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

In Anraj's case (supra) this Court considerec! Entry 34 of List II in terms whereof the State Legislature has been conferred power to enact Statutes B on gambling. In Mis. Maruthi Agencies, Bangalore rep. by its Proprietor v. The State of Tami! Nadu and Ors.. [1997] (1) MLJ 589, it was held that in the event lotteries are organized by a State, sale of tickets thereof cannot be prohibited in other States on the ground that it is gambling and prohibited by List II. If trade in liquor like gambling or betting were not to be regulated by statutes it is difficult to comprehend as to why entries in respect thereof have been made in the Seventh Schedule to the Constitution.

The American decisions relied upon before this Court may not be held to have any application having regard to the fact that trade in liquor in the United States of America was completely prohibited at one point of time but the same was modified by reason of Constitution Twenty-first Amendment. Let me now take the case of 21st Amendment in US Constitution. In the Constitution of the United States, an express provision guaranteeing freedom from inter-State trade and commerce does not exist. There only the Congress is empowered to regulate commerce. In the States freedom on trade and commerce clause only provides for a limitation upon the power of the State E Legislature but not Congress and 'the freedom is confined to the inter-State aspect.

In Southern Pacific Co. v. State of Arizona (1945) 325 US 761, it is stated: F "For a hundred years it has been accepted constitutional doctrine that the commerce clause, without the aid of congressional legislation, thus affords some protection from state legislation inimical to the national commerce, and that in such cases, where Congress has not acted, this Court, and not the State legislature, is under the commerce G clause the final arbiter of the competing demands of state and national interests".

It is further stated:

"The Commerce Clause is a grant of authority to Congress, and not H

1020 SUPREME COURT REPORTS (2003] SUPP. 5 S.C.R.

A a restriction on the authority of that body."

In the United States, the inter-State restraint trade as such is prohibited but a State is not denuded of its power imposing general taJCes under its wing power. The state has also the power to regulate such aspects of commerce which do not require a new form of national control. See Bob-Lo B Excursion Company v. People of the State of Michigan, (1948) 333 US 28). Furthermore, in United States a complete prohibition was imposed. The said prohibition was sought to be relaxed by 21st Amendment which is in the following terms:

"Section I. The eighteenth article of amendment to the Constitution c of the United States is hereby repealed.

Section 2. The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited. D Section 3. This article shall be inoperative unless it shall have been ratified as an amendment to the Constitution by conventions in the several States, as provided in the Constitution, within seven years from the date of the submission hereof to the States by the Congress."

E In the United States of America, the State has the requisite power to impose general taxes. Despite the same, an exemption granted in favour of local manufacturers vis-a-vis the exporters was frowned upon by the American Courts.

In Bacchus Imports, Ltd. v. Herbert H. Dias (82 L.Ed. 2d 200), the challenge was to the following effect:

STATE v. DEV ANS MODERN BREWERIES [B.N. AGRAWAL, J.) 102 \ White, J. speaking for the majority stated the law thus: A "3. A cardinal rule of Commerce Clause jurisprudence is that "no State, consistent with the Commerce Clause, may 'impose a tax which discriminates against interstate commerce ... by providing a direct commercial advantage to local business." Boston Stock Exchange v State Tax Comm'n, 429 US 318, 329, 50 L Ed 2d 514, 97 S Ct 599 B (1977) (quoting Northwestern States Portland Cement Co. v. Minnesota, 358 US 450, 458, 3 L Ed 2d 421, 79 S ct 357, 67 ALR2d 1292 (1959)). Despite the fact that the tax exemption here at issue seems clearly to discriminate on its face against interstate commerce by bestowing a commercial advantage on okolehao and pineapple wine, the State argues - and the Hawaii Supreme Court held - that • there is no improper discrimination."

The Court noticed:

The State's position that there is no competition is belied by its purported justification of the exemption in the first place. The legislature originally exempted the locally produced beverages in order H

1022 SUPREME COURT REPORTS (2003) SUPP. 5 S.C.R.

A to foster the local industries by encouraging increased consumption of their product. Surely one way that the tax exemption might produce that result is that drinkers of other alcoholic beverages might give up or consume less of their customary drinks in favor of the exempted products because of the price differential that the exemption will permit. Similarly, nondrinkers, such as the maturing young, might be B attracted by the low prices of okolehao and pineapple wine. On the stipulated facts in this case, we are unwilling to conclude that no competition exists between the exempted and the nonexempted liquors."

As regards the State's right on economic protectionism it was said: c ~· "A finding that state legislation constitutes "economic protectionism" may be made on the basis of either discriminatory purpose, see Hunt v. Washington Apple Advertising Comm'n, 432 US 333, 352-353, 53 L Ed 2d 383, 97 S Ct 2434 (1977), or discriminatory effect, see D Philadelphia v New Jersey, supra. See also Minnesota v. r.lover Leaf Creamery Co., supra, at 471, n 15, 66 L Ed 2d 659, IOI S Ct 715. Examination of the State's purpose in this case is sufficient to demonstrate the State's lack of entitlement to a more flexible approach permitting inquiry into the balance between local benefits and the burden on interstate commerce. See Pike v Bruce Church, Inc., 397 . E US 137, 142, 25 L Ed 2d 174, 90 S Ct 844 (1970). The Hawaii Supreme Court described the legislature's motivation in enacting the exemptions as follows: "The legislature's reason for exempting 'ti root okolehao' from the 'alcohol tax' was to 'encourage and promote the establishment F of a new industry,' S.L.H. 1960, c 26; Sen Stand Comm Rep No. 87, in 1960 Senate Journal, at 224, and the exemption of 'fruit wine manufactured in the State from products grown in the State' was intended 'to help' in stimulating 'the local fruit wine industry'. S.L.H. 1976, c 39; Sen Stand Comm Rep No. 408-76, in 1976 Senate Journal, at I056." In re Bacchus Imports, G Ltd. supra at 573-574, 656 P2d, at 730. Thus, we need not guess at the legislature's motivation, for it is undisputed that the purpose of the exemption was to aid Hawaiian industry. Likewise, the effect of the exemption is clearly discriminatory, in that it applies only to locally produced beverages, H

STATE v. DEVANS MODERN BREWERIES [B.N. AGRAWAL, J.] I023

even though it does not apply to all such products. Consequently, as A long as there is some competition between the locally produced exempt products and non-exempt products from outside the State, there is a discriminatory effect."

The Learned Judge proceeded to observe: B "No one disputes that a State may enact laws pursuant to its police powers that have the purpose and effect of encouraging domestic industry. However, the Commerce Clause stands as a limitation on the means by which a State can constitutionally seek to achieve that goal. One of the fundamental purposes of the Clause "was to insure ...against discriminating State legislation." Welton v. Missouri, 91 US C 275, 280, 23 L Ed 347 (1876). In Welton, the Court struck down a Missouri statute that "discriminated in favor of goods, wares, and merchandise which are the growth, product, or manufacture of the State, and against those which are the growth, product or manufacture of other states or countries..." Id., at 277, 23 L Ed 347. Similarly, in D Walling v Michigan, 116 US 446, 455, 29 L Ed 691, 6 S Ct 454 (1886), the Court struck down a law imposing a tax on the sale of alcoholic beverages produced outside the State, declaring:

"A discriminating tax imposed by a State operating to the disadvantage of the products of other States when introduced E into the first mentioned State, is, in effect, a regulation in restraint of commerce among the States, and as such is a usurpation of the power conferred by the Constitution upon the Congress of the United States."

See also l.M Darnell & Son Co. v Memphis, 208 US I 13, 52 L Ed p 413, 28 S Ct 247 (1908)."

It was held:

"We also find unpersuasive the State's contention that there was no discriminatory intent on the part of the legislature because "the G exemptions in question were not enacted to discriminate against foreign products, but rather, to promote a local industry." Brief for Appellee Dias 40. If we were to accept that justification, we would have little occasion ever to find a statut~ unconstitutionally discriminatory. Virtually every discriminatory statute allocates benefits or burdens unequally; each can be viewed as conferring a benefit on one party H

1024 SUPREME COURT REPORTS [2003) SUPP. 5 S.C.R.

A and a detriment on the other, in either an absolute or relative sense. The determination of constitutionality does not depend upon whether one focuses upon the benefited or the-burdened party. A discrimination claim, by its nature, requires a comparison of the two classifications, and it could always be said that there was no intent to impose a burden on one party, but rathe.r the intent was to confer a benefit on B the other. Consequently, it is irrelevant to the Commerce Clause inquiry that the motivation of the legislature was the desire to aid the makers of the locally produced beverage rather than to harm out-of-state producers."

C The learned Judge explained the application of 21st Amendment by posing the question:

"Whether the interests implicated by a state regulation are so closely related to the powers reserved by the Twenty-first Amendment that the regulation may prevail, notwithstanding that its requirements D directly conflict with express federal policies."

and answered the same :

"Approaching the case in this light, we are convinced that Hawaii's discriminatory tax cannot stand. Doubts about the scope of the Amendment's authorization notwithstanding, one thing is certain: The E central purpose of the provision was not to empower States to favour local liquor industries by erecting barriers to competition. It is also beyond doubt that the Commerce Clause itself furthers strong federal interests in preventing economic Balkanization. South-Central Timber, Development, Inc. v. Wunniclce, 467 US 82, 81 L Ed 2d 71, 104 S Ct F 2237 (1984); Hughes v. Oklahoma, 441 US 322, 60 L Ed 2d 250, 99 S Ct 1727 (1979); Baldwin v G.A.F. Seelig, Inc., 294 US 511, 79 L E:l 1032, 55 S Ct 497, IOI ALR 55 (1935). State laws that constitute mere economic protectionism are therefore not entitled to the same deference as laws enacted to combat the perceived evils of an unrestricted traffic in liquor. Here, the State does not seek to justify G

.. its tax on the ground that it was designed to promote temperance or to carry out any other purpose of the Twenty-first Amendment, but instead acknowledges that the purpose was "to promote a local industry." Brief for Appellee Dias 40. Consequently, because the tax violates a central tenet of the Commerce Clause but is not supported H

STA TE v. DEVANS MODERN BREWERIES [B.N. AGRAWAL,J.) 1025 by any clear concern of the Twenty-first Amendment, we reject the A State's belated claim based on the Amendment."

