http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 11  

CASE NO.: Appeal (civil)  151 of 2007

PETITIONER: State of U.P. & Ors

RESPONDENT: M/s Lalta Prasad Vaish

DATE OF JUDGMENT: 25/10/2007

BENCH: H.K. SEMA,ALTAMAS KABIR & LOKESHWAR SINGH PANTA

JUDGMENT: JUDGMENT  With

Civil Appeal No. 152 of 2007, Civil Appeal No. 153 of 2007, Civil Appeal No. 154 of 2007, Special Leave Petition (C) No.16505 of 2004 Special Leave Petition (C) No. 26110 of 2004 Special Leave Petition (C) No. 26111 of 2004  and Special Leave Petition (C) No. 19275 of 2004

ALTAMAS KABIR,J.

1.      Special Leave Petition No. 16505 of 2004 was filed by  the State of Uttar Pradesh and its officers in the Excise  Department on 23rd June, 2004 against the Judgment and Order  passed by the Division Bench of the Allahabad High Court on  12th February 2004 in Civil Misc. Writ Petition No. 1027 of  1999, which had been filed by Shri R.P. Sharma in his  capacity as the sole proprietor of M/s Bimal Paints and  Chemical Industries situated at Aligarh in Uttar Pradesh.

2.      The writ petitioner in the said writ petition is the  holder of a licence in Form FL No. 41 granted under the   provisions of the Uttar Pradesh Excise Act, 1910 and the  rules framed thereunder.  The petitioner was aggrieved by  the levy of licence fee on the sale of specially denatured  spirit to licencees holding licence in Form FL 41 @ 15% ad  valorem on the sale made by a  distillery/wholesale vendor  to FL 41 licencees purportedly under the provisions of the  U.P. Licences for the Possession of Denatured Spirit and  Specially Denatured Sprit Rules, 1976 as amended from time  to time.   On behalf of the writ petitioners it was  contended that the licence fee levied on a FL 41 licence is  neither regulatory nor a compensatory fee because no  services are rendered to the licensee which could justify  it as a regulatory fee.    

3.      Although, on behalf of the petitioner reliance was  placed on the decision of this Court in State of U.P. Vs.  Vam Organic Chemicals Ltd and Anr. (2004 (1) SCC 225), such  stand was held to be untenable by the High Court inasmuch  as, in the said case it was held that denatured spirit is  outside the seisin of the State Legislature which has  jurisdiction over only potable alcohol.  

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 11  

4.      However, the High Court held the impugned licence fee  to be wholly illegal upon observing that in the case before  it, the respondents had not claimed that the fee in  question was being charged for ensuring that the rectified  sprit is not diverted and used for human consumption, but  that the fee was being charged for sale/purchase of  denatured spirit.  The High Court was of the view that  having regard to the findings of this Court in Vam  Organic’s case (supra) imposition of fee on such ground was  not acceptable since legislation with regard to denatured  spirit was outside the perview of the State Legislative  powers.  Paragraph 42 of the judgment in Vam Organic’s case  (supra) has been quoted in its judgment by the High Court  and reads as follows:-

"Assuming that de-natured sprit may by  whatever process be renatured, (a proposition  which is seriously disputed by the respondents)  and then converted into potable liquor this would  not give the State the power to regulate it."

5.      On the basis of the aforesaid reasoning the impugned  licence fee was declared to be illegal by the High Court.    The High Court also directed the respondents to refund the  fee collected from the writ petitioners along with interest  at the rate of 10% per annum from the date of  realization/deposit till the date of refund within two  months of production of the certified copy of the judgment  before the respondent No. 2.    There is further discussion with regard to the  direction given regarding interest with which we are not  concerned.

6.      As mentioned hereinbefore, Special Leave Petition (C)  No. 16505 of 2004 was filed against the said judgment and  order of the Allahabad High Court and the same was taken up  for admission on 22nd August, 2004, when this Court directed  notice to issue and also granted interim stay in the  meantime.  The interim relief as prayed for as indicated in  Prayer (a) of the Special Leave Petition reads as follows:- "Ad-interim ex-parte stay of the impugned  final judgment and order dated 12.02.2004  passed by the Hon’ble High Court of  Judicature at Allahabad in Civil Misc. Writ  Petition No. 1027 of 1999."

