Cooverjee B. Bharucha vs The Excise Commissioner Andthe Chief...

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Petition No. 232 of 1953

Decision Date: 13 January 1954

Coram: Mehar Chand Mahajan, B.K. Mukherjea, Vivian Bose, Ghulam Hasan, B. Jagannadhadas

In the matter titled Cooverjee B. Bharucha versus the Excise Commissioner and the Chief Commissioner of Ajmer, the Supreme Court of India delivered its judgment on the thirteenth day of January, 1954. The opinion was authored by Justice Mehar Chand Mahajan, who also sat as Chief Justice of the bench, and the judgment was pronounced by a full bench consisting of Justice Mehar Chand Mahajan, Justice B.K. Mukherjea, Justice Vivian Bose, Justice Ghulam Hasan and Justice B. Jagannadhadas. The case was cited in the All India Reporter as volume 1954, page 220 and also reported in the Supreme Court Reports as volume 1954, page 873. Subsequent citation references record the decision in a number of later reporters, including the 1954 law reports, the 1958 and 1960 law reports, and various other law journals up to the year 1992, illustrating the continuing relevance of the decision. The petitioner, Cooverjee B. Bharucha, challenged the actions of the Excise Commissioner and the Chief Commissioner of Ajmer under article 32 of the Constitution of India, seeking relief on the ground that the provisions of Excise Regulation I of 1915 were ultra vires the Constitution, particularly in relation to the fundamental right to trade conferred by article 19(1)(g) and the permissible reasonable restrictions under article 19(6). The bench considered whether the charge of a licence fee collected by public auction constituted a tax rather than a mere fee, and whether the regulation of liquor trade under the 1915 rule was constitutionally valid.

The Court held that, with reference to Excise Regulation I of 1915, determining what constituted a reasonable restriction under article 19(6) required an assessment of the specific nature of the business involved and the prevailing conditions within that particular trade; the Court emphasized that no universal rule could be applied uniformly to all trades. It affirmed that the State possessed the authority to prohibit trades that were illegal, immoral or detrimental to public health and welfare, and it observed that there was no inherent constitutional right for any citizen to engage in the retail sale of intoxicating liquors. Consequently, the provisions of the 1915 regulation that sought to control the liquor trade in its various aspects were not deemed invalid. Moreover, the Court concluded that the charge of a licence fee obtained through public auction functioned more like a tax than a simple licence fee, despite being described as such in the regulation. The Court noted that one of the principal purposes of the regulation was to raise revenue, which was accomplished by granting contracts to operate liquor establishments and selling those contracts by auction. The successful bidder, upon payment of the auction price, received a licence, an arrangement expressly authorised by the regulation. Accordingly, the charge could not be characterised as a fee levied without statutory authority.

The judgment also referenced several authorities that informed the Court’s analysis. These included the decision of Crowley v. Christensen reported in the fourth volume of the Law Reports, the Commonwealth of Australia v. Bank of New South Wales reported in the 1950 Appeal Cases, and the case of Rashid Ahmed v. Municipal Board of Kairana reported in the 1950 Supreme Court Journal, which the Court distinguished for the purposes of its reasoning. The petition was filed as original jurisdiction under article 32 of the Constitution, identified as petition number 232 of 1953. Counsel for the petitioner was engaged, and the Attorney-General for India, assisted by counsel, represented the respondent. The Court’s opinion was delivered by Chief Justice Mahajan, setting out the factual background, the constitutional questions, the applicable legal principles, and the ultimate conclusions regarding the validity of the excise regulation and the character of the licence fee.

The petition was presented by the former licence holder, while counsel for the State was the Attorney-General for India, assisted by a junior counsel, and the judgment was delivered on 13 January 1954 by Chief Justice Mahajan. The petition invoked article 32 of the Constitution of India and arose from an auction conducted by the Collector of Excise at Ajmer on 16 March 1953. The auction concerned the “Chang Gate country liquor shop, Beawar” for the fiscal year 1953-54 and was held under the rules made pursuant to Excise Regulation I of 1915.

