Nashirwar Vs. The State of Madhya
Pradesh  INSC 252 (27 November 1974)
RAY, A.N. (CJ) RAY, A.N. (CJ) MATHEW, KUTTYIL
KURIEN UNTWALIA, N.L.
CITATION: 1975 AIR 360 1975 SCR (2) 861 1975
SCC (1) 29
CITATOR INFO :
F 1975 SC1121 (52,53) F 1975 SC2008 (20) RF
1976 SC 633 (5) RF 1976 SC1913 (15,19) R 1977 SC 722 (17,29,32) R 1978 SC1457
(63,64) F 1980 SC 614 (6,7,11,15,16,35) RF 1988 SC 771 (5) RF 1990 SC1927
(23,28,29) RF 1992 SC1393 (4)
Central Provinces Exercise Act, 1915--S.
18-Whether the State has the power to grant liquor licences by public
auction-Whether violates fundamental right under Art.
19(1)(g) of the Constitution.
Constitution of India, 1950-Art.
19(1)(g)-Entry 8, List II.
Under the Central Provinces Excise Act, 1915
(which was the Act applicable to the State of Madhya Pradesh) the excise
authorities granted licences for selling foreign liquor under a system of fee
per bottle. From the year 1964-65 the State Government decided that licences
for foreign liquor should be disposed of by public auction The appellants
unsuccessfully challenged before the High Court the authority of the State to
hold public auctions for grant of licences for foreign liquor. In 1964 the Act
was amended, as a result of which the State could grant leases in respect of
both country and foreign liquor. By a notification the State Government
declared that it would grant foreign liquor licences by public auction.
Similarly the impugned Act of Kerala State places restrictions on the
manufacture. sale, import and export of liquor. The appellants in the Madhya
Pradesh case and the petitioners in the Kerala case have questioned the
constitutional validity of the restrictions on the ground that they deprive
them of the fundamental right to carry on trade in liquor. It was contended
that the right to trade in liquor was not declared by the legislature to be a
monopoly of the State to exclude trade in liquor from the operation of Art.
19(1)(g) as a fundamental right to trade.
Dismissing the appeals and writ petitions
HELD : 1(a) The State has exclusive right or
privilege of `manufacturing and selling liquor. The State grants such right or
privilege in the shape of a licence or a lease.
The State has power to hold public auction
for grant of such right or privilege and accept payment of money in
consideration of grant of lease. [872-B] (b) The State legislature is
authorised to make a provision for public auction by reason of the power
contained in Entry 8, List II of the Constitution. That entry empowers the
State Government to legislate with regard to intoxicating liquor, that is to
say, production, manufacture, possession.
transport, purchase and sale of intoxicating
liquor. [865-F] (2) (a) There are three principal reasons to hold that there is
no fundamental right of citizens to carry on trade or to do business in liquor.
First, there is the police power of the State to enforce public morality, to
prohibit trades in noxious or dangerous goods. Second. there is power of the
State to enforce an absolute prohibition of manufacture or sale of intoxicating
liquors. Article 47 states that the State shall endeavour to bring about
prohibition of the consumption, except for medical purposes, of intoxicating
drinks and drugs which are injurious to health. Third, the history of excise
law in India shows that the State has the exclusive right or privilege of
manufacture or sale of liquor. [868E-F] (b) Trade in liquor has historically
stood on a different footing from other trades. Restrictions which are not
permissible with other ides are lawful and reasonable so far as the trade in
liquor is concerned. That is why even prohibition of the trade in liquor is not
only permissible but is also reasonable The reasons are public morality public
interest and harmful and dangerous character of the liquor. The State possesses
the right of complete control over all aspects of intoxicants viz.,,
manufacture, collection. sale and consumption. The State has exclusive right to
manufacture and sell liquor and to sell the said right in order to raise
revenue. [871D-E] 862 (c) The nature of the trade is such that the State
confers right to vend liquor by farming out either in auction or on private
treaty. Rental is the consideration for the privilege granted by the Government
for manufacturing or vending liquor. Rental is neither a tax nor an excise
dirty. Rental is the consideration for the agreement for grant of privilege by
the Government. [871F] (d) The grant of a lease either by public auction or for
a sum is a regulation pertaining to liquor. One of the purposes of regulation
is to raise revenue. Revenue is collected by the grant of contracts to carry on
trade in liquor. These contracts are sold by auction. The grantee is given
licence on payment of auction price. [872A] Krishna Kumar Narula etc. v. The
State of Jammu and Kashmir and Ors.  3 S.R. 50; Coovarjee B. Bharucha v.