7.      Subsequently, several other similar writ petitions  were filed by several licence holders holding licences in  Form FL Nos.16, 17, 39 and 41 which were all disposed of by  applying the decision in R.P. Sharma’s case.  8.      Seven of the writ petitioners filed special leave  petitions in this Court and on leave being granted in four  of the matters, they were converted into Civil Appeals,  being C.A. No. 151 of 2007, C.A. No.152 of 2007, C.A. No.  153 of 2007 and C.A. No. 154 of 2007.   The remaining three  matters are sill at the special leave petition stage.   On  29th November, 2004, SLP(C) No. 26110 of 2004 (State of U.P.  Vs. Anil Kumar Sharma) together with SLP (C) No. 26111 of  2004 (State of U.P. vs. Priyambada Jaiswal) were directed  to be tagged with R.K. Sharma’s case, namely, SLP(C) No.  16505 of 2004.  Similarly, SLP(C) 19275 of 2004 (State of  U.P. vs. Somaiya Organic (India) Ltd.) was tagged with  SLP(C) No. 16505 of 2004 on 16th August, 2005.  The four  other matters, which were converted into appeals, were also

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 11  

tagged with SLP(C) 16505 of 2004 by order dated 26th April,  2007.

9.      It is on account of the aforesaid orders, that all the  eight matters have come up before us for final hearing and  disposal.

10.      When these matters were taken up for hearing, Mr.  Dhruv Agrawal, Senior Advocate, appearing for the  respondent in SLP(C) No. 19275 of 2005 (M/s. Somaiya  Organic (India) Ltd.), submitted that this matter was  different from the seven other matters since the respondent  therein was the holder of licence in Form FL 39, which was  meant for possession of  denatured spirit, including  specially denatured spirit for industrial purposes, in  which alcohol is destroyed or converted chemically in the  process into other products which did not contain alcohol,  such as, Ether, Styrene, Butadiene, Acetone, Polythene,  etc., whereas those holding licence in Form FL 41 were  entitled to be in possession of denatured spirit for use in  industries in which alcohol is used directly or as solvent  or vehicle and appears  in the final product to some  extent, such as, Lacquers, Varnishes, Polishes, Adhesive,  Anti-freezers and Brake fluid, etc.

11.     It was also pointed out that in C.A. No. 151 of 2007   (State of U.P. vs. M/s Lalta Prasad Vaish) the respondent  was the holder of licences under Form FL 16 and Form FL 17,  but the same had also been disposed of by the High Court on  the basis of the decision in R.P. Sharma’s case which  declared the licence fee payable by a Form FL 41 licencee  to be illegal.

12.     Mr. Dhruv Agrawal submitted that the case of Somaiya  Organic (India) Ltd. should not, therefore, be heard in the  light of the decision in R.P. Sharma’s case, but should be  detached from the other matters and be heard separately.  

13.     Although, it is true that the respondent, Somaiya   Organic (India) Ltd., is the holder of licence in Form FL  39, the case as made out in the writ petition and in  particular in paragraphs 16, 17 and 20 thereof, is similar  to the cases made out in the other writ petitions.   The  common challenge in all the matters is that the State had  no power to regulate the manufacture and sale of denatured  spirit in view of Section 2 and Section 18G of the  Industries (Development and Regulation) Act, 1961.

14.     It is also the common case in all these matters that  by Section 2 of the aforesaid Act of 1961 read with Entry  52 of List I of the Seventh Schedule of the Constitution,  the Parliament declared alcohol industry to be an industry,  control of which by the Union is expedient in the public  interest and consequently the power to legislate in respect  thereof is now vested exclusively in Parliament.

15.     Furthermore, all the aforesaid matters have been  decided by the High Court relying on the decision of this  Court in State of U.P. and Ors. vs. Vam Organic Chemical  Ltd. and Anr., reported in (2004 (1) SCC 225), and also on  the decision of the seven Judge Bench of this Court in the  case of (Synthetics and Chemical Ltd. vs. State of U.P.  (1990 Vol. I SCC 109).

