The Hindu Business Line : Subserve the constitutional goal and don't subvert the same

ABOUT a month ago, the Supreme Court decided Ashok Lanka vs Rishi Dixit, a case that straddled both excise law and the Constitution. "The trade in country/foreign liquor is said to be res extra commercium," begins the intro of a judgment that runs into about 13,000 words. The Latin phrase means thing or things outside of business or commercial transactions.

"A citizen does not have any fundamental right to deal therewith. The State alone has the exclusive privilege to deal in liquor from manufacture to distribution and from sale to consumption," continued the court, laying down clearly the rules of the game. The State may part with its exclusive privilege for a price that is loosely called `excise duty'", observed the court.

"The power of the State to control and regulate the trade in liquor is envisaged under Entry 8, List II of the Seventh Schedule of the Constitution of India. It may also impose excise duty as also countervailing duty in exercise of its legislative power under Entry 51, List 2 of the Seventh Schedule of the Constitution." What lay at the core of the case was the grant of liquor shop licence under Chhattisgarh's excise law. The judgment traces the provisions from the relevant Act and also amendments and notifications issued apparently quite hastily thereunder, including a March communiqué that states, "The first, second and third applicant selected for retail shop/group of country/foreign liquor by the selection committee after lottery drawn by computer must submit affidavit verified by the Notary in the prescribed pro forma the next day during office hours."

A public interest litigation commenced with writ petitions filed before the High Court questioning the change from manual to computer in the selection process, and also contending that the selection process adopted by the State was vitiated on the premise that no affidavit was filed by the applicants as was mandatorily required by Rule 9 of the Excise Rules.

The High Court was of the opinion that the State was entitled to make the selection of the eligible candidates through computer; however, it was also necessary to ensure that the applicant provided required information "so as to enable the authorities to satisfy themselves about the fulfilment of eligibility conditions". Consequently, the High Court directed that a fresh selection be made in terms of the extant rules. "While holding that the application fees to the extent of Rs 77 crore earned by the State need not be refunded, it directed scrutiny of about 2.65-lakh applications by the respective District Level Committees for their satisfaction that all eligibility requirements stand satisfied whereafter only the draw of lottery may take place."

Don't read to absurd ends

The State has a duty to see that its people do not consume spurious or adulterated liquor, said justices N. Santosh Hegde and S. B. Sinha. "The Act and the rules no doubt contain provisions for cancellation and/or suspension of the licence in the event the conditions laid down therein are violated, but it is beyond any cavil that before a licence is granted, the applicant must satisfy all the statutory conditions and meet the eligibility requirements," they added.

The court noted that two clauses of the affidavit had met with strong protest: Clause 5 was that the deponent neither owes any dues to the government or public works nor his name exists in the black list and neither he has been debarred to acquire excise licence under Chhattisgarh excise law. And clause 6 was that the deponent bears good moral character; that he has not been held guilty of non-bailable offence under the Chhattisgarh Excise Act, 1915 or the Narcotics Drugs and Psychotropic Substances Act, 1985 or any other procedure or law promulgated that time.

On whether amendments can have retrospective effect, the court stated that a statute must be read reasonably.

"A statute should not read in such a manner which results in absurdity. A statute, on its plain language, although postulates a prospective operation, cannot be held to be retrospective only because it would apply for the excise year for which applications were invited despite the fact that the selection process made thereunder is over."

Accordingly, the court said that the State is bound by the terms of the advertisement and the rules existing at that time, because one is expected to follow the law as it stood thence and no step could be taken on the pre-supposition that the rule would be amended. This was also not a case where draft rules were already in existence and such draft rules had been applied. Most important, "By reason of a rule making power, an invalid action on the part of the Commissioner of Excise cannot be validated."

Affirmative on the affidavit

The apex court was not happy that the selected candidates had not been asked to submit affidavits in the prescribed format. "It is not expected of the statutory functionaries to ask the selected candidates to comply with the requirements orally. It is beyond our comprehension as to why such a post haste action was taken by the State," said the court, pointing out that "different persons belonging to different communities had filed different applications showing the same address" and also that "even persons having the same name had filed more than one application".

The court emphasised the role of the affidavit in ascertaining required information from applicants for verification purpose.

"Licences to deal in liquor cannot be granted on mere asking by a person and only because he is in a position to fulfil the requirements as regard deposit of licence fee and other charges," said the court.

True, the State has a right to raise its revenue; but it has the duty also to fulfil its constitutional and statutory duties, opined the court, before issuing detailed directions on how the licences were to be awarded.

The entire exercise of the scrutiny as regard ascertainment of the eligibility of the candidates vis-à-vis the selection process is required to be undertaken again by the Selection Committee, ruled the court, pushing aside the argument of how the exercise had earned good revenue for the State.

"The Rules postulate that each and every application must be examined carefully. Mere fact that a large number of applications have been filed, as a result whereof the State had been able to obtain crores and crores of rupees by itself did not entitle the State to dispense with the statutory requirements." Application fees were for meeting the administrative expenses, and not for earning revenue, reminded the apex court. "Application fees cannot be equated with tax," said the court.

Though the State has the exclusive privilege to deal in liquor, it has to remember its constitutional and legal duty to safeguard the public interest and public health, advised the court. "The conditions for grant of licence as laid down in the statute are required to be observed only with a view to subserve the constitutional goal and not to subvert the same," is a line that is worth reading once again.

Tailpiece

"BASIS has asked the Bangladesh Government for full tax holiday!"

"On what basis?"

"Bangladesh Association of Software and Information Services has cited tax sops available in India, Malaysia, China, Vietnam, Sri Lanka and Pakistan!"

Detaxification@TheHindu.co.in

D. Murali

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