The Excise Commissioner and the Chief Commissioner,Ajmer  S.C.R. 873;
Crowley v. Christensen 34 L.Ed. 620; State of Assam v. A N. Kidwai,
Commissioner of Hills Division and Appeals,.Shillong  S.C.R. 295; State
of Bombay & Anr. v. F. N. Balsara  S.C.R. 682; M/s Guruswamy &
Co., etc. v. State of Mysore & Ors.  1 S.C.R. 548; State of Orissa
& Ors. v. Hari Narayan Jaiswal & Ors.  3 S.C.R.
748; Amar Chandra Chakraborty v. Collector of
Excise Government of Tripura and Ors.  1 S.C.R. 533; State of Bombay v.
R. M. D. Chamarbaugwalla  S.C.R. 874 and A. B. Abdulkadir v. State of
Kerala  2 Supp. S.C.R. 741 referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeal
Nos. 1711 to 1721, 7123, 1699, 1706 & 1744 of 1974.
From the Judgment and Order dated the 24th
April, 1974 of the Madhya Pradesh High Court in Misc. Petitions Nos. 391, 392,
395, 394, 412, 401, 405, 430, 400, 399, 403, 390, 409, 417 and 407 of 1970
Civil Appeal No. 1267 of 1970.
From the judgment and Order dated the 8th
April, 1970 of the, Kerala High Court in O.P. No. 995 of 1970.
Writ Petitions Nos. 436 of 1971 and 26 and
133 of 1972.
Petitions under Art. 32 of the Constitution
B. Sen, S. Balakrishnan and N. M. Ghatate,
for the appellants (In CAs. Nos. 1711-1721, 1723/74), for the appellants.
S. S.Khanduja and S. K. lain (In CAs. Nos.
1699, 1706, 1744 and 1715/74), for the appellants.
S. N. Andley (In CA. 1723/70) R. P. Kapur and
I. N. Shroff, for the respondents in all the appeals.
D. V. Patel (In CA 1267/70) Y. S. Chitale,
(WP. 436/71), N. K. Shreedharan (In WPNo. 133 /72), V. Bhaskaran Nambuar (CA.
1267/70 and WP. 436/71) P. K. Sreedharan (In WP.
133/72). P. Sankaran Kutty (In WP. 436/71 and
133/72) and A. S. Nambiar, for the appellants (In CA No. 1267/70) and
petitioners (In WPs. Nos. 436/71 and 133/72).
D. V. Patel and S. Gopalakrishnan, for the
petitioner (In WP 26/72).
863 K. T. Harindernath (In CA No. 1267/70 and
WP., 436/71) and K. M. K. Nair, for the respondents (In CA. No. 1267/70) and
WPs. Nos, 436/71 and 26/72.
Lily Thomas, for the Intervener (K. J,
The Judgment of the Court was delivered byRAY,
C.J. The principal question in these civil appeals and writ petitions is
whether it is permissible for the State Government to auction licences for
carrying on the business of selling foreign liquor which is neither
manufactured nor imported by the State Government. Some of these appeals relate
to State of Madhya Pradesh and others relate to State of Kerala.
The Madhya Pradesh appeals are governed by
the Central Provinces and Berar Excise Act 1915 which became applicable to
Madhya Pradesh as the Central Provinces Excise Act, 1915.
