13 January 1954
Supreme Court


Case number: Writ Petition (Civil) 232 of 1953






DATE OF JUDGMENT: 13/01/1954


CITATION:  1954 AIR  220            1954 SCR  873  CITATOR INFO :  D          1954 SC 728  (20)  R          1958 SC 398  (8)  R          1960 SC 424  (6,11)  R          1960 SC 430  (15,16)  R          1960 SC 554  (6)  R          1965 SC1107  (49,52)  E          1967 SC1368  (11)  MV         1967 SC1512  (53,68)  R          1972 SC1816  (16,17)  R          1974 SC 651  (11)  R          1975 SC 360  (13,14,15,16,17,35,37)  R          1975 SC1121  (39,45,51,53,59)  RF         1975 SC2008  (25)  R          1977 SC 722  (29)  RF         1978 SC1457  (64)  R          1979 SC  25  (20)  RF         1980 SC 614  (14,15)  E&R        1985 SC1676  (2)  RF         1988 SC 771  (5)  RF         1990 SC1927  (28,60,73,74)  RF         1992 SC1256  (14)

ACT:  Constitution  of India, art. 19 (1) (g)-Excise Regulation  I  of  1915-Whether  ultra  vires art.  19  (1)  (g)-Reasonable  restrictions under art. 19 (6)-Charge of fee-Whether in  the  nature of tax.

HEADNOTE: Held, (i) that with reference to Excise Regulation I of 1915 for  the  purpose  of  determining  reasonable  restrictions within the meaning of art. 19 (6) of the Constitution on the right  given under el. 19 (1) (g) regard must be had to  the nature  of the business and the conditions  prevailing  in,a particular  trade and no hard and fast rules concerning  all trades  can  be  laid  down.  The State  has  the  power  to prohibit trades which are illegal or immoral or injurious to the health and welfare of the public.  There is no  inherent right  in a citizen to sell intoxicating liquors  by  retail



and therefore the provisions. of the Excise Regulation I  of 1915  purporting  to  regulate trade in liquor  in  all  its different spheres are not invalid; (ii)charge  of licence fee by public auction is more in  the nature of a tax than a licence fee though it is described as a licence fee.  One of the purposes of the regulation is  to raise  revenue.  Revenue  is  collected  by  the  grant   of contracts  to carry on trade in liquors and these  contracts are sold by auction, The grantee 113 874 is  given  a licence on payment of the auction  price.   The Regulation  specialty  authorises  this.  It is  not  a  fee levied without authority of law. (i)  Crowley v. Christensen (34 Law, Ed. 620, 623) (ii) Commonwealth of Australia v. Bank of New South Wales he ([1950] A.C. 235) (iii)     Rashid Ahmed v. Municipal Board of Kairana ([1950] S.C.J. 324) (distinguished) referred to.

JUDGMENT: ORIGINAL  JURISDICTION  : Petition (No. 232 of  1953)  under art. 32 of the Constitution of India. B.D. Sharma for the petitioner. M.C. Setalvad, Attorney-General for India (PorusA.     Mehta, with him) for the respondent. 1954.  January 13.  The Judgment of the Court was  delivered by MAHAJAN  C.   J.-This  petition  under  article  32  of  the Constitution of India arises in the following circumstances. The  Collector  of Excise, Ajmer, respondent No. 3,  on  the 16th  March,  1953,  held an auction sale of  "  Chang  Gate country liquor shop, Beawar," for the year 1953-54 -pursuant to the rules framed under’ Excise Regulation I of 1915.  The petitioner and respondent No. 5, Chhoga La], offered bids at the  auction sale.  Chhoga Lal, whose bid was in the sum  of Rs.  57,000,  was  declared  the  highest  bidder  and   the petitioner who was the former licensee was thus unsuccessful in  obtaining  the  contract  to run  this  liquor  shop  as hereinbefore.   Half  of  the  auction  price  was   payable immediately  on  the  provisional  acceptance  of  the  bid. Chhoga Lal, however, deposited Rs. 16,500 on the 16th March, 1953,  and  the balance of Rs. 12,000 ,on  the  18th  March, 1953,  i.e.,  two days after the due date, contrary  to  the provisions of sub-rule 8(a) of rule 6 of the auction  rules. In  spite of this the sale was eventually confirmed  in  his favour by the Minister of Excise. The  petitioner, when apprised of this irregularity, sent  a telegram to the Collector of Excise stating that 875 the sale should not be confirmed in favour of Chhoga Lal  as he  had failed in paying the price according to  the  rules, and  expressing his willingness to take the  licence.on  the price  fetched at that auction sale.  He also  preferred  an appeal  to the Chief Commissioner against the order  of  the Collector allowing the deposit of Rs.’ 12,000 after the  due date  and  in  not  ordering  a  resale.   His  appeal   and representation  both were unsuccessful.  He  claims  redress for both these grievances by means of this petition. The petition is founded on the following allegations: (1)  That the petitioner’s fundamental right to  carry    on trade  or business in liquor under article 19(1)(g)had  been infringed  by  the  act  of  the  Collector  of  Excise,  in



