SYNTHETICS & CHEMICALS LTD. ETC. v. STATE OF U.P. AND ORS

Citation: [1989] SUPP. 1 S.C.R. 623

Court: Supreme Court of India

Bench: E.S. VENKATARAMIAH, SABYASACHI MUKHERJI, RANGANATH MISRA, G.L. OZA, B.C. RAY, K.N. SINGH, S. NATARAJAN

Case summary

granted immunity to the challenge under Articles 13, 14 and 19 of the Constitution, and under Article 298, trading powetofthe State-must he" recognised, coupled with century old monopoly of the State in alcohol;...

Judgment text

SYNTHETICS & CHEMICALS LTD. ETC. v. STATE OF U. P. AND ORS. OCTOBER 25, 1989 [E. S. VENKATARAMIAH, CJ. , SABYASACHI MUKHARJI, RANGANATH MISRA, G. L. OZA, B. C. RAY, K. N. SINGH AND S. NATARAJAN, JJ. ] CONSTITUTION OF INDIA, l industries in the public interest and for industrial development in general and can render units unviable and sick. In the above background, it is necessary to refer to certain facts and as such it would be appropriate to refer to the facts and contentions in writ petition No. 182/80, i. e. Synthetics & Chemicals Ltd. v. State of U. P. , which is under Art. 32 of the Constitution, filed by M/s. Synthetics & Chemicals Ltd. -a registered Company in Bombay, and one Mr. A. K. Roy, Director and shareholder of the said company. The respondent therein is the State of Uttar Pradesh and the Excise Commissioner, Uttar Pradesh. p In the said writ petition, a notification of the State of Uttar Pradesh, being No.

4840E/XIII-330/79, dated Lucknow May 31, 1979 was made in exercise of the power under sub-section (1) of s. 40 of the U. P. Excise Act, 1910 (hereinafter referred to as 'the U. P. Act') read with clause (d) of sub-section (2) of the said section. However, in order to appreciate the position, we should bear in mind the history of the legislative powers and different lists in the 7th Schedule, regarding impost in respect of industrial alcohol. It appears that local legislatures of Uttar Pradesh had enacted the United Provinces Act, 1910 being Act IV of 1910, and it received the assent of the Governor on 18th December, 1909 and of the Governor-General on 14th Febru~ry, 1910. Before 1920 there was as such no distinct dis- SYNTHETICS CHEMICALS v. STATE OF U. P. IMUKHARJI, J. ] 645 tribution of legislative subjects between the Central Legislature and the State Legislatures.

It appears that the local legislatures enacted with the assent of the Governor-General, Excise Acts imposing duties and r. egulating production, supply and distribution of alcoholic liquors including denatured spirits and methylated spirits. These were done under the Indian Councils Act, 1861 and the Indian Councils Act, 1909. The provisions of the Indian Council Act, 1861 were initially applicable only to the Presidencies of Fort St. George and Bombay, but were later made applicable to other provinces by virtue of the Indian Councils Act, 1892 and 1909.

Section 43 of the Indian Councils Act, 1861 enjoined that it shall not be lawful for the Governor in Council of either of the Presidencies, except with the sanction of the Governor-General, previously com- · municated to him, to make regulations or take into consideration any law or regulation for any of the purposes mentioned therein and one of the purposes, inter alia, mentioned was, anything affecting the public debt of India or the Customs Duties, or any other tax or duty then in force and imposed by the authority of the Govt. of India for the general purposes of such Government. The Government of India Act, 1915 was amended from time to time with a view to consolidate and amend the enactment relating to the Govt. of India. The Governor General-in-Council with the sanction of the Secretary of State-in-Council made Devolution Rules.