This will be referred to as the Madhya
The Kerala Appeals are governed by the Abkari
Act (Act No. 1 This will be referred to as the Abkari Act.
Prior to 1 April, 1964 licences for sale of
foreign liquor in Madhya Pradesh were granted by the excise authorities under
the fee per bottle system. In 1964-65 the State decided that licences for
foreign liquor would be disposed of by public auction to the highest bidder.
The appellants then challenged in the Madhya Pradesh High Court the authority,
of the State Government to hold public auction for grant of licences for
foreign liquor. The appellants did not succeed because the Act was amended in
1964. The result of the amendment was that whereas formerly the State
Government could grant lease only in respect of country liquor, the Amending
Act empowered the Government to grant lease in respect of any liquor which
meant both foreign and country liquor . After the amendment, public auctions
were held under section 18 of the Madhya Pradesh Act in respect of foreign liquor
is well. In 1956-66 public auctions were held in respect of foreign liquor. The
leases were renewed up to 1969-70. In 1967-68 prohibition was withdrawn in
certain areas of Madhya Pradesh And new foreign liquor vends were opened. These
vends were disposed of by public auction. In 1968 the State Government by a
notification dated 29 March, 1968 ordered that with effect from 1 April, 1965
foreign liquor licence shall be disposed of on payment of extra fee of Rs. 1000
in addition to the payment of a fee per bottle at specified rates. The
notification further directed that where new shops were required to be opened
licences would be disposed of by public auction in addition to a fee per
bottle. In 1970 there was a notification dated 14 August, 1970 where the State
Government would dispose of foreign liquor licences by public auction. This
notification is the subject matter of the Madhya Pradesh appeals.
The Madhya Pradesh Act by sections 8 and 9
confers power on the State to prohibit import, export or transport of any
intoxicant. "Intoxicant" under the Act means any liquor or
intoxicating drug. The State Government has power to impose restrictions on
import, export 864 or transport of intoxicant in the shape of payment of duty
and compliance with other conditions. Chapter IV of the Madhya Pradesh Act
consisting of sections 13 to 24 deal with manufacture, possession and sale of
intoxicants. Section 13 requires licence for manufacture, collection,
possession of intoxicants and materials for manufacturing intoxicants.
Sections, 17 and 18 of the Madhya Pradesh Act
are important for the purposes of these appeals. Section 17 deals with licences
for sale of intoxicants. Section 18 states that the State Government may lease
to any person on such conditions and for such period as it may think fit the
right (a) of manufacturing or of supplying by wholesale, or of both, or (b) of
selling by wholesale or by retail, or (c) of manufacturing or of supplying by
wholesale, or of both, and selling by retail any liquor intoxicating drug
within any specified area.
The Abkari Act which governs the Kerala
Appeals in sections 6 to 11 deal with import, export and transport of liquor or
intoxicating drugs. Permission of the Government is required for import, export
of liquor. Section 9 of the Abkari Act confers power on the Government to
prohibit, transport of liquor from any local area to any other local area.
Sections 12 to 15C of the Abkari Act deal with manufacture, possession and sale
of liquor or intoxicating drug. Manufacture is prohibited except under the
provisions of the Act, viz., licence granted by the Commissioner. The
establishment and control of distilleries, breweries, warehouse etc. is by
grant of a licence. Sections 17 to 23 of the Abkari Act deal with duties taxes
Section 17 of the Abkari Act speaks of duty
on liquor or intoxicating drugs. Section 18A of the Abkari Act confers power on
the Government to grant, on such conditions and for such period as the
Government may deem fit the exclusive or other privilege (i) of manufacturing
or supplying by wholesale; or (ii) of selling by retail; or (iii) of
manufacturing or supplying by wholesale and selling by retail any liquor or
intoxicating drugs within any local area on his or their payment to the
Government of an amount as rental in consideration of the grant of such
The Act further states that the amount of
rental may be settled by auction, negotiation or by any other method as may be
determined by the Government, from time to time, and may be collected to the
exclusion of, or in addition to, the duty or tax leviable under sections 17 and
18. No grantee of any privilege under section 18A of the Act shall exercise the
same until he has received a licence in that behalf from the Commissioner. Rule
13(1) 'under the Abkari Act states that the privilege under the licence will be
sold in public auction subject to conditions of the sale notification published
by Government from time to time.