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 11  

16.     Having regard to the aforesaid factual as well as  legal position, we are unable to accept Mr. Agrawal’s  prayer to detach SLP(C) No. 19275 of 2004 and to hear it  separately from the other matters.

17.     All the eight matters before us have, therefore, been  taken up for consideration together.

18.While deciding the said matters, the Allahabad High  Court accepted the contention of the writ petitioners that  the questions involved had been decided by this Court in  State of U.P. Vs. Vam Organic Chemicals Ltd. and ors.  (supra).  The High Court decided the writ petitions on the  basis of the decision of this Court in the aforesaid case  and declared the imposition of licence fee @ 15% ad valorem  vide Notification No.1327 dated 25.5.1999 under  the U.P.  Licences for the Possession of Denatured Sprit and  Specially Denatured Sprit (Fourth Amendment) Rules, 1999,  to be wholly illegal.  The writ petitions were accordingly  allowed and the impugned licence fee was declared illegal. 19.     During the course of arguments, Mr. S.K. Dwivedi,  learned senior counsel for the appellants, submitted that  the Vam Organic’s case (supra) referred to and relied upon  the Constitution Bench decision in the case of Synthetics  and Chemicals Ltd. Vs. State of U.P.  (1990 (1) SCC 109).   Mr. Dwivedi pointed out that in the said case what was  under consideration, were Lists I, II and III of Schedule  VII of the Constitution, as also the provisions of the  Industries (Development and Regulation) Act, 1951, Section  2 whereof provides as follows: "2. Declaration as to expediency of control  by the Union - It is hereby declared that  it is expedient in the public interest that  the Union should take under its control the  industries specified in the First  Schedule."

20.     In this regard reference was also made to Section 18- G which empowers the Central Government to secure the  equitable distribution and availability at fair prices of  any article or class of articles relatable to any  scheduled industry, to provide and regulate the supply and  distribution thereof, and trade and commerce therein by a  notified order.  It was pointed out that the said Act was  amended in 1956 and item No.26 was inserted in the First  Schedule of the said Act which, inter alia, empowers the  Central Government  to control the fermentation industry  including alcohol industries.  Item No.26 of the First  Schedule reads as follows:         "26. Fermentation Industries" i)      ’Alcohol ii)     ’Other products of fermentation  industries’.

21.     While dealing with the aforesaid provisions, the  Court noticed the provisions of Entry 8 in List II  which empowers the State to legislate in relation to   intoxicating liquors i.e. to say the production,  manufacture, possession, purchase and sale of  intoxicating liquors.  The Constitution Bench in  Synthetics and Chemicals Ltd. case (supra) in para 63  indicated that there was no necessity to dwell on the  question whether the States have police power or not.   It was mentioned that the Court must accept the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 11  

position that the States have the power to regulate  the use of alcohol and that power must include the  power to make provisions to prevent and/or check  industrial alcohol being used as intoxicating liquor.   In para 64  of the judgment the Bench stated that it  recognises the power of the State to regulate though  perhaps not as emanation of police power, but as an  expression of the sovereign power of the State. 22.     As against the above, in para 85 a view has been  taken which appears to be at variance with what has been  stated in paragraphs 63 and 64.  In order to appreciate  the submission made by the learned counsel,  paragraphs 85  and 86 are reproduced:

"85. After the 1956 amendment to the IDR Act  bringing alcohol industries (under  fermentation industries) as Item 26 of the  First Schedule to IDR Act the control of this  industry has vested exclusively in the Union.   Thereafter, licences to manufacture both  potable and non-potable alcohol is vested in  the Central Government.  Distilleries are  manufacturing alcohol under the central  licences under IDR Act. No privilege for  manufacture even if one existed, has been  transferred to the distilleries by the State.   The State cannot itself manufacture industrial  alcohol without the permission  of the Central  Government.  The States cannot claim to pass a  right which they do not possess.  Nor can the  States claim exclusive right to produce and  manufacture industrial alcohol which are  manufactured under the grant of licence from  the Central Government.  Industrial alcohol  cannot upon coming into existence under such  grant be amenable to States’ claim of  exclusive possession of privilege. The State  can neither  rely on Entry 8 of List II nor  Entry 33 of List III as a basis for such  a  claim.  The State cannot claim that under  Entry 33 of List III, it can regulate  industrial alcohol as a product  of the  scheduled industry, because the Union, under  Section 18-G of the IDR Act, has evinced clear  intention to occupy the whole field.  Even  otherwise sections like Sections 24-A and 24-B  of the U.P. Act do not constitute any  regulation in respect of the industrial  alcohol as product of the scheduled industry.  On the contrary these purport to deal  with  the so-called transfer of privilege regarding  manufacturing and sale.  This power,  admittedly, has been exercised by the State  purporting to act under Entry 8 of List II and  not under Entry 33 of List III. 86.     The position with regard to the control of  alcohol industry has undergone material and  significant change after the amendment  of  1956 to the IDR Act.  After the amendment, the  State is left with only the following powers  to legislate in respect of alcohol:

(a)     It may pass any legislation in the nature  of prohibition of potable liquor referable  to Entry 6 of List II and regulating

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 11  

powers. (b)     It may lay down regulations to ensure that  non-potable alcohol is not diverted and  misused as a substitute for potable  alcohol. (c)     The State may charge excise duty on  potable alcohol and sales tax under Entry  52 of List II.  However, sales tax cannot  be charged on industrial alcohol in the  present case, because  under the Ethyl  Alcohol (Price Control) Orders, sales tax  cannot be charged by the State on  industrial alcohol. (d)     However, in case State is rendering any  service, as distinct from its claim of so- called grant of privilege, it may charge  fees based on quid pro quo. See in this  connection, the observations of Indian  Mica case."

23.     The aforesaid paragraphs seem to indicate that under  Entry 33 of List III the State cannot regulate industrial  alcohol as a product of the industry, because the Union  under Section 18-G of the Act had evinced a clear  intention to occupy the whole field.  It was submitted by  Mr. Dwivedi that the aforesaid observations have to be  read in the context in which the matter was decided and  related to grant of licences for manufacture of potable  and  non-potable alcohol.     It was submitted that while  Entry 33 in List III provided for powers to both the State  and the Central Government to legislate with regard to the  product of any industry, where control of such industry by  the Union is declared by the Parliament by law to be  expedient in the public interest, the Constitution Bench  had not considered the said aspect and had interpreted the  provisions of Entry 33 in relation to the concept of  manufacture only. According to the learned counsel, what  stood ousted from the legislative powers of the State was  the power to legislate on matters relating to manufacture  of potable and non-potable alcohol.  In order to  appreciate the position better, Entry 33(a) of List III is  reproduced hereunder: "33. Trade and commerce in, and the  production, supply and distribution of \026

(a)  the products of any industry where the  control of such industry by the Union is  declared by Parliament by law to be expedient  in the public interest, and imported goods of  the same kind as such products."

24.      Mr. Dwivedi urged that the power of the State to  legislate with regard to matters relating to Entry 33(a)  in List III of Schedule 7 of the Constitution did not  stand ousted merely on the basis of a declaration made  under Section 2 of the Industries (Development and  Regulation) Act, 1951, which was relatable to Entry 52 of  List I of the Seventh Schedule.  Mr. Dwivedi also urged  that the power conferred on the Central Government under  Section 18 G to secure the equitable distribution and  availability at fair prices any article or articles  relatable to any schedule industry, to provide and  regulate the supply and distribution thereof, and trade  and concurrences therein, would become operative only when  a notified order was issued.   Without the promulgation of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 11  

such a notified order, the Central Government did not  acquire any power to act, in furtherance of the objects  contemplated in Section 18G.

