JUDGMENT - A.P. SHAH, J.:---The petitioner is a company engaged in manufacture of acetic acid, acetic anhydride and certain other chemicals. These chemicals are manufactured from rectified spirit. The State of Maharashtra has framed the Bombay Rectified Spirit (Transport in Bond) Rules, 1951 (for short "the Rules") for transport of such rectified spirit on terms and conditions specified therein. The petitioner company has been issued requisite licence for transport, possession and use of rectified spirit for manufacture of chemicals. The petitioner company has been allowed to purchase, transport, possess and use rectified spirit under bond and under excise supervision pursuant to R.S. II licence. 2.Rule 8 of the aforesaid Rules as it stood at the relevant time reads as follows: "8(1). On arrival of the consignment at the bounded laboratory, the officer-in-charge shall compare the particulars given in Part II with those in Part III of the pass, shall examine the seals and if he has no reason to believe that the consignment has been tempered with, he shall admit the consignment into the laboratory. (2) The officer-in-charge shall then draw samples from each case or drum and examine them to see that the particulars as regards the quantity and strength of spirit actually ascertained by him correspond with those given by the Distillery or Warehouse Officer in Part III of the pass accompanying the consignment. The consignment shall then be entered in the register maintained by him for the purpose. He shall then return Part III duly completed to the Distillery or Warehouse Officer (and retain Part II on his record). In case of any wastage of spirit found by the officer-in-charge on arrival of the consignment in excess of the sanctioned wastage of ½ per cent (per 160 kilometers) he shall report the fact to the Collector for obtaining the orders of the Director as regards the amount of duty to be levied on such excess wastage from the persons liable to pay the same." 3.It appears that in respect of two consignments of rectified spirit which were being transported to the petitioners factory at Khopoli, there was a loss of 660 and 410 bulk litres in transit. In view of the fact that wastage was of more than the permissible limit, the Excise Collector raised a demand of Rs. 23,782.50 and Rs. 23,723.00 respectively on both the consignments under Rule 8(2) of the Rules. In view of the fact that wastage was of more than the permissible limit, the Excise Collector raised a demand of Rs. 23,782.50 and Rs. 23,723.00 respectively on both the consignments under Rule 8(2) of the Rules. The petitioner had preferred an appeal to the Government against the aforesaid demand raised by the Collector which came to be dismissed. The orders of the Collector and the Government are impugned in this petition. 4.The main contention raised on behalf of the petitioner is that the State of Maharashtra has no powers under the Constitution of India to levy excise duty on rectified spirit under the provisions of the Bombay Prohibition Act, 1949 or the Rules framed under the said Act. It is argued by Mr. Kamdar, the learned Counsel appearing for the petitioner, that it has been categorically laid down in (Synthetics Chemicals Ltd v. State of U.P.)1, A.I.R. 1990 S.C. 1927 that in respect of industrial alcohol, the States have no power to impose excise duty as is sought to be done in the instant case. According to the learned Counsel, the rectified spirit being industrial alcohol as held in the case of Synthetic Chemicals Ltd. and being not fit for human consumption, the State Legislature has no power to make law with respect to it or to charge any excise duty. It was submitted by Mr. Kamdar that industrial alcohol is within the exclusive domain of Parliament by virtue of declaration made by it in section 2 of Industrial Development and Regulations Act, 1956 (hereinafter referred to as "IDR Act") and the addition of Item 26 in the Schedule to the Act. Further, it was submitted by Mr. Kamdar that Entry 8 or Entry 51 of List II of Seventh Schedule to the Constitution cannot support the levy of excise duty under Rule 8 of the said Rules in respect of industrial alcohol. Reliance is also placed on the decision of the Supreme Court in the case of (State of U.P. v. Modi Distillery)2, 1995(5) S.C.C. 753 . 5.In countering the submission, it is argued by the learned Advocate General on behalf of the State, that Synthetic Chemicals Ltd. dealt merely with vend fee and that is not the case here. Rule 8 of the Rules is by way of regulatory measures in order to see that rectified spirit is not diverted for the use of potable alcohol. 5.In countering the submission, it is argued by the learned Advocate General on behalf of the State, that Synthetic Chemicals Ltd. dealt merely with vend fee and that is not the case here. Rule 8 of the Rules is by way of regulatory measures in order to see that rectified spirit is not diverted for the use of potable alcohol. Such a regulatory measure is perfectly valid as seen from the decision in the case of (Southern Pharmaceuticals Chemicals v. State of Kerala)3, A.I.R. 1981 S.C. 1863. This decision was noted with approval in the case of Synthetic chemicals Ltd. (supra). The learned A.G. also relied upon the decisions of the Supreme Court in the case of (Gujchem distillers India Ltd. v. State of Gujarat)4, A.I.R. 1992 S.C. 1256, (Vam Organic Chemicals Ltd. v. State of U.P.)5, 1997(2) S.C. 7151 and (Bihar Distillery v. Union of India)6, A.I.R. 1997 S.C. 1208. Relying upon the aforesaid decisions, the learned A.G. submitted that the State Government has power to make necessary regulations to ensure that the rectified spirit is not diverted or misused for potable purposes. According to the learned A.G., this power has also been recognised by the Supreme Court in the case of Synthetic Chemicals (supra) relied upon by the petitioner. 