The contention on behalf of the appellants is
that it is the fundamental right of the citizens to carry on trade in liquor.
It is said that the right to trade in liquor is not declared by the legislature
to be a monopoly of the State to exclude trade in liquor from the operation of
Article 19(1)(g) as a fundamental right to trade. The appellants 865 challenge
that the State has any right or privilege in the matter of manufacture or sale
of liquor which can be granted as a right or privilege to the citizens.
On behalf of the State it is said that the
State is not claiming monopoly in foreign liquor. The State does not contend
that the auction of licences is either a fee or a tax. The State contends that
the highest bid represents the consideration for the lease under section 18 of
the Madhya Pradesh Act or section 18A of the Abkari Act. It is said on behalf
of the State that the State has the exclusive right or privilege to
manufacture, possess and sell intoxicant liquor and these provisions in the Act
confer a right or privilege on the highest bidder at the auction to vend foreign
liquor in specified areas.
The Madhya Pradesh Act as well as the Abkari
Act states that citizens cannot have the right to carry on trade in liquor
except to the extent and subject to such conditions as may be imposed by the
legislature under its regulatory powers.
The Acts deal with four principal forms of
activities pertaining to liquor. First, the import, export and transportation
of liquor is regulated by providing for passes on terms and conditions
mentioned in the Act. A fee is also prescribed for such passes. Second, the
manufacture of liquor is dealt with by providing for licences from the State
Government and fees are prescribed for such licences.
Third, the possession of liquor requires a
permit from the Government and a fee there for. Fourth, the sale of liquor ,is
dealt with by sections 17 and 18 of the Madhya Pradesh Act and section 18A of
the Abkari Act. The Acts speak of the grant of privilege or right to sell
liquor by lease.
The Government can hold a public auction to
The State Government accepts payment of a sum
in consideration of the grant of any lease. The amount of bid at a public
auction represents the consideration for the grant of such right or privilege.
The State Legislature is authorised to make a
provision for public auction, by reason of power contained in Entry 8 of List
II of the Constitution. That Entry empowers the State Government to legislate
with regard to intoxicating liquor, that is to. say production, manufacture,
possession, transport, purchase and sale of intoxicating liquor.
Counsel on behalf of the appellants relied on
the decision of this Court in Krishna Kumar Narula etc. v. The State of Jammu
and Kashmir and Ors.  3 S.C.R. 50 as an authority for the proposition
that a citizen has a fundamental right to do business to deal in liquor.
This Court in Cooverjee B. Bharucha v. The
Excise Commissioner and of Chief Commissioner, Ajmer  S.C.R.
873 held that the grant of a lease either by
public auction or for a sum is a regulation pertaining to liquor. It was
contended on behalf of the citizen in Bharucha's case (supra) that every person
has an inherent right to carry on trade in intoxicating liquors and that the
State has no right to create a monopoly in them. In Bharucha's case (supra) the
auction sale of country liquor shop under Excise Regulation 1 of 1915 was
challenged on the ground that the provisions of the Excise 866 Regulation and
the auction rules were ultra vires because the same purported to grant monopoly
to trade to a few persons. The Excise Regulation 1915 in that case provided
that the Chief Commissioner might lease to any person the right of
manufacturing or of supplying or of selling by wholesale or retail any country
liquor or intoxicating drug within any special area. This Court said that laws
prohibiting trades in noxious or dangerous goods cannot be held to be illegal
as enacting a prohibition and not a mere regulation.