The minority opinion, however, proceeded on the basis that by reason of Twenty-first Amendment, the State has the power to create a monopoly. Such constitutional permissibility is absent from our constitutional scheme. B It may be noticed that the same principles as in Atiabari (supra) or Automobile (supra) have been applied by the Privy Council and the Australian Courts while interpreting Section 92 of the Australian Constitution to hold that even for any purpose for which the State has acted the legislation would not be relevant criteria for declaring it ultra vires if it is found that the same interferes with the right of trade. (See James v. Commonwealth of Australia C (1936) A.C.578, North Eastern Dairy Co. Ltd. v. Dairy Industry Authority of New South Wales (1974-1975) 134 C.L.R. 559 at 581 and The Commonwealth and Ors. v. Bank of New South Wales and Ors. (1949) 79 C.L.R. 497).

Mason, J. in Pilkington v. Frank Hammond Pty. Ltd., (1974) 131 C.L.R. D 124 interpreted Section 92 of the Australian Constitution in the following terms:

"The section does not in terms speak of the private right of the individual to engage in trade, commerce, and intercourse among the States; it refers to trade, commerce and intercourse among the States E as an entire and total concept and provides that it is to be 'absolutely free' in the sense in which this expression has been discussed in the decided cases. In saying so much the section protects the right of the individual to engage in inter-State trade, commerce and intercourse but it needs to be recognized that this protection is incidental to, and in a sense consequential upon, the protection which is given to the F entire concept of inter-State trade, commerce and intercourse, including the various acts and transactions by which it is constituted."

Reference in this connection may also be made to North Eastern Dairy Co. Ltd. v. Dairy Industry Authority of New South Wales, (1974-1975) 134 C.L.R. 559, at 615). G

In India, the constitutional guarantee under Article 30 I of the Constitution is more extensive than either in United States or Australia. The decisions of United States Supreme Court and Australian Supreme Court as also. the Privy Council, as referred to hereinbefore, clearly demonstrate that H

1026 SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.

A in these countries, although States have more constitutional freedom but despite the same Commerce Clause received ample protection at the hands of the Judiciary.

Subba Rao, J. in Automobile case (supra) observed:

B "The freedom declared under Article 30 I may be defined as a right to free movement of persons or things, tangible or intangible, comiilercial or non-commercial, unobstructed by barriers, inter-State or intra-State or any other impediment operating as such barriers. To state it differently, all obstructions or impediments, whatever shape they may take, to the free flow or movement of trade, or non- c commercial intercourse, offend Article 30 I of the Constitution except in so far as they are saved by the succeeding provisions." The public character theory although is an important, but has a limitation on the individual right which is guaranteed; having regard to the fact that legislative restriction 11.Itimately permits the individual State to go D ahead, only subject to the reasonable restriction.

The rule against enacting protectionist measures has also been noticed by the High Court of Australia in Cole v. Whitfield and Anr., (1987-1988) 165 CLR 360, settling a long debate.

E In Shree Mahavir Oil Mills and Another v. State of J&K and Ors., [I 996] ti SCC 39 at pages 53-54, this Court while rejecting an argument of justification of exemption from sales tax of small scale industrial units within the State of J&K on the ground that the commodity produced within the State and that produced in other States and sold in J&K, constitute different classes, has held as under:- • F "The States are certainly free to exercise the power to levy taxes on goods imported from other States/Union Territories but this freedom, or power, shall not be so exercised as to bring about a discrimination between the imported goods and the similar goods manufactured or produced in that State. The clause deals only with discrimination by means of taxation; it prohibits it. The prohibition cannot be extended beyond the power of taxation. It means in the immediate context that States are free to encourage and promote the establishment and growth of industries within their States by all such means as they think proper but they cannot, in that process, subject the goods imported from other States to a discriminatory rate of taxation, i.e., a higher rate of

STA TE v. DEVANS MODERN BREWERIES [B.N. AGRA WAL, J.) I027 sales tax vis~a-vis similar goods manufactured/produced within that A State and sold within that State. Prohibition is against discriminatory taxation by the States. It matters not how this discrimination is brought about. ............ We find it difficult to appreciate how can the concept of classification be read into clause (a) of Article 304 to undo the precise object and purpose underlying the clause. Shri Verma repeatedly stressed that the object underlying the impugned measure is a laudable one and that it seeks to serve and promote the interest of the State of Jammu and Kashmir which is economically and industrially an undeveloped State, besides being a disturbed State. We may agree on this score but then the measures necessary in that behalf have to be taken by the appropriate authority and in the appropriate manner. Part XIII of .the Constitution itself contains adequate provisions to remedy such a situation and there is no reason why the necessary measures cannot be taken to protect the edible oil industry in the State in accordance with the provisions of the said Part." D It is thus evident that 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 30 I. 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. E In Brown v. Maryland (1827) 12 Wheat 419, the US Supreme Court in the context of the competence of the States to enact and impose a duty on imports or exports has held that the power to regulate inter state commerce in non-discriminatory fashion and "to break down or to eliminate barriers to trade amongst the States" is an essential federal power. It has, therefore, been F said that in the absence of such a power "local interest exerting powerful influences in State Legislatures would, in the long run, prefer home industries over those that are out of state, establish tariff barriers, or employ other means tending to Balkanize the nation into hostile trade areas." [See also William 0. Doughlas J: From Marshall to Mukherjea: Tagore Law Lectures 1956 P. 169]. G In James v. Commonwealth of Australia, (1936) AC 578, referring to McArthur's case 28 CLR 530 it was held:

"It is now convenient to examine the actual language of the Constitution so far as relevant, in order to ascertain its true H

1028 SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.

A construction. The first question is what is meant by "absolutely free" in s. 92. It may be that the word "absolutely" adds nothing. The trade is either free or it is not free. "Absolutely" may perhaps be regarded as merely inserted to add emphasis. The expression "absolutely free" is generally described as popular or rhetorical. On the other hand, 'absolutely' may have been added with the object of excluding the B risk of partial or veiled infringements. In any case, the use of the language involves the fallacy that a word completely general and undefined is most effective. A good draftsman would realize that the mere generality of the word must compel limitation in its interpretation. "Free" in itself is vague and indeterminate. It must take its colour c from the context. Compare, for instance, its use in free speech, free love, free dinner and free trade. Free speech does not mean free speech; it means speech hedged in by all the laws against defamation, blasphemy, sedition and so forth; it means freedom governed by law, as was pointed out in McArthur 's case. Free love, on the contrary, means licence or libertinage, though, even so, there are limitations based on public decency and so forth. Free dinner generally means free of expense, and sometimes a meal open to any one who comes, subject, however, to his condition or behaviour not being objectionable. Free trade means, in ordinary parlance, freedom from tariffs.

"Free" in s. 92 cannot be limited to freedom in the last mentioned sense. There may at first sight appear to be some plausibility in that idea, because of the starting-point in time specified in the section, because of the sections which surround s. 92, and because the proviso to s. 92 relates to customs duties. But it is clear that much more is included in the term; customs duties and other like matters constitute F a merely pecuniary burden; there may be different and perhaps more drastic ways of interfering with freedom, as by restriction or partial or complete prohibition of passing into or out of the State.

Nor does "free" necessarily connote absence of discrimination between inter-State and intra-State trade. No doubt conditions restrictive of G freedom of trade among the States will frequently involve a discrimination; but that is not essential or decisive. An Act may contravene s.92 though it operates in restriction both of intra-State and of inter-State trade."

However, in India Part XIII of the Constitution relates both to inter- H State trade and commerce as also intra-State trade.

STATEv. DEVANS MODERN BREWERIES [B.N.AGRAWAL,J.] 1029

. In Fox v. Robbins [8 CLR 115], It was held: A "Sec. 92 of the Constitution does not reframe State Acts by making new affirmative legislation not contemplated by the State Parliament.

It prevents adverse discrimination from being lawful; so far as the Act can be effectively worked in conformity with the constitutional requirement it still stands; so far as it cannot it simply ceases to operate."