Rule 3( 1) thereof provided for distinguishing the functions of the local governments and local legislatures of governors' provinces and of the province of Burma from the functions of the Governor General in Council. It was provided that any matter which is included in the list of provincial subjects set out in Part II of Schedule I of the said Act shall, to the extent of such inclusion, be excluded from any central subject of which, but for such inclusion, it would form part. Part II of the Government of India Act, 1915 provided that any matter which is included in the provincial subjects set out in Part II of Schedule I shall, to the extent of such inclusion be excluded from any central subject of which, but for such inclusion. it would form part. Part II dealt with provincial subjects.

Item 16 of Part II provided as under: "Excise, that is to say, the control of production, manufacture, possession, transport, purchase, and sale of alcholic liquor and intoxicating drugs, and the levying of excise duties and licence fees on or in relation to such articles, but excluding, in the case of opium, control of cultivation, manufacture and sale for export. " It appears that the Govt. of U. P. levied a vend fee on denatured spirit for the first time @ 8 annas per bulk gallon, vide notification dated January 18, 1937 under s. 40(2) of the U. P. Excise Act, 1910. It was levied as a duty. By this notification Rule 17(2} was added which enjoined that in case of issues from a distillery a vend fee of annas 8 per bulk gallon shall be payable in advance before the spirit is issued.

The fee was not made chargeable in case of issues to hospitals, dispensaries and other charitable and educational institutions upto a quantity allowed to be issued by the Excise authorities, and also on the issues for export out of the provinces. Thereafter, on 1st April, 1937 the Govt. of India Act, 1935 came into effect. The federal legislative list in the 7th Schedule to the said Act contained entry 45 which included duties of excise on tobacco and other goods manufactured or produced in India except alcoholic liquors for human consumption. The provincial legislative List being List II of the 7th Schedule. contained entry 31 on intoxicating liquors and narcotic drugs, that is to say, the production, manufacture, possession, transport, purchase and sale of intoxicating liquors, opium and other narcotic drugs, but subject, as respects opium, to certain provisions.

It also included entry 40 which was on duties of excise including, inter alia, all these items and alcoholic liquors, opium, Indian hemp . and medicinal and toilet preparations containing alcohol. It was contended on behalf of M/s Synthetic Chemicals Ltd. that the duties previously levied by the local legislatures continued in force by virtue of s. 143(2) of the Govt. of India Act, 1935 only if these were levied befoe 31st January, 1935, and that only these duties were to be so continued until provisions to the contrary were made by the Federal Legislature. The Constituent Assembly which derived from the people all power and authority, was convened. On 15th August, 1947 the British Parliament passed the Indian Independence Act, 1947 making provisions for the setting up in ! hoia of two independent dominions. Under s.

6( 1) of the said Act, the legislature of each of the new dominions was to have full powers to make laws for that dominion including laws having extra-territorial operations. Under s. 8(2) read withs. 9(1) of the Indian Independence Act, 1947 the Governor General adopted the provisions of the Govt. of India Act, 1935. It appears that on 3rd April, 1948 the Constituent Assembly acting as the Dominion Legislature passed the Indian Power Alcohol Act, 1948 which received the _ass. eat of Governor General on the same day. By this Act. the Central SYNTHETICS CHEMICALS v. STATE OF U. P (MUKHARll, J. ] 647 Government took under its control the Power Alcohol Industry. This was in pursuance of the declaration made by the Dominion Legislature under entry 34 of List I of the 7th Schedule to the Government of India Act, 1935. The entry was: "Development of Industries where development under Dominion oontrol is declared by Dominion Law to be expedient in public interest".

"Power Alcohol" was defined as meaning Ethyle Alcohol containing not less than 95. 5% by volume of Ethanol measured at 60 degree F, corresponding to 74. 4 over proof strength. It may be mentioned that Rectified Spirit is Ethyl Alcohol or Ethanol with 96% alcohol v/v. ON dehydration, Ethyl Alcohol with 99. 5% volume of Ethanol is produced. It was suggested that take over by the Dominion of the potable liquor industry was precluded by virtue of entries 29 & 31 of list II read with entry 34 of list I of the Govt. of India Act, 1935. It may be mentioned that the word 'industries' is the analogous provision in the Stae list under the Constitution of India, 1950, hence, the meaning given to it in that list, must be applied. According to the petitioners/appellants, the expression 'industries' has been given a restricted meaning so as not to entrench on the State's power with respect to other industries specifically assigned to the State under other entries in the State list.

