TaxTMI 
TaxTMI 
1951 (5) TMI 3
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....ordering them (1) to allow him to exercise his right to possess, consume and use certain articles, namely, whisky, brandy, wine, beer, medicated wine, eau-de-cologne, etc., and to import and export across the Customs frontier and to purchase, possess, consume and use any stock of foreign liquor, eau-de-cologne, lavender water, medicated wines and medicinal preparations containing alcohol, and (2) to forbear from interfering with his right to possess these articles and to take no steps or proceedings against him, penal or otherwise, under the Act. The petitioner also prayed for a similar order under section 45 of the Specific Relief Act against the respondents. The High Court, agreeing with some of the petitioner's contentions and disagreeing with others, declared some of the provisions of the Act to be invalid and the rest to be valid. Both the State of Bombay and the petitioner, being dissatisfied with the judgment of the High Court, have appealed to this Court after obtaining a certificate from the High Court under article 132(1) of the Constitution. The Act in question was passed by the Legislature of the Province of Bombay as it was constituted in 1949, and was published....
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....elates to "control, regulation and exemptions ", and contains inter alia sections 30 to 38 and section 44 which provide for cases in which licenses for the manufacture, export, import, transport, sale or possession of liquor may be granted; section 39, which authorises the Government to permit the use or consumption of foreign liquor on cargo boats, warships, troopships and in military and naval messes and canteens; section 40, which provides for the grant of permits for the use or consumption of foreign liquor to persons whose health would be seriously and permanently affected if they were not permitted to use or consume such liquor and to foreigners who do not intend to stay permanently in India; section 41, which enables special permits to be granted to diplomats and foreign sovereigns; section 45, which authorises use of liquor for sacramental purposes; section 52, which empowers an authorized officer to grant licenses, permits, etc., in cases not specifically provided for; section 53, which deals with the form in which and the conditions under which licenses, etc., may be granted; and section 54 which provides for the cancellation or suspension of licenses and permits. The oth....
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....iquor Rules and Notifications Nos. 10484/45 (c) and 2843/49 (a), dated the 30th March, 1950, invalid. It further held that the word"addict" in the medical certificate was not warranted by the provisions of the Act. The two important questions which this Court is called upon to decide in these appeals are :-- (1) whether there are sufficient grounds for declaring the whole Act to be invalid; and (2) to what extent the judgment of the High Court can be upheld with regard to the specific provisions of the Act which have been declared by it to be void. It seems to me that it will be convenient to deal in the first instance with the argument assailing the validity of the Act as a whole, which is based on three grounds, these being :-(1) that the law is an encroachment on the field which has been assigned exclusively to the Central Legislature under entry 19 of List I; (2) that some of the material provisions of the Act interfere with or are calculated to interfere with interState trade and commerce and as such transgress the provisions of section 297 of the Government of India Act, 1935 ;and (3) that the High Court having 'held a number of material provisions to be void,....
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.... consideration is that "import" does not end with mere landing of the goods on the shore or their arrival in the customs house, but it implies that the imported goods must reach the hands of the importer and he should be able to possess them. On this basis, it is contended that there is no difference in effect between a power to prohibit the possession and sale of an article and a power to prohibit its import or introduction into the country, since the one would be a necessary consequence of the other. This contention is based upon some American cases to which I shall refer later, but it may be stated at once that the point which is raised in this case is precisely the point which was raised and negatived in Miss Kishori Sherry v. The King ([1949] F.C.R. 6S0). In that case, the appellant had been convicted under section 14-B of the Bombay Abkari Act, 1878, as amended by the Bombay Abkari (Amendment) Act, 1947, for having in her possession a certain quantity of foreign liquor in excess of the limit prescribed by a notification issued under the following provision of the Act :- "14-B (2) ......... the Provincial Governme....
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....iquors into British India by sea or land" Since the enactment of the Government of India Act, 1935, there have been several cases in which the principles which govern the interpretation of the Legislative Lists have been laid down. One of these principles is that none of the items in each List is to be read in a narrow or restricted sense(1). The second principle is that where there is a seeming conflict between an entry in List II and an entry in List I, an attempt should be made to see whether the two entries cannot be reconciled so as to avoid a conflict of jurisdiction. This principle has been stressed in a number of cases by the Federal Court as well as by the Privy Council.. In In re The Central Provinces and Berar Act No. XIV of 1938(2), the question arose as to whether a tax on the sale of motor spirits was a tax on the sale of goods within entry 48 of the Provincial List or a duty of excise within entry 45 of the Federal List. Dealing with the difficulty which arose in that case, Gwyer C.J. observed as follows :-- "Only in the Indian Constitution Act can the particular problem arise which ....
