Radhakrishnan, J.

Constitutional validity of the Kerala Liquor Transit (Amendment) Rules 2005 imposing enhanced fee for transit of liquor through the State of Kerala to Mahe alone, a part of the Union Territory of Pondicherry is under challenge in these appeals as discriminatory and offending free trade and commerce through out the territory of India.

2. Petitioners are engaged in the trade of liquor through various retail shops at Mahe, a part of Union Territory of Pondicherry. Government of Pondicherry in exercise of it powers conferred under rule 113(1) framed under the Pondicherry Excise Act, 1970 have issued necessary licenses for possession and sale of Indian made foreign liquors/foreign liquors and beer in the town of Mahe, which fails under the administration of Government of Pondicherry. Licence permits the licensees to import all kinds of Indian liquor or foregin liquors and beer from outside and also from the manufacturers of permit issued by the Licensing Authority of the Government of Pondicherry.

3. Transit Permit was not earlier necessary for transporting liquor from the Kerala State to another State. During the year 1989 Kerala State had insisted for transit permits for transporting liquor to Mahe through the State of Kerala. Series of writ petitions were preferred before this court questioning the imposition of the transit fee which were disposed of by a Division Bench, the Judgment is reported in Thirumal Wines v. State of Kerala, 1990 (1) ILR (Ker.) 634. The Bench had taken the view that if liquor is transported from Karnataka State to Mahe, or from Tamil Nadu, Punjab, Maharashtra, goa, West Bengal etc. to Mahe, even though the liquor has to pass through Kerala State before it reaches Mahe, no transit permit is required under the Act and the rules, for, there is no movement from one State to the same State, as Mahe is in a different State, the Union Territory of Pondicherry, but when liquor is transported from Pondicherry to Mahe, both within the Union Territory of Pondicherry to Mahe, both within the Union Territory of Pondicherry, that liquor passing through Kerala State required a transit permit.

4. The Kerala State Government later issued SRO No.386/95 inserting subrule (3) to Rule 5, as per which, an application fee of Rs.500/- for each permit was introduced by way of transit fee. Later the application fee was enhanced to Rs.2,500/- per permit by the introduction of SRO, No.332/96. By the same SRO the State Government also inserted rule 3A, 3B and 3C providing for escort of liquor. By SRO. 728/01 the Kerala State also amended rule 3 by inserting “or to any other State” making transit permit mandatory even when liquor is brought from any other State to Mahe, through the State of Kerala. Rule then stood as follows:

“3. Permit for transit of liquor:- No liquor shall be allowed to be moved from one place in a State to another place in that State or to any other state through the territory of the State of Kerala, except under a permit issued by the Assistant Excise Commissioner of the Division through whose jurisdiction it is proposed to be moved:

Provided that when liquor has to be moved through more than one Excise Division, permit shall be issued by the Deputy Commissioner of Excise and when liquor has to be moved though more than one Excise Zone, by the Excise Commissioner.”

5. Grant of permit: (1) On receipt of an application, the Assistant Excise Commissioner, the Deputy Commissioner of Excise or the Excise Commissioner as the case may be, shall, if he is satisfied as to the genuineness of the application, issue the permit:

Provided that the Excise Commissioner may authorize an officer working in the Board of Revenue (Excise) not below the rank of an Assistant Excise Commissioner/Assistant Secretary to issue the permit on behalf of the Commissioner.

(2) A permit granted under sub-rule (1) shall be in Form T.P. and shall be in printed forms and in duplicate. Each permit shall bear a consecutive numbe