Sheo Pat Rai v. State of Uttar Pradesh — 1972 DIGILAW 339 (ALL)

JUDGMENT R.L. Gulati, J. - This is a petition under Article 226 of the Constitution. The petitioners are four in number. Petitioner Nos. 1 to 3 are licensed vendor of foreign liquor at Allahabad, Firozabad and Lucknow respectively. Petitioner No. 4 is the U.P. Foreign Liquor Merchants Association, a registered society under the Societies Registration Act, 1860, having its head office at Kanpur. The connected petitions are also of licensed vendors of foreign liquor of different places in the State of Uttar Pradesh. They all raise common questions and shall be disposed of by this common judgment. In some of the petitions, some additional points have been raised which we shall deal separately. 2. We shall state briefly the facts relating to petitioner No. 1. The petitioner is engaged since long in the business of sale of foreign liquor under a licence in form F.L. 5 issued under the provisions of the U.P. Excise Act, 1910 (hereinafter called as the Excise Act) . It may be stated here, that a `foreign liquor' means beers, spirit, wines and liquors imported into and manufactured in India but sophisticated and coloured so as to resemble in flavour or colour to liquors imported into India (U.P. Excise Manual Vol. I, Part II, Paragraph 12). The licence in form F.L. 5 permits the licensee to sell foreign liquor for consumption `off the premises'. For the grant of such a licence, the licensee has to pay licence fee which is charged according to what is known as `surcharge system'. The method of calculating the fee under the surcharge system is detailed in paragraphs 653 to 656 of the U.P. Excise Manual. According to these rules a prospective licensee has to pay by way of licence fee an amount calculated on the sale of foreign liquor in the immediately preceding year. The licence is valid for one excise year, which is a period of twelve months from April 1 to March 31. At the end of the excise year the licence fee is recalculated on the basis of the actual sale of foreign liquor in that year. Normally the licence is renewed from year to year, if the licensee is not in arrears, as provided in paragraph 656 of the Excise Manual. 3. At the end of the excise year the licence fee is recalculated on the basis of the actual sale of foreign liquor in that year. Normally the licence is renewed from year to year, if the licensee is not in arrears, as provided in paragraph 656 of the Excise Manual. 3. In respect of country liquor the licenses for its retail sale are settled by auction so that the licence is granted to a person who gives the highest bid. This system brings in much more revenue than the surcharge system applicable to foreign liquors. For some time past the State has been considering the advisability of changing over to the auction system in respect of foreign liquors also. The Finance Minister in his budget speech delivered in March, 1972 stated that the auction of foreign liquor shops would bring in an additional revenue of Rs. 50 lacs. The Government, therefore, decided to switch over to the auction system and. accordingly issued instructions to the excise authorities not to renew the licences for the current year for the sale of foreign liquor in form F.L. 4 and F.L. 5 for more than three months pending the finalisation of the necessary legislation. It was for this reason that the petitioner's licence was renewed upto June 30, 1972, although the petitioner had applied for its renewal for 4th whole year. The licence was later on extended to July 31, 1972 and again upto August 31, 1972. The Governor of Uttar Pradesh promulgated an Ordinance published in the U.P. Gazette, Extraordinary dated June 30, 1972 and the Excise Commissioner issued three notifications amending certain rules. The combined effect of the Ordinance and the notifications is that the licence fee for the renewal and grant of licences in form F.L. 4 and F.L. 5 shall be determined by auction. This was followed by a notification by the State Government fixing different dates for different towns for the grant of licences in forms F.L. 4 and F.L. 5. It may be stated here that a licence in form F.L. 4 entitles the licensee to sell foreign liquor for consumption "off and on the premises", July 18, 1972 was the date fixed for auction at Allahabad and Agra and July 20 was the date of auction at Lucknow. 4. It may be stated here that a licence in form F.L. 4 entitles the licensee to sell foreign liquor for consumption "off and on the premises", July 18, 1972 was the date fixed for auction at Allahabad and Agra and July 20 was the date of auction at Lucknow. 4. The petitioners have challenged the constitutional validity of the ordnance as also of the rules newly framed by the Excise Commissioner, which permit the levy of licence fee by auction. To begin with, the petitioners have stated that the change from the surcharge system to the auction system would breed corruption and malpractice in the trade and to support that contention they have cited extracts from the reports of the various enquiry committees and Commissions appointed, by different governments. It is true that according to those reports, the system of auction for the grant of licences would breed corruption and malpractice in the trade, but we are not concerned with that aspect of the matter. That is a matter of policy with the Government and cannot affect the validity of the provisions which have been impugned in this petition. 5. The Ordinance and the notifications issued by the Excise Commissioner have been challenged in this writ petition on the following grounds :- (i) That the Ordinance is ultra vires of the legislative powers of the State. (ii) That it contravenes Articles 14, 31 and 301 of the Constitution; (iii) That the impugned notifications dated July 5, 1972 issued under Sec. 41 (c) of the Excise Act are ultra wires of the Act and suffer from the vice of excess:re delegation and contravene Article 14 of the Constitution. Copies of the three notifications issued by the Excise Commissioner on July 5, 1972 have been annexed to the writ petition as Annexures A-2, A-3 and A-4. For our purpose it is necessary only to reproduce Notification No. 1 : "Office Of The Excise Commissioner, U.P., Allahabad. Notification/Miscellaneous No. 1/Camp. Dated : Lucknow July 5, 1972. Copies of the three notifications issued by the Excise Commissioner on July 5, 1972 have been annexed to the writ petition as Annexures A-2, A-3 and A-4. For our purpose it is necessary only to reproduce Notification No. 1 : "Office Of The Excise Commissioner, U.P., Allahabad. Notification/Miscellaneous No. 1/Camp. Dated : Lucknow July 5, 1972. In exercise of the powers under clause (c) of Sec. 41 of the U.P. Excise Act, 1910 (Act No. IV of 1910) read with Sec. 21 of the U.P. General Clauses Act, 1904 (U.P. Act No. 1 of 1904) the Excise Commissioner, U.P. with the previous sanction of the State Government, is pleased to make the following rules with a view to amending rules under the heading "Fees" published with Board of Revenue, U.P. Notification No. 423/V-284 B dated September 20, 1910, as amended from time to time. RULES Short title and commencement. 2. (i) These rules may be called the U.P. Excise (Amendment) Rules, 1972. (ii) They shall come into force with effect from August 1, 1972. Amendment 2. In the aforesaid rules, for the rules as set out in column 1, the rule as set out in col. 2 shall be subsituted. Existing Rule Rules as hereby substituted 1. The licence fees for the retail vend of the following commodities under the auction system is fixed by public auction periodically, but the Excise Commr. reserves the right to grant any licence on payment of a fixed fee or a fee determined in accordance with a graduated scale. 1. The licence fees for the retail vend of the following commodities under the auction system is fixed by public auction periodically, but the Excise Commr. reserves the right to grant any licence on payment of a fixed fee or fee determined in accordance with graduated or uniform scale. (a) Country Spirit (a) Country Spirit (b) Tari in areas other than those under the tree tax system; (b) Tari in areas other than those under the tree tax system; (c) Hemp drugs (c) Foreign liquor for consumption "on and off" the premises in Form. F.L.-4 and "Off" the premises in form F.L. 5. (d) Hemp drugs: Note: (i) The settlement of Tari shop under the auction-cum-tree tax system is also made by public auction (i) the settlement of Tari shops under the auction-cum-tree tax system is also made by public auction. F.L.-4 and "Off" the premises in form F.L. 5. (d) Hemp drugs: Note: (i) The settlement of Tari shop under the auction-cum-tree tax system is also made by public auction (i) the settlement of Tari shops under the auction-cum-tree tax system is also made by public auction. (ii) Ganja shops are at present settled under the uniform surcharge fee system (ii) Ganja shops are at present settled under the uniform surcharge system. Provided that the licence for the retail vend of foreign liquor for consumption of the premises only in form F.L. 5 in the prohibition area shall be determined in accordance with a uniform scale." The remaining two notifications merely make consequential changes in the relevant rules and need not be reproduced. 6. The Ordinance which has been impugned in this petition is as follows : "An Ordinance further to amend the United Provinces Excise Act, 1910. 