Liquor trade is not a commercial activity, rules Supreme Court

NEW DELHI: In a landmark ruling, the Supreme Court has held that liquor trade is not a commercial  activity and is, therefore, not entitled to the protection of article 19(1)(g) of the Constitution.

A Bench comprising Justice HK Sema and Justice VS Sirpurkar, while striking down Rule 17 of the Jammu and Kashmir Rules,
1946 as unconstitutional, held that any licensing, regulation or imposition in respect of liquor trade cannot be arbitrary and discriminatory.

The Excise Commissioner had made a demand for payment of salaries to excise personnel posted at appellant's distillery and a demand notice was issued on October 6, 1988.

The rules are framed under the Jammu and Kashmir Excise Act, 1901.

Appellant Gupta Modern Breweries had challenged the validity of the Rule 17 as well as the demand made in the notice.

A Single Judge Bench as well as a Division Bench of the Jammu and Kashmir High Court dismissed the petitions of the appellant.

The apex court, in its April 19 judgement, ruled, "Rule 17 has no statutory backing  and it is in excess of the Act. It is manifestly unjust and arbitrary. Provision of Rule 17 is clearly a tax  and not a fee. Imposition of tax  or fee  on the citizen  for the services  that the state  renders  to itself  and not the tax payers is clearly  impermissible, arbitrary and unjustifiable."

The apex court, while allowing the appeal and setting aside the judgement of the High Court, directed the respondents  to refund the payment made in interregnum with interest calculated at the statutory rate.

The court quoted with approval, its earlier judgement in Khoday Distilleries Ltd. that the state can adopt any mode of selling licenses for  trade or business with a view to maximise its revenue so long as the method adopted is not discriminatory.