See Calcutta Gas Co. , [1962] Suppl 3 SCR 1. By virtue of the Constitution of India which came into effect from 26th January, 1950 the powers oflegislation in respect of alcohol were distributed between list I and list II of the 7th Schedule to the Constitution. Duties of excise on tobacco and other goods manufactured or produced in India except, inter alia, alcoholic liquors for human consumption, and opium, Indian hemp and other narcotic drugs and narcotics, but including medicinal and toilet preparations containing alcohol or any such substance were given to Parliament under entry 84, list I. But duties of excise on goods manufactured or produced in the State and countervailing duties at the similar rates, inter alia, alcoholic liquors, the State was given power by entry 51 of list II to legislate. By entry 8 of list II, States were given power to legislate on liquors, that is to say production, manufacture, processing, transport, purchase and sale thereof.

On or about 8th May, 1952 the Parliament enacted the Industries (Development & Regulation) Act, 1951. Chapter IIIB of the said Act contains s. 18G whereby the Central Govt. was empowered for securing equitable distribution and availability at fair prices of any article or class of articles relatable to any scheduled industry to provide for ·A regulating the supply and distribution thereof, and trade and commerce therein by a notified order. The notified order was also to provide for controlling the prices 'at which such article or class of articles could be bought or sold. The said Act was amended in 1956. Item 26 was inserted in the First Schedule to the said Act and empowered the Central Govt. to control the Fermentation Industries including alcohol industries. Item 26 was as follows: "26. Fermentation Industries. (1) Alcohol (2) Other products of Fermentation Industries. " The Govt. oflndia issued licences for the manufacture of alcohol based industries.

It is asserted by M/s Synthetics & Chemicals Ltd. that one Tulsidas Kilachand, who had promoted the said Company, was invited by the U . P. Govt. to set up a synthetic rubber factory in the State of Uttar Pradesh. It is stated that the Govt. of Uttar Pradesh assured the said Tulsidas Kilachand of the supplies of alcohol necessary for ·the factory upto 20 million gallons, on payment only of Rs. 7. 50 kilo litre as administrative charges. It is the case of M/s Synthetics & Chemicals that there was no assertion or claim or privilege on behalf of the State Govt. in respect of denatured spirit nor was the said company or its promoters informed that there might be a charge of rental or consideration for parting with any such privilege. On 30th December, 1960 the Govt. of U. P. issued a notification under s. 4(2) of the U. P. Excise Act, 1910 by which all "rectified, perfumed, medicated and denatured spirits wherever made" was included under the definition of 'foreign liqour'.

Thereafter, the said notification was embodied in Rule 12 of the U. P. Excise Rules. On or about 28th November, 1952 the Power Alcohol Authority and Excise Commissioner of U. P. issued an order for allotment of alcohol to M/s Synthetics & Chemicals Ltd. and also provided a condition that "the denatured alcohol meant for supply to M/s Synthetics & Chemicals Ltd. is exempted from payment of vend fee". Paragraph 2 of the said order provided that M/s Synthetics & Chemicals Ltd. shall pay an administrative charge at the rate of Rs. 7. 50 per kilo litre of S¥NTHETICS CHEMICALS v. STATE OF U. P. [MUKHARJI, J. ] 649 denatued alcohol. The denatured alcohol meant for supply to Mis Synthetics & Chemicals Ltd. was exempted from payment of vend fee. It was stipulated that alcohol shall be denatured with 5% Ethyl Ether or 0. 2% crotonaldehyde at distilleries. It appears that in May, 1963 M/s Synthetics & Chemicals Ltd. established a factory in Bareilly.