In Bharucha's case (supra) this Court
concurred with the observations in Crowely v. Christensen 34 L.Ed. 620. Those
observations indicate that the sale of liquor has been at all times considered
as the proper subject of legislative regulation. A licence may be exacted and
restrictions may be imposed as to sale of liquor. There may be absolute
prohibition of sale of liquor. At the root lies public expediency and public
morality. The sanction is the police power of the State to regulate business
and to mitigate evils.
The observations in Crowely's case (supra)
which were laid down as a ruling of this Court in Bharucha's case (supra) are
these. "There is no inherent right in a citizen to 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 is a business attended with danger to
the community, it may, as already said, be entirely prohibited, or be permitted
under such conditions as will limit to the utmost its evil. The manner and
extent of regulation rest in the discretion of the governing authority".
Bharucha's case (supra) negatived the contention of inherent right of citizens
to carry on trade in intoxicating liquors.
Bharucha's case (supra) lays down three
First, that there is no inherent right of
citizens to carry on trade in intoxicating liquors. Second, the auction sale of
liquor shop is a method by which carrying on particular trade in liquor is
regulated and one of the purposes of regulating is to raise revenue. Third,
there can be a monopoly only when a trade which could be carried on by all
persons is entrusted to one or more persons to the exclusion of the general
public. That is not the case with the business of liquor.
This Court in Narula's case (supra) referred
to the decision in Bharucha's case (supra) and the concurrence of this Court in
Bharucha's case (supra) with Crowley's case (supra) that there is no inherent
right in a citizen to sell intoxicating liquor. In Narula's case (supra) this
Court read the observations of this Court in Bharucha's case (supra) to have
conceded the inherent and fundamental right of a citizen to carry on business
in sale of intoxicating liquor.
Bharucha's case (supra) in no uncertain terms
repelled the citizens contention of inherent right to sell intoxicating liquor.
Bharucha's case (supra) is a Constitution Bench decision. Narula's case is also
a Constitution Bench decision. Narula's case (supra) cannot be said to have
overruled Bharuchas case (supra).
There is an earlier decision of this Court in
State of Assam v. A. N. Kidwai, Commissioner of Hills Division and Appeals,
Shillong 867  S.C.R. 295 where it is said that no person has any
absolute, right to sell liquor. In Kidwai's case (supra) this Court said that
the purpose of the Act and the Rules is to control and restrict the consumption
of intoxicating liquor. Such control and restriction is said by this Court to
be necessary for the preservation of public health and morals and to raise
In Narula's case (supra) it was held that
dealing in liquor is business and a citizen has a right to do business and that
a State can make a law imposing restrictions on the rights in public interest.
In Narula's case (supra) it was also said that unless dealing in liquor is not
trade or business a citizen has a fundamental right to deal in that commodity.
It is not correct to read the decision in Narula's case (supra) that there is a
fundamental right to do business in liquor The decision is that dealing in
liquor is business and a citizen has a. right to do business in that commodity
and the State can impose reasonable restrictions on the right in public
interest. If the State can prohibit business in liquor as is held in State of
Bombay and Anr. v. F. N. Balsara  S.C.R. 682 this establishes that the
State has exclusive right of privilege of manufacture, possession, sale of
intoxicating liquor and therefore the State grants such a right of privilege to
persons in the shape of licence or lease.
The auction of the privilege of selling
liquor was upheld by this Court in M/s. Guruswamy & Co. etc. v. State of
Mysore and Ors.  1 S.C.R. 548. This Court said that the licensee pays for
the exclusive privilege of selling toddy from certain shops. The licensee pays
what be considers to be equivalent to the value of the right. It has no
relation to the production or manufacture of toddy. The only relation it has to
the production or manufacture of toddy, is that it enables the licensee to sell
it. The privilege of selling is auctioned welt before the goods come into
existence. The levy is in respect of the business of carrying on the sale of toddy.