6.Before we advert to the various decisions cited at the Bar, it would be useful to refer to the provisions of the Bombay Prohibition Act. The scheme of the Act, as reflected in the Preamble, is that it is an Act to consolidate the law relating to the promotion and enforcement of and carrying into effect the policy of the prohibition and to consolidate the Abkari law in the State of Bombay for the said purpose and provide for certain other purposes appearing in the Act. It is not necessary to set out all the provisions of the Act in question, but reference may be made to the derintions or expressions, de-natured, intoaxicant, liquor, rectification and spirit, defined in section 2(10), (22), (24), (37) and (43). The expression liquor as defined in section 2(24) includes :-- (a) spirits, denatured spirits, wine, beer, toddy and all liquids consisting of or containing alcohol, and (b) any other intoxicating substance which the State Government may, by notification in the Official Gazette, declare to be liquor for the purposes of this Act. The expression liquor as defined in section 2(24) includes :-- (a) spirits, denatured spirits, wine, beer, toddy and all liquids consisting of or containing alcohol, and (b) any other intoxicating substance which the State Government may, by notification in the Official Gazette, declare to be liquor for the purposes of this Act. Under section 2(22) intoxicant means "any liquor, intoxicating drug, opium or any other substance, which the (State) Government may, by notification in the Official Gazette, declare to be an Intoxicant'. Under section 2(43) spirit has been defined to mean any liquor containing alcohol and obtained by distillation (whether it is denatured or not). The expression rectification defined under section 2(37) includes every process whereby liquor is purified on refined and the expression denatured under section 2(10) means subjected to a process prescribed for the purposes of rendering unfit for human consumption. Thus spirit is included in the definition of "liquor" and liquor is included in the definition of intoxicant. Therefore, any liquid consisting of or containing alcohol including rectified spirit, denatured spirit, is included in the definition of intoxicant. 7.Section 11 of the Prohibition Act provides that all activities such as manufacture, possession, import, export, transport, use, sale in respect of any intoxicant may be permitted by the State Government in the manner and to the extent permitted under the provisions of the Prohibition Act or any rules, regulations or orders made or in accordance with the terms and conditions of the licence, permit, pass of authorisation granted thereunder. Under section 27 of the Act, no intoxicant can be removed from any distillery, warehouse or other place of storage established or licensed under the Prohibition Act except under a pass and unless the duty, if any, imposed under the provisions of the Act has been paid or a bond has been executed for the payment thereof. 8.Section 105 of the Prohibition Act confers power on the State Government to impose excise duty on certain commodities mentioned therein viz (a) any alcoholic liquor for human consumption, (b) any intoxicating drug or hemp, (c) opium, and (d) any other excisable article. Section 106 of the Act provides for the manner of levying excise duty. 8.Section 105 of the Prohibition Act confers power on the State Government to impose excise duty on certain commodities mentioned therein viz (a) any alcoholic liquor for human consumption, (b) any intoxicating drug or hemp, (c) opium, and (d) any other excisable article. Section 106 of the Act provides for the manner of levying excise duty. Under section 148 provision is made, inter alia, for regulating various activities in respect of any intoxicant and under section 148(2)(h)(i) and (h)(ii) provisions are made for, inter alia, fixation of price, quantity or strength of any intoxicant which will be supplied or for denaturation or spirit. 9.The State Government has framed Bombay Rectified Spirit Rules, 1951, providing for licence in respect of possession and use of rectified spirit either for the industrial purpose or educational and research purposes, by grant of a licence in form F.R.S. 11, which such licence the petitioner was holding during the relevant period. Under Rule 3(1)(a) of the said Rules rectified spirit includes absolute alcohol. As per Rules 24 and 30 of the said Rules, the provisions of the Bombay Rectified Spirt (Transport-in-Bond) Rules, 1951 and the Bombay Foreign Liquor and Rectified Spirit (Transport) Fees Rules, 1954, have to be followed. Under Clause (h) of Rule 2 of the Bombay Rectified Spirit (Transport-in-Bond) Rules, transport-in-bond means transport of rectified spirit from the Government distillery or warehouse or any licensed distillery or warehouse to a bonded laboratory without payment of duty. We have already reproduced Rule 8 of the Bombay Rectified Spirit (Transport-in-Bond) Rules, 1951, which is impugned in the present petition. The State has made provision for use or rectified spirit for non-potable purposes by allowing its use under a bond, i.e. under excise supervision but without recovery of excise duty on rectified spirit or denatured spirit. However, Rule 8 referred to above authorises the State Government to recover excise duty in case the loss in transit is more than the permissible limit. 