6. The Ordinance which has been impugned in this petition is as follows : "An Ordinance further to amend the United Provinces Excise Act, 1910. WHEREAS The United Provinces Excise Act, 1910, already makes provisions in the interests of the general public, for the Regulation of trade and business in country liquor and foreign liquor by requiring a licence issued in accordance with rules made thereunder for the privilege of sale of such liquor and prohibiting its sale, except under such licence, and it also provides for rules to be made for the levy of fees for such licence; AND WHEREAS while the said Act makes express provision for the grant of licences for the exclusive privilege of selling country liquor by retail in any local area it does not contain express provision in similar terms in respect of foreign liquor; AND WHEREAS it is expedient in the public interest to make express provision enabling the adoption of the system of a grant of licences prevailing in respect of country liquor with necessary modifications for the grant of licences in respect of foreign liquor with a view to affording to all suitable applicants equality of opportunity to obtain such licence and also with a view to raising additional public revenues (through increased licence fees) out of the consumption of foreign liquor which is a luxury; AND WHEREAS the State Legislature is not in session and the Governor is satisfied that circumstances exist which render it necessary for him to take immediate action; NOW, THEREFORE, in exercise of the powers conferred by clause (1) of Article 213 of the Constitution that Governor is pleased to promulgate the following Ordinance : (1) This Ordinance may be called the Uttar Pradesh Excise (Amendment) Ordinance, 1972. (2) In Sec. 21 of the United Provinces Excise Act, 1910, hereinafter referred to as the Principal Act, clause of the proviso thereto be omitted. (3) After Sec. 24 of the Principal Act, the following section shall be inserted, namely: GRANT OF EXCLUSIVE PRIVILEGE OF SALE IN RESPECT OF FOREIGN LIQUOR "24-A. (1) Subject to the provisions of Sec. 31, the Excise Commissioner may grant to any person a licence or licences for the exclusive privilege of selling by retail at shops (for consumption both on and off the licenced premises, or for consumption of the licences premises only) any foreign liquor in any locality. (2) The grant of licence or licences sub-sec. (1) in relation to any locality shall be without prejudice to the grant of licences for the retail sale of foreign liquor in the same locality in hotels and restaurants for consumption on their premises. (3) Where more licences than one are proposed to be granted under sub-sec. (1) in relation to any locality over the same period, advance intimation of the proposal shall be given to the prospective applicants for every such licence. (4) The provisions of Secs. 25 and 30 and the proviso to Sec. 39 shall apply in relation to the grant of a licence for an exclusive privilege under this section as they apply in respect of the grant of a licence for an exclusive privilege under Sec. 24. 4. In Sec. 40 of the Principal Act, sub-sec. (3) shall be omitted. B. Gopala Reddi, Governor, Uttar Pradesh." 7. In order to appreciate properly the implications of the Ordinance, it is necessary to set out a few provisions of the Excise Act. Sec. 3 (13) defines `intoxicant' to mean any liquor or intoxicating drug as defined by the Act. Sec. 21 provides that no intoxicant shall be sold without a licence from the Collector. Sec. 28 provides for the duty of excise and countervailing duty on excisable articles which include foreign liquor and country liquor. Sec. 31 then provides for the payment of fee for a licence. Then we have Secs. 24 and 30. They are important and are reproduced below : "24. GRANT OF EXCLUSIVE PRIVILEGE OF MANUFACTURE, ETC.: Subject to the provisions of Sec. 31 the Excise Commissioner may grant to any person a licence for the exclusive privilege- (1) of manufacturing or of supplying by wholesale or of both, or (2) of selling by wholesale or by retail, or (3) of manufacturing or of supplying by wholesale, or of both, and of selling by retail, any country liquor or intoxicating drug within any local area." 30. PAYMENT FOR EXCLUSIVE PRIVILEGE : Instead of or in addition to any duty leviable under this chapter the Excise Commissioner may accept payment of a sum in consideration of the grant of the licence or any exclusive privilege under Sec. 24." A perusal of the provisions quoted above shows that no one can carry on business in intoxicant except under a licence from the Government. The licensee is required to pay licence fee as well as excise duty on the intoxicants. These provisions are applicable to all intoxicants including foreign liquor. Sec. 24 and Sec. 30 apply to country liquor only. They provide that the Government may grant to a person a licence for exclusive privilege of manufacture or sale of country liquor and may charge from him a sum in consideration of such grant, besides licence fee and excise duty. So far as foreign liquor is concerned, the Excise Act does not contemplate the conferment of any exclusive privilege for its manufacture or sale but contemplates only licences in different forms on payment of excise duty and licence fee. We have already indicated above that in the case of foreign liquor the licence fee is calculated on the basis of the turnover of different kinds of foreign liquor but in the case of country liquor, one of the modes and which is the most common mode, is to collect licence fee by auction. 8. Now the Ordinance has introduced in the Excise Act, Sec. 24-A, which is analogous to Sec. 24, and authorises the Excise Commissioner to grant exclusive privilege to any person of retail sale of foreign liquor in forms F.L. 4 and F.L. 5. Sec. 30 has also been made applicable so that the Excise Commissioner may charge from the grantee of such an exclusive privilege any sum over and above the licence fee and excise duty. The three notifications issued by the Excise Commissioner seek to make necessary amendments in the rules. 9. Now, let us examine the contention relating to the constitutional validity of the Ordinance. It is contended that what the Government is seeking to realise by auction of licences for the retail vend of foreign liquor is an impost levied long after the coming into force of the Constitution and must be justified with reference to one or the other entries in List II and III to the 7th Schedule of the Constitution. The argument is that the proposed levy is not covered by any of the entries in those two lists. It is argued that the levy in question can only if at all be justified with reference to the following three entries in List II : "51. The argument is that the proposed levy is not covered by any of the entries in those two lists. It is argued that the levy in question can only if at all be justified with reference to the following three entries in List II : "51. Duties of excise on the following goods manufactured or produced in the State and countervailing duties at the same or lower rates on similar goods manufactured or produced elsewhere in India . (a) alcoholic liquors for human con-sumption. (b) opium, Indian hemp and other narcotic drugs and narcotics, but not including medical and toilet preparations containing alcohol or any substance included in sub-paragraph (b) of this entry. 62. Taxes on luxuries, including taxes on entertainments, amusements, betting and gambling. 66. Fees in respect of any of the matters in this list, but not including fees taken in any court." 10. Entry 51 authorises the levy of excise duty on intoxicating liquors and drugs. But such a duty is levied on the production or manufacture of these articles. The quantum of the duty must be related to the quantity or the price of such goods depending on as to whether the duty is leviable ad quantum or ad valorem. The auction money, which would be relised for the grant of exclusive privilege for the sale of foreign liquor cannot be said to be excise duty. Indeed, the learned Advocate-General, who appeared on behalf of the respondents, did not try to justify the proposed duty as excise duty. So nothing further need be said about it. 11. We next take up Entry 66 which provides for the levy of fees. The question as to what amounts to a fee as understood in the Constitution has been examined by the Supreme Court in various cases and we shall consider those cases chronologically. 