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. The petitioners were engaged in the business of purchasing, storing and selling molasses exclusively for non-intoxicant purposes such as cattle feed, gudakhu, industrial use and other commercial activities.

The State Government insisted that all traders dealing in molasses obtain an Excise Licence under the 2022 Rules and comply with the regulatory framework framed under the Chhattisgarh Excise Act, 1915. According to the petitioners, molasses in its raw form is neither an intoxicant nor fit for human consumption and therefore cannot be regulated under the Excise Act merely because it is capable of being converted into alcohol through a separate industrial process.

The petitions challenged the validity of the Rules on the ground that they exceeded the legislative competence of the State Government and violated the constitutional rights guaranteed under Articles 14 and 19(1)(g) of the Constitution.

Issues Involved

  1. Whether the Chhattisgarh Molasses Control and Regulation Rules, 2022 are constitutionally valid.
  2. Whether raw molasses used exclusively for non-intoxicant purposes falls within the ambit of the Chhattisgarh Excise Act, 1915.
  3. Whether the State Government can compel traders dealing in non-intoxicant molasses to obtain an Excise Licence.
  4. Whether the Rules travel beyond the scope of the parent Excise Act.
  5. Whether regulation of non-intoxicant molasses by the Excise Department violates Articles 14 and 19(1)(g) of the Constitution.

Petitioners' Arguments

  • Molasses in its natural form is neither an intoxicant nor fit for human consumption.
  • Molasses becomes capable of producing alcohol only after undergoing fermentation through a separate industrial process.
  • The petitioners were dealing only in molasses meant for cattle feed, gudakhu and other non-intoxicant uses and had no connection with manufacture or sale of liquor.
  • Entry 8 of the State List empowers the State only in relation to intoxicating liquor and not ordinary commercial trade in raw molasses.
  • Molasses is subject to GST, demonstrating that it is treated as a taxable commodity and not as an intoxicant.
  • The Excise Rules impose unreasonable restrictions on lawful business and therefore violate Articles 14 and 19(1)(g) of the Constitution.
  • Rules framed under the Excise Act cannot enlarge the scope of the parent legislation.

Respondents' Arguments

  • Molasses is the principal raw material for manufacturing alcohol and therefore requires effective regulation.
  • The State Legislature has legislative competence under Entry 8 of List II to regulate substances used in the manufacture of liquor.
  • Section 8(c) of the Chhattisgarh Excise Act authorises the Government to regulate any base capable of being utilised for manufacturing liquor.
  • The Rules were enacted to prevent misuse of molasses, illegal manufacture of liquor and consequent loss of State revenue.
  • Since the Central Government no longer regulates molasses under the earlier Molasses Control Order, the State is competent to frame appropriate regulatory measures.
  • The Rules are within the powers conferred by Sections 8 and 62 of the Excise Act.

Court Order / Findings

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 observed that:

  • Molasses is merely a by-product of the sugar industry.
  • Raw molasses is neither an intoxicant nor fit for human consumption.
  • It contains no alcohol in its natural form and becomes capable of producing alcohol only after fermentation.
  • Non-intoxicant use of molasses for cattle feed, agriculture, industrial purposes, gudakhu and similar activities does not fall within the regulatory scope of the Excise Act.
  • Rules framed under delegated legislation cannot expand the scope of the parent statute.
  • The Rules attempted to regulate commercial activities beyond the object and purpose of the Excise Act.
  • The State cannot compel traders dealing exclusively in non-intoxicant molasses to obtain Excise Licences merely because molasses can potentially be converted into alcohol.
  • Consequently, the Rules were held unconstitutional and all consequential reliefs were granted to the petitioners.

Important Clarification

The High Court clarified that:

  • Raw molasses by itself is not an intoxicant.
  • The Excise Act governs intoxicating liquor and intoxicating substances and cannot automatically extend to every commodity capable of fermentation.
  • Delegated legislation cannot enlarge the scope of the parent statute.
  • Regulation of molasses used for industrial, agricultural, cattle-feed, gudakhu and other non-intoxicant purposes falls outside the Excise regulatory framework.
  • A rule cannot travel beyond the object and purpose of the statute under which it is framed.
  • Any Rules or delegated legislation framed under a statute cannot enlarge the scope of the parent Act or extend legislative power beyond constitutional limits.

Sections Involved

  • Section 8(c), Chhattisgarh Excise Act, 1915
  • Section 62, Chhattisgarh Excise Act, 1915
  • Articles 14, 19(1)(g), 226, 246 & 246A of the Constitution of India
  • Entries 8 & 51 of List II (State List)
  • Entries 52 & 84 of List I (Union List)
  • Chhattisgarh Molasses Control and Regulation Rules, 2022 

Link to Download the Order

https://www.mytaxexpert.co.in/uploads/1785221240_2126compressed.pdf

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