condoning  the failure of the respondent in  depositing  the whole  of the security deposit required under sub-rule  8(a) of  rule 6 of the auction rules within the  prescribed  time and in not reauctioning the licence under sub-rule 9 of rule 6. (2)That  in allowing-, Chhoga Lal to make the deposit  after the  expiry  of  the  prescribed  time  the  Collector   had discriminated  between.  him  and Chhoga Lal  and  had  thus abridged  the petitioner’s fundamental right  under  article 14.  It is alleged that if the petitioner had known that the Collector would enlarge the time for the security deposit he would have offered a higher bid. (3)  That  the Hon.  Minister for Excise, respondent No.  2, had no authority under the regulation to confirm the auction sale held by the Collector. (4)That the summary rejection of his appeal without  hearing was not justified and has resulted in the abridgement of his right to carry on his trade. (5)That  the  provisions of the Excise  Regulation  and  the auction  rules made thereunder were ultra vires as the  same purport to grant monopoly of trade to a few  persons and are thus inconsistent with article 19(1)    (g)      of      the Constitution and that the provisions of the  regulation regarding  levy  of licence fee with the  avowed  object  of raising a big source of revenue also 876 seriously affected the fundamental rights of the  petitioner under  article  19(1)  (g) of the  Constitution.   On  these allegations the petitioner prayed for a writ of mandamus  or a  writ  in the nature thereof or a direction  or  order  on respondents Nos.  I to 4 directing  them, (a)  not to levy any duty or fee for the purpose of  raising revenues for the benefit of the State by holding auction   sales, (b)  not to grant monopoly  in the trade to a selected  few individuals, but to grant licences freely on application, and  (c) to grant a licence to the petitioner to deal in country liquor  with  his place of business at or near  Chang  Gate, Beawar.  In  the  alternative  a mandamus was  asked  directing  the officer  concerned either to confirm the next lower  bid  of the  petitioner  and  to grant the licence  for  Chang  Gate liquor shop, Beawar, in his favour or to hold a reduction in accordance with the  auction rules and to cancel the licence of respondent No. 5. Some  of the points raised are clearly outside the ambit  of the  constitutional remedy provided under article 32 of  the Constitution  and will be considered hereinafter.  The  main contention   which  needs  consideration  in  the  case   is regarding   the  constitutional  validity  of   the   Excise Regulation I of 1915.  It was contended that the petitioner, a citizen of free India, had an unfettered right to carry on trade  and  business  in  liquor and  this  right  had  been guaranteed   to  him  under  article  19  (1)  (g)  of   the Constitution,  and  that  being so, the  provisions  of  the regulation   which   confer   discretion   on   the   Excise Commissioner to restrict the number of liquor shops, and  to license  them  by  auction to the higher  bidder  amount  to creation  of a monopoly in liquor trade and are  void.   The excessive  licence  fee  recovered  by  public  auction  was attacked on the ground I that it was not in the nature of  a licence  fee but was in the nature of a tax and  this  could not be 877



