Facts of the Case

The petitioners, including M/s Kedia Trading and several other traders and manufacturers, challenged the constitutional validity of the Chhattisgarh Molasses Control and Regulation Rules, 2022, framed under Sections 8 and 62 of the Chhattisgarh Excise Act, 1915.

The petitioners were engaged in lawful trading of molasses for non-intoxicant purposes such as manufacturing cattle feed, gudakhu, agricultural products, industrial products and other commercial uses. They neither manufactured liquor nor operated distilleries.

Under the Rules of 2022, the State Government required all molasses traders to obtain excise licences, pay licence fees and molasses duty, and subjected them to inspections, transportation permits and regulatory control under the Excise Department.

The petitioners contended that molasses, in its natural form, is merely a by-product of sugar manufacture and is neither liquor nor an intoxicant. Since they dealt exclusively in non-intoxicant uses of molasses, the State lacked legislative competence to regulate their trade under the Excise Act.

Accordingly, they filed writ petitions seeking declaration that the Chhattisgarh Molasses Control and Regulation Rules, 2022 were unconstitutional and ultra vires.

Issues Involved

  1. Whether the Chhattisgarh Molasses Control and Regulation Rules, 2022 are beyond the scope of the Chhattisgarh Excise Act, 1915.
  2. Whether molasses in its raw form constitutes an "intoxicant", "liquor" or "excisable article" under the Excise Act.
  3. Whether the State Government possesses legislative competence under Entries 8 and 51 of List II of the Seventh Schedule to regulate ordinary trading of molasses used for non-intoxicant purposes.
  4. Whether compelling traders dealing exclusively in non-intoxicant molasses to obtain excise licences violates Articles 14 and 19(1)(g) of the Constitution.
  5. Whether delegated legislation can enlarge the scope of the parent statute.

Petitioners' Arguments

The petitioners argued that:

  • Molasses is merely a by-product of sugar manufacture and is not an intoxicant or alcoholic liquor.
  • Molasses does not contain alcohol in its natural form and only becomes capable of producing alcohol after undergoing fermentation.
  • They exclusively traded molasses for cattle feed, gudakhu, industrial, agricultural and other lawful non-intoxicant purposes.
  • The Chhattisgarh Excise Act regulates intoxicating liquor and intoxicating drugs only and does not include molasses within the definition of "excisable article."
  • The Rules of 2022 illegally expanded the scope of the Excise Act by bringing ordinary molasses traders within the licensing regime.
  • Regulation of non-intoxicant molasses falls outside the legislative competence of the State under Entries 8 and 51 of List II.
  • The Rules imposed arbitrary restrictions on their fundamental right to carry on business under Article 19(1)(g) and violated Article 14.
  • Since molasses is already taxable under the GST regime, the State could not impose additional excise-based licensing and regulatory burdens without statutory authority.

Respondents' Arguments

The State Government submitted that:

  • Molasses is the principal raw material for manufacture of alcohol and therefore requires strict regulation.
  • Entry 8 of List II authorises the State Legislature to regulate every stage involved in manufacture of intoxicating liquor, including raw materials.
  • Section 8(c) of the Excise Act authorises regulation of "any other base" capable of being utilised for manufacture of liquor, which includes molasses.
  • Control over molasses is necessary to prevent illegal diversion into manufacture of illicit liquor and to safeguard State revenue.
  • The Rules of 2022 merely regulate possession, transportation, licensing and use of molasses and are valid exercises of delegated legislative power.
  • Since the Central Government has withdrawn the Molasses Control Order, 1961, the field is no longer occupied by Parliament, permitting State regulation.

The Union of India submitted that GST is merely a taxation mechanism and does not regulate the movement, licensing or control of molasses.

Court Findings / Order

The Chhattisgarh High Court allowed all the writ petitions and declared the Chhattisgarh Molasses Control and Regulation Rules, 2022 as ultra vires the Constitution and the parent Excise Act.

The Court held that:

  • Molasses is a by-product of the sugar industry and is not an intoxicant in its natural form.
  • Molasses is neither "liquor", "intoxicating liquor", "intoxicating drug" nor an "excisable article" under the Chhattisgarh Excise Act.
  • The Excise Act is confined to intoxicating liquor and intoxicating drugs and cannot be extended to regulate ordinary commercial trading in non-intoxicant molasses.
  • The expression "any other base" in Section 8(c) cannot be interpreted so broadly as to include raw molasses used for non-intoxicant purposes.
  • Delegated legislation cannot enlarge or expand the scope of the parent statute.
  • The Rules of 2022 travelled beyond the object and preamble of the Excise Act by regulating industrial, agricultural, cattle-feed and other non-intoxicant uses of molasses.
  • The licensing requirements, duty provisions and regulatory controls imposed on ordinary traders dealing in non-intoxicant molasses were beyond the statutory authority conferred by the Excise Act.

Accordingly, the Court declared the Rules unconstitutional and granted consequential relief to all petitioners.

Important Clarification

The Court clarified that:

  • Molasses in its raw form is not an intoxicant merely because it can subsequently be fermented.
  • Rules framed under delegated legislation cannot create substantive liabilities not contemplated by the parent statute.
  • The State may regulate activities directly connected with manufacture of intoxicating liquor, but cannot regulate every commercial use of molasses merely because it has the potential to be converted into alcohol.
  • The regulatory framework under the Excise Act cannot be extended to ordinary traders dealing exclusively in non-intoxicant uses of molasses.
  • Any subordinate legislation that enlarges the scope of the parent statute is liable to be struck down as ultra vires.

Sections Involved

  • Articles 14, 19(1)(g), 246 & 246A of the Constitution of India
  • Entries 8 & 51 of List II (State List), Seventh Schedule
  • Entries 52 & 84 of List I (Union List), Seventh Schedule
  • Sections 2(6), 2(6A), 2(11A), 2(12), 2(13), 8 & 62 of the Chhattisgarh Excise Act, 1915
  • Chhattisgarh Molasses Control and Regulation Rules, 2022

Link to download the order - https://www.mytaxexpert.co.in/uploads/1783924127_2126compressed.pdf

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