constitution cannot be sustained on the procedural doctrine of estoppel or waiver. ( l 030-A, Bl

E Per SB. Sinha, J. (Dissenting from majority and concurring with B.N. Agrawal, J.)

1. While granting largesse 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 p and would not be violative of Article 301 of the Constitution of India. (1033-F, GI

Kapila Hingorani v. State of Bihar, [2003 ) 6) SCC 1, referred to.

2.¹. 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, I the common law principle based on the maxim 'res extra commercium' shall have no application in relation thereto. (1083-G-H; 1084-A, BJ

p. 949 Copy page pinpoint

2.². The statute lays down that the Acts regulating the trade would A be lawful, if done in the manner and to the extent provided by the provisions thereof or any rules, regulations or orders made thereunder. (1047-C, DI

State of Bombay v. R.M.D. Chamarbaugwala, (1957( SCR 874; Har Shankar and Ors. etc. etc. v. Deputy Excise & Taxation Commissioner and B Ors., (1975] 3 SCR 254; Khoday Distilleries Ltd. and Ors. v. State of Karnataka and Ors., (1995( 1 SCC 574; Kalyani Stores v. State of Orissa and Ors., (1966] l SCR 865; Commissioner of Sales Tax, M.P. v. Popular Trading Company, Ujjain, (2000] 5 SCC 5ll; Indian Aluminium Company Ltd. etc. v. Assistant Commissioner of Commercial Taxes (Appeals) and C Another etc., [2001] 2 SCC 201; Welfare Association ARP Maharashtra and Ors. v. Ranjit P. Gohil and Ors., (2003) 2 SCALE 288; Kapila Hingorani v. State ofBihar, (2003] 6 SCC 1; B.R. Enterprises etc. v. State of UP and Ors., etc., [1999] 9 SCC 700; India Handicrafts Emporium and Ors. v. Union of India and Ors., (2003] 7 SCC 589; Unni Krishnan, JP and Ors. v. State of Andhra Pradesh, [1993] 1 SCC 645; T.MA. Pai Foundation and Ors. v. State D ofKarnataka and Ors., [2002] 8 SCC 481; Sadan Singh and Ors. v. New Delhi Municipal Committee and Ors., (1989] 4 SCC 155; Islamic Academy of Education and Anr. v. State of Karnataka and Ors., JT (2003) 7 SC 1; Mis Fatehchand Himmatlal and Ors. v. State of Maharashtra, (19771 2 SCC 670; Mis Bishamber Dayal Chandra Mohan etc. v. State of U.P. and Ors. etc., AIR E (1982) SC 33; The State of Himachal Pradesh and Ors. v. Yash Pal Garg (Dead) By LRs. and Ors., (2003) 3 Supreme 759; Jindal Strips Ltd. and Anr. v. State of Haryana and Ors., (2003) 8 SCALE 206; State of Tamil Nadu v. Mis Hind Stone etc., AIR (1981) SC 711; State of Tamil Nadu and Ors. v. Ml s Sanjeetha Trading Co. and Ors., (199311 SCC 236; State ofBihar and Ors. v. Harihar Prasad Debuka etc., AIR (1989) SC 1119; Government of F Maharashtra and Ors. v. Deokar's Distillery, (2003( 5 SCC 669; H. Anraj and Ors. v. State of Maharashtra, (1984] 2 SCC 292; H. Anraj v. State of Tamil Nadu, (1986] 1 SCC 414; State of Haryana v. Mis. Suman Enterprises and Ors., (1994] 4 SCC 217; Mis. Sat Pal and Co. and Ors. v. Lt. Governor of Delhi and Ors., (1979] 4 SCC 232; R.C. Cooper v. Union of India, AIR G (1970) SC 564; Mis. Maruthi Agencies, Bangalore v. The State of Tamil Nadu and Ors., (1997) 1 MLJ 589; State of Madhya Pradesh v. Bhailal Bhai and Ors., (1964) 6 SCR 261; Stale of Bihar and Ors. v. Industrial Corporation Pvt. Ltd. and Ors., (2003) 9 SCALE 169; State of U.P. and Ors. v. Varn Organic Chemicals Ltd. and Ors., JT (2003) 8 SC 1: [2003[ 8 SCC 270; Deccan Sugar & Abkari Co. Ltd v. Commissioner of Excise, A.P., [19981 3 H