25.     Mr. Dwivedi submitted that the aforesaid question  had been considered  by this Court as far back as in 1956  while deciding  the case of  Ch. Tika Ramji and others  Vs. The State of Uttar Pradesh and others (1956 SCR 393).   It was pointed out that the central issue in the said  case was with regard to the question as to whether  legislation by the Centre under Entry 52 of List I would  also affect the concurrent powers vested  in the State by  way of Entry 33 in List III of the Seventh Schedule to  the Constitution.   Although, the said judgment was  rendered in the context of the U.P. Sugar Factories  Control Act, 1938 (U.P. At 1 of 1938) to provide for the  licensing of sugar factories and for regulating the  supply of sugarcane intended to be used in such factories  and the price at which it could be purchased and for  other incidental matters, the provisions of both Section  2 as well as Section 18 G of the Industrial (Development  and Regulation) Act, 1951 fell for consideration in the  said case.  This Court while dealing with the said  provisions held that the provisions of Section 18G of the  1951 Act did not cover sugarcane, nor did it indicate the  intention of the Parliament to cover the entire field of  such legislation.  It was also held that the expression  "any article or class of articles related to any  scheduled industry" used in Section 18G, 15 and 16 of the  Act did not refer to raw material but only to finished  products of the scheduled industries the supply and  distribution of which  Section 18-G was intended to  regulate, its whole object being the equitable  distribution and availability of manufactured articles at  fair prices and not to invest the Central Government with  the power to legislate in regard to sugarcane.  It was  also held that even assuming  the sugarcane was an  article which fell within the purview of Section 18-G of  the Act, no order having been issued by the Central  Government thereunder, no question of repugnancy could  arise, as repugnancy must exist as a fact and not as a  mere possibility and the existence of such an order would  be an essential pre-requisite for it.

26.     Mr. Dwivedi submitted that the decision in the  aforesaid case had not been brought to the notice of the  7 Judge Bench which decided the Synthetics and Chemicals  case (supra) and it, did not, therefore, have the benefit  of the reasoning which prompted  this Court earlier to  hold that one aspect of Entry 33 of List III was not  covered  by the U.P. Sugar Industries Control Act, 1938.    The 7 Judge Bench did not also have the benefit  of the  reasoning in Ch. Tikaramji’s case (supra) which had held  that in the absence of any notified order under Section  18-G of the 1951 Act no question of repugnancy could  arise, which Mr. Dwivedi urged, recognised the State’s  power to legislate with regard to matters under Entry 33  of List III notwithstanding the provisions and existence  of Section 18-G in the 1951 Act.

27.     Mr. Dwivedi  then went on to refer to the judgment  of this Court in SIEL Limited  and Ors. vs. Union of  India and ors. (1998) 7 SCC 26) wherein the learned  Judges relying on the policy decision in Ch. Tikaramji’s  case (supra)  explained and distinguished the decision of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 11  

the 7 Judge Bench in Synthetics and Chemicals case  (supra).  Following another decision of this Court in  A.S. Krishna vs. State of Madras (AIR 1957 SC 297) the  learned Judges held that the contention of the appellants  that by the enactment of Section 18-G the power of the  State to legislate under said Entry 33 of List III was  taken away, was untenable.  The learned Judges went on to  observe that, moreover, apart from the provisions of  Article 254(2) of the Constitution the enactment  of  Section 18-G did not by itself create any repugnancy   between the Parliamentary legislation and the State  legislation, namely, the U.P. Sheera Niyantran Adhiniyam,  1964.  It was, further observed that although the  Molasses Control Order, 1961 was issued by the Central  Government under Section 18-G of the 1951 Act, the said  order was never brought into operation in the State of  U.P., and accordingly, the power of the State of U.P.  under Entry 33 of List III to legislate in relation to  trade and commerce or supply and distribution of Molasses  in the State was not taken away, in any event,  irrespective of Article 254.  It was held that since the  aforesaid 1961 order had not been extended to the State  of U.P. at any point of time, the question of repugnancy  between the Molasses Control Order 1961 and the U.P.  Sheera Niyantran Adhiniyam, 1964 which was enacted in  legitimate exercise of power of legislation under Entry  33 of List III, did not arise and the same was within the  legislative competence of the State Government.  