Once it is held that the principle of res-extra commercium is not applicable, the decisions in Kalyani Stores (supra), H. Anraj (supra) and Bhailal Bhai (supra) having been rendered by a Constitution Bench would constitute binding precedents. Once it is held that the Legislature has no power to levy any excise duty on imported liquor in excess of the 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( I) 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 Automobile (supra). I am, therefore, of the opinion that the impugned impost cannot be ~~w. E Before parting, however, I may notice the submission made by Mr. Iyer on behalf of the State ofKerala that the licensees, having obtained a privilege and enjoyed the benefit out of it, cannot, turn round subsequently and repudiate the obligations subject to which they obtained the privilege. The submission of Mr. Iyer is wholly mis-conceived for more than one reason. The F manufacturers of liquor outside the State of Kerala did not obtain any privilege from the State. The decisions relied upon by the learned counsel, namely, Har Shankar (supra), Jage Ram (supra), Lal Chand (supra), Mis. Dial Chand Gian Chand and Company (supra), thus, cannot be said to have any application in the instant case. The decisions in these cases were rendered in the fact G situation obtaining therein. The licensees therein questioned the power of the State to hold auction by the State and/or they refused to comply with the terms and conditions of licence. In fact in Harshankar (supra) the Court on the factual matrix obtaining therein clearly came to the conclusion that the writ petition was not maintainable as thereby the licensees sought avoidance from compliance of contractual terms and licensing conditions and, thus, H

1030 SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.

A they were not entitled to any relief. 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 competence of a State is in question, the same goes to the root B 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.

C For the reasons aforementioned, Civil Appeal No. 3017 of 1997 is dismissed and impugned judgment rendered by the Punjab and Haryana High Court quashing the Notification impugned before it is upheld. On 23.7.1998 when prayer for grant of interim relief was being considered, a prayer was made by Shri Harish N. Salve, learned Senior Counsel, appearing on behalf of the State of Punjab, to the effect that operation of impugned judgment D rendered by the High Court may be stayed as the State was ready to undertake before this Court to refund the amount that would be realized by way of import duty together with interest thereon @ 15% per annum to the respondents in the event of dismissal of State's appeal by this Court and the said prayer having been acceded to, this Court stayed the operation of the judgment , E rendered by the High Court upon the aforesaid undertaking. In view of this, the State of Punjab is hereby directed to refund the amount that has been realized by it by way of import duty to the respondents together with interest thereon @ 15% per annum from the date of its realization till payment, which must be made within a period of three months.

p Civil Appeal Nos. 2696-2697 are allowed and the Notification impugned before the Kerala High Court is quashed.

There shall be no order a~ to costs.

S.B. SINHA, J. G THE REFERENCE:

A three-Judge Bench of this Court has made a reference to the Constitution Bench for deciding as to whether, having regard to the decisions < of the Constitution Benches of this Court in State of Bombay v. R.M.D. H Chamarbaugwala (1957] SCR 874, Har Shankar and Ors. etc. etc. v. Deputy

STATEv. DEV ANS MODERN BREWERIES [SINHA, J.] 1031

PROPOSITIONS OF LAW: B

The following questions inter alia are required to be answered for deductions of the propositions of law involved in the matter:

I. Whether the constitutional validity of a statute can be determined

. on the basis of the interpretation given to the maxim 'res extra c ~ commercium'?

2. Whether the freedom to carry on trade or business as envisaged under Article 30 I of the Constitution of India can be held to be inapplicable to the trade of liquor which is permitted by the State itself? D

3. If Article 14 of the Constitution of India is applicable in the matter of grant of contract by the State, in exercise of its power under Article 298 of the Constitution, can it be said that another constitutional provision, namely, Article 301 would not be appiicable? E

4. Whether in interpreting u constitutional provision, the Court should take into consideration international treaties and covenants covering the subject-matter and having regard to the social milieu?

5Copy pinpoint5. Whether Kalyani Stores (supra), having been rendered by a F Constitution Bench, is it permissible for another coordinate bench to ignore the said decision relying on or on the basis of subsequent decisions which either had not discussed the said decision nor overruled the same?

The Punjab and Haryana High Court applied Kalyani Stores (supra) for striking down the provisions contained in Sections 16 and 31 of the Punjab Act, 1932. The Kerala High Court, however, dismissed the writ petition upholding the validity of Section 17 of the Kerala Abkari Act, 1902 on the ' • sole ground that by reason of the notification impugned in the writ petition a regulatory fee was imposed. The Kerala High Court, therefore, had no occasion to deal with the questions involved herein.

1032 SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.

A LEGISLATIVE COMPETENCE: ' The Acts are pre-constitutional ones but the impugned amendments thereto and/or notifications issued thereunder are post-constitutional. Such legislative power of the State admittedly must be traceable to any of the three Entries, viz., 8, 51and66 of List II of the Seventh Schedule of the Constitution B of India, which read as under :

"8. Intoxicating liquors, that is to say, the production, manufacture, possession, transport, purchase and sale of intoxicating liquors.

51. Duties of excise on the following goods manufactured or produced c in the State and countervailing duties at the same or lower rates on similar goods manufactured or produced elsewhere in India :-

(a) alcoholic liquors for human consumption; (b) opium, Indian hemp and other narcotic drugs and narcotics; but D not including medicinal and toilet preparations containing alcohol or any substance included in sub-paragraph (b) of this entry.;

66. Fees in respect of any of the matters in this List, but not including fees taken in any court."

E Laws relating to imposition of duty of excise is within the legislative competence of the Parliament in terms of Entry 84, List I of the Seventh Schedule of the Constitution oflndia. One of the exceptions to the said field is imposition of duty on alcoholic liquor for human consumption, which is exclusively within the legislative competence of the State. The States of Punjab and Kerala exercised its constitutional power in enacting the said Act, F the sources whereof are referable to Entry 8 or 51 of List II of the Seventh Schedule of the Constitution of India. The vilidity of the impugned provisions of the said Acts, therefore, revolves round the question as to whether the same fulfil constitutional requirements.

G Entry 8 of List II does not envisage any control over import. Entry 51 of List II empowers the State to levy countervailing duty at the same or lower rates of excise duty levied on similar goods produced in that State.

Entry 8 of List II of the Seventh Schedule of the Constitution of India uses the expression 'that is to say' which is descriptive, enumerative and H exhaustive and circumscribes to a great extent the scope of the said entry

STATEv. DEY ANS MODERN BREWERIES [SINHA, J.] 1033 (See Commissioner of Sales Tax, MP. v. Popular Trading Company, Ujjain, A (2000] 5 sec 511 - para 3].

In Indian Aluminium Company Ltd. etc. v. Assistant Commissioner of Commercial Taxes (Appeals) and Anr. etc., (2001] 2 SCC 201 the expression 'that is to say' both in original Entry 11 and in the new Entry 67 has been held to have clearly indicated that the items mentioned therein were exhaustive. B It is, therefore, evident that import of liquor in terms of the licences granted under the provisions of a statute cannot be the subject-matter of regulation within the purview of Entry 8 of List II of the Seventh Schedule of the Constitution of India. C Furthermore, on a plain reading of Entry 51 no duty can be imposed on import of liquor over and above the countervailing duty. Ex-facie, therefore, the imposition of import duty on liquor is unconstitutional.

For determining the legislative competence reference to Directive D Principles contained in Part IV of the Constitution oflndia may be proper (as was done in Welfare Association ARP Maharashtra and Ors. v. Ranjit P. Gohil and Ors., reported in (2003) 2 SCALE 288 but not when the constitutionality of a taxing statute is in question.

RIGHT OF STATE TO CARRY ON BUSINESS: E

The right of a State to carry on business of liquor as being a part of its exclusive privilege must be traced to Article 298 of the Constitution oflndia. See Kapila Hingorani v. State of Bihar, (2003] 6 SCC I.

While granting largess or licence in such trade, the State must exercise F its functions under Article 298 within the parameters of the constitutional scheme, which would include imposition of such regulation and would not be violative of Article 30 I of the Constitution of India.

RES EXTRA COMMERCIUM: G In R.M.D. Chamarbaugwa/a (supra), Har Shankar (supra) and Khoday Distilleries Ltd. (supra), this Court relying on or on the basis of a maxim 'res extra commercium' observed that trade in liquor is not a fundamental right within the meaning of Article 19(1 )(g) of the Constitution of India. H The Constitution Bench of this Court in those decisions had neither

1034 SUPREME COURT REPORTS [2003) SUPP. 5 S.C.R.

A referred to nor discussed the dictionary or legal meaning of 'res extra commercium' which means those things which had been dedicated to the public, such as public roads, rivers, title of owners etc. The question, therefore, is whether the said maxim can be applied in relation to a trade the field whereof is covered by legislative enactments? Answer to the said question, as would appear from the discussions made hereinafter must be rendered in the negative.

As a sovereign prior to coming into force of the Constitution of India, the State may have exclusive privilege to do business in liquor but all post- constitutional statutes and actions taken thereunder must relate to a source of power under the Constitution of India. Even if there is no express provision in the Constitution, principles of constitutionalism exist providing that, for the said purpose, the relevant statutes should also be looked into. A statute is enacted by the State Legislature or the Parliament having regard to one or the other entry made in the three lists contained in the Seventh Schedule of the Constitution. The Punjab Excise Act and the Kerala Abkari Act although pre-constitutional Acts, the subsequent amendments which are impugned in these matters must, thus, be referable either to Entry 8 or Entry 51 of List II of the Seventh Schedule of the Constitution of India. When a statute governs the trade in a particular commodity, the provisions contained therein would only regulate the same. The Constitution of India or the State Legislatures do not state that trade in liquor ipso facto is totally prohibited. States of Punjab and Kerala have not adopted any policy of prohibition whether in whole or in part.

For imposing total prohibition the State must formulate a policy decision having regard to Article 47 of the Constitution oflndia, necessitating issuance of a declaration either through legislative process or through executive instructions.

For judging the validity of taxing statutes, Part IV of the Constitution or Article 47 will have no role to play. Recourse to Part IV or Part IVA of the Constitution can only be taken as regard interpretation of a legislative enactment for giving effect to objects and purport thereof and not for any other purpose. A statute imposing a levy must not only satisfy the tests of Article 245 of the Constitution but also other provisions of the Constitution.