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....mported. There is thus no real conflict between entry 31 of List II and entry 19 of List I, and I find it difficult to hold that the Bombay Prohibition Act in so far as it purports to restrict possession, use and sale of foreign liquor. is an encroachment on the field assigned to the Federal Legislature under entry 19 of List I. There is also another way of dealing with the contention raised before us. It is well settled that the validity of an Act is not affected if it incidentally trenches on matters outside the authorised field, and therefore it is necessary to inquire in each case what is the pith and substance of the Act impugned. If the Act, when so viewed, substantially falls within the powers expressly conferred upon the Legislature which enacted it, then it cannot be held to be invalid, merely because it incidentally encroaches on matters which have been assigned to another legislature. This was emphasised very clearly in Gallagher v. Lynn(1) in these words :- "It is well established that you are to look at the `true nature and character of the legislation ': Russell v. The Queen the pith an....
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....Miss Kishori Shetty v. The King( in the following passage :-- "It may be that a general adoption of the policy of prohibition by the Provinces will lead to a fall in the import of foreign liquors and to a consequential diminution of the Central customs revenue, but where the Constitution Act has given to the Provinces legislative power with respect to a certain matter in clear and unambiguous terms, the Court should not deny it to them or impose limitations on its exercise, on such extraneous considerations. It is now well settled that if an enactment according to its true nature, its pith and substance, clearly falls within one of the matters assigned to the Provincial Legislature, it is valid notwithstanding its incidental encroachment on a Federal subject." The short question therefore to be asked is whether the impugned Act is in pith and substance a law relating to possession and sale etc. of intoxicating liquors or whether it relates to import and export of intoxicating liquors. If the true nature and character of the legislation or its pith and substance is not import and export of intoxicating liquor b....
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...., but to authorise the importer to sell." Upon principles so stated, what is known as the "original package" doctrine was evolved in America, which was applied not only to commodities imported from foreign countries but also to commodities which were the subject of inter-state commerce. This doctrine laid down that importation was not over so long as the goods were in the original package and hence a State had no power to tax imports until the original package was broken or there was one sale while the goods were still in the original package. The principle upon which this doctrine was founded is explained by Marshall C.J. in the case referred to in these words:" There must be a point of time when the prohibition ceases, and the power of the State to tax commences;we cannot admit that this point of time is the instant that the articles enter the country ...It is sufficient for the present to say, generally, that when the importer has so acted upon the thing imported that it has become incorporated and mixed up with the mass of property in the country, it has, perhaps, lost its distinctive character as an import, and has become subject to the taxing power of the State; but while ....
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....ith the power to authorise the sale of the thing imported ? Congress has a right, not only to authorise importation, but to authorize the importer to sell...What does the importer purchase, if he does not purchase the privilege to sell?" On this view of the Commerce Clause, it would indeed be difficult to recognize the right of the State to impose a tax upon the first sale of the commodity, at any rate so long as it remained in the importer's hands. In the Indian Constitution Act no such question arises; and the right of the provincial Legislature to levy a tax on sales can be considered without any reference to so formidable a power vested in the Central Government. Lastly, the prohibition in the American Constitution is against the laying of "any imposts or duties on imports or exports "the prohibition is not merely against the laying of duties of customs, but is expressed in what we conceive to be far wider terms; and it does not appear to us that it would necessarily follow from the principle of the Maryland decision that in India the payment of customs duty on goods imported from abroad or the payment of an excise duty on goods manufactured or produced in India can be rega....
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.... a Province of goods of any class or description cannot be prohibited or restricted on the ground that it will affect, trade and commerce within the Province or the production, supply and distribution of commodities. If therefore by any law framed by a Provincial Legislature relating to or based on the subjects of entry 27 or entry 29 of List II, the entry into or export from the Province of any goods is prohibited or restricted, such a law will be invalid. But, here, we are concerned not with a law which purports to be made and was made by virtue of entry 27 or entry 29 of List I1, but a law which is claimed to have been made and was made by virtue of entry 31 of that List and certain other entries therein. Section 297 (1) (a) therefore has no application to the present case. This was clearly pointed out in the case of Bhola Prasad v. King Emperor(1). In that case, the Bihar Excise (Amendment) Act, 1940, which amended the Bihar and Orissa Excise Act, 1915, was challenged as contravening section 297 (1) (a), but it was held to be a valid Act on grounds already stated, as will. appear from the following observations of Gwyer C.J. :"The second point-raised on behalf of the appellant ....
