SHAH J.C., J. [On behalf of himself and P.B.GAJENDRAGADKAR, C.J.I., K.N.WANCHOO, and S. M Sikri, JJ.]

(1) THE appellants-Kalyani Stores-deal in liquor at Rourkela, District of Sundergarh in the State of orissa. The appellants held a licence as retail vendors for `all types of foreign liquor` under the Bihar and orissa Excise Act, 191 The expression `foreign liquor, apparently includes Ale, Beer, Port. Cider and other fermented liquors, cordials, mixtures and other preparations containing spirit, perfumed spirit and ill sorts of wines whether manufactured in India or abroad. Under the Bihar & orissa Excise Act, 1915 by a notification issued in 1937 under s. 27 a duty of Rs. 401.00 - 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 1/04/1960 to 31/03/1961 duty was levied on `foreign liquor` imported by the appellants at the rate fixed in the notification issued in 1937. On 31/03/1961 In exercisc of the powers conferred by s. 90 of the Bihar & orissa. Excise Act 2 of 1915 the Board of Revenue enhanced the duty with effect from 1/04/1961 in respect of `foreign liquors from Rs. 40.00 to Rs. 70.00 per L.P. Gallon, and also raised duty in respect of other excisable articles. The licence held by the was :In due course renewed from April 1, 196 1/03/1962. On 14/11/1961 the Sub-Inspector of Excise, Panposh called upon the appellants to pay the difference at the rate of Rs. 30.00 per L.P. Gallon in respect of the stocks of liquor found in the shop of the appellants on 1/04/1961 and to pay duty at the rate of Rs. 70.00 per L.P. Gallon in respect of fresh stocks received after 1/04/1961. 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 contented 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 articles imported into the State, imposed with a view to equalize 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 11, in Sch. VII of the Constitution, the State Legislature bad 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 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 & 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. 70.00 per L.P. Gallon under the notification dated 31/03/1961, is without authority of law, in that it contravenes Entry 51 List II, Sch. VI