Equivalent Citation: 2003(5)ALD725
IN THE HIGH COURT OF ANDHRA PRADESH AT HYDERABAD
W.P. Nos. 5083 and 7335 of 2003
Decided On: 26.08.2003

Appellants: Balaji Traders
Vs.
Respondent: Commissioner of Excise and Ors.

Hon'ble Judges:
L. Narasimha Reddy, J.

Counsels:
For Appellant/Petitioner/Plaintiff: Milind G. Gokhale, Adv.

For Respondents/Defendant: Government Pleader for Excise

Subject: Excise

Acts/Rules/Orders:
Andhra Prdesh Excise Act, 1968 - Sections 13(1) and 34

Cases Referred:
Commissioner of Prohibition and Excise v. Balaji Traders, WA No. 2209 of 1998; Ganesh Traders v. District Collector, 2002 (1) ALD 210; Pyarelal Sharma v. Managing Director, J & K Industries Ltd., AIR 1989 SC 1854; London and North Eastern Railway v. Verrium, (1964) 1 All ER 255; Rosenbaum v. Burgoyne, (1964) 2 All ER 988; Seksaria Cotton Mills v. State of Bombay, AIR 1953 SC 278; State of U.P. v. Ramagya Sharma, AIR 1966 SC 78; State of Haryana v. Ch. Bhajan Lal, AIR 1993 SC 1348

Disposition:
Petition allowed

Case Note:

Excise seizure of molasses Sections 13 (i) (f) and 34 (e) of A.P. Excise Act, 1968 petitioner found storing molasses in his factory respondent seized molasses on doubt that petitioner using it for manufacture of illegal liquor held, storing molasses by manufacturer of sugar in sugar factory is not punishable.

ORDER

L. Narasimha Reddy, J.

1. Similar questions of facts and law arise in these two writ petitions. Hence, they are disposed of through a common order.

2. W.P. No. 5083 of 2003 is filed by a proprietary concern by name Sri Balaji Traders. W.P. No. 7335 of 2003 is filed by the proprietor himself by name M. Ram, The respondents are almost common in both the writ petitions. The only distinguishing feature is that in W.P. No. 7335 of 2003, the owner of the vehicle also figures as petitioner No. 2. Their interests are common. For the sake of convenience, they are referred to as 'the petitioners'.

3. The petitioners are engaged in the business of trading in Molasses. They had the place of business at Hyderabad. Their business comprises of purchase of Molasses from various sugar factories and supplying the same to the purchasers of different categories.

4. On 10-3-2003, the Station House Officer, Prohibition and Excise, Patancheru, intercepted a tanker bearing No. AP9U 465 engaged by the petitioners in transporting Molasses at the Rudraram, Patancheru Mandal, Medak District, on the ground that the Molasses being transported in the tanker was meant for supply to manufactures of illicit liquor at Dhoolpet, Hyderabad. The tanker was seized and Crime No. 177 of 2002-03 of the said PS was registered. WP No. 5083 of 2003 is filed challenging the seizure and the consequential proceedings.

5. On 8-4-2003, another tanker bearing No. APlOT 9505 engaged by the petitioners for transporting the Molasses was intercepted nearby Karshak Khandsari Sugar Mills, Chintakunta Village of Medak District. On the same allegations, this tanker was also seized and Crime No. 1 of 2003-04 on the PS, Prohibition, and Excise, Andole, Medak District, was registered. These proceedings are challenged in WP No. 7335 of 2003. In both the cases, the violation alleged against the petitioners is under Sections 13(1)(f) and 34(e) of the A.P. Excise Act, 1968 (for short 'the Act').

6. The petitioners contend that Molasses is not an intoxicant and, as such, the provisions of the Act do not apply to the same. As regards the allegation that Molasses was meant to be supplied to the manufacturers of illicit liquor, the petitioners contend that there is nothing on record, except the surmises and presumptions on the part of the respondents that the Molasses were intended to be supplied to the manufacturers of illicit liquor.