recovered  by  having resort to the  powers  of  legislation saved by article 19 (6) of the Constitution. In order to determine the validity of these contentions,  it is  necessary  to refer to the relevant  provisions  of  the regulation which consolidates and amends the law relating to import, export, transport, manufacture, sale and  possession of  intoxicating liquors and of intoxicating drugs,  in  the Provinces  of  Ajmer-Merwara.   It  has  been  enacted   in- exercise   of  the  legislative  power  conferred   by   the Government of India Act, 1935, Seventh Schedule, List II,  " For  making laws regarding intoxicating liquors,  i.e.,  the production, manufacture, possession, transport, purchase and sale  of intoxicating liquors ", and under  power  conferred for  raising  " duties of excise on  alcoholic  liquors  for human consumption.  " The pith and substance of the  regula- tion is that it raises excise revenue by imposing duties  on liquor  and intoxicating drugs by different methods  and  it also  regulates the import, export, transport,  manufacture, sale  and  possession of intoxicating liquors.   Section  13 enacts  that no excisable article shall be  manufactured  or collected  except  under the authority and  subject  to  the terms  and conditions of a licence granted in  that  behalf. Section  14  provides that the excise commissioner  may  (a) establish  a distillery in which spirit may be  manufactured under a licence granted under section 13 on such  conditions as  the Chief, Commissioner may impose; (b) discontinue  any such  distillery;  (c) license, on such  conditions  as  the Chief Commissioner may impose, the construction and  working of  a  distillery  or brewery; (d) establish  or  license  a warehouse wherein any excisable article may be deposited-and kept  without payment of duty; and (e) discontinue any  such warehouse.  Section 15 provides that without the sanction of the Chief Commissioner no excisable article shall be removed from  any distillery, brewery, warehouse or other  place  of storage.   Section 18 says that the Chief  Commissioner  may lease  to an person, on such conditions and for such  period as  he  may  think fit, the right of  ’manufacturing  or  of supplying by wholesale, or of both, or 878 of selling by wholesale or by retail, or of manufacturing or of  supplying by whole, or of both and of selling by  retail any country liquor or intoxicating drug within any specified area.   Restrictions regarding the manufacture and  sale  of liquors  in cantonments and other places are found  in  some other  provisions  of  the regulation.   The  employment  of children  and  women  is prohibited  in  this  business  and provision  is made authorising the District  Magistrate  for closing shops ’for the sake of maintenance of public  peace. Section  24  authorises the Chief Commissioner to  impose  a duty at such rate or rates as he thinks fit on any excisable article  imported,  exported, transported  or  manufactured, cultivated  or  collected under any  licence  granted  under section  13.   Section  27 deals  with  grant  of  licences, permits  and  passes.  It provides that a licence  shall  be granted on payment of such fees, if any, for such period and subject  to  such restrictions and on  such  conditions  and shall  be in such form and contain such particulars  as  the Chief  Commissioner  may direct either generally or  in  any particular instance.  Power is then given by section 30  for cancellation or suspension of the licence.  Sections 31  and 32  provide  for the withdrawal and  surrender  of  licence. Chapter  VII  of  the regulation  deals  with  offences  and penalties.  Chapter VIII deals with detection, investigation and  trial  of offences under the  regulation.   Section  62 provides, inter alia, that the Chief Commissioner has  power