p. 950 Copy page pinpoint

A SCC 272; State of UP v. Modi Distillery, [1995) 5 SCC 753 and Synthetics and Chemicals Ltd. v. State of UP., [1990( l SCC 109, referred to. 3.¹. If by reason of judicial interpretation it is held that those trades which are obnoxious in nature would not fall within the purview of Article 19, what was the necessity of extending the meaning of 'reasonable B restrictions' to prohibition; and in some cases even with the aid of the provisions contained in the Directive Principles of State Policy in Part IV of the Constitution of India. (1051-E-F) 3.². The Parliament or the State Legislature, it is trite, do not make legislation in vacuo. The legislations are not enacted in futility. The C legislation are not only to be implemented, their constitutionality must also be judged:·on the touchstone of Part Ill and other provisions of the Constitution of India. No short-cut method can be adopted to do away therewith. J1051-G-H) 3.³. Concededly restrictions of trade in liquor within the meaning of Article' 19(l)(g) of the Constitution of India can be extended to prohibition. Such prohibition may not be permissible in other cases. The decisions of this Court clearly show that such a prohibition can be imposed by laying down a law only in the event that the trade in relation thereto is noxious ones and not otherwise. The distinction made by this Court in a large number of judgments is to be applied in proper perspective, insofar as the words trade in liquor will carry two different meanings - one in respect of trade which are noxious or pernicious and the others which are not. If it is held that Article 19 of the Constitution of India and for that matter anj other provision of the Constitution of India including Article 301 will net have any application in relation to pernicious or obnoxious trade, the State will not be entitled to issue any prohibitory order in relation th~reto. The very fact that this Court in no uncertain terms held that the.trade in liquor can be prohibited being noxious or pernicious, it i111plicitly ~s to show that prohibition of such a trading activity must be . .referable to legislations made in terms of clause (6) of Article 19 of the CoBStitutilln of India which is itself an indication of the fact that there G .exists a richt to carry on the trade in terms of Article 19(l)(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. )1052-A-D) H 3.⁴. There are decisions of this Court which have held that Article

p. 951 Copy page pinpoint

19(1)(g) will not apply so long as the trade in liquor is prohibited. The A Constitution Bench of this Court in Khoday Distilleries 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 qotdeclared . .B the same to be otherwise illegal. (1052-E, FI

Har Shankar and Ors. etc. etc. v. Deputy Excise & Taxation Commissioner and Ors.. [1975I 3 SCR 254; Cooverjee B. Bharuijia v. Excise"~ · Commissioner, (1954[ SCR 873; State of UP v. Synthetics and Chemical Lf⁴; C [1980I 2 SCC 441; State of Orissa v. Harinarayan Jaiswal, [1972I 2 SC<:;.· 36; Synthetic and Chemicals Ltd v. State of UP, [19901 I SC~ 109; In the · matter of Phool Din, AIR (1952) All 491; Narender Kumarv. Union ofIndia, .. · [1960I 2 SCR 375; MB. Cotton Association v. Union of India, AIR (1954) SC 634; Hanif Quareshi Mohd. v. State of Bihar, [1959I SCR 6;9; Union of India and Anr. v. International Trading Co. and Anr.. (2003) 4 Supreme 114; D Saurabh Choudhary v. Union of India, (2003) 9 SCALE 272; Municipal Corporation ofthe City ofAhmedabad and Ors. v. Jan Mohammed Usmanbhai ·· and Anr., AIR (1986) SC 1205: [1986I 2 SCR 700 and B.P. Sharma v. Union of India, (2003) 6 SCALE 498, referred to.