12. In 1954 the Supreme Court has dealt with this matter in the following three cases : (1) Commissioner, Hindu Religious Endownment, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt, AIR 1954 SC 282 . (2) Ratilal Pananchand v. State of Bombay, AIR 1954 SC 388 . (3) Sri Jagannath Ramanuj Dass v. State of Orissa, AIR 1954 SC 400 . (2) Ratilal Pananchand v. State of Bombay, AIR 1954 SC 388 . (3) Sri Jagannath Ramanuj Dass v. State of Orissa, AIR 1954 SC 400 . In the first case, after pointing out the distinction between a tax and a fee, the Supreme Court held in paragraph 46 as under :- "If, as we hold, a fee is regarded as a sort of return or consideration for services rendered, it is absolutely necessary that the levy of fees should on the face of the legislative provision, be co-related to the expenses incurred by the Government in rendering the services." Further, in paragraph 48 it has been observed by the Supreme Court that there is no generic difference between a fee and a tax, but our constitution has, for legislative purposes, made a distinction between the two. 13. Then in the second case, the same view has been expressed by the Supreme Court in paragraphs 20, 21 and 22. The following extract from paragraph 22 may be quoted with advantage :- "It follows, therefore, that although a tax may be levied upon a particular class of persons or particular kind of property, it is imposed not to confer any special benefit upon individual persons and the collections are all merged in the general revenue of the State to be applied for general purposes. Tax is a common burden and the only return which the tax-payer gets is participation in the Common benefit of the state. Fees, on the other hand, are payments primarily in the public interest, but for some special services rendered or some special work done for the benefit of those from whom the payments are demanded. Thus in fees there is always an element of `quid pro quo which is absent in a "tax". In the third case also the same thing has been said by the Supreme Court in the following words in paragraph 9 :- "Thus, in fees there is always an element of quid pro quo, which is absent in a tax." 14. In the Hinger Rampur Coal Co. Ltd. v. State Orissa, AIR 1961 SC 459 the Supreme Court again repeated the same view in paragraph 9 in the following words : "It is true that between a tax and a fee there is no generic difference. In the Hinger Rampur Coal Co. Ltd. v. State Orissa, AIR 1961 SC 459 the Supreme Court again repeated the same view in paragraph 9 in the following words : "It is true that between a tax and a fee there is no generic difference. Both are compulsory exactions of money by public authorities, but whereas a tax is imposed for public purposes and is not, and need not, be supported by many consideration of service rendered in return, a fee is levied essentially for services rendered and as such there is an element of quid pro quo between the person who pays the fees and the public authority which imposes it." 15. In H.H. Sudhundra Thirtha Swamiar v. Commissioner for Hindu Religious and Charitable Endowments, Mysore, AIR 1963 SC 966 the earlier view has been reaffirmed by the Supreme Court in paragraph at page 975. 16. In Corporation of Calcutta v. Liberty Cinema, AIR 1965 SC 1107 the Supreme Court held that the levy which the Calcutta Corporation imposed by way of fee on cinema houses was really a tax and not a fee, because no services of any special kind were rendered by the Corporation resulting in any special benefit to the licensees. Their Lordships further took the view in paragraph 18 that the mere fact that the levy in question is leviable as a fee is immaterial for if it is found that the levy is not for special services rendered to the person or whom the levy is imposed, it cannot be a fee wherever it may be placed in the statute. 17. In Nagar Mahapalika, Varanasi v. Durga Dass Bhattachrya, AIR 1968 SC 1119 while dealing with the question as to whether the licence fee imposed by the Nagar Mahapalika, Varanasi on rickshaw pullers could be justied as a fee, their Lordships of the Supreme Court quoted with approval their earlier decisions in the case of Commissioner of Hindu Religious Endowment, Madras and affirmed the view of a Full Bench of this Court in Durga Dass Bhattacharya v. Municipal Board, Benaras, AIR 1962 Alld. 277 striking down the levy made by the Nagar Mahapalika on the ground that the fee in question could not be justified as the services commensurate with the charges had not been established. 18. In the Delhi Cloth and General Mills Co. 277 striking down the levy made by the Nagar Mahapalika on the ground that the fee in question could not be justified as the services commensurate with the charges had not been established. 18. In the Delhi Cloth and General Mills Co. Ltd. v. The Chief Commissioner, Delhi, AIR 1971 SC 344 the Supreme Court again reaffirmed its earlier view as regards distinction between a tax and a fee. 19. Now, we come to the latest case of the Supreme Court in the Indian Mica and Micanite Industries Ltd. v. The State of Bihar, AIR 1971 SC 1182 . In this case their Lordships observed at page 1186 : "From the above discussion, it is clear that before any levy can be upheld as a fee, it must be shown that the levy has reasonable corelationship with the services rendered by the Government. In other words, the levy must be proved to be a quid pro quo for the services rendered. But in these matters it will be impossible to have an exact corelationship. The co-relationship expected is one of a general character and not as of arithmetical exactitude." 20. From the foregoing discussion, it is clear that the proposed levy under the impugned Ordinance cannot be upheld as a fee, unless it is based upon the principle of `quid pro quo'. The learned Advocate-General conceded that the levy could not be justified as a fee for services rendered. In fact, the preamble to the Ordinance makes it explicit that the levy in question was intended to augment the revenue of the State. The learned Advocate-General, however, urged that a fee for the grant of a licence can still retain its character as a fee, even though it is not for any service rendered or does not have any element of quid pro quo and in support of this contention has placed strong reliance on a decision of the Privy Council in George Walkmen Shanon v. Lower Mainland Dairy Products Board, AIR 1939 PC 36 . That decision is, however, clearly distinguishable for the legislative entry under which the fee was imposed gave a power to levy a fee for purposes of the revenue of the State. This decision as such cannot be of any assistance for the proposition advanced. That decision is, however, clearly distinguishable for the legislative entry under which the fee was imposed gave a power to levy a fee for purposes of the revenue of the State. This decision as such cannot be of any assistance for the proposition advanced. This apart in the cases which we have already referred to earlier, the Supreme Court has clearly laid down that although there is no generic difference between a tax and a fee in general law, yet our Constitution has maintained a distinction between a tax and a fee for legislative purposes. 21. Reliance was next placed on paragraph 9 of a decision of the Supreme Court in Cooverjee B. Bharncha v. Excise Commissioner and the Chief Commissioner, Ajmer, AIR 1954 SC 220 where the licence fee realised by auction for granting a licence to vend country liquor was upheld in the following words : "The grantee is given a licence on payment of the auction price. The Regulation specifically authorises this. It is not a fee levied without authority of law as was the situation in Rashid Ahmad v. Municipal Board, Kairana, AIR 1950 SC 163 ." It is clear that in this case the legislative competence to impose such a fee was not challenged. The only question considered was whether the levy was authorised by the statute. The Supreme Court found that it was specifically authorised by the Ajmer Excise Regulations (Act No. 1 of 1915) . Indeed, the Ajmer Excise Regulations was a pre-constitutional enactment and the levy could not be challenged on the ground on which it has been challenged before us. The only possible challenge could be, and was, that it infringed the fundamental right of the petitioners under Article 19 (1)(g). The Supreme Court held that having regard to the nature of the trade, the restriction imposed was not unreasonable. 22. The learned Advocate-General then referred to Article 199 (2) of the Constitution where two types of fees are referred to : (1) Fee for a licence and (2) Fee for services rendered. He contended that for licence fee no services need be rendered. It is true that Article 199(2) refers to two classes of fees as enumerated above, but to us it appears that it is only by way of description of the various kinds of fees which may be imposed. He contended that for licence fee no services need be rendered. It is true that Article 199(2) refers to two classes of fees as enumerated above, but to us it appears that it is only by way of description of the various kinds of fees which may be imposed. It does not mean that a licence fee, which is not backed by cervices rendered and is excessive can be justified without reference to any taxing entry in the Legislative List. If a fee for licence is a fee for a privilege granted to a person for doing something which he otherwise cannot do, such a fee, if excessive, shall be treated as a tax and such a tax must be justified on the basis of coma taxing entry in the Legislative List. In Commissioner, Hindu Religious Endowments, Madras (supra), the Supreme Court held a licence fee of this type cannot but be regarded as tax. Similarly, in Corporation of Calcutta v. Liberty Cinema a licence fee levied for the privilege of running a cinema house was ultimately found by the Supreme Court to be a tax. This is what their Lordships held in paragraph 20 :- "The conclusion to which we then arrive is that the levy under Sec. 548 is not a fee as the Act does not provide for any services of special kind being rendered resulting in benefits to the person on whom it is imposed. The work of inspection does by the Corporation which is