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PETITIONER:

COOVERJEE B. BHARUCHA

Vs.

RESPONDENT:

THE EXCISE COMMISSIONER ANDTHE CHIEF COMMISSIONER, AJMER,AND

DATE OF JUDGMENT:

13/01/1954

BENCH:

MAHAJAN, MEHAR CHAND (CJ)

BENCH:

MAHAJAN, MEHAR CHAND (CJ)

MUKHERJEA, B.K.

BOSE, VIVIAN

HASAN, GHULAM

JAGANNADHADAS, B.

CITATION:

1954 AIR 220 1954 SCR 873

CITATOR INFO :

D 1954 SC 728 (20)

R 1958 SC 398 (8)

R 1960 SC 424 (6,11)

R 1960 SC 430 (15,16)

R 1960 SC 554 (6)

R 1965 SC1107 (49,52)

E 1967 SC1368 (11)

MV 1967 SC1512 (53,68)

R 1972 SC1816 (16,17)

R 1974 SC 651 (11)

R 1975 SC 360 (13,14,15,16,17,35,37)

R 1975 SC1121 (39,45,51,53,59)

RF 1975 SC2008 (25)

R 1977 SC 722 (29)

RF 1978 SC1457 (64)

R 1979 SC 25 (20)

RF 1980 SC 614 (14,15)

E&R 1985 SC1676 (2)

RF 1988 SC 771 (5)

RF 1990 SC1927 (28,60,73,74)

RF 1992 SC1256 (14)

ACT:

Constitution of India, art. 19 (1) (g)-Excise Regulation I

of 1915-Whether ultra vires art. 19 (1) (g)-Reasonable

restrictions under art. 19 (6)-Charge of fee-Whether in the

nature of tax.

HEADNOTE:

Held, (i) that with reference to Excise Regulation I of 1915

for the purpose of determining reasonable restrictions

within the meaning of art. 19 (6) of the Constitution on the

right given under el. 19 (1) (g) regard must be had to the

nature of the business and the conditions prevailing in,a

particular trade and no hard and fast rules concerning all

trades can be laid down. The State has the power to

prohibit trades which are illegal or immoral or injurious to

the health and welfare of the public. There is no inherent

right in a citizen to sell intoxicating liquors by retail

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and therefore the provisions. of the Excise Regulation I of

1915 purporting to regulate trade in liquor in all its

different spheres are not invalid;

(ii)charge of licence fee by public auction is more in the

nature of a tax than a licence fee though it is described as

a licence fee. One of the purposes of the regulation is to

raise revenue. Revenue is collected by the grant of

contracts to carry on trade in liquors and these contracts

are sold by auction, The grantee

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is given a licence on payment of the auction price. The

Regulation specialty authorises this. It is not a fee

levied without authority of law.

(i) Crowley v. Christensen (34 Law, Ed. 620, 623)

(ii) Commonwealth of Australia v. Bank of New South Wales

he ([1950] A.C. 235)

(iii) Rashid Ahmed v. Municipal Board of Kairana ([1950]

S.C.J. 324) (distinguished) referred to.

JUDGMENT:

ORIGINAL JURISDICTION : Petition (No. 232 of 1953) under

art. 32 of the Constitution of India.

B.D. Sharma for the petitioner.

M.C. Setalvad, Attorney-General for India (PorusA. Mehta,

with him) for the respondent.

1954. January 13. The Judgment of the Court was delivered

by

MAHAJAN C. J.-This petition under article 32 of the

Constitution of India arises in the following circumstances.

The Collector of Excise, Ajmer, respondent No. 3, on the

16th March, 1953, held an auction sale of " Chang Gate

country liquor shop, Beawar," for the year 1953-54 -pursuant

to the rules framed under' Excise Regulation I of 1915. The

petitioner and respondent No. 5, Chhoga La], offered bids at

the auction sale. Chhoga Lal, whose bid was in the sum of

Rs. 57,000, was declared the highest bidder and the

petitioner who was the former licensee was thus unsuccessful

in obtaining the contract to run this liquor shop as

hereinbefore. Half of the auction price was payable

immediately on the provisional acceptance of the bid.

Chhoga Lal, however, deposited Rs. 16,500 on the 16th March,

1953, and the balance of Rs. 12,000 ,on the 18th March,

1953, i.e., two days after the due date, contrary to the

provisions of sub-rule 8(a) of rule 6 of the auction rules.

In spite of this the sale was eventually confirmed in his

favour by the Minister of Excise.

