U.P. & Anr Vs. Synthetics and
Chemicals Ltd. & Anr  INSC 125 (15 March 1993)
Reddy, B.P. (J) Jeevan Reddy, B.P. (J) Venkatachala N. (J)
1993 SCR (2) 291 1993 SCC (2) 308 JT 1993 (2) 233 1993 SCALE (2)65
of India, 1950 : Article 136--Special leave
petition--High Court's direction : "We further direct that the respondents
shall not allot molasses to the petitioner in accordance with the assurance
given to the petitioner vide order of the Government dated 23.3.1989"--Construction.
High Court reiterating the principles enunciation in Synthetics and Chemicals
Ltd. and Ors. v. State of U.P. and Ors.,  1 S.C.C. 109 held that the
Central Government had the exclusive power to grant a licence for the
manufacture of industrial alcohol and it was not necessary for the
Company-respondent to obtain a PD-2 licence from the Excise Commissioner before
starting its distillery for the manufacture of industrial alcohol. The High
Court directed the State of U.P. and
another not to interfere with the respondent-Company's manufacturing Industrial
alcohol in the distillery for which licence was granted but subject to the
State Government's right to ensure that industrial alcohol was not converted
into potable alcohol. The State of U.P. filed a special leave petition against
the judgment of the High Court, in this Court contending that before
manufacturing industrial alcohol, the respondent-company was to manufacture
into rectified spirit and that rectified spirit Could be converted potable
liquor by merely adding water, that the High Court did not give any reason in
support of the High Court's direction.
further direct that the respondents shall allot molasses to the, petitioner in
accordance with the assurance given to the petitioner vide order of the
Government dated 23.3.1989." The respondent-Company submitted that the
High Court order was extended from time to time for the subsequent years as
the Special Leave Petition, this Court,
The law laid down by this court and the observations of 292 the High Court in
the impugned judgment recognise and safeguard the right of the State Govt. to
guard against any abuse and to ensure that rectified spirit is not diverted for
human consumption.-That power is affirmed. [293F]
The direction of the High Court cannot be construed and shall not be understood
as calling upon or directing the Government to do anything, or to make any
supplies, contrary to the provisions of the provisions of the Molasses Contral
Order or any other law governing the supplies of molasses.
supply of molasses to the respondent shall be made in accordance with law. [294A-B]
Synthetics and Chemicals Ltd. and Ors. v. State of U.P. and Ors.,  1 SCC 109, referred to. [292F]
APPELLATE JURISDICTION: Special Leave Petition (c) No.17098 of 1992.
the Judgment and Order dated 23.10.1992 of the Allahabad High Court in Civil
Misc. Writ Petition No.473 of 1992.
for the Petitioners.
Soni, Mrs. P.S. Shroff (For M/s S.A. Shroff & Co.) for the Respondents.
following Order of the Court was delivered:
counsel for the petitioners as well as the counsel for the respondents. We see
no reason to entertain this special leave petition. It is established by the
decision of this Court in Synthetics and Chemicals Ltd. and Ors. v. State of U.P. and Ors.,  1 S.C.C. 109 that so far as the
industrial alcohol is concerned, the power of licencing vests in the Union of
India alone. At the same time it is held that the power of the State Government
to legislate with respect to potable liquor referable to Entry 6 of List II
remains unaffected. It is also held that the State has the power to make
regulations and to take appropriate action to ensure that nonpotable alcohol is
not diverted and misused as a substitute for potable alcohol. Another principle
enunciated in the said decision is that the State can, not only charge excise
duty on potable alcohol and sales tax on sales of such potable alcohol, but
also entitled, in cases it renders any service, 293 as distinct from its claim
of grant of privilege, to charge fees based on quid pro quo. The High Court in
this case has merely reiterated the said principles. It has held "that the
Central Government has the exclusive power to grant a licence for the the
manufacture of Industrial Alcohol. It is not necessary for the petitioner to
obtain a PD-2 licence from the Excise Commissioner, U.P., Allahabad before starting its distillery for
the manufacture of Industrial Alcohol. The provisions in the U.P. Excise Manual
relating to taking of PD-2 licence are not applicable to a case where a person
wants to manufacture industrial alcohol. The other provisions of the Act and
Rules of the U.P. Excise Act and Manual are applicable in order to ensure that
Industrial alcohol is not converted into potable alcohol." The final order
of the High Court is to the following effect:
view of the above, we allow the writ petition and direct the respondents not to
interfere with the petitioner's manufacturing industrial alcohol in the
distillery for which licence had been granted. This is, however, subject to the
right of the State Government to ensure that industrial alcohol is not
converted into potable alcohol." In our opinion the said observations must
be understood as reiterating the principles enunciated by this Court in the
decision afore-cited. Mr. Salve, learned counsel for the State of Uttar Pradesh
submitted that before manufacturing industrial alcohol, the Respondent-company
has to manufacture rectified spirit and that rectified spirit can be coverted
into potable liquor by merely adding water. May be so. The observations made by
the High Court and the law laid down by this Court recognise and safeguard the
power of the State Government to guard against such abuse. We affirm it.
Salve questioned the direction given by the High Court to the following effect:
"We further direct that the respondents shall allot molasses to the
petitioner in accordance with the assurance given to the petitioner vide order
of the Government dated 23.3.1989." The proceeding dated 23.3.1989 of
course pertaints to the year 1989. But Mr. F.S. Nariman, leanred counsel for
the Respondent-Company says that the said order has been extended from time to
time for the subsequent years as well. Mr. Salve points out that in the body of
the Judgment of the High Court no reasons 294 are given in support of the
aforesaid direction. We are, however, of the opinion that the said direction cannot
be construed and shall not be understood, as calling upon or directing the
Government to do anything, or to make any supplies, contrary to the Provisions
of the Molasses control order or any other law governing the supply of
supply of molasses to the Respondent shall be made in accordance with law.
Salve raised certain other contentions but we did not allow him to do, so in
view of the fact that those contentions were not urged before the High Court.
We need express no opinion thereon.
Leave Petition is accordingly dismissed subject to the above observations.