to  make rules prescribing the scale of fees and the  manner of  fixing  the. fees payable in respect of  any  privilege, licence,  permit  or pass or the storing  of  any  excisable article.  Section 64 says that the following moneys, namely, all  excise revenue, any loss that may accrue when ’in  con- sequence of default a grant has been taken under  management by the Collector or has been resold by him, and all  amounts due  to  the  Government by any person  on  account  of  any contract  relating to the excise revenue, may  be  recovered from  the person primarily liable to pay the same,  or  from his,  surety (if any), by distress and sale of  his  movable property, or by any other process for the recovery of land 879 revenue  due  from landholders or from farmers  of  land  or their sureties. Article  19 (1) (g) of the Constitution guarantees that  all citizens  have the right to practise any pro. fession or  to carry on any occupation or trade or business, and clause (6) of   the  article  authorises  legislation   which   imposes reasonable  restrictions on this right in the  interests  of the  general public.  It was not disputed that in  order  to determine the reasonableness of the restriction regard  must be  had  to the nature of the. business and  the  conditions prevailing in that trade.  It is obvious that these  factors must  differ from trade to trade and no hard and fast  rules concerning all trades can be laid down.  It can also not ,be denied that the State has the power to prohibit trades which are  illegal  or  immoral or injurious  to  the  health  and welfare  of the public.  Laws prohibiting trades in  noxious or dangerous goods or trafficking in women cannot be held to be  illegal  as  enacting  a  prohibition  and  not  a  mere regulation.   The nature of the business is,  therefore,  an important  element  in deciding the  reasonableness  of  the restrictions.   The  right of every citizen  to  pursue  any lawful  trade  or  business is  obviously  subject  to  such reasonable  conditions  as may be deemed  by  the  governing authority  of the country essential to the  safety,  health, peace, order and morals of the community.  Some  occupations by  the noise made in their pursuit, some by the odors  they engender, and some by the dangers accompanying them, require regulations  as  to  the  locality  in  which  they  may  be conducted.  Some, by the dangerous character of the articles used,   manufactured   or   sold,   require   also   special qualifications in the parties permitted to use,  manufacture or sell them.  These pro positions were not disputed, but it was  urged that there was something wrong in  principle  and objectionable  in similar restrictions being applied to  the business   of  selling  by  retail,  in  small   quantities, spirituous  and  intoxicating liquors.  It  was  urged  that ,their sale should be without restriction, that every person has a right which inheres in him, a natural 880 right to carry on trade in intoxicating liquors and that the State  had  no  right to create a monopoly  in  them.   This contention stands answered by What Field J. said in  Crowley v. Christensen(1): "There  is  in this position an assumption of a  fact  which does  not exist, that when the liquors are taken  in  excess the  injuries  are  confined to the  party  offending.   The injury,  it  is true, first falls upon him  in  his  health, which the habit undermines; in his morals, which it weakens; and in the self-abasement which it creates.  But as it leads to  neglect  of business and waste of property  and  general demoralisation,   it  affects  those  who  are   immediately connected  with  and  dependent upon him.   By  the  general



