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PETITIONER: HAR SHANKAR & ORS.  ETC.  ETC.

       Vs.

RESPONDENT: THE DY.  EXCISE & TAXATION COMMR. & ORS.

DATE OF JUDGMENT21/01/1975

BENCH: CHANDRACHUD, Y.V. BENCH: CHANDRACHUD, Y.V. RAY, A.N. (CJ) MATHEW, KUTTYIL KURIEN ALAGIRISWAMI, A. GUPTA, A.C.

CITATION:  1975 AIR 1121            1975 SCR  (3) 254  1975 SCC  (1) 737  CITATOR INFO :  F          1975 SC2008  (20)  RF         1976 SC 633  (5)  RF         1976 SC1913  (15,19)  R          1976 SC2045  (14,19)  RF         1976 SC2243  (28)  D          1977 SC 509  (6)  R          1977 SC 722  (17,18,29,32)  RF         1977 SC1496  (19)  R          1977 SC1717  (2)  RF         1978 SC1457  (39)  R          1979 SC1550  (16,17)  F          1980 SC 614  (6,7,8,15,16,18,35)  F          1980 SC 738  (8)  E          1980 SC1008  (15)  F          1980 SC2018  (13)  R          1981 SC 479  (10)  R          1981 SC1368  (9)  R          1981 SC1374  (3,56)  F          1983 SC 743  (9)  APL        1983 SC1207  (3,14)  C          1984 SC1326  (8,9)  E&D        1987 SC 251  (32)  RF         1987 SC 993  (14)  R          1988 SC 771  (5)  RF         1990 SC1927  (27,29,60,73)  R          1991 SC1947  (13)  RF         1992 SC1256  (14)

ACT: Constitution  of  India,  1950,  Art.  226--Petition   under reciprocal  rights and obligations arising out of  contract, if could be enforced. Constitution of India, 1950, Art. 226 and Punjab Excise Act, 1914  and  Punjab  Liquor  Licence  Rules,  1956--Appellants applying  for and accepting licences to vend foreign  liquor Appellants,  if could question the validity of  Rules  while attempting to exploit licences. Constitution  of  India, 1950,  Art.  19(1)(g)--Business  in intoxicants--Citizen, if has a fundamental right to trade in intoxicants--State,  if  has power  to  prohibit  absolutely every form of activity relating to intoxicants.

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The  Punjab  Act.  1 of 1914, Sections 27  and  34--Levv  of ’licence  fee’ and ’fixed fee’ on traders in  liquor--’fee’, if fee in technical sense of the expression, Punjab  Excise  Act,  1 of 1914, S.  34  and  Punjab  Liquor Licence Rules, 1956, Rules 35 and 59(d)--Grant of licence to the sale of liquor--Fee, if can be fixed by auction. Punjab Excise Act, 1 of 1914, Ss. 3(9), 34, 59(d) and 60 and Punjab Liquor Licence Rules, 1956, Rules 11, 12 and 31--Levy of  ’fixed  fee’  and  additional  fee  on  persons  holding licences for sale of foreign liquor, if illegal.

HEADNOTE: The appellants are retail vendors of country liquor  holding licences  for the sale of liquor in specified vends.   Those licences were granted to them on acceptance of their  bids-, in the auctions held by the Excise Department, Government of Punjab.   The appellants in Civil Appeals Nos. 485 and  2205 of 1969 held licences for the retail sale of foreign  liquor for   consumption  on  the  premises  of  their   respective establishments. Facts in Civil Appeal No. 365 of 1971 are as follows : Consequent on the judgment dated March 12, 1968 of the  High Court  of Punjab and Haryana in Civil Writ No. 1376 of  1967 (Jage Ram and Ors. v. State of Haryana & Ors.), holding that the  auctions for granting the right to sell country  liquor for  the  year  1968-69 had become  ineffective,  the  first respondent  held on March 23, 1968 an auction  for  granting the right to sell country liquor at the ’Town Hall Vend’ and ’Kailash Cinema Chowk Vend’, Ludhiana.  The appellants  gave bids  in  the  sum  of  Rs.  34,01,000  and  Rs.   12,02,000 respectively  for  two  vends,  and  those  bids  were  duly accepted by the first respondent.  The appellants were  then granted  licences  in  Form IS. 14-A of  the  Punjab  Liquor Licence Rules, 1956.  ’The appellants deposited Rs. 1,41,708 for the Town Hall Vend and Rs. 50,091 for the Kailash Cinema Chowk  Vend being 1/24th of the licence fee required  to  be deposited by way of security.  They were, however, unable to meet  their obligations under the conditions of auction  and fell in arrears.  The State Government demanded the payment, threatened to cancel the licences granted to the  appellants and  declared its intention to resell the vends at the  risk of the appellants.  On August 22, 1968, the appellants filed their writ petition in the High Court of Punjab and Haryana. They  prayed  for a direction quashing the auction  held  on March 23, 1968 and secondly, they asked that the respondents be  restrained form enforcing the obligations arising  under the terms and conditions of the auction. The High Court held that the State Legislature was competent to  regulate the business of vending  intoxicating  liquors, that  various  provisions of the Act showed that  the  State Government  had the exclusive right to manufacture  or  sell intoxicants,  that  the  Financial  Commissioner  held   the jurisdiction to determine the method of disposal of  country liquor vends, that the rules under which the 255 impugned auctions were held are substantially different from those under which the auctions challenged in Jage Ram’s case were  held,  that  s. 34 of the Act is not  an  instance  of delegated  legislation and that the fixation of the  maximum price of country liquor was a part of the power to  regulate the  trade in liquor.  On the main contention that the  levy in  the shape of licence fee was unconstitutional, the  High Court  held  that licences granted for regulating  trade  in

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intoxicating liquors stand in a class by themselves and that the  consideration  which governs licence  fees  charged  in return for services rendered cannot apply to licences issued to the successful bidders at auctions of liquor vends.   The High  Court further held that Entry 66 in the State List  is not  confined  to  fees levied  for  services  rendered  but extends to all kinds of fees and therefore the imposition of the licence fee was within the ambit of that Entry. in these appeals founded on certificates of fitness  granted by  the High Court of Punjab and Haryana under Arts.  132(1) and 133(1) (a) and (c) of the Constitution, it was contended on  behalf  of the appellants that (1)  the  Financial  Com- missioner has no power to frame rules so as to authorise the grant  of liquor licences by holding auctions; (2) under  s. 34   of   the  Punjab  Excise  Act,  1914,   the   Financial Commissioner   has  no  right  to  authorise  the  levy   or collection  of any amount which, strictly, is not a fee;  an auction  bid for fixing ’fees’ is a contradiction in  terms; (3) The licence fee bears no relationship with the  services rendered to the licensees and is therefore not ’fee’ in  the true  sense.   Nor can the licence fee be  justified  as  an ’excise duty’ as it is not levied on the manufacture or pro- duction of liquor; (4)The real character of the levy imposed on licensees through the medium of auctions is that it is in the  nature of a tax; and the Financial Commissioner who  is an  independent statutory authority having powers which  are distinct and different from those of the Government, has  no authority  to  impose  the tax; nor indeed,  has  the  State Government  the  power  to  impose  such  a  tax;  (5)   The Government  cannot under a contract impose a levy  which  it has  no  power  to  impose by law; (6)  The  new  terms  and conditions  of  auctions are, basically  and  in  substance, similar to those which were struck down, by the Punjab  High Court  in  Jage Ram’s case which decision  was  affirmed  in appeal by the Supreme Court-. and (7) The demand made by the Government  for payment of large sums of money by  hoteliers and bar-keepers who supply foreign liquor for consumption on their  premises is arbitrary, without the authority  of  law and otherwise illegal.  The respondents raised a preliminary objection to the maintainability of the writ petitions filed by  the appellants and to- the grant of reliefs  claimed  by them  on the ground that such of the appellants who  offered their  bids in the auctions did so with a full knowledge  of the terms and conditions attaching to the auctions and  they cannot by their writ petitions, be permitted to wriggle  out of the contractual obligations arising out of the acceptance of their bids. Dismissing the appeals, HELD   :  (On  the  preliminary  objection  raised  by   the respondents).   The bids given by the appellants  constitute offers and upon their acceptance by the Government a binding agreement came into existence between the parties.  The con- ditions  of auction became the terms of the contract and  it is  on  those  terms  that  licences  are  granted  to   the successful  bidders  in  Form  L 14-A  of  the  Rules.   The licensees exploited the respective licences for a portion of the period of their currency, presumably in expectation of a profit.   Commercial  considerations may  have  revealed  an error of judgment in the initial assessment of profitability of  the  adventure  but that is a  normal  incident  of  all trading  transactions.   Those who contract with  open  eyes must  accept  the  burdens of the contract  along  with  its ’benefits.   The  powers of the  Financial  Commissioner  to grant liquor licences by auction and to collect licence fees through  the medium of auctions cannot by writ petitions  be

