Facts of the Case

  • The petitioners were engaged in the purchase, storage and sale of molasses for non-intoxicant purposes including cattle feed, gudakhu and other industrial applications.
  • The State Government framed the Chhattisgarh Molasses Control and Regulation Rules, 2022 under Sections 8 and 62 of the Chhattisgarh Excise Act, 1915.
  • Excise authorities insisted that every trader dealing in molasses should obtain an Excise Licence under Rule 8, failing which coercive action including inspections, seizures and prosecution could be initiated.
  • The petitioners challenged the constitutional validity of these Rules insofar as they applied to traders dealing only in non-intoxicant molasses.

Issues Involved

  1. Whether the State Legislature had legislative competence to regulate and license traders dealing in molasses used exclusively for non-intoxicant purposes.
  2. Whether molasses, in its natural form, constitutes an intoxicant or excisable article under the Chhattisgarh Excise Act, 1915.
  3. Whether applying the Excise licensing regime to GST-registered traders dealing in non-intoxicant molasses violated Articles 14 and 19(1)(g) of the Constitution.
  4. Whether the Chhattisgarh Molasses Control and Regulation Rules, 2022 were constitutionally valid to the extent they governed non-intoxicant uses of molasses.

Petitioner’s Arguments

  • Molasses is merely a by-product of sugar manufacture and is not an intoxicant in its natural form.
  • It cannot be consumed by humans and acquires alcoholic characteristics only after undergoing a separate fermentation process.
  • The petitioners were not engaged in manufacturing liquor or alcohol and therefore fell outside the scope of the Excise Act.
  • Since molasses is subject to GST, regulation of its trade for non-intoxicant purposes lies within the GST framework rather than the Excise regime.
  • The Rules imposed unreasonable restrictions on legitimate business activities, violating Articles 14 and 19(1)(g) of the Constitution.
  • The State exceeded its legislative competence under Entries 8 and 51 of List II by regulating ordinary commercial trade in molasses unrelated to liquor manufacture.

Respondent’s Arguments

  • The State argued that molasses is the principal raw material used in the manufacture of alcohol and therefore requires regulatory control.
  • Entry 8 of List II empowers the State to regulate every component necessary for the manufacture of intoxicating liquor.
  • The Rules were intended to prevent diversion of molasses for illegal liquor production and safeguard State revenue.
  • The Central Molasses Control Order had already been repealed, leaving regulatory space for the State.
  • The petitioners had challenged the Rules generally without identifying any specific unconstitutional provision.

Court Order / Findings

The Chhattisgarh High Court held that:

  • Molasses used exclusively for scientific, industrial, agricultural, medicinal, cattle-feed and other non-intoxicant purposes does not fall within the regulatory field of the Excise Act merely because it is capable of being converted into alcohol through a subsequent industrial process.
  • The State's legislative competence under Entry 8 of List II extends to intoxicating liquor and activities directly connected with its manufacture, but cannot be stretched to regulate every commercial transaction involving molasses used for non-intoxicant purposes.
  • The Rules of 2022 could validly operate in relation to molasses intended for distillation and liquor manufacture, but their application to ordinary commercial traders dealing exclusively in non-intoxicant uses was constitutionally impermissible.
  • The Court concluded that applying the Excise licensing regime to GST-registered traders dealing solely in non-intoxicant molasses was beyond the scope of the Excise Act and inconsistent with the constitutional distribution of legislative powers.

Important Clarification

  • The judgment does not invalidate regulation of molasses intended for manufacture of liquor or spirit.
  • The decision specifically protects traders dealing exclusively in non-intoxicant uses of molasses.
  • The Court distinguished between molasses as a commercial commodity and alcohol manufactured after fermentation.
  • GST compliance and Excise regulation operate in separate legislative fields and one does not automatically justify the other.

Sections / Constitutional Provisions Involved

  • Sections 8 and 62, Chhattisgarh Excise Act, 1915
  • Chhattisgarh Molasses Control and Regulation Rules, 2022
  • Articles 14, 19(1)(g), 226, 246 and 246A of the Constitution of India
  • Entry 8 and Entry 51 of List II (State List)
  • Entry 52 and Entry 84 of List I (Union List)
  • CGST Act, 2017 (Relevant GST framework relating to molasses)

Link to Download the Order

https://www.mytaxexpert.co.in/uploads/1785221252_2127compressed.pdf

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