TaxTMI 
TaxTMI 
1996 (3) TMI 525
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....xcept for medicinal purposes of intoxicating drinks which are injurious to health; AND WHEREAS there is urgent need in public interest to bring about the prohibition of the sale and consumption of intoxicating liquors except for medicinal, scientific, industrial and such like purposes, in the State of Andhra Pradesh. BE it enacted by the Legislative Assembly of the State of Andhra Pradesh in the Forty-sixth Year of the Republic of India as follows:-" Clause (7) of Section 2 defines the expression "liquor" to include "(a) spirits of wine, denatured spirits, methylated spirits, rectified spirits, wines, beer and every liquid consisting of or containing alcohol; and (b) any other intoxicating substance which the Government may, by notification declare to be liquor for the purposes of this Act, but does not include today". Section 7 is the main provision prohibiting selling, buying and consumption of liquor. It reads: "Prohibition of selling, buying and consumption of liquor. 7. The selling. buying, being in possession and consumption of liquor, otherwise than in accordance with the provisions of this Act, or as the case may be, the Andhra Pradesh Excise Act, 1968, is he....
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....or carried through or into any such local area from the operation of the Act. The remaining provisions in the nature of machinery provision and need not be noticed except Sections 32 and 33. Section 32 excepts certain operations from the purview of the Act. It. reads: "32. Nothing in this Act shall be deemed to preclude,-- (a) the Andhra Pradesh Pradesh Beverages Corporation Limited to carry on trade in liquor in accordance with rules made in this behalf; (b) the buying selling of liquor carried on by the military canteens in the State under any licence granted in accordance with the provisions of the Andhra Pradesh Excise Act, 1963 and the rules made thereunder; and (c) the consumption of medicines containing alcohol." Section 33 confers the rule-making power upon the Government while Section 35 repeals the Ordinance issued in December, 1994. There are a number of industries in the State of Andhra Pradesh engaged in the manufacture of intoxicating liquors. They had taken out D-2 and B-2 licences prescribed by the rules made under the Andhra Pradesh Excise Act, 1968. The period of these licences, we are told, was one year, i.e., financial year. The Government of A....
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....ance with law and subject to the conditions laid down in the letter of the Commissioner of Prohibition and Excise No.9736/95/Ex/J-5 dated May 24, 1995 referred to in the letter of the Commissioner dated June 16, 1995. It was also clarified that the said order shall not preclude the Governor of Andhra Pradesh from issuing an ordinance seeking to amend the Acts if he is so advised with a view to remove the alleged defects pointed out by the Full Bench. On July 18, 1995, the Governor of Andhra Pradesh issued Ordinance No.12 of 1995 amending certain provisions of the Act. Sections 2, 3 and 5 of the Ordinance were given effect from January 16, 1995 (the date of commencement of the Act). Section 2 amended the long title of the Act by including the expression "manufacture" within the ambit of the prohibition envisaged by it. By Section 3, the preamble to the Act was also similarly amended. Section 4 amended the definition of "liquor" contained in clause (7) of Section 2 of the Act . The amended definition reads as follows: "(7). 'Liquor' includes,-- (a) spirits of wine, wine, beer and every liquid consisting of or containing alcohol including Indian liquor and Foreign liquor; ....
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....radesh even for limited local consumption. Even after the Amending Act, learned counsel submitted several classes of persons are exempted from the operation of the Act and their requirements have to be met. Closing down the industries manufacturing liquor in Andhra Pradesh and importing the requirements of the consuming classes (exempted categories) from outside the State is discriminatory and violative of Article 14, he submitted. Sri Ganguly, learned counsel appearing for the petitioner in Writ Petition (C) No. 602 of 1995, submitted that the later decision of the Constitution Bench of this Court in Khoday Distilleries v. State of Karnataka (1995 (1) S.C.C.574) does not altogether rule out the argument that right to trade in intoxicating liquors is within the ambit of Article 19(1)(g). The learned counsel reiterated the submissions of Sri Desai in other respects. Sri Rohinton F.Nariman, learned counsel appearing for the petitioner in Writ Petition (C) No.593 of 1995, laid stress upon the provisions contained in clauses (1), (2) and (3) of Article 246 of the Constitution and submitted that the power of the State Legislature to make a law with reference to matters enumerated in ....