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questioned by those who, had their venture succeeded,  would have  relied upon those very powers to found a legal  claim. Reciprocal rights and obligations arising out of contract do not   depend  for  their  enforceability  upon   whether   a contracting party finds if prudent to abide by the terms  of the contract.  By such a test no contract could ever have a. binding force. [265B; 263D-E] Lekhrai  Sairamdas Lalvani v. Deputy  Custodian-cum-Managing Officer & Ors., [1966] 1 S.C.R. 120, relied on. 256 Basheshar Nath v. The Commissioner of Income-tax, Delhi, and Rajasthan & Anr. [1959] Supp. 1 S.C.R. 528, referred to. Just as country liquor contractors offered bids  voluntarily on   terms  and  conditions  governing  the  auctions,   the appellants  in Civil Appeals Nos. 485 and 2205 of  1969  who hold licences in Form Nos.  L-3, L-4 and L-5 for the  retail vend of foreign liquor, voluntarily applied for and accepted the   licences  knowing  fully  well  that   the   Financial Commissioner  had  the power to frame  rules  governing  the licences.   The  licences,  in a large  measure,  owe  their existence  and  validity  to the rule-making  power  of  the Financial  Commissioner.   One  of  the  reliefs  which  the appellants ask for is that Rules 27A, 30 and 31 be  declared ultra  vires  and  unconstitutional  and  consequently   the respondents be directed to refund the assessed fees  already recovered.   By attempting to exploit the  licences  without the  burden  of assessed fees originally attaching  to  them under  the rules framed by the Financial  Commissioner,  the appellants are seeking to work the licences on such terms as they  find convenient. The writ jurisdiction of High  Courts under  Art.  226  of the Constitution  is  not  intended  to facilitate  avoidance of obligations  voluntarily  incurred. [265 H; 266 A-B] Held  further, (i) The true position governing  dealings  in intoxicants  is as stated and reflected in the  Constitution Bench  decisions  of this Court in The State of  Bombay  and Anr.  v.  F.  N. Balsara, [1951] S.C.R.  682,  Cooverjee  B. Bhavasha   v.   The  Excise  Commissioner  and   the   Chief Commissioner, Ajmer & Ors. [1954] S.C.R. 875, State of Assam v. A. N. Kidwai, Commissioner of Hills Division and Appeals, Shillong [1957] S.C.R. 295, Nagendra Nath Bara & Anr. v. The Commissioner  of Hills Division and Appeals, Assam and  Ors. [1958]  S.C.R. 1240, Amar. Chandra Chakrabarty v.  Collector of Excise, Government of Tripura & Ors. [1973] 1 S.C.R.  633 and  State  of  Bombay v. R. M.  D.  Chamarbaugwala,  [1957] S.C.R.  874  as  interpreted in State of Orissa  and  Om  v. Harinarayan Jaiswal and Ors. [1972] S.C.R. 784 and Nashirwar etc.  v. State of Madhya Pradesh & Ors.  Civil Appeals  Nos. 1711-1721  and  1723 of 1974 decided on November  27,  1974. There  is  no fundamental right to do trade or  business  in intoxicants.   The State, under its regulatory  powers,  has the  right to prohibit absolutely every form of activity  in relation  to intoxicants-its manufacture,  storage,  export, import,  sale and possession.  In all their  manifestations, these rights are vested in the State and indeed without such vesting  there  can be no effective  regulation  of  various forms of activities in relation to intoxicants. [277 F-G] Krishna Kumar Narula etc. v. The State of Jammu and  Kashmir JUDGMENT: Crowley  v. Christansen, 54 Law, Ed. 620, 623 and Russel  v. The Queen 7 A.C. 829, referred to. (ii)The  distinction  which  the  Constitution  makes   for legislative  purposes  between a ’tax’ and a ’fee’  and  the characteristics  of these two as also of ’excise  duty’  are well  known.   The amounts charged to the licensees  in  the

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instant case are, evidently, neither in the nature of a  tax nor  of excise duty.  But then, the ’licence fee’ which  the State Government charged to the licensees through the medium of  auctions  or  the ’fixed fee’ which it  charged  to  the vendors of foreign liquor holding licensees in Forms.   L-3, 1-4  and  L-5  need bear no quid pro  quo  to  the  services rendered  to the licensees.  The word ’fee’ is not  used  in the  Act  or  the  Rules  in  the  technical  sense  of  the expression.  By ’licence fee’ or ’fixed fee’ is meant the or consideration which the Government charges to the  licensees for  parting  price  privileges and  granting  them  to  the licensees.   As the State can carry on a trade or  business, such  a  charge  is  the normal incident  of  a  trading  or business transaction. [278 H, 279 B-C] Mathews  v. Chickory, Marketing Board, 60 C.L.R.  263,  276, The Commissioner, Hindu Religious Endowment$, Madras v.  Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt; [1954]  S.C. 1005, 1041 and M/s.  Guruswamy & Co. Etc.v.  State of Mysore & Ors., [1967] 1 S.C.R. 548, referred to. Gundbing  v. Chicago, 44 L.ed. 725, Phillips v. Mobile,  52, L.ed.  578 and Richard v. Mobile, 52 L.ed     581,  referred to. (iii)The position obtaining under the Rules as  amended on  March 22, 1969 is in principle different as  the  still- head duty is now only 0.64 Paise as against  257 Is.  17-60 per liter which was in force under the old  rules and  excise  duty as such s no longer  payable  on  unlifted quota.   The  principles governing the decisions  in  Bhajan Lal’s case C.A. Nos. 1642 and 1643 of 1968 decided on August 21,  1972) and Jage Ram’s case cannot, therefore, apply  any longer. [281 B-F] (iv)As the amount payable by the licensees on the basis  of the  bids  offered by them in auction and on  the  basis  of ’Fixed and Assessed Fees’ is neither a fee in the  technical sense  nor  a  tax but is in the nature of the  price  of  a privilege,   there   is  no  question   of   the   Financial Commissioner  lacking  power to organize auctions so  as  to authorize  the  recovery of any amount which is  not  a  fee properly so-called.  The Financial Commissioner, under s. 34 of  the  Act read with rule 59(d), has the power  to  direct that  licences may be granted on payment of such fees,  that is, such consideration as he may by rules prescribe.  It  is open  to him to frame a rule, as he has in fact framed  Rule 35,  directing that any class of licences may be granted  on payment  of fees fixed by auction.  Once it  is  appreciated that auctions are only a mode or medium for ascertaining the best  price  obtainable for the grant of privilege  to  sell liquor,  there  would  be no  ’contradiction  in  terms’  in directing,  as r. 35 does, that a class of "licences may  be granted on the fee fixed by auction. [281 F-H] (v)It  is  true  that  the  amendments  under  which   the appellants  (holding  licenses for sale of  Foreign  liquor) have been called upon to pay fixed fees were made after  the licences were renewed.  But the licences, though renewed  in January 1968, were to be effective from April 1, 1968.   The amendments  having  come into force before  April  1,  would govern  the  appellants’ licences and they  are,  therefore, liable  to  pay  the fixed fees  under  the  amended  rules. Licences  are granted under s. 34 of the Act subject to  the payment  of  such  fees as the  Financial  Commissioner  may direct.   The  rules  made  under  s.  59(d)  authorize  the imposition  of additional fees and such authorization  would operate  on all licences to be effective  thereafter.   Such payments  demanded from the appellants are "excise  revenue’

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within  the meaning of s. 3(9) and 60(1) (a) of the Act  and it is, therefore, open to the Government to recover its dues in the manner authorised by s.     60 of the Act. [282 EF]

& CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 365,  366, 485,  1102, 1260 to 1263, 1385, 1537, 1548 to 1551, 1553  to 1555, 1557 to 1560, 1566 to 1573, 1588, 1588, 1589, AND 2205 of 1969. Appeals  from the Judgment & Order dated the 18th  November, 1968/6th/10th/24th  January,  1969 of the Punjab  &  Haryana High Court in C.W. Nos. 37/69, 2646/68, 2582/68, 1818, 2343, 2875,  2754, 2254, 2256, 2629, 2630, 2753 & 29-11/68  91/69, 2706-2708,  3084, 2460, 2461, 2644, 2652, 2580, 2581,  2549, 2699, 2501, 2694, 1277 and 2514 of 1968, for the  appellants (In C. As.  Nos. 365, 366, 1102 1537, 1548-1551,  1553-1555, 1557-1560, 1566-1573, 1588 & 1589/69). V.M. Tarkunde (In C.A. Nos. 1566, 485/69), A. K. Sen  (In C.A. Nos. 1559 & 1588/69) Tirath Singh Mujral, (In all the 258 appeals) except C.As. Nos. 1537, 1554, 1557 and ’1558/69) P. C.  Bhartari and 0. C. Mathur (In all the appeals and B.  P. Jha (In all the appeals except C.As. Nos. 1566, 485, 1559  & 1588/69). S.K.  Mehta,  K. R. Nagaraja and M. Qamaruddin,  for  the appellants.  In C.As. Nos. 1260-1263/693. K.B.  Rohtagi and Tarachand Sharma, for  the  appellants, (In C.A. No. 1385/69). Tirath Singh Munjral and H. K. Puri, for the appellants  (In C.A. No. 2205/69). F.S. Narinan, Additional Solicitor General of India, C In C.A. No. 365/69) V. C. Mahajan (In C.A. No. 1102/69), H.  S. Dhillon  (In C.A. Nos. 1588-1589/69) K. S. Chawla  (In  C.A. No.  2205/69)  S. S. Jauhar (In C.A. No.  1537/69),  S.   K. Gambhir  (In C.As. Nos. 1548-1551/69) N. S. Das.   Behl  (In C.As.  Nos. 1553-1555/69), Bishamber Lal, (In C.  As.   Nos. 1557-1560/69)  Harbans,  Singh,  (In  C.  As.   Nos.   1566- 1573/69),  N. N. Goswami (In C.A. Nos. 1588-1589/69)  K.  S. Chawla  (In  C.A.  No. 2205/69) 0. P. Sharma,  (In  all  the matters), for the respondents (In C.As. Nos. 366, 1260-1263, 1385, 1537, 1548-1551, 1553-1555, 15571560, 1566-1567 1573 & 2205/69)  and respondent Nos. 1-3 (In C.As. Nos. 365,  1102, 1568-1572- 1588 and 1589-/69). 0. P. Sharma, for respondents (In C-As.  Nos, 485/69). The Judgment of the Court was delivered by CHANDRACHUD, J.-This is a group of appeals founded on certi- ficates  of fitness granted by the High Court of Punjab  and Haryana  under Articles 132(1) and 133(1)(a) and (c) of  the Constitution.   The appeals arise out of a  common  judgment dated  November  18, 1968 rendered by the High  Court  in  a batch  of  152  writ  petitions under  Article  226  of  the Constitution.    Those  petitions  were  filed   by   liquor contractors and hoteliers to challenge the demands made upon them by the Department of Excise and Revenue, Government  of Punjab. The  appellants are mostly retail vendors of country  liquor holding licences for the sale of liquor in specified  vends. Those  licences were granted to them on acceptance of  their bids  in  the  auctions  held  by  the  Excise   Department, Government  of Punjab.  The ’licence fees’ realised  through bids made in the auction are said to be in the  neighborhood of Rs. 29 crores. In  Civil Appeals Nos. 485 and 2205 of 1969, the  appellants

