Decided on October 31,1967



- (1.) THIS application under Article 226 of the Constitution is by a person doing business in the sale of country liquor under the name and style of 'baboolal and balgovind Company' and who obtained a licence for the year 1967-68 for sale of country liquor by retail at some shops in Mhow. The respondent No. 3, Ganesh prasad, also secured a licence for the sale of country liquor by retail at sixteen shops for Indore City and Pargana, and Sanwer Pargana The petitioner paid Rs. 1,82,000 for obtaining licence in respect of Mhow shops, and the respondent No. 3 paid Rupees 14,11,111 in respect of shops at Indore and Sanwer. He has also averred that the price of Masala, Dabara and Rasi liquor sold at his shops is respectively at Rs. 6, Rs. 4 and Rs. 3 per bottle; and that the respondent No. 3 charges for each bottle of Masala, Dabara and Rasi Rs. 10, Rs. 7. 50 P. , and Rs. 6 respectively. The statement given by the applicant with regard to the price of liquor at his shops is disputed by the respondents Nos. 1 and 2 in their return. But it is not denied that the prices charged by the petitioner for different kinds of liquor are lower than those charged by the respondent No. 3.
(2.) THE petitioner's case is that on account of the low prices at which he sells country liquor, persons residing in Mhow and in villages nearabout Indore purchase liquor from his shops and consume it either at their residence or carry the liquor bottles along with them to the place in Indore where they work or carry on trade; that they do not prefer to purchase liquor from the respondent No. 3's shops in Indore as he charges exorbitant rates for the same; and that this has resulted in large sales of country liquor from his shops and affected adversely the sale of liquor at the shops in Indore run by the respondent No. 3. In order to check this fall in his sales, the respondent No. 3, Ganeshprasad, moved the government to declare the area of the sixteen shops run by him as high-duty area so that no country liquor could be transported at all from Mhow area of the petitioner's shops to Indore area. The petitioner says that at the time when excise licences were obtained by him and third respondent, the excise-duty payable in respect of Mhow and Indore shops was the same, but the Government, yielding to the pressure of the respondent No. 3, declared the Indore areas to be a high-duty area and increased the excise duty payable in Indore area in respect of Masala and plain country liquor; and that after the enhancement of this duty the liquor sold at the shops of the respondent No. 3 is differently coloured so as to distinguish it from the liquor sold by the petitioner in the low-duty area. The applicant contends that the declaration of the Indore area as high-duty area by the Government is mala fide arbitrary and altogether illegal, and prays that the declaration and the enhancement of duty in Indore area be struck down as illegal.
(3.) IN the return filed by the State, it has been denied that the declaration of high-duty area and the enhancement of duty is mala fide and illegal. In justification of the declaration and the enhancement of duty, it has been stated in paragraph 5 of the return that:-- "it is submitted that there is a regular racket which takes country liquor from the surrounding liquor shops and smuggles it into the Indore City area. Those that drink liquor do not so much care to go to Mhow only for this purpose and bring stock of liquor with them for consumption in city area. It is submitted that it has come to the knowledge of the department that the interested shop-keepers in the surrounding area regularly employ a number of persons who buy liquor from them at a lower rate and smuggle the liquor into the Indore City area just for the purpose of running down the business in the city area. This practice it wholly unauthorised but the Department is not able to catch any of these persons because the liquor available in the city area cannot be distinguished from the liquor purchased from the surrounding area. Since an individual is entitled to keep two bottles for his consumption, the possession of liquor to the extent of two bottles is quite legal and no action was possible until he was caught selling the same. Such a practice would adversely affect the revenue. If the sales at the Indore City group shops falls, they will not bring the same price which they are expected to normally. Moreover, the Indore City shops are the main source of income in this area and if the revenue in these shops falls, it would be a serious loss to the Government. " It appears from the return and the annexures filed to it that the application of the respondent Ganeshprasad for enhancement of duty on Indore City liquor shops was first presented to the Collector, who forwarded it to the Excise Commissioner, madhya Pradesh, Gwalior. While recommending the enhancement, the Collector in his forwarding letter dated the 21st July 1967 (Annexure R/ii to the return of the respondents Nos. 1 and 2), said:-"in General Auction for the year 1967-68 the local contractors of Indore, who had formed themselves into a combine, offered very low bids and the City shops were put to resale. In this resale the applicant, who is an outsider from Bilaspur took the City group shop by offering tender for rupees 14,11,111-00 The local contractors had secured number of surrounding shops. Liquor from these surrounding shops is being smuggled on a very large scale in the Indore City to cause loss to the new incumbent by rival group contractors. Within a period of three months 89 cases of Illegal possession of duty paid liquor have been detected in Indore City as against 6 of last year. Out of 89, fortynine cases were detected while smuggling liquor into the city. . . . . . Most of the interior shops are well connected by road and rail and are also close to the Indore City. Some people have made it their regular business. They bring liquor upto the legal limit of possession on cycles or by train and bus from interior shops and repeat the process a number of times in a day. In such cases no legal action is possible. Due to vast area of the city it is also not possible for the limited Excise Staff to check smuggling from all sides. Specially, when the old contractors have made it their business to put the new contractor to loss and thus maintain their monopoly. " The Collector also added in his letter that enhancement of duty yield an additional income of Rs. 20,000 approximately.;

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