Narula's case (supra) was explained by this
Court in a Bench decision in State of Orissa & Ors. v. Hari Narayan Jaiswal
and Ors.  3 S.C.R. 784 with considered whether the sale by public auction
of the exclusive privilege of selling by retail country liquor in 8 shops was
valid. The respondent was the highest bidder there. His bid was rejected. The
Government was of the view that inadequate prices had been offered because of
collusion between the bidders. Fresh tenders were called for. The State accepted
the tender in respect of one shop and rejected the others.
The remaining seven shops were sold by
private negotiation for substantially higher prices. The respondent whose
highest bid was rejected applied to the High Court for a direction to the Government
to confirm his bid. Section 22 of the Orissa Excise Act which governed that
case stated that "the State Government may grant to any person, on such
conditions and for such period as it may think fit, the exclusive privilege (e)
of manufacturing and supplying wholesale and selling retail, any country liquor
or intoxicating drug within any specified local area". Section 29(2) of
the Orissa Excise Act dealt with the payment for grant of exclusive privilege.
Section 29(2) of the Act stated that the sum payable shall be868 determined by
calling tenders or by auction or otherwise.
In Hari Naryana's case (supra) this Court
held that the right to trade in intoxicating liquor is subject to regulations
and restrictions and upheld the public auction of the right or privilege of
selling liquor 'as an attribute of collection of State revenue.
In the recent decision in Amar Chandra
Chakraborty v. Collector of Excise, Government of Tripura & Ors.  1
S.C.R. 533 under the Tripura Excise Rules fees for licence for the wholesale
vend of country spirit were required to be fixed by tender-cum-auction. Section
22 of the Bengal Excise Act 1909 conferred power on the Chief Commissioner to
grant exclusive privilege of manufacturing and supplying country liquor. No grantee
of any privilege could exercise the same without a licence. The Constitution
Bench in Chakraborty's case (supra) held that trade or business in country
liquor has from its inherent nature been treated by the State and the society
as a special category requiring legislative control. This trade or business is
treated as a class by itself and cannot be treated on the same basis as other
trades while considering Article 14. A contention was raised in Chakraborty's
case (supra) that the business of selling liquor is protected under Article 19
as a fundamental right and reliance was placed on the decision in Narula's case
(supra). This Court held that the State can make a law imposing reasonable
restrictions in public interest on the right to deal in liquor by public
auction of the right of selling liquor.
There are three principal reasons to hold
that there is no fundamental right of citizens to carry on trade or to do
business in liquor. First, there is the police power of the State to enforce
public morality to prohibit trades in noxious or dangerous goods. Second, there
is power of the State to enforce an absolute prohibition of manufacture or sale
of intoxicating liquor. Article 47 states that the State shall endeavour to
bring about prohibition of the consumption except for medicinal purpose of
intoxicating drinks and of drugs which are injurious to health. Third, the
history of excise laws shows that the State has the exclusive right or
privilege of manufacture or sale of liquor.
In Balsara's case (supra) this Court referred
to Article 47 and said that the idea of prohibition was connected with public
health. The challenge to a prohibition law under our Constitution was made
under Article 14 and 19 in Balsara's case. This Court held that absolute prohibition
of manufacture or gale of liquor is permissible and the only exception can be
for' medicinal preparations. The concept of inherent right of citizens to do
business in liquor is antithetical to the power of the State to enforce
prohibition laws in respect of liquor.
Das, C. J. in State of Bombay v. R. M. D.
Chamarbaugwalla  874 said that gambling could not be regarded as trade or
business within the meaning of Article 19 (1) (f) and (g) and Article 301.
'Inherently vicious activities cannot be treated as entitling citizens to do
business or trade in such activities. No one can deal in 869 counterfeit coins
or currency notes, Das, C. J. held that activities. which are criminal, or
dealing in articles or goods which are res extra co commercium could not have
been intended to be permitted by Article 19(1)(f) and (g) relating to
fundamental rights to trade or business.
