Bombay High Court
Saral Manufacturing Co. & Others vs State Of Maharashtra & Others on 19 November, 1998
Equivalent citations: 2000(1)BOMCR192, 1999(2)MHLJ465
ORDER P.S. PATANKAR, J.
1. All these petitions under Article 226 of the Constitution of India can be disposed of by this common judgment as they involve the common question.
2. All these petitioners are the holders of D.S.P.I. licenses issued under the Maharashtra Denatured Spirituous Preparations Rules, 1963 (hereafter referred to as the Rules of 1963) effected under the provisions of the Bombay Prohibition Act, 1949 (hereafter referred to as the Prohibition Act). They were granted sometime in 1963 for the purpose of manufacture and sale of French Polish and Thinners.
3. The grievance of these petitioners is that for the period from November, 1979 to September, 1980, the quota of Ordinary Denatured Spirit (hereafter referred to as OSD) granted to them for enabling them to manufacture French Polish and Thinners came to be drastically reduced illegally.
4. For example, in Misc. Petition No. 2372 of 1979, M/s. Fraser and Co. and others the allotted quota per month for the period 1-10-1978 to 31-10-1979 was 3625 litres. It came to be reduced to 588 litres for the period 1-10-1979 to 30-9-1980. This was done on the basis of the wireless message issued by the State Government dated 29-10-1979 and consequent letter dated 31-10-1979 issued by the Commissioner of Prohibition and Excise, Maharashtra State, Bombay to the District Collectors. So far as the petitioners are concerned, the calculation for the quota was provided as under:--
D.S.P.I licences for the manufacture and sale of French Polish, thinners and varnish excluding picture varnish....
No cut to be effected in monthly quota of ordinary denatured spirit upto 250 bulk litres and the balance of the quota if any, should be reduced by 90% of the quantity in excess of 250 bulk litres.
In view of this, the quota came to be uniformly reduced in case of those who were manufacturing French Polish and Thinners. The manufacture, sale, transport, use etc. of denatured spirit is regulated under the Bombay Denatured Spirit Rules, 1959 (hereinafter referred to as the Rules of 1959). Condition No. 16 of the licence in Form D.S.P.I stipulates the quota of denatured spirit fixed under the licence which the licensee can use in a month. Under it, the licensee is permitted to obtain the quota of OSD for the manufacture of denatured spirituous preparations permitted to be manufactured.
5. The reduction is challenged by the petitioners' on the ground that it is violative of their fundamental right under Article 19(1)(g) of the Constitution of India as it seriously affects their trade and virtually takes away their right to carry on their business. It is submitted that since the grant of licence, they are carrying on the business. They have developed it. OSD is the basic raw material for the manufacture of their products and the drastic reduction of the same would lead to serious consequences as far as their business and financial position is concerned. It is submitted that this is nothing but prohibiting them from doing the business and hence illegal and unconstitutional. As against it it is contended by the State that this is only regulatory in nature and the restrictions imposed are reasonable in the facts and circumstances. Hence, it cannot be called either illegal or unconstitutional.
6. This was earlier challenged by the petitioners and the Division Bench of this Court passed the order on 23rd September, 1980 in case of some petitions and the learned Single Judge passed the order in some other petitions on 4-9-1981. It was mainly held relying upon the Judgment of the Apex Court , Har Shankar and others v. The Deputy Excise and Taxation Commissioner and others, and , State of U.P. and others v. Synthetics and Chemicals Ltd. and others, and , P.N. Kaushal etc. v. Union of India and others, that there is no fundamental right to do trade or business in intoxicants and the State, under its regulatory powers, had the right to prohibit absolutely every form of activity in relation to intoxicants -- its manufacture, sale, etc. Hence, the petitioners have no fundamental right to carry on the business and trade in French Polish and thinners and to claim the quota earlier granted. They cannot complain as a class that the said right has been abridged or taken away. It was held that it was in the nature of a concession given by the State for reasons which the Government thinks fit and for such duration and on such conditions as are deemed necessary and the said right is not an absolute one. It was further held that the State was having the right to curtail the said right by controlling the production of or manufacture a French Polish etc. and the petitioners cannot complain that their right was affected as there was no such right in existence. This was challenged by the petitioners before the Apex Court and the Apex Court in Civil Appeal No. 2371 of 1982. M/s. Fraser and Co. v. State of Maharashtra and others, passed the order in the above Appeal on 20-7-1995 (and other companion Appeals) and the Apex Court set aside the order passed by the High Court and remanded the matters back for disposal in the light of the Judgment . Synthetics and Chemicals Ltd. and others v. State of U.P. and others. Hence, these Petitions are heard by us.