Industrial alcohol is said to be one of the basic taw-materials for the manufacture of synthetic rubber,. Accordingly, the Govt. of U. P. on or about 30th July, 1963 issued a notification excluding from the levy of vend fee the alcohol issued tc industries engaged in the manufacture of synthetic rubber on terms and conditions the State Government might determine. Rule 17(2) was accordingly modified. On. or about 3rd November, 1972 the Govt. of U. P. issued a notification (being U. P. Excise Third Amendment Rules, 1972) substituting a new rule 17(2) which is now embodied in para 680(2) of the U. P. Excise Manual at p. 201. In the new rule, vend fee@Rs. 1. 10 per bulk litre was imposed on denatured spirit without examining industries engaged in the manufacture of synthetic rubber. Supplies to the hospitals of certain quantity, and exports out of the State were exempted.

In December, 1972 when a demand was raised for payment of the vend fee, it was asserted on behalf of M/s Synthetic & Chemicals that they had to close down their factory, and filed a writ petitior, No. 8069 of 1972 in the Allahabad High Court challenging the validity of the notification dated 30th November, 1972 whereby vend fee on denatured spirit was introduced for the first time. The Division Bench of the Allahabad High Court vide judgment dated 24th March, 1973 struck down the said notification holding that the vend fee could not be justified either as a tax or fee or as excise duty. Relying on the decision of this Court in the case of Nashirwar etc. v. The State of M. P. , [1975] 2 SCR 861 and stating the same in the Preamble to the Act, the U. P. Legislature passed Act No. 5 of 1976 being U. P. Excise Amendment (Re-enactmem and Validation) Act, 1976 inter a/ia, introducing ss. 24A and 24B in the U. P. Excise Act, 1910 and making other amendments with retrospective effect.

Sections 24A and 24B are as follows: "24-A. (1) Subject to the provisions of Section 31, the Excise Commissioner may grant to any person a licence or licence for the exclusive or othe rprivilege: (a) of manufacturing or of supply by wholesale, or of both; or (b) of manufacturing or of supplying by wholesale, or or both and selling by retail; or (c) of selling by wholesale (to wholesale or retail vendors); or (d) of selling by retail at shops (for consumption 'off' the premises only); anyforeign liquor in any locality: (2) The grant of licence or licences under clause (d) of sub-section (1) in relation to any locality shall be without prejudice to the grant of licences for the retail sale of foreign liquor in the same locality in hotels and restaurants for consuruption in their premises.

(3) Where more licences than one are proposed to be granted under clause (d) of sub•section (1) in relation to any locality for the same period advance intimation of the proposal shall be given to the prospective applicants for every such licence. (4) The provisions of section 25, and proviso to section 39 shall apply in relation to grant of a licence for an exclusive or other privilege under this section as they apply in respect of the grant of a licence for.. an exclusive privilege F' under section 24. 24-B.. For the removal of doubts, it is hereby declared: (a) that the State Govt. has an exclusive right or privilege of manufacture and sale of country liquor and foreign liquor; - (b) that the amount described as licence fee in clause (c) of section 41 is in its essence the rental or consideration for the grant of such right or privilege by the State Government; SYNTHETICS CHEMICALS ·v. STATE-OF U. P. (MUKHARJI, J.

] 651 (c) that the Excise Commissioner as the head of the Excise Department of the State shall be deemed while determining or realising such fee, to act for and on behalf of the State Government. " · It is stated that in May, 1976 the State of U. P. filed an appeal against the decision of the Allahabad High Court in writ petition No. 8069 /72; and that between 1976 and 1978, relying on the judgment of the Allahabad High Court certain wholesale dealers in denatured spirit filed writ petitions in the High Court of Allahabad claiming refund of vend fee already paid by them. These writ petitions were heara and allowed by the fearned Single Judge of the Allahabad High Court. Against ! he judgment of the Single Judge, special appeals to a Division Bench were preferred by the State of U. P. and all were allowed on 6th October, 1978, relying upon ss. 24A and 24B of the said Act. In 1976, the State Government issued the U. P.

