GOWRI INDUSTRIES BANGALORE Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) in these writ petitions the basic question pertains to the power of the state government to fix the price of rectified spirit to be sold to the manufacturers of arrack. This question is sought to be projected by reference to several rules made under the Provisions of the Karnataka Excise Act, 1965 ('the act' for short). Petitioners primarily rely on the decision of the Supreme Court in synthetics and chemicals ltd., etc. V state of U.P. and others (hereinafter referred as the 'second synthetics case'). Rectified spirit is manufactured out of molasses by a process of fermentation. It is not fit for human consumption and it is not potable alcohol. Therefore, according to the petitioner it is not an 'intoxicant' or 'liquor' in the ordinary sense of the term. Rectified spirit is also called industrial alcohol which is the raw material for the use in many chemical and drug industries. It is also a raw material in the manufacture of potable alcohol including arrack and other liquors such as whisky, brandy, etc. Commonly referred as Indian made foreign liquors ('imfl' for short). In view of the insistence on the part of the respondents, petitioners have obtained licences in respect of the distillery units under sections 13 to 15 of the act and the rules framed thereunder. Thus the licences according to the petitioners are limited to regulate the activities of the distilleries to prevent diversion and misuse of rectified spirit for the purpose of illicit manufacture of potable alcohol. It is stated that ethyl alcohol grade-i is the raw material used in the pharmaceutical industries, imfl and arrack manufacturers as well as in chemical industries. This is 66 op (over proof). Ethyl alcohol below the said degree cannot be used as a raw material in the manufacture of the articles referred just now. When this grade-i ethyl alcohol is treated with certain chemicals it is converted into "de-natured spirit", used for chemical purposes. It cannot be used for the manufacture of the arrack, imfl, etc. A small quantity of ethyl alcohol manufactured by the petitioners is permitted to be converted into de-natured spirit. Earlier, industry engaged in the manufacture or production of alcohol and other products of fermentation industries were brought under the first schedule to the industries (development and regulation) Act, 1951 (hereinafter referred as 'idr act'). In the exercise of the powers vested in the central government under this Act, ethyl alcohol price control Order, 1971, as well as molasses control Order, 1961, were issued which regulated and controlled the supply and sale of ethyl alcohol and molasses. According to the petitioners, the price of rectified spirit produced by them were, all along, regulated under the price control orders referred above. But these price control orders were withdrawn on 10-6-1993 by two notifications (annexures a and b). Therefore the central government has clearly permitted free formulation of prices. This is also clear, says the petitioners, by the circular dated 11-6-1993 addressed to all state governments, by the secretary to the department of chemicals and petro chemicals, government of india, New Delhi (Annexure-C). The said circular states that the earlier price control orders outlived their utility and that the regime of controls is inhibiting the free movement of molasses and alcohol and causing unnecessary delays which are having adverse effect on the down stream industries. The relevant sentences reads thus:

(2.) petitioners advanced the following contentions:(1) state has no legislative competence to issue the impugned orders in view of the fact that the subject pertaining to non-potable alcohol has been specifically included in the schedule to idra. (2) after judgment of Constitution bench in synthetics and chemicals case the area left to legislative by the state is only restricted to those areas which are specified in para 85 of the said judgment. (3) there is no requirement under the Constitution that after the parliamentary declaration there should be either a ban or a notification to establish that the subject has fallen within the legislative jurisdiction of the centre ; mere intention to occupy the field is sufficient to establish that the subject is occupied by the centre. (4) the withdrawal of the central orders does not leave the field vacant for the state to make laws or issue orders since by the very object of withdrawal of the orders, the centre still occupied the field. Even if we assume for a moment that the power vests back in the state, the state cannot use the Provisions of the Excise Act as they were rendered void by the doctrine of implied repeal. (5) the state cannot trace its powers to issue the impugned orders either to the Karnataka Excise Act or to various rules framed under the said act and Rule 17 of the Karnataka (manufacture and bottling of arrack) rules is ultra vires; the said Rule also suffers from excessive delegation of legislative power. (6) at any rate, price fixation is wholly arbitrary and without basis, hence violative of article 14 of the constitution. Above contentions could be broadly formulated as follows: i. Whether the state has any competence to make a law affecting the industrial alcohol/rectified spirit ? Ii. Whether Rule 17 of the-aforesaid Rule is ultra virus the act in so far as it empowers, the state government to fix the price of rectified spirit sold to arrack manufacturers and whether the Rule to that extent suffers from excessive delegation of legislative power ? Iii. Whether fixation of price, as a fact, is arbitrary, unreasonable and without any basis? Re. Contention No. I

(3.) the petitioners elaborated their contention as follows:the regulation of ethyl alcohol comes solely within the power of the centre as per Provisions of the idr act. The field has been totally occupied by the centre and has been held to be so by the Supreme Court in second synthetics case, at para-84. The court has further pointed out in para 85 that under the only power that remains with the state it may lay down regulations to ensure that non-potable alcohol is not diverted and misused as a substitute for potable alcohol. The central power has been assumed under the heading 'fermentation industry' as found in entry 2 of schedule i of the idr act and evidenced by the ethyl alcohol (price control) Order, 1971 as well as the molasses (control) Order, 1971. By the notification dated 11-1-1993 which decontrolled molasses (vide circular No. 15021/24/91) the centre has decided that price of the molasses and ethyl alcohol are not to be controlled. This does not have the effect of reviving the state's power to regulate. This submission has three aspects, (i) the notification dated 11-6-1993 is an act in the exercise of an exclusive power and does not amount to the centre abdicating the power to regulate non-potable alcohol. This is evidenced from the fact that a plain reading of the notification shows that its purpose is to improve production and distribution and doesn't contemplate fetters being imposed on the industry by the state. It is, therefore, clear that the decontrol order is also in the nature of the exercise of power and therefore such power has not been abdicated and does not revert back to the state. (ii) it has been explained by the Supreme Court in second decision that, to determine the question of occupied field, no law or notification is required and mere intention to occupy is sufficient. Therefore, the non-existence of a regulation does not result in the power being reverted back to the state. In state of Orissa and another v M/s. M.a. tulloch and co. And another the court held that the test of two legislations containing contradictory Provisions is not the only criterion of repugnancy, for if a competent legislature with a superior efficacy expressly or impliedly evinces by its legislation, an intention to cover the whole field, the enactments of the other legislature would be over-borne on the ground of repugnance and this view has been reiterated by the Supreme Court in the decisions in (a) baijnath v state of Bihar and (b) state of haryana v channan mal. (iii) alternatively if we assume for a moment that the power to regulate reverts back to the state, even then the Karnataka excise rules cannot be invoked, because, once the central enactment came into force, the earlier state law became void and stood repealed on the basis of the doctrine of implied repeal. The Supreme Court explained this doctrine in tulloch and co. 'S case. The parliamentary enactment superseded the state law and this results in its repeal. As the legislative intent to supersede the earlier law is the basis on which this doctrine is founded there can be no incongruity in attributing to the later legislation, the same intent which Section 6 of General Clauses Act has and that such implied repeal has the effect of rendering the state legislation void: t. Barai v henry ah hoe and another. Earlier in zaverbhai amaladas v state of Bombay also, the Supreme Court, in para-7 held that, even where the central law does not expressly repeal the state law, even then the state law will be void, if the state law conflicts with the central law with respect to the same matter. Also to the same effect is the decision in the hingir-rampur coal co. Ltd. And others v state of Orissa and others. A repeal of the repealing law does not revive what was repealed except as provided for under Section 7 of the General Clauses Act is the contention.