7. First we shall state the relevant provisions of Jaw. Under section 2(24) of the Prohibition Act, "liquor" is defined as under:--
"2(24) "liquor" means-
(a) (spirits), (denatured spirits), wine, beer, toddy and all liquids consisting of or containing alcohol; and
(b) any other intoxicating substance which the State Government may, by notification in the Official Gazette, declare to be liquor for the purposes of this Act."
Section 2(10) thereof defines "denatured" as under:
"2(10) "denatured" means subject to a process prescribed for the purpose of rendering unfit for human consumption."
Section 2(10a) defines "denatured spirituous preparation" as under :--
"2(10a) "denatured spirituous preparations" means any preparation made with denatured spirit or denatured alcohol and includes lacquers, French Polish, and varnish prepared out of such spirit or alcohol;"
Section 2(43) defines "spirit" as-
"2(43) "spirit" means any liquor containing alcohol and obtained by distillation (whether it is denatured or not);"
Section 139 of the Bombay Prohibition Act provides for general powers of the State Government in respect of grant of licences. Section 139(1)(h) empowers the State to prescribe the maximum quantity of any intoxicant or denatured spirituous preparation which may be sold in any area or at any place. Section 139(1)(n) of the said Act empowers the State to issue such other instructions in any manner pertaining to the grant or otherwise licences granted under the Act as the State government may deem proper.
8. A detailed affidavit in reply has been filed on behalf of the State sworn by Mr. Pratapsingh Damodar Golekar, Deputy Commissioner of State Excise (Medicinal and Toilet Preparations), Maharashtra State, Mumbai, dated 2nd September, 1998. He has pointed out that French Polish preparation is made from denatured spirituous preparation after mixing substances like rosin, chandras, shellac etc. It becomes denatured spirituous preparation and used for polishing of furniture. It is thus for non-potable use. It has been pointed out that sale of ODS or French Polish to fictitious persons for potable use is effected by unscrupulous licensees and in such cases methanol which is a very highly poisonous chemical, is mixed in the OSD or denatured spirituous preparation to increase volume and/or toxicity, and thereby profit of the seller. It was also pointed out that sometime instead of manufacturing French Polish from ODS, the licensees sell it illegally for potable use, the quota of ODS obtained by them under the D.S.P.I. licence, although on record it is indicated that French Polish or other denatured spirituous preparation was manufactured and sold. The addition of Methanol is dangerous and causes blindness or even death of the drinker. It is also pointed out by an illustration how much the unscrupulous persons make profit.
"...If one litre of rectified spirit, which normally contains 95% of ethyl alcohol v/v i.e. contains 1.66 proof litres of alcohol, is used for manufacture of country liquor, excise duty at the rate of Rs. 50/- per proof litre is applicable and therefore, 1.66 x 50 = Rs. 83/- are recovered by the State by way of excise duty. If the same 1 litre of rectified spirit is used for manufacture of IMFL, the minimum rate of excise duty on Indian made foreign liquor of Rs. 100/- per proof litre is applicable and therefore, 1.66 x 100 = 166/- are recovered from the manufacturer. However, if the same 1 litre of rectified spirit is denatured, the levy of excise duty on rectified spirit, country liquor or IMFL stands exempted on account of denaturation; and the purchaser has to pay only a small fee of 20 paise per litre of denatured spirit under Rule 49 of the Rules of 1959 and, therefore, there was and is a tendency to sell illegally denatured spirit or denatured spirituous preparations for potable use to earn exorbitant illegal profits. And, therefore, unscrupulous persons who have obtained licences, under the Prohibition Act for use of denatured spirit, their wholesale, retail sale or for manufacture and sale of denatured spirituous preparations, sell denatured spirit or denatured spirituous preparations, at slightly lower price than the price of authorisedly manufactured and sold potable liquor, for potable use to earn huge illegal profits...."
