TaxTMI 
TaxTMI 
TaxTMI 
1995 (12) TMI 378
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....cence is prescribed for the first time under Rule 3(11) of the amended Karnataka Excise (Sale of Indian and Foreign Liquors) Rules, 1968. Under Rule 3(11) a distributor licence shall be granted by the Excise Commissioner for the whole of the State or any part thereof to deal in the products of all distilleries, breweries or wineries in the State or to import liquor from outside the State for the purpose of distribution or sale within the State or any part of it, as may be specified in the licence. The licensee is required to establish not less than one depot in each district within the State or within that part of the State where it proposes to distribute or sell such liquor. What is more important for our purpose, the rule provides that a distributor licence shall be issued only to such company owned or controlled by the State Government as the State Government may specify. The other rules mentioned above have also been correspondingly amended to provide that the licensees under those Rules shall sell the liquor only to a holder of a distributor licence under the Karnataka Excise (Sale of Indian and Foreign Liquors) Rules, 1968, subject to certain exceptions specified in each of t....
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....ave petitions and writ petitions were directed to be placed before an appropriate Bench for decision of other questions arising in these matters. 6. Accordingly, these matters have been placed before us. The appellants contend that the Rules as amended in 1989 are ultra vires because they go beyond the scope of the delegated authority given to the State to formulate Rules. The appellants have contended that there is no legislative policy prescribed by the Karnataka Excise Act of 1965 for a distributor licence. Hence the Rules prescribing a distributor licence have travelled beyond the scope of the main Act and are beyond the ambit of the delegated authority. 7. In order to evaluate this contention, it is necessary to look at the scheme of the Karnataka Excise Act, 1965. The Preamble to the Karnataka Excise Act, 1965 states, "Whereas it is expedient to provide for a uniform law relating to the production, manufacture, possession, import, export, transport, purchase and sale of liquor and intoxicating drugs and the levy of duties of excise thereon in the State of Karnataka", the Karnataka Excise Act has been enacted. The Preamble has a clear reference to Entry 8, List II of the Sev....
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....rsons or classes of persons to whom, licences for the wholesale or retail sale of any intoxicant may be granted and regulating the number of such licences which may be granted in any local area ; (f)........... (g)........... (h) prescribing the authority by which, the form in which and the terms and conditions on and subject to which any licence or permit shall be granted, and may, be such Rules, among other matters, (i) fix the period for which any licence or permit shall continue in force; (ii) to (vi)................... (i) to (m)..................... (n) any other matter that may be prescribed under this Act. 10. Sub-section (3) of Section 71 provides that every rule made under this Act shall have effect as if enacted in this Act subject to such modifications as may be made under sub- section (4). Sub-section (4) requires every rule to be laid as soon as may be before each House of the State Legislature for total period of 30 days in the manner prescribed there. Section 71, therefore, clearly contemplates Rules being made prescribing different kinds of licences which may regulate the activity of manufacture and sale of intoxicants and the terms and conditions su....
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....wineries located within Karnataka or import from outside the State. (3) The licensee shall sell the liquor only to a person who is holding CL 1 licence in the State or export liquor to a person outside the State, who is holding a valid licence to deal in liquor. (6) The licensee shall sell only the approved brands of liquor." 12. A distributor licence, therefore, is only a licence to deal in liquor by sale and purchase of liquor. This activity is not something different from what is contemplated under the Act itself or in respect of which the rule-making authority has been delegated to the State under Section 71. The mere fact that a monopoly of distributor licence is sought to be created, does not take the licence outside the ambit of the Act. The Act itself provides that the number of licences can be regulated by the State. If the State chooses to regulate licences by providing that the licence shall be granted only to a company owned by the State, it cannot be said that such a licence is something which is outside the purview of the Act or the rule-making authority of the State under the Act. 13. The appellants also contend that the amended Rules are beyond the legislative....
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....15. In this connection, we would also like to refer to a decision of this Court in the State of Madhya Pradesh & Ors. v. Nandlal Jaiswal & Ors. (1987 (1) SCR 1 at p.53). This Court has held that though there is no fundamental right in a citizen to carry on trade or business in liquor; and the State under its regulatory power has the power to prohibit absolutely every form of activity in relation to intoxicants such as its manufacture, storage, export, import, sale and possession; nevertheless when the State decides to grant such right or privilege to others, the State cannot escape the rigor of Article 14. The Court, however, observed, "But while considering the applicability of Article 14 in such a case we must bear in mind that having regard to the nature of the trade or business the Court would be slow to interfere with the policy laid down by the State Government for grant of licences for manufacture and sale of liquor. The Court would, in view of the inherently pernicious nature of the commodity allow a large measure of latitude to the State Government in determining its policy of regulating manufacture and trade in liquor. Moreover, the grant of licences for manufacture and s....
