Topic: Cooverjee B. Bharucha vs The Excise Commissioner

Cooverjee B. Bharucha vs The Excise Commissioner
Equivalent citations: 1954 AIR 220, 1954 SCR 873 - 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) - Date of Judgment: 13/01/1954


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.


Held, (i) that with reference to Excise Regulation I of 1915 for the purpose of determining reasonable    restrictions within the meaning of art. 19 (6) of the Constitution on the right given under el. 19 (1) (g) regard must be had to     the nature    of the business and the conditions prevailing    in,a particular trade and no hard and fast rules concerning     all trades    can be     laid down. The State     has the power to prohibit trades which are illegal or immoral or injurious to the health and welfare of the public. There is no inherent right in a citizen to sell intoxicating liquors by retail and therefore the provisions. of the Excise Regulation I of 1915 purporting to regulate trade in liquor    in all     its different spheres are not invalid;

(ii)charge of licence fee by public auction is more in     the nature of a tax than a licence fee though it is described as a licence fee.    One of the purposes of the regulation is to raise revenue.     Revenue is collected     by the grant     of contracts to carry on trade in liquors and these contracts are sold by auction, The grantee



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.


ORIGINAL JURISDICTION    : Petition (No. 232 of    1953) under art. 32 of the Constitution of India.

B.D. Sharma for the petitioner.

M.C. Setalvad, Attorney-General for India (PorusA. Mehta, with him) for the respondent.

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

MAHAJAN     C. J.-This petition     under    article     32 of     the Constitution of India arises in the following circumstances. The Collector    of Excise, Ajmer, respondent No. 3, on     the 16th March, 1953, held an auction sale of "     Chang    Gate country liquor shop, Beawar," for the year 1953-54 -pursuant to the rules framed under' Excise Regulation I of 1915.     The petitioner and respondent No. 5, Chhoga La], offered bids at the auction sale. Chhoga Lal, whose bid was in the sum of Rs. 57,000, was declared the highest bidder and     the petitioner who was the former licensee was thus unsuccessful in obtaining the contract to run this liquor shop as hereinbefore.    Half of the auction    price was payable immediately on     the provisional acceptance of the    bid. Chhoga Lal, however, deposited Rs. 16,500 on the 16th March, 1953, and the balance of Rs. 12,000 ,on the    18th March, 1953, i.e., two days after the due date, contrary to     the provisions of sub-rule 8(a) of rule 6 of the auction rules. In spite of this the sale was eventually confirmed in     his favour by the Minister of Excise.

The petitioner, when apprised of this irregularity, sent a telegram to the Collector of Excise stating that 875

the sale should not be confirmed in favour of Chhoga Lal as he had failed in paying the price according to     the rules, and expressing his willingness to take the licence.on     the price fetched at that auction sale. He also preferred an appeal    to the Chief Commissioner against the order of     the Collector allowing the deposit of Rs.' 12,000 after the     due date and in not ordering a     resale. His appeal     and representation    both were unsuccessful.     He claims redress for both these grievances by means of this petition. The petition is founded on the following allegations: (1) That the petitioner's fundamental right to     carry     on trade or business in liquor under article 19(1)(g)had    been infringed by the act     of the Collector of     Excise, in condoning the failure of the respondent in depositing     the whole of the security deposit required under sub-rule    8(a) of rule 6 of the auction rules within the prescribed    time and in not reauctioning the licence under sub-rule 9 of rule


(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


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


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


of selling by wholesale or by retail, or of manufacturing or of supplying by whole, or of both and of selling by retail any country liquor or intoxicating drug within any specified area.    Restrictions regarding the manufacture and sale of liquors     in cantonments and other places are found in    some other provisions of the regulation.     The employment of children and women is prohibited in     this business     and provision is made authorising the District Magistrate     for closing shops 'for the sake of maintenance of public peace. Section     24 authorises the Chief Commissioner to impose a duty at such rate or rates as he thinks fit on any excisable article     imported, exported, transported or manufactured, cultivated or    collected under any licence granted under section     13. Section    27 deals with    grant of licences, permits     and passes. It provides that a licence shall be granted on payment of such fees, if any, for such period and subject     to such restrictions and on such conditions     and shall be in such form and contain such particulars as     the Chief Commissioner may direct either generally or in     any particular instance. Power is then given by section 30     for cancellation or suspension of the licence. Sections 31     and 32 provide for the withdrawal and surrender    of licence. Chapter     VII of the regulation deals     with offences     and penalties. Chapter VIII deals with detection, investigation and trial of offences under the regulation.     Section 62 provides, inter alia, that the Chief Commissioner has power to make rules prescribing the scale of fees and the manner of fixing the. fees payable in respect of any privilege, licence, permit or pass or the storing of any excisable article. Section 64 says that the following moneys, namely, all excise revenue, any loss that may accrue when 'in    con- sequence of default a grant has been taken under management by the Collector or has been resold by him, and all amounts due to     the Government by any person    on account of     any contract relating to the excise revenue, may be recovered from the person primarily liable to pay the same, or    from his, surety (if any), by distress and sale of    his movable property, or by any other process for the recovery of land 879

revenue     due from landholders or from farmers    of land or their sureties.