Trade in liquor is regulated by statutes and, thus, if it is carried out within the parameters of the regulatory provisions and subject to observance

STATE v. DEVANS MODERN BREWERIES [SINHA, J.] 1035

of the tenns and conditions of the licence, it would be legal. All rights and obligations flowing from the grant of such licence being mutual would be binding on the parties.

If the Constitution or the relevant statutes do not prohibit carrying out a trade/business, the courts cannot do so by taking recourse to interpretive process or on the supposed grounds of public morality. B Whereas lottery was looked down upon in Chambarbaugwala (supra) and B.R. Enterprises etc. v. State of VP and Ors etc., [ 1999] 9 SCC 700 with reference to scriptures which are thousands years old, the Court did not make a similar attempt in case of Indian Made Foreign Liquor or Imported Liquor C nor considered that sacramental wine has received statutory protection under the laws validly enacted. [As for example see Bombay Sacramental Wine Manufacturing Rules, 1950 framed under the Bombay Prohibition Act, 1949. Sacramental wine refers both to Christian and Hindu tenets.]

In India Handicrafts Emporium and Ors. v. Union of India and Ors., D [2003] 7 SCC 589, a three-Judge Bench of this Court had noticed how education was held to be outside the purview of 'occupation' within the meaning of Article 19(1)(g) of the Constitution of India in Unni Krishnan, JP and Ors. v. State ofAndhra Pradesh, [1993] I SCC 645 but stood overruled by an eleven-Judge Bench of this Court in TMA. Pai Foundation and Ors. v. State of Karnataka and Ors., [2002] 8 SCC 481 following Sodan Singh E and Ors. v. New Delhi Municipal Committee and Ors., [1989] 4 SCC 155. The said view has been reiterated by a Constitution Bench in Islamic Academy of Education and Anr. v. State of Karnataka and Ors., JT (2003) 7 SC I.

In Indian Handicrafts Emporium (supra), this Court pointed out that judicial vagaries should not be pennitted to have its play in such matters F stating:

"The High Court has referred to the decision in P. Crowley v. Henry Christensen (1890) 34 Law. Ed. 620 so as to hold that a citizen has no inherent right to deal in intoxicating liquors. Thereiri the U.S. G Supreme Court was dealing with a federal law imposing restrictions on a person dealing in retail trade in liquor without obtaining a due licence therefor. The law was upheld negativing the contention that the restriction was unreasonable. It was not held therein that trade of liquor is impennissible in all situations. H

\036 SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.

A Restriction in trade, therefore, would depend upon the nature of the article and the law governing the field. By reason of judicial vagaries, fundamental right under Article 19(1 )(g) of the Constitution cannot be further restricted. See Krishna Kumar Narula v. The State of Jammu and Kashmir and Ors., AIR (1967) SC 1368.

B With respect, I am of the opinion that constitutionality of a statute could not detennined solely relying on or on the basis of the said maxim without any reference to the limitations contained in the Constitution.

CASE LAWS - Analysis of

C (A) Case Laws Where 'Res Extra Commercium' was applied:

In Chamarbaugwa/a (supra), this Court applied the doctrine of res extra commercium having regard to the obnoxious nature of trade but in subsequent decisions the said principle had been extended mechanically to trade of liquor without tracing the history as to whether Indian Made Foreii;n D Liquor (IMFL) or the other expensive liquors imported from foreign country would fall in that category. No discussions have been made as to in which areas and in relation to which stratas of the society consumption of liquor was looked down upon. The fact that at different ages, at least in respect of liquor in higher echelons of the society drinks became a part of 'culture' was not taken into consideration. For the purpose of determination of the issue, the Courts were required to take into consideration, the history, the social perceptions vis-a-vis the state policy and other relevant factors before arriving at a decision that it is necessarily a 'social evil'. Law is not to be laid down having regard to the perceptions of a Judge but on premises having a solid foundation therefor, both on facts as well as in law.

The question is required to be considered in today's scenario (which would be discussed a little later), but is suffice it to point out at this stage that what was frowned upon a few decades back, has received the acceptance of society today.

In R.M.D. Chambarbaugwala (supra), with· highest respect, a wrong approach was adopted holding that the Constitution-makers of India, out to create a welfare State, could never have intended to raise betting and gambling to the status of trade, commerce or intercourse without taking into consideration

STATE v. DEVANS MODERN BREWERIES [SINHA, J.] I037 the fact that there exists legislative entries therefor and thus the field is covered by Article 245 of the Constitution.

In Mis Fatehchand Himmatlal and Ors. v. State of Maharashtra, [1977] 2 SCC 670, this Court upheld the validity of the Maharashtra Debt Relief Act, I 976 holding that every systematic, profit-oriented activity, however, sinister, suppressive or socially diabolic, cannot, ipso facto, exalt itself into B a trade. The validity of the Act was upheld on the touchstone of Article 304(b) of the Constitution of India. The binding decision of Kalyani Stores (supra), unfortunately was not noticed.

The said decision does go to show that validity of these regulatory measures are required to be considered on the constitutional anvil on its own force.

In State of Tamil Nadu v. Mis Hind Stone etc., AIR (1981) SC 711 validity of rule SC of the Tamil Nadu Minor Mineral Concession Rules, 1959 came to be questioned. The said rule was made by the State in exercise of its power conferred upon it under Section 15 of the Mines and Minerals (Regulation and Development) Act, 1957. By reason of said rule lease of quarrying in respect of black granite was proposed to be granted only in ' favour of any corporation wholly owned by the State. Such a power also exists in the Central Government under Section 17A of the 1957 Act. As the said rule had nothing to do with inter-State trade or commerce, it was held H

1038 SUPREME COURT REPORTS (2003) SUPP. 5 S.C.R.

: A that the same was outside the purview of Article 301 and in any event would come within the purview of Article 305.

We are not at all concerned with the said question, as therein the Court was dealing with question of State monopoly created under a statute.

B We may notice that such monopoly has also been held to be permissible in terms of the provision of Motor Vehicles Act, 1988.

In State of Tamil Nadu and Ors. v. Mis Sanjeetha Trading Co. and Ors., [1993] 1 SCC 236, a complete prohibition was issued on export of certain items from the concerned States. The question which arose for consideration of the Court was whether such a complete prohibition on export was permissible. It was held:

"The framers of the Constitution neither wanted to ensure the freedom of trade and commerce on the pattern of the freedom guaranteed by Section 92 of the Australian Constitution nor they thought it prcyer that the different States should have unfettered and unrestricted power while imposing prohibitions on inter-State trade. In the larger interest of the nation, there must be free flow of trade, commerce and intercourse both inter-State and intra-State but at the same time the regional problems cannot be ignored altogether. Whenever there is E a clash between the national interest and the interest of the State because of which any crisis is created, the Union has power of intervention. According to us, the expression "free trade" cannot be interpreted in an unqualified manner. Any prohibition on movement of any article from one State to another has to be examined with reference to the facts and circumstances of that particular case-whether F it amounts to regulation only, taking into consideration the local conditions prevailing, the necessity for such prohibition and what public interest is sought to be served by imposition thereof..."

Such prohibition is permissible both under Clause (6) of Article I⁹ and G Article 302 of the Constitution. This decision is again an authority for the proposition that even in relation to essential commodities or goods over which prohibition is required to be imposed in larger public interest, the question must be tested on the anvil of Articles 19(l)(g) and 301 of the Constitution of India and not on applying an age old maxim.

H Har Shankar (supra) was rendered in a situation where the licensee

- • STATE v. DEVANS MODERN BREWERIES [SINHA, J.) 1039 wanted to avoid the rigours of the licence. Therein the appellants applied for and accepted licence to vend foreign liquor. Licence granted to them was A

subject to the provisions of the Punjab Excise Act and the Rules framed thereunder. Although, the parties entered into a concluded contract, the appellant therein filed a writ petition asking for a direction quashing the auction held on March 23, 1968 and secondly, they asked that the respondents B · be restrained from enforcing the obligations arising under the terms and conditions of the auction.

In the aforementioned backdrop, the Court distinguished K.K. Narula (supra) stating:

"It was unnecessary in Krishna Kumar Narula's case (supra) to C • examine the question from this broader point of view, as the only contention bearing on the constitutional validity of the provision impugned therein was not permitted to be raised as it was not argued in the High Court. The discussion of the question whether a citizen has a fundamental right to do trade or business in liquor proceeded D in that case, avowedly, from a desire to clear the confusion arising from the "different views" expressed by the two Judges of High Court. This may explain why the Court restricted its final conclusion to holding that dealing in liquor is business and the citizen has a right .' to do business in that commodity. The court did not say, though such an implication may arise from its conclusion, that the citizen has a E fundamental right to do trade or business in liquor. If we may repeat, Subba Rao, C.J. said :

We, therefore, hold that dealing in liquor is business and a citizen has a right to do business in that commodity; but the State can make a law imposing reasonable restrictions on the said right, in public F . ... interests .

It is significant that the judgment in Krishna Kumar Narula 's case does not negate the right of the.State to prohibit absolutely all forms of activities in relation to intoxicants. The wider right to prohibit G absolutely would include the narrower right to permit dealings in intoxicants on such terms of general application as the State deems expedient. "

It is relevant to note that in Har Shankar (supra) itself, it was stated:

"Since rights in regard to intoxicants belong to the State, it is open H

1040 SUPREME COURT REPORTS (2003] SUPP. 5 S.C.R.

A to the Government to part with those rights for a consideration. By ~ Article 298 of the Constitution, the executive power of the State extends to the carrying on of any trade or business and to the making of contracts for any purpose."