7. In the counter-affidavit filed by the respondents, it is alleged that the petitioners were found to have supplied Molasses to several manufacturers of illicit liquor at Dhoolpet and it was in that context that the seizure was effected. So far as the applicability of the provisions of the Act is concerned, they contend that, being a material used in manufacture of illicit liquor, the action is very much sustainable under Sections 13(1)(f) and 34(e) of the Act.

8. Sri Milind Gokhale , learned Counsel for the petitioners, submits that there are no restrictions on possession, transport and trade in Molasses in the State of Andhra Pradesh. According to him, the petitioners are supplying the Molasses to various customers for industrial purposes and there was nothing to suggest that the consignment in question was meant to be supplied for illicit purposes. Placing reliance upon the Judgment of the Division Bench in Commissioner of Prohibition and Excise v. Balaji Traders, WA No. 2209 of 1998 and Batch dated 8-5-2001, he submits that as long as the A.P. State Legislature has not enacted any law on the subject, it was not competent for the excise officials to interfere with the trade in Molasses.

9. Learned Government Pleader for Excise, on the other hand, submits that though the Government of India has rescinded the Molasses Control Order, the petitioners cannot be permitted to supply the same for the purpose of manufacture of illicit liquor. Referring to the instances of the petitioners having been found supplying Molasses to such purposes, he submits that it was on the basis of credible information that the seizure was effected. As regards the applicability of provisions of the Act, he submits that any material, which is used in manufacture of illicit liquor, is liable to be proceeded against under Sections 13(1)(f) and 34(e) of the Act. He places reliance upon the judgment of a Full Bench of this Court in Ganesh Traders v. District Collector, MANU/AP/0764/2001 (FB).

10. The question that falls for consideration in these two writ petitions is as to whether it is competent for the authorities of the Excise Department to prosecute the petitioners for possessing Molasses. For this purpose, it is necessary to examine the provisions of the Act, in its application to Molasses.

11. The purpose underlying the enactment of the Act, is indicated in its preamble. It reads as under:

"An Act to consolidate and amend the law relating to the production, manufacture, possession, transport, purchase and sale of intoxicating liquor and drugs, the levy of duties of excise and countervailing duties on alcoholic liquors for human consumption and opium, Indian hemp and other narcotic drugs and narcotise and to provide for matters connected therewith in the State of Andhra Pradesh."

The commodities that are to be dealt with in this Act are intoxicating liquor and drugs, alcoholic liquors for human consumption, opium, Indian hemp and other narcotic drugs. The terms 'intoxicant', 'intoxicating drug' and 'intoxicating liquor' are defined under Sub-sections (19), (20) and (21) respectively of Section 2 of the Act. Molasses does not fall in any of these definitions. Therefore, the Act or the Rules made there under per se do not regulate the production, manufacture, possession, transport and other allied activities, in relation to Molasses.

12. Initially, possession and movement of Molasses used to be regulated under the Molasses Control Order, 1961 (hereinafter referred to as the Control Order') issued by the Government of India, in exercise of the powers conferred on it under Section 18(c) of the Industries (Development and Regulation) Act, 1951. The Control Order provided for obtaining of licences and permits by those who undertake trade in Molasses. The Control Order was, however, rescinded by Government of India, through its notification dated 10-6-1993.

13. With the notification of the Government of India, rescinding the Control Order, hardly there exist any restrictions on the possession and transport of or trade in Molasses. The Government of Andhra Pradesh sought to place certain restrictions on the movement and trade of Molasses, through its Order contained in G.O. Ms. No. 205 dated 29-44994. The petitioners herein challenged the same in W.P. No. 14399 of 1997. The writ petition was allowed, holding that it is not competent for the State Government to impose such restrictions. Against the judgment in W.P. No. 14399 of 1997, WA No. 2209 of 1998 was filed. This writ appeal, together with other writ appeals and writ petitions, involving the same question, was dealt with by a Division Bench. In its judgment dated 8-5-2001, the Division, Bench discussed at length, the legislative competence of the Central and State Governments to enact laws in relation to Molasses, with special reference to the provisions of the Industries (Development and Regulation) Act. Several cases, decided by the Supreme Court on the subject, were also referred to. Ultimately, it summed up its discussion as under;

"In this 'scenario', the only option for the State Government is to legislate on the Molasses if it wants to impose any restrictions on the said product. As on this date, no such statutory provision has been enacted.....