The tragedies and deaths which have taken place recently from time to time are also given in Exhibit "D" due to the consumption of the illicit liquor produced out of OSD in the State. There is also mention made of the tragedy which has taken place in 1971 at Khopoli, District Raigad due to consumption of French Polish adulterated with methanol in which 65 persons died. It is pointed out that due to the said tragedy, the State appointed an Enquiry under Shri M.G. Wagh. He reported the use and misuse of denatured spirit sanctioned under the D.S.P.I. licence is the cause. The quota granted was extremely disproportionate to the actual need and it is diverted for illegal purposes. He pointed out that from the said quota not only the furniture in India but also in the world could be polished. It is, therefore, the case of the State Government that this reduction in quota is not to prohibit or stop the business of the petitioners but to regulate it in view of the experience gained in the past few years and to safeguard the public health. It is also stated that the reduction of quota of OSD sanctioned on licences for manufacture and sale, the actual users are not inconvenienced and they can obtain licences if they required denatured spirit was preparations for their use i.e. for polishing of furniture manufactured by them or other purposes. Considering all this, in our view, the measure adopted by the State in this case very well be said to be regulatory in nature and not with a view to prohibit the petitioners' business. The business of petitioners might have been affected, but the step taken by the State in imposing uniform cut in the present case can be said to be to safeguard public health and hence reasonable restrictions. It cannot be termed as unconstitutional or illegal.
9. The learned Advocate General has relied upon the wireless Instructions dated 6th June, 1978 (Exhibit "B") issued by the Commissioner of Prohibition and Excise, Maharashtra State, Mumbai and also the circular issued by the Commissioner of Prohibition and Excise, Maharashtra State, Mumbai dated 20th September, 1980. He has also stated that no new licences have been granted for the manufacture and sale of French Polish after 6-6-1978 in view of the instructions mentioned above. He also relied upon paragraph (3) thereof which reads as under:--
"The quota of spirit on the existing licences should not be increased." However, he has fairly stated that the quota which is already granted to the petitioners shall not be reduced, but the question is whether it can be increased or not. We find that the Circular dated 20-9-1980 refers to allotment/increase in the quota of alcohol for the manufacture of the sensitive products which include French Polish, Thinners, Varnish, etc. Therefore, the quota can be increased if the concerned authority finds considering various facts and circumstances that it is necessary in a particular case. Further, the said circular dated 20-9-1980 lays down the different requirements to be complied with by any applicant in that respect. Therefore, it is clear from the said Circular that if the case is made out by any petitioner that it requires higher quota of OSD it can be granted. The concerned authority has to consider it in the light of the circular dated 20-9-1980. We may give an illustration in that respect. If at a particular point any manufacturer of furniture gets order from a foreign country for supply of furniture and requires French Polish for polishing it and such a manufacturer places an order upon one of the petitioners, then he would certainly require higher quota of OSD. In such a case, the application made by the said petitioner for higher OSD can be called as a bona fide one and can be granted by the concerned authority in view of the said Circular.
10. Both sides have relied upon certain judgments of the Apex Court but in view of the above position, we find that it is not necessary to discuss them in detail. Further, we may point out that at the stage of admission of these petitions, interim orders were passed by this Court and the quota allocable to the petitioners has been substantially increased. Therefore, the grievance essentially made by the petitioners for the period 1979 to 1980 has already been redressed.
11. In view of the conclusions we have reached, strictly speaking, it is not necessary for us to discuss the various judgments cited by both the sides. However, we are making short reference to them.