concurrence  of  opinion of every  civilized  and  Christian community,  there  are few sources of crime  and  misery  to society equal to the dram shop, where intoxicating  liquors, in  small  quantities,  to be drunk at the  time,  are  sold indiscriminately to all parties applying.  The statistics of every  State  show  a greater amount  of  crime  and  misery attributable to the use of ardent spirits obtained at  these retail liquor saloons than to any other source.  The sale of such liquors in this way has therefore, been, at all  times, by  the  courts  of every State, considered  as  the  proper subject of legislative regulation.  Not -only may a  licence be  exacted from the keeper of the saloon before a glass  of his liquors can be thus disposed of, but restrictions may be imposed as to the class of persons to whom they may be sold, and the hours of the day, and the days of the week, on which the  saloons may be opened.  Their sale in that form may  be absolutely   prohibited.   It  is  a  question   of   public expediency and public morality, and not of federal law.  The police power of the State is fully competent to regulate the business  to mitigate its evils or to suppress it  entirely. There  is  no  inherent  right in a  citizen  to  thus  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 (1)  34 Law.  Ed. 620, 623. 881 permitted under such conditions as will limit to the  utmost its evils.  The manner and extent of regulation rest in  the discretion  of the governing authority.  That authority  may vest  in  such officers as it may deem proper the  power  of passing upon applications for permission to carry it on, and to  issue  licences  for that purpose.  It is  a  matter  of legislative will only." These  observations  have our entire  concurrence  and  they completely  negative the contention raised on behalf of  the petitioner.   The  provisions of the regulation  purport  to regulate  trade’ in liquor in all its different spheres  and are valid. The  contention that the effect of some of these  provisions is to enable Government to confer monopoly rights on one  or more persons to the exclusion of others and that creation of such monopoly rights could not be sustained under article 19 (6)  is  again without force.  Reliance was  placed  on  the decision  in Rashid Ahmad v. Municipal Board of  Kairana(1). That decision is no authority for the Proposition  contended for.  Elimination and exclusion from business is inherent in the  nature of liquor business and it will hardly be  proper to apply to such a business principles applicable to  trades which  all  could carry.  The provisions of  the  regulation cannot  be attacked merely on the ground that they create  a monopoly.  Properly speaking,, there can be a monopoly  only when  a  trade which could be carried on by all  persons  is entrusted by law to one or more persons to the exclusion  of the general public.  Such, however, is not the case with the business  of  liquor.  Reference in this connection  may  be made  to the observations of Lord Porter in Commonwealth  of Australia  v. Bank of New South Wales(2).  This is what  his Lordship said: "Yet  about  this as about every other proposition  in  this field  a reservation must be made.  For their  Lordships  do not  intend  to lay it down that in no  circumstances  would exclusion of competition so as to (1)  (1950) S.C.J. 324.   (2) [1950] A.C. 235. 114



882 create  a monopoly either in a State or Commonwealth  agency or  in  some other body be justified.  Every  case  must  be judged  on  its  own  facts  and  in  its  own  setting   of time. Further  it seems to us that this argument suffers  ’from  a fallacy.   Under  the rules every member of the  public  who wishes to carry on trade in liquor is invited to make  bids. This is the only method by which carrying on of liquor trade can  be  regulated.   When the contract is  thrown  open  to public auction, it cannot be said that there is exclusion of competition  and  thereby a monopoly is  created.   For  all these reasons we are of opinion that the contention that the provisions  of the regulation are unconstitutional  as  they abridge  the  rights of the petitioner to  carry  on  liquor trade freely cannot be sustained. The next contention that the charge of fee by public auction is  excessive  and is not in the nature of a fee but  a  tax ignores the fact that licence fee described as a licence fee is  more in the nature of a tax than a licence fee.  One  of the purposes of the regulation is to raise revenue.  By  the provisions  of  section  24, duties can be  imposed  on  the manufacture,  import,  export and transport  of  liquor  and other excisable articles.  Revenue is also collected by  the grant  of contracts to carry on’ trade in liquors and  these contracts  are  sold  by auction.  The grantee  is  given  a licence  on  payment of the auction price.   The  regulation specifically  authorises  this.   It is  not  a  fee  levied without  authority  of law as was the  situation  in  Rashid Ahmad’s case(1). As regards the other contentions of the learned counsel,  it is  sufficient to say that if there has been any  breach  of the  rules  framed  under the  regulation  by  the  officers concerned,  the remedy for such breaches is provided for  in the  regulation  itself.  Mere irregularities  committed  in conducting  an auction sale cannot be said to have  abridged the petitioner’s fundamental rights and so article 32 is not attracted.   It is open to the petitioner under article  226 to I approach the- High Court for a mandamus if the officers concerned have (1)  [1950] S.C.J. 324. 883 conducted  themselves not in accordance with law or if  they have acted in excess of their jurisdiction.  The same is the answer  to  the petitioner’s next contention that  the  sale could  not be confirmed by the Minister and that  under  the rules it was only the Chief Commissioner who was  authorised to  confirm  it.   Then  point  of  discrimination  was  not seriously argued before us. For  the  reasons  given above we see no  validity  in  this application and we accordingly dismiss it with costs. Petition dismissed. Agent for the petitioner: S. D. Sekhri. Agent for the respondent: G. H. Rajadhyaksha.