In view of what is stated above, while we uphold the argument that the State is not debarred from making any legislation with regard to the Molasses, we hold that since no such legislation has been made by the State of A.P., regarding the subject of Molasses, the impugned orders of the respondents are unconstitutional, illegal and non-est."

14. From a reading of the Panchanamas under which the seizures were effected, it is evident that Respondent No. 3 i.e., the Station House Officer has treated the Molasses as contraband. The Panchanama dated 10-3-2003 inter alia reads as under:

"Then the officers recorded separate confessional Panchanamas of the above two persons separately. Then basing in the confession made by the above persons, the officers seized the water Molasses (raw material) as the above persons failed to produce any valid transit permit for transportation of the above 'contraband'."

15. The respondents do not dispute that Molasses as such is not treated as intoxicant under the Act or the Rules made thereunder. The only basis for effecting seizure is the suspicion that the Molasses is supplied as raw material for manufacture of illicit liquor. For this purpose, they have invoked Sections 13(1)(f) and 34(e) of the Act. The relevant provisions read as under:

"13. Manufacture etc., of excisable articles prohibited except under a licence:--(1) No person shall--

(f) use, keep or have in his possession, any materials stills, utensils, implements, apparatus, whatsoever for the purpose for manufacturing any intoxicant other than toddy; except under the authority and subject to the terms and conditions of a licence granted by such officer, not below the rank of an Excise Superintendent, as may be prescribed."

"34. Penalties for illegal import, etc :--Whoever, in contravention of this Act or of any rule, notification or order made, issued or passed thereunder or of any licence or permit granted or issued under this Act:

.....

(e) uses, keeps, or has in his possession any materials, still utensil, innplement or apparatus whatsoever for the purpose of manufacturing any intoxicant other than toddy; or

.....

shall on conviction, be punished--

(i) in the case an offence falling under Clause (a), Clause (e), Clause (f) or Clause (i) with imprisonment for a terms which shall not be less than two years but which shall not exceed five years, and with fine which may extend to five thousand rupees;

(ii) in any other case, with imprisonment which may extend to six months or with fine which may extend to one thousand rupees, or with both."

16. The respondents seek to sustain the initiation of proceedings against the petitioners, placing reliance on the word "material" occurring in the provisions referred to above. According to the respondents, Molasses is a material capable of being used for manufacture of intoxicants, and the petitioners possess the same only for the purpose of supplying to manufacturers of ID liquor. On this premise, they contend that the seizure, in exercise of the powers under the said provisions, is valid. The respondents strongly relied upon the judgment of a Full Bench of this Court in Ganesh Traders' case (supra). The Full Bench was dealing with batch of writ petitions filed for quashing the FIRs registered against persons possessing or transporting black jaggery, by invoking Sections 13(1)(f) and 34(e) of the Act.

17. Chief Justice S.B. Sinha (as he then was), took the view that it is not permissible for the excise authorities to seize or confiscate Black Jaggery or punish persons for possessing or transporting the same, since it is neither intoxicant nor a commodity within the purview of the Act and the Rules made thereunder.

18. The majority view is comprised in separate judgments of learned brothers Justice G.Raghuram and Justice V. V.S.Rao. In his separate judgment, Justice Raghuram opined as under:

"31. On the analysis above, I hold that "Black Jaggery" which has no other legitimate, established or demonstrable purpose and utility except for the manufacture of an intoxicant, is comprehended within the meaning of the expression "materials" in Section 13(f) and as such is susceptible to the regulatory framework and to the penalties set out in the 1968 Act, including Section 34 there under.

32. As potential hardship and grave inconvenience would ensue in the absence of a clear prescription as to what constitutes "Black Jaggery" within the meaning of the 1968 Act, the State Government is directed to prescribe, by an appropriate instrument, the description, character and composition of 'Black Jaggery' that would have no other use except for the manufacture of an intoxicant; prescribe procedures for prompt and speedy analysis of "Black Jaggery" seized, duly specifying the authority or agency for conduct of such analysis; prescribe the time frame within which the report of such an analysis should be submitted to the regulatory agency and shall further specify that on such report recording that the commodity seized is not "Black Jaggery" within the meaning of the 1968 Act, as interpreted by this Court above, the seized material and the vehicles carrying the same shall be released forthwith and further proceedings dropped.

