Legislature upholds validating law confirming wholesale-to-retailer pricing and recovery including 0.70 paise warehouse maintenance component

SC allowed the appeals and set aside the High Court judgment, upholding the Bihar Excise (Amendment and Validating) Act, 1995 as constitutional and effective. The Act was held merely to validate prior orders fixing wholesale-to-retailer prices and their break-up, including a 0.70 paise warehouse maintenance component, and to provide statutory sanction for recovery. The court found the distilleries had accepted the Commissioner's letter and supplies were made accordingly. The Legislature had competence to enact the Act and the broad claim of arbitrariness or violation of fundamental rights was rejected.

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Issues Involved:

1. Regulation and price fixation of country liquor in Bihar.
2. Validity of the Bihar Excise (Amendment and Validating) Act, 1995.
3. Deduction of warehouse maintenance charges from the cost price of country liquor.
4. Legislative competence and constitutionality of the Amending Act.

Detailed Analysis:

1. Regulation and Price Fixation of Country Liquor in Bihar:

The distribution and sale of country liquor in Bihar are governed by the Bihar Excise Act, 1915, and related rules. Initially, a two-tier system was in place where wholesale dealers supplied liquor to retailers, with prices fixed either statutorily or through negotiations. In 1989, writ petitions led to the Patna High Court directing the State to supply liquor directly to retailers, a practice that continued until March 31, 1992. On December 15, 1989, a meeting between Excise Officers and distillery representatives led to a new cost price of Rs.3.42 per L.P.L. being agreed upon, which included various components like maintenance charges for warehouses.

2. Validity of the Bihar Excise (Amendment and Validating) Act, 1995:

Following the High Court's judgment quashing the Excise Commissioner's orders on price fixation, the Bihar government enacted the Bihar Excise (Amendment and Validating) Act, 1995, to provide statutory backing to the price fixation and the deduction of maintenance charges. The Amending Act was given retrospective effect from February 20, 1990. The High Court, however, allowed writ petitions challenging the validity of this Act, stating that it did not apply to manufacturers of rectified spirit but only to country liquor.

3. Deduction of Warehouse Maintenance Charges from the Cost Price of Country Liquor:

The Excise Commissioner, on February 19, 1990, fixed the cost price of country liquor at Rs.3.42 per L.P.L., including Rs.0.70 for warehouse maintenance. This was communicated to all relevant officials and distilleries. However, on July 26, 1990, the Commissioner directed the deduction of Rs.0.70 per L.P.L. for maintenance from the cost price. Distilleries contested this deduction, arguing that they were entitled to the full Rs.3.42 per L.P.L. as initially fixed, and that the maintenance of warehouses was the State's responsibility.

4. Legislative Competence and Constitutionality of the Amending Act:

The Supreme Court emphasized the presumption of constitutionality of legislative enactments. The Amending Act, by providing statutory backing to the price fixation and deductions, was within the legislative competence of the Bihar Legislature. The Court criticized the High Court for not appreciating the legislative intent and purpose, which was clearly outlined in the Preamble of the Amending Act. The Court held that the Amending Act did not violate any constitutional provisions and was not arbitrary.

Conclusion:

The Supreme Court allowed the appeals, setting aside the High Court's judgment, and upheld the validity of the Bihar Excise (Amendment and Validating) Act, 1995. The Court declared that the Act was neither unconstitutional nor ineffective in achieving its objectives. The writ petitions filed by the respondents were dismissed.

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