The petitioner, when apprised of this irregularity, sent a

telegram to the Collector of Excise stating that

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the sale should not be confirmed in favour of Chhoga Lal as

he had failed in paying the price according to the rules,

and expressing his willingness to take the licence.on the

price fetched at that auction sale. He also preferred an

appeal to the Chief Commissioner against the order of the

Collector allowing the deposit of Rs.' 12,000 after the due

date and in not ordering a resale. His appeal and

representation both were unsuccessful. He claims redress

for both these grievances by means of this petition.

The petition is founded on the following allegations:

(1) That the petitioner's fundamental right to carry on

trade or business in liquor under article 19(1)(g)had been

infringed by the act of the Collector of Excise, in

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condoning the failure of the respondent in depositing the

whole of the security deposit required under sub-rule 8(a)

of rule 6 of the auction rules within the prescribed time

and in not reauctioning the licence under sub-rule 9 of rule

6.

(2)That in allowing-, Chhoga Lal to make the deposit after

the expiry of the prescribed time the Collector had

discriminated between. him and Chhoga Lal and had thus

abridged the petitioner's fundamental right under article

14. It is alleged that if the petitioner had known that the

Collector would enlarge the time for the security deposit he

would have offered a higher bid.

(3) That the Hon. Minister for Excise, respondent No. 2,

had no authority under the regulation to confirm the auction

sale held by the Collector.

(4)That the summary rejection of his appeal without hearing

was not justified and has resulted in the abridgement of his

right to carry on his trade.

(5)That the provisions of the Excise Regulation and the

auction rules made thereunder were ultra vires as the same

purport to grant monopoly of trade to a few persons and are

thus inconsistent with article 19(1) (g) of the

Constitution and that the provisions of the regulation

regarding levy of licence fee with the avowed object of

raising a big source of revenue also

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seriously affected the fundamental rights of the petitioner

under article 19(1) (g) of the Constitution. On these

allegations the petitioner prayed for a writ of mandamus or

a writ in the nature thereof or a direction or order on

respondents Nos. I to 4 directing them,

(a) not to levy any duty or fee for the purpose of raising

revenues for the benefit of the State by holding

auction sales,

(b) not to grant monopoly in the trade to a

selected few individuals, but to grant licences freely on

application, and

(c) to grant a licence to the petitioner to deal in country

liquor with his place of business at or near Chang Gate,

Beawar.

In the alternative a mandamus was asked directing the

officer concerned either to confirm the next lower bid of

the petitioner and to grant the licence for Chang Gate

liquor shop, Beawar, in his favour or to hold a reduction in

accordance with the auction rules and to cancel the licence

of respondent No. 5.

Some of the points raised are clearly outside the ambit of

the constitutional remedy provided under article 32 of the

Constitution and will be considered hereinafter. The main

contention which needs consideration in the case is

regarding the constitutional validity of the Excise

Regulation I of 1915. It was contended that the petitioner,

a citizen of free India, had an unfettered right to carry on

trade and business in liquor and this right had been

guaranteed to him under article 19 (1) (g) of the

Constitution, and that being so, the provisions of the

regulation which confer discretion on the Excise

Commissioner to restrict the number of liquor shops, and to

license them by auction to the higher bidder amount to

creation of a monopoly in liquor trade and are void. The

excessive licence fee recovered by public auction was

attacked on the ground I that it was not in the nature of a

licence fee but was in the nature of a tax and this could

not be

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recovered by having resort to the powers of legislation

saved by article 19 (6) of the Constitution.

In order to determine the validity of these contentions, it

is necessary to refer to the relevant provisions of the

regulation which consolidates and amends the law relating to

import, export, transport, manufacture, sale and possession

of intoxicating liquors and of intoxicating drugs, in the

Provinces of Ajmer-Merwara. It has been enacted in-

exercise of the legislative power conferred by the

Government of India Act, 1935, Seventh Schedule, List II, "

For making laws regarding intoxicating liquors, i.e., the

production, manufacture, possession, transport, purchase and

sale of intoxicating liquors ", and under power conferred

for raising " duties of excise on alcoholic liquors for

human consumption. " The pith and substance of the regula-

tion is that it raises excise revenue by imposing duties on

liquor and intoxicating drugs by different methods and it

also regulates the import, export, transport, manufacture,

sale and possession of intoxicating liquors. Section 13

enacts that no excisable article shall be manufactured or

collected except under the authority and subject to the

terms and conditions of a licence granted in that behalf.