only to see that the terms of the licence are observed by the licensee is not a service to him. No question here arises of correlating the amount of the levy to the costs of any service. The levy is a tax. It is not disputed, it may be stated, that if the levy is not a fee, it must be a tax." 23. In Nagar Mahapalika, Varanasi v. Durga Das Bhattacharya, which was a case of licence fee charged for plying Rickshaw, it was conceded by the Nagar Mahapalika that the tax element was pre-dominent in its imposition and was, therefore, in the nature of a tax. The learned Advocate-General also relied on a decision of a Full Bench of this Court in Khacheru Singh v. S.D.O. Khurja, AIR 1960 Alld. 464. We find that that case deals with court fees and, as such, is not relevant. The learned Advocate-General also relied on a decision of a Full Bench of this Court in Khacheru Singh v. S.D.O. Khurja, AIR 1960 Alld. 464. We find that that case deals with court fees and, as such, is not relevant. In Lakshmi Kant Sahu's case the Supreme Court has held that the charge for the grant of a privilege for the `off' vend of foreign liquor under the system of auctioning is a tax and not a fee. This finding is based upon a concession. But the law laid down by the Supreme Court is binding, even though it is based upon a concession. It is thus clear that the proposed levy is in the nature of a tax and it must conform to the requirement of a valid tax sanctioned by the Constitution. 24. A Similar position obtains in the United States of America and a reference for this proposition may be made to the following paragraph in Volume 51, American Jurisprudence, 2nd Edition at page 12 :- "The exaction of licence fees for revenue purposes is the exercise of the power of taxation, and, as such, is usually considered to come within the scope of constitutional limitations on taxation. And an exercise of the power of taxation for the sole purpose of revenue or under restraint or prohibition of a business will not be saved from the constitutional restrictions that apply to it as the imposition of a tax by its designation, in the statute, as a `license fee'." No case has been brought to our notice in which a levy imposed as a licence fee has been upheld as such, even though it was found to be not based on the principle of quid pro quo. 25. Before we consider the question as to whether the proposed levy can be justified as a tax, we wish to deal with the contention of the learned Advocate-General that it can be justified with reference to Entry 8 of List II. Entry 8 of List II of the Seventh Schedule reads as under :- "8. 25. Before we consider the question as to whether the proposed levy can be justified as a tax, we wish to deal with the contention of the learned Advocate-General that it can be justified with reference to Entry 8 of List II. Entry 8 of List II of the Seventh Schedule reads as under :- "8. Intoxicating liquors, that is to say, the production, manufacture, possession, transport, purchase and sale of intoxicating liquors." The learned Advocate-General has urged that this Entry gives power to the State Government to regulate the business of intoxicants and a levy of the nature imposed can be justified with reference to the regulatory power which the State enjoys under this item. 26. It is a settled rule of interpretations that the legislative entries have to be liberally construed and that being so, regulatory legislation in respect of intoxicants can be enacted by the State Legislature in exercise of the powers conferred on it under Entry 8 of List II. The power of regulation, however, does not carry with it the power of taxation. It is now well settled that a taxing enactment cannot be sustained by reference to a general entry in the legislative List. It has been observed by the Supreme Court in M.P.V. Sundararamier & Co. v. State of Andhra Pradesh, AIR 1958 SC 468 that "under the Scheme of the Entries in the List, taxation is regarded as a distinct matter and is separately set out." Thus it is clear that the proposed levy cannot be justified under Entry No. 8. 27. The only other entry in List II, under which it may be sustained and upon which the learned Advocate-General also places reliance is Entry 62 of fist II. Entry 62 empowers the State Legislature to levy tax on luxuries. Luxuries obviously mean the articles of luxury. We shall assume that the foreign liquor is an article of luxury. The tax on foreign liquor as an article of luxury must, however, be related to the quantity, quality or the value of foreign liquor. No such tax can be upheld which is not so related. It is again true that a tax of this nature can be imposed either on the manufacturer or producer of a luxury or its seller or consumer so that the tax may be levied at the point of manufacture or sale or consumption. No such tax can be upheld which is not so related. It is again true that a tax of this nature can be imposed either on the manufacturer or producer of a luxury or its seller or consumer so that the tax may be levied at the point of manufacture or sale or consumption. A tax, which is levied at the point of auction of a right to sell foreign liquor cannot be said to be a tax levied either on the manufacturer or the seller or the consumer. A successful bidder at an auction sale will have to pay the auction money before he embarks upon the trade in foreign liquor. In State of Mysore v. D. Cawasji & Co., AIR 1971 SC 152 the Supreme Court held that : "A payment for exclusive privilege of selling Tari from certain shops is called shops rent. The licensee pays what he considers to be equivalent to the value of the right and it has no relation to the production or manufacture of today and such shop rent is not excise duty within the meaning of Entry 51 List 2 of Schedule of the Constitution." The principle underlying in that case will apply to the case before us and, as such the impugned impost cannot be said to be a tax on luxury. 28. In State of Bombay v. R.M.D. Chamarbaugwala, AIR 1957 SC 699 the validity of tax levied by Bombay Lotteries and Price Competition Control Tax Act was upheld by the Supreme Court on the ground that it was a tax on each entry fee received from each individual competitor. In other words, there was a direct corelation between the amount of tax levied on the promoter and the total value of the entry fee received by him. Similarly, in Western India Theatres v. Cantonment Board, Poona, AIR 1959 SC 582 , the tax on entertainment, which was levied on cinemas, dramas and circus was upheld by the Supreme Court on the ground that the tax was on each show of a cinema or circus, which was a tax on entertainment and not a tax on the business or profession. 29. 29. In M/s. D. Cawasji & Co., Mysore v. State of Mysore, AIR 1969 Mysore 23, the Mysore High Court after noticing the aforesaid two decisions of the Supreme Court laid down the following proposition in paragraph 94 :- "From the aforesaid two decisions of the Supreme Court, the propositions that emerge are (1) that a tax on luxuries may be imposed either on the person providing or giving luxuries, or both and (ii) that the amount of tax on luxuries must be correlated to the value, quality or quantity of luxuries and the tax should not be imposed for the privilege of carrying on any trade or calling providing luxuries." We respectfully agree with these observations. 30. It was contended on behalf of the petitioners that the proposed tax would be a tax on trade falling under Entry 60 of List II of the Constitution. But such a tax cannot exceed Rs. 250/- as provided in Article 276 of the Constitution. There appears to be force in this contention but we do not propose to express any final opinion on this point. It would be enough for our purposes if we hold, as we do, that the tax which the State propose to levy under the impugned notifications is not a tax on luxury. 31. This leaves with the contention of the learned Advocate-General that the right to carry on business in intoxicants; is some sort of a privilege, or monopoly or property of the State so that if the State permits a person to carry on such a business it confers upon him a special privilege and, in consideration, it can charge from him a price or a premium. It is further contended that such a price or premium need not be in the nature of a fee, excise duty or a tax and that such a premium or price can be charged in public interest for raising revenue and need not be justified with reference to any entry in the Legislative List. His argument is like this. Intoxicating drugs and liquors are dangerous commodities and no one has inherent right to carry on business in them. The State has complete control over their production, import, export, transport and possession. He then refers to the various provisions of the Excise Act. Chapter III controls import, export and transport. Chapter IV controls manufacture, possession and their sale. Intoxicating drugs and liquors are dangerous commodities and no one has inherent right to carry on business in them. The State has complete control over their production, import, export, transport and possession. He then refers to the various provisions of the Excise Act. Chapter III controls import, export and transport. Chapter IV controls manufacture, possession and their sale. Then he refers to Sec. 24 of the Excise Act which authorises the Government to confer upon any person exclusive privilege of selling country liquor. Reference is then made to Sec. 26 of the Excise Act, which authorises the grantee of the exclusive privilege to let or assign such a privilege. Lastly, he refers to Sec. 30, which authorises the Government to accept payment of a sum in consideration of exclusive privilege granted under Sec. 24 of the Excise Act. He then invited our attention to certain decisions of the Supreme Court where it has been held that the trade intoxicants is a noxious trade and no one has inherent right to carry on such a trade and further that the State can control or regulate such a trade in any manner it thinks proper. 