Licence for the possession of Denatured Spirit and Special Denatured Spirit Rules, 1976 requiring a licence for possession of denatured spirit and specially denatured spirit for industrial purposes. "Special Denatured Spirit" was ··defined as "Spirit rendered unfit for human consumption". Licences for possession of denatured spirit including Specially Denatured Spirit for industrial purposes were to be of 3 kinds, according to tlie parties. (1) Form F. L. 39 for use in industries in which alcohol. is destroyed or converted chemically in the process into other product . and the product does not contain alcohol,, such as Ether, Styrene, Butadiene, Acetone, ,Polythene etc. (2) Form F. L. 40 for use in industries in which alcohol is used only as a solvent or processing agent and the product does nof contain alcohol, whch is generally recovered for re-u~e, such as Cellulose and its derivatives, Pectin etc. (3) Form F. L.

41 for use in industries in which alcohol is used directly or alcohol is used as solvent or vehicle and appears in the final produce to some extent such as Lacquers, Varnishes, Polishes, Adhesives and antifreezers etc. The Allahabad High Court in W. P. No. 8096 of 1972, referred to hereinbefore, held that the State did not have the legislative compe- · tence to impose a tax under entry 8 of list II of the Seventh Sch~dule to the Constitution following the decision of Sheopat Rai & Ors. v. State of U. P. , (1972] All L. J. 1000. The High Court held that the power of regulatio11 does not carry with it the power of taxation and thus vend fee could not be justified. The High Court also held that the levy could not be justified as a fee as there was no quid pro quo. It appears that in view of the judgment of the High Court, a telegram was issued to the distilleries by the Excise Commissioner that vend fee should not be charged from the petitioner.

Instead the State Government resorted to imposition of sales tax. It may be mentioned herein that this decision of the Allahabd High Court was set aside by this Court by a Bench of two judges in State of U. P. v. Synthetics & Chemicals, (supra). In view of the fact that review petition in respect of the same is pending, it may be necessary to refer to the said decision. This Court held that the levy of vend fee is for parting with the exclusive right of the·State with regard to intoxicating liquors and for conferring a right on the licensees to sell such liquors.

A conspectus of the decisions of this Court, according to the said decision, establishes: (i) that there is no fundamental right of a citizen to carry on trade or to do business in liquor because under its police power, the State can enforce public morality, prohibit trade in · noxious or dangerous goods; (ii) the State has power to enforce an absolute prohibition on manufacture or sale of intoxicating liquors pursuant to Article 47 of the Constitution; and (iii) the history of excise laws in the country shows that the State has the exclusive right or privilege to manufacture or sell liquors. Reference was made to the decision of this Court in the State ofBombay & Anr. v. F. N. Balsara, [1951) SCR 682. This Court further held that the term "intoxicating liquor" is~not confined to potable liquor alone but would include all liquors which contain alcohol.

The term "liquor", according to the said decision, used in Abkari Acts not only covers alcoholic liquor which is generally used for beverage purposes and which produces intoxication but would also include liquids containing alcohols. It was further held that the power to regulate the notified industries is not exclusively within the jurisdiction of Parliament as entry 33 in the Concurrent List enables a law to be made regarding production, supply and distribution of products of notified industries. The exclusive power of the State to provide for manufacture, distribution, sale and possession of intoxicating liquors is vested in the State. The power of the State Government to levy a fee for parting with its exclusive right regarding intoxicating liquors has been recognised as could be seen from the various State Acts regulating the manufacture, sale, etc. of intoxicating liquors.