Section 14 provides that the excise commissioner may (a)

establish a distillery in which spirit may be manufactured

under a licence granted under section 13 on such conditions

as the Chief, Commissioner may impose; (b) discontinue any

such distillery; (c) license, on such conditions as the

Chief Commissioner may impose, the construction and working

of a distillery or brewery; (d) establish or license a

warehouse wherein any excisable article may be deposited-and

kept without payment of duty; and (e) discontinue any such

warehouse. Section 15 provides that without the sanction of

the Chief Commissioner no excisable article shall be removed

from any distillery, brewery, warehouse or other place of

storage. Section 18 says that the Chief Commissioner may

lease to an person, on such conditions and for such period

as he may think fit, the right of 'manufacturing or of

supplying by wholesale, or of both, or

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of selling by wholesale or by retail, or of manufacturing or

of supplying by whole, or of both and of selling by retail

any country liquor or intoxicating drug within any specified

area. Restrictions regarding the manufacture and sale of

liquors in cantonments and other places are found in some

other provisions of the regulation. The employment of

children and women is prohibited in this business and

provision is made authorising the District Magistrate for

closing shops 'for the sake of maintenance of public peace.

Section 24 authorises the Chief Commissioner to impose a

duty at such rate or rates as he thinks fit on any excisable

article imported, exported, transported or manufactured,

cultivated or collected under any licence granted under

section 13. Section 27 deals with grant of licences,

permits and passes. It provides that a licence shall be

granted on payment of such fees, if any, for such period and

subject to such restrictions and on such conditions and

shall be in such form and contain such particulars as the

Chief Commissioner may direct either generally or in any

particular instance. Power is then given by section 30 for

cancellation or suspension of the licence. Sections 31 and

32 provide for the withdrawal and surrender of licence.

Chapter VII of the regulation deals with offences and

penalties. Chapter VIII deals with detection, investigation

and trial of offences under the regulation. Section 62

provides, inter alia, that the Chief Commissioner has power

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to make rules prescribing the scale of fees and the manner

of fixing the. fees payable in respect of any privilege,

licence, permit or pass or the storing of any excisable

article. Section 64 says that the following moneys, namely,

all excise revenue, any loss that may accrue when 'in con-

sequence of default a grant has been taken under management

by the Collector or has been resold by him, and all amounts

due to the Government by any person on account of any

contract relating to the excise revenue, may be recovered

from the person primarily liable to pay the same, or from

his, surety (if any), by distress and sale of his movable

property, or by any other process for the recovery of land

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revenue due from landholders or from farmers of land or

their sureties.

Article 19 (1) (g) of the Constitution guarantees that all

citizens have the right to practise any pro. fession or to

carry on any occupation or trade or business, and clause (6)

of the article authorises legislation which imposes

reasonable restrictions on this right in the interests of

the general public. It was not disputed that in order to

determine the reasonableness of the restriction regard must

be had to the nature of the. business and the conditions

prevailing in that trade. It is obvious that these factors

must differ from trade to trade and no hard and fast rules

concerning all trades can be laid down. It can also not ,be

denied that the State has the power to prohibit trades which

are illegal or immoral or injurious to the health and

welfare of the public. Laws prohibiting trades in noxious

or dangerous goods or trafficking in women cannot be held to

be illegal as enacting a prohibition and not a mere

regulation. The nature of the business is, therefore, an

important element in deciding the reasonableness of the

restrictions. The right of every citizen to pursue any

lawful trade or business is obviously subject to such

reasonable conditions as may be deemed by the governing

authority of the country essential to the safety, health,

peace, order and morals of the community. Some occupations

by the noise made in their pursuit, some by the odors they

engender, and some by the dangers accompanying them, require

regulations as to the locality in which they may be

conducted. Some, by the dangerous character of the articles

used, manufactured or sold, require also special

qualifications in the parties permitted to use, manufacture

or sell them. These pro positions were not disputed, but it

was urged that there was something wrong in principle and

objectionable in similar restrictions being applied to the

business of selling by retail, in small quantities,

spirituous and intoxicating liquors. It was urged that

,their sale should be without restriction, that every person

has a right which inheres in him, a natural

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right to carry on trade in intoxicating liquors and that the

State had no right to create a monopoly in them. This

contention stands answered by What Field J. said in Crowley

v. Christensen(1):

"There is in this position an assumption of a fact which

does not exist, that when the liquors are taken in excess

the injuries are confined to the party offending. The

injury, it is true, first falls upon him in his health,

which the habit undermines; in his morals, which it weakens;

and in the self-abasement which it creates. But as it leads

to neglect of business and waste of property and general

demoralisation, it affects those who are immediately

connected with and dependent upon him. By the general

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concurrence of opinion of every civilized and Christian

community, there are few sources of crime and misery to

society equal to the dram shop, where intoxicating liquors,

in small quantities, to be drunk at the time, are sold

indiscriminately to all parties applying. The statistics of

every State show a greater amount of crime and misery

attributable to the use of ardent spirits obtained at these

retail liquor saloons than to any other source. The sale of

such liquors in this way has therefore, been, at all times,

by the courts of every State, considered as the proper

subject of legislative regulation. Not -only may a licence

be exacted from the keeper of the saloon before a glass of

his liquors can be thus disposed of, but restrictions may be

imposed as to the class of persons to whom they may be sold,

and the hours of the day, and the days of the week, on which

the saloons may be opened. Their sale in that form may be

absolutely prohibited. It is a question of public

expediency and public morality, and not of federal law. The

police power of the State is fully competent to regulate the

business to mitigate its evils or to suppress it entirely.