32. There can be no manner of doubt that trade in intoxicants cannot be placed at bar with the ordinary trade. Intoxicants may be harmful to the health of community if allowed to be bought and sold without let or hindrance. The Government cannot and does not permit a free trade in intoxicants. It follows that the State has the power, in fact, a duty to regulate such a trade to the point of complete prohibition, if necessary. It also cannot be disputed that the Excise Act controls the trade in intoxicants in all its department. No one can manufacture, transport, possess or sell any intoxicating drugs or liquor without the permission. permit or licence from the Government. But does it follow from it that the State has the monopoly of trade in intoxicants: or has some sort of exclusive privilege or property right either in such a trade or in its subject-matter ? After having heard the learned Advocate-General at great length we are satisfied that so far as foreign liquor is concerned, the State does not possess any exclusive privilege, a monopoly or a property right. After having heard the learned Advocate-General at great length we are satisfied that so far as foreign liquor is concerned, the State does not possess any exclusive privilege, a monopoly or a property right. So far as country liquor and other intoxicants are concerned, their position appears to be different, as we shall show presently. 33. Foreign liquor no doubt is manufactured within the State under a licence and the imported foreign liquor is allowed to enter the State after satisfactory proof of the payment of duty has been furnished. It is sold to the consumers through licenced dealers. The State is only concerned with the excise duty, which it levies on liquor manufactured in the State and counter Vailing duty when imported from other States or outside India. The State is further authorised to charge licence fee from the licenced vendors. Excise Act merely regulates the trade in foreign liquor. It creates no monopoly in favour of the State nor does it create any exclusive privilege or property right in its favour. Nothing to the contrary has been brought to our notice. It has, of course, the power to control the trade in foreign liquor but such a power of control does not create any right in the State which it can sell for a price. It is no doubt possible under Article 19(6) (ii) for the Legislature to enact appropriate legislation authorising the State to carry on itself or through a corporation owned or controlled by it any trade to the exclusion of citizens, but no such law has been enacted. 34. Now let us examine the cases relied upon by the learned Advocate-General. In The State of Bombay v. F.N. Balsara, AIR 1951 SC 318 it has been held by the Supreme Court that power to regulate a trade, like the trade in intoxicants, includes the right of complete prohibition. That is a proposition which is not, and cannot be contested. But that does not mean that this power of Regulation creates any property or monopoly right in the State. In fact, in the case of Cooverjee B. Bharucha v. Excise Commissioner and the Chief Commissioner, Ajmer a case also relied upon by the learned Advocate-General, the Supreme Court has held that the pro-visions of Ajmer Excise regulations relating to the auction of country liquor shops do not create any monopoly in favour of the State. In fact, in the case of Cooverjee B. Bharucha v. Excise Commissioner and the Chief Commissioner, Ajmer a case also relied upon by the learned Advocate-General, the Supreme Court has held that the pro-visions of Ajmer Excise regulations relating to the auction of country liquor shops do not create any monopoly in favour of the State. In the State of Assam v. Sristikar Dowerah, AIR 1957 SC 414 the Supreme Court has merely laid down that Eastern Bengal, and Assam Excise Act and its Rules make it clear that no person has any absolute right to sell liquor. It further held that the purpose of the Act and the Rules is to control and restrict the consumption of intoxicating liquors, such control and restriction being obviously necessary for the preservation of public health and morals and to raise revenue." This is true also of the U.P. Excise Act and no one contests this proposition. The case of Nagendra Nath Bora v. Commissioner of Hills Division and Appeals, Assam, AIR 1958 SC 398 was again a case under the Eastern Bengal and Assam Excise Act. Here also the Supreme Court has reiterated what it has said earlier that there is no inherent right in a citizen to sell liquor. 35. There can be no manner of doubt that from its nature, the trade or business in liquor is not and cannot be free for all. Between 1909 and 1916 Excise Acts in almost all the States (then known as Provinces) were passed to control the trade in intoxicants so that such a trade could be carried on only by such persons as were licensed in that behalf. There is also no doubt that one of the objects of the Excise Acts is to raise revenue for the States. There are provisions in the Excise Acts of all the States, including the Excise Act of our own State, authorising the State to raise revenue in the shape of excise duty, licence fee and extra money for the grant of exclusive rights. But after the coming into force of the Constitution any impost under the Excise Act has to be justified with reference to some entry in the Legislative List. That is a topic which we have already dealt with. 36. But after the coming into force of the Constitution any impost under the Excise Act has to be justified with reference to some entry in the Legislative List. That is a topic which we have already dealt with. 36. Now from the decisions of the Supreme Court, referred to above, it can be said that no citizen has any absolute right to carry on the trade in intoxicants but there is no authority for the proposition that the State enjoys some kind of property right in such a trade or it has any monopoly over it. In fact, such an argument is completely negatived by the decision of the Supreme Court in the case of Krishan Kumar Narula and Surender Kumar v. State of Jammu and Kashmir, AIR 1967 SC 1368 where the Supreme Court after referring to the cases quoted above, has held in paragraph 14 :- "We, therefore, hold that dealing in liquor is business and a citizen has a right to do business in that commodity; but the State can make a law imposing reasonable restrictions on the said right, in public interests." This decision establishes two propositions (1) that even though intoxicants are noxious commodities, yet a citizen has a right to carry on business in them and (2) that it being a fundamental right of every citizen to carry on such a trade, it cannot be said to be the exclusive privilege, monopoly or the property of the State. How can any one have a fundamental right to do something which belongs to the State? 37. However, there are three cases, which seem to lay down a contrary proposition. The first is a decision of a Full Bench of this Court in Gappu Lal Munni Ltd v. State of Uttar Pradesh, 1971 ALJ 796. This was a case in which levy of tax under the U.P. Sales Tax Act on the turnover of country liquor was challenged. While examining the scheme of the Excise Act, the Court observed in paragraph 30 : "Under the Act, the State Government has the power to exclusively undertake the activity of manufacture and sale of alcoholic liquors. If instead of undertaking such an activity, it grants permission to person or persons to manufacture or sell intoxicant, it in essence parts with its exclusive right. If instead of undertaking such an activity, it grants permission to person or persons to manufacture or sell intoxicant, it in essence parts with its exclusive right. It can while doing so decide what considerations should be paid by the person or persons to whom such right is to be given. The confirment of such right in the circumstances, is a matter of contract between the State Government or the Excise Commissioner and the person or persons who want to acquire such right." This case can easily he distinguished on more than one grounds. Firstly, the Full Bench was dealing with country liquor while we are dealing with foreign liquor. The position in respect of country liquor is materially different. Not only the sale of country liquor is controlled but its production and manufacture is also controlled. Chapter VII of Volume I of the U.P. Exercise Manual deals with the rules relating to country liquor. Rule 415 in that Chapter deals with the system of supply of country liquor. There are two systems of supply; (1) the contract supply system and (2) the out still system (in outlying areas only) . Rule 416 then gives a description of "contract supply" system and reads : "416 - The contract supply system denotes the system under which the exclusive privilege of supplying country spirit at a fixed price to a particular tract is granted for a certain period to a particular firm or distillers." Rule 417 then provides the method in which the contractor for the supply of country liquor is selected. The selection is done by inviting tenders. The contractor is required to submit-a tender in form C.L. 22 giving the price at which he is willing to undertake the supply of country liquor to a particular tract. Rule 418 then provides : "418 - The contractor is bound to sell spirit to licensed vendors at all the bonded warehouses and wholesale depots, if any, in his contract area, at such strengths as may be prescribed, and at the price fixed per bulk gallon of spirit of specific strength. The selling price does not include the duty which Government is at liberty to vary at any time during the contract." The detailed conditions of the contract are given in the notice in form C.L. 23 calling for tenders and in the licence in Form C.L. 1. The selling price does not include the duty which Government is at liberty to vary at any time during the contract." The detailed conditions of the contract are given in the notice in form C.L. 23 calling for tenders and in the licence in Form C.L. 1. A perusal of these rules and forms shows that the licensed contractor enters into a contract with the State to supply country liquor at a specified price to a bonded warehouse or depot within a particular tract from which the liquor is supplied to retail vendors. In clause (vii) of C.L. 1. :- "The contractor shall maintain such minimum stock at each warehouse and depot as may be fixed by the Excise Commissioner. Whenever the stock falls short of this minimum and the contractor fails at once to replenish it, the collector may procure spirit from elsewhere, the cost of which shall be recoverable from the contractor in the manner provided in condition II". 38. The scheme with regard to country liquor appears to be that the Government enters into a contract with a distiller or an importer to supply country liquor to warehouses and depots in a particular tract at an agreed price. The liquor is passed on to the retail vendors at the same price plus the excise duty, which may be leviable. Thus the retail vendor is assured of a regular supply at a cheap rate. The contractor is not free to sell the country liquor produced or imported by him in the open market nor is the licenced vendor free to purchase it from the open market. He can only deal in the liquor supplied to him by the Government. This shows that the State purchases country liquor and thus becomes its owner. A similar view has been taken by the Supreme Court in M/s. Produce Exchange Corporation v. The Commissioner of Excise Assam, Civil Appeal No. 15 of 1972 decided on 17th April, 1972. While dealing with the system of supply of country liquor under the Eastern Bengal and Assam Excise Act, 1910, the Supreme Court observed : "It must be borne in mind that the Government is the purchaser. While dealing with the system of supply of country liquor under the Eastern Bengal and Assam Excise Act, 1910, the Supreme Court observed : "It must be borne in mind that the Government is the purchaser. On good grounds it prefer one seller to an other." Thus if the State is the owner of the country liquor, which it supplies to the retail vendors for sale, there is no difficulty in appreciating that the State can charge from such retail vendors any price or premium for granting such a contract to him. Such a case would be analogous to a commercial contract under which a producer or manufacturer of goods appoints an exclusive distributor or stockist for the sale of his product in any particular area. He can charge for such a contract any price or premium he wants. The observations of the Full Bench quoted above, can thus easily he explained on this basis with reference. to country liquor but the observations cannot and were not intended to be applied to foreign liquor, which is not procured by the State like country liquor but is purchased or imported by the licenced vendors directly without the intervention of the State. 39. Chapter VIII of the U.P. Excise Manual Vol. I, contains rules relating to foreign liquor. Under these rules the State is not required to procure foreign liquor for retail vend at a fixed price. The State at no times purchases foreign liquor or becomes its owner. That is why Secs. 24 and 30 of the Excise Act were not made applicable to foreign liquor. These two provisions no doubt authorise the State to confer an exclusive privilege upon a person for the manufacture or sale of country liquor and to accept from him a sum over and above the excise duty and licence fee in consideration of grant of such a privilege. The constitutional validity of these provisions was not challenged before the. Full Bench nor indeed it could successfully be challenged, because they being apart of a pre-constitutional Act were fully protested by Article 272 of the Constitution. The Supreme Court in the case of Laxmi Kant Sahu has not laid down any contrary proposition. That was a case under the Bihar and Orissa Excise Act, 1915. Full Bench nor indeed it could successfully be challenged, because they being apart of a pre-constitutional Act were fully protested by Article 272 of the Constitution. The Supreme Court in the case of Laxmi Kant Sahu has not laid down any contrary proposition. That was a case under the Bihar and Orissa Excise Act, 1915. The system of levying fee for the sale of country liquor by auction was sought to be applied by the Bihar Government to the licences for the retail vend of foreign liquor by amending Rule 103. The Supreme Court struck down that rule on the ground that Sec. 38 of the Excise Act, which empowered the State to collect licence fee under the system of auction was applicable only to country liquor and did not apply to foreign liquor and that the fee collected by auction was a tax and not a fee and that Sec. 38 of that Act did not empower the Board to levy tax. The Supreme Court did not hold that if such a provision was inserted after the constitution, it would be immune from challenge. For the foregoing reasons we hold that the decision of the Full Bench in the case of Gappu Lal Munni Lal does not apply to the present case. 40. Then there are two cases of the Madhya Pradesh High Court. The first case is of Shrimati Nanhibai of Jabalpur v. The Excise Commissioner, State of Madhya Pradesh, Gwalior, AIR 1963 MP 352 . That was a case of country liquor. It was held that the State Government has the exclusive right to manufacture and sell country liquor and other intoxicating drugs which it could part with for a price fixed by auction. This case has been followed by the Madhya Pradesh High Court in M/s Gulab Rai and Sons v. The State of Madhya Pradesh, M.P. No. 466 of 1971 decided on 19th July 1972. This was a case of foreign liquor. However, we find that the provisions in the Madhya Pradesh Excise Act are materially different from the corresponding provisions in the Excise Act of our State. Sec. 18 of that Act, which corresponds to Sec. 24 of our Act, materially reads : "18 (1) The State Government may lease to any person, on such conditions and for such period as it may think fit, the right . . . . . . . Sec. 18 of that Act, which corresponds to Sec. 24 of our Act, materially reads : "18 (1) The State Government may lease to any person, on such conditions and for such period as it may think fit, the right . . . . . . . . . . . . . . . . . (a) . . . . . . . . . . . . . . . . . . . . . (b) of selling by wholesale or by retail, or (c) . . . . . . . . . . . . . . . . . any liquor or intoxicating drug within any specified area." Section 27, which corresponds to Sec. 30 of our Act reads :- "Instead of or in addition to any duty leviable under this Chapter, the State Government may accept payment of a sum in consideration of the grant of any lease under Sec. 18". It would be at once clear that Sec. 18 of the Madhya Pradesh Excise Act unlike Sec. 24 of our Act, applies to all liquors and under Sec. 27 the Government is authorised to accept payment of a sum in consideration of such a grant. We have already pointed out above that in our Act, the grant of an exclusive privilege under Sec. 24 is restricted to country liquor and likewise Sec. 30 which corresponds to Sec. 27 of the Madhya Pradesh Excise Act, also is restricted to country liquor. 