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....erised as constituting the ratio of the said decision. They cannot be understood as decisions on those issues since those issues were not in controversy before the court nor were the parties at issue thereon. He referred to certain later decisions of this Court to indicate how they have understood the decision in Synthetics and Chemicals Limited. Learned counsel submitted that the decisions of this Court in Harshankar v. Deputy Excise and Taxation Commission (1975 (3) S.C.R.254) and Khoday Distilleries conclusively lay down that no citizen of this country has a fundamental right to trade in liquor. Once they have no such right, the learned counsel submitted, writ petition under Article 32 of the Constitution, which lies only to enforce a fundamental right, is misconceived. Learned counsel also disputed the correctness of the petitions' submissions based upon Article 14. P A R T - II Part XI of the Constitution deals with relations between the Union and the States. Chapter-I in this Part bears the heading "Legislative Relations: Distribution of Legislative Powers". Clause (1) of Article 245 declares that "subject to the provisions of this Constitution, Parliament may make law....
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....to the State enactment or later, the State enactment shall to the extent of repugnancy be void. If, however , the State enactment is reserved for and received the assent of the President, such law will prevail in that State notwithstanding its repugnancy with a Parliamentary enactment. After considering the aforesaid provisions and the scheme of the Constitution a nine-Judge Bench of this Court in S.R.Bommai & Qrs. v. Union of India (1994 (3) S.C.C.1) has opined that within the sphere allotted to States, they are supreme. It has been repeatedly pointed out by this Court and the Federal Court (dealing with a similar distribution of legislative powers among the Centre and the provinces under the Government of India Act, 1935) that the several entries in the three Lists in the Seventh Schedule are mere legislative heads and that it is quite likely that very often they overlap. Wherever such a situation arises, lt is held, the issue must be solved by applying the rule of pith and substance. As explained by T.L. Venkatarama Iyer,J. in A.S.Krishna & Ors. v. State of Madras (1957 S.C.R.399): "It must be remembered that we are construing a federal Constitution. It is of the essenc....
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....that this very principle was enunciated by the Federal Court in Subramanyan Chettiar v. Muttudesmi Gaundan (1940 F.C.R. 188) and by the Privy Council in prafulla Kumar v. Bank of Commerce Ltd. (A.I.R 1947 P.C.60) wherein the statement of law in Subramanyan Chettiar was endorsed in full. Sri Sorabjee invited our attention to the decision of the Federal Court in Bhola Prasad v. The King-Emporer (1940 F.C.R.17) where it was held that the power to legislate "with respect to intoxicating liquors conferred upon the Provincial Legislature by Entry 31 in the Provincial Legislative List includes a power to prohibit intoxicating ligours throughout the province or any specified part of province unless the meaning of the words used is restricted or controlled by the context or by other provisions in the Act." Learned counsel also invited our attention to another decision of the Federal Court in Miss Kishori Shetty v. The King (1949 F.C.R.650). The appellant was charged for being in possession of a certain quantity of foreign liquor/whisky in excess of the limit provided under the notification issued under Section 14B of the Bombay Abkari Act. The appellant contended that Section 148 inso....
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....uors, that is to say, the production, manufacture, possession, transport, purchase and sale of intoxicating liquors. 6. Public health and sanitation; hospitals and dispensaries. 24. Industries subject to the provisions of Entries 7 and 52 of List I. 51. Duties of excise on the following goods manufactured or produced 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 not including medicinal and toilet preparations containing alcohol or any substance included in sub-paragraph (b) of this entry." Entries 52 and 7 in list-I may now be set out. They read: "52. Industries, the control of which by the Union is declared by Parliament by law to be expedient in the public interest. 7. Industries declared by Parliament by law to be necessary for the purpose of defence or for the prosecution of war." Entry 33 in List-III was substituted by the Constitution IIIrd (Amendment) Act, 1954. The background to this entry is explained by this Court in Ch.Tika Ramji & Ors.etc. v. State of U....