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held  licences  for the retail sale of  foreign  liquor  for consumption   on   the   premises   of   their    respective establishments. Civil  Writ No. 2645 of 1968 out of which Civil  Appeal  No. 365  of  1971  arises, may be taken to  be  typical  of  the petitions  filed by retail vendors of country  liquor.   For understanding  the points in controversy it would be  enough to refer to the facts of that petition.  259 Auctions  for granting the right to sell country liquor  for the year 1968-69 were initially held in various districts of Punjab on or about March 8, 1968 in pursuance of  conditions of  auction  framed on February 19,  1968.   Those  auctions became  ineffective by reason of a judgment dated March  12, 1968  of a Division Bench of the High, Court of  Punjab  and Haryana  in Civil Writ No. 1376 of 1967 (Jage Ram  and  Ors. vs.  State of Haryana & Ors.). Following an earlier judgment in  Bhajan Lal vs.  State of Punjab (Civil Writ No.  528  of 1966  decided on February 6, 1967), the High Court took  the view  that  the licence fee realised through the  medium  of auctions  was really in the nature of "still-head duty"  and that licences could not be called upon by the Government  to pay  still-head  duty on the liquor quota which,  under  the terms of auctions, they were bound to lift but which in fact was not lifted by them. On  March 21, 1969 a meeting of the, State  Excise  Officers was.   held   under  the  chairmanship  of   the   Financial Commissioner  to evolve a new formula for leasing the  right to  sell  liquor so as to meet the judgment  in  Jage  Ram’s case.  The new policy containing fresh terms and  conditions of  auction  was  announced on the  22nd  and  the  impugned auctions  in pursuance of that policy were held  immediately thereafter. On March 23, 1968 the first respondent-the Deputy Excise and Taxation Commissioner Jullundur-held an auction for granting the right to sell country liquor at the ’Town Hall Vend’ and the  Kailash Cinema Chowk Vend’, Ludhiana.   The  appellants gave  bids  in the sum of Rs. 34,01,000  and  Rs.  12,02,000 respectively  for  the two vends and those  bids  were  duly accepted by the first respondent.  The appellants were  then granted  licences  in  Form L. 14-A  of  the  Punjab  Liquor Licence Rules, 1956 (herein called "the Rules"), Forr L. 14- A  is prescribed under the Rules for the grant  of  licences for  "retail vend of country spirit for consumption off  the premises". The  conditions  governing auctions  were  notified  through announcements made at the time of auctions.  Condition No. 1 provides  that  all  licences for sale  of  country  spirit, foreign  liquor, Beer, etc. shall be granted subject to  the provisions of the Punjab Excise Act, 1 of 1914, (hereinafter called  "the  Act")  and the rules  framed  thereunder.   By Condition 14(1), licences for retail vend of country  spirit are granted on the basis of "licence fee" fixed by  auction. Condition  14(ii) requires that the quota of country  liquor fixed for each vend must be announced before the vend is put to auction.  Under Condition 15(i) the successful bidder has to  deposit security equivalent to 1/24th of the  amount  of the  annual  licence  fee within  the  stated  period.   The security  is  refundable to the licensee at the end  of  the year unless it is liable to be forfeited or adjusted against any  amount due from him in respect of the licence.   Clause (ii)  of condition 15 requires the successful bidder to  pay the  whole  amount of licence fee in 24  equal  installments spread  over  the  year.   Clause  (iii)  of  Condition   15 authorises   the  Collector  to  resell  the  vend  if   the

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successful  bidder fails to deposit the security or  refuses to accept the licence, 260 In  the event of such resale, any deficiency in the  licence fee  is  recoverable from the defaulter in the  manner  laid down in section 60 of the Act which provides by clauses  (a) and (c) that an "excise revenue" and all amounts due to  the Government on account of any contract relating to the excise revenue  may be recovered from the person liable to pay  the same  by  any process for the recovery of  arrears  of  land revenue.  By Condition 15(iv), a similar right is  conferred on the Collector to resell vend in the event of the  cancel- lation  of a licence.  By Condition 17, the still-head  duty on ordinary spiced country spirit is leviable at the rate of Rs.  0.64  per proof liter.  Condition  18(i)  entitles  the licensee  to  the refund of the proportionate  part  of  the licence fee if there is a shortfall in the supply of  liquor to him but he is not entitled to any compensation or damages for  the  short supply.  By Condition No.  24,  the  maximum price at which the spiced country liquor may be sold by  the licensee is fixed at Rs. 10.00 per Quart, Rs. 5.25 per  Pint and Rs. 2.75 per Nip. The  Town Hall Vend was auctioned on the basis of the  fixed quota  of  1,50,560  proof liters  which  is  equivalent  to 4,01,000  bottles per year.  The Kailash Cinema  Chowk  Vend was  auctioned  on the basis of the fixed  quota  of  50,506 proof  liters  which is equivalent to 1,34,685  bottles  per year. The appellants deposited Rs. 1,41,708 for the Town Hall Vend and  Rs.  50,091  for the Kailash Cinema  Chowk  Vend  being 1/24th of the licence fee required to be deposited by way of security.    They  were,  however,  unable  to  meet   their obligations  under  the conditions of auction  and  fell  in arrears.    The  State  Government  demanded  the   payment, threatened to cancel the licences granted to the  appellants and declared its intention to resell the vends a the risk of the appellants. On August 22, 1968 the appellants filed their writ  petition in  the High Court of Punjab and Haryana.  They  prayed  for three  reliefs  out of which only two were  pressed  at  the hearing.   They asked for a direction quashing the  auctions held  on  March 23, 1968 and secondly they  asked  that  the respondents  be  restrained from enforcing  the  obligations arising under the terms and conditions of the auctions.  The Deputy  Excise and Taxation Commissioner, Jullundar, is  the first  respondent to the petition; the Excise  and  Taxation Commissioner Punjab, Patiala, is the second respondent;  and the  State  of Punjab is the third respondent.   The  relief sought  against the fourth respondents private firm-was  not pressed. Though several contentions-factual and legal were raised  in the petitions, the appellants restricted their challenge, in the High Court, to the following points :-               (1)   The  Excise  and  Taxation  Commissioner               (who  in the Punjab exercised the powers of  a               Financial  Commissioner under the Act) had  no               jurisdiction  to  determine  ’the  method   of               disposal of the country liquor vends;                261               (2)   The  power  conferred on  the  Financial               Commissioner  under section 34 of the  Act  to               grant a license, permit or pass on payment  of               such  fees, if any, as he may direct  did  not               extend  to  disposing of  the  country  liquor               vends by-auction;

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             (3)   The  impugned auctions  conducted  under               the  amended Rule 36 on the basis of  estimated               quota  in  proof  litres  was  in   substance,               founded  on  the same system  which  had  been               struck  down by the High Court in  Jage  Ram’s               case  where it was held that the levy  imposed               through  the medium of auctions was a tax  and               not a licence fee;               (4)   The State Government alone was competent               to  impose a tax or an excise duty  under  the               Act; that power could not be delegated to the,               Financial Commissioner or any other officer.               (5)   Section  34 of the Act  which  empowered               the  Financial Commissioner to levy  fees  was               not a charging section; but if it is construed               as containing a delegation to him of the power               of the state to levy taxes, no guidelines were               laid   down  and  thus  the   delegation   was               excessive.               (6)   The  fee which could be imposed  by  the               Financial Commissioner under Section 34 of the               Act  could  only  be justified  if  it  had  a               reasonable  relation to the services  rendered               to the licensees.  If it was imposed solely or               mainly for the purpose of collecting  revenue,               it was outside the ambit of Item 66 of List II               of  the Seventh Schedule of the  Constitution.               The  amounts realised in the auctions  in  the               guise of licence fees were so exorbitant  that               they  could  not possibly be  justified  under               item 66.               (7)   The  rule  fixing the maximum  price  at               which a licence could sell a bottle of  liquor               was ultra vires of the rule,-making powers  of               the Financial Commissioner under Section 59 of               the Act. The High Court negatived all of these contentions.  It  held that  the  State Legislature was competent to  regulate  the business  of  vending  intoxicating  liquors,  that  various provisions  of the Act showed that the State Government  had the exclusive right to manufacture or sell intoxicants, that the Financial Commissioner had the jurisdiction to determine the  method  of disposal of country liquor vends,  that  the rules  under  which  the impugned  auctions  were  held  are substantially different from those under which the  auctions challenged in Jage Ram’s case were held, that section 34  of the Act is not an instance of delegated legislation and that the  fixation of the maximum price of country liquor  was  a part  of the power to regulate the trade in liquor.  On  the main  contention that the levy in the shape of  licence  fee was  unconstitutional,  the High Court  held  that  licences granted for regulating 262 trade in intoxicating liquors stand in a class by themselves and  that  the  consideration  which  governs  licence  fees charged  ’in  return for services rendered cannot  apply  to licences  issued  to the successful bidders at  auctions  of liquor vends.  The High Court further held that Entry 66  in the  State List is not confined to fees levied for  services rendered but extends to all kinds of fees and therefore  the imposition  of the licence fee was within the ambit of  that Entry. Before  us,  the controversy was limited  to  the  following contentions               1.    The Financial Commissioner has no  power

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             to frame rules so as to authorise the grant of               liquor licences by holding auctions;               2.    Under  section 34 of the  Punjab  Excise               Act,  1914, the Financial Commissioner has  no               right  to authorise the levy or collection  of               any  amount which, strictly, is not a fee;  an               auction   bid   for   fixing   ’fees,   is   a               contradiction in terms;               3.    The  licence fee bears  no  relationship               with  the services rendered to  the  licensees               and  is  therefore  not a ’fee’  in  the  true               sense’.  Nor can the licence fee be  justified               as an ’excise duty’ as it is not levied on the               manufacture or production of liquor;               4.    The  real character of the levy  imposed               on licensees through the medium of auctions is               that  it  is in the nature of a tax;  and  the               Financial  Commissioner who is an  independent               statutory  authority having powers  which  are               distinct  and  different  from  those  of  the               Government,  has  no authority to  impose  the               tax; nor, indeed, has the State Government the               power to impose such a tax.               5.    The  Government cannot under a  contract               impose a levy which it has no power to  impose               by law;               6.    The new terms and conditions of auctions               are,  basically and in substance,  similar  to               those  which  were struck down by  the  Punjab               High  Court  in  Jage  Ram’s  case  and  which               decision was affirmed in appeal by the Supreme               Court; and               7.    The  demand made by the  Government  for               payment  of large sums of money  by  hoteliers               and bar-keepers who supply foreign liquor  for               consumption  on their premises  is  arbitrary,               without  the  authority of law  and  otherwise               illegal. Learned  counsel  for the respondents raised  a  preliminary objection to the maintainability of the writ petitions filed by  the  appellants and to the grant of reliefs  claimed  by them.   He contends that such of the appellants who  offered their  bids in the auctions did so with a full knowledge  of the terms and conditions attaching to the auctions and  263 they  cannot  by  their  writ  petitions,  be  permitted  to wriggle.  out of the contractual obligations arising out  of the  acceptance  of  their bids.  This  objection  is  well- founded and must be accepted. Those interested in running the country liquor vends offered their  bids  voluntarily in the auctions held  for  granting licences  for  the sale; of country liquor.  The  terms  and conditions  of auctions were announced before  the  auctions were  held  and  the bidders participated  in  the  auctions without  a demur and with full knowledge of the  commitments which  the  bids involved.  The announcement  of  conditions governing  the auctions were in the nature of an  invitation to  an  offer to those who were interested in  the  sale  of country liquor.  The bids given in the auctions were  offers made   by  prospective  vendors  to  the  Government.    The Government’s acceptance of those bids was the acceptance  of willing offers made to it.  On such acceptance, the contract between ,,he bidders and the Government became concluded and a. binding agreement came into existence between them.   The successful bidders were then granted licences evidencing the