Article     19 (1) (g) of the Constitution guarantees that     all citizens have the right to practise any pro. fession or to carry on any occupation or trade or business, and clause (6) of the article authorises legislation which imposes reasonable restrictions on this right in the interests of the general public. It was not disputed that in order to determine the reasonableness of the restriction regard    must be had     to the nature of the. business and the conditions prevailing in that trade. It is obvious that these factors must differ from trade to trade and no hard and fast rules concerning all trades can be laid down.     It can also not ,be denied that the State has the power to prohibit trades which are illegal or immoral or injurious    to the     health     and welfare     of the public.     Laws prohibiting trades in noxious or dangerous goods or trafficking in women cannot be held to be illegal as     enacting a prohibition and not a    mere regulation. The nature of the business is, therefore, an important element in deciding the reasonableness of     the restrictions.    The right of every citizen to     pursue     any lawful    trade or business is    obviously subject to    such reasonable conditions    as may be deemed by the governing authority of the country essential to the safety, health, peace, order and morals of the community. Some     occupations by the noise made in their pursuit, some by the odors    they engender, and some by the dangers accompanying them, require regulations as     to the locality in    which they may be conducted. Some, by the dangerous character of the articles used,    manufactured or sold, require also special qualifications in the parties permitted to use,     manufacture or sell them. These pro positions were not disputed, but it was urged that there was something wrong in principle     and objectionable in similar restrictions being applied to     the business of selling    by retail, in     small quantities, spirituous and     intoxicating liquors.    It was     urged    that ,their sale should be without restriction, that every person has a right which inheres in him, a natural 880

right to carry on trade in intoxicating liquors and that the State had no    right to create a monopoly in them.    This contention stands answered by What Field J. said in Crowley v. Christensen(1):

"There    is in this position an assumption of a     fact which does not exist, that when the liquors are taken in excess the injuries are confined to the party offending.     The injury,     it is true, first falls upon him in    his health, which the habit undermines; in his morals, which it weakens; and in the self-abasement which it creates. But as it leads to neglect of business and waste of property    and general demoralisation,     it affects those who are     immediately connected with     and dependent upon him. By the general concurrence of     opinion of every civilized and Christian community, there are few sources of crime and misery to society equal to the dram shop, where intoxicating liquors, in small quantities,    to be drunk at the time, are    sold indiscriminately to all parties applying. The statistics of every State show a greater amount of crime     and misery attributable to the use of ardent spirits obtained at these retail liquor saloons than to any other source.     The sale of such liquors in this way has therefore, been, at all times, by the     courts     of every State, considered as     the proper subject of legislative regulation. Not -only may a licence be exacted from the keeper of the saloon before a glass of his liquors can be thus disposed of, but restrictions may be imposed as to the class of persons to whom they may be sold, and the hours of the day, and the days of the week, on which the saloons may be opened. Their sale in that form may be absolutely prohibited. It is a question     of public expediency and public morality, and not of federal law.     The police power of the State is fully competent to regulate the business to mitigate its evils or to suppress it entirely. There is no inherent     right in a citizen to thus    sell intoxicating liquors by retail; it is not a privilege of a citizen     of the State or of a citizen of the United States. As it is a business attended with danger to the community, it may, as already said, be entirely prohibited, or be (1) 34 Law. Ed. 620, 623.


permitted under such conditions as will limit to the utmost its evils. The manner and extent of regulation rest in     the discretion of the governing authority.     That authority     may vest in such officers as it may deem proper the power of passing upon applications for permission to carry it on, and to issue licences for that purpose.    It is a matter of legislative will only."

These observations have our entire concurrence and    they completely negative the contention raised on behalf of     the petitioner. The provisions of the regulation     purport to regulate trade' in liquor in all its different spheres     and are valid.

The contention that the effect of some of these provisions is to enable Government to confer monopoly rights on one or more persons to the exclusion of others and that creation of such monopoly rights could not be sustained under article 19 (6) is     again without force. Reliance was placed on     the decision in Rashid Ahmad v. Municipal Board of     Kairana(1). That decision is no authority for the Proposition contended for. Elimination and exclusion from business is inherent in the nature of liquor business and it will hardly be proper to apply to such a business principles applicable to trades which all could carry. The provisions of the regulation cannot    be attacked merely on the ground that they create a monopoly. Properly speaking,, there can be a monopoly only when a     trade which could be carried on by all     persons is entrusted by law to one or more persons to the exclusion of the general public. Such, however, is not the case with the business of liquor. Reference in this connection may be made to the observations of Lord Porter in Commonwealth of Australia v. Bank of New South Wales(2). This is what     his Lordship said:

"Yet about this as about every other proposition in    this field a reservation must be made. For their Lordships do not intend to lay it down that in no    circumstances would exclusion of competition so as to

(1) (1950) S.C.J. 324.     (2) [1950] A.C. 235. 114


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.


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.