In State of Bihar and Ors. v. Harihar Prasad Debuka etc., AIR ( 1989) B SC 1119 the question was answered again on the anvil of Article 304(b) of the Constitution of India.

Government of Maharashtra and Ors. v. Deokar 's Distillery, (2003] 5 sec 669 has no application in the present case. The question which arose for consideration therein was as to whether the exercise of power under Section c 58-A of the Bombay Prohibition Act, 1949 so as to recover the arrears of salaries of the officers deputed for excise supervision was permissible. It was not a case where an executive action was under challenge on the touchstone of Articles 19(1Xg) and 301 of the Constitution of India. Such a legislation was found to be within the purview of Entry 8, List II of the Seventh Schedule D of the Constitution of India stating:

"Under Entry 8 List II in the Seventh Schedule to the Constitution of India and thereby under Sections 49 and 143(2XV) of the Prohibition Act, the State has the exclusive right/ privilege in respect of potable liquor and the State, in our opinion, can charge any reasonable < • E expenses or even consideration for permitting such activity by grant of licence and that the respondents ought to comply with all reasonable orders, as undertaken by them while obtaining the licence."

In B.R. Enterprises (supra), lottery was not held to be a trade as there no skill was involved in the game. It was held that therein there is only an element of chance in contrast to trade and commerce where there is an exchange of goods, production or properties or exchange of any article either by barter or money. The said principle would not apply herein. .... Even in B.R. Enterprises (supra) lotteries were held to be 'goods' for the purpose of Article 298 being included in the expression 'trade and business'. Despite holding that Articles 301 and 304 of the Constitution of India were not applicable, it having realised that Section 5 of the Lotteries Act was without any guidelines read down the provisifl!lS' thj':reof evidently to bring it within the purview of Articles 14 and 246 ilf the Constitution of ., India. H

STATE v. DEVANS MODERN BREWERIES [SINHA, J.) 1041

.. The reasoning in the aforesaid judgment in the case of B.R. Enterprises v. State of UP (supra) - (2 Hon 'ble Judges) is contrary to and in conflict with A

the earlier decisions in the cases of (i) H. Anraj and Ors. v. State of Maharashtra [1984] 2 SCC 292 (ii) H. Anraj v. State of Tamil Nadu, [1986] I SCC 414, (iii) State of Haryana v. Mis. Suman Enterprises and Ors., [19941 4 sec 211. B The Court noticed that in Krishna Kumar Naruia, a Constitution Bench has held that a right to trade in liquor was business but committed a manifest error in jumping to the conclusion that it was reversed in Khoday Distilleries (supra), which was neither in fact done nor could be done as both of the judgments were rendered by coordinate benches. K.K. Narula (supra) was C only sought to be explained in Khoday Distilleries (supra).

In Mis. Sat Pal and Co. and Ors. v. Lt. Governor of Delhi and Ors., [ 1979] 4 SCC 232 the question which arose for consideration was as to whether the Parliament's power to legislate in respect of Union Territory was plenary and unfettered by entries in the Lists of the Seventh Schedule of the D Constitution oflndia having regard to Entry 97, List I of the Seventh Schedule of the Constitution. It was held : ·• "Accordingly, if excise or countervailing duty could be levied on ' country liquor manufactured or imported into Delhi, albeit other conditions for the levy of such duty being fulfilled, Parliament would E not lack competence to levy the same only because levy of such duty on alcoholic liquors for human consumption is within the competence of a State. But it must be confessed that as country liquor is not manufactured in Delhi, the Parliament could not under Entry 51 of the State List levy either excise or countervailing duty on it. Merely F because Parliament could not levy countervailing duty on country ... liquor imported into Delhi because country liquor is not manufactured in Delhi, it does not exhaust the power of Parliament to levy some other duty on the import of liquor if it is otherwise constitutionally permissible. " G (Emphasis supplied)

Thus, in that case also the Parliamentary competence as regard a legislation was considered.

The impugned duty therein, therefore, even in that case was tested on H

1042 SUPREME COURT REPORTS (2003) SUPP. 5 S.C.R.

A the anvil of the constitutional provisions. Khoday Distilleries (supra) is to be read as a whole. It does not say that no right can be claimed by a trader even after grant of licence. Exclusive privilege theory in Khoday Distilleries (supra) if read in its entirety would lead to the conclusion that the same had been considered only in a no right situation.

In Khoday Distilleries (supra) inter alia validity of rules framed by various States was in question. Sawant, J. analyzing several decisions stated:

"The proposition of law laid down there has to be read in conformity with the proposition laid down in that respect by the other decisions of this Court not only to bring comity in the judicial decisions but also to bring the law in conformity with the provisions of the Constitution. The fundamental rights conferred by our Constitution are not absolute. Article 19 has to be read as a whole. The fundamental rights enumerated under Article 19(1) are subject to the restrictions mentioned in clauses (2) to (6) of the said article. Hence, the correct way to describe the fundamental rights under Article 19(1) is to call them qualifiedfundame.'ltal rights. To explain this position in law, we may take the same illustration as is given in K.K. Narula case. The citizen has undoubtedly a fundamental right to carry on business in ghee. But he has no fundamental right to do business in adulterated ghee. To expound the theme further, a citizen has no right to trafficking in women or in slaves or in counterfeit coins or to carry on business ii of exhibiting and publishing pornographic or obscene films and literature. The illustrations can be multiplied. This is so because there are certain activities which are inherently vicious and pernicious and are condemned by all civilised communities. So also, there are goods, articles and services which are obnoxious and injurious to the health, morals, safety and welfare of the general public. To contend that merely because some activities and trafficking in some goods can be organised as a trade or business, right to carry on trade or business in the same should be considered a fundamental right is to beg the question. The correct interpretation to be placed on the expression "the right to practise any profession, or to carry on any occupation, trade or business" is to interpret it to mean the right to practise any profession or to carry on any occupation, trade or business which can be legitimately pursued in a civilised society being not abhorrent to H r

STATE v. DEV ANS MODERN BREWERIES [SINHA, J.) 1043 the generally accepted standards of its morality. Human perversity knows no limits and it is not possible to enumerate all professions, occupations, trades and businesses which may be obnoxious to decency, morals, health, safety and welfare of the society. This is apart from the fact that under our Constitution the implied restrictions on the right to practise any profession or to carry on any occupation, trade or business are made explicit in clauses (2) to (6) of Article 19 of the Constitution and the State is permitted to make law for imposing the said restrictions. In the present case, it will be clause ( 6) of Article 19 which places restrictions on the fundamental right to do business under Article 19(1) (g). These restrictions and limitations on fundamental right are implicit and inherent even in the fundamental rights spelt out in the American Constitution, although they are not explicitly stated as in our Constitution by clauses (2) to (6) of Article 19."

It was further observed: D "Whether one states as in K. K. Narula case that the citizen has a fundamental right to do business but subject to the State's powers to impose valid restrictions under clause (6) of Article 19 or one takes the view that a citizen has no fundamental right to do business but he has only a qualified fundamental right to do business, the practical consequence is the same so long as the former view does not deny E the State the power to completely prohibit, trade or business in articles· and products like liquor as a beverage, or such trafficking as in women and slaves. This Court in K. K. Narula case has not taken such view."

Khoday Distilleries (supra), thus, does not suggest that there is no fundamental right to trade in liquor at all. The Court explaining the doctrine F t of 'res-extra commercium' observed:

(a) There cannot be a business in ciime;

(b) What is res-extra commercium would be trade or business in liquor when it is completely prohibited; G (c) The State can create a monopoly to do the business itself or through an agency in terms of Article 19(6) or otherwise; (d) Restrictions and limitations on the trade or business in potable liquor can be both under Article 19(6) or otherwise; H

1044 SUPREME COURT REPORTS [2003) SUPP. 5 S.C.R.

A (e) When the State permits trade or business in the potable liquor with or without limitation, the citizen has the right to carry on trade or business subject to the limitations, if any, and the State cannot make a discrimination between the citizens who are qualified to carry on the trade or business.

B The various rights granted in favour of a citizen under the provisions of the Constitution must be considered to be an amalgam of rights. Such rights are required to be given effect to and when a law is enacted or an executive instruction is issued prohibiting or regulating such rights, the conditions precedent therefor under the relevant Constitutional provisions C individually and separately are required to be fulfilled. See R. C. Cooper v. Union of India, AIR (1970) SC 564.

(B) Case laws where the said Doctrine was not applied :

The Constitution Bench of this Court divided lotteries into five categories laying down the law that the State has no power to ban the sale of lottery tickets. H

" ... There can be no doubt, therefore that even though it is the sale in Madhya Bharat of the imported goods that creates the liability to tax and not the import by itself, the trade and commerce as between D Madhya Bharat and other parts of India is directly impeded by this tax ..." (C) Some decisions where this court enforced the rights of a grantee:

In ·state of Bihar and Ors. v. Industrial Corporation Pvt. Lt'µ. and Ors., reported in (2003) 9 SCALE 169, it was held: E " ... Revenue being a subject-matter of legislation in terms of Entry 8 of List II of the Seventh Schedule of the Constitution of India, the recovery thereof must be made in terms of the provisions of a legislative Act enacted pursuant thereto and not by reason of any executive fiat."