41. The decision of the Madhya Pradesh High Court can be supported on a short ground, namely, that the Madhya Pradesh Excise Act being a preconstitutional Act, its provisions like Secs. 18 and 27 were protected by Article 272 of the Constitution. When the Madhya Pradesh Excise Act was passed, there were no limitations on the powers of the State to enact laws for raising revenue for the State. There was no distribution of legislative powers between the Union and the State as is provided in the Constitution. But any new impost levied whether under the Madhya Pradesh Excise Act or under the Uttar Pradesh Excise Act, after the coming into force of the Constitution, will have to be justified with reference to some taxing entry in the legislative list of the State. Thus the two decisions of the Madhya Pradesh High Court ago do not support the learned Advocate-General. Thus the two decisions of the Madhya Pradesh High Court ago do not support the learned Advocate-General. We are thus of the opinion that the State has no proprietary right or monopoly in the trade of foreign liquor. The impost that is sought to be levied under Sec. 24-A react with Sec. 30, therefore, has to be justified with reference to some taxing entry in List II and we have already shown above that it cannot be justified with reference to the Entries 8, 51, 62 and 66, which are only entries relied upon by the learned Advocate-General. Reliance was placed by the respondents on the case of State of Orissa v. Harinarayan Jaiswal, (1972) 2 SCC 36 which is also out of context for that case dealt with country liquor and it was conceded that the Government had a right to sell the exclusive privilege while in the case before us the right of the State to grant an exclusive privilege for the sale of foreign liquor and its right to sell such privilege by auction is denied. 42. For the reasons stated above we are of the view that Sec. 3 (i) and Sec. 3 (iv) insofar as it makes the provisions of Sec. 30 of the Excise Act applicable to the grant of licence for foreign liquor is ultra vires. 43. Coming now to the remaining contentions, the complaint based on Article 14 of the Constitution is like this. Sub.-sec. (1) of Sec. 3 of the Ordinance makes applicable Sec. 24-A to the licences in form F.L. 4 and F.L. 5 only and leaves out the licences in form F.L. 6 and F.L. 7, which relate to hotels, Dakbungalows and restaurants. The contention is that there is no rational justification for this discrimination. We find no force in this contention. Licences in form F.L. 6 and F.L. 7 are in respect of hotels and restaurants while licences in form F.L. 4 and F.L. 5 are in respect of shops. There is a clear distinction between the two types of licences. Rule 646 deals with the licensing of shops in form F.L. 4 and F.L. 5 while Rules 647 and 648 deal with licences in form F.L. 6 and F.L. 7. There is a clear distinction between the two types of licences. Rule 646 deals with the licensing of shops in form F.L. 4 and F.L. 5 while Rules 647 and 648 deal with licences in form F.L. 6 and F.L. 7. Under Rules 647 a licence in form F.L. 6 is granted to a proprietor or lessee of a hotel or Dakbunglow for retail sale for consumption on the premises only to the persons actually residing in the hotel or their bona fide guests. Similiarly. under Rule 648 a licence in form F.L. 7 is granted to restaurants or hotel premises which are maintained for the main purpose of supplying public meals served in Western fashion. Thus the licenses in F.L. 6 and F.L. 7 are only ancillary to the main business of hotel keeping or running a restaurant, such a licence cannot obviously be put to auction open to all. If the proprietor or a lessee of a hotel or restaurant is deprived of the licence as a result of auction his main business will suffer. No such situation prevails in the case of licences in form F.L. 4 and F.L. 5. Thus the two classes of persons covered by two sets of licences are distinct and there is no question of discrimination between the two. 44. Now we come to the challenge to the notifications based upon Article 14 the Constitution. It is contended that the notification No. 1 authorises the licence fee to be fixed by auction but it reserves to the Excise Commissioner the right to grant any licence on payment of a fixed fee or fee determined in accordance with a graduated or uniform scale. It is said that this amounts to excessive delegation and confers upon the Excise Commissioner unfettered power either to grant a licence by auction or by other modes, without there being any guideline, thus infringing the guarantee of equal protection as provided in Article 14 of the Constitution. We find no merit in this contention. The delegate is the Excise Commissioner who is the Head of the Excise Department in the State (Sec. 10(2) (c) ) . One of the objects of the levy of licence fee is to raise revenue for the State. We find no merit in this contention. The delegate is the Excise Commissioner who is the Head of the Excise Department in the State (Sec. 10(2) (c) ) . One of the objects of the levy of licence fee is to raise revenue for the State. The Excise Commissioner will, therefore, always be guided by the interest of revenue while deciding as to whether in a particular locality the, licence fee should be raised by auction or by some other mode. This is enough guideline. Having regard to the nature of the trade, it is not unlikely that in certain localities there may not be many bidders. In such a case it would be more advantageous to grant a licence on fixed or graduated scale of fees rather than by auction. It is also not unlikely that the bidders may collude and may not give adequate bids at the auction. To guard against such a situation it is necessary that the Excise Commissioner should have the power not to hold an auction at all or to cancel, the auction already held, and to raise licence fee by other modes. The discretion having been vested in the highest authority of the Excise Department, it cannot he said that the discretion would be exercised arbitrarily or in such a manner as to bring about discrimination. 45. We now come to the challenge made to the Act based on Articles 31 and 301 of the Constitution. So far as infringement of Article 31 is concerned, it is contended that the petitioner has a fundamental right to vend liquor and the State Government has by the impugned legislation taken away that right without payment of any compensation. This argument is without substance. It may be conceded that in view of the (decision of the Supreme Court in the case Krishna Kumar Narula v. State of Jammu and Kashmir that every citizen has a right to deal in liquor. Irrespective of the question of morality dealing in liquor is also business. But the State Government in exercise of its restrictive powers conferred under Article 19 (1) (g) of the Constitution can impose reasonable restriction on the exercise of this power. The present legislation restricts the business of dealing in liquor to licensees. Irrespective of the question of morality dealing in liquor is also business. But the State Government in exercise of its restrictive powers conferred under Article 19 (1) (g) of the Constitution can impose reasonable restriction on the exercise of this power. The present legislation restricts the business of dealing in liquor to licensees. The fetters that are imposed are restrictive in nature and are not exproprietary so as to bring the case within Article 31 of the Constitution. This apart. Article 31 after is amendment applies only to those cases were there is transfer of ownership or right to possession of any property to the State or to a Corporation owned or controlled by the State. In the present case, the law does not provide for transfer of the ownership or right to possession or the right to vend liquor. It only imposes restriction;. As such the challenge made on the basis of Article 31 of the Constitution is out of context. 46. The challenge based on Article 301 of the Constitution is also without merit. Article 301 guarantees free tom of trade, commerce and intercourse. Thus any restriction which directly effects the movement of trade is hit by Article 301 of the Constitution, unless it is saved by the other provisions of the Constitution. See : The State of Madras v. N.K. Nataraja Mudaliar, AIR 1960 SC 147. The imposition of a tax in certain cases, which directly and immediately restricts or hampers trade offends Article 301, but every imposition of tax does not do so. See : Atiabari Tea Co. Ltd. v. The State of Assam, AIR 1961 SC 232 and Andhra Sugars Ltd. v. State of Andhra Pradesh, AIR 1968 SC 599 . The impugned legislation only insists on taking out a licence before vending liquor, and in that process levies an amount which as we have held, earlier, in the nature of a tax. Considering the scheme of the operation of the Act, it cannot be said that the tax imposed by introducing the auction system directly interferes with the free flow of trade and commerce. This contention therefore, also fails. 47. The last contention is that the impugned notification issued by the Excise Commissioner is ultra vires the Excise Act. The notification purports to have been issued under Sec. 41 (c) of the Excise Act. This contention therefore, also fails. 47. The last contention is that the impugned notification issued by the Excise Commissioner is ultra vires the Excise Act. The notification purports to have been issued under Sec. 41 (c) of the Excise Act. That provision authorises the Excise Commissioner to make rules prescribing the scale of fee or manner of fixing the fee payable in respect of any licence. permit or pass or of the storing of any intoxicants and thus refers to Sec. 31 of the Act. We have already held that proposed levy by auction for the grant of licence for the retail vend of foreign liquor cannot be justified as a fee under Sec. 31. The impugned notification is thus ultra vires Sec. 41 (c) of the Excise Act. 48. It is now necessary to refer to some additional contentions which have been raised in Writ Petition Nos. 4149, 4150, 4154, 4158, 4159 and 4160 of 1972. In Writ Petition Nos. 4149 and 4158, the licences were renewed for the entire period 1972-73 but subsequently the Excise Officer sent an intimation to the petitioners to the effect that the licence stood renewed only upto 31-7-1972 and directed them to clear off their existing stock by 31-7-1972. In Writ Petition Nos. 4158 and 4159, the licenses were similarly renewed for the entire year but by subsequent order dated 2nd April, 1972 and 30th April, 1972 passed by the Excise Officer, licences were cancelled and thereafter renewed upto 31-7-1972. In Writ Petition Nos. 4155 and 4160, the licences were renewed for the entire year and have not been cancelled although the auction system has been introduced in the localities where these petitioners are vending their liquor. 