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terms  of  contract between them and the  Government,  under which  they became entitled to, sell liquor.  The  licensees exploited  the  respective  licences for a  portion  of  the period  of  their currency, presumably in expectation  of  a profit.   Commercial  considerations may  have  revealed  an error of judgment in the initial assessment of profitability of  the  adventure  but that is a  normal  incident  of  the trading  transactions.   Those who contract With  open  eyes must  accept  the  burdens of the contract  along  With  its benefits.   The  powers of the  Financial-  Commissioner  to grant  liquor  licensees by auction and to  collect  licence fees through the medium of auctions cannot by writ petitions be,  questioned by those who, had their  venture  succeeded, would  have relied upon those very powers to found  a  legal claim.   Reciprocal rights and obligations.. arising out  of contract do not depend for their enforceability upon whether a  contracting party finds it prudent to abide by the  terms of the contract.  By such a test no contract could ever have a binding force. In  Lekhraj  Satramdas  Lalvani  v.  Deputy   Custodian-cum- Managing  Officer & Ors.(1), the appellant who  was  removed from the manager-ship of certain evacuee properties filed  a petition  in the Kerala High Court under Article 226 of  the Constitution  praying  for a writ of  mandamus  against  the Deputy  Custodian  and  others.  This Court  held  that  the appellant’s  appointment was contractual in its  nature  and the duties or obligations arising out of contract could  not be enforced by the machinery of a writ under Article 226. There   was  some  discussion  before  us  as   to   whether Fundamental  Rights  could be waived and in  answer  to  the preliminary  contention of ’he respondents it was  urged  on behalf  of the appellants that they are entitled to  enforce their  fundamental rights, no matter whether they agreed  to waive  those rights while entering into contracts  with  the Government.  In support of the, contention that there can be no  waver of fundamental rights, reliance was placed by  the appellants  on  the  well-known decision of  this  Court  in Basheshar  Nath v. The Commissioner of Income-Tax,  Delhi  & Rajasthan & Anr.(2). (1)  [1966] 1 S.C.R. 120. (2) [1959] Supp. 1 S.C.R. 528.. 264 The writ petitions filed by the appellants in the High Court are   wholly   directed  to  showing  that   the   Financial Commissioner  lacked  the  power to  grant  liquor  licences through auctions and to levy through the medium of  auctions a sum which was not a ’fee’ in the strict sense of the term. The  two reliefs which the appellants asked for in the  writ petitions  are that the auctions held by the Government  for granting liquor licences and the bids offered therein by the prospective licensees should be quashed and secondly that  a direction  should be issued to the  respondents  restraining them from enforcing the obligations arising under the  bids. It  is interesting that except in the title of the  petition showing  that  it  was  filed  "Under  Article  226  of  the Constitution  of  India", the representative  Writ  Petition (No.  2646 of 1968) does not even refer to so much  as,  any provision of the Constitution, much less to the infringement of any Constitutional rights.  Apart from this, in the  view which  we  are disposed to take on the main  contention,  no question of the waiver of a "fundamental right" can arise. The appellants objected to the preliminary contention of the respondents  on the ground that in their  counter  affidavit filed  in the ’High Court, respondents had not pleaded  that there was any contract ’between the parties or that the writ

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jurisdiction  of the High Court was inappropriate  _for  the enforcement   of   contractual  rights.    This   submission overlooks  the  material  averments contained  in  the  res- pondents’  counter affidavit.  This is what  the  respondent say               "The  allegations with respect to  the  policy               are not relevant inasmuch as the  petitioner’s               liability arises from the terms and conditions               of the Excise contract granted in his favour.               "I   further  submit  that  the   petitioners’               voluntarily  and  of their own  free  volition               offered  themselves as bidders at the time  of               auction.   The petitioners were aware  of  the               business  that  they were likely to  do  as  a               result  of grant of licence in  their  favour.               Since  theirs  was the highest bid  they  were               also  aware of the cost that they were  likely               to  incur  for obtaining a bottle  of  country               liquor."               "I  submit that the conditions  regarding  the               sale  price  of  ,country  liquor  were   duly               announced  before  the  commencement  of   the               auction of the vend.  The petitioners gave bid               of   their   own  accord  knowing   all   the,               implications thereof.  The petitioners having,               taken   the  licence  with  open   eyes   .and               understanding  the law on the subject have  no               cause of action.  No constitutional  provision               has been infringed." Towards  the end of the counter affidavit it is stated  that the  appellants had made contradictory allegations  "with  a view  to confusing the real issue in an attempt  to  wriggle out of their contractual obligations." It is thus clear that in the High Court, the respondents had raised the contention which  is taken before us by their counsel in the form of  a preliminary objection. On  the preliminary objection it was fin-ally urged  by  the appellants that the objection was misconceived because there was, in fact, no  265 contract  between  the parties and therefore they  were  not attempting  to enforce any contractual rights or to  wriggle out  of contractual obligations.  The short answer  to  this contention  is  that  the  bids  given  by  the   appellants constitute   offers  and  upon  their  acceptance   by   the Government  a binding agreement came into existence  between the parties.  The conditions of auction become the terms  of the  contract  and it is on those terms  that  licences  are granted  to  the successful bidders in Form L. 14-A  of  the Rules.  As stated in Chesbire and Fifoot’s ’Law of Contract’ (Eighth Ed., 1972; P. 24),               "In  order to determine whether, in any  given               case, it is reasonable to infer the  existence               of  an  agreement, it has long been  usual  to               employ  the language of offer and  acceptance.               in  other  words, the court examines  all  the               circumstances  to see if the one party may  be               assumed  to have made a firm ,,offer"  and  if               the  other  may  likewise  be  taken  to  have               ’accepted"  that offer.   These  complementary               ideas present a convenient method of analysing               a  situation,  provided  that  they  are   not               applied  too literally and that facts are  not               sacrificed to phrases." Analysing  the situation here, a concluded contract must  be

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held  to have come into existence between the parties.   The appellants  have  displayed ingenuity in  their  search  for invalidating  circumstances  but a writ petition is  not  an appropriate remedy for impeaching contractual obligations. In   Civil  Appeals  Nos.  485  and  2205  of  1969,   filed respectively  by Northern India Caterers (P) Ltd., and  M/s. Green  Hotel, Bar and Restaurant and Others, the  appellants hold  licences in Form Nos.  L-3 L-4 and L-5 for the  retail vend  of foreign liquor in a hotel, restaurant and in a  bar attached  to  a  restaurant.   No  auctions  were  held  for granting  these  licences and therefore the  reasoning  that acceptance  of  bids  brought  into  existence  a  concluded contract  between the successful bidders and the  Government will not apply to the cases of these appellants.  But.  they also accepted the licences subject to the provisions of  the Punjab Excise Act, 1914 and the Punjab Liquor Licence Rules, 1956.  By section 34 of the Act a licence under the Act  has to  be  granted,  inter alia, on payment of  such  fees  and subject  to such restrictions and on such conditions as  the Financial Commissioner may direct.  Section 59(d) of the Act confers  power on the Financial Commissioner to  make  rules prescribing  the  scale of fees in respect of  any  licence. Rule  24  provides  that  the fees  payable  in  respect  of licences shall be either (a) fixed fees or (b) assessed fees or  (c)  auction fees.  By amendments made on  February  22, 1968  wad March 30, 1968, the fixed fees were  substantially enhanced  and the, appellants were called upon to pay  those fees.   Just  as  country liquor  contractors  offered  bids voluntarily on terms and conditions governing the  auctions, so  in these two appeals the appellants voluntarily  applied for  and accepted the licences knowing fully well  that  the Financial   Commissioner  had  the  power  to  frame   rules governing the licences.  Whether the amendments made to  the Rules  after  the  appellants’  licences  were  renewed  are applicable  is  another  matter but  the  appellants  cannot question the power of the Financial Commissioner to frame- 266 those  rules.  The licences, in a large measure,  owe  their existence  and  ,validity to the rule-making  power  of  the Financial  Commissioner.   One  of  the  reliefs  which  the appellants ask for is that Rules 27A, 30 and 31 be  declared ultra  vires  and  unconstitutional  and  consequently   the respondents be directed to refund the assessed fees  already recovered.   By attempting to exploit the  licences  without the  burden  of assessed less originally attaching  to  them under  the rules framed by the Financial  Commissioner,  the appellants are seeking to work the licences on such terms as they find convenient.  The writ jurisdiction of High  Courts under  Article  226 of the Constitution is not  intended  to facilitate  avoidance of obligations  voluntarily  incurred. That, however will not estop the appellants from  contending that the amended Rules are not applicable as their  licences were renewed before the amendments were made. Though  this  is  the true position, we do  not  propose  to dismiss  the appeals on the narrow ground that the  reliefs, or some of them, sought by the appellants cannot be  awarded in  the writ petitions brought by them.  We have  heard  the appeals  fully and since the points involved are of  general public importance, we would like to deal with the appeals on merits. The main and the real focus of controversy is the power,  of the Government to levy and realise large licence fees either through the medium of auctions or on scales fixed under  the rules.  The  country liquor contractors  offered  incredibly high  bids  in  the auctions which on  the  whole  netted  a

