1. Conflict regarding the respective legislative and taxing jurisdictions of the Union and States over intoxicating liquors, industrial alcohol, and rectified spirit. (Para 2 , 3 )
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1997 Supreme(SC) 457
SUPREME COURT OF INDIA
Government OF HARYANA
Vs.
HARYANA BREWERY Limited
Decided on March 11, 1997
Important Points
The court referred the conflict between Union and State legislative and taxing powers regarding industrial alcohol and potable liquors (specifically rectified spirit) to a Constitution Bench to resolve inconsistent judicial precedents and establish a coherent formula for their respective jurisdictions.
Subject
Constitutional Law - Powers of the Union and States
Act Referred
Headnote
Leave granted in both these matters – Levy of duties thereon – Certain important questions arise in these matters which, in our opinion, require to be decided authoritatively by a Constitution bench. Much water has flowed since the decision of the seven-Judge Constitution bench of this court in Synthetics and Chemicals and Co. it has been held by a three-Judge bench of this court that so far as intoxicating liquors are concerned, their production, manufacture, possession, transport, purchase and sale is the exclusive province of the States by virtue of Entry 8 of List II – It has also been held that the imposition of prohibition and levy of duties thereon is also the prerogative of the States alone –Held, Rectified spirit which is removed for industrial purposes (purposes other than manufacture of IMFLs or country liquor) can be taxed by the Union while the rectified spirit which is removed for the purpose of manufacture of IMFL or country liquor or other intoxicating liquors can be taxed by the State Distillery a three-Judge bench of this court held that any wastage occurring in the course of manufacture of alcoholic liquors occurring before it reaches the stage of alcoholic liquor for human consumption is outside the States jurisdiction but any wastage occurring after they reach the alcoholic liquor for human consumption is the province of the State. This was held in the context of power to levy duty upon liquors – Ordered Accordingly.
Legal Category Hierarchy
Table of Contents
2. Whether the power to legislate and tax rectified spirit and alcoholic wastage resides with the Union or the States. (Para 2 , 3 )
3. Existing precedents present conflicting views on the control of rectified spirit and alcoholic wastage, necessitating a coherent formula to define respective jurisdictions. (Para 2 , 3 , 4 )
4. State legislative powers should include incidental and ancillary powers to ensure a practical and realistic distribution of jurisdiction between the Union and States. (Para 4 )
5. Matters referred to a Constitution Bench for authoritative determination of the respective powers of the Union and the States. (Para 1 , 5 )
6. What is the legal conflict regarding the taxation of rectified spirit?
Precedents differ on whether States can tax rectified spirit if it can be converted to country liquor or diverted to human consumption, or if it is reserved for the Union when used for industrial purposes. (Para 2 )
7. How is jurisdiction over wastage of alcoholic liquors determined?
Wastage occurring before the liquor reaches the stage of alcoholic liquor for human consumption is outside State jurisdiction, while wastage occurring after that stage falls within State province. (Para 3 )
8. What principle should guide the distribution of legislative powers between the Union and the States?
Legislative powers granted to States should include incidental and ancillary powers, and the principles governing Union-State jurisdiction must be practical, realistic, and prevent abuse or misuse. (Para 4 )
( 1 ) LEAVE granted in both these matters.
( 2 ) CERTAIN important questions arise in these matters which, in our opinion, require to be decided authoritatively by a Constitution bench. Much water has flowed since the decision of the seven-Judge Constitution bench of this court in Synthetics and Chemicals Ltd. v. State of U. P In State of A. P. v. Mcdowell and Co. it has been held by a three-Judge bench of this court that so far as intoxicating liquors are concerned, their production, manufacture, possession, transport, purchase and sale is the exclusive province of the States by virtue of Entry 8 of List II. It has also been held that the imposition of prohibition and levy of duties thereon is also the prerogative of the States alone. In Vam Organic Chemicals Ltd. v. State of U. P. it has been held by a two-Judge bench of this court that the decision in synthetics and Chemicals was concerned only with industrial alcohol and that so long as any alcoholic preparation can be diverted to human consumption, the States have the power to legislate in that behalf and also to impose taxes. It has been held that rectified spirit can be converted into country liquor by mere addition of water and, therefore, the States are not to tally excluded from control over the rectified spirit. In Bihar Distillery v. Union of India it has been held by another bench of two Judges that having regard to the fact that by merely adding water, rectified spirit can be converted into country liquor and also because rectified spirit can also be used for manufacturing IMFLs, the States are entitled to joint control overproduction, storage and distribution of rectified spirit. It has been held that so far as levy of duties are concerned, the point of departure is the stage ofremoval. The rectified spirit which is removed for industrial purposes (purposes other than manufacture of IMFLs or country liquor) can be taxed by the Union while the rectified spirit which is removed for the purpose of manufacture of IMFL or country liquor or other intoxicating liquors can be taxed by the States
( 3 ) IN State of U. P. v. Modi Distillery a three-Judge bench of this court held that any wastage occurring in the course of manufacture of alcoholic liquors occurring before it reaches the stage of alcoholic liquor for human consumption is outside the States jurisdiction but any wastage occurring after they reach the alcoholic liquor for human consumption is the province of the State. This was held in the context of power to levy duty upon liquors. To the same effect is the decision of a two-Judge bench in Mohan Meakin Ltd. v. Excise and Taxation Commr.
( 4 ) WE are of the opinion that the legislative power conferred upon the states by the Constitution and recognised even in Synthetics and Chemicals should include all incidental and ancillary powers and it is this aspect which was emphasised in Bihar Distillery. Any principle enunciated with respect to the respective powers of the Union and the States should be practical and realistic and such as not to give room for abuse or misuse. Since the decisions aforementioned project different points of view, it is necessary to evolve a coherent and effective formula so that the Union and the state should know what are their respective powers and jurisdiction
( 5 ) THE papers may accordingly be placed before Honble the Chief Justice for orders regarding placing these matters before the constitution Bench