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....say in the matter; the State Legislature is incompetent to prohibit manufacture of intoxicating liquors. But this argument, in our opinion, ignores the existence and the ambit of Entry 8 in List-II. Entry 8 expressly speaks of production, manufacture, possession, transport, purchase and sale of intoxicating liquors. It means that the power to make a law with respect to said matters rests with the State Legislature. What is significant is that the entry speaks expressly of production and manufacture of intoxicating liquors as well. This would mean that the industries producing and manufacturing intoxicating liquors fall within the purview of Entry 8. In other words, we must first carve out the respective fields of Entry 24 and Entry 8 in List- II. Entry 24 is a general entry relation to industries whereas Entry 8 is a specific and special entry relating inter alia to industries engaged in production and manufacture of intoxication liquors. Applying the well-known rule of interpretation applicable to such a situation (special excludes the general). we must hold that the industries engaged in production and manufacture of intoxication liquors o not fall within Entry 24 but do fall wit....
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....ption, as we shall presently point outs is without a basis and unacceptable, Moreover, industries which are exempted from the I.D.R. Act are exempted because of the very provisions of the I.D.R. Act- and not by virtue of Entry 8 in List-II. The ambit and scope of a constitutional entry cannot be determined with reference to a Parliamentary enactment. The definition of "factory" in clause (c) of Section 3 of the I.D.R. Act may be changed tomorrow. The meaning and scope of Entry 8 in List-II does not and cannot vary with the change in the provisions of the I.D.R. Act. This submission too is, therefore, unacceptable. It was then contended that Entry 52 in List-I governs not only Entry 24 in List-II but all other entries in List-II including Entry 8 insofar as it deals with industries. We cannot accept this submission either. A perusal of List-II would show n that whenever a particular entry was intended to be made subject to an entry in List-I or List-III, it has been so stated specifically. Not one but several entries in List-II are made subject to one or the other entry in List-I or List-III. [See Entries 2,3,17,22, 23,26,27 and 33]. Certain other entries use a different phraseology....
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.... particular, they rely upon the following observations in Para 85 of the opinion of Sabyasachi Mukharji,J., rendered on behalf of six learned Judges: "After the 1956 amendment to the IDR Act bringing alcohol industries (under fermentation industries) as Item 26 of theFirst Schedule to IDR Act the control of this industry hasvested exclusively in the Union. Thereafter, licences to manufacture both potable and non-potable alcohol is vested in the Central Government. Distilleries are manufacturing alcohol under the central licences under IDR Act. No privilege for manufacture even if one existed, has been transferred to the distilleries by the State. The State cannot itself manufacture industrial alcohol without the permission of the Central Government. The States cannot claim to pass a right which they do not possess. Nor can the States claim exclusive right to produce and manufacture industrial alcohol which are manufactured under the grant of licence from the Central Government. Industrial alcohol cannot upon coming into existence under such grant be amenable to States' claim of exclusive possession of privilege. The State can neither rely on Entry 8 of List II nor Entr....
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....relation to intoxicants = its manufacture, storage, export, import, sale and possession,' (Emphasis added) 29.Though most of the cases dealt with the right of the State Government as regard auction of country liquor, in Balsara case, Nashirwar case and Har Shankar case, this Court was concerned with the right of the State 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 case as follows: (SCC p.755, para 47) 'These unanimous decisions of five Constitution Benches uniformly emphasized 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, that elimination and exclusion from business is inherent in the nature of liquor by 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 all civilized communities." (Emphasis added) Reference may also be had in this behalf to Para 74 of the Judgment. Towards the end of the para, M....