33. As "Black Jaggery" in general may include "Black Jaggery" within the meaning of the 1968 Act, and as the question is whether a specific sample of Black Jaggery includes "Black Jaggery" as comprehended within the meaning of the 1968 Act and as this identification is possible only after the analysis of the sample, I hold that the satisfaction of the regulatory agency/authority under the Act that a specific material is "Black Jaggery" within the meaning of this Act, would justify the seizure thereof for the purpose of further proceedings, which shall of course, be subject to the result of the analysis."

In his judgment, Justice V.V.S. Rao, observed as under:

"38. It is not denied before us that Black Jaggery seized from the petitioners is raw material for manufacturing ID Liquor...... Black Jaggery is not fit for human consumption and being left over residue settled at the bottom after removing fine quality Jaggery, consists of a lot of dirt, sand, straw and other harmful materials deleterious to health."

"41. We may, however, hasten to add that unless the Commissioner, Collector, Police Officer or competent Excise Officer "has reason to believe" Black Jaggery is intended to manufacture ID liquor mere keeping and/ or transporting any other material cannot be violation of law. In such an event, it is always open to the accused to prove before the competent Criminal Court that Black Jaggery was material intended not for manufacture of liquor but was intended for other purpose. The learned Counsel for the petitioners have not placed before us any evidence/material to show that Black Jaggery can also be used for other purposes. Be that as it may they only submitted that Black Jaggery or Jaggery with which they were dealing was not intended for manufacturing liquor."

"52. We may now summarise our discussion on the main question whether keeping or being in possession of Black Jaggey material for the purpose of manufacture of liquor is an offence under the excise Act.

(a) The provisions of the A.P. Excise Act including Sections 13(f) and 34(e) should be interpreted with reference to the objects of the Act and penal provisions dealing with excise offences should also receive broader interpretation having regard to the fact that the Excise Act is intended to achieve partially the objective of Article 47 of the Constitution of India.

(b) Having regard to the provisions of Sections 13, 34 and 53 and 55 of the Excise Act, we must hold that if Commissioner, Collector, Police Officer or Excise Officer "has reason to believe" that Black Jaggery (material) is likely to be used for manufacture of ID liquor the same can be seized and persons can be arrested and subject to facts and circumstances of each case including any report of the chemical examiner a charge-sheet can be filed under Section 34(e) of the Excise Act.

(c) In a situation such as (a) and (b) above, if the circumstances so warrant the person/ accused is entitled to approach under Section 482 of Cr.PC and/or Article 226 of the Constitution of India and seek quashing of proceedings provided his case come within well settled principles for quashing F.I.R., charge-sheet or Criminal Case. However, a writ petition in such an event at the stage of investigation is not permissible when there is prima facie material to show that Black Jaggery is not fit for human consumption and was intended for manufacture of ID liquor.

(d) As held by the Supreme Court in Nasu Sheikks case (supra) if the F.I.R. shows the ingredients of offence under Section 34(e) read with Section 13(f) of the Excise Act, a person cannot be heard to say in High Court that he is carrying on business or transporting Black Jaggery either because he is an agriculturist or businessman. All such pleas are to be raised before appropriate Criminal Court."

The majority proceeded on the footing that 'Black Jaggery' as a commodity, cannot be used for any other purpose, except for manufacture of intoxicant and, as such, it falls within the expression "material" under Section 13(1)(f) of the Act.

19. The learned Counsel for the petitioners has tried to impress upon this Court that, had the fact that "Black Jaggery" can be put to other uses, such as, mixing in the cattle feed, and the principle that it is not permissible through interpretative process to constitute a new item of crime, been brought to the notice of or presented in their proper perspective, the majority would have been persuaded to take a different view. He urges that requiring an accused to prove his innocence is unknown to law. A further, and interesting submission is made to the following effect: If "Black Jaggery" was brought within the sweep of the provisions of Sections 13(f) and 34(e) of the Act, by the process of filling the legislative vacuum by the Court, whether the consequences of such exercise could be retrospective in effect, to sustain the FIRs which were registered anterior thereto. This contention is raised based on the principle that penal statutes cannot be given retrospective effect {See Pyarelal Sharma v. Managing Director, J & K Industries Ltd., AIR 1989 SCI 854.