28.     Yet another case referred to by Mr. Dwivedi was the  decision of a Constitution Bench of 5 Judges of this  Court in Belsund Sugar Co. Ltd. vs. State of Bihar (1999)  9 SCC 620, wherein while discussing Section 18-G of the  1951 Act it was held that since ’flour industry’ was  listed as one of the scheduled industries as Item 27(4),  the production of wheat  as a raw material or its sale  was not covered by the said Act.  Consequently, so far as  wheat as agricultural product is concerned, it was  outside the sweep of the 1951 Act.   In the said case  also it was observed by the Constitution Bench that in  the absence of promulgation of any statutory order  covering the field under Section 18-G it could not be  said that mere existence of a statutory provision for  entrustment of such power by itself would result in  regulation of purchase and sale of flour even if it is a  scheduled industry.  It may be noted that even while  noting the decision of the 7 Judge Bench in Synthetics  and Chemicals case (supra) the Court placed reliance on  the decision rendered in the SIEL Ltd. case (supra).

29.     Mr. Dwivedi also referred to the decision of a  Constitution Bench in the case of Ganga Sugar Corporation  Ltd. vs. State of Uttar Pradesh and others (1980) 1 SCC  223) where it was held that in pith and substance the  U.P. Sugarcane (Purchase Tax) Act, 1961 was not with  respect to a controlled industry namely the sugar  industry and hence did not encroach upon Entry 52 of   List I.

30.     Various other decisions, such as the decision in  Shri Bileshwar Khand Udyog Khedut Sahakari Mandal Ltd.  vs. State of Gujarat (1992) 2 SCC 42; and  B.  Viswanathiah and Company vs. State of Karnataka and  others (1991) 3 SCC 358, were also referred to by Mr.  Dwivedi in support of his submission.  That even after

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 11  

the decision of the 7 Judge Bench in the Synthetics and  Chemicals case (supra) this Court had in several other  judgments, including the judgments delivered by  Constitution Benches of 5 Judges, had held in unequivocal  terms  that  Section 18-G of the 1951 Act did not  encroach upon the concurrent powers of the State  legislature to legislate with regard to Entry 33 of List  III of the Seventh Schedule and, more so, in the absence  of any notified order under the said Section.  In  contrast to the aforesaid decisions, Mr. Dwivedi also  referred to the decision of this Court in VAM Organic’s  case (supra), which relying on the decision in the  Synthetics and Chemicals case (supra) held that the State  had no power to levy tax on industrial alcohol, whether  or not it had the potential to be used as alcoholic  liquor. It was held further that the State’s power was  limited to the regulation of non-potable alcohol for the  limited purpose of preventing its use as alcoholic liquor  and charging fees based on the principle of quid pro quo.  It also held that the State Government was competent to  levy a fee for the purpose of ensuring that industrial  alcohol was not converted into potable alcohol so as to  deprive the State of its revenue on the sale of such  alcohol and the public was protected from consuming  illicit liquor.  But the powers stopped with the  denaturing of industrial alcohol, since denatured  rectified spirit was wholly and exclusively industrial  alcohol.

31.     The sum and substance of Mr. Dwivedi’s submission  was that the mere existence of Section 18-G in the  Statute book could not oust the competence of the State  legislature to enact legislation in respect of matters  falling under Entry 33 of List III of the Seventh  Schedule to the Constitution.  The further contention of  Mr. Dwivedi was that even if a notified order had been  issued under Section 18-G the effects of the same had  been nullified by clause (a) of Entry 33 which reads as  follows: "33.Trade and commerce in, and the  production, supply and distribution of  \026 (a)  the products of any industry where  the control of such industry by the  Union is declared by Parliament by law  to be expedient in the public interest,  and imported goods of the same kind as  such products;"  

32.     According to Mr. Dwivedi, this aspect of the matter  had not been gone into by the 7 Judge Bench of this Court  in the Synthetics and Chemicals case (supra), while  interpreting the provisions of Section 18-G of the 1951  Act, and therefore, requires reconsideration by a larger  Bench of this Court.

33.     Apart from making a submission that SLP(C)  No.19275/05 State of U.P. vs. M/s Somaiya Organic (India)  Limited     was different from the other matters and  should be dealt with independently, Mr. D. Agrawal  submitted that the issue being sought to be raised on  behalf of the State of U.P. in these matters was no  longer res integra, since it had already been decided by  the 7 Judge Bench in the Synthetics and Chemicals case  (supra) which has subsequently been followed by this

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 11  

Court in the case of Vam Organic’s case (supra), which  had been relied upon by the High Court in disposing of  the writ petitions from which these civil appeals and  special leave petitions arise.  