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revenue  of  rupees  twentynine odd  crores  to  the  ’State Government.  Licensees like the Northern India Caterers  and M/s.   Green Hotel who run hotels, restaurants or bars  were asked under the amended rules to pay, besides assessed fees, fixed  fees varying between Rs. 7500 and Rs. 20,000 for  the year.  Apprehending ’that it was fruitless to do business on these  terms  and fearing the resort ’by the  Government  to coercive measures for the recovery of the amounts due to it, the  appellants filed writ petitions in the High Court  soon after  ’the  commencement of the term  of  their  respective licences. Liquor  licensing has a long history.  Prior to the  passing of the Indian Constitution, the licensees mostly  restricted their challenge to the demands of the Government as being in excess  of  the conditions of the licence or on  the  ground that  the rules in pursuance of which such  conditions  were framed  were themselves beyond the rule-making power of  the authority  concerned.  This conflict took a new shape  after the  enactment  of the Constitution.  The challenge  now  is generally based on the ground that there is no quid pro  quo between the fees imposed ,on the licensees and the  services rendered  to them; that the fees are in the nature of a  tax which  there  is no authority to impose; that the  ’levy  is beyond  the legislative competence of the State  Government; or  that the terms and conditions of the licence  constitute an unreasonable restriction on the fundamental right of  the citizen  to carry on business ’for the sale of liquor.   The appeals  before  us require consideration .of both  sets  of points. The  provisions  of  the Punjab Excise Act  1914,  like  the provisions  ,of  similar  Acts in  force  in  other  States, reflect the nature and the  267 A    width  of  the power which the  State  Governments  are empowered to exercise in the matter of liquor licensing.  We will  notice first the relevant provisions of the Act  under consideration. Section  5  of  the Act empowers  the  State  Government  to regulate  the maximum or minimum quantity of any  intoxicant which  may  be sold by retail or  wholesale.   Section  8(a) vests the general superintendence and administration of  all matters  relating to excise in the  Financial  Commissioner, subject to the control of the State Government.  Section  16 provides  that no intoxicant shall be imported, exported  or transported  except after payment of the necessary  duty  or execution of a bond for such payment and in compliance  with such conditions as the State Government may impose.  Section 17  confers upon the State Government the power to  prohibit the import or export of any C intoxicant into or from Punjab or  any  part thereof and to prohibit the transport  of  any intoxicant.   By   section  20(1)  no  intoxicant   can   be manufactured or collected, no hemp plant can be  cultivated, no  tari-producing tree can be tapped, no tari can be  drawn from  any  tree and no person can possess  any  material  or apparatus  for manufacturing an intoxicant other  than  tari except  under  the authority and subject to  the  terms  and conditions  of a licence granted by the Collector.  By  sub- section  (2) of section 20 no distillery or brewery  can  be constructed  or  worked  except  under  the,  authority  and subject to the terms and conditions of a licence granted  by the  Financial  Commissioner.  Section 24 provides  that  no person shall have in his possession any intoxicant in excess of such quantity as the State Government declares to be  the limit  of  retail sale, except under the  authority  and  in accordance  with  the terms and conditions of a  licence  or

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permit.   Sub-section (4) of section 24 empowers  the  State Government  to prohibit the possession of any intoxicant  or restrict  its possession by imposing such conditions  as  it may  prescribe.   Section 26 prohibits the  sale  of  liquor except  under  the authority and subject to  the  terms  and conditions of a licence granted in that behalf. Section  27  of  the Act empowers the  State  Government  to "lease"  on  such conditions and for such period as  it  may deem fit or retail, any country liquor or intoxicating  drug within  any  specified  local area.   On  such  lease  being granted  the Collector, under sub-section (2), has to  grant to the lessee a licence in the form of his lease. Section 34(1) of the Act provides that every licence, permit or  pass  under the Act shall be granted (a) on  payment  of such  fees, if any, (b) subject to such restrictions and  on such  conditions,  (c)  in such  form  and  containing  such particulars,  and  (d)  for such  period  as  the  Financial Commissioner  may  direct.   By section  35(2),  before  any licence  is  granted  for  the retail  sale  of  liquor  for consumption  on any premises the Collector has to  ascertain local  public  opinion in regard to the  licensing  of  such premises.   Section  36  confers  power  on  the   authority granting any licence to cancel or suspend it if, inter alia, any duty or fee payable thereon has not been duly paid. Section  56  of  the Act empowers the  State  Government  to exempt  any intoxicant from the provisions of the  Act.   By section  58  the  State Government may make  rules  for  the purpose of carrying out 268 the  provisions  of  this  Act.   Section  59  empowers  the Financial  Commissioner  by  clause  (a)  to  regulate   the manufacture, supply, storage or sale of any intoxicant.   By clause  (d)  of  section 59 the  Financial  Commissioner  is authorised  to make rules "prescribing the scale of fees  or the  manner  of fixing the fees payable in  respect  of  any licence, permit or pass or in respect of the storing of  any intoxicant."   Section  60(1)  provides  that  "all   excise revenue", any loss that may accrue, by reason of the  resale of a grant and all amounts due to the Government on  account of  any  contract  relating to the  excise  revenue  may  be recovered by any process for the recovery of arrears of land revenue. In pursuance of section 59(d) the Excise and Taxation Commi- ssioner on whom the powers of the Financial Commissioner are conferred  by the State Government framed the Punjab  Liquor Licence  Rules, 1956.  Since the appellants have  challenged the  legality of some of these rules and as the  rules  also indicate  the  large  powers  which  are  attempted  to   be exercised  under  the Act, it is essential to  set  out  the relevant rules. Rule  I contains a Table which. is divided into  six  parts, the  first  two  of which are called  "Foreign  Liquor"  and "Country  Spirit".  The classes of licences, their  mode  of grant  and  the  authorities who can  grant  and  renew  the licences  are specified in the Table.  Part I of  the  Table dealing with Foreign Liquor refers, inter alia, to  licences in  Form L-3, 1,4 and L-5 which relate respectively  to  (i) retail  vend of foreign liquor in a hotel or  dak  bungalow, (ii)  retail  valid of foreign liquor in  a  restaurant  and (iii)  retail vend of foreign liquor in a bar attached to  a restaurant.   Northern  India Caterers (P)  Ltd.,  and  M/s. Green Hotel, Bar and Restaurant, who are appellants in Civil Appeals No. 485 and 2205 of 1969 respectively hold  licences in Form Nos.  L-3, L-4 and L-5.  The Collector is designated as the authority to grant and renew these licences.

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Prior  to March 22, 1968 licences in Forms L-3, L-4 and  L-5 used to be granted on assessed fees only as provided in Rule 28.   The assessed fees were quantified in  accordance  with scale  of fees prescribed under Rules 30 and 31.  The  scale of fees was raised in 1965 by a Notification dated April 15, 1965.  Under the revised rates the following fixed fees were prescribed. "Indian made spirit              -Rs.   25 .00 Imported spirit                   -Rs.  31 .25 per bulk Wine                              -Rs. 6.25 litre Indian Beer                       -Rs.  0 .63 Imported Beer                     Rs. 1 /25" On  March  22, 1968 the second respondent  (the  Excise  and Taxation Commissioner) issued a notification in the exercise of  powers conferred by section 59 of the Act whereby a  new Rule  30  was  substituted for the old  Rule  30.   By  this notification,  the Table under Rule I was amended so  as  to provide for the levy of both ’Fixed Fee’ and 269 Assessed Fee’ on those licences.  Under the new Rule 30  the licensees in Forms L-3, L-4 and L-5 became liable to pay, in addition  to  assessed  fees,  fixed  annual  fees  at   the following rates : "(a) For a licence in a town with population not exceeding 50,000                               Rs. 5,000/- (b)  For a licence in a town with population exceeding 50,000 but not exceeding one lacs;    Rs.     7,500 (c)  For a licence in a town with population exceeding one lac but not exceeding two lacs;    Rs.    10,000 (d)  For a licence in a town with population exceeding  2 lacs.                       Rs.     15,000" .lm0 The  amendments made by this notification are  called  "’the Punjab Liquor Licence (First Amendment) Rules, 1968." On  March  30, 1968 another notification was issued  by  the second  respondent  introducing the  Punjab  Liquor  Licence Second  Amendment)  Rules, 1968.  Under these  rules  a  new rule-rule 27A was introduced whereby licensees in Forms L-3, L-4  and L-5 became liable to pay a fixed annual fee of  Rs. 10,000. The second part of the Table under Rule 1. which deals  with country  spirit,  refers, inter alia, to  licences  in  Form L-14-A  for "Retail vend of country spirit  for  consumption off  the premises".  Barring the two appellants referred  to above  the  other appellants hold licences in  Form  L-14-A. The  Table describes the mode of grant of the licence as  by "Auction". Rule  36 prescribes the procedure for the grant of  licences by  auction.   Before  the  annual  auctions  are  held  the Collector  is required to determine the quantum of  probable sales  during  the  period for which the licence  is  to  be auctioned.  The quota of country liquor thus fixed for  each vend  is  then to be announced by the Collector  before  the vend  is put to auction.  The notice of auction has to  spe- cify,  among  other  things, the  conditions  to  which  the auction is subject and the prices for retail vend of country Liquor.   Rule  23  provides for  the  payment  of  security deposit  and  Rule  24  for the resale  of  licence  on  the cancellation  of  an existing licence.   The  conditions  of auction  which  we  have set out at  the  beginning  of  our judgment  are  in fact in terms of the  rules  framed  under section 59(d) of the Act. The  Prohibition  and Excise laws in force in  other  States contain provisions substantially similar to those  contained in  the  Punjab Excise Act.  Several Acts  passed  by  State

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Legislatures  contain  provisions rendering it  unlawful  to manufacture  export, import, transport or sell  intoxicating liquor  except in accordance with a licence. permit or  pass granted  in  that behalf.  The Bombay Abkari Act  1878:  the Bombay Prohibition Act 1949; the Bengal Excise Act-, of 1878 and  1909;  the Madras Abkari Act 1886; the Laws  and  Rules contained in the Excise Manual United Province, the  Eastern Bengal  and  Assam  Excise Act 1910; the  Bihar  and  Orissa Excise Act 1’915; the 3-423SCI/75 270 Cochin  Abkari Act as amended by the Kerala Abkari Laws  Act 1964; and the Madhya Pradesh Excise Act 1915, are  instances of   State  legislations  by  which  extensive  powers   are conferred  on the State Government in the matter  of  liquor licensing. The  power of the State Government under section 17  of  the Act  to prohibit absolutely the import, export or  transport of  any intoxicant; its power under section 20  to  prohibit the  manufacture  or  collection of  an  intoxicant  or  the construction or working of a distillery or a brewery  except under the authority and subject to the terms and  conditions of a licence granted in that behalf, its power under section 24(4) to prohibit the possession of any intoxicant; and  its power  under section 27 to lease on such conditions and  for such period as it may deem fit, the right of  manufacturing, supplying  or selling an intoxicant are only  in  conformity with  the ancient and hoary rights which all governments  in all   countries  have  exercised  in,   matters   concerning intoxicants.    The  rationale  of  such  rights  has   been explained  in  several cases to some of which  we  many  now refer. In  Cooverjee B. Bharucha vs.  The Excise  Commissioner  and the  Chief Commissioner, Ajmer & Ors.,(1) it  was  contended that  the citizen had an unfettered right to carry on  trade and  business  in  liquor  under  Article  19(1)(g)  of  the Constitution  and  therefore  the provisions  of  the  Ajmer Excise  Regulation I of 1915 which conferred  discretion  on the  Excise  Commissioner to restrict the number  of  liquor shops  and to licence them by auction to the highest  bidder were  void  as  creating a monopoly in  liquor  trade.   The recovery  of large licence fees through public auctions  was also  attacked on the ground that the amount was not  a  fee but  was  in the nature of a tax and the same could  not  be recovered  by  recording  to  legislative  powers  saved  by Article 19(6) of the Constitution. Mahajan  C.J.,  delivering  the  unanimous  judgment  of   a Constitution Bench observed.               "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." This  position  was not disputed but is was urged  that  the sale  of intoxicating liquors by retail in small  quantities should  be  without restriction because every person  had  a right  which  interred in him, that is, a natural  right  to carry  on trade in intoxicating liquors and that  the  State had no right to create a monopoly in them.  This  contention was  repelled on the reasoning contained in the judgment  of Field J. in Crowley vs.  Christensen(2) Field J. observed                "There is in this position an assumption of a               fact  which  does  not exist,  that  when  the

