INDIA BUSINESS WORLD - OCTOBER 21^st - NOVEMBER 15^th - 2007

SUPREME COURT REFERS SPIRIT FEE DISPUTE TO LARGER BENCH

A larger constitution bench will decide whether state governments had the authority to levy fee on sale of specially denatured spirit to licencees.

A Supreme Court bench comprising Justices H K Sema, Altamas Kabir and L S Panta referred the issue of state government's power to regulate the manufacture and sale of denatured spirit in view of Section 2 and Section 18G of the Industries (development and regulation) Act, to a larger bench.

While referring the matter to a larger bench, the court also formulated certain questions to be considered.

Firstly, whether Section 2 of the Industries (Development and Regulation) Act, had any impact on the field covered by Section 18-G of the Act or Entry 33 of List III of the Seventh Schedule of the Constitution. Secondly, whether the Section 18G of the Act fell under Entry 52 of List I of the Seventh Schedule of the Constitution or covered by Entry 33 of List III. Thirdly, in the absence of any notified order by the central government under Section 18-G of the Act, is the power of the state to legislate in respect of matters enumerated in Entry 33 of List III ousted.

The court also sought to know if the mere enactment of Section 18-G of the 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. Also, whether the mere presence of Section 18-G of the Act, oust the state's power to legislate in regard to matters falling under Entry 33(a) of List III.

It also wanted to know the interpretation given in an earlier order in respect of section of section 18-G of the Industries (Development and Regulation) Act, 1951, correctly stated 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 or not

Uttar Pradesh has challenged the Allahabad high court order holding levy of license fee under the provisions of the UP Licences for the Possession of Denatured Spirit and Specially Denatured Sprit Rules, 1976 as being illegal. Subsequently, several licence holders had also come in cross appeals before the apex court. The license holders had said that the Parliament declared alcohol industry to be an industry, control of which by the Union is expedient in the public interest and consequently the power to legislate in respect thereof is now vested exclusively in Parliament.