R.M. Sahai, J. - (1.) Validity of demand, under Section 58A of the Bombay Prohibition Act, for maintenance of the excise staff for supervision of the manufacture of industrial alcohol was assailed on lack of legislative competence of the State.
(2.) Section 58A is extracted below: "58A:The State Government may by general or special order direct that the manufacture, import, export, transport, storage, sale, purchase, use, collection or cultivation of any intoxicant, denatured spirituous preparations, hemp, Mowra flowers, or molasses shall be under the supervision of such Prohibition and Excise or Police Staff as it may deem proper to appoint, and that the cost of such staff shall be paid to the State Govt. by person manufacturing, importing, exporting, transporting, storing, selling, purchasing, using, collecting or cultivating the intoxicant, denatured spirituous preparation, hemp, Mhowra flowers or molasses: Provided that the State Government may exempt any class of persons or institutions from paying the whole or any part of the cost of such staff." Rule 2 of Bombay Prohibition (Manufacture of Spirit) (Gujarat) Rules, 1963, framed by the State of Gujarat empowered the director to grant a licence for working of the distillery for the manufacture of the spirit. Condition Nos. 2 and 3 of the licence issued provided for employment of excise staff for supervision of the operations of manufacture and storage of spirit as well as for payment of salary and allowances to staff so posted. Attack was not on power to supervise or ever the right to post staff for supervision but on demand of cost of maintenance of such personnel. Levy was upheld, by the High Court, as fee under Entry 8 of List II of the VIIth Schedule read with Entry 66 of the same List. In Synthetics and Chemicals Ltd. v. State of U.P., (1990) 1 SCC 109 a Constitution Bench after exhaustively reviewing the constitutional entries and various decisions held that industrial alcohol being unfit for human consumption as no levy on it could be made by a State either under Entry 51 or Entry 8 List II of VIIth Schedule. Nor such levy could be justified on doctrine of privilege or police power. Therefore it was urged that the order of High Court was liable to be set aside and the provision was liable to be struck down as ultra vires.
(3.) Such understanding of the judgment is not warranted. The Constitution Bench while distinguishing between potable and non-potable alcohol and holding that the State had no privilege in it upheld the power of State to regulate and ensure that non-potable alcohol was not diverted and misused.;