It was further held that the term "foreign liquor" cannot be given a restricted meaning because the word consumption cannot be confined to consumption of_beverages only. When liquor is SYNTI! ETICS CHEMICALS v. STATE OF U. P. [MUKHARJI, J. J 653 put. to any use such as manufacture of other articles. the liquor is all the same consumed. The State is empowered to declare what shall be deemed to be country liquor or foreign liquor. "Foreign liquor" is defined as meaning all rectified, perfumed, medicated and denatured spirit wherever made. Therefore, this Court in that case held that the plea that the Excise Commissioner had no right to accept payment in consideration for the grant of licence for the exclusive privilege for selling in wholesale or retail, foreign liquor which includes denatured spirit cannot be accepted. It was further held that the definition of "alcohol" includes both ordinary as well as specially denatured spirit.

The specially denatured spirit for industrial purposes is different from denatured spirit only because of the difference in the quantity and quality of the denaturants. Specially denatured spirit and ordinary dei;1atured sp. irit are classified according to their use and denaturants used. Therefore, the contention that specially denatured spirit for industrial purposes is different from the ordinary denatured spirit has no force, according to the said decision. Reference was made to the decisions of this Court in Har Shankar & Ors. etc. v. The Dy. Excise f£ Taxation Commissioner & Ors. , [1975] 3 SCR 254. In this connection, it may be necessary to refer to the observations of this Court in Har Shankar & Ors. 's case (supra), where Chandrachud, J, (as the learned Chief Justice then was) stated: "In our opinion, the true position governing dealings in intoxicants is as stated and reflected in the Constitution Bench decision of this Court in the State ofBombay & Anr. v. F. N.

Balsara, [1951] SCR 682, Cooverjee B. Bharucha v. The Excise Commissioner and the Chief Commissioner, Ajmer and Ors. , [1954] SCR 875, State of Assam v. A. M. Kidwai, Commissioner of Hills Division and Appeals, Shi! long, [1957] SCR 295, Nagendra Nath Bora and Anr. v. The Commissioner of Hills Division and Appeals, Assam and Ors. , [1958] SCR 1240, Amar Chandra Chakraborty v. Collector ofExcise, Govt. of Tripura & Ors. , [1973] 1SCR 633 and State of Bombay v. R. M. D. Chamarbaugwala, [1957] SCR 874 as interpreted in State of Orissa & Ors. v. Harinarayan Jaiswal and Ors. , [1972] 3 SCR 784 and Nashirwar etc. v. State of Madhya Pradesh and Ors. Civil Appeals Nos. 17! 1-1721 and 1723 of 1974 decided on November 27, 1974. There is no fundamental right to do trade or business in intoxicants. The State under its regulatory powers, has the right to prohibit absolutely every form of activity in relationto intoxicants-its manufacture, storage, export, import, sale and possession.

" Though most of the cases dealt with the right of the State Government as regards auction of country liquor, in Balsara's case, Nashirwar's case and Har Shankar's case, this Court was concerned with the right of the Stae Government over foreign liquor. After considering all the decisions of five Constitutional Benches, Chandrachud, J. summed up the position at page 274 of the Report in Har Shankar's case (supra) as follows: "These unanimous decisions of five Constitutional Benches uniformly emphasised after a careful consideration of the problem involved that the State has the power to prohibit trades which are injurious to the health and welfare of the public is inherent in the nature of liquor business, that no person has an absolute right to deal in liquor and that all forms of dealings in liquor have, from their inherent nature, been treated as a class by themselves by all civilised communities. '' Review Petition bas been moved by Synthetics & Chemicals Ltd.

which was purchaser or user and not manufacturer or dealer. It is contended that the Synthetics & Chemicals Ltd. were never manufacturers of denatured spirit and they were and have been purchasers of denatured1spirit. Ii 1s contended that this Court in Synthetics & Chemicals Ltd. 's case (supra) had proceeded on the basis that State's privilege is with respect to manufacture or sale of foreign liquor or denatured spirit. It is. contended that they were not liable to pay the vend fee. The judgment '. aforesaid had not dealt with that submission and, therefore, it was claimed that there was an error and that this judgment should be reviewed. It was contended that the fee charged is not a vend fee but fee in respect of licence for possession of denatured spirit. It was cm;itended that the judgment had not held that the purchasers are -. ,G liable to pay vend fee.