12. We shall first refer to the judgment of the Apex Court , Synthetics and Chemicals Ltd. and others v. State of U.P. and others, as the Apex Court has directed to consider these petitions in the light of the said judgment. The said judgment mainly considered the power to levy of vend fees on industrial alcohol by the State Government. The Apex Court laid down as under:--
"...We must accept the position that the States have the power to regulate the use of alcohol and that power must include power to make provisions to prevent and/or check industrial alcohol being used as intoxicating or drinkable alcohol. The question is whether in the garb of regulations a legislation which is in pith and substance, as we look upon the instant legislation, fee or levy which has no connection with the cost of expenses administering the regulations, can be imposed purely as regulatory measure."
It was answered in the negative holding that it cannot be treated as a part of the regulatory measure. In para 86, it was observed:--
"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)....
(b) It may lay down regulations to ensure that non potable alcohol is not diverted and misused as a substitute for potable alcohol.
(c)...
(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."
It is clear from this that the State is having power to lay down regulations to ensure that non-potable alcohol is not diverted and misused as a substitute for potable alcohol.
13. In . M/s. Khoday Distilleries Ltd. etc. v. State of Karnataka and others etc., the law laid down so far regarding trade in alcohol came to be summarised. The relevant part in as under:
"(a) The rights protected by Article 19(1) are not absolute but qualified. The qualifications are stated in Clauses (2) to (6) of Article 19. The fundamental rights guaranteed in Article 19(1)(a) to (g) are, therefore, to be read along with the said qualifications even the rights guaranteed under the Constitution of the other civilized countries are not absolute but are read subject to the implied limitations on them. Those implied limitations are made explicit by Clauses (2) to (6) of Article 19 of our Constitution."
"(1) Likewise, the State cannot prohibit trade or business in industrial alcohol which is not used as a beverage but used legitimately for industrial purposes. The State, however, can place reasonable restrictions on the said trade or business in the interests of the general public under Article 19(6) of the Constitution."
"(m) The restrictions placed on the trade or business in industrial alcohol or in medicinal and toilet preparations containing liquor or alcohol may also be for the purposes of preventing their abuse or diversion for use as or in beverage."
.....
It was thus held that the decision in the case of Synthetics and Chemicals Ltd. (cited supra) was confined to trade or business in industrial alcohol which is legitimately used for industrial purpose and not for consumption as an intoxicant drink and that the said judgment does not say that the State has no right to place reasonable restrictions on the trade or business.
14. In , Bihar Distillery and another v. Union of India and others, it was again affirmed that the State is having power to see that the rectified spirit is not diverted or misused for potable purpose and this can be done by making necessary regulations requiring industry to submit periodical statement of raw materials and finished product (rectified spirit) and the authority is entitled to verify the correctness. It was held that for this purpose, the State is entitled to post their staff in the distillery and levy reasonable regulatory fee to defray the cost of such staff. However, this cannot be read to say that State has no power to regulate misuse of industrial alcohol by using other means or the State is permitted to adopt only those measures. In the present case, the circular dated 20-9-1980 has been issued to see that no inconvenience is caused to a bona fide user of OSD and to see that the requirements of such consumers are met.
15. The learned Advocate General has relied upon the Judgment of the Apex Court reported in 1993 Supp. (2) S.C.C. 659, Razakbhai Issakbhai Mansuri and others v. State of Gujarat and others. The question involved was whether a person is required to take licence for possessing of rotten gur in excess of prescribed quantity. The Government requirement in that respect was held to be valid. However, it was held that there can be no complete prohibition. It was observed that the unlawful activities of bootleggers are well known and the policy of prohibition has failed and it is necessary to check illegal activities effectively. It was held that reasonable restrictions in public interest can be imposed and the business of intoxicating liquor can be regulated and this would be protected by Clause 6 of Article 19.
16. The learned Advocate General then relied on , P.N. Krishna Lal and others etc. v. Government of Kerala and others, etc. This has no much relevance here as it deals with right to manufacture and sale, etc. of potable liquor. However, it was observed that no person has any absolute right to sell liquor or intoxicating drug except in accordance with law which aimed at preservation of public health as well as to raise revenue.
17. In view of the above, we pass the following order:-
Rule is discharged in each of the petitions. However, it is clarified that the petitioners shall be at liberty to apply with regard to the Circular dated 20th September, 1980 and the Authority shall decide the claim in the light of the Circular. No order as to costs.
18. Order accordingly.