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....ed enactment is within the four corners of Entry 8 read with Entry 6, no central law whether made with reference to an entry in List-I or with reference to an entry in List-III can affect the validity of such State enactment. The argument of occupied field is totally out of place in such a context. If a particular matter is within the exclusive competence of the State legislature, i.e., in List-II that represents the prohibited field for the Union. Similarly, if any matter is within the exclusive competence of the Union, it becomes a prohibited field for the States. The concept of occupied field ss really relevant in the case of laws made with reference to entries in List-III. In other words, whenever a piece of legislation is said to be beyond the legislative competence of a State Legislature, what one must do is to find outs by applying the rule of pith and substances whether that legislation falls within any of the entries in List II. If it does no further question arises; the attack upon the ground of legislative competence shall fail. It cannot be that even in such a case, Article 246(3) can be employed to invalidate the legislation on the ground of legislative incompetence of....
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....vant entries in the Seventh Schedule to the Constitution [including Entries 7 and 52 in List I and Entries 24 to 27 in List-II7 and the principles governing the interpretation of the entries in the Seventh Schedule, the Court indicated that the matter was susceptible of three possible constructions, viz., "(1) entry 24 of List II,which provides for industries, generally, covers the industrial aspect of gas and gas works leaving entry 25 to provide for other aspects of gas and gas-works; (2) entry 24 provides generally for industries, and entry 25 carves out of it the specific industry of gas and gas-works, with the result that the industry of gas and gas works, is excluded from entry 24; and (3) the industry of gas and gas-works falls under both the entries, that is, there is a real overlapping of the said entries." The Court opined that having regard to the well-settled principles relating to interpretation of these entries, that interpretation which reconciles and harmonises the contending entries should be adopted and held thus: "Entry 24 in List II in its widest amplitude takes in all industries, including that of gas and gas- works. So too, entry 25 of the said List compreh....
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....in List-II. While Entry 25 merely speaks of "gas and gas-works"*, Entry 8 expressly speaks of production and manufacture besides possession, transport, purchase and sale of intoxicating liquors. The ratio of the Calcutta Gas Company fully supports our conclusion that the industries engaged in the production and manufacture of intoxicating liquors are outside the purview of Entry 24 and fall squarely within Entry 8 in *Perhaps, it is appropriate to point out in the interest of avoiding any misunderstanding that Entry 35 of List-II should be read with Entry 53 of List-I, which reads: "53. Regulation and development of oilfields and mineral oil resources; petroleum and petroleum products; other liquids and substances declared by Parliament by law to be expedient in the public interest." Not only mineral gases fall under Entry 53 in List-I, the words 'gas works" also have to be properly understood. In short, both the said entries have to be read harmoniously and their respective fields delineated properly. List-II and that Entry 52 in List-I does not over-ride or impinge upon Entry 8 in List-II. According to this decision, the expression "industry" in both Entry 24 in List-II....
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....We do not think that any such argument can be built upon the said observations. In clause (e), the Bench held, a monopoly in the State or its agency can be created "under Article 19(6) or even otherwise". Similarly, in clause (f), while speaking of imposition of restrictions and limitations on this business, it held that they can be imposed "both under Article 19(6) or otherwise". The said words cannot be read as militating against the express propositions enunciated in clauses (b), (c), said summary. The said decision, as a matter of fact, emphatically reiterates the holding in Har Shankar that a citizen has no fundamental right to trade in intoxicating liquors. In this view of the matter, any argument based upon Article 19(1)(g) is out of place. For the sake of completeness, and without prejudice to the above holding, we may examine the alternate line of thought. In Cooverjee Bharucha, a Constitution Bench of this Court with the opinion of whole-hearted concurrence in (34 L.Ed.620) to the effect that: "There is no inherent right in a citizen to thus sell intoxicating liquors by retail; it is not a privilege of a citizen of the State or of a citizen of the United States. As it ....