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....ly strongly challenged on the other before us, and I therefore proceed to deal with the question at some length. In the Oxford English Dictionary, edited by James Murray, several meanings are given to the word "liquor", of which the following may be quoted:- Liquor... 1. A liquid; matter in a liquid state; in wider sense a fluid. 2. A liquid or a prepared solution used as a wash or bath, and in many processes in the industrial arts. 3. Liquid for drinking; beverage, drink. Now almost exclusively a drink produced by fermentation or distillation. Malt liquor, liquor brewed from malt; ale, beer, porter etc. 4. The water in which meat has been boiled; broth,' sauce; the fat in which bacon, fish or the like has been fried; the liquid contained in oysters. 5The liquid produced by infusion (in testing the quality of a tea). In liquor, in the state of an infusion. 704 Thus, according to the Dictionary, the word 'liquor' may have a general meaning in the sense of a liquid, or it may have a special meaning, which is the third meaning assigned to it in the extract quoted, above, viz. a drink or beverage produced by fermentation or distillation. The latter is u....
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....ds, or preparations made with spirits." It was contended before us that the definition of the word "spirits" in the Spirits Act should not be imported in the Act of 1910, but in our view for the purpose of understanding the definition of 'intoxicating liquor', the two Acts should be read together. I do not suggest that the definition of "liquor" in the present Act was borrowed from those Acts, but I am only trying to show that the word 'liquor' is capable of being used in a wide sense. Coming now to the various definitions given in the Indian Acts, I may refer in the first instance to the Bombay Abkari Act of 1878 as amended by subsequent Acts, where the definition is substantially the same as in the Act with which we are concerned. In the Bengal Excise Act, 1909, "liquor, is said to mean 'liquid consisting of or containing alcohol' and includes spirits of wine, spirit, wine, tari pachwai, beer, and any substance which the Provincial Government may ...... declare to be liquor for the purposes of the Act." In several other Provincial Acts, e.g., the Punjab Excise Act, 1914, the U.P. Excise Act, 1910, "liquor" is used as meaning intoxicating liquor and as i....
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....prohibition effectively the wider definition of the word "liquor" would have to be adopted so as to include all alcoholic liquids which may be used as substitutes for intoxicating drinks, to the detriment of health. On the whole, I am unable to agree with the High Court's finding, and hold that the definition of "liquor" i,2 the Bombay Prohibition Act is not ultra vires. The learned Attorney-General also relied upon entry 1 of List II which relates among other items to "public' order", and though at first sight it may appear to be far-fetched to bring the subject of intoxicating liquor under "public order", yet it should be noted that there has been a tendency in Europe and America to regard alcoholism as a menace to public order. In Russel v. The Queen(1), Sir Montague Smith held that the Canada Temperance Act, 1878, the object and scope of which was to promote temperance by means of a uniform law throughout the Dominion, was a law relating to the "peace, order, and good government" of Canada, and, in so deciding, said as follows:-- "Laws of this nature designed for the promotion of public order, safety, or moral....
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....ifference peculiar to any individual or class and not applicable to any other individual or class, and yet the law hits only a particular individual or class. (3) The principle of equality does not mean that every law must have universal application for all persons who are not by nature, attainment or circumstances in the same position, and the varying needs of different classes of persons often require separate treatment. (4) The principle does not take away from the State the power of classifying persons for legitimate purposes. (5) Every classification is in some degree likely to produce some inequality, and mere production of inequality is not enough. (6) If a law deals equally with members of a well defined class, it is not obnoxious and it is not open to the charge of denial of equal protection on the ground that it has no application to other persons. (7) While reasonable classification is permissible, such classification must be based upon some real and substantial distinction bearing a reasonable and just relation to the object sought to be attained, and the classification cannot be made arbitrarily and without any substantial basis. Similarly, Professor Wil....
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....selecting certain bodies or groups of people for favoured treatment, while subjecting the petitioner and other citizens to the general provisions of the Act. It is said that the law should have been enforced alike against the civil population and military personnel, between whom no distinction can be made at all on any rational ground in the enforcement of the policy of prohibition. The scheme of Chapter IV of the Prohibition Act, in which the impugned provision finds a place, seems inter alia to relax the law in favour of certain persons or groups of persons or institutions by introducing the system of passes, licences, permits and authorizations. A few examples will show that the legislature did not proceed without making any classification. For instance, section 35 deals with licences to hotels, section 37 with licences to dining ears and coastal setamers, section 38 with licences to shipping companies, section 40 with permits to foreigners and persons who need liquor on grounds of health, section 41 with permits to foreign sovereigns and diplomats, section 44 (1) Constitutional Law, by Prof. Willis, (1st Edition) with licences to clubs, section 45 with authorisations for ....