49. In Writ Petition Nos. 4155 and 4160, the licences were renewed for the entire year and have not been cancelled although the auction system has been introduced in the localities where these petitioners are vending their liquor. 49. Counsel for the petitioners has contended: (1) that before the licences were cancelled or modified, an opportunity should have been given to them for showing cause against the proposed order; (2) That in any event the licences could not be cancelled without payment of compensation; (3) that they could not be cancelled at the behest of the State Government; (4) that the Excise authorities were estopped from cancelling the licences in question inasmuch as the petitioners had changed their position to their detriment by the payment of money; and (5) that assuming that Sec. 35 empowers Excise authorities to cancel the licences for "any other cause" the words "any other cause" have to be read as referring to grounds analogous to those contained in Sec. 34. Apart from these contentions, it has also been urged that even if Sec. 24-A as introduced by the Ordinance is valid, the auctions can be held for the grant of exclusive privilege to only one person in a particular locality, while in the present case more than one licences are proposed to be granted in the same locality. 50. It is settled law that before a licence can be cancelled, it would be incumbent upon the authority cancelling the licence to give an opportunity to the licence-holder to show cause against the proposed action, and in case that is not done, the order passed would be void as being opposed to the principles of natural justice. The orders in question having been passed without affording any hearing are as such void. The learned Advocate-General, however, contends that inasmuch as the licences have been cancelled on account of a change in the law it would have been an idle formality on the part of the Excise Officer to give an opportunity of hearing the licences because the result in any event would be the same. The argument advanced by the respondents presupposes that at the time when the licences were cancelled, the law had been changed. That, however, is not a fact, as the Ordinance was passed on the 30th June, 1972 while orders of cancellation had been made much earlier. The argument advanced by the respondents presupposes that at the time when the licences were cancelled, the law had been changed. That, however, is not a fact, as the Ordinance was passed on the 30th June, 1972 while orders of cancellation had been made much earlier. The further contention that on account of the fact that the State Government had taken a policy decision not to renew the licences for the whole year, and for that reason the licensing authorities were bound to give effect to that decision, also does not appeal to us. No provision in the Excise Act specifically empowers the State Government to direct the Excise Department to alter or change their orders, so that they may be in line with the decision taken by the State Government. Sec. 10 (1) of the Act vests the administrative control of the Excise department of a district in the Collector. Thus by the statute, the Collector is in over all charge and control of administration of the Excise department in each district. The State Government does not come into the picture at all. The learned Advocate-General, however, urged that the State Government exercises general control over the administration of the Excise department in each district, in view of the provisions of Sec. 10 (2) (b) of the Act. Sec. 10 (2) (b) applies only to cases where the licences are granted by a licensing board or some person other than a Collector. It is only in respect of those authorities that the State Government exercises supervisory control. Such is not the case here. That being so, it was incumbent upon the Excise Officer, who happens to be the Collector of the district, to afford an opportunity to the petitioners before passing the impugned orders cancelling or modifying the licences of the petitioners. From this, it follows that the Excise Officer should not have cancelled the licences at the behest of the State Government. So far as the argument regarding payment of compensation is concerned, that is based on Sec. 35 sub-clause (2) of the Act. This section does not postulate that compensation should be paid as soon as the order of cancellation is passed. In the very nature of things, compensation follows the event, which in this case is the cancellation of the licence. This section does not postulate that compensation should be paid as soon as the order of cancellation is passed. In the very nature of things, compensation follows the event, which in this case is the cancellation of the licence. If the order cancelling the licence of the petitioners is valid, they are entitled to compensation within a reasonable time as provided for under the Act. This contention, therefore fails. Further this point loses significance, as the Advocate-General has stated that the State proposes to pay compensation in due course. 51. So far as the argument based on the plea of estoppel is concerned, we do not find much merit in it. Sec. 35 powers the appropriate authority to cancel a licence for any cause other than the one specified in Sec. 34 of the Act. The statutory power conferred on the licensing authority to cancel the licence cannot be defeated on the ground that the petitioners had parted with money for obtaining the licences, and as such the authority was estoppel from cancelling the licence. It is settled law that there cannot be any estoppel against the exercise of statutory power. This contention, therefore, must he rejected. 52. We also do not find any substance in the contention that the grounds on which a licence could be cancelled under Sec. 35 of the Act must be analogous to the around as contained in Sec. 34. In other words, it is contended that the expression `any other cause' in Sec. 35 should be construed in ejusdem generis with the cause specified in Sec. 34. As has been held by the Supreme Court in Amar Chandra Chakrabarty v. The Collector of Excise, Government of Tripura, Civil Appeal No. 1063 of 1971 dated May 3, 1972 the ejusdem generis rule strives to reconcile the incompatibility between specific and general words. This doctrine applies when (i) the statute contains an enumeration of specific words; (ii) the subjects of the enumeration constitute a class or category; (iii) that class or category is not exhausted by the enumeration; (iv) the general term follows the enumeration, and (v) there is no indication of a different legislative intent. In the present case, it is not easy to construe the various clauses of Sec. 34 as constituting one category or class. In the present case, it is not easy to construe the various clauses of Sec. 34 as constituting one category or class. But that apart, the very language of the two sections and the objects intended respectively to be achieved by them also negative any intention of the legislature to attract the rule of ejusdem generis. 53. The last contention that the auctions could only be held for grant of exclusive privilege to one person in a locality may now be considered. It is no doubt true that the word `locality' has a larger meaning than the word `shop', and if Sec. 24-A as introduced contained only sub-clause (1) this argument would have been considerable force. But Sec. 24-A (3) as newly introduced contemplates granting of more licences than one in the same locality. In view of this provision, the word `locality' has to be given a restricted meaning, and, as such, it would be permissible to grant exclusive privilege to more than one person in the same locality. This contention has, therefore, to be rejected. 54. For the reasons stated above, this and the connected writ petitions are allowed. A mandamus shall issue directing the respondents not to give effect to Sec. 3 (1) and Sec. 3 (iv) of the Ordinance to the extent indicated in this judgment and not to take any action on the strength of these provisions or the rules framed by the Excise Commissioner on 5th July, 1972. The orders cancelling or modifying the licences of the petitioners in writ Petition No. 4149, 4150, 4158 and 4159 of 1972 are quashed inasmuch as the date fixed for holding the auction for the licences has expired, it is not necessary to quash the notification issued by the State Government fixing the various dates of auction. The respondents are also directed to renew in accordance with law the licences for the remaining part of the year 1972-73 in the case of those petitioners whose licences were renewed only for a part of the year. The petitioners are entitled to their costs. Copies of this judgment shall be placed in the connected writ petitions.