The State's appeal should have been dismissed and the petitioner's appeal should have been allowed, it wa; pleaded in the review petition. There was an error, it was contended. It may ',be at the outset made clear that in these matters, we will dispose of the contention whether vend fee is leviable in respect of in_d~strial alcoho,I. If it is so leviable, who should actually pay or from SYNTHETICS CHEMICALS v. STATE OF U. P. [MUKHARJI, J. ] 655 whom the same should be realised, would not be the subject matter of this adjudication. Whether the manufacturer or the purchaser or the user should pay them, must be decided in separate appropriate proceedings, if necessary. =. I', In order to complete the narration of events, however, it may be mentioned that Ordinance No. 6 of 1973 was promulgated by the Government of U. P. purporting to amend the U. P. General Sales Tax Act, 1948 so as to authorise the State Govt. to impose sales tax on alcohol at the rate upto Rs. 2 per litre.

By the said notification, the first schedule to the Act was amended and the new entry read as follows: "Spirits and ',spirituous liquors ot all kinds including the rectified spirit, methyl alcohol and absolute alcohol but excluding denatured spirit and country liquor. " Ordinance 9 of 1974 being the Uttar Pradesh Sales of Motor Spirit & Diesel Oil Taxation {Amendment) Ordinance 1974 was promulgated by the Government of U. P. By virtue of the amendment, the definition of alcohol in section 2 was amended as follows: "(aaa) Alcohol means ethyl alcohol not being alcoholic liquor for human consumption and includes rectified spirit, absolute alcohol. " Notification was issued thereafter by the Government of U. P. in exercise of power under section 3(1) of the U. P. Sales of Motor Spirit and Diesel· Oil Taxation Act 1939. Several other notifications were issued. This Ordinance was struck down Qy the division bench and the Government was made liable to refund.

Writ Petition was filed by Synthetics & Chemicals Ltd. Thereafter, no appeal was filed by the State Government. The other facts are not relevant for the present controversy. There was an application challenging the purchase tax. The State of U. P. filed an appeal against the judgment and order dated 24th March, 1973 of the division bench of the Allahabad High Court in Writ Petition No. 8069/72 striking down the vend fee notification. The ~, appeal was numbered as Civil Appeal No. 1130(NCL}/76. After the . G sales tax levy was struck down the government proposed a purchase tax. Aggrieved by the aforesaid Act, writ petition was filed, and the hearing of the petition had been stayed by the order of this Court. Meanwhile, certain whoiesale dealers in denatured spirit filed writ petitions in the High Court of Judicature at Allahabad, claiming refund of the vend fee paid by them.

Against the judgment of the High Court of Allahabad dated 6th October, 1978, appeals were admitted being Civil Appeal Nos. 2191-98/78. All these have been disposed of by the bench of two learned Judges of this Court, as mentioned hereinbefore. It appears that Kesar Sugar Works Ltd. filed writ petition challenging the validity both of licence fee and vend fee on the ground that the fees charged have all the characteristics of a duty of excise which is beyond the legislative competence of the State and that the alcohol industry is covered by the IDR ,Act. Writ Petition Nos. 4663-4664 of 1978 were also disposed of by the judgment of this Court in Synthetics & Chemicals Ltd. (supra). Notification was issued thereafter by the Government of U. P. in 1979 in exercise of powers under section 40, sub-section (1) of the U. P. Excise Act of 1910, read with clause (d) of sub-section (2) of the said section. amending the U. P. Excise (Amendment) Rules 1979.

