ORDER
Shivashankar Bhat, J.
1. In these Writ Petitions referred to Division Bench by the learned Single Judge, the question for consideration is, whether Section 43(2) of the Karnataka Excise Act, 1965 (hereinafter referred as ‘the Act’) is violative of Articles 14 and 19(1)(g) of the Constitution of India.
2. Petitioners are liquor merchants possessing licences issued under the provisions of the Act and Rules framed thereunder. It is alleged that, on an inspection of the licenced shop premises of the petitioner in WP. 11715/81, the authorities found excess and unaccounted stock of 29.730 litres of IML and consequently seized the entire stock of liquor under Section 43(2) of the Act for the alleged offence under Sections 32 & 36(b) of the Act. The stock of liquor, thus seized, included the liquor which the petitioner had lawful authority to possess. Ultimately an order was made on 9-6-1981 (Annexure-C) permitting compounding of the offence, by levying a compounding fee of Rs. 1,000/-. The seized property was ordered to be released on payment of value of the entire stock quantified as Rs. 13,433.95. A similar order was made on 5-6-1981 (Annexure-C) in W.P.No. 11392/81, permitting compounding of the offence and release of seized stock on payment of its value.
3. The grievance of the petitioners is, that, the provisions of Section 43(2) empower the confiscation of an intoxicant lawfully imported, transported or manufactured, and held in possession or sold legally, by a licencee, just because, the said possession or sale was along with or in addition to any intoxicant liable to confiscation under Section 43(1). A person may be lawfully in possession of certain quantities of intoxicant and at the same time, he may be in possession of some other quantity illegally. In such a situation, the confiscation of the entire stock will be a harsh and disproportionate penalty and hence, the petitioners contend, the law to be unconstitutional. Section 45 provides for compounding of offences. In addition to the fine prescribed as a compounding fine, it provides that in all cases in which any property has been seized as liable to confiscation, the property may be released on payment of the value thereof as estimated by the officer. Therefore, it is argued, that, the law not only punishes for contravening the law in respect of the intoxicants dealt illicitly, but also for possession or selling other intoxicants lawfully, provided the said sale or possession was accompanied by an illicit transaction. The contention of the petitioners is, the confiscation of an article which, a person has lawful authority to possess or sell, is arbitrary and unjust, just because the said person, also committed an illegality in respect of another article.
4. Section 43 reads as follows :-
“Liability of certain things to confiscation –
Whenever an offence has been committed, which is punishable under this Act, the following things shall be liable to confiscation namely:
(1) any intoxicant, materials, still, utensil, implement or apparatus in respect of, or by means of which, such offence has been committed;
(2) any intoxicant lawfully imported, transported, manufactured, had in possession or sold along with, or in addition to, any intoxicant liable to confiscation under Clause (1) ; and
(3) any receptacle, package, or covering in which anything liable to confiscation under Clause (1) or Clause (2); is found, and the other contents, if any, of such receptacle package or covering and any animal, vehicle, vessel, raft or other conveyance used for carrying the same.
Provided -that, if anything specified in Clause (3) is not the property of the offender, it shall not be confiscated if the owner thereof had no reason to believe that such offence was being or was likely to be committed.”
5. The Act regulates the production, manufacture, possession, import, export, transport, purchase and sale of liquor and intoxicating drugs and the levy of duties of excise thereon in the State of Karnataka. To effectuate the provisions of enactment, incidental provisions are also made. The Act, in essence, provides for the conferment of a privilege to deal in intoxicants, including various aspects of dealing. It is now firmly established that any activity involving an intoxicant is considered a dangerous activity and it is the exclusive privilege of the State to deal with the intoxicant. Citizens have no fundamental right to manufacture, possess, sell or deal in any intoxicant, in any manner. Such a right has to be conferred by the State as a privilege. The question, therefore, is, whether the law can impose severe and deterrent penalties on a person who obtains a privilege from the State and indulges in an illegality activity along with the articles permitted by such a privilege, and whether the law permitting imposition of such a penalty be characterised as arbitrary and unreasonable.