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....c rules and regulations and drunkenness is made an offence, the relaxation of the law of prohibition in their case is not likely to produce the same evil results as it may produce under other circumstances. I find therefore nothing wrong prima facie in the legislature according special treatment to persons who form a class by themselves in many respects and who have been treated as such in various enactments and statutory provisions. In my opinion, therefore, section 39, in so far as it affects the military and naval messes and canteens, warships and troop: ships, cannot be held to be invalid. So far as the cargoboats are concerned, it was contended on behalf of the petitioner that no rational differentiation could be made between them and the passenger boats, and there was no conceivable ground for granting exemption or concession of any kind to the former. Here again, we cannot assume that the legislature has proceeded arbitrarily. The cargoboats being slower boats have to be on the sea for long periods, the number of persons affected by the exemption is comparatively small, and they are mostly sojourners who stay at the port for a short time and then go away. These consideration....
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....under section 139 (c) power is given to Government to exempt any person or institution or any class of persons or institutions from the observance of all or any of the provisions of the Act or any rule or regulation or order made thereunder. The policy of legislation has been clearly laid down by the legislature in the Act itself. As pointed out by us before, the legislature intended to grant permits ordinarily only on grounds of health and certain exceptions were made in the case of certain classes. It is always open to the legislature to leave it to the Government to work out the policy in details. It would be impossible for the legislature to provide for all circumstances and all eventualities that may arise in the actual working of the Act. But it is not open to the legislature to permit Government to alter the policy itself. In our opinion, in leaving it to Government to issue permits in cases other than those provided for by the Act, in permitting Government to vary or substitute conditions of the licence, and in permitting Government to exempt persons or classes from the provisions of the Act, the legislature was clearly delegating to Government its own power of legislation.....
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....acquire, hold and dispose of a kind of property, namely, "liquor" as defined in section 2(24) of the Act, and as such would be void under article 13. The question to be considered is whether they can be saved by clause (5) of article 19, which runs as follows :-- "Nothing in sub-clauses (d), (e) and (f) of the said clause shall affect the operation of any existing law in so far as it imposes, or prevent the State from making any law imposing, reasonable restrictions on the exercise of any of the rights conferred by the said subclauses either in the interests of the general public or for the protection of the interests of any scheduled tribe. '' The question boils down to ascertaining whether the restrictions imposed by the provisions to which reference has been made are reasonable. In judging the reasonableness of the restrictions imposed by the Act, one has to bear in mind the directive principles of State policy set forth in article 47 of the Constitution, "The State is charged with the duty of bringing about prohibition of the consumption, except for medical purposes, of intoxicating dri....
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....vocate-General that a citizen may possess eau-de-cologne or lavender water under a permit. But that is a restriction upon the right of the citizen to acquire, hold and dispose of property, and, in our opinion, that restriction is not reasonable. The same argument applies to medicinal and toilet preparations containing alcohol. Therefore we hold that tO the extent to which the Prohibition Act prevents the possession, use and consumptiOn of non--beverages and medicinal and toilet preparations containing alcohol for legitimate purposes the provisions are void as offending against article 19 (1) (f) of the Constitution even if they may be within the legislative competence of the Provincial Legislature." The next step in the argument is that as the law purports to authorise the imposition of a restriction on a fundamental right in language wide enough to cover restrictions both within and without the limits of constitutionally permissible legislative action affecting such right. it is not possible to uphold it even so far as it may be applied within the constitutional limits, as it is not severable. This line of reasoning, no doubt, seeks to find support from the observations made in....
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....irits (except eau-de-cologne), in item (3) dutypaid spirituous toilet preparations (except lavender water) and in item (4) duty-paid spirituous medicinal preparations other than 123 specified liquids, are exempted from the operation of sections 12(c) and (d) and 13(b) to the extent specified therein. This notification was superseded on the 1st April, 1950, by another notification which is more liberal in certain respects, and these notifications, being made in exercise of the power given by the Act itself, have undoubtedly the force of law and must be read along with the Act. So read, it is quite clear that "all liquids consisting of or containing alcohol" are capable of being split up into and have in fact been split up into several distinctly separate sub-items including liquid toilet and medicinal preparations containing alcohol. The legislature itself contemplated this sub-division, for by section 139 it authorised the Provincial Government to exempt any intoxicant or class of intoxicants from the operation of the Act. This circumstance takes the case out of the principles laid down in the two cases mentioned above and the item being thus severable I am free to consider whether....
