Supreme Court's 9-Judge Constitution Bench comprising Dr. D. Y. Chandrachud, Chief Justice of India, Justices Hrishikesh Roy, Abhay S. Oka, B.V. Nagarathna, J.B. Pardiwala, Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine George Masih is all set to hear State of Uttar Pradesh v. M/s. Lalta Prasad Vaish along with connected matters on March 19, 2024. The Advocates and Parties-in-person have been asked to be ready to present their cases before the Court.
The 3-judge bench of Justices H.K. Sema, Altamas Kabir and Lokeshwar Panta had referred it to a 9-judge bench by the judgement dated October 25, 2007. The judgement was authored by Justice Kabir. The judgement formulated the following six questions for the 9-judge bench to consider:
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?
Section 2 of the Industries (Development and Regulation) Act, 1951 states: "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." The First Schedule of the Act read with Sections 2 provides a list of industry engaged in the manufacture or production of any of the articles.
Notably, Industries (Development and Regulation) Act, 1951 has been placed under Ninth Schedule of the Constitution of India which contains a list of central and state laws which cannot be challenged in courts. It was added by the Constitution (First Amendment) Act, 1951. The first Amendment had added 13 laws to Ninth Schedule. The Constitution (First Amendment) Act, 1951 was enacted by the provisional Parliament amidst vociferous protest.
Section 18-G of the Act deals with power of the Central Government to control supply, distribution, price, etc., of certain articles.
Entry 52 of Union List I covers "Industries, the control of which by the Union is declared by Parliament by law to be expedient in the public interest."
Entry 33 of Concurrent List III covers "33. Trade and commerce in, and the production, supply and distribution of,—(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;(b) foodstuffs, including edible oilseeds and oils; (c) cattle fodder, including oilcakes and other concentrates; (d) raw cotton, whether ginned or unginned, and cotton seed; and (e) raw jute." Notably, this entry was substituted by the Constitution (Third Amendment) Act, 1954 amidst from opposition party leaders in the Parliament and State Assemblies. Karpoori Thakur (Bharat Ratna ) had opposed it on the ground that it erodes State's autonomy in breach of the intent of the framers of the Constitution.
The case emerged out of Special Leave Petition No. 16505 of 2004 filed by the State of Uttar Pradesh and its officers in the Excise Department on June 23, 2004 against the Judgment and Order passed by the Division Bench of the Allahabad High Court on February 12, 2004 in Civil Misc. Writ Petition No. 1027 of 1999, which was filed by R.P. Sharma in his capacity as the sole proprietor of M/s Bimal Paints and Chemical Industries situated at Aligarh in Uttar Pradesh. The writ petitioner was the holder of a licence in Form FL No. 41 granted under the provisions of the Uttar Pradesh Excise Act, 1910 and the rules under it. 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 Spirit Rules, 1976 as amended from time to time. The petitioner 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.
The High Court has 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 spirit 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 State of U.P. v. Vam Organic Chemicals Ltd (2004) imposition of fee on such ground was not acceptable since legislation with regard to denatured spirit was outside the purview of the State Legislative powers. It was held that denatured spirit is outside the seisin of the State Legislature which has jurisdiction over only potable alcohol. Citing paragraph 42 of the judgment in Vam Organic’s case, the High Court observed "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." The High Court held that the licence fee was illegal. It 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.
Supreme Court granted interim stay on the High Court's judgement on August 22, 2004. Subsequent to the stay, 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. 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. The remaining three matters were at the special leave petition stage. On November 29, 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 tagged with SLP(C) 16505 of 2004 by order dated April 26, 2007. On account of these orders all the eight matters have came up for final hearing and disposal before the 3-judge bench of Supreme Court.
The Court observed that 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. 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.
All these matters were decided by the High Court relying on the decision of the Supreme Court in State of U.P. and Ors. vs. Vam Organic Chemical Ltd (2004) and on the decision of the 7-Judge Bench of the Court in the case of Synthetics and Chemical Ltd. vs. State of U.P. (1990). Notably, the former had relied on the latter judgement.
The Court recorded the submission that while deciding the case of Ch. Tika Ramji v. State of Uttar Pradesh (1956) the central issue 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 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. The Supreme 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 mere possibility and the existence of such an order would be an essential pre-requisite for it.
It was pointed out that the decision in the Ch. Tika Ramji v. State of Uttar Pradesh (1956) case was not been brought to the notice of the 7 Judge Bench which decided the Synthetics and Chemicals case 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 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.
The decision in SIEL Limited v. Union of India (1998) was also cited wherein relying on the policy decision in Ch. Tikaramji’s case, the Court explained and distinguished the decision of the 7 Judge Bench in Synthetics and Chemicals case. Following decision of the Supreme Court in A.S. Krishna v. State of Madras (1957), the 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 Court observed that 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.
The sum and substance of the submission of S.K. Dwivedi, the senior counsel for the appellants,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 3-judge bench noted that his submissions have a good deal of force, since by virtue of the interpretation of Section 18-G in the Synthetics and Chemicals case 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. It endorsed the view that the 7 Judge Bench did not have the benefit of the views expressed by the Supreme Court earlier in Ch. Tikaramji case 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.
The 3-judge bench of Supreme Court observed, "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." It concluded, "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."
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