There is no inherent right in a citizen to thus sell

intoxicating liquors by retail; it is not a privilege of a

citizen of the State or of a citizen of the United States.

As it is a business attended with danger to the community,

it may, as already said, be entirely prohibited, or be

(1) 34 Law. Ed. 620, 623.

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permitted under such conditions as will limit to the utmost

its evils. The manner and extent of regulation rest in the

discretion of the governing authority. That authority may

vest in such officers as it may deem proper the power of

passing upon applications for permission to carry it on, and

to issue licences for that purpose. It is a matter of

legislative will only."

These observations have our entire concurrence and they

completely negative the contention raised on behalf of the

petitioner. The provisions of the regulation purport to

regulate trade' in liquor in all its different spheres and

are valid.

The contention that the effect of some of these provisions

is to enable Government to confer monopoly rights on one or

more persons to the exclusion of others and that creation of

such monopoly rights could not be sustained under article 19

(6) is again without force. Reliance was placed on the

decision in Rashid Ahmad v. Municipal Board of Kairana(1).

That decision is no authority for the Proposition contended

for. Elimination and exclusion from business is inherent in

the nature of liquor business and it will hardly be proper

to apply to such a business principles applicable to trades

which all could carry. The provisions of the regulation

cannot be attacked merely on the ground that they create a

monopoly. Properly speaking,, there can be a monopoly only

when a trade which could be carried on by all persons is

entrusted by law to one or more persons to the exclusion of

the general public. Such, however, is not the case with the

business of liquor. Reference in this connection may be

made to the observations of Lord Porter in Commonwealth of

Australia v. Bank of New South Wales(2). This is what his

Lordship said:

"Yet about this as about every other proposition in this

field a reservation must be made. For their Lordships do

not intend to lay it down that in no circumstances would

exclusion of competition so as to

(1) (1950) S.C.J. 324. (2) [1950] A.C. 235.

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882

create a monopoly either in a State or Commonwealth agency

or in some other body be justified. Every case must be

judged on its own facts and in its own setting of

time.

Further it seems to us that this argument suffers 'from a

fallacy. Under the rules every member of the public who

wishes to carry on trade in liquor is invited to make bids.

This is the only method by which carrying on of liquor trade

can be regulated. When the contract is thrown open to

public auction, it cannot be said that there is exclusion of

competition and thereby a monopoly is created. For all

these reasons we are of opinion that the contention that the

provisions of the regulation are unconstitutional as they

abridge the rights of the petitioner to carry on liquor

trade freely cannot be sustained.

The next contention that the charge of fee by public auction

is excessive and is not in the nature of a fee but a tax

ignores the fact that licence fee described as a licence fee

is more in the nature of a tax than a licence fee. One of

the purposes of the regulation is to raise revenue. By the

provisions of section 24, duties can be imposed on the

manufacture, import, export and transport of liquor and

other excisable articles. Revenue is also collected by the

grant of contracts to carry on' trade in liquors and these

contracts are sold by auction. The grantee is given a

licence on payment of the auction price. The regulation

specifically authorises this. It is not a fee levied

without authority of law as was the situation in Rashid

Ahmad's case(1).

As regards the other contentions of the learned counsel, it

is sufficient to say that if there has been any breach of

the rules framed under the regulation by the officers

concerned, the remedy for such breaches is provided for in

the regulation itself. Mere irregularities committed in

conducting an auction sale cannot be said to have abridged

the petitioner's fundamental rights and so article 32 is not

attracted. It is open to the petitioner under article 226

to I approach the- High Court for a mandamus if the officers

concerned have

(1) [1950] S.C.J. 324.

883

conducted themselves not in accordance with law or if they

have acted in excess of their jurisdiction. The same is the

answer to the petitioner's next contention that the sale

could not be confirmed by the Minister and that under the

rules it was only the Chief Commissioner who was authorised

to confirm it. Then point of discrimination was not

seriously argued before us.

For the reasons given above we see no validity in this

application and we accordingly dismiss it with costs.

Petition dismissed.

Agent for the petitioner: S. D. Sekhri.

Agent for the respondent: G. H. Rajadhyaksha.