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Report No. 158

3.3. Consideration of the problem and recommendations.-

The Law Commission has considered the pros and cons of the problem including the import of various decisions cited in the report from various perspectives and also parameters envisaged in Bihar Distillary's case [cited in para. 2.2.4 (supra)]. While construing the scope of provisions it is a well-settled principle of construction that where alternative constructions are equally open that alternative is to be chosen which will be consistent with the smooth working of the system which the statute purports to be regulating; and that alternative is to be rejected which will introduce uncertainty, friction or confusion into the working of the system [Collector of Customs v. D. S&W Mills Ltd., AIR 1961 SC 1549: (1962) 1 SCR 896].

Besides one cannot ignore the fact that a duty is cast upon the State to protect the fundamental right of citizens under Article 21 read with Article 47 of the Constitution, i.e. the duty of the State to raise the level of nutrition and the standard of living and to improve the public health. The Sarkaria Commission on Centre-State relations in its report (Part I) has also comprehensively dealt with the scope of the IDR Act in the context of Union-State relations and recommended as follows:-

"12.11.01. If Union control of a specific aspect of an industry is considered expedient in the public interest, it would be advisable that the IDR Act is suitably amended to facilitate the Union Government's regulation of that aspect only. Parliament may have to pass a separate law under Entry 52 of List I. If such new legislation presents any serious difficulty, an alternative may be to replace the present First Schedule of the IDR Act by several Schedules, each of such would specify the purpose for which a particular control was imposed on an industry so that all other areas of Entry 24 of List II remain unoccupied by the Union. The Planning Commission, in consultation with the Ministries of Industry and Law and Justice, should prepare a paper on this subject for the consideration of the NEDC at an early date.

12.11.02. As a mandatory legal requirement, there should be a periodical review, say, every three years, to determine whether in respect of any of the industries the Union's control should be continued or relaxed or lifted. Such a review may be undertaken by a Committee of Experts on which the State Governments should be represented on a Zonal basis. The result of the review may also be placed before the NEDC."

Thus, the Sarkaria Commission has also recommended that the Union control of a specific aspect of an industry which is considered expedient in the public interest, should be dealt with by the Centre by amending the IDR Act to facilitate the Union Government's regulation of that aspect only. Besides, the said Commission has emphasised the need for a mandatory legal requirement whereunder there should be a periodical review, say, every three years, to determine whether in respect of any of the industries the Union's control should be continued or relaxed or lifted.

In order to attain the smooth working of the system and to remove uncertainties, friction and confusion in the working of the system, as also to realise the constitutional objectives set out above, and above all by treading in the direction set out in the Sarkaria Commission's report quoted above to minimise the Union's control on a specific aspect of an industry, instead of its all pervasive control of industries, we are of the view that there is urgent need to amend the IDR Act, 1951 in the manner set out below. The Law Commission of India is of the opinion that the above matter should be clarified by enacting appropriate amendments to the IDR Act instead of leaving the matter to be fought out in Courts.

This controversy has already attracted four or more judgments and the confusion has not been cleared. In the interests of maintaining balance between the Union and the States and also with a view to eliminate the room for abuse of law and misuse of alcohol, to enable the States to levy and collect the income which they were receiving by levying excise duties on alcohol for more than a century prior to the decision in Synthetics and also to put an end to the legal wrangling, it is eminently proper and expedient to substitute the following item as item 26 in the First Schedule to the IDR Act in the place of the existing item 26:

"Fermentation Industries but not including alcohol". This would make the law, and more so its administration, clear, and unambiguous. It would also help the States to raise a little more revenue than at present and remove their grievance as expressed by them during the hearing of Bihar Distillery Case.

For removal of any doubts, it may be clarified that so far as the levy of excise duty is concerned, the position should be as indicated in the decision of the Supreme Court in Bihar Distillery viz., the alcohol 'removed' for purposes other than potable purposes (for obtaining arrack or for manufacturing alcoholic drinks) shall be subject to the central excise duty while the alcohol removed for potable purposes (for obtaining arrack or for manufacturing alcoholic drinks) shall be subject to the State excise duty and shall be levied and collected accordingly. Indeed, the collection of the central excise duty can be entrusted, if found advisable, to the State Excise officials, who will in turn make it over to the designated authorities of the Central Government.



The Amendment of the Industries (Development  Back




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