4.¹. In order to determine whether total prohibition would be E reasonable the Court has to balance the direct impact on the fundamental right of the citizens thereby against the greater public or social inlerest sought to be ensured. Implementation of Directive Principles contained · in Part IV is within the expression of restrictions in the interest .of Hie general public. [1054-D, EI F Municipal Corporation of the City of Ahmedabad and .Ors. v. Jan Mohammed Usmanbhai and Anr., AIR (1986) SC 1205: [1986I'.² SCR 700; Synthetics and Chemicals Ltd v. State of UP.. [1990I 1SCC109; HarShankar and Ors. etc. etc. v. Deputy Excise & Taxation Commissioner and Ors., (197$1 3 SCR 254 and Rustom Cavasjee Cooper and Ors. v. Union of India, AIR (} (1970) SC 564, referred to.

4.². In certain cases even in relation to the grant of contract in liquor, Article 14 of the Constitution has been held to be applicable. Once it is held that a person, in certain situation is entitled to invoke the equality clause contained in Article 14 of the Constitution of India, there is H

p. 952 Copy page pinpoint

A absolutely no reason as to why Article 301 will not be applicable. (1054-H; 1055-A(

Krishna Kumar Narula v. The State of Jammu and Kashmir and Ors., AIR (1967) SC 1368, relied on.

B TMA. Pai Foundation and Ors. v. State of Karna/aka and Ors., (2002) 8 sec 481, referred to. 4.³. The State has exclusive right to sell liquor and to sell the said right. Both rights are, thus, different and distinct. (1056-A]

Cooverjee B. Bharucha v. Excise Commissioner, (1954] SCR 873; State C of Bombay v. F.N. Balsara, AIR (1951) SC 318 and State of Orissa v. Harinarayan Jaiswal, (1972] 2 SCC 36, referred to.

4.⁴. 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. D In Synthetics & Chemicals Ltd., the Seven-Judge Bench, made a distinction between a country liquor and a foreign liquor. (1084-D, E]

State of Bombay v. F.N. Balsara, AIR (1951) SC 318; State of Orissa v. Harinarayan Jaiswal, (1972 ( 2 SCC 36 and Synthetics and Chemicals Ltd. v. State of UP., (1990] 1SCC109, referred to. E 5.¹. While the Australian Constitution failed to expressly define restrictions, the American Constitution defined the clause in an extremely ambiguous manner. The Indian Constitution provides for freedom of trade and commerce, but puts the minimum required restriction in terms of public interest. (1062-E] F 5.². Whereas in terms of Article 19(6) as also Article 302 of the Constitution of India in relation to a trade which is noxious in nature a complete prohibition would be permissible, the same would not mean that while permitting the trade to go on the State's action whether legislative or executive need not undergo the constitutional tests in terms of Articles G 14, 19 or 301 of the Constitution of India. The argument that the relationship between State and the licensee is contractual in nature but the same would not mean that any legislative interference thereupon as a result whereof the contract becomes more burdensome would not be a subject-matter of challenge. There is no estoppel against statute. There H cannot be any waiver of fundamental right. (1062-F, G]

p. 953 Copy page pinpoint

Constitutional Assembly Debates, 8th September, 1949, Vol. 9, p.1124; A Powell, Thomas Reed, "Vagaries and Varieties in Constitutional Interpretation", p. 181 and Shiva Rao, B. "The Framing of India's Constitution" p. 699, referred to.

6. The object behind Article 301 is to ensure that the economic unity of India may not be broken up by internal barriers. Further, unlike the B Fundamental right provided to citizens only under Article 19 (1) (g), Article 301 seeks to extend its benefits to all individuals. 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. (1063-F-H]

Atiabari Tea Co. v. State of Assam, AIR (1961) SC 232, relied on.