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             liquors are taken in excess the               (1) [1964]  S.C.R.8 7 3.               (2) 3 4 Law.  Ed. 620, 623.               271               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 democratisation, it affects  those               who  are  immediately connected with  and  de-               pendent 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  drain  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 keep er 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 his 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.               Their  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  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." After  citing this passage the learned Chief Justice said  : "These  observations  have our entire concurrence  and  they completely negative tile contention raised on behalf of  the petitioner.   The provisions of the Regulations  purport  to regulate  trade in liquor to all its the  different  spheres and are valid." The contention that the effect of some of the provisions  of the  Regulation was to enable Government to confer  monopoly rights on One or more persons to the exclusion of others and

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that  the  creation  of such monopoly rights  could  not  be sustained  under  Article 19(6) was repelled on  the  ground that:               "Elimination  and exclusion from  business  is               inherent in the nature of liquor business  and               it will hardly be proper               272               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." Lastly,  the  argument  that the fees  recovered  by  public auction  were excessive was rejected on the ground that  one of  the purposes ,of the Regulations was to  raise  revenue, that  the licence fee though described as ’fee’ was more  in the nature of a tax, that revenue could be collected by  the grant  of  contracts to carry on trade in liquors  and  that these contracts could be sold by auction. In Stale of Assam v. N. Kidwai, Commissioner of Hills  Divi- sion  and  Appeals, Shillong,(1) Das C.J.,  speaking  for  a Constitution Bench, observed while rejecting a challenge  to some  of the provisions of Assam Act No. 4 of 1948,  that  a perusal  of the Act and the rules framed thereunder made  it clear that               "no  person  has any absolute  right  to  sell               liquor and that the purpose of the Act and the               rules   is   to  control  and   restrict   the               consumption of intoxicating liquors, such con-               trol and restriction being obviously necessary               for  the  preservation of public  health   and               morals, and to raise revenue." In  The  State of Bombay and Anr. v. F. N.  Baisara,(2)  the constitutional validity of the Bombay Prohibition Act,  1949 was  challenged.  On the question of legislative  competence of the State legislature to enact the statute, reliance  was placed  upon  entry I of List II which  relates  to  "Public Order".   Fazl  Ali J., speaking for a  Constitution  Bench, observed that though at first sight it may appear to be far- fetched  to bring the subject of intoxicating  liquor  under "Public  Order"  yet  it had to be noted that  there  was  a tendency  in  Europe and America to regard alcoholism  as  a menace to public order.  The learned Judge then referred  to the decision in Russel vs.  The Queen(3) in which the Canada Temperance  Act, 1878, was held to be a law relating to  the "peace,  order, and good Government" of  Canada.   Reference was  also  invited  to  be a  passage  in  The  Encyclopedia Britannica, 14th Edition, Vol. 14, page 191, to the  follow- ing effect :-               "’The dominant motive everywhere, however, has               been  a  social one, to combat  a  menance  to               public  order  and  the  increasing  evils  of               alcoholism  in  the interests  of  health  and               social  welfare.  The evils vary greatly  from               one   country   to   another   according    to               differences in climate, diet economic                (1) [1957]S.C.R.295.                (3) 7 A.C. 829@                (2) [1951] S.C.R. 682.                273

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             conditions  and even within the  same  country               according  to  differences in  habits,  social               customs and standards of ’public morality.   A               new  factor  of growing importance  since  the               middle of the 19th century has been the  rapid               urbanisation,      industrialization,      and               mechanization of our modern every day life  in               the  leading  nations of the  world,  and  the               consequent wider recognition of the  advantages               of  sobriety in safeguarding public order  and               physical efficiency.-, This  passage  was treated as lending some  support  to  the contention of the State Government that the Prohibition  Act fell within the subject of "Public Order" but the matter was not  pursued  further as the particular entry had  a  remote bearing on the object and scope of the Act In  Nagendra Nath Bora & Anr. v. The Commissioner  of  Hills Division  and Appeals, Assam, and Ors.(1) the  decisions  in Cooverjee   case   and  Kidwai’s  case  were  cited   by   a Constitution Bench as laying down the proposition that there was  no inherent right in a citizen to sell liquor and  that the   control  and  restriction  over  the  consumption   of intoxicating  liquors was necessary for the preservation  of public health and morals and to raise revenue. In Amar Chandra Chakraborty v. Collector of Excise,  Govern- ment  of  Tripura & Ors.,(2) a Constitution  Bench  of  this Court had to consider the question whether section 43 of the Bengal Excise Act, 1909 under which the licence of a  liquor contractor  was withdrawn, violated Articles 14 and  19  (1) (g)  of the Constitution.  The contention in regard  to  the violation of Article 14 was repelled by this Court with  the observation               "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 which has  been               in  force in the whole of India since  several               decades.   In view of the injurious effect  of               excessive consumption of liquor on health this               trade or business shall be treated as a  class               by itself and it cannot be treated on the same               basis  as other trades while considering  Art.               14." The, contention as I regards the violation of Article 19 was rejected  on  the  ground that in  dealing  with  reasonable restrictions no abstract standard ’or general pattern  could be  laid down and that in each case regard had to be had  to the nature of trade or business and the other circumstances. In  the case of country liquor, according to the Court,  due weight had to be given to the increasing evils of  excessive consumption of country liquor in the interests of health and social welfare.  For................ (I) [1958] S.C.R. 1240. (2) [1973] 1 S.C.R. 533. 274               "Principles  applicable  to trades  which  all               persons carry on free from regulatory controls               do  not apply to trade or business in  country               liquor,  this is so because of the  impact  of               the  trade  on  society due  to  its  inherent               nature." These  unanimous  decisions  of  five  Constitution  Benches uniform  by emphasised after a careful consideration of  the problem  involved that the State has the power  to  prohibit trades which are, injurious to the health and welfare of the

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public, that elimination and exclusion from the business  is inherent  in the nature of liquor business, that  no  person has  an absolute right to deal in liquor and that all  forms of dealings in liquor have, from their inherent nature, been treated   as  a  class  by  themselves  by   all   civilised communities.   The contention that the citizen had either  a natural or a fundamental right to carry on trade or business in liquor thus stood rejected. But,   in  spite  of  the  weight  of  this   authority,   a Constitution Bench struck a different note in Krishna  Kumar Narula  etc. vs.  The State of Jammu and Kashmir  &  Ors.(1) The appellant therein who was doing business in liquor in  a hotel,  under an annual licence issued under the  Jammu  and Kashmir Excise Act, 1958, challenged an order of the  Excise and  Taxation Commissioner asking him to shift the  licensed premises to some other approved locality.  Four  contentions were  raised  in that case on behalf of the  appellant,  the first of which was that if section 20 of the Act of 1958 was construed as conferring an absolute discretion on the Excise and Taxation Commissioner in the matter of granting licences to do business in liquor, it was void on the ground that  it infringed  Article 19 of the Constitution.  This  point  was not  allowed to be raised in this Court on the  ground  that the constitutional validity of section 20 was not challenged in  the  High  Court.  It would, however,  appear  that  the learned  Judges  of  the  High Court  had  differed  on  the question whether the appellant had a fundamental right to do business.in liquor and this Court desired "to make the posi- tion  clear"  in order to "avoid further  confusion  in  the matter".   The decisions in Cooverjee’s case, Kidwai’s  case and Nagendra Nath’s case were  cited before the Court but it took the view that they did not support the contention  that dealing in liquor was not business or trade or that a  right to do business in liquor was not a fundamental right.  Subha Rao  C.J.  speaking for the Court expressed  the  conclusion thus               "We, therefore, bold that dealing in liquor is               business  and  a  citizen has a  right  to  do               business  in the commodity; but the State  can               make a law imposing reasonable restrictions on               the said right, in public interests." Since,  however, the constitutional validity of  section  20 was  not  challenged in the High Court, this  Court  assumed without deciding that section 20 did not infringe Article 19 (1) (g) (1)  [1967] 3 S.C.R. 50. 275 In the State of Bombay vs.  R. M. D. Chamarbaugwala,(1)  one of  the contention raised was that the restrictions  imposed by  the Bombay Lotteries and Prize Competition  Control  and Tax  Act, 1948, on the trade or business of the  respondents contravened  the fundamental right guaranteed to them  under Article  19(1)(g)  of the Constitution.  It was  urged  that even   if  the  prize  competitions   constituted   gambling transactions  they  were  nevertheless  trade  or   business activities.  On the other hand it was contended on behalf of the State of Bombay that as prize competitions were  opposed to  public  policy there could be no trade  or  business  of promoting a prize competition and therefore the question  of infraction  of  the  respondents’  fundamental  right  under Article  19(1)  (g)  did not  arise.   This  contention  was described by the Court as raising a question "of a very far- reaching nature".  Speaking, for the Constitution Bench, Das C.J.  after examining several Australian and American  cases observed