In Industrial Corporation Pvt. Ltd (supra), it was further held :

"In the present case, what we find is that before creating a demand of penal duty or penalty, there was no adjudication by any authority as regard to the breach committed by the respondents. We also find that no opportunity of any kind was offered to the respondents before the demand as regard the penal duty was pressed against the respondents. The matter was not even examined as to what was the reason for shortfall in the production of rectified spirit. The Molasses Act does not provide for imposition of such penalty in the everit of H

1046 SUPREME COURT REPORTS [2003) SUPP. 5 S.C.R.

A shortfall of spirit. It must, therefore, necessary be held that the imposition of the impugned penalty being against the principles of natural justice is illegal and void.

The statutory authorities must act within the four-corners of a statute. They could take recourse to the proceedings for levy of penalty and the recovery thereof from the respondents only in the event there existed any agreement or statutory provision therefor. Such a power did not exist in the Commissioner of Excise or the superintendents of Excise who had issued the impugned demand notices."

In that case, therefore, it was laid down that the executive authorities of the State in exercise of their purported regulatory power cannot hold the people who are legally carrying on their business in liquor in 1ansom. They, on the ground of contractual power or otherwise, cannot be permitted to travel beyond the four-corners of a statute by levying any penalty or any other amount which is not contemplated thereunder. D The aforementioned decision is also an authority for the proposition that rule of law must prevail. The country is governed by the rule of law and not by whims and caprice of the executive authorities. The court cannot be a party to such whims and caprices.

In State of U.P. and Ors. v. Varn Organic Chemicals Ltd. and Ors., JT E (2003) 8 SC I : [2003] 8 SCC 270, this Court while examining the validity of fees levied on denatured spirit noticed that the principles laid down in Bihar Distillery were doubted in Deccan Sugar & Abkari Co. Ltd. v. Commissioner of Excise, A.P., [1998] 3 SCC 272, and referred to a larger Bench but in its decision dated 13.².2003 in C.A. No. 4355 of 1985 - Deccan F Sugar & Abkari Co. Ltd. v. Commissioner ofExcise, A.P., although it followed Synthetics and Chemicals (supra) and State of UP v. Modi Distillery, [1995] 5 SCC 753 the decision in Bihar Distillery was not expressly overruled. The • Bench, thus following Synthetics and Chemicals, [1990] I SCC 109 held that the levy of such fee was not justified in terms of Entry 66, List II of the G Seventh Schedule of the Constitution of India by striking down the same. It was observed :

"The question is (to borrow the language in Synthetics) whether in the garb of regulations a legislation which is in pith and substance, as we look upon the instant legislation, a fee or levy which has no connection with the cost or expenses administering the regulation,

STATE v. DEV ANS MODERN BREWERIES [SINHA, J.] I 04 7 can be imposed purely as a regulatory measure. Judged by the pith and substance of the impugned legislation, we are definitely of the opinion that these levies cannot be treated as part of regulatory measures ..."

Yet again in State of UP and Ors. v. Jagjeet Singh and Ors., JT (2003) 8 SC 40 a three-Judge Bench of this Court while interpreting Rule 34 ofU.P. B Excise Licenses (Tender-cum-Auction) Rules, 1991 vis-a-vis Para 179 of the Excise Manual enforced the right of the liquor vendors as regard remission of fee in tenns thereof. The said decision is, therefore, an authority for the proposition that the rights contained in the statutory rules can be enforced in a given situation. Thus, it cannot said that the licensees have no enforceable C right at all.

The statute lays down that the Acts regulating the trade would be lawful, if done in the manner and to the extent provided by the provisions thereof or any rules, regulations or orders made thereunder. D As the matter has been discussed by B.N. Agrawal, J. in some details, it is not necessary to notice other judgments herein.

APPLICATION OF THE CONSTITUTIONAL PROVISIONS:

Part Ill of the Constitution of India, in general, and Articles 14 and 19, E in particular, not only intend to confer very valuable rights to the citizens but also provides for protection from the legislative and executive vagaries. The legislature as also the executive in terms of the provisions of the Constitution of India must not only act within the constitutional parameters but also act reasonably and in public interest. I may, however, hasten to add that the rights under Articles 14 and 19 are not absolute. Article 19 provides for reasonable restrictions.

What is the meaning of 'reasonable restriction' is the question. Article 19(1)(g) of the Constitution guarantees to all citizens to practice any profession, or to carry on any occupation, trade or business. Clause (6) of Article 19 empowers the State to make laws imposing reasonable restrictions on the exercise of the right in the interest. of general public. Freedom under Article 19(1)(g), however, can be completely curtailed in certain circumstances but it would depend upon the nature of the mischief which is sought to be remedied. For the aforementioned purpose dealing in liquor, trading in dangerous goods as explosives, trafficking in women, tourism, essential H

1048 SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.

A commodities and realisation of tax have been placed in the same category. See Har Shankar v. Dy. Excise Commer. of Taxation (supra), Cooverjee B. Bharucha v. Excise Commissioner, [1954] SCR 873, State of UP v. Synthetics, and Chemical Ltd., [1980] 2 SCC 441, State ofOrissa v. HarinarayanJaiswal [1972] 2 SCC 36, Synthetic and Chemicals Ltd v. State of UP, [1990] l SCC 109 In the matter of Phool Din, AIR 1952 All 491, Narender Kumar v. B Union of India, [1960] 2 SCR 375 MB. Cotton Association v. Union of India, AIR (1954) SC 634 and Hanif Quareshi Mohd v. State of Bihar, [1959] SCR 629.

In Union of India and Anr. v. International Trading Co. & Anr. (2003) C 4 Supreme 114 this Court held:

In Municipal Corporation of the City of Ahmedabad and Ors. v. Jan Mohammed Usmanbhai and Anr., AIR (1986) SC 1205 : [1986] 2 SCR 700, F this court held: "15. Before proceeding to deal with the points urged on behalf of the appellants it will be appropriate to refer to the well-established principles in the construction of the constitutional provisions. When the validity of a law placing restriction on the exercise of a fundamental right in Article 19( I )(g) is challenged, the onus of proving to the satisfaction of the court that the restriction is reasonable lies upon the State. If the law requires that an act which is inherently dangerous, noxious or injurious to the public interest, health or safety or is likely to !)rove a nuisance to the community shall be done under a permit or a licence of an executive authority, it is not per se unreasonable

STATE v. DEVANS MODERN BREWERIES [SINHA. J.] I 049 and no person may claim a licence or a permit to do that act as of right..."

It was observed:

"Where, however, power is entrusted to an administrative agency to grant or withhold a permit or licence in its uncontrolled discretion the law ex facie infringes the fundamental right under Article 19(1 )(g). Imposition of restriction on the exercise of a fundamental right may be in the form of control or prohibition.

"20. The tests of reasonableness have to be viewed in the context of the issues which faced the legislature. In the construction of such laws and in judging their validity, couns must approach the problem from the point of view of furthering the social interest which it is the purpose of the legislation to promote. They are not in these matters functioning in vacuo but as part of society which is trying, by the enacted law, to solve its problems and furthering the moral and material progress of the community as a whole ..." D The matter has also received the attention of a two-Judge Bench of this Court in B.P. Sharma v. Union of India (2003) 6 SCALE 498 wherein this Court upon noticing a catena of decisions observed :

" ... On consideration of a catena of decisions on the point, this Court, E in a case reported in 1998 (8) SCC p.227, MR.F. ltd. v. Inspector, Kerala Government and Ors., has laid certain tests on the basis of which reasonableness of the restriction imposed on exercise of right guaranteed under Article 19(l)(g) can be tested. Speaking for the Court, Saghir Ahmad, J. (as he then was), laid such considerations as follows :

"(!) While considering the reasonableness of the restrictions, the court has to keep in mind the Directive Principles of State Policy.

(2) Restrictions must not be arbitrary or of an excessive nature so as to go beyond the requirement of the interest of the general public.

(3) In order to judge the reasonableness of the restrictions, no abstract or general pattern or a fixed principle can be laid down so as to be of universal application and the same will H

1050 SUPREME COURT REPORTS (2003] SUPP. 5 S.C.R.

A vary from case to case as also with regard to changing conditions, values of human life, social philosophy of the < Constitution, prevailing conditions and the surrounding circumstances.

(4) A just balance has to be struck between the restrictions B imposed and the social control envisaged by clause (6) of Article 19.

(5) Prevailing social values as also social needs which are intended to be satisfied by restrictions have to be borne in mind. See State of U.P. v. Kaushaliya, AIR (1964) SC 416 c [1964] 4 SCR 1002.

(6) There must be a direct and proximate nexus or a reasonable connection between the restrictions imposed and the object sought to be achieved. If there is a direct nexus between the restrictions and the object of the Act, then a D strong presumption in favour of the constitutionality of the Act will naturally arise. See Kavalappara Akottarathil Kochuni v. State of Madras and Kera/a, O.K. Ghosh v. E.X Joseph, AIR (1960) SC 1080 [1960] 3 SCR 887, AIR (1963) SC 812 [1963] Supp (1) SCR 789." E The question has also been considered in Indian Handicrafts Emporium (supra) wherein this Court held :

"In Narender Kumar and Ors. v. Union of India and Ors., [1960] 2 SCR 375, this Court while interpreting the word 'restrictions' held as follows: F "It is reasonable to think that the makers of the Constitution considered the word "restriction" to be sufficiently wide to save laws "inconsistent" with Art. 19(1), or "taking away the rights" conferred by the Article, provided this inconsistency or taking away was reasonable in the interests of the different matters mentioned in the G clause. There can be no doubt therefore that they intended the word "restriction" to include cases of "prohibition" also. The contention that a law prohibiting the exercise of a funda01ental right is in no case saved, cannot therefore be accepted." ,. (See also State ofMaharashtra v. Mumbai Upnagar Gramodyog Sang, H

STATE v. DEV ANS MODERN BREWERIES (SINHA, J.] 1051 [1969] 2 SCR 392). A In Saurabh Chaudhri (supra), V.N. Khare, CJ! speaking for the majority stated:

"Constitutional interpretation is a difficult task. Its concept varies from statute to statute, fact to fact, situation to situation and subject matter to subject matter..."