10.In Synthetics and Chemicals Ltd. v. State of U.P. (supra), the Supreme Court held that the expression "Intoxicating liquors", in Entry 8 of List 11 means and refers to only potable liquors and that the potability is determined by the standards specified by I.S.I. (Indian Standard Institute), i.e., alcohol content not exceeding 43% v/v. Entry 51 of List II was also similarly held limited to potable liquors. The power of the States to legislate in respect of liquors was held to be restricted to potable liquors alone. The Court has held further that "rectified spirit" (which expression was used interchangeably with the expression ethyl alcohol and industrial alcohol) which is of 95% and above purity cannot be treated as a potable liquor and hence lies within the exclusive control of the Union by virtue of I.D.R. Act. After 1956, the Court held, the power of the States is confined to (1) making a law prohibiting potable liquor and to regulate it, (2) laying down regulations to ensure that non potable alcohol is not diverted and misused for potable purposes, (3) charging excise duty on potable alcohol and (4) to charge fees for rendering any service.... The Following observations are found in para 85 at page 1956 of that case. "85. The position with regard to the control of alcohol industry has undergone material and significant change after the amendment of 1956 to the I.D.R. Act. After the amendment, the State is left with only the following powers to legislate in respect of alcohol : a) it may pass any legislation in the nature of prohibition of potable liquor referable to entry 6 of List II and regulating powers; b) it may lay down regulations to ensure that non-potable alcohol is not diverted and misused as a substitute for potable alcohol; c) the State may charge excise duty on potable alcohol and sales tax under Entry 52 of List II. However, sales tax cannot be charged on industrial alcohol in the present case, because under the Ethyl Alcohol (Price Control) Orders, sales tax cannot be charged by the state on industrial alcohol; (d) However, in case State is rendering any service, as distinct from its claim of so-called grant of privilege, it may charge fees based on quid pro quo. See in this connection, the observations of (India Mica a case)7, A.I.R. 1971 S.C. 1182." 11.In regard to the police power of the State Government for regulation, the Supreme Court in para 60 and 62 at page 1948 has observed as under : "60. See in this connection, the observations of (India Mica a case)7, A.I.R. 1971 S.C. 1182." 11.In regard to the police power of the State Government for regulation, the Supreme Court in para 60 and 62 at page 1948 has observed as under : "60. Learned Advocate General for the States of Gujarat and Kerala have also made their submissions and referred to several decisions and the concept of police power, and contended that imposition of a fee would be the most effective method of regulating intoxicating liquor other than alcohol. According to the Advocate General of Kerala, that would be justified as the reasonable measure in regard to intoxicating liquor. According to him, it has been accepted by courts all along that the police power of the State enables regulations to be made regarding manufacture, transport, possession and sale of intoxicating liquor. Such police power could be exercised as to impose reasonable restrictions as to effectuate the power. He referred to the observations of this Court in (Cooverjee B. Bharucha v. The Excise Commr. and the Chief Commr, Ajmer)8, 1954 S.C.R. 878 which quoted the passage from (Crowley v. Christensen)9, 1890(34) Lawyers Edn. 620. Reference was also made to Har Shankar's case, A.I.R. 1975 S.C. 1121 (supra) where this Court quoted Vol. 38 of the American Jurisprudence where it was stated that the higher the fee is imposed for a licence, better is the regulation. Reliance was also placed on P.N. Kaushal's case, A.I.R. 1978 S.C. 1457 (supra). It was contended that it has been accepted by this Court that the police power is exercisable for regulation of all activity of a legislature within the permissible field or impost as regulatory measure. It may be valid though it may neither be fee nor a tax in the limited sense of the term. See the observations of this Court in (Southern Pharmaceuticals Chemicals Trichur v. State of Kerala), 1982(1) S.C.R. 519 at p. 537 Regarding regulatory measures in connection with medicinal preparations containing alcohol it was observed by this Court that the impugned provisions had to be enacted to ensure that the rectified spirit is not misused under the pretext of being used for toilet and medicinal preparations containing alcohol. Such a regulation is a necessary concomitant of the police power of the State to regulate such trade or business which is inherently dangerous to public health. Such a regulation is a necessary concomitant of the police power of the State to regulate such trade or business which is inherently dangerous to public health. The American doctrine of police power is not perhaps applicable as such in India, but powers of the sovereignty to regulate as part of the powers of the competent legislature to effectuate its aim are there. 