Sections 15 to 22 of the Andhra Pradesh Excise Act, 1968 form the commercial spine of the statute: they make the sale of intoxicants unlawful except under licence (Section 15), let the State grant the exclusive privilege of dealing in liquor (Section 17), arm it to close shops for public peace (Section 20), and authorise the excise and countervailing duties and the modes of levy that turn the privilege into revenue (Sections 21–22). The unifying premise, repeatedly affirmed by the Supreme Court, is that there is no fundamental right to trade in liquor; the entire business exists only because the State chooses to part, for a price, with a privilege it exclusively owns. This note threads each bare provision through the controlling authority so an aspirant can both recite the section numbers and explain the doctrine that animates them. For the statutory scheme as a whole, see our AP Excise Act hub.
Why a Sale Licence Is Needed at All: The Privilege Theory
The licensing of liquor sale rests on the constitutional premise that Article 19(1)(g) confers no fundamental right to carry on trade or business in intoxicants. In Nashirwar v. State of Madhya Pradesh, AIR 1975 SC 360, (1975) 1 SCC 29, the Supreme Court held that the State has the exclusive right or privilege of manufacturing and selling liquor and that a citizen has no fundamental right to do business in it, resting the conclusion on the State's police power over noxious goods and its power to enforce absolute prohibition under Article 47. The doctrine was placed beyond doubt by the Constitution Bench in Khoday Distilleries Ltd. v. State of Karnataka, (1995) 1 SCC 574, which classified intoxicating liquor as res extra commercium and held that the State alone holds the privilege to manufacture, possess and sell it, granting that privilege to private persons by way of licence or lease on terms it thinks fit. This is why every provision in Sections 15 to 23 is structured around the State granting and pricing a privilege rather than merely regulating a pre-existing freedom. The conceptual groundwork is developed in our introduction to the Act.
Section 15: Sale Without Licence Prohibited
Section 15 is the operative prohibition for this topic. It provides that no person shall sell or buy any intoxicant except under the authority and in accordance with the terms and conditions of a licence granted under the Act. The licensing authority is identified by territorial reach — broadly, the District Officer within a district, the higher authority where the area spans more than one district — and the section deliberately casts the net wide: it brings within the licensing requirement not only ordinary vends but also the supply of liquor by clubs and hotels to their members or customers, so that even a members-only bar is a 'sale' needing a licence. Section 15 carries narrow carve-outs — for instance limited toddy dealings and the bona fide disposal of private stock on death or relocation — but these are exceptions that prove the rule that sale is otherwise comprehensively prohibited absent licence. Section 15 sits alongside Section 13, which prohibits unlicensed manufacture; the two together make licensing the universal gateway to every excise activity. The manufacture side is treated in our note on manufacture of liquor, licences and permits.
Section 16: Distilleries and Warehouses Behind the Sale
Section 16 supplies the institutional infrastructure that supports lawful sale. It empowers the Commissioner of Prohibition and Excise, with the previous sanction of the Government, to establish, continue or discontinue distilleries and breweries and to establish or license warehouses wherein intoxicants may be deposited and kept without payment of duty. A warehouse so established is for the general accommodation of intoxicants subject to duty, pending removal for local consumption or for export. The significance for sale is that liquor lawfully sold must ordinarily have passed through this duty-paid or bonded channel; the warehouse is the point at which the State's revenue interest crystallises before the article reaches the retail counter. The officers and authorities who administer this machinery — Commissioner, Deputy Commissioners and District Officers — are surveyed in our note on establishments and officers.
Section 17: Grant of the Exclusive Privilege
Section 17 is the central pricing-and-grant provision. Subject to Section 28 and the rules, the Government may, on such conditions as it deems fit, grant for a fixed period to any person, at any place within a specified area, a lease or licence or both, either jointly or severally, for the exclusive privilege of manufacturing, of supplying by wholesale, of both, or of supplying by wholesale and selling by retail any liquor or other intoxicant within the specified area. Sub-section (2) permits the Government to confer this power on an officer. Crucially, a lease granted under Section 17 does not take effect until the Collector or other competent officer has issued a licence under the Act — the grant of the privilege and the issue of the licence are two distinct legal steps. The constitutional validity of conferring such an exclusive privilege, including by auction or fixed levy, flows directly from Khoday Distilleries and was applied to the AP scheme in State of Andhra Pradesh v. McDowell & Co., AIR 1996 SC 1627, (1996) 3 SCC 709, where the Court upheld the State's legislative competence to regulate and even prohibit dealings in intoxicating liquor.
The Privilege Is Priced: Auction Bids Bind the Bidder
Because Section 17 grants a privilege rather than recognising a right, the amount the licensee pays is a price, not a tax or a fee in the conventional sense. The foundational authority is Har Shankar v. Deputy Excise & Taxation Commissioner, AIR 1975 SC 1121, (1975) 1 SCC 737, where the Supreme Court held that the sum charged to a liquor licensee is neither a tax nor an excise duty requiring quid pro quo but is the price or consideration the Government charges for parting with its exclusive privilege. The Court drew the practical corollary that a successful auction bidder is bound by his bid: those who contract with open eyes must accept the burdens of the contract along with its benefits, and a bidder cannot resile through a writ petition merely because the venture proved unprofitable or because he lifted no liquor. The same characterisation was reaffirmed in State of Punjab v. Devans Modern Breweries Ltd., (2004) 11 SCC 26, which held that the levy charged for parting with the privilege is neither a tax nor a fee but simply a levy for the act of granting permission to exercise the State's exclusive right. Section 23 codifies this by allowing the Commissioner to accept payment of a sum in consideration of the grant of the privilege under Section 17.
Sections 18–19: Measurement, Testing and Employment Conditions
Sections 18 and 19 impose operating conditions on every licensed seller. Section 18 obliges a licensee to maintain correct weights, measures and testing instruments in good condition and to permit officers, on demand, to inspect, measure, weigh and test the intoxicants and the apparatus — a provision aimed squarely at preventing adulteration, short measure and evasion of duty at the point of sale. Section 19 prohibits a licensee from employing, in any part of the licensed premises where intoxicants are consumed by the public, any person below the prescribed age, and from employing any person suffering from leprosy or any contagious or infectious disease. These are conditions of the licence in the strict sense: their breach is not merely a regulatory lapse but a ground engaging the cancellation machinery, because the licensee, his servants and persons acting on his behalf are bound by the terms on which the privilege was granted. The principle that the State may attach stringent conditions to a liquor licence is settled by P.N. Kaushal v. Union of India, AIR 1978 SC 1457, (1978) 3 SCC 558.
Section 20: Closing of Shops for Public Peace
Section 20 is a public-order control directly on the activity of sale. Sub-section (1) empowers the District Magistrate to require that any shop in which an intoxicant is sold be