It was observed:

"...The courts shall all along strive hard for maintaining a balance. • While interpreting the Constitution, we must notice the following view of Justice Holmes expressed in Missouri v. Holland, [252 US 416 (433)] :

"When we are dealing with words that also are a constituent act, like the Constitution of the United States, we mu~t realise that they have called into life a being the development of which could not have been foreseen completely by the most gifted of its begetters. It was enough for them to realise or to hope that they had created an organism, it has taken a century and has cost their successors much sweat and blood to prove that they created a nation. T)ie case before us must be considered in the light of our whole experience and not merely in that of what was said a hundred years ago." E 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 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 F India?

If matters in relation to such trades which are said to be obnoxious in nature, no provisions of the Constitution of India were to be made applicable, where was the need of enacting statutes prohibiting them either in whole or G in part? The Parliament or the State Legislature, it is trite, do not ·make legislation in vacuo. The legislations are not enacted in futility. The legislation ·• are not only to be implemented, their constitutionality must also be judged on the touchstone of Part III and other provisions of the Constitution of India. No short-cut can be adopted to do away therewith. H

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A Concededly restrictions of trade in liquor within the meaning of Article 19( I )(g) of the Constitution of India can be extended to prohibition. Such prohibition may not be permissible in other cases, as noticed hereinbefore. 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 any other provision of the Constitution of India including Article 30 I will not have any application in relation to pernicious or obnoxious trade, the State will not be entitled to issue any prohibitory order in relation thereto. The very fact that this Court in no uncertain terms held that the trade in liquor .~an be prohibited being noxious or pernicious, it implicitly goes 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 Constitution of India which is itself an indication of the fact that there exists a right to carry on the trade in terms of Article 19( I)(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.

E There are decisions of this Court which have held that Article 19(1)(g) will not apply so long as the trade in liquor is prohibited. The Constitution Bench of this Court in Khoday Distilleries (supra) clearly held that a citizen will have no fundamental right to carry on such trade which is illegal and would lead to commission of penal offences. The logical corollary of the said decision would be that a citizen will have a right including a fundamental F right to carry on the said trade or business when the same would not lead to a penal or criminal offence or has not declared the same to be otherwise illegal.

REGULATORY POWER OF THE STATE:

G In Synthetics and Chemicals Ltd. (supra), this Court held:

"76. Balsara case (1951] SCR 682: AIR (1951) SC 318: 52 Cri LJ 1361) dealt with the question of reasonable restriction on medicinal and toilet preparations. In fact, it can safely be said that it impliedly and sub-silentio clearly held that medicinal and toilet preparations H would not fall within the exclusive privilege of the States. If they did

STA TE v. DEV ANS MODERN BREWERIES [SINHA, J.] I053 there was no question of striking down of Section 12(c) and (d) and A Section 13(b) of the Bombay Prohibition Act, 1949 as unreasonable under Article 19(l)(f) of the Constitution because total prohibition of the same would be permissible. In K.K. Naru/a case (K.K. Naru/a v. State ofJ & K, [1967] 3 SCR 50: AIR (1967) SC 1368) it was held that there was right to do business even in potable liquor. It is not B necessary to say whether it is good law or not. But this must be held that the reasoning therein would apply with greater force to industrial alcohol."

(Emphasis Supplied)

Thus, even therein although an occasion had arisen, a Seven-Judge C Bench did not expressly over-rule K.K. Narula but applied the principles laid down therein in case of industrial alcohol.

In Ramana Dayaram Shelly v. The International Airport Authority of India and Ors., AIR (1979) SC 1628 [1979] 3 SCR 1014, this Court held: D " ... We fail to see how the plea of contravention of Article l 9(1)(g) or Article 14 can arise in these cases. The Government's power to sell the exclusive privilege set out in Section 22 was not denied. It was also not disputed that these privileges could be sold by public auction. Public auctions are held to get the best possible price. Once E these aspects are recognised, there appears to be no basis for contending that the owner of the privileges in question who had offered to sell them cannot decline to accept the highest bid if he thinks that the price offered is inadequate.

It will be seen from these observations that the validity of clause (6) p - of the Order dated January 6, 1971 was upheld by this Court on the ground that having regard to the object of holding the auction, namely, to raise revenue, the Government was entitled to reject even the highest bid, if it thought that the price offered was inadequate. The Government was bound to accept the tender of the person who offered the highest amount and if the Government rejected all the bids made at the auction, G it did not involve any violation of Article 14 or 19( 1)(g). This is a self-evident proposition and we do not see how it can be of any assistance to the respondents."

In Har Shankar and Ors. v. Dy. Excise and Taxation Commissioner H

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A (supra), this Court held: " ...The state, under its regulatory powers, has the right to prohibit absolutely every form of activity in relation to intoxicants - its manufacture, storage, export, import, sale and p.ossession. In all their manifestations, these rights are vested in the State and indeed without B such vesting there can be no effective regulation of various forms of activities in relation to intoxicants. In American Jurisprudence'', Volume 30 it is stated that while engaging in liquor traffic is not inherently lawful, nevertheless it is a privilege and not a right, subject to governmental control (page 538). This power of control is an incident of the society's right to self-protection and it rests upon the c right of the state to care for the health, morals and welfare of the people. Liquor traffic is a source of pauperism and crime (pp. 539, 540, 541 )."

In order to determine whether total prohibition would be reasonable the D Court has to balance the direct impact on the fundamental right of the citizens thereby against the greater public or social interest sought to be ensured. Implementation of Directive Principles contained in Part IV is within the expression of restrictions in the interest of the general public. (See also Municipal Corporation ofthe City ofAhmedabad and Ors. v. Jan Mohammeq Usmanbhai and Anr., AIR (1986) SC 1205 : (1986] 2 SCR 700). E In Rustom Cavasjee Cooper and Ors. v. Union of India, AIR (1970) SC 564, the law is stated in the following terms:

" .. .If this be the true view and we think it is, in determining the impact of State action upon constitutional guarantees which are F fundamental, it follows that the extent of protection against impairment of a fundamental right is determined not by the object of the Legislature nor by the form of the action, but by its direct operation upon the individuals rights.

We are of the view that the theory that the object and form of the G State action determine the extent of protection which the aggrieved party may claim is not consistent with the constitutional scheme. Each freedom has different dimensions ..."

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

STATE v. DEVANS MODERN BREWERIES [SINHA, J.] I055 contained in Article 14 of the Constitution of India, there is absolutely no reason as to why Article 30 I will not be applicable.

A I I-Judge Bench of this Court in T.M.A. Pai Foundation (supra), observed:

"The question of whether there is a fundamental right or not cannot be dependent upon whether it can be made the subject-matter of controls."

It is relevant to note that two of the Hon 'ble Judges were parties to Kalyani Stores (supra) as also to Krishna Kumar Narula (supra) which again being a Constitution Bench judgment wherein it has been held that a person has a fundamental right under Article 19( I )(g) to carry on trade or business in liquor. K.K. Narula (supra) has not been overruled. The same holds the field. In that view of the matter, we cannot ignore K.K. Narula (supra).

Furthermore, there exists a distinction between a fundamental right of a citizen to carry on business in noxious or pernicious trade under Article D 19(1 )(g) of the Constitution of India and freedom to carry on such trade through out the country without any hindrance or obstruction except in terms of reasonable regulations which may be made under Article 304(b) of the Constitution of India.

ARTICLE 14 - SOME FACETS OF COUNTRY AND FOREIGN LIQUOR, E DIFFERENCE BETWEEN:

The equality clause contained in Article 14 of the c.onstitution of India recognizes that reasonable classification is permissible. Article i4 has been held to be applicable at all stages for grant of a contract. F It is interesting to note that Rule 39 of the Maharashtra Country Liquor Rules, I973 and Rule 17 of the Maharashta Foreign Liquor (Sale on Cash, Register of Sales etc.) Rules, 1969 prohibits the vendors from selling foreign liquor or the country liquor : G Rule 17 of the Maharashtra Foreign Liquor (Sale on Cash, Register of Sales etc.) Rules, 1969 prescribes that no vendor is to sell foreign liquor to the following class of persons :

* A Police Officer in uniform; * A Prohibition and Excise Officer on duty; H

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A * A Railway servant on duty;

* An insane person; or • A person who is intoxicated.

Rule 39 of the Maharashtra Country Rules, 1973 provides that a retail B licence shall not sell country liquor to the following categories of persons, namely:

* A lunatic insane person; • Person who is in an intoxicated State;

c * Person known or suspected to be participating in any rioting or disturbance of peace; and

* The Armed Forces of the Union, Member of the Police Force, the Prohibition and the Excise Department, State Transport and Railway Department or driver of a motor vehicle, when on duty or in uniform, or both.

The comparison of these two lists reveals that the categories of persons are different for country liquor and foreign liquor. The vendor is not allowed to sell country liquor to certain categories of persons, who are not specified thereunder and whereas Rule 17 of 1969 Rules categories a different list of persons. A vendor can sell foreign liquor to the driver of a vehicle but is prohibited from doing so in respect of country liquor. Foreign liquor can be sold to a railway servant on duty but not country liquor.