6. In HAR SHANKAR and Ors. v. THE DEPUTY EXCISE AND TAXATION COMMISSIONER and Ors., the Constitution Bench of the Supreme Court, after referring to several earlier rulings, held, at para-53:-
“There is no fundamental right to do trade or business in intoxicants. The State, under its regulatory powers, had the right to prohibit absolutely every form of activity in relation to intoxicants – its manufacture, storage, export, import, sale and possession. In all their manifestations, these rights are vested in the State and indeed without such vesting there can be no effective regulation of various forms of activities in relation to intoxicants. In ‘American Jurisprudence’, Volume 30 it is stated that while engaging in liquor traffic is not inherently unlawful, nevertheless it is a privilege and not a right, subject to governmental control (page 538). This power of control is an incident of the society’s right to self-protection and it rests upon the right of the State to care for the health, morals and welfare of the people. Liquor traffic is a source of pauperism and crime.”
Some of the observations to contra found in KRISHNA KUMAR NARULA’S CASE, (referred by the learned Counsel for the petitioners before us) was referred by Supreme Court at para-54 in Har Shankar’s case, and held the same were unnecessary for deciding the said case.
7. It has been recognised for long that trade in liquor stood on a different footing from other trades and the power of the State to prohibit or regulate the trading was absolute. In this regard the Supreme Court, in NASHIRWAR ETC. v. STATE OF MADHYA PRADESH and Ors., held :-
“There are three principal reasons to hold that there is no fundamental right of citizens to carry on trade or to do business in liquor. First, there is the police power of the State to enforce public morality to prohibit trades in noxious or dangerous goods. Second, there is power of the State to enforce an absolute prohibition of manufacture or sale of intoxicating liquor. Article 47 states that the State shall endeavour to bring about prohibition of the consumption except for medicinal purposes of intoxicating drinks and of drugs which are injurious to health. Third, the history of excise law shows that the State has the exclusive right or privilege of manufacture or sale of liquor.
“Trade in liquor has historically stood on a different footing from other trades. Restrictions which are not permissible in other trades are lawful and reasonable so far as the trade in liquor is concerned. That is why even prohibition of the trade in liquor is not only permissible but is also reasonable. The reasons are public morality, public interest and harmful and dangerous character of the liquor. The State possesses the right of complete control over all aspects of intoxicants, viz., manufacture, collection, sale and consumption. The State has exclusive right to manufacture and sell liquor and to sell the said right in order to raise revenue. That is the view of this Court in Bharucha’s case and Jaiswal’s case . The nature of the trade is such that the State confers the right to vend liquor by framing out either in auction or on private treaty. Rental is the consideration for the privilege granted by the Government for manufacturing or vending liquor. Rental is neither a tax nor an excise duty. Rental is the consideration for the agreement for grant of privilege by the Government.”
8. All kinds of rights to deal in intoxicants (which is also referred here as liquor) thus, basically belong to the State. By granting a licence to deal in liquor, a privilege is conferred to the licencee to deal in liquor to the extent permitted by the licence. A person, in possession of or dealing in any liquor without any licence from the State, indulges himself in an activity which he is not entitled in any manner and such a person, is deemed to exercise a privilege which exclusively vest in the State. It is a grave misconduct, enormity of which requires severe deterrent to prevent repetition of such an activity by the said person and others.
9. Assuming that the impugned provision called for an examination of its constitutional validity by measuring the reasonableness of the penalty, the test propounded by the Supreme Court in the following statement, in STATE OF MADRAS v. V.G. ROW, may be recalled :-
“…..It is important in this context to bear in mind that the test of reasonableness, wherever prescribed, should be applied to each individual statute impugned, and no abstract standard, or general pattern of reasonableness can be laid down as applicable to all cases. The nature of the right alleged to have been infringed, the underlying purpose of the restrictions imposed, the extent and urgency of the evil sought to be remedied thereby, the disproportion of the imposition, the prevailing conditions at the time, should all enter into the judicial verdict. In evaluatin such elusive factors and forming their own conception of what is reasonable, in all the circumstances of a given case, it is inevitable that the social philosophy and the scale of values of the Judges participating in the decision should play an important part, and the limit to their interference with legislative Judgment in such cases can only be dictated by their sense of responsibility and self-restraint and the sobering reflection that the Constitution is meant not only for people of their way of thinking but for all, and that the majority of the elected representatives of the people have in authorising the imposition of the restrictions, considered them to be reasonable.”