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....sing prohibition is to achieve the directive principle adumbrated in Article 47. Such a course merits to be treated as a reasonable restriction within the meaning of clause (6) of Article 19. Thus, whichever line of thought one adopts, the result is that the prohibition of manufacture, production, consumption and sale of intoxicating drinks brought about by the Act (as amended by the Andhra Pradesh Act 35 of 1995) is perfectly valid and beyond challenge. CHALLENGE BASED ON ARTICLE 14: The attack on the amending Act based on Article 14 was mounted on several grounds. Sri Rohinton Nariman submitted that inasmuch as a large number of persons falling within the exempted categories are allowed to consume intoxicating liquors in the State of Andhra Pradesh, the total prohibition of manufacture and production of these liquors is "arbitrary" and the amending Act is liable to be struck down on this ground alone. Support for this proposition is sought from a judgment of this Court in State of Tamil Nadu & Ors. v. Ananthi Ammal & Ors. (1995 (1) S.C.C.519). Before, however, we refer to the holding in ourselves of certain basic propositions in this behalf. In the United Kingdom, the....
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....and rather indiscriminately - an expression of inherently imprecise import. The extensive use of this expression, in India reminds one of what Frankfurter,J. said in Attil Mac Tiller v. Atlantic Coast - line Ranbroad Company (87 L.Ed. 610). "The phrase begins life as a literary expression; its felicity leads to its lazy repetition and repetition soon establishes it as a legal formula, undiscriminatingly used to express different and sometimes contradictory idea", said the learned Judge. enactment cannot be struck down on the ground that Court thinks it unjustified. The Parliament and the Legislatures, composed as they are of the representatives of the people, are supposed to know and be aware of the needs of the people and what is good and bad for them. The Court cannot sit in judgment over their wisdom. In this connection, it should be remembered that even in the case of administrative action, the scope of judicial review is limited to three grounds, viz., (i) unreasonableness, which can more appropriately be called irrationality, (ii) illegality and (iii) procedural impropriety [See Council of Civil Services Union v. Minister for the Services (1985 A.C.374) which decision has bee....
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....adu Act were contrasted with the provision of the Land Acquisition Act and ultimately it was found that Section 11 insofar as it provided for payment of compensation in instalments was invalid. The ground of invalidation is clearly one of discrimination. It must be remembered that an Act which is discriminatory is liable to be labelled as arbitrary. It is in this sense that the expression "arbitrary" was used in Para-7. Reference was then made by Sri G.Ramaswamy to the decision in Mithu v. Union of India (1983 (2) S.C.C. 27) wherein Section 303 of the Indian Penal code was struck down. But that decision turned mainly on Article 21 though Article 14 is also referred to along with Article 21. Not only did the offending provision exclude any scope for application of judicial discretion, it also deprived the accused of the procedural safeguards contained in Sections 235(2) and 354(3) of the Criminal Procedure Code. The ratio of the said decision is thus of no assistance to the petitioners herein. We make it clear that the above discussion is confined to an Act made by the Legislature. We express no opinion insofar as delegated legislation is concerned. Learned counsel for the petiti....
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.... this Court in the matter of nationalization of bus routes [C.S.Rewji v. State of Andhra Pradesh (1964 S.C.R.330]. Counsel for the petitioners complained of discrimination in the matter of providing exemptions. It is complained that there is no justification in providing for grant of permits to "companies, corporations, institutions, industrialists, exporters, importers and similar such functionaries as may be notified" for entertaining not only foreigners and N.R.Is. but also persons from outside the State of Andhra Pradesh in connection with their business. Similar criticism is levelled against certain other clauses in Section 15 as well. We are of the opinion that this argument is not open to manufacturers of intoxicating liquors like the petitioners. It would be a different matter if any person affected by such discriminatory treatment complains of the same. The petitioners at any rate cannot be heard to complain of the same. We decline to entertain this argument. We express no opinion thereon. It was suggested in parting that the policy of prohibition is a difficult one to enforce, that though laudable in principles it gives rise to several other ills and so on. We need not ex....