62. We are of the opinion that we need not detain ourselves on the question whether the States have police power or not. We must accept the position that the States have the power to regulate the use of alcohol and that power must include power to make provisions to prevent and/or check industrial alcohol often being used as intoxicating or drinkable alcohol. The question is whether in the garb of regulations a legislation which is in pith and substance, as we look upon the instant legislation, fee or levy which has no connection with the cost or expenses administering the regulation, can be imposed purely as regulatory measure. Judged by the pith and substance of the impugned legislation, we are definitely of the opinion that these levies cannot be treated as part of regulatory measures. In this view of the matter, we do not detain ourselves with examining the numerous American decisions to which our attention was drawn by learned Counsel very elaborately and thoroughly." 12.In Southern Pharmaceuticals Chemicals v. State of Kerala, A.I.R. 1981 S.C. 1863, the Supreme Court had considered the constitutional validity of certain provisions of Kerala Abkari (Amendment) Act, 1967 and Kerala Rectified Spirit Rules, 1972. In that, case, the appellants by virtue of licence in Form 25 granted under the Drugs and Cosmetics Act, 1940 and a licence in Form L-1 granted under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 were entitled to manufacture the drugs specified therein. In that, case, the appellants by virtue of licence in Form 25 granted under the Drugs and Cosmetics Act, 1940 and a licence in Form L-1 granted under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 were entitled to manufacture the drugs specified therein. They had filed a writ petition is the High Court complaining that they were entitled to the supply of alcohol free of duty for the manufacture of their medicinal and toilet preparations under Rule 21 of the Medicinal and Toilet Preparations (Excise Duties) Rules, 1959 and Rule 8 of Kerala Rectified Spirit Rules, 1972 and challenged the validity of the impugned provisions mainly on the ground that the State Legislature has no power to enact the law relating to medicinal and toilet preparations as the topic of legislation is within the exclusive domain of Parliament under Entry 84 List I of the Seventh Schedule to the Constitution. There were certain other challenges raised with which we are not concerned in the present case. Rule 13 of the Kerala Rectified Spirit Rules, which is somewhat similar to Rule 8 of the Bombay Rectified Spirit Rules, 1951 which is under challenge in the present petition, read as follows : "13(1) If the rectified spirit imported or purchased under these rules is used for the manufacture of medicinal and toilet preparations on which duty of excise is leviable under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 (Central Act 16 of 1955), no duty shall be collected under the Abkari Act 1 of 1077 on so much quantity of alcohol, as is present in the finished product. (2) The assessment of duty under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 (Central Act 16 of 1955) being applicable only to the quantity of spirit existing in the finished product, all spirit wasted during the course of manufacture of any medicinal or toilet preparation shall be assessable to duty under the Abkari Act 1 of 1077." 13.Repelling the challenge to the validity of the relevant sections and the rules, the Supreme Court has held that the impugned provisions are relatable to the State's power to make a law on the topics of legislature covered by Entries 1 and 51 List II of the Seventh Schedule of the Constitution. The Supreme Court in para 13 and 14 at page 1869 of that case observed as under : "13. The Supreme Court in para 13 and 14 at page 1869 of that case observed as under : "13. In determining whether an enactment is a legislation with respect to a given power, what is relevant is not the consequences of the enactment on the subject matter or whether it affects it, but whether in its pith and substance it is a law upon the subject matter in question. The Central and the State Legislations operate on two different and distinct fields. The Central Rules, to some extent, trench upon the field reserved to the State Legislature, but that is merely incidental to the main purpose, that is, to levy duties of excise on medicinal and toilet preparations containing alcohol. Similarly, some of the impugned provisions may be almost similar to some of the provisions of the Central Rules, but that does not imply that the State Legislature had no competence to enact the provisions. 