7.¹. Imposition of tax is a constitutional function. No tax can be levied except in terms of Article 265 of the Constitution of India. It is one thing to say that tax levied is constitutionally valid but it is another thing to say that tax although levied in exercise of its constituent power by a State Legislature, it need not undergo the test of constitutional requirement at all. The latter proposition, would be totally against the letter and spirit of the Constitution of India as also constitutionalism. [1064-B, C)

Saghir Ahmad and Anr v. State of U.P. and Ors., AIR (1954) SC 728, referred to.

7.². The terms "Excise Duty", "Counterveiling Duty", "import duty" F are not terms of art. They are made part of the interpretation section contained in the respective Excise Acts. (1066-G I

S.K. Pattanaik (Dead) through LRs. v. State of Orissa and Ors., [2000) 1 SCC 413 and Aristocrat Agencies, Hyderabad v. Excise Superintendent, Hyderabad and Ors., (20011 1 SCC 496, referred to. G 7.³. "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 H

p. 954 Copy page pinpoint

A 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 can not 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. (1066-G-H; 1067-A, Bl

State of Orissa v. Harinarayan Jaiswal, (1972[ 2 SCC 36 and State of U.P. v. Sheopat Rai, (1994) Supp. 1 SCC 8, referred to. 8.¹. A constitutional provision should always receive a fair, liberal and progressive interpretation so that its true objects might be promoted. By this it can fulfil the aspirations of the people at large. To achieve the above goal, the Organic method of interpretation which is now universally accepted, requires to see the present social conditions and interpret the Constitution in a manner so as to resolve the present difficulties. The social conditions existing at the time when the Constitution was made may be very different from the present conditions and l>!!nce an interpretation of the Constitution from the angle of the Constitution makers would bring a completely outdated and unrealistic view. So 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. (1067-H; 1068-A-DJ

8.². 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. 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. H Implementation of Directive Principles contained in Part IV is within the expression of "restrictiims in the interest of the general public". A (1068-D-F(

p. 955 Copy page pinpoint

8.³. There exists a distinction between a fundamental right of a citizen to carry on trade in obnoxious matters under Article 19(1Xg) of the Constitution of India and freedom to carry on such trade throughout the country without any hindrance or obstruction except in terms of B reasonable regulations which may be made under Part XIII of the Constitution of India. (1068-G)

Siegan, Bernard H., "Economic liberties and the Constitution", p.8, referred to.

9. Although, the United States is guided by a capitalist philosophy c unlike the sodalist 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 D taking place both at the social and political levels. (1071-F) • Webster's 3rd New International Dictionary, I993; "The World Trade Organisation-Law, Practice and Policy" by Mitsuo Matsushita, Thomas J Schoenbaum & Petros C. Mavroidis Jackson, John J., "The Jurisprudence of GAIT and WTO", referred to. E

10. Legal history is a good guide for the purpose of appreciating the legal development across the world particularly in the field of international law. The judiciary cannot cling to age-old notions of any underlying philosophy behind interpretation. It has to move with the times. There cannot be any doubt whatsoever that a law which was at one point of time p was constitutional may be rendered unconstitutional because of passage of time. (1071-G, H; 1072-A, H; 1073-A( Kapila Hingorani v. State of Bihar, (2003) 6 SCC 1; John Vallamattom and Anr. v. Union of India, JT (2003) 6 SC 37 and People's Union for Civil Liberties and Anr. v. Union of India and Anr.: (2003) 4 SCC 399, referred G to. R v. Hughes, 12 BHRC 243 = (2002) UKPC 12, referred to

11. The court cannot interpret on equality, freedom or commerce clauses of the Constitution in such a manner so as to take away the rights and llbligations created under a statute on the ground of public morality H

p. 956 Copy page pinpoint

A or otherwise. 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. (1074-E)

Mwlidhar Agarwal and Anr v. State of UP. and Ors., (1975) 1 SCR B 575, referred to.

