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State of Uttar Pradesh v. M/s. Lalta Prasad Vaish

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State of Uttar Pradesh v. M/s. Lalta Prasad Vaish

This case deals with imposition of license fee on manufacture and sale of denatured spirit and interpretation of the Industries (Development and Regulation) Act, 1951.

Petitioners Arguments
The appellant argued on the precedents laid down by the High Court under State of U.P. and Ors. v. Vam Organic Chemical Ltd. and Anr. [(2004) 1 SCC 225] and Synthetics and Chemical Ltd. vs. State of U.P. [(1990)1 SCC 109], where it was indicated that the States did have the power to regulate the use of alcohol including the power to make provisions to prevent and/or check the use of industrial alcohol as intoxicating liquor. However, it was further observed in the Synthetics and Chemical case that under Entry 33 of List III the State could not regulate industrial alcohol as a product of the industry, because the Union under Section 18-G of the Act had evinced a clear intention to occupy the whole field. While Entry 33 in List III provided for powers to both the State and the Central Government to legislate with regard to the product of any industry, where control of such industry by the Union is declared by the Parliament by law to be expedient in the public interest, the Constitution Bench had not considered the said aspect and had interpreted the provisions of Entry 33 in relation to the concept of manufacture only. The appellant further urged that the power of the State to legislate with regard to matters relating to Entry 33(a) in List III of Schedule 7 of the Constitution did not stand ousted merely on the basis of a declaration made under Section 2 of the Industries (Development and Regulation) Act, 1951, which was relatable to Entry 52 of List I of the Seventh Schedule. Moreover, the power conferred on the Central Government under Section 18-G would become operative only when a rooted order was issued. Without the promulgation of such a notified order, the Central Government did not acquire any power to act, in furtherance of the objects contemplated in Section 18-G. Placing reliance on a number of judgments, primarily on Ch. Tika Ramji & Ors. v. The State of Uttar Pradesh & Ors. [(1956 SCR 393)], the appellant State pleaded that the interpretation of Section 18-G of the 1951 Act by the seven-Judge Bench in Synthetics and Chemicals Ltd. , required reconsideration by a larger Bench.
Responders Arguments
Respondents submitted that the issue being raised by the appellants had already been decided by the 7 Judge Bench in the Synthetics and Chemicals case which has subsequently been followed by the Court in the case of Vam Organic's case, which had been relied upon by the High Court in disposing of the writ petitions from which these civil appeals and special leave petitions arise. The impugned levy imposed by the State of U.P. was exorbitant and excessive and was not regulatory in nature and could not be imposed on ad valorem basis as the sale price had no nexus with the amount incurred by the State.
Last Listed On
2024-10-23
Start Date
2010-12-08
End Date
2024-10-23
Card Stage Date
2024-10-23
Review Petition No
C.A. No. 151/2007
Case Status
Archive
Bench Status
Constituted
Subject Matter
Constitution
Comment
NA
Disposal Time
13 years, 10 months, 16 days

9 Judge Bench

Judgment delivered

Consider As Stage Of Pendency
false

Date of institution of case

Date of reference to 5 Judge Bench

Date of reference to 9 Judge Bench

Judgement pronounced

On 25-05-1999, a notification (No. 1327) was issued under the U.P. Licences for the Possession of Denatured Spirit and Specially Denatured Spirit Rules , 1976 imposing a licence fee @ 15% ad valorem on the sale made by a distillery/wholesale vendor to holders of licence under the U.P. Excise Act , 1910. An ad valorem tax is a tax based on the assessed value of an item. The petitioner in the present case was a holder of a licence in Form FL No. 41 granted under the provisions of the UP Excise Act. The petitioner challenged the imposed license fee alleging that the State had no power to regulate the manufacture and sale of denatured spirit in view of Section 2 and Section 18-G of the Industries (Development and Regulation) Act, 1951 , and the licence fee is neither regulatory nor a compensatory in nature because no services are rendered to the licensee which could justify it as a regulatory fee. In 2004, the Allahabad High Court declared the imposition of license fee wholly illegal and directed the State to refund the fee collected from the writ petitioners along with interest at the rate of 10% per annum. Subsequently, several other similar writ petitions were filed by several licence holders holding licences in Form FL Nos.16, 17, 39 and 41 which were all disposed of by applying the decision in R.P. Sharma v. State of U.P. [(2004) 5 AWC 4318]. In 2007, eight matters including the present case were taken up by a three-Judge bench of the Supreme Court for consideration. It was first referenced for a five-judge bench and later referenced for a larger bench.