14. It is sufficient to say upon the first ground that the impugned legislation is confined to intoxicating liquor, that is, to ensure proper utilisation of rectified spirit in the manufacture of medicinal and toilet preparations and, therefore, within the powers granted to the State Legislature under Entry 8 List II. It further seeks to regulate the manuracture of bona fide medicinal preparations and prevent misuse of rectified spirit in the manufacture of spurious medicinal and toilet preparations containing alcohol capable of being used as ordinary alcoholic beverages. It was suggested that the provisions are identical with the provisions contained in the Central Rules and, in particular, to Rule 45(1), therefore, the legislation is in the occupied field. The answer is that the enumeration of intoxicating liquor in Entry 8 List II confers exclusive power to the State to legislate in respect of medicinal and toilet preparations containing alcohol." 14.In so far as the validity of the Rule 13 was concerned, the Supreme Court rejected the argument that the said Rule cannot be supported in terms of the charging section under the Kerala Abkari Act. It was noted that no duty is chargeable on alcohol actually used in the manufacture of medicinal and toilet preparations. It was noted that no duty is chargeable on alcohol actually used in the manufacture of medicinal and toilet preparations. It was further noted that the government having realised that some margin for wastage should be allowed and therefore inserted the proviso to Rule 13(2) which provides that the government may, in consultation with the Drugs Controller and the Chemical Examiner, by notification in the Gazette, permit such allowance as they think fit for such wastage occurring during the manufacture. Beyond the permissible limit, the State has the right to levy a duty on excess wastage of alcohol i.e. on alcohol not accounted for. As seen earlier, the decision in Southern Chemicals case was cited with approval in the 7 Judges Judgment in Synthetics Chemicals case. 15.In a Division Bench judgment in M/s. Gujchem Distillers India Ltd. v. State of Gujarat (supra), the ratio of Southern Chemicals was followed by the Supreme Court while upholding the validity of section 58-A of the Bombay Prohibition Act providing for supervisory charges of staff appointed by Director of Prohibition Excise to be paid by manufacturer of intoxicant, denatured spirit preparation. It was observed in paragraph 9 of the judgment that: "In countering the submissions. It is argued on behalf of the State that Synthetics Chemicals Ltd., A.I.R. 1990 S.C. 1927 (supra) dealt merely with the vend fees. That is not the case here. The maintenance of the staff contemplated under section 58(A) or the Act is primarily for the purpose of ensuring that while dealing with industrial alcohol, no attempt shall be made to divert non-potable alcohol. Therefore, by regulatory measures, the State sees to it that industrial alcohol is not diverted for the use as potable alcohol. Such regulatory measure is perfectly valid as seen from Southern Pharmaceuticals Chemicals v. State of Kerala, A.I.R. 1981 S.C. 1863. Therefore, by regulatory measures, the State sees to it that industrial alcohol is not diverted for the use as potable alcohol. Such regulatory measure is perfectly valid as seen from Southern Pharmaceuticals Chemicals v. State of Kerala, A.I.R. 1981 S.C. 1863. This decision was noted with approval in Synthetics and Chemicals Ltd., A.I.R. 1990 S.C. 1927 (supra) However, such a power was sustained though not on police power but as a regulatory measure." 16.In Vam Organic Chemicals Ltd. v. State of U.P, 1997(2) S.C.C. 715 , the Supreme Court approved the view taken by the Allahabad High Court that the distinction between ethyl alcohol/rectified spirit as such denatured spirit was not in issue nor was it considered in the case of Synthetics Chemicals therefore, it cannot be said that any every rectified spirit/ethyl alcohol is an industrial alcohol. In para 7 of the judgment, the Supreme Court has observed. "This Court dealt with the question of legislative competence of the State to impose tax or levy on industrial alcohol in the case of Synthetics Chemicals v. State of U.P., 1990(1) S.C.C. 109 ruled in the negative. The High Court took the view that the distinction between ethyl alcohol/rectified spirit as such denatured spirit was not in issue, nor was it considered in that judgment held that this Court cannot be said to have ruled that every rectified spirit/ethyl alcohol is industrial alcohol. The High Court reiterated that once denatured, the alcohol becomes exclusively industrial alcohol since it cannot be used for obtaining country liquor or for manufacturing IMFLs and said that it is to ensure that ethyl alcohol meant for industrial use is not misused or diverted for human consumption that impugned regulation is provided for by the State further that the regulation being part of general regulation of the trade in alcohol in the interest of public health is relatable to Entries 6 8 of List II." 17.At a later stage, the learned Chief Justice of the Supreme Court speaking for the Bench, observed: "A careful reading of that judgment (Synthetics) shows that the Court was fully aware of the fact that rectified spirit was the ingredient for intoxicating liquor