Facts of the Case

The present batch of writ petitions, led by M/s Kedia Trading vs State of Chhattisgarh & Others, challenged the constitutional validity of the Chhattisgarh Molasses Control and Regulation Rules, 2022, framed under Section 8(c) and Section 62 of the Chhattisgarh Excise Act, 1915.

The petitioners were traders and manufacturers dealing in molasses exclusively for non-intoxicant purposes, including cattle feed, gudakhu, agricultural, industrial and other commercial uses. They were neither manufacturers nor sellers of liquor, spirit or intoxicating substances.

Under the impugned Rules, the State Government required all traders dealing in molasses to obtain Excise licences, pay licence fees and molasses duty, and comply with the Excise regulatory framework irrespective of the end use of molasses.

The petitioners contended that molasses, in its raw form, is merely a by-product of sugar manufacture, contains no alcohol, is not fit for human consumption, and becomes capable of producing alcohol only after undergoing fermentation. Therefore, bringing ordinary commercial trade in molasses within the Excise regime exceeded the legislative competence of the State and violated the Constitution.

Issues Involved

  1. Whether the Chhattisgarh Molasses Control and Regulation Rules, 2022 were beyond the scope of the Chhattisgarh Excise Act, 1915.
  2. Whether molasses used exclusively for non-intoxicant purposes could be regulated under the Excise Act.
  3. Whether the State Government possessed legislative competence under Entries 8 and 51 of List II of the Seventh Schedule to regulate all trade in molasses.
  4. Whether compelling traders dealing in non-intoxicant molasses to obtain Excise licences violated 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 submitted that:

  • Molasses is merely a by-product of sugar manufacturing and is not an intoxicant in its natural form.
  • Raw molasses contains no alcohol and cannot be consumed by humans.
  • It becomes capable of producing alcohol only after undergoing a complex industrial fermentation process.
  • Molasses is extensively used in cattle feed, gudakhu, agriculture, chemicals, foundries and several industrial products.
  • The Excise Act regulates only intoxicating liquor and intoxicating drugs.
  • Molasses has not been included within the definition of:
    • Excisable Article;
    • Intoxicant;
    • Intoxicating Drug; or
    • Liquor under the Excise Act.
  • The State cannot indirectly regulate an ordinary commercial commodity merely because it may potentially be converted into alcohol.
  • The impugned Rules imposed unreasonable restrictions upon legitimate trade protected under Article 19(1)(g).
  • The Rules also violated Article 14 by treating ordinary traders at par with liquor manufacturers.
  • The rule-making power under Section 62 cannot enlarge the scope of the parent statute.
  • Levy of licence fee and molasses duty on GST-registered traders dealing exclusively in non-intoxicant uses was unconstitutional.

Respondents’ Arguments

The State Government argued that:

  • Molasses is the principal raw material for manufacture of alcohol.
  • Entry 8 of List II authorises the State to regulate every stage connected with manufacture of intoxicating liquor.
  • Effective control over molasses was necessary to prevent diversion into illegal liquor manufacture.
  • Section 8(c) of the Excise Act authorises regulation of "any other base" capable of being used for manufacture of liquor.
  • Since the Central Government had withdrawn the Molasses Control Order, 1961, there was no occupied legislative field preventing the State from regulating molasses.
  • The Rules merely regulated possession, transport, licensing and movement of molasses and therefore fell within the State's legislative competence.
  • The Rules were necessary to prevent revenue leakage arising from illegal liquor production.

Court Findings / Order

The Chhattisgarh High Court allowed all the writ petitions and declared the Chhattisgarh Molasses Control and Regulation Rules, 2022 to be ultra vires the Constitution.

The Court held that:

  • Molasses is neither an intoxicant nor intoxicating liquor in its raw form.
  • It contains no alcohol and becomes capable of producing alcohol only after fermentation.
  • The Excise Act governs intoxicating liquor and intoxicating drugs only.
  • Molasses is not included within the statutory definitions of:
    • Excisable Article;
    • Intoxicant;
    • Intoxicating Drug; or
    • Liquor.
  • Rules framed under delegated legislation cannot enlarge the scope of the parent Act.
  • Section 62 merely authorises framing of Rules for carrying out the provisions of the Excise Act and cannot create substantive liabilities not contemplated under the Act.
  • Regulation of molasses for cattle feed, agriculture, industrial, scientific, medicinal or commercial purposes falls outside the Excise Act.
  • The expression "any other base" occurring in Section 8(c) cannot be stretched to include raw molasses used for non-intoxicant purposes.
  • The State cannot compel traders dealing exclusively in non-intoxicant molasses to obtain Excise licences.
  • Levy of molasses duty and licence fee under the impugned Rules lacked statutory authority.

Accordingly, the Court declared the Chhattisgarh Molasses Control and Regulation Rules, 2022 unconstitutional and granted consequential relief to all petitioners.

Important Clarification

The judgment does not prohibit the State from regulating molasses used for distillation or manufacture of liquor.

The Court clarified that:

  • Regulation connected with actual manufacture of intoxicating liquor may continue under the Excise Act.
  • However, traders dealing in molasses exclusively for cattle feed, gudakhu, industrial, agricultural, medicinal, scientific or similar non-intoxicant purposes cannot be brought within the Excise licensing regime merely because molasses has the potential to be converted into alcohol.

The Court also reiterated the settled principle that delegated legislation cannot enlarge the scope of its parent statute or create obligations beyond those authorised by the Legislature.

Sections  Involved

Chhattisgarh Excise Act, 1915

  • Section 2(6)
  • Section 2(6A)
  • Section 2(11A)
  • Section 2(12)
  • Section 2(13)
  • Section 8(c)
  • Section 62

Constitution of India

  • Article 14
  • Article 19(1)(g)
  • Article 246
  • Article 246A

Seventh Schedule

Union List

  • Entry 52
  • Entry 84

State List

  • Entry 8
  • Entry 51

Link to download the order - https://www.mytaxexpert.co.in/uploads/1783924581_2128compressed.pdf

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