In that auction the petitioner and another participant, identified as respondent No 5, Chhoga Lal, submitted competing bids. Chhoga Lal’s bid amounted to Rs 57,000 and was accepted as the highest offer, thereby depriving the petitioner, who had previously held the licence, of the contract to operate the liquor shop. According to the auction rules, half of the winning amount was to be paid immediately upon provisional acceptance of the bid. Chhoga Lal paid Rs 16,500 on the day of the auction, that is, on 16 March 1953, but the remaining balance of Rs 12,000 was deposited only on 18 March 1953, two days after the stipulated deadline, in breach of sub-rule 8(a) of rule 6 of the auction regulations.

Despite this breach, the Minister of Excise subsequently confirmed the sale in favour of Chhoga Lal. Upon learning of the irregularity, the petitioner sent a telegram to the Collector of Excise, urging that the sale not be confirmed because the required deposit had not been made within the prescribed time, and he expressed his readiness to accept the licence at the price determined by the auction. The petitioner also filed an appeal before the Chief Commissioner contesting the Collector’s order that permitted the delayed deposit and that declined to direct a resale of the licence. Both the appeal and the accompanying representation were dismissed.

Through the present petition, the former licence holder sought redress for what he described as two grievances. He advanced four principal allegations. First, he claimed that his fundamental right under article 19(1)(g) to carry on a trade or business in liquor had been infringed by the Collector’s condonation of Chhoga Lal’s late deposit and by the failure to re-auction the licence in accordance with sub-rule 9 of rule 6. Second, he alleged that by allowing Chhoga Lal to make the deposit after the deadline, the Collector had discriminated against him, thereby violating article 14, and that, had he known the Collector would relax the time limit, he would have offered a higher bid. Third, he asserted that the Honorable Minister for Excise, respondent No 2, lacked authority under the regulation to confirm the auction sale effected by the Collector. Fourth, he maintained that the summary dismissal of his appeal without a hearing was unjustified and resulted in the infringement of his constitutional right to conduct his trade.

The petitioner asserted that several provisions of the Excise Regulation and the accompanying auction rules were unconstitutional because they effectively granted a monopoly over the liquor trade to a limited number of individuals, thereby violating article 19 (1) (g) of the Constitution which guarantees the right to carry on any trade, business, or profession. Specifically, the petitioner claimed that the regulation’s provisions concerning the imposition of a licence fee, which were ostensibly aimed at generating a substantial source of revenue for the State, also infringed upon his fundamental right under article 19 (1) (g). On the basis of these allegations, the petitioner sought the issuance of a writ of mandamus, or any similar equitable order, directing respondents numbered one through four to refrain from levying any duty or fee for the purpose of raising revenue through auction sales, to avoid granting a monopoly in the liquor trade to a select few, and to award him a licence to deal in country liquor at his place of business situated at or near Chang Gate, Beawar. In the alternative, he requested that a mandamus be issued compelling the concerned officer either to confirm the petitioner’s next lower bid and grant the licence for the Chang Gate liquor shop in Beawar, or to effect a reduction in accordance with the auction rules and to cancel the licence held by respondent number five.

It was noted that certain points raised by the petitioner fell outside the scope of the constitutional remedy available under article 32 of the Constitution and would be addressed later. The principal issue requiring examination was the constitutional validity of Excise Regulation I of 1915. The petitioner contended that, as a citizen of a free India, he possessed an unfettered right to engage in the liquor trade and business, a right that article 19 (1) (g) enshrined. Consequently, he argued that the regulation’s provisions conferring discretionary power on the Excise Commissioner to limit the number of liquor shops and to allocate licences through an auction to the highest bidder amounted to the creation of a monopoly in the liquor trade and were therefore void. Moreover, the petitioner attacked the excessive licence fee obtained through public auction, asserting that it did not constitute a genuine licence fee but rather functioned as a tax, and that such a tax could not be imposed under the legislative powers preserved by article 19 (6).