or alcoholic liquor for human consumption although rectified spirit/ethyl alcohol as well as denatured spirit are referred to as industrial alcohol in that judgment. This Court did not hold that the State will have no power whatever in relation to industrial alcohol." This Court observed further: "It is be noticed that the States under Entries 8 and 51 of List II read with Entry 84 of List I have exclusive privilege to legislate on intoxicating liquor or alcoholic liquor for human consumption. Hence, so long as any alcoholic preparation can be diverted to human consumption, the States shall have the power to legislate as also to impose taxes, etc." (emphasis supplied) 18.In view of the above observations of the Supreme Court, in the case of Vam Organic Chemical Limited, we have no hesitation in rejecting the argument of Mr. Kamdar that rectified spirit being industrial alcohol and being not fit for human consumption, the State Legislature has no power to make law with respect to it. We may hasten to add that the view expressed in Vam Organic Chemicals case has been reiterated in a recent judgment of the Supreme Court in Bihar Distillery v. Union of India, A.I.R. 1997 S.C. 1208. The following observations in para 24 of the judgment are apposite: "We are of the respectful and considered opinion that the decision in Synthetics, A.I.R. 1990 S.C. 1927 did not deal with the aspects which are arising for consideration herein and that it was mainly concerned with industrial alcohol, i.e., denatured rectified spirit. While holding that rectified spirit is industrial alcohol, it recognised at the same time that it can be utilised for obtaining country liquor (by diluting it) or for manufacturing I.M.F.Ls. when the decision says that rectified spirit with 95% alcohol content v/v is "toxic" it did not mean that it cannot be utilised for potable purposes either by diluting it or by blending it with other items. The undeniable fact is that rectified spirit is both industrial alcohol as well as a liquor which can be converted into country liquor just by adding water. It is also the basic substance from which I.M.F.Ls. are made. The undeniable fact is that rectified spirit is both industrial alcohol as well as a liquor which can be converted into country liquor just by adding water. It is also the basic substance from which I.M.F.Ls. are made. (Denatured rectified spirit, of course, is wholly and exclusively industrial alcohol.) This basic factual premise, which is not and cannot be denied by any one before us, raises certain aspects for consideration herein which were not raised or considered in Synthetics." (emphasis supplied) 19.In Bihar Distillery's case, the Supreme Court had demarcated the respective spheres or Parliamentary and State Legislation in the matter of alcoholic liquors in the following terms. "(1) So far as industries engaged in manufacturing rectified spirit meant exclusively for supply to industries (industries other than those engaged in obtaining or manufacturer of potable liquors), whether after denaturing it or without denaturing it, are concerned, they shall be under the total and exclusive control of the Union and be governed by the I.D.R. Act and the rules and regulations made thereunder. In other words, where the entire rectified spirit is supplied for such industrial purposes, or to the extent it is so supplied, as the case may be, the levy of excise duties and all other control including establishment of distillery shall be that of the Union. The power of the States in the case of such an industry is only to see and ensure that rectified spirit, whether in the course of its manufacture or after its manufacture, it is not diverted or misused for potable purposes. They can make necessary regulations requiring the industry to submit periodical statements of raw material and the finished product (rectified spirit) and are entitled to verify their correctness. They can make necessary regulations requiring the industry to submit periodical statements of raw material and the finished product (rectified spirit) and are entitled to verify their correctness. For this purpose, the States will also be entitled to post their staff in the distilleries and levy reasonable regulatory fees to defray the cost of such staff, as held by this Curt in (Shri Bileshwar Khad Udyog Khedut Sahakari Mandali Ltd. v. State of Gujarat)10, 1992(1) S.C.R. 319 and Gujchem Distillers India Ltd. v. State of Gujarat, 1992(1) S.C.R. 675 (2) So far as industries engaged in the manufacture of rectified spirit exclusively for the purpose of obtaining or manufacturing potable liquors or supplying the same to the State Government or its nominees for the said purpose are concerned, they shall be under the total and exclusive control of the States in all respects and at all stages including the establishment of the distillery. In other words, where the entire rectified spirit produced is supplied for potable purposes or to the extent it is so supplied, as the case may be the levy of excise duties and all other control shall be that of the States. According to the State Governments, most of the distilleries fall under this category. (3) So far as industries engaged in the manufacture of rectified spirit, both for the purpose of (a) supplying it to industries (other