20. It is neither permissible nor advisable to deal with such contentions in these writ petitions. Judicial discipline requires that the opinion rendered by a bench of higher strength is to be honoured.

21. From a reading of the majority judgment of the Full Bench, particularly, paragraph 32 of the judgment of Justice Raghuram, it is evident that the State was directed to prescribe, by an appropriate instrument, the description, character and composition of Black Jaggery, which would have no other use except for manufacture of intoxicant. A further direction was issued to prescribe the procedures for prompt and speedy analysis of Black Jaggery, duly specifying the authority or agency to conduct such analysis, etc, and the time limit therefor. It is, therefore, axiomatic that it is only on such exercise having been undertaken, that the commodity gets attracted to the provisions of Sections 13(1)(f) and 34(e) of the Act. This is particularly so, because Section 34 of the Act prescribes a minimum punishment for the offence under Section 34(e). At any rate, the commodity, which is the subject-matter of these writ petitions, is Molasses, which has nothing to do with Black Jaggery. The judgment of the Full Bench is more commodity specific than provision specific.

22. Learned Government Pleader contends that as long as Molasses is used as a material for manufacturing the intoxicant, the provisions of Sections 13(1)(f) and 34(e) can be invoked as regards this commodity also. In this regard, it needs to be observed that the Excise Act has provided for regulatory and punitive measures. Whatever be the permissibility of extending the scope of regulatory measures, through the interpretative process, the same facility is not available to expand the scope of a punitive provision. Reference in this context for instance may be made to the judgments in London and North Eastern Railway v. Verrium, (1946) 1 All ER 255, Rosenbaum v. Burgoyne, (1964) 2 All ER 988, and Seksaria Cotton Mills v. State of Bombay, MANU/SC/0027/1953.

23. It is cardinal principle of interpretation of statues that punitive provisions should receive strict interpretation. Enumeration of acts and omissions, constituting offences and prescription of punishment therefor, is always treated as the prerogative of the legislature. The reason is that it is for the Legislature to treat a particular activity as an offence or crime and provide punishment therefor, taking into account, the social, economic moral and other similar aspects. What constitutes an offence at a given point of time may not be so, at a later point of time. The policy of the Government as regards the extent of regulation of a given activity is not static. It keeps on changing depending upon the political, social and economic compulsions, that the State, through its legislature may feel. Till the recent past, imposition of prohibition on all kinds of intoxicants was the proclaimed policy of the Government. The same has been revised. An examination of the various measures taken from time to time discloses that the emphasis now is to promote sale of as much quantity of intoxicants as possible. If circumstances warrant, this policy may also be revised. The Legislature as well as the Administration are allowed such latitude in the matter of formulation of policies or framing of laws. The concern of the Courts is to ensure that the executive Acts conform to the legislative measures prevailing at the relevant point of time, and the legislation in turn, accords with the Constitution. It is almost impermissible to examine the wisdom or otherwise behind a particular legislative or administrative measure, as long as they are within the limits delineated by the Constitution or the Laws made thereunder.

24. Though Sections 13(1)(f) and 34(e) are couched in same terms, the former is a regulatory measure and the latter is a punitive one. Section 34(e) makes it an offence if an individual "uses, keeps or has in his possession any materials, still utensil, implement or apparatus whatsoever for the purpose of manufacturing any intoxicant other than toddy". The expressions "materials" and "for the purpose of manufacturing" become significant, in this context. To constitute an offence under this provision, the material used or possessed should be the one used for the purpose of manufacturing any intoxicant.

25. The word "materials" has to be understood in the context of the proximity of it having been used or proposed to be used for the purpose, prohibited under the said provision.

26. The Legislature and the Executive were clear in their mind in the matter of bringing the commodities within the regulatory or punitive regime of the Act and the Rules framed thereunder.