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....brand of liquor and the company from which the supplies are required. Accordingly MSIL places orders with the concerned companies for the brands of liquor which are demanded by their purchasers. It is on the basis of these demand requisitions received by MSIL that MSIT places orders. There is, therefore, no question of any hardship being caused to the appellants by reason of the fact that their sales have to be channelled through an intermediary. Depending upon the orders received by the MSIL, it in turn, places orders with the suppliers or manufacturers concerned. The business activity of the appellants cannot, therefore, be said to be curtailed in any manner. Nor can there be any hardship on the appellants. Once the Rules oblige the manufacturers to supply their product only to the company holding the distributor licence, a corresponding duty is cast on the distributor to place orders with the suppliers concerned whenever demand for a particular product is received by it. 17. Looking to the channelizing role of MSIL, the fear of discrimination between different suppliers expressed by the appellants does not appear to be justified. In the case of Maganlal Chhagganlal (Pvt.) Ltd. ....
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....situated are similarly affected by the amended Rules. There is, therefore, no discrimination under Article 14 in its traditional sense. 19. The appellants have placed reliance upon the observations of this Court in Doongaji & Co. (I) v. State of Madhya Pradesh & Ors. (1991 Suppl. (2) SCC 313 at p.220) to the effect that there is no fundamental right in a citizen to carry on trade or business in liquor. However, when the State has decided to part with such right or privilege to others, then the State can regulate the business consistent with the principles of equality enshrined under Article 14 and any infraction in this behalf at its pleasure is arbitrary as violating Article 14. Therefore, the exclusive right or privilege of manufacture, storage, sale, import and export of liquor through any agency other than the State would be subject to the rigorous of Article 14. We respectfully agree with these observation. In the present case, however, there is no violation of Article 143 20. It was also submitted before us that the Rules must be considered manifestly arbitrary because the avowed purpose of formulating the amended Rules is to stop evasion of excise. In the counter statement....
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....ismissed with the above directions. S.L.P. (C) Nos. 13817-13828/1993 24. These petitions are for leave to appeal from a judgment of the Andhra Pradesh High Court upholding the validity of the amendments made to sub-rule (2) of Rule 4 and sub-rule (2) of Rule 11 of the Andhra Pradesh (Foreign Liquor and Indian Liquor) Rules, 1970 as also sub-rule (12) of Rule 66 of the Andhra Pradesh Distillery Rules, 1970 and Rule 34 (2) of the Andhra Pradesh Brewery Rules, 1970. These rules have been framed under the Andhra Pradesh Excise Act of 1968 in exercise of powers conferred by Section 72 of the Andhra Pradesh Excise Act of 1968. They were amended by G.O.M.S. No. 187 Revenue (Excise III(2) dated 18.3.1991. These amendments were challenged before the Andhra Pradesh High Court on the ground that they violated the petitioners' rights under Articles 14 and 19(1)(g) of the Constitution of India. These challenges have been negatived by the Andhra Pradesh High Court except for the retrospective operation of the amended Rules. The present petitions are for leave to appeal from this judgment and order of the Andhra Pradesh High Court. As a result of these amendments, the fee for the approval o....
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....n respect of any lease, licence or permit, or the storing of any excisable article." Thus the State Government is authorized to levy fees for various kinds of permits or licences which may be required for activities connected with the manufacture, supply or sale of liquor. Labelling of liquor bottles with brand lables is an essential activity connected with the sale and distribution of different varieties of liquor manufactured in the State by different manufacturers or imported into or exported outside the State. Different varieties of liquor produced by various manufacturers are thus identified for purchase of sale. It is, therefore, permissible for the State Government under the Andhra Pradesh Excise Act, 1968 to levy fees for approval of different varieties of labels to be affixed to liquor bottles for the purpose of distribution and sale of liquor. The amendments are within the rule-making power of the State Government. In fact prior to these amendments, a fee of Rs.100/- was being charged for approval of lables. It is nobody's case that the fee was beyond the rule-making power under Section 72 of the Act. 27. It is also contended that the fee of Rs.25000/- for the appro....