In our country the history of excise shows
that the regulations issued between 1790-1800 prohibited manufacture or sale of
liquors without a licence from a Collector.. In 1808 a regulation was
introduced in the Madras Presidency which provided that the exclusive privilege
of manufacturing and selling arrack should be farmed in each district. in 1820
the law was amended to authorise the treatment of toddy and other fermented
liquors in the same way as spirits by allowing Collectors to retain the
manufacture and sale under direct management if deemed preferable to farming.
In 1884 a Committee was appointed to investigate the excise system.
The recommendations of the Committee were
adopted. Under the new system the monopoly of manufacture was let separately
from that of sale. The former was granted on condition of payment of a fixed
duty per gallon. The right of sale was given on payment of a fee per shop or a
number of shops, or on payment of a fee determined by auction. In the Bombay
Presidency the monopoly of the retail sale of spirits and the right to purchase
spirits was farmed. In 1857 the Government declared its future policy to be the
letting by auction of each shop, with its still, separately.
In 1870-71 a change was made. The rule at
that time was that the Collector would fix the number and locality of the
different shops and determine their letting value according to the advantages
possessed by each. It was not intended that they should, as a rule, be put up
to public competition; but competition might be resorted to by the Collector
and taken into account in determining the sum at which each would be leased.
This rule remained in force for many years. The practice of putting the shops
up to auction was, thereafter followed. The history of excise administration in
our country before the Independence shows that there was originally the farming
system and thereafter the central distillery system for manufacture. The retail
sale was by auction of the right and privilege of sale. The Government of India
appointed an Excise Committee in 1905.
The measures recommendedby the Committee were
the advances of taxation, the concentration of distillation, the extended
adoption of the contract distillery system. The Committee suggested among other
things the replacement of the then existing excise law by fresh legislation on
the lines of the Madras Abkari Act. (See Dr. Pramatha Nath Banerjee : History
of Indian Taxation p. 470 seq.).
Reference may be made to the Taxation Enquiry
Commissioner Report 1953-54 Vol. 3. At page 130 following there is a discussion
of State excises. Among the major sources of revenue which are available to the
State Government there is a duty on alcoholic liquors for human consumption. At
page 132 of the Report it is stated that in addition to the excise duties,
licence fees are charged for manufacture or sale of liquor or for tapping toddy
trees etc. Similarly, 870 several it fees, vend fees, outstill duties are also
levied.Manufacture or sale of liquor is forbidden except under licences which
are generally granted by auction to the highest bidders. The manufacture of
country spirit is done in Government distilleries or under the direct
supervision of the excise staff. All supplies are drawn from Government ware houses
which ensures that the liquor is not more than of the prescribed strength. The
licensed sellers have to sell the country spirit between fixed hours and at
fixed selling rates. As in the case of country spirit, the right of tapping and
selling toddy is also auctioned. In addition to the licence, in some States the
licensee has to pay a tree tax to Government.
Traditionally tobacco, opium and intoxicating
liquors have been the subject matter of State monopoly. (See section IV of the
Madras Regulation XXV of 1802 relating to permanent settlement of land
revenue). Section IV states that the Government having reserved to itself the
entire exercise of its discretion in continuing or abolishing, temporarily or
permanently, the articles of revenue included, according to the custom and
practice of the country, under the several heads inter alia of the abkary, or
tax on the sale of spirituous liquors and intoxicating drugs, of the excise on
articles of consumption, of all taxes personal and professional, as well as
those derived from markets, fairs, or bazais, of lakhiraj lands (or lands
exempt from the payment of public revenue), and of all other lands paying only
favo urable quit rents, the permanent assessment of the land-tax shall be made
exclusively of the said articles now recited.
This was followed by section XXXII of
Regulation II of 1803 in the Madras Presidency. That section provided that
Collectors shall collect the reyenue arising from sayer, salt, spirituous
liquors or from other sources, in the manner prescribed by the regulations.