27. The terms "intoxicant" and "intoxicating liquor" were clearly defined under the Act. Even as regards certain materials, which are capable of being used in manufacture of "intoxicant", Rules have been framed. For example, in exercise of its Rule Making Power under Section 72 read with Sections 12, 13, 14, 15 and 53 of the Act, the Government framed "the Andhra Pradesh Excise (Mohwa Flowers) Rules, 1973". The only basis for providing license for possession or sale of Mohwa Flowers was the possibility of its being used in manufacture of intoxicants. Similarly, the "A.P. Denatured Sprits and Denatured Spirituous Preparations Rules 1971" were framed providing for regulation of the manufacture, possession, transport, sale and import of the said commodity. By themselves, these commodities were neither intoxicants nor intoxicating liquors. They are the materials used in manufacture of intoxicants. When the Government had taken such measures, and did not choose to make similar provisions as regards Molasses, the omission is not without significance. That commodity cannot be brought within the regulatory or punitive regimes, by way of interpretative process.

28. In State of U.P. v. Ramagya Sharma, MANU/SC/0072/1965, the Supreme Court, while interpreting the word "use" occurring in the Iron and Steel (Control) Order (1956), observed as under:

"The word 'use' must take its colour from the context in which it is used. In Clause 7 the expression "use...in accordance with the conditions contained" suggests something done positively, e.g., utilisation or disposal. Mere 'non-use' in our opinion, is not included in the word 'use'."

29. The fact that an individual possesses a substance, which is a potential material for manufacturing an intoxicant, by itself does not make him punishable. It should be established or at least alleged, on the basis of a reasonable factual background, that he possessed it for the purpose of manufacturing a intoxicant. Necessary facts constituting the basis for such presumption should be contained in the FIR itself. Any latitude shown in this regard, would give rise to disastrous consequences. For example, utensils and firewood are also used in manufacture of such intoxicants. Utensils and firewood can certainly be treated as materials. On that account every person who possess utensils and firewood cannot be made liable to be punished on the ground that they possess such material. Similarly, the sugar factories, which store the Molasses and any other trader or manufacturer in possession of the same, would become liable to be punished, because the material possessed by them is capable of being put to use in manufacture of intoxicant. It is for these reasons that in Ganesh Traders's case (supra), the State Government was directed to undertake necessary measures providing for description, character and composition of a commodity involved therein through a proper instrument, before a punitive action could be undertaken thereon. Such direction was issued in respect of a commodity, which was not fit for any other use, except for manufacture of illicit liquor. The industrial use of Molasses is undisputed. That fact that it is also used in manufacture of illicit liquor is rather occasional than regular. In Commissioner of Excise v. Balaji Traders's case (supra), it was already held by the Division Bench of this Court that as on today, there is no enactment to regulate the trade or use of Molasses in the State of Andhra Pradesh.

30. Another circumstance, which needs to be noted is that, the petitioners filed W.P. No. 12279 of 2001 seeking writ of mandamus declaring the action of the respondents therein, who are the officials of the Excise Department, in interfering with the business of the petitioners in Molasses, as illegal, arbitrary and prayed for a preventive relief. The wit petition was disposed of through order dated 9-8-2001. A categorical observation was made therein that Molasses is neither an intoxicant nor intoxicating liquor, as defined under the Act. The contention as raised in these writ petitions was almost accepted. The relevant portion of the order reads as under:

"6. Either under the A.P. Prohibition Act or A.P. Excise Act, 1968, Molasses per se is neither an intoxicant nor an intoxicant drug. In the circumstances, the contentions urged by the respondent that powers are available under A.P. Excise Act, 1968 and A.P. Prohibition Act, 1995 to regulate and seize Molasses merely because they might potentially be used for manufacturing of illicit liquor does not appear to be well founded."

31. Therefore, viewed from any angle, the crimes registered against the petitioners cannot be sustained, if tested with the parameters laid down by the Supreme Court in several cases including the one in State of Haryana v. Ch. Bhajan Lal, MANU/SC/0210/1993. They are accordingly quashed.

32. The writ petitions are accordingly allowed. No costs.