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             "We  have  no  doubt that  there  are  certain               activities which can under no circumstances be               regarded  as  trade or  business  or  commerce               although  the usual forms and instruments  are               employed therein.  To exclude those activities               from the meaning of those words is not to  cut               down their meaning at ill but to say only that               they are not within the true meaning of  those               words." Referring  to  the  Directive  Principles  of  State  Policy contained  in Part IV of the Constitution the learned  Chief Justice  posed the question whether the  Constitution-makers who  set up such an ideal of a welfare State could  possibly have  intended to elevate betting and gambling to the  level of country’s trade or business or commerce and to  guarantee to  its  citizens, the right to carry on the same.   It  was said that "there can be only one answer to the question" and the  answer  was  that  the prize  competition  being  of  a gambling  nature could not be regarded as trade or  commerce and   therefore   the  respondents  could  not   claim   any fundamental right under Article 19(1)(g) in respect of  such competitions.  It was observed               "It   will  be  abundantly  clear   from   the               foregoing  observations  that  the  activities               which have been condemned in this country from               ancient times appear to have been equally dis-               couraged  and  looked upon  with  disfavor  in               England,   Scotland,  the  United  States   of               America and in Australia in the cases referred               to above.  We find it difficult to accept  the               contention   that   those   activities   which               encourage a spirit of reckless propensity  for               making  easy gain by lot or chance which  lead               to  the loss of the hard earned money  of  the               undiscerning  and improvident common  man  and               thereby lower his standard of living and drive               him  into a chronic state of indebtedness  and               eventually disrupt the peace and happiness  of               his  humble  home  could  possibly  have  been               intended  by  our Constitution  makers  to  be               raised to the status of               (1)   [1957] S.C.R. 874.                276               trade, commerce or intercourse and to be  made               the  subject  matter of  a  fundamental  right               guaranteed  by  Art. 19( 1) (g).  We  find  it               difficult to persuade ourselves that  gambling               was  ever  intended to form any part  of  this               ancient    country’s   trade,   commerce    or               intercourse to be declared as free under  Art.               301 It is not our purpose nor is it  necessary               for  us  in deciding this case to  attempt  an               exhaustive  definition  of the  word  "trade",               "business",   or   "intercourse".    We   are,               however, clearly of opinion that whatever else               may  or may not be regarded as falling  within               the  meaning of these words,  gambling  cannot               certainly  be  taken as one of them.   We  are               convinced and satisfied that the real  purpose               of Arts. 19(1) (g) and 301 could not  possibly               have been to guarantee or declare the  freedom               of  gambling.  Gambling activities from  their               very nature and in essence are extracommercium               although  the external forms, formalities  and               instruments of trade may be employed and  they

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             are  not protected either by Art. 19 (1 )  (g)               or Art. 301 of our Constitution." This  decision  was also cited before the Court  in  Krishna Kumar’s case but it said "This decision only lays down  that gambling is not business or trade.  We are not concerned  in this  case with gambling".  With great respect, the  reasons mentioned  by  Das C.J. for holding ,that there  can  be  no fundamental  right  to do trade or business in  an  activity like gambling apply with equal force to the alleged right to trade  in liquor and those reasons may not be brushed  aside by restricting them to gambling operations. In  State  of  Orissa and Ors. v.  Harinarayan  Jaiswal  and Ors.(1) the highest bidder in an auction. held for  granting the  exclusive privilege of selling country liquor  filed  a writ  petition to challenge an order rejecting his bid.   It was  contended that the power retained by the Government  to accept or reject any bid without assigning any reason was an arbitrary  power  and  was  violative  of  Articles  14  and 19(1)(g)  of  the  Constitution.   After  referring  to  the decisions  in  Cooveriee’s case and Krishna  Kumar  Narula’s case  it was observed that one of the important purposes  of selling  the  exclusive ’right to vend liquor was  to  raise revenue  and  since  the Government had the  power  to  sell exclusive privileges there was no basis for contending  that the owner of the privileges could not decline to accept  the highest  bid  if  he  thought that  the  price  offered  was inadequate.   Hegde  J.,  speaking for  the  Division  Bench observed               "The  fact that the Government was the  seller               does  not change the legal position  once  its               exclusive right to deal with those  privileges               is  conceded.   If the Government is  the  ex-               clusive owner of those privileges, reliance on               Art.  19(1)(g) or Art. 14 becomes  irrelevant.               Citizens cannot have any               (1)   [1972] 3 S. C. R. 784.               277               fundamental   right  to  trade  or  carry   on               business in the properties or rights belonging               to  the  Government  nor  can  there  be   any               infringement  of  Art. 14, it  the  Government               tries to get the best available price for  its               valuable rights." In  a  recent  judgment  delivered  on  November  27,   1974 (Nashirwar  etc. vs.  State of Madhya Pradesh & Ors.,  Civil Appeals  Nos.  17111721 and 1723 of 1974) it was held  on  a review  of  various authorities including  the  decision  in Krishna Kumar Narula’s case that the State had the exclusive right or privilege of manufacturing and selling liquor, that it  had the power to hold a public auction for granting  the right  or  privilege  to  sell  liquor,  that  traditionally intoxicating  liquors  were  ’the  subject-matter  of  State monopoly  and  that  there was no  fundamental  right  in  a citizen to carry on trade or business in liquor.  One of us, the learned Chief Justice, observed while speaking on behalf of the 3-Judge Bench that :               "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

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             the  State  shall  endeavor  to  bring   about               prohibition  of  the  consumption  except  for               medicinal purposes of intoxicating drinks  and               of  drugs  which  are  injurious  to   health.               Third,  the history of excise law  shows  that               the State has the exclusive right or privilege               of manufacture or sale of liquor." In  our  opinion, the true position  governing  dealings  in intoxicants  is as stated and reflected in the  Constitution Bench decisions of this Court in Balsara’s case, Cooveriee’s case,   Kidwai’s   case,   Nagendra   Nath’s   case,    Amar Chakraborty’s case and the R.M.D.C. case, as interpreted  in Harinarayan Jaiswal’s case and Nashirwar’s case, There is no fundamental  right to do trade or business  in  intoxicants. The  State,  under its regulatory powers, has the  right  to prohibit  absolutely every form of activity in  relation  to intoxicants-its  manufacture, storage, export, import,  sale and  possession.  In all their manifestations, these  rights are  vested  in the State and indeed  without  such  vesting there  can  be no effective regulation of various  forms  of activities   in  relation  to  intoxicants.   In   "American Jurisprudence",  Volume 30 it is stated that while  engaging in liquor traffic is not inherently lawful,. nevertheless it is  a  privilege and not a right,  subject  to  governmental control. (page 538).  This power of control is’ an  incident of the society’s right to self-protection and it rests  upon the  right of the State to care for the health,  morals  and welfare  of  the  people.  Liquor traffic  is  a  source  of pauperism and crime. (pp. 539, 540, 541). It was unnecessary.in Krishna Kumar Narula’s case to examine the  question from this broader point of view, as  the  only contention  bearing  on the constitutional validity  of  the provision impugned 278 therein was not permitted to be raised as it was not  argued in the High Court.  The discussion of the question whether a citizen  has a fundamental right to do trade or business  in liquor,  proceeded in that case, avowedly, from a desire  to clear  the  confusion  arising from  the  "different  views" expressed  by  the two Judges of the High Court.   This  may explain  why  the Court restricted its final  conclusion  to holding  that dealing in liquor is business and the  citizen has a right to do business in that commodity.  The court did not  say,  though  such an implication may  arise  from  its conclusion.  that the citizen has a fundamental right to  do trade or business in liquor.  If we may repeat, Subba Rao C. J. said               "We, therefore, hold that dealing in liquor is               business  and  a  citizen has a  right  to  do               business in that commodity; but the State  can               make a law imposing reasonable restrictions on               the said right, in public interests." It  is  significant  that  the  judgment  in  Krishna  Kumar Narula’s  case  does not negate the right of  the  State  to prohibit absolutely all forms. of activities in relation  to intoxicants.   The wider right to prohibit absolutely  would include the narrower right to permit dealing in  intoxicants on  such  terms of general application as  the  State  deems expedient. Since  rights in regard to intoxicants belong to the  State, it is open to the Government to part with those rights for a consideration.   By  Article 298 of  the  Constitution,  the executive  power of the State extends to the carrying on  of any  trade or business and to the, making of  contracts  for any purpose.  As observed in Harinarayan Jaiswal’s case, "if

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the Government" is the exclusive owner of those  privileges, reliance  on  Article  19 ( 1 ) (g) or  Article  14  becomes irrelevant.   Citizens cannot have any fundamental right  to trade  or  carry  on business in the  properties  or  rights belonging   to  the  Government,  nor  can  there   be   any infringement  of Article 14, if the Government tries to  get the best available price for its valuable. rights."  Section 27  of  the Act recognises the right of  the  Government  to grant  a lease of its right to ’manufacture, supply or  sell intoxicants.  Section 34 of the Act read with section  59(d) empowers  the  Financial  Commissioner  to  direct  that   a licence, permit or pars be granted under the Act on  payment of  such fees and subject to such restrictions and  on  such conditions as he may prescribe.  In such a scheme, it is not of  the essence whether the amount charged to the  licensees is  predetermined  as  in  the  appeals  of  Northern  India Caterers  and  of Green Hotel or whether it is  left  to  be determined  by  bids offered in auctions held  for  granting those rights to licensee,,.  The power of the Government  to charge a price for parting with its rights and not the  mode of fixing that price is what constitutes the essence of  the matter.   Nor  indeed does the label affixed  to  the  price determine either the true nature of the charge levied by the Government or its right to levy the same. The distinction which the Constitution makes for legislative purposes between a ’tax’ and a ’fee’ and the  characteristic of these two 279 as  also  of  ’excise duty’ are well-known.   "A  tax  is  a compulsory exaction of money by public authority for  public purposes  enforceable  by  law  and is  not  a  payment  for services  rendered".(1)  A  fee is  a.  charge  for  special services  rendered  to individuals by  some  government  tat agency and such a charge has an element in it of a quid  pro quo. (2).  Excise duty is primarily a duty on the production or manufacture of goods produced or manufactured within  the country(3).   The amounts, charged to the licensees  in  the instant  case  are,  evidently, neither nature  of  tax  nor excise  duty.  But then, the ’Licence fee’ which  the  State government  charged to the licensees through the  medium  of auctions or the ’Fixed fee’ which it charged to the  vendors of foreign. liquor holding licences in Forms L-3, L-4 and L- 5 need bear no, quid pro quo to the services rendered to the licencees.   The  word ’fee’ is not used in the Act  or  the Rules in the technical sense of the expression.  By ’licence fee’  or  ’fixed fee’ is meant the  price  or  consideration which  the Government charges to the licensees  for  parting with its privileges and granting them to the licensees.   As the State can carry on a trade or business, such a charge is the normal incident of a trading, or business transaction. While on this question, we may with advantage cite a passage from.   "American  Jurisprudence" (Vol. 30 pages  642,  645) which  is based on the decisions Gundling vs.  Chicago,  (4) Phillips vs.  Mobile (5) and. Richai-d vs.  Mobile (6) It says :                "the  familiar principle that the  imposition               of  license  fees  on  useful  and  honourable               occupations  must  not  exceed  the  cost   of               issuing    the  license,  plus  the  expenseof               inspecting and regulating the  business               icensed........is not necessarily applicable to               the  liquor license.The liquor traffic is  not               something which is licensed for the purpose of               promoting  it.   Indeed, license fees  may  be               exacted  in  amounts  intended  to  discourage