In Cooverjee Bharucha v. Excise Commissioner and Chief Commissioner, Ajmer, AIR ( 1954) SC 220 and Harinarayan Jaiswal (supra), F this Court held that the State has exclusive right to sell liquor and to sell the said right. Both rights are, thus, different and distinct. (

REGULATION OF THE TRADE IN RELATION TO FOREIGN LIQUOR:

In State of Bombay v. F.N. Ba/sara, AIR (1951) SC 318, this Court G heta: (i) A provision of law, which provided for permitting certain persons to drink and prohibited certain others from drinking, would not violate Article 14, provided such classification was reasonable.

STATE v. DEV ANS MODERN BREWERIES [SINHA, J.] I057 (ii) Pennitting the use or consumption of foreign liquor among A members of the Military and Naval Officers does not offend Article 14, as the members of such Force could be regarded as a class by themselves, and such classification was reasonable.

(iii) Restrictions, which are imposed for securing the objects, which are enjoined by the Directive Principles of State Policy in the B Constitution, may be regarded as reasonable restrictions within the meaning of clauses (2) and (6) of Article 19 of the Constitution of India.

(iv) When restrictions imposed by a law on the exercise of Fundamental Rights are reasonable in respect of certain items and C unreasonable in respect of certain other items, the law as a whole will not be void when the offending provisions are severable; the provisions of the law imposing unreasonable restrictions alone would be void, and those provisions which impose reasonable restrictions will be valid. D (v) Prohibition of possession, consumption, buying or selling of wines by a law is a reasonable restriction upon the right to "acquire, hold and dispose of property" conferred by Article 19(l)(f) having regard to the Directive Principles in Article 47.

In Fatehchand (supra), also a distinction was made between money- E lending amongst commercial community as integral to trade which was held to be trade and a narrow noxious category of money-lending where there is no flow of trade, no movement of commerce, no promotion of intercourse, no servicing of business, but merely stagnates rural economy, strangulates the borrowing cornmunity and turns malignant in its repercussions. F [Italics is mine for emphasis]

A similar distinction was noticed in Synthetics and Chemicals Ltd v. State of UP., [1990] I SCC 109 in the following terms :

" .. .In other words, excise duty and price for privileges were regarded G as one and the same thing. So-called privilege was reserved by the State mostly in respect of country liquor and not foreign liquor which included denatured spirit."

1058 SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.

A The seven-Judge Bench, therefore, made a distinction between a country liquor and a foreign liquor.

ARTICLE 301:

(A) The Constitutional Assembly Debates: B It is trite that in interpreting constitutional provisions, reference to constitutional debates is permissible. [See T.M.A. Pai Foundation (supra)].

This Article was introduced in its final form by B.R. Ambedkar on 8th September 1949. [See Constitutional Assembly Debates, 8th September, 1949, C Vol. 9, p.1124). Ambedkar's esteemed view was not to make interstate commerce and trade absolutely free. He contemplated a certain amount of legislative restrictions that could be imposed in 'public interest'. While this view was widely supported by T.T. Krishnamachari and Alladi Kuppuswami, it was contested by Pandit Thakur Das Bhargava who advocated several amendments to promote absolute free trade; as well as Dr, P.S. Deshmukh D who felt that a policy should be kept very broad, for the Parliament to fill in the details at the relevant time, for the relevant place.

Realizing the need for some level of State regulation of trade and commerce, in the interest of the public, Dr. B.R. Ambedkar stated: E " .. .it is not the intention to make trade and commerce absolutely free, that is to say, deprive both the Parliament as well as the States of any power to depart from the fundamental provision that trade and commerce... has been made subject to certain limitations which may be imposed by the Parliament or ... the Legislatures of various states subject to the fact that the limitation contained in the power of Parliament to invade the freedom of trade and commerce is confined f to cases arising from scarcity of goods in any part of the territory of India and in the case of states, it must be justified on the grounds of public interest...the action of the states in invading the freedom of trade and commerce in the public interest is also made subject to the condition that any Bill affecting the freedom of trade and commerce shall have previous sanction of the President; otherwise the State would not be in a position to undertake such a legislation ..."

[See Constitutional Assembly Debates, 8th September, 1949, Vol.⁹,pp.1124-25] H

STATE v. DEV ANS MODERN BREWERIES [SINHA, J.) I059 This point of view was supported by T.T. Krishnama.::hari who in reply to the strong stand taken by Pandit Bhargava stated that the entire Chapter provides the maximum possible amount of liberty for trade and commerce. It provides the maximum amount of concession that can be given to maintain consistency with the fature economic improvement of the country. Bijt he strongly emphasized that, "the world has well-nigh come to the position when trade and commerce cannot run without control and some kind of direction by the government." He reafized that the restrictions cannot be whittled down, if there is to be economic progress, when he stated,

"A certain amount of freedom of trade and commerce has to be permitted. No doubt restrictions by the State have to be prevented so that particular idiosyncrasies of some people in power or narrow provincial policies of certain states should not be allowed to come into play and effect the general economy of the country. That I think is amply covered ... certain amount of powers in regard to restriction on trade is necessary and has been provided for." [See Constitutional Assembly Debates, D 8th September, 1949, Vol.⁹,p.1139] He also believed that the State should be given the right and the Centre should only interfere ifthe economic and fiscal policy of the Centre is unduly interfered with. E While justifying why a certain Ieve 1 of restrictions were required, T. T. Krishnamachari drew largely from the Australian experience wherein it was believed that absolute freedom of trade and commerce was running contrary to the purpose of the State and in turn the citizens.

However, in sharp contrast to these views, Pandit Thakur Das Bhargava F wanted interstate trade and commerce to be almost absolutely free. The only restrictions to this absolute freedom would be in emergencies. Any other restrictions would be considered as derogatory to the very concept of freedom. He further wanted the restrictions to be qualified with the term 'reasonable' so as to enable the judiciary to adjudicate upon the reasonableness of the G restrictions in public interest. [See Shiva Rao, B., Supra, p.704]

Taking a slightly tangential position, Dr. P.S. Deshmukh stated that, "Trade and commerce are not things which are decided once and for all; they are things that arise and grow from day to day ... there may be circumstances when the whole thing may have to be revised." He thus advanced the view H

1060 SUPREME COURT REPORTS [2003) SUPP. 5 S.C.R.

A that amendments be made to give Parliament a completely blank cheque and let them determine the policy, bearing in mind the differential levels of advancement in various states.

However, all the amendments proposed to be inflicted on BR Ambedkar's Draft provisions were negatived and the Chapter was passed in its exact form. Thus, the position, as it lies, is to grant the maximum possible freedom of interstate trade and commerce. This is however, subject to a certain level of legislative restrictions in order to ensure that the greater economic interests of the country are not hampered, to make provision for public interest, and to make way in times of emergencies. However, it was the very obvious intent of the Constitutional framers to place only this minimum level of restrictions on the freedom of trade and business. Any restriction, not falling within these categories will be bad in law and will run contrary to the intention behind its presence in the Constitution.

External aids such as the Constitution Assembly Debates are an able guide for discerning the meaning behind a particular provision and in exactly what light their interpretation should take place. The debates in the Constitution Assembly would show how Article 301, on the one hand, is more near the Australian Constitution provisions contained in Sections 92 and 99 and different in material particulars from the American Constitution.

E Sections 92 and 99 of the Australian Constitution along with Section 297 of the Government of India Act, I935 served as a source for Article 30 I. These provisions in the Australian Constitution serve to guarantee an omnibus right of interstate trade and commerce. Being so absolute, they acted as barriers to many measures of economic reform undertaken by the government. F The Commerce Clause in the American Constitution is in sharp contrast. Referred to as the 'dormant' clause it simply states that, "the Congress shall ( have power... to regulate commerce ...among the several states." [See U.S. Constitution, Article I, p.⁸ Cl.³].

G The interpretation of this ambiguous clause has been equally varied. The courts have held that the 'very silence' in these words delimits an implied negative against unduly burdensome or discriminatory state or local interferences with free trade across state lines. [See Tribe, Lawrence H. "Constitutional Choices", p.³⁴]. This was primarily the view taken in Leisy v. Hardin, [See 135 US 100 at pp I 09-110] by Justice Fuller who was in the majority while striking down an Iowa statute prohibiting sale of intoxicating

STATE v. DEVANS MODERN BREWERIES [SINHA, J.] 1061

liquor. He said that, "the Congress' silence with respect to an area of interstate commerce- that i~, its non-enactment of any law either regulating that area or allowing states to do so-indicates its will that such commerce shall be free and untrammelled."

However, the minority did not agree. They read into the silence and inaction precisely the opposite-that Congressional intent that the law shall remain as it had been. [See 135 US at p.160-Gray, J. joined by Justices Harlan and. Brewer].

Thus, as stated by Thomas Powell Reed in an essay in 1938, "The congress has the power to keep silent. The Congress can regulate interstate commerce simply by just not doing anything about it."

State laws in conflict with valid Congressional enactments are inoperative so long as the national legislation remains unchanged. "If the Constitution ... makes the commerce power of the Congress an exclusive one over subjects for which a single uniform rule is preferable, it must be the Constitution that prohibits the states from exercising any kind of commerce power over that type of commerce as it prohibits the states form taxing the first sale of an import before bulk is broken." (See Powell, Thomas Reed, "Vagaries and Varieties in Constitutional Interpretation", p. 156)