Does Section 2 of the Industries (Development and Regulation) Act, 1951, have any impact on the field covered by Section 18-G of the said Act or Entry 33 of List III of the Seventh Schedule of the Constitution? Does Section 18G of the Act fall under Entry 52 of List I of the Seventh Schedule of the Constitution, or is it covered by Entry 33 of List III? In the absence of any notified order by the Central Government under Section 18-G of the above Act, is the power of the State to legislate in respect of matters enumerated in Entry 33 of List III ousted? Does the enactment of Section 18-G of the above Act, give rise to a presumption that it was the intention of the Central Government to cover the entire field in respect of Entry 33 of List III so as to oust the States' competence to legislate in respect of matters relating thereto? Does the mere presence of Section 18-G of the above Act, oust the State's power to legislate in regard to matters falling under Entry 33(a) of List III?; Does the interpretation given in Synthetics and Chemicals Case (1990) 1 SCC P 109, in respect of Section 18-G of the Industries (Development and Regulation) Act, 1951, correctly state the law regarding the States' power to regulate industrial alcohol as a product of the Scheduled industry under Entry 33 of List III of the Seventh Schedule of the Constitution in view of clause (a) thereof?

Section 2 of the Industries (Development and Regulation) Act, 1951

Section 18G of the Industries (Development and Regulation) Act, 1951

The three-Judge bench observed that the appellant’s submissions had a good deal of force and if the decision in the Synthetics and Chemicals case with regard to the interpretation of Section 18-G of the 1951 Act is allowed to stand, it would render the provisions of Entry 33 (a) of List III nugatory. The Court further stated that the 7 Judge Bench also did not have the benefit of the views expressed by the Court earlier in Ch.Tikaramji case where the State's power to legislate under the Concurrent List stood ousted by legislation by the Central Government under Entry 52 of List I and also in view of Section 18-G of the Industries (Development and Regulation) Act, 1951. Therefore, the bench concluded that the matter requires reconsideration by a larger Bench of this Court, particularly, when the views expressed by 7 Judge Bench on the aforesaid question have been distinguished in several subsequent decisions of this Court. The five-Judge bench having meticulously examined the judgement of the Constitution Bench of seven learned Judges in the case of Synthetics and Chemicals , were of the view that the matter requires consideration by a Bench of nine Judges.

State of U.P. v. Vam Organic Chemicals Ltd and Anr. (2004 (1) SCC 225)

Synthetics and Chemical Ltd. v. State of U.P. (1990 Vol. I SCC 109)

Ch. Tika Ramji and others v. The State of Uttar Pradesh and others (1956 SCR 393)

SIEL Limited and Ors. v. Union of India and ors. (1998) 7 SCC 26)

A.S. Krishna v. State of Madras (AIR 1957 SC 297)

Belsund Sugar Co. Ltd. v. State of Bihar (1999) 9 SCC 620

Ganga Sugar Corporation Ltd. v. State of Uttar Pradesh and others (1980) 1 SCC 223)

Shri Bileshwar Khand Udyog Khedut Sahakari Mandal Ltd. v. State of Gujarat (1992) 2 SCC 42

B. Viswanathiah and Company v. State of Karnataka and others (1991) 3 SCC 358

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Date Of Institution Start
2006-11-01
Date Of Tagging
2007-12-10
Case No
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Date Of Tagging Link
https://main.sci.gov.in/jonew/bosir/orderpdf/528962.pdf

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Date Of Tagging
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Case No
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Date Of Tagging Link
https://main.sci.gov.in/jonew/bosir/orderpdf/1311127.pdf

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Date Of Institution Start
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Date Of Tagging
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Case No
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Date Of Tagging Link
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