Regulation I of 1813 in the Madras Presidency
provided that the licensed retail dealer shall be supplied exclusively by the
Collector of Madras with the quantity of liquor which they may require, at such
price as may be from time to time determined.
Regulation 1 of 1820 of the Madras Presidency
inter alia provided that the Board of Revenue was authorised to empower the
Collectors either to retain the exclusive privilege of manufacturing country
arrack, toddy, and other fermented liquors, as well as the retail sale of
foreign or country manufactured spirits, toddy and other fermented liquors in
their respective districts, under their own immediate r management, on account
of Government; or to rent out those privilges, jointly or separately, for such
periods as may be deemed eligible.
The Board of Revenue is aforesaid was also
authorised to alter, amend and enlarge rules for regulating the exclusive
manufacture and sale of country arrack, toddy and other fermented liquors, and
the exclusive sale of foreign spirits. The other provisions were that licences
for renting out the exclusive privilege of manufacturing of country, arrack,
toddy or other fermented liquor, and of retailing spirituous liquors would be
prepared by the Board of Revenue.
871 Act XXIII of 1841 of the Madras
Presidency, Act XXXII of 1845 of the Madras Presidency, Sections XLIII to XLVII
of Regulation VII of 1932 of the Madras Presidency all indicate that it is the
right and privilege of/ the State Government to manufacture, sell intoxicant
liquors and the State grants lease of such rights by public auction on rental
in consideration of the grant of such right.
The excise revenue arising out of manufacture
and sale of intoxicating liquors is one of the sources of the State Exchequer.
One of the principal sources of State revenue is customs and excise. In England
sale of intoxicating liquors although perfectly lawful at common law is subject
to certain statutory restrictions. These restrictions are primarily of two
kinds; those designed for the orderly conduct of the retail trade and those
designed to obtain revenue from the trade whether wholesale or retail.
Trade in liquor has historically stood on a
different footing from other trades. Restrictions which are not permissible
with other trades are lawful and reasonable so far as the trade in liquor is
concerned. That is why even prohibition of the trade in liquor is not only
permissible but is also reasonable. The reasons are public morality, public
interest and harmful and dangerous character of the liquor. The State possesses
the right of complete control over all aspects of intoxicants, viz.,
manufacture, collection, sale and consumption. The State has exclusive right to
manufacture and sell liquor and to sell the said right in order to raise
revenue-. That is the view of this Court in Bharucha's case (supra) and
Jaiswal's case (supra).
The nature of the trade is such that the
State confers the right to vend liquor by farming out either in auction or on
private treaty. Rental is the consideration for the privilege granted by the
Government for manufacturing or vending liquor. Rental is neither a tax nor an
Rental is the consideration for the agreement
for grant of privilege by the Government.
This Court in A. B. Abdulkadir v. State of
Kerala  2 Supp. S.C.R. 741 said that in British India there used to be
public auction of the right to possess and sell exciseable goods like country
liquor, ganja and bhang and the amount realised was excise revenue. The auction
system which was in force was said by this Court in Abdulkadir's case (supra)
to be only a method of realising duty from the grant of licences to those who
made the highest bid at the auctions.
The grant of a lease either by public auction
or for a sum is a regulation pertaining to liquor One of the purposes of
regulation 872 is to raise revenue. Revenue is collected by the grant of
contracts to carry on trade in liquor. These contracts are sold by auction. The
grantee is given a licence on payment of auction price. [See Bharucha's case
For these reasons we hold that the State has
the exclusive right or privilege of manufacturing and selling liquor. The State
grants such right or privilege in the shape of a licence or a lease. The State
has the power to hold a public auction for grant of such right or privilege and
accept payment of a sum in consideration of grant of lease.
The appeals and the writ petitions are,
therefore, dismissed. Parties will pay and bear their own costs.
P.B.R. Appeals and petitions dismissed.