12. In interpretation 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 C view the interpretation of the Constitution should receive such a treatment which would be in tune with the original intention of the Constitution makers. The ultimate duty to achieve and maintain integrity of the nation vis-a-vis life lies on the Union. It is for this reason though law and order is included in List II of the Seventh Schedule of the Constitution of India, D 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. This again requires more industries. In the long run, subject to providing congenial atmospbere results in foreign investment. The Court having regard to globalisation should take notice of the futuristic thought in developed countries for interpretation of the Constitution in the ascertainment of meaning of the relevant provisions thereof with reference to everything which is logically relevant. [1076-A-E)

United States v. Lopez, 514 US 549 (1995); Gibbons v. Ogden, 22 US (9Wheat) 1 (1824); NLRB v. Jones & Laughlin Steel Corp .. 301 US 1 (1937); G Katzenbach v. McC/ung, 379 US 294 (1964) and Joseph Lochner v. People of the State of New York, 198 US 937, referred to.

13. Doctrine of precedent is a well-accepted principle. However, although a decision has neither been reversed nor overruled, it may cease to be 'law' owing to changed conditions and changed law. [1080-C, El H

p. 957 Copy page pinpoint

M.A. Murthy v. State of Karnataka and Ors., (2003( 7 SCC 517, A referred to.

14.¹. Kalyani Stores is a Constitution Bench judgment. A Constitution Bench has unequivocally held that Article 301 of the Constitution of India shall apply to trade of liquor. Once this Court comes to the conclusion that doctrine of res extra commercium was not applicable, Ka/yani Stores B must be applied in all fours. In any event, the decision or a Constitution Bench cannot be brushed aside as having been passed 'sub silentio' or on the basis of doctrine of 'per incurium' Judicial discipline envisages that a coordinate bench follow the decision of earlier coordinate bench. If a coordinate Bench does not agree with the principles of law enunciated by another Bench, the matter may be referred only to a larger Bench. But no decision can be arrived at contrary to or inconsistent with the law laid down by the coordinate Bench. (1081-C-E(

14.². Kalyani Stores and K.K. Narula both have been rendered by the Constitution Benches. The said decisions, therefore, cannot be thrown out for any purpose whatsoever; more so when both of them if applied collectively lead to a contrary decision proposed by the majority. (1081-F) Kalyani Stores v. State ofOrissa and Ors., (196611SCR865; Pradip Chandra Parija v. Pramod Chandra Patnaik, (2002( 1SCC¹; State ofTripura E v. Roop Chand Das and Ors., [2002( 7 SCC 273; State of Bihar v. Kalika Kuer@Kalika Singh and Ors., JT 2003 4 SC 489 and Dr. Vijay Laxmi Sadho v. Jagdish, JT 2001 1 SC 382, referred to.

Halsbury's Laws of England, (Fourth Edition) Vol. 26, referred to.

Gibbons v. Ogden, 22 US (9Wheat) 1 (1824), referred to. F CIVIL APPELLATE JURISDICTION: Civil Appeal No. 30I7 of I997.

From the Judgment and Order dated I 7.¹.97 of the Punjab and Haryana High Court in C.W.P. No. 5358 of I996. WITH G C.A. Nos. 2696-2697 of 2003.

Dr. A.M. Singhvi, P.N. Misra, Ashok H. Desai, R.F. Nariman, R. Venkataramani, T.L.V. Iyer, H.M. Singh, Anil Hooda, Kaushal Yadav, R.S. Suri, Rajeev Kumar Sharma (NP), Pallav Shishodia, George Poonthatham, R.Yoshod Vardhan, Nanjunda Reddy, Nagendra Naidu, S. Sukumaran, M.P. H

958 ~UPREME COURT REPORTS (2003] SUPP. 5 S.C.R.

A Vinod, Ms. Divya Nair, Vikram Mehta, Ms. Padmalakshmi Nigam, Mohan Jain, Sanjiv Sen, Neeraj Sethi, Ms. Nandini Gore, Ramesh Babu M.R. and E.M.S. Anam for the appearing parties.