The Patna High Court, in a significant ruling, held that the State has no power to prohibit the production of Extra Neutral Alcohol.
While upholding the constitutional validity of sections 2(40)(ii), 13, 23, 24 (1) of the Bihar Prohibition and Excise Act, 2016, the full bench set aside the Bihar’s Government 24th January notification prohibiting production of industrial alcohol and spirits.
The Court also directed the government to renew the licenses of distillery companies which has expired on March, 2017.
The petitioners, manufacturers of Extra Neutral Alcohol (ENA) which is considered unfit for human consumption, have been granted licence in Form-28A for manufacture of the same. However, the State, exercising its powers under Section 24(1) of the Prohibition Act, banned production of ENA from grain and refused to renew the license of distilleries companies manufacturing ENA from grain from the financial year 2017-18. Section 19(4) of the Prohibition Act was amended and an absolute prohibition in the manufacture, sale, possession etc. of all kind of intoxicants was introduced. In the definition of ‘intoxicant‘, it was indicated that it would include spirits obtained by distillation as well.
The petitioners challenged the constitutional validity of Section 2(40)(ii), Section 13, Section 23, Section 24 (1) of the Bihar Prohibition and Excise Act, 2016 as ultra vires to the constitution and in excess of the legislative power of the state. Before the High Court, they urged that ENA, which is an industrial alcohol unfit for human consumption, does not come within the definistion of the term “intoxicant” which is nothing but a substance fit for human consumption. Further, by refusing the renewal of license and thereby prohibiting manufacture of ENA and alcohol and refusing to pay compensation, the State acted beyond its legislative power entrusted by the Constitution as the power to regulate the production of ENA and other industrial spirits exclusively lies with the Union. It was also contended that the said act is violative of Article 300A of the Constitution, having rescinded back and taken a decision contrary to the industrial policy. Petitioner invoked the doctrine of promissory estoppel and prayed before the High Court that the action of government should be declared as illegal.
The Court accepted the contention of the Petitioners and held that the act of the State Government extending the scope of the definition of ‘intoxicant‘ in s. 2(40) (ii), so as to include ENA or industrial alcohol is beyond the legislative competence of the State Government.
Accordingly, the bench set aside the Notification dated 24th January, 2017 issued by the State Government so far as it prevents or denies the right of renewal of an existing license for production of ENA from grain based distilleries with a direction to the government to renew the license of the distillery companies manufacturing ENA.
Read the full text of the Judgment below.