34.     Similar submissions were made by Mr. K. D. Mishra,  learned counsel appearing for the respondents in C.A.  Nos.152/2007 and C.A. No.153/2007.  It was also urged by  him that the respondents in the said two appeals were  holders of licences in Form No. FL 16 and FL 17 and deal  with licensing of manufacture of denatured spirit and  that the impugned levy imposed by the State of U.P. was  exorbitant and excessive and was not regulatory in nature  and could not be imposed on ad valorem basis as the sale  price had no nexus with the amount incurred by the State.   While dealing with the said question the question of  powers under Section 18-G of the 1951 Act was also in  question, as the control of supply, distribution of an  article relatable to a scheduled industry was occupied by  the Parliament and the State legislature could not  legislate for the purpose of regulating by licence/  permit or otherwise the distribution, transport,  disposal, acquisition, possession, use or consumption of  any such article or class thereof.  

35.     On consideration of the aforesaid submissions made  on behalf of the respective parties, we are of the view  that Mr. Dwivedi’s submissions have a good deal of force,  since by virtue of the interpretation of Section 18-G in  the Synthetics and Chemicals case (supra) the power of  the State to legislate with matters relating to Entry 33  of List III have been ousted, except to the extent as  explained in the Synthetics and Chemicals case in  paragraphs 63-64 of the judgment, where the State’s power  to regulate, as far as regulating the use of alcohol,  which would include the power to make provisions to  prevent and/or check industrial alcohol being used as  intoxicant liquor, had been accepted.  It was also stated  in paragraph 64 of the judgment that the Bench recognised  the power of the State to regulate not as an emanation of  police power but as an expression of the sovereign power  of the State. As submitted by Mr. Dwivedi, the 7 Judge  Bench did not have the benefit of the views expressed by  this Court earlier in Ch. Tikaramji case (supra) where  the State’s power to legislate under the Concurrent List  stood ousted by legislation by the Central Government  under Entry 52 of List I and also in view of Section 18-G  of the Industries (Development and Regulation) Act, 1951.

36.     In our view, if the decision in the Synthetics and  Chemicals case (supra) with regard to the interpretation  of Section 18-G of the 1951 Act is allowed to stand, it  would render the provisions of Entry 33 (a) of List  III  nugatory or otiose.

37.     We are, therefore, also of the view that this aspect  of the matter requires reconsideration by a larger Bench  of this Court, particularly, when the views expressed by  7 Judge Bench on the aforesaid question have been  distinguished in several subsequent decisions of this  Court, including the two decisions rendered by  Constitution Benches of five Judges.

38.     We, accordingly, formulate the following questions,  which, in our view, may be referred to a larger Bench :

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 11  

Q.1     Does Section 2 of the Industries (Development and  Regulation) Act, 1951, have any impact on the field  covered by Section 18-G of the said Act or Entry 33 of  List III of the Seventh Schedule of the Constitution?

Q.2     Does Section 18G of the aforesaid Act fall under  Entry 52 of List I of the Seventh Schedule of the  Constitution, or is it covered by Entry 33 of List III  thereof?

Q.3     In the absence of any notified order by the Central  Government under Section 18-G of the above Act, is the  power of the State to legislate in respect of matters  enumerated in Entry 33 of List III ousted?

Q.4     Does the mere enactment of Section 18-G of the above  Act, give rise to a presumption that it was the intention  of the Central Government to cover the entire field in  respect of Entry 33 of List III so as to oust the States’  competence to legislate in respect of matters relating  thereto?

Q.5  Does the mere presence of Section 18-G of the above  Act, oust the State’s power to legislate  in regard to  matters falling under Entry 33(a) of List III ?;

Q.6     Does the interpretation given in Synthetics and  Chemicals Case (1990) 1 SCC P 109, in respect of Section  18-G of the Industries (Development and Regulation) Act,  1951, correctly state the law regarding the States’ power  to regulate industrial alcohol as a product of the  Scheduled industry under Entry 33 of List III of the  Seventh Schedule of the Constitution in view of clause  (a) thereof ?

39.     Let these matters be placed before the Hon’ble Chief  Justice of India for consideration and appropriate  orders.