By virtue of this amendment, rule 17 was substituted and in the case of FL 39 licence, veno fee. was to be so charged that the amount of vend fee and purchase together did not exceed 25 paise per bulk litre. It is not necessary to set out in detail the exact provisions. Another notification was issued. It was challenged in the High Court. It was kept pending. The o. ther matter herein is writ petition No. 3163-64/82 (All India Alcohol Based Industries Developlment Association v. State of Maharashtra) which challenges the amendment to s. 49 of the Bombay Prohibition Act, 1949. It may be relevant to refer to the said section as amended in 1981. The section is titled "Exclusive privilege of Government to import etc. , intoxicants and fees levied include rent or consideration for grant of such privileges to persons concerned. " In this connection, it is significant to refer to the Statement of Objects for the amendment. The section is as follows: "49.

Notwithstanding anything contained in this Act, the State Government shall have the exclusive right or privilege of importing, exporting, transporting, manufacturing, bottling, selling, buying, ~K>ssessing or using any intoxicant, hemp or toddy, and whenever under this Act or any licence, permit, pass, thereunder any fees are levied and . , collected for any licence, permit, pass, authorisation or other permission given to any person for any such purpose, such fees shall be deemed to include the rent or consideration for the grant of such right or privilege to that person by or on behalf of the State Government. " The power was contained in the Prohibition Act, 1949 which was SYNTHETICS CHEMICALS v. STATE OF U. P. IMUKHARJI, J. ] 657 an Act to amend and consolidate the law relating to the promotion and enforcement of and carrying into effect the policy of prohibition· and also the Abkari law in the State of Bombay.

It may be mentioned that the Bombay Prohibition Act, 1940 was brought into force on 25th May, 1949. Then there was the Bombay Rectified Spirit (Transport-in- Bond) Rules, 1951 brought into force. On 23rd October, 1981 the amendment was made introducing s. 49. The provision of the Andhra Pradesh Act was challenged by impugning the allotment of alcohol under the Andhra Pradesh Excise Act No. XVIlof 1968. The Andhra Pradesh Act receive•; the assent of the President"on 26th August, 1968. This was an Act to consolidate and amend the law relating to production, manufacture, possession, transport, purchase and sale of intoxicating liquors and drugs, the levy of duties of excise and countervailing duties of alcoholic liquor for human consumption and opium, Indian hemp and other narcotic drugs and narcotics and to provide for matters connected therewith in the State of Andhra Pradesh. Writ·Petition No. 1892/73-Hindustan Polymers Ltd. v.

State of Andhra Pradesh challenges the Andhra Pradesh Distillery Rules, 1970 and Andhra Pradesh Rectified Spirit Rules, 1971. The Tamil Nadu Prohibition Act is also challenged in C. A. Nos. 466-67/80 as well as writ petition No. 4501/78. In all these the point is similar and we have hea(d learned counsel and respective Advocate-Generals. Appearing for the petitioners S/Shri Nariman, Diwan, Baig and Banerjee and others have made their submissions. We have also heard Mr. Trivedi, learned Additional Advocate-General of U. P. , Mr. Yogeshwar Prasad, Dr. Singhvi, Mr. Sanghi, learned Advocate Generals of Andhra Pradesh and other States. We had also the advantage of the submissions made by learned Attorney General on behalf of Union oflndia. It was submitted in the statement on behalf of Union of India that the legislative competence of the State enactment in the various States wi!

l have to be determined by reference to following entries in list I of the 7th Schedule-entries 7, 52, 59, 84, 96, 97 & entries in list . - II, being 8, 24, 26, 27, 51-52, 54, 56, 62 and entries in list III 19 & 33. It was urged that there is a dichotomy between entry 84 list I and entry 51 of list II but this would not control the interpretation of othe entries. There is no such dichotomy in entry 8. It has also been stated on behalf of the Union of India that while opium was in entry 19 of list III and entry 59 of list I of the 7th Schedule, it means that Parliament will have power with f<Ogard to opium.. But tbe power to levy excise duty on