than industries engaged in obtaining or manufacturing potable liquors/intoxicating liquors) and (b) for obtaining or manufacturing or supplying it to Governments/persons for obtaining or manufacturing potable liquors are concerned, the following is the position : the power to permit the establishment and regulation of the functioning of the distillery is concerned, it shall be the exclusive domain of the Union. But so far as the levy of excise duties is concerned, the duties on rectified spirit removed/cleared for supply to industries (other than industries engaged in obtaining or manufacturing potable liquors), shall be levied by the Union while the duties of excise on rectified spirit cleared/removed for the purposes of obtaining or manufacturing potable liquors shall be levied by the concerned State Government. The disposal, i.e. clearance and removal of rectified spirit in the case of such an industry shall be under the joint control of the Union and the concerned State to ensure evasion of excise duties on rectified spirit removed/cleared from the distillery. The disposal, i.e. clearance and removal of rectified spirit in the case of such an industry shall be under the joint control of the Union and the concerned State to ensure evasion of excise duties on rectified spirit removed/cleared from the distillery. It is obvious that in respect of these industries too, the power of the States to take necessary steps to ensure against the misuse or diversion of rectified spirit meant for industrial purposes (supply to industries other than those engaged in obtaining or manufacturing potable liquors) to potable purposes, both during and after the manufacture of rectified spirit, continues unaffected. Any rectified spirit supplied, diverted or utilised for potable purposes, i.e. for obtaining or manufacturing potable liquors shall be supplied to and/or utilised, as the case may be, in accordance with the concerned State Excise enactment and the rules and regulations made thereunder. If the State is so advised, it is equally competent to prohibit the use, diversion or supply of rectified spirit for potable purposes. (4) It is advisable-nay, necessary -that the Union Government makes necessary rules/regulations under the I.D.R. Act directing that no rectified spirit shall be supplied to industries except after denaturing it save those few industries (other than those industries which are engaged in obtaining or manufacturing potable liquors) where denatured spirit cannot be used for manufacturing purposes." 20.In the light of the aforesaid a decisions, we are unable to hold that the State has no power to legislate on rectified spirit. It is true that on rectified spirit which is cleared for industrial user, no duty can be levied by the State Government. However, till it reaches its destination and converted into denatured spirit or put for industrial user, the State has competence to provide for regulatory measures in order to prevent misuse of the rectified spirit. Rule 8 has been enacted to ensure that rectified spirit is not diverted for obtaining country liquor or other form of liquor. It is not intended by the legislature to levy excise duty on rectified spirit used for industrial user. In our opinion, Rule 8 has a regulatory character to avoid misuse of rectified spirit and has been enacted to ensure proper utilisation of rectified spirit and therefore it falls within the power vested in the State Legislature under Entry 8, List III. In our opinion, Rule 8 has a regulatory character to avoid misuse of rectified spirit and has been enacted to ensure proper utilisation of rectified spirit and therefore it falls within the power vested in the State Legislature under Entry 8, List III. By Rule 8, the minimum percentage on wastage is fixed by the State Government and the reasonableness thereof is not challenged by the petitioner's Counsel. If there is any loss of rectified spirit during transit beyond the permissible limit, Rule 8 is attracted which prescribes for levy of excise duty as provided, in notification issued under sections 105 and 106 of the Bombay Prohibition Act. 21.It is pertinent to note that according to the State Government, bulk of the rectified spirit produced in the State is meant for and is utilised for obtaining or manufacturing potable liquors. Merely because the use of alcohol for non potable purposes as the industrial purposes has increased, it cannot be said that the commodity has become a harmless substance losing its inherently dangerous character. In the affidavit filed on behalf of the State Government, it has been pointed out that the State Excise Officers have seized many tankers which were carrying rectified spirit under fictitious documents and details of recent seizures have been annexed to the affidavit at Exhibit D. The decision of the Allahabad High Court which was cited with approval in the cases of Vam Organic Chemicals Ltd. and Bihar Distillery, it has been pointed out that Ethyl alcohol, which is also called rectified spirit, the alcohol content of which is 95% v/v, can be used both as an industrial alcohol and also for obtaining country liquor and other liquors. Even without denaturing it, rectified spirit can be used for industrial purposes. But it is not correct to say that Ethyl alcohol/rectified