Constitution Pf India, 1950 : Article 14.

Excise Rules compelling manufacturers to sell liquor to specified Government company only-Government company facing some problems in discharge of its duties-Held : does not render the rules providing for licence arbitrary or violative of Article 14-Export of liquor outside India or to other States-Loss of rebate in excise duty-No violation of article 14-Rules apply to all persons similarly situated-No discrimination in the traditional sense.

Excise Laws :

Karnataka Excise (Sale of Indian and Foreign Liquors) Rules, 1968: Rule 3 (11)--Distributor Licence-To be issued only to a State owned company-Creation of monopoly-Does not take the licence outside the ambit of rule-making authority. Karnataka Excise Act, 1965 : Section 71-Amended Rules-Within the scope of delegated authority. Andhra Pradesh (Foreign Liquor and Indian Liquor) Rules, 1970: Rules 4(2) and 11(2)--Fee for approval of labels on bottles of liquor-Enhancement of-From Rs. 100 to Rs. 25,000-Approval to be obtained every yew-Fee constitutes only small percentage of total turnover,-Imposition cannot be considered exorbitant or wholly arbitrary.

A distributor licence was prescribed for the first time under Rule 3(11) of the amended Karnataka Excise (Sale of Indian and Foreign Liquors) Rules, 1968. The licensee was required to establish not less than one depot in each district within the State or within that part of the State where it proposed to distribute or sell such liquor. The rule provided that a distributor licence should be issued only to such company owned or controlled by the State Government as the State Government might specify. The licensees were required to sell the liquor only to a holder of a distributor licence. The holder of such a licence could only be a company owned or controlled by the State Government. The State Government had specified Mysore Sales International Ltd. (MSIL) as a company so specified and had granted it to the distributor licence. In the state of Andhra Pradesh, fee for the approval of any one variety of labels to be affixed on bottles of liquor was either enhanced from Rs. 100 to Rs. 25000 or a fee of Rs. 25000 for approval of lables was introduced for the first time under Rules 4(2) and 11(2) of the Andhra Pradesh (Foreign Liquor and Indian Liquor) Rules, 1970. The approval had to be obtained every year. The appellants challenged the validity of the Karnataka rules prescribing a distributor licence and also enhancement of fees for the approval oflabels under the Andhra Pradesh Rules before the High Courts which repelled the challenge. Aggrieved by the High Courts' judgments the appellants preferred the present appeals. On behalf of the appellants it was contended that by compelling them to sell liquor only to MSIL their fundamental rights under Article 19(1) (g) of the constitution were violated; that the Rules were ultra vires because they went beyond the scope of the delegated authority; that there was no legislative policy prescribed by the Karnataka;a Excise Act, 1965 for a distributor licence; that the Rules were arbitrary, unreasonable and caused undue hardship and hence violative of Article 14 of the Constitution; that the roles were manifestly arbitrary because their purpose was to stop evasion of excise duty; that MSIL was not competent to discharge its obligations and did not have the necessary infrastructure; that there was hardship relating to excise duty; and that the enhancement of the fee for approval of labels from Rs. 100 to Rs. 25,000 had been sudden; exorbitant, highly arbitrary and hence violative of Article 14 of the Constitution. On behalf of the respondents it was contended that the Government company was bound to purchase the liquor if there was demand from the wholesalers; that the Government company was expected to act bonafide; and that MSIL had the necessary infrastructure.