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             participation  in  the business.   The  courts               have quite generally refused to hold that  the               license fee imposed, merely because it is,  is               a  tax,  where  the  object  is  no   control,               regulate,  and restrict, and not to  encourage               the  liquor  traffic, the  revenue  being  the               result  of the system and not the  motive  for               its adoption...... The, higher the fee imposed               for  a  license,  it is  sometimes  said,  the               better the regulation, as the effect of a high               fee  is to keep out of the business those  who               are undesirable, and to keep within reasonable               limits  the number of those who may engage  in               it."               (1)   Per Latham C. J. in Mathews v. Chickor-v                             Marketitngg Board.60 C.L.R. 263, 276,               The Commissioner, Hindu Religious Endownments,               Madras vs. Sri Lakshmindra Thirtha Swamiar  of               Sri Shurur Madras.; [1954] S.C.R. 1095, 1041.               (3)   M/s. Guruswamy & Co.  Etc. vs. .State of               Mysore Ors., [1967] 1 S. C. R. 548.               (4) 44 L. ed. 725.               (6) 52 L, ed. 581.                (5) 52, L. ed. 578.                280 In the view we have taken, the argument that the  Government cannot by contract do what it cannot do under a statute must fail. ,No statute forbids the Government from trading in its own   rights   ,or   privileges  and   the   statute   under consideration,  far from doing so, expressly empowers it  by sections 27 and 34 to grant lease of its right to issue  the requisite  licences,  permits or passes on payment  of  such fees as may be prescribed by the Financial Commissioner. The  argument  that in Cooveriee’s case the  impugned  power having   been   exercised   in  respect   of   a   centrally administrated   area,   the  power  was  not   fettered   by legislative  lists loses its relevance in the view we  ,:are taking.  It is true that in that case it was permissible  to the  court to find, as in fact it did, that the fee  imposed on  the licencees was ,’more in the nature of a tax  than  a licence fee".  As the authority which levied the fee had the power  to  exact a tax, the levy could be upheld as  a  tax, even if  it  could  not  be justified as  a  ’fee’,  in  the constitutiotin sense of thatterm.  But the ’Licence fee’  or ’Fixed fee’ in the instant case does not     have to conform to   the  requirement  that  it  must  bear   a   reasonable relationship  with the services rendered to  the  licensees. The  amount charged to the licensees is not a  fee  properly so-called nor indeed a tax but is in the nature of the price of  a  privilege,  which the purchaser has  to  pay  in  any trading or business transaction. This answers the main and the more important arguments urged ,on behalf of the appellants.  What remains to be considered is  the contention in regard to the scope and extent of  the powers  of  the  Financial Commissioner  and  the  legality, otherwise,  of  the demand for the payment of  ’Fixed  Fees’ made on vendors of foreign liquor holding licences in  Forms L-3, L-4 and L-5. Before  adverting  to these contentions it is  necessary  to refer  to  two decisions on which the appellants  laid  some stress.   In Laxmi Kant Sahu v. Supdt. of Excise,  Behrampur (C.A.  1415  of 1966 decided on 10--4-1967) it was  held  by this  Court that section 38 of the Bihar and  Orissa  Excise Act, 1915 did not empower the board to levy a tax and  since the charge for the grant of a privilege for the retail ’off’

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vend  of  foreign  liquor under  the  system  of  auctioning introduced  by the amended rule 103(1) was a tax,  the  rule was  beyond the scope of section 38 and therefore void.   It was  expressly conceded in that case on behalf of the  State of  Orissa that the charge for the grant of a privilege  for the  ’off’  vend  of  foreign liquor  under  the  system  of auctioning  was  a tax and not a fee.  The  decision,  being based on a concession, does not involve determination of the point  whether  the levy was truly in the nature of  a  tax. Besides, the question Is to ,whether the word ’fee’ was used in  section 38 in the technical sense was not  canvassed  in that  case.   The finding that the State Government  had  no power  under the Act to levy duty in the form of  a  payment for the grant of a licence for retail vend of foreign liquor was based on a "combined reading of sections 22, 27, 28  and 29" of the 281 Bihar  Act.  Section 22 empowered the Government to  make  a grant  of  the  exclusive privilege  of  selling  by  retail country liquor or intoxicating drugs only. The second decision on which the appellants laid stress  was rendered by the High Court of Punjab and Haryana in Jage Ram v. State of Haryana (C.W. No. 1376 of 1967 decided on March- 12,  1968).  The argument is that this decision is based  on the  earlier  decision of the High Court in  Bhajan  Lal  v. State of Punjab (C.W. No. 538 of 1966 decided on February 6, 1967), that the decision in Bhajan Lal’s case was  confirmed in  appeal  by this Court (C.A. Nos. 1042 and 1043  of  1968 decided  on  August  21, 1972), that there  is  no  material difference,  between the rules and the procedure adopted  in the instant cases and those which were struck down in Bhajan Lal’s.  case  and  therefore the  rules  and  the  procedure followed  herein  must  also be struck  down  for  the  same reasons.  This argument overlooks the significant difference between the rules struck down in Bhajan.  Lal’s case and  in Jage Ram’s case, and the amended Rules now in force.   Under the old Rule 36 (23-A) still-head duty which was  admittedly in  the  nature of excise-duty was payable by  the  licensee even on quota not lifted by him.  The Rule and Condition No. 8  founded on it were therefore struck down in Bhajan  Lal’s case  as being beyond the scope of entry 51 of List II,  the taxable event under the impugned Rule being the sale and not the manufacture of liquor.  Rule 36 was amended on March 31, 1967 in order to meet the judgment in Bhajan Lal’s case  but the High Court found in Jage Ram’s case that even under the- amended  Rule,  still-head duty which was in the  nature  of excise  duty was payable on, unlifted quota of liquor.   The position  obtaining under the Rules as amended on March  22, 1968  which  at* relevant for our purposes is  in  principle different  as the still-head duty is now only 0.64 paise  as against Rs. 1.760 per litre which was in force under the old Rules  and  excise-duty  as such is  no  longer  payable  on unlifted  quota.  The principle governing the  decisions  in Bhajan  Lal’s  case and Jage Ram’s case  cannot,  therefore, apply any longer. As  the amount payable by the licensees on the basis of  the bids offered by them in auctions and on the basis ’of ’Fixed and  Assessed Fees’ is neither a fee in the technical  sense nor a tax but is in the nature of the price of a  privilege, there  is no question of the Financial Commissioner  lacking power  to organize auctions so as to authorize the  recovery of  any  amont which is not a fee properly  so-called.   The Financial  Commissioner;  under section 34 of the  Act  read with  rule 59(d), has the power to direct that licences  may be  granted  on  pay-,  ment of such  fees,  that  is,  such

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consideration  as he may by rules prescribe.  It is open  to him  to  frame  a rule, as he has in fact  framed  Rule  35, directing that any class of licences may be granted on  pay- ment of fees fixed by auction.  Once it is appreciated  that auctions are only a mode or medium for ascertaining the best price obtainable for the grant of privilege to Sell  liquor, there would be no ’contradiction in terms’ in directing,  as Rule  35 does, that a class of "licences may be  granted  on the fee fixed by auctiont". 282 The demands for the payment of Fixed Fees made on vendors of ,Foreign  Liquor holding licences in Forms L-3, L-4 and  L-5 were  ,challenged  on the additional ground that  they  were contrary  to  the terms of Rule 12  and  therefore  illegal. Under Rule 11, applications for renewal of licences for  the following  year have to be made before .the end of  October’ By  Rule  12  the Excise Inspector has  to  lay  before  the Collector  by the 7th January each year a.list  of  licences requiring  renewal, together with a certificate of sales  as provided  by  rule 30, to facilitate  the  determination  of assessed  fee.   No  order for renewal  can  be  made  after January  20  in  respect of licences to  be  valid  for  the following  financial year, except with the special  sanction of  the  Financial  Commissioner.   The  appellants  holding licences for sale of Foreign Liquor applied duly for renewal of  their licences any orders granting renewals were  passed before January 20.  Later the Rules were amended on March 22 and  March  30,  1968 under  which  the  appellants  holding licences in Form Nos.  L-3, L-4 and L-5 became liable to pay fixed  fees up to Rs. 20,000 per annum in addition  to  fees assessed  under rule 31.  The grievance of those  appellants is  that since their licences were renewed in January  1968, the  amendments made in March 1968 cannot apply to them  and therefore the ,demand made on the basis of amended rules  is illegal. It  is true that the amendments under which  the  appellants have been called upon to pay fixed fees were made after  the licences were renewed.  But the licences, though renewed  in January 1968, were lo be effective from April 1, 1968.   The amendments  having  come  into force before  April  1  would govern  the  appellants’ licences and they  are,  therefore, liable  to  pay  the fixed fees  under  the  amended  Rules. Licences are granted under section 34 of the Act subject  to the  payment of such fees as the Financial Commissioner  may direct.   The rules made under section 59(d)  authorise  the imposition  of additional fees and such authorization  would operate on all licences to be effective thereafter. We are accordingly of the opinion that the payments demanded from   the  appellants  are  lawfully  )due  to  the   State Government.   Such payments are "excise revenue" within  the meaning  of section 60(1) (a) of the Act.  Section  3(9)  of the Act defines "excise revenue" to mean "revenue derived or derivable from any payment, duty, fee, tax, confiscation  or fine,  imposed or ordered under the provisions of this  Act, or of any other law for the time being in force relating  to liquor or intoxicating drugs, but does not include a fine 283 opposed  by  a court of law".  The payments  due  from  the’ appellants  holding licences in Form L-14A are also  due  to the  Government on account of any contract relating  to  the excise revenue" as provided in section 60(1)(c) of the  Act. It  is therefore open to the Government to recover its  dues in the manner authorized by section 60. In  the result, all the appeals stand dismissed but in  view of  the  circumstance  that observations  in  Krishna  Kumar

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Narula’s  case  may have led the appellants to  embark  upon this litigation, there will be no order as to costs. V.M.K. Appeals dismissed.. 284