spirit can be used only for industrial purposes and for no other purpose. As pointed out by the State Government, just by mixing water with it, it becomes country liquor and is sold and taxed as such by the State. Further it can also be used as a raw material for producing Indian made foreign liquors (IMFLs.), wines, rum, etc. As pointed out by the State Government, just by mixing water with it, it becomes country liquor and is sold and taxed as such by the State. Further it can also be used as a raw material for producing Indian made foreign liquors (IMFLs.), wines, rum, etc. It was also held by the Allahabad High Court that by virtue of enactment of the I.D.R. Act (after insertion or Item 26), the State is not totally denuded of any power to make a law with respect to rectified spirit or for that matter, industrial alcohol. After noticing Entry 33 of List III in the Seventh Schedule, Section 18-6 read with the other provisions of I.D.R. Act and the Rule (made by the State Excise authority) concerned therein, the High Court has observed: "All this discussion is for the purpose of establishing that by virtue of the I.D.R. Act, the State Legislatures are not completely and totally deprived of the power conferred upon them by Entry 24 of List II, but that the deprivations is only partial, viz., to the extent indicated in the I.D.R. Act. This discussion is equally relevant for the purpose of determining whether the field indicated by Entry 33 of List III has been totally occupied by Parliament or whether any field is still left unoccupied for the State Legislature to make a law. Entry 33, it may be reiterated, empowers both Parliament and State Legislatures to make a law with respect to trade and commerce in products of any industry included in the first schedule to the IDR Act. The said entry further empowers both Parliament and State Legislatures to make a law with respect to production, supply and distribution of the products of such industry. Rectified spirit is, without a doubt, a product of an industry specified in the First Schedule to the IDR Act. If so, both the Parliament and State Legislatures can make a law with respect to the production, supply and distribution of products or such industry. Rectified spirit is, without a doubt, a product of an industry specified in the First Schedule to the IDR Act. If so, both the Parliament and State Legislatures can make a law with respect to the production, supply and distribution of products or such industry. By virtue of section 18-G of the I.D.R. Act, the State Legislature cannot, of course, make a law regulating the supply and distribution of and /or trade and commerce in such products for securing the equitable distribution and availability of fair prices of such product; such an order can be made only by the Central Government under that section, but in other respects, the field is open for the State Legislatures." 22.We have already referred to the decision of the Supreme Court in Southern Pharmaceuticals case wherein the Supreme Court after considering the provisions of the Kerala Rectified Spirit Rules, 1972 and M.T.P. Act found the provisions of the Kerala Rectified Spirit Rules, 1972 valid, which provide for levy of excise duty on excess loss of rectified spirit and ruled, "beyond the permissible limit, the State has the power to levy a duty on excess wastage of alcohol, i.e. on alcohol not accounted for." Thus the decision in Southern Pharmaceuticals case which has been followed in Synthetics judgment clearly shows that the State has the power to levy excise duty on rectified spirit. In our opinion, Rule 8 is a regulatory measure and otherwise also a reasonable restriction to avoid misuse of rectified spirit. Under the circumstances, the challenge raised to the legislative competence of the State Government in enacting Rule 8 is liable to be rejected. In our opinion, the decision of the Supreme Court in State of U.P. v. Modi Distillery (supra) relied upon by Mr. Kamdar is not of much assistance to the petitioner. In that case, the High Court has struck down 3 demands. Group B related to demands made for excise duty on wastage, during transportation in containers of high strength spirit of 80 to 85% from distillery to warehouse. Group C related to the demand of excise duty on obstruction. Group D related to excise duty sought to be levied on pipeline wastage. The Supreme Court while affirming the decision of the High Court held that the power of the State Government to levy excise duty cannot be expanded with reference to its power to regulate manufacture. Group C related to the demand of excise duty on obstruction. Group D related to excise duty sought to be levied on pipeline wastage. The Supreme Court while affirming the decision of the High Court held that the power of the State Government to levy excise duty cannot be expanded with reference to its power to regulate manufacture. The Supreme Court however did not express any opinion in regard to the power of the State to regulate the manufacture of alcoholic liquors for human consumption. 24.In view of the foregoing discussion, we do not find any merit in the challenge raised by the petitioner. The writ petition is therefore dismissed. No order as to costs. Interim relief stands vacated. Petition dismissed. *****