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Health at the Cost of Health

Kerala - Excise Duty - COVID-19 - Taxscan

This article aims to reflect upon the Government’s decision to open liquor shops for the public amidst the third phase of the nationwide lockdown in light of Article 47 of the Indian Constitution.

Article 47 of the Constitution

“State shall endeavor to bring about prohibition of the consumption except for medicinal purposes of intoxicating drinks and of drugs which are injurious to health” Before getting into the relationship this Article has with the ongoing Pandemic and the paradox it results in, it is vital to understand the nature of trade in liquor in the country as enumerated by the Hon’ble Supreme Court.

‘Res Extra Commercium’ and the Ratio of Khoday Distilleries

A correct understanding of Article 47 will suggest that a total prohibition on liquor should be the endeavor of the state. If that is the case, can there be a right to trade in liquor which is protected under Article 19 (1)(g) of the Constitution? The answer lies in the negative and the Supreme Court in Khoday Distilleries v. State of Karnataka explains why.

The Court states that the right to practice any profession or to carry on any occupation or trade as enumerated under Article 19(1)(g) does not extend to an occupation, trade or business which is inherently vicious and pernicious, and is condemned by all civilized societies. The Court brought potable liquor within this ambit as it is an intoxicating and depressant drink which is dangerous and injurious to health. As a result, the Court held trade in liquor to be ‘Res Extra Commercium’ which means ‘outside the scope of commerce’. In a nutshell, there exists no fundamental right to trade in liquor.

However, the Court also clarifies that as long as a state permits the trade or business in liquor, a citizen’s right to engage in the same arises and there cannot be any discrimination on who runs such trade or business. This right however gets subsumed if the state decides to impose total prohibition in light of Article 47 of the Constitution. This ratio is binding even today as far as trade in liquor is concerned.

Spirit of Article 47 visited by the Courts

It is well established that there exists no fundamental right to trade in liquor. However, is there a fundamental right to consume alcohol protected under Article 21 of the constitution within the facets of the right to choose and right to privacy? The High Court of Patna was called upon to decide on this question in the Confederation of Indian Alcoholic Beverage Companies v. State of Bihar. The Court however, differed in their judgments and the question was still open for interpretation. The question was finally answered in the negative by the Kerala High Court in M.S Anoop v. State of Kerala. The Court took aid from Khoday Distilleries on the point that the right to trade in liquor is always subservient to a decision of a state in imposing a total prohibition by upholding the spirit of Article 47, the same cannot be diluted by including a right to consume alcohol within the mandate of Article 21.

Trade-in Liquor and Revenue Generation

The ratio in Khoday Distilleries did not stop with declaring trade in liquor as outside the scope of commerce. It also considered the aspect of revenue generation when the trade is indeed permitted by the state. The Court held that even though there cannot be right to ‘business in crime’, the collection of taxes and other levies on such trade when permitted falls within the power of the state to ‘raise revenue’.

Contribution by the Liquor Industry to India’s Revenue

Except for the state of Gujarat and Bihar where liquor prohibition is enforced, the remaining states in the Union earn a significant amount of their revenue through trade in liquor and it is, therefore, important to consider the statistics. Placing reliance on the ‘Study of Budgets’ by the RBI, it can be inferred that revenue through liquor is the second or third highest contributor to a state’s own tax revenue. An astonishing amount of 1.75 Lakh Crores was collected as excise duty on liquor by all the states and two union territories combined. Considering individual state collections in the previous year, the State of Uttar Pradesh tops the list with 25100 crores and is followed by Karnataka and Maharashtra at 19750 crores and 15500 crores respectively. It must be understood that the figures stated herein are only revenue collection through excise duty. Certain states also slap a certain percent of VAT on the same transaction. For example, Tamil Nadu’s overall revenue through liquor trade in the previous financial year amounted to 31157 crores.

Liquor Trade and the Pandemic

The nationwide lockdown began in the Indian Union on 24th March 2020, and liquor shops have been shut down ever since. However, as India entered into its third phase of the lockdown starting from 4th May, 2020, the states also formulated certain policies to improve their economy and most importantly to handle the pandemic more efficiently. One such measure to generate revenue was to reopen liquor trade.

State of Andhra Pradesh and NCT Delhi imposed a 70% additional tax called ‘Special Corona Fee’ along with few other states which increased the prices of liquor. The State of Karnataka serves to be the best example of how this policy has benefitted the economy of states. On day one of opening, Karnataka recorded an income of 45 crores and on day two, 197 crores of income has been recorded and is the most Karnataka has ever sold in a single day.

Conclusion: The Paradox

Article 47 of the Constitution forms part of the Directive Principles of State Policy and the Hon’ble Supreme Court has dealt with them in the following manner.

In-State of Madras v. Champakam Dorairajan, the Court declared that Directive Principles of State Policy must conform and run subsidiary to the Fundamental Rights. In Mohammad Hanid Quarashi v. State of Bihar, the court held that Directive Principles are fundamental to the governance of the country and a state should endeavor to implement the same. In Minerva Mills v. Union of India, the Court held the goals set out in Directive Principles must be achieved, but without infringing Fundamental Rights. In Ashoka Kumar Thakur v. Union of India, it was declared that merely because directive principles are not justiciable, it does not mean they are of subordinate importance compared to Fundamental Rights.

Understanding the above precedents would lead to two inevitable conclusions. One, achieving the goals set out in Directive Principles should always be of paramount importance to a state. Two, while doing so, it should not infringe on any Fundamental Rights. An interesting question then arises. When there exists no Fundamental Right to trade in liquor nor consume liquor, and an enforcement to satisfy the spirit of Article 47 is always available to a state, has it then moved forward towards reaching that goal?

‘Larger public interest’ will prevail over individual rights is a concept coined deeply by the Hon’ble Apex Court on many occasions. A state which should endeavor to prohibit alcohol in the larger interest of the public has resorted to trade in the same to fill its coffers and to serve the public during this pandemic. In simple words, to protect the health of the public from the deadly virus on one side, the state is actively depriving good health by trading in liquor to raise revenue for the former cause. On another note, keeping the pandemic aside, an average of 15% revenue hike every year through liquor trade also suggests that the state is not heading towards the goals set out in the Constitution under Article 47.

Then, should one simply accept that, for both man and the state, liquor has become a necessary evil?

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