10. The restriction imposed by the impugned provision is on a statutory right to prevent anyone eroding into the State’s exclusive privileges in respect of an activity which has inherent tendency to harm the morals and economy of the society. Therefore, the penalty of confiscating the intoxicans etc., which were lawfully held by a person, along with other intoxicants for which he had no lawful authority, cannot be termed as a harsh and disproportionate penalty. Such a penalty also will deter a person from holding out his licence obtained for one subject to cover up his illegal activity in other articles for which he has no licence.
11. BADRI PRASAD v. COLLECTOR OF CENTRAL EXCISE, SARVODAYANAGAR, KANPUR and Ors., AIR 1971 SC 1171 was relied by the learned Counsel in support of his contention, that, a penalty should bear a reasonable nexus to the offence, as otherwise, the law would offend Article 19(1)(g) of the Constitution. There, the impugned provision was Section 71 of the Gold Control Act, 1968. Section 16 of the said Act, inter alia, provided for the making of a declaration by a pawn broker. If there was a failure, the gold in his possession (whether he was the owner of it or not) was liable to confiscation under Section 71. It is in this context, the law was held to be violative of Article 19(1)(g) of the Constitution.
12. Thus, for the fault of the licenced dealer with whom the articles had been pawned by the actual owner thereof, the owner’s property was to be confiscated. In these circumstances, the Supreme Court held that there was absolutely no justification for confiscating the pawned articles merely for non-compliance of Section 16 of the Act in making the required declaration. The Parliament, in these circumstances, intervened and amended the section and now a proviso has been added in Section 71 and the proviso contemplates that where it is established to the satisfaction of the officer adjudicating the confiscation that such gold or other things belong to a person, other than the person, who has by any actor omission, rendered it liable to confiscation, and such act or omission was without the knowledge or connivance of the person to whom it belonged it shall not be ordered to be confiscated, but such other action, as is authorised by the said Act may be taken against the person, who has, by such contravention, rendered it liable to confiscation. This proviso clearly contemplates that for the fault of the pawnee, the property of the pawner shall not be confiscated. Prior to the amendment even the goods of the pawner in possession of the pawnee could be confiscated for the fault of the pawnee in not making the required declaration under Section 16 of the Act. Likewise, Section 73 of the Gold (Control) Act contemplated levy of fine of twice the amount or the value of the goods sought to be confiscated. That Section was found by the Supreme Court to be unduly harsh. In lieu of confiscation of the goods, there was absolutely no justification for imposing a fine of twice the amount of the value and thus it was struck down by the Supreme Court. The Parliament consequently, amended Section 73 of the Act as well and removed the word ‘twice.’
13. As already pointed out earlier, the subject matter of legislation under the Act is quite different from other subjects of trade or ownership. The goods legislated upon and dealing in the said goods – both are not matters in respect of which ordinarily, a citizen can claim a right. The said activities of owning, possessing or dealing in any manner in intoxicants, is a dangerous activity. The legislative wisdom in enacting a law to control such an inherently dangerous activity cannot be interfered with by the Courts. The legislature knows the seriousness of the situation and is fully competent to enact the law to mitigate the vice.
14. It was further contended that, in case there was a mixing up of goods lawfully held with other goods for which there was no lawful authority, the confiscating authority has to separate the lawful goods from the illicit ones, by applying the decision in MOTIBHAI FULABHAI PATEL & CO. v. R. PRASAD, COLLECTOR OF CENTRAL EXCISE, BARODA and Ors, AIR 1970 SC 829 The learned Counsel for the petitioners, suggested that the ratio of the said decision supports his proposition, that only the goods in respect of which an offence is committed, could be confiscated and not others. The learned Counsel is not justified in this submission. The Supreme Court was considering the provisions of Central Excise Rules which provide for the imposition of a penalty and confiscation of such goods in respect of which excise duty was not paid. The decision rested solely on the language of Rule 40 of the Central Excise Rules and therefore it is unnecessary to refer to the principle stated by the Supreme Court as to how the two sets of goods should be separated for levying the penalty. At p.832 (Para-11) the Supreme Court, brings out the distinction, by pointing out, —
“….Rule 40 permits the Central Excise authorities to confiscate only those goods on which duty has not been paid It does not permit them either specifically or by necessary implication to confiscate other goods. Therefore, it was not permissible for the Collector to confiscate the entire tobacco mixture.”
In the light of the above decision, we find no merit in the contention of the petitioners.
15. In the result, for the reasons stated above, these petitions fail and are dismissed. Rule discharged.
Each petitioner shall pay the costs of the respondents, computed at Rs. 1,000/-