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....bsp; ''The licensee shall not sell to any person on any one day any kind of perfumed spirits, spirituous toilet preparations or essences in excess of such quantity as may be prescribed by the Commissioner under the Similarly, in the second notification of the 11th April, rules 9 and 10 run as follows :-- "9. The licensee shall not sell medicated tonics or medicated wines containing more than 10 per cent of alcohol (or containing alcohol in strength more than 17.5 per cent. of proof spirit) except those which are classified as spirituous medicinal preparations and regulated as such under the Drugs Act, 1940. 10. Subject to the provisions of rule 9 the licensee shall not sell the following spirituous medicinal preparations to any person unless he produces a medical prescription in that behalf, namely :-- (a) medicated tonics and medicated wines; (b) asaves and arishtas specified in the Schedule hereto annexed; (c) any other spirituous medicinal preparations containing more than 10 per cent of alcohol....
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....at the restrictions imposed by the Act even when read with the above notifications are not reasonable, and I would affirm the conclusion arrived at by the High Court. The next group of sections which the High Court has held to be invalid, are sections 23(a) and 24(1) (a) in so far as they refer to "commending" any intoxicant, section 23(b) in its entirety, and section 24(1)(b) in so far as it refers to. "inciting or encouraging" any individual or class of individuals or the public generally "to evade the provisions of any rule, regulation or order made thereunder or the conditions of any licence, etc." These provisions run as follows :-- "23. No person shall-- (a) commend, solicit the use of, or offer any intoxicant or hemp, or (b) incite or encourage any member of the public or any class of individuals or the public generally to commit any act which frustrates or defeats the provisions of this Act, or any rule, regulation or order made thereunder, or ...... 24. (1) No person shall print or publish in any newspaper, news-sheet, book, leaflet, booklet or any other single or periodical publication or otherwise display or distribute any advertisement or other matter,-(a) w....
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....he judgment of the High Court in regard to them will therefore stand. I will now deal with two Notifications Nos. 10484/45 (c) and 2843/49(a), dated the 30th March, 1950, which the High Court has held to be invalid. As regards the first notification, the High Court has stated that section 139 (c) having been held to be ultra vires the legislature, this notification, which was issued under that section is ultra vires the Bombay Government. But. since this Court has taken a different view in regard to the validity of section 139(c), the decision of the High Court as regards the above notification cannot stand. It appears from certain observations in the judgment under appeal, firstly that the High Court upheld section 40(1) (c) (i) and (ii), which deals with the grant of permits to foreigners who do not intend to stay permanently in India, merely because the Explanation to that section provided that "a person shall be deemed to be residing or intending to reside in India temporarily, if the period of his residence does not exceed six months"; and secondly, that the High Court would have found it difficult to uphold the classification on which section 40(1)(c) is based if the restrict....
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....erefore, void." In order to understand these remarks, it will be necessary to state that persons holding permits under clause (c) of sub-section (1) of section 40 are foreigners as described in sub-clauses (i)and (ii)of clause (c), that persons holding special permits under section 41 are foreign sovereigns, ambassadors, etc., and that persons holding interim permits under section 47 are persons applying for permits under either section 40, or section 41. The last class will include not only foreigners but also Indian citizens applying for permits on the ground that their health will be seriously and permanently affected if they are not permitted to use or consume liquor. Thus, the assumption on which the conclusion of the High Court is based, does not appear to be correct. Besides, I do not find anything in this notification which violates the principle of equality. It simply enables a certain class of persons holding permits to offer drinks to persons holding similar permits, This is in accord with the principle underlying the provisions of section 43 which has not been assailed before us and which provides that "no holder of a :permit granted under section 40 or 41 shall allo....
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....ded is whether as a result of some of the sections of the Act having been declared to be invalid, what is left of the Act should survive or whether the whole Act should be declared to be invalid. This argument was raised before the High Court also, but it was rejected and it was held that it was not possible on a fair review of the whole matter to assume that the legislature would not have enacted the part which remained without enacting the part that was held to be bad. It is to be noted that upon the findings of the High Court, the question should have assumed a more serious aspect than it presents now, because the High Court has declared several important sections of the Act including the definition of "liquor" to be ultra vires the legislature. I have now examined those sections and have held many of them to be valid. The provisions which are in my view invalid cannot affect the validity of the Act as a whole. The test to be applied when an argument like the one addressed in this case is raised,has been very correctly summed up by the Privy Council in Attorney-General for Alberta v. AttorneyGeneral for Canada(1) in these words:-" The real question is whether what remains is so ....