In order to assess the merits of these contentions, reference was made to the relevant sections of the regulation, which consolidates and amends the law relating to the import, export, transport, manufacture, sale, and possession of intoxicating liquors and intoxicating drugs within the Provinces of Ajmer-Merwara. The regulation was enacted pursuant to the legislative authority conferred by the Government of India Act, 1935, Seventh Schedule, List II, which empowers the making of laws concerning intoxicating liquors, encompassing production, manufacture, possession, transport, purchase, and sale, as well as the raising of duties of excise on alcoholic liquors for human consumption. The substantive purpose of the regulation identified itself as the generation of excise revenue through the imposition of duties on liquor and intoxicating drugs by various mechanisms, while simultaneously regulating the import, export, transport, manufacture, sale, and possession of such intoxicating substances. Section 13 of the regulation stipulates that no excisable article may be manufactured or collected except under a licence issued in accordance with its authority, terms, and conditions. Section 14 empowers the excise commissioner to establish a distillery, discontinue it, license the construction and operation of a distillery or brewery, and to establish or license a warehouse for the deposit and safekeeping of excisable articles, all subject to conditions imposed by the chief commissioner.

In the regulation, the legislature placed within its authority the power to make laws concerning intoxicating liquors, specifically the production, manufacture, possession, transport, purchase and sale of such liquors, and also the power to impose excise duties on alcoholic liquors intended for human consumption. The essential purpose of the regulation, as the Court observed, was to generate revenue for the excise treasury by levying duties on liquor and intoxicating drugs through various mechanisms, while simultaneously prescribing rules for the import, export, transport, manufacture, sale and possession of intoxicating liquors. Section 13 of the regulation stipulated that no article subject to excise could be manufactured or collected unless the activity was carried out under a licence issued pursuant to that section and complied with the licence’s terms and conditions. Section 14 enumerated a series of powers that were vested in the Excise Commissioner. Under subsection (a) the Commissioner could establish a distillery for the manufacture of spirit, provided that the distillery operated under a licence granted under section 13 and subject to conditions that the Chief Commissioner might impose. Subsection (b) authorized the Commissioner to discontinue any such distillery. Subsection (c) permitted the Commissioner to issue licences, again on conditions set by the Chief Commissioner, for the construction and operation of a distillery or a brewery. Subsection (d) gave the Commissioner authority to establish or licence a warehouse where any excisable article could be stored without payment of duty, and subsection (e) allowed the Commissioner to discontinue any such warehouse. Section 15 required that no excisable article could be removed from a distillery, brewery, warehouse or any other place of storage unless the removal had received the sanction of the Chief Commissioner. Section 18 conferred on the Chief Commissioner the power to lease, for such period and on such conditions as he thought appropriate, the right to manufacture, wholesale-supply, or retail-sell any country liquor or intoxicating drug within a specified area. The regulation also contained separate provisions that imposed restrictions on the manufacture and sale of liquors in cantonments and other designated places. It expressly prohibited the employment of children and women in the liquor business and authorised the District Magistrate to close shops when necessary to maintain public peace. Section 24 empowered the Chief Commissioner to fix, at his discretion, the rate of duty that would apply to any excisable article that was imported, exported, transported, manufactured, cultivated or collected under a licence granted pursuant to section 13. Section 27 dealt with the issuance of licences, permits and passes, stating that a licence would be granted upon payment of any prescribed fee, for a specified period, subject to particular restrictions and conditions, and that the licence form and particulars would be determined by the Chief Commissioner either generally or in each individual case. Section 30 gave the Commissioner authority to cancel or suspend a licence, while sections 31 and 32 provided for the mechanisms of licence withdrawal and surrender. Chapter VII of the regulation set out the offences and the penalties applicable to them, and Chapter VIII described the procedures for detection, investigation and trial of offences. Finally, section 62, among other matters, authorised the Chief Commissioner to make rules prescribing the

