Judgement

SHAH, J. [On behalf of himself and P. B. Gajendragadkar, C.J.I., K. N. Wanchoo, and S. M. Sikri, JJ.] : The appellants-Kalyani Stores-deal in liquor at Rourkela, District of Sundergarh in the State of Orissa. The appellants held a license as retail vendors for "all types of foreign liquor" under the Bihar and Orissa Excise Act, 1915. The expression "foreign liquor" apparently includes Ale, Beer, Port, Cider and other fermented liquors, cordials, mixtures and other preparations containing spirit, perfumed spirit, perfumed spirit and all sorts of wines whether manufactured in India or abroad Under the Bihar and Orissa Excise Act, 1915 by a notification issued in 1937 under S. 27 a duty of Rs. 40 per L. P. Gallon was imposed and realised by the State of Orissa on foreign liquor of Indian manufacture imported into State of Orissa from other parts of India. For the year April 1, 1960 to March 31, 1961 duty was levied on "foreign liquor" imported by the appellants at the rate fixed in the notification issued in 1937. On March 31, 1961 in exercise of the powers conferred by S. 90 of the Bihar and Orissa Excise Act, 2 of 1915 the Board of Revenue enhanced the duty with effect from April 1, 1961 in respect of "foreign liquors" from Rs. 40 to Rs. 70 per L. P. Gallon, and also raised duty in respect of other excisable articles. The licence held by the appellants was in due course renewed from April 1, 1961 to March 31, 1962. On November 14, 1961 the Sub-Inspector of Excise, Panposh called upon the appellants to pay the difference at the rate of Rs. 30 per L. P Gallon in respect of the stocks of liquor found in the shop of the appellants on April 1, 1961 and to pay duty at the rate of Rs. 70 per L. P. Gallon in respect of fresh stocks received after April 1, 1961. The appellants challenged the legality of this levy by a petition under Art. 226 of the Constitution filed before the High Court of Orissa. The appellants contended, inter alia, that the State could levy under S. 27 of the Bihar and Orissa Act duty on excisable articles produced or manufactured in the State and a countervailing duty on excisable article imported into the State, imposed with a view to equalise the burden on the imported articles with the burden on manufactured articles in the State but no countervailing duty on liquor imported could be levied if there was in the year of licence no liquor similar to the imported liquor manufactured within the State, and as there was no distillery in the State manufacturing "foreign liquor" the levy of countervailing duty was without authority of law. The High Court dismissed the petition holding that under. Entry 51, List II, in Sch. VII of the Constitution, the State Legislature had the power to legislate for levying duties of excise on alcoholic liquors for human consumption manufactured or produced in the State and countervailing duties at the same or lower rates on similar goods manufactured or produced elsewhere in India, and as it was admitted that the rate of duty on liquor produced in Orissa levied by the State of Orissa was identical with the countervailing duty required to be paid on imported liquor, the impugned notification was not invalid. With special leave granted by this Court, the appellants have appealed to this Court.

2. The Bihar and Orissa Excise Act, 2 of 1915 was enacted with the object, amongst others, to control the import, export, transport, manufacture, possession and sale of certain kinds of liquor and intoxicating drugs. Section 27 of the Act as amended by the Adaptation Order, 1950 provides:

"An excise duty or a countervailing duty, as the case may be, at such rate or rates as the State Government may direct, may be imposed, either generally or for any specified local area, on-

(a) any excisable article imported, or

* * * *

Explanation.- * * *"

The appellants submit that the levy of duty at the rate of Rs. 70 per L. P. Gallon under the notification, dated March 31, 1961 is without authority of law,