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IN THE HIGH COURT OF JUDICATURE AT PATNA
I.A. Ansari and Navaniti Prasad Singh, JJ.
M/s Samrat Laboratories and Ors. - Petitioner
Versus
The State of Bihar through the Chief Secretary and Ors. - Respondents
Civil Writ Jurisdiction Case No. 5795, 6054, 7411, 7550, 7634, 10598 of 2016
Decided On : 30-09-2016
The Court held that the impugned notification and letter issued by the State Government prohibiting the manufacture, sale, possession, and use of denatured spirit were ultra vires the Constitution and quashed them. The Court also held that the condition of bank guarantee imposed for facilitating exports of ENA was illegal and not enforceable.
Fact of the Case:
The petitioners challenged the authority of the State Government to prohibit their business in and with regard to denatured spirit, which is unfit for human consumption. The State Government issued a notification prohibiting distilleries from manufacturing rectified spirit after 29.02.2016 and further directed the Collectors-cum-District Magistrates of Bihar not to renew licenses for dealing in denatured spirit.
Finding of the Court:
The Court held that denatured spirit is an industrial alcohol unfit for human consumption and the State has no legislative competence to regulate, prohibit, or confiscate it. The Court further held that the impugned notification and letter were issued without any legal authority and were arbitrary and unreasonable restrictions on the fundamental rights of the petitioners.
Issues: 1. Whether the State Government has the authority to prohibit the manufacture, sale, possession, and use of denatured spirit? 2. Whether the condition of bank guarantee imposed for facilitating exports of ENA was legal and enforceable?
Ratio Decidendi: 1. The Court held that the State Government lacks the legislative competence to regulate, prohibit, or confiscate denatured spirit because it is an industrial alcohol unfit for human consumption. The Court relied on the decisions of the Supreme Court in Synthetics and Chemicals Limited and others Vs. State of U.P. and others, (1990) 1 SCC 109, and Mohan Meakin Limited Vs. State of Himachal Pradesh and others, (2009) 3 SCC 157, which held that rectified spirit and denatured spirit are non-potable alcohol and are, therefore, beyond the legislative competence of the State. 2. The Court held that the condition of bank guarantee imposed for facilitating exports of ENA was illegal and not enforceable because it was a colourable exercise of power, only to spite the industry, which had challenged the authority of the State.
Final Decision: The Court allowed the writ applications and quashed the impugned notification and letter issued by the State Government. The Court also held that the condition of bank guarantee imposed for facilitating exports of ENA was illegal and not enforceable.
I.A. Ansari, J.
In these six writ petitions, the petitioners challenge the authority of the State Government to prohibit their business in and with regard to denatured spirit, which is unfit for human consumption. Specifically, the challenge is (i) to the notification, dated 04.02.2016, issued by the State Government, in so far as it prohibit distilleries, in the State, to manufacture rectified spirit after 29.02.2016 and further wherever, in course of manufacture of Ethanol/Extra Neutral Alcohol (ENA), whatever denatured spirit or any other bye-product is produced, it shall be compulsorily destroyed; and (ii) that part of the letter, dated 17.03.2016, issued by the Commissioner Excise, Bihar, Patna, which directs the Collectors-cum-District Magistrates of Bihar not to renew licences, wholesale or retail, for dealing in denatured spirit and not to grant new licences in respect thereof. Consequential challenge is to the consequences thereof.
2. Petitioners of the first two writ petitions (C.W.J.C. Nos. 5795 of 2016 and 6054 of 2016), namely, M/s Samrat Laboratories and M/s Shiva Laboratories Private Limited are industrial units engaged in the production of organic chemicals, namely, ethyl acetate, acetic acid, acetic anhydride, vinyl acetate, organic solvents, formaldehyde and surgical spirits. These are basically lacquer, sealant, paint remover, thinner, premixed varnish and surgical spirits. The main raw material for this industry is rectified spirit/ethyl alcohol (ethanol) (industrial grade), methyl alcohol (methanol) (formaldehyde).
3. It may be noted that before rectified spirit/ethyl alcohol is issued from various distilleries to the petitioners’ industry, it is added with specified denaturants rendering it unfit for human consumption. Upon its being denatured, it is termed as denatured spirit/special denatured spirit. Both these units have permission to store over one lakh bulk liters of special denatured spirit on monthly basis, which is the basic raw material for the industry by orders of the Excise Commissioner, Bihar. In respect of these units, they held licences, in Form No.24, granted by the respective Collectors of the districts in which the industry is situated.
4. Section 90 of the Bihar Excise Act, 1915 (in short, “the Act”) empowers the Board of Revenue to frame rules and, in exercise of that power, the Board of Revenue issued notification No.23-137-2, dated 29.04.1919, published in the Bihar and Orissa Gazette, dated 07.05.1919, a set of rules. Rule 63 to Rule 71 thereof deals with denatured spirit. Rule 63 thereof provides for substances, which may be used as “denaturants”. Rule 64 of the Rules provides that spirit may be denatured only under licences issued by the Collector at the distilleries or excise warehouse. Rule 65 provides for licence to denatured spirit at distillery. For this, distilleries are issued licences in Excise Form No. 25. Rule 69 further provides that distilleries shall, ordinarily, not manufacture denatured spirit exceeding 10% of the total portable quantity and denatured spirit from the distilleries are to be delivered to any person only on production of export or transport pass. Rule 69 further provides for regulating the sale and purchase of denatured spirit by wholesale or retail licensee.
5. The Board of Revenue has issued executive instructions referable to, apart from others, Section 38 (1) (b) of the Act, with regard to the process of denaturing, storage and issuance of denatured spirit and various licenses in respect thereof. Paragraph 192 thereof provides for limit of retail sale. Paragraph 193 thereof provides for licences including licence in the prescribed From No. 24 for possession of denatured spirit in excess of limit of retail sale. Licence in Form No.24 are prescribed under these executive instructions and licence in Form No.24, which these two industries hold, for storing denatured spirit in bulk quantities, are issued by the respective district Collect
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