The Court explained that Section 62 empowers the Chief Commissioner to formulate rules specifying the scale of fees and the method of fixing fees payable for any privilege, licence, permit, pass, or for the storage of any excisable article. Section 64 provides that all excise revenue, any loss that may arise when, as a result of default, a grant has been taken under management by the Collector or has been resold by him, and all amounts due to the Government by any person on account of any contract relating to the excise revenue, may be recovered from the person primarily liable to pay the same, or from his surety if any, by distress and sale of his movable property, or by any other process for the recovery of land revenue due from landholders, farmers, or their sureties. The Court then turned to the constitutional guarantee in Article 19(1)(g) of the Constitution, which affirms that every citizen has the right to practice any profession or to carry on any occupation, trade or business, while clause (6) of the same article authorises legislation that imposes reasonable restrictions on this right in the interests of the general public. The Court noted that it was not contested that, in order to assess the reasonableness of a restriction, the nature of the business and the conditions prevailing in that trade must be considered. It observed that these factors inevitably vary from trade to trade and that no rigid, universal rule can be prescribed for all trades. The Court further recognised that the State possesses the power to prohibit trades that are illegal, immoral, or injurious to the health and welfare of the public, and that statutes prohibiting the trade in noxious or dangerous goods or the trafficking in women constitute prohibitions rather than mere regulations. Consequently, the nature of the business emerges as a critical element in deciding whether a restriction is reasonable. The Court affirmed that the right of every citizen to pursue any lawful trade or business is subject to reasonable conditions deemed essential by the governing authority for the safety, health, peace, order and morals of the community. It identified that certain occupations produce noise, odors, or dangers that justify regulation of the locality in which they may be conducted, and that trades involving dangerous articles may require special qualifications for the parties permitted to use, manufacture or sell them. While these propositions were not disputed, the Court noted that it was contended that there was a principled problem with applying similar restrictions to the retail sale of spirituous and intoxicating liquors in small quantities. The argument presented was that the sale of such liquors should be unrestricted, that every individual possesses an inherent natural right to engage in the trade of intoxicating liquors, and that the State lacks the authority to create a monopoly over them. The Court indicated that this contention had been addressed earlier in the judgment.

In addressing the petitioner's arguments, the Court cited the opinion of Justice Field in Crowley v. Christensen, observing that “there is in this position an assumption of a fact which does not exist, that when the liquors are taken in excess the injuries are confined to the party offending. The injury, it is true, first falls upon him in his health, which the habit undermines; in his morals, which it weakens; and in the self-abasement which it creates. But as it leads to neglect of business and waste of property and general demoralisation, it affects those who are immediately connected with and dependent upon him. By the general concurrence of opinion of every civilized and Christian community, there are few sources of crime and misery to society equal to the dram shop, where intoxicating liquors, in small quantities, to be drunk at the time, are sold indiscriminately to all parties applying. The statistics of every State show a greater amount of crime and misery attributable to the use of ardent spirits obtained at these retail liquor saloons than to any other source. The sale of such liquors in this way has therefore, at all times, by the courts of every State, considered as the proper subject of legislative regulation. Not only may a licence be exacted from the keeper of the saloon before a glass of his liquors can be thus disposed of, but restrictions may be imposed as to the class of persons to whom they may be sold, and the hours of the day, and the days of the week, on which the saloons may be opened. Their sale in that form may be absolutely prohibited. It is a question of public expediency and public morality, and not of federal law. The police power of the State is fully competent to regulate the business to mitigate its evils or to suppress it entirely. There is no inherent right in a citizen to thus sell intoxicating liquors by retail; it is not a privilege of a citizen of the State or of a citizen of the United States. As it is a business attended with danger to the community, it may, as already said, be entirely prohibited, or be permitted under such conditions as will limit to the utmost its evils. The manner and extent of regulation rest in the discretion of the governing authority. That authority may vest in such officers as it may deem proper the power of passing upon applications for permission to carry it on, and to issue licences for that purpose. It is a matter of legislative will only.” The Court affirmed its full concurrence with these observations and held that they completely defeat the petitioner's contentions. Accordingly, the Court found that the provisions of the regulation, which aim to control the trade in liquor across all its aspects, are valid. The Court rejected the claim that some provisions merely enable the Government to grant monopoly rights to one or more persons to the exclusion of others, and that

In this case, the Court observed that the argument that the creation of monopoly rights could not be upheld under article 19 (6) was without merit. The petitioners had relied on the decision in Rashid Ahmad v. Municipal Board of Kairana (1). The Court held that that decision did not provide authority for the proposition advanced by the petitioners. The Court noted that the liquor trade is inherently exclusive and that it would be inappropriate to apply to it the principles that govern trades open to all participants. Consequently, the regulations could not be challenged merely because they appeared to create a monopoly. The Court explained that a true monopoly exists only when a trade that any person could normally undertake is by law granted to one or more persons to the exclusion of the rest of the public. The Court found that such a situation does not arise in the business of liquor. The Court referred to the observations of Lord Porter in Commonwealth of Australia v. Bank of New South Wales (2), quoting his Lordship: “Yet about this as about every other proposition in this field a reservation must be made. For their Lordships do not intend to lay it down that in no circumstances would exclusion of competition so as to create a monopoly either in a State or Commonwealth agency or in some other body be justified. Every case must be judged on its own facts and in its own setting of time.” The Court added that the argument advanced by the petitioners suffered from a fallacy. Under the rules, every member of the public who wishes to engage in the liquor trade is invited to submit bids. This public auction is the only mechanism by which the trade may be regulated. Because the contract is offered openly to all bidders, the Court held that there is no exclusion of competition and therefore no monopoly is created. For all these reasons, the Court concluded that the contention that the provisions of the regulation are unconstitutional because they abridge the petitioner’s right to carry on the liquor trade freely could not be sustained.

The Court then turned to the next contention that the charge imposed by public auction was excessive and that it was a tax rather than a fee. The Court observed that a licence fee described as a licence fee is, in substance, more akin to a tax than to a conventional fee. One of the purposes of the regulation, the Court explained, is to raise revenue. Section 24 of the regulation permits the imposition of duties on the manufacture, import, export and transport of liquor and other excisable articles. In addition, revenue is collected through the grant of contracts for carrying on the liquor trade, and these contracts are sold by auction. The successful bidder receives a licence upon payment of the auction price, and the regulation expressly authorises this procedure. Consequently, the fee is not levied without legal authority, unlike the situation described in Rashid Ahmad’s case (1). The Court indicated that the remaining contentions would be considered subsequently.

The Court noted that, as indicated by counsel, it was sufficient to state that any breach of the rules made under the regulation by the officers concerned was itself subject to a remedy contained within that same regulation. The Court observed that mere irregularities in the conduct of an auction sale could not be said to have infringed the petitioner’s fundamental rights, and consequently the jurisdiction of article 32 of the Constitution did not arise. The Court further explained that under article 226 the petitioner retained the right to approach the High Court for a writ of mandamus if the officials had acted contrary to law or had exceeded the limits of their authority; the citation (1) [1950] S.C.J. 324 was mentioned in support of this principle. In response to the petitioner’s subsequent contention that the sale could not be confirmed by the Minister because, according to the rules, only the Chief Commissioner was authorised to confirm such sales, the Court held that this argument did not demonstrate a substantial point of discrimination before the Court. After considering all the material advanced, the Court found no merit in the application and therefore dismissed it, ordering that costs be awarded. The petition was dismissed. The petitioner’s agent was identified as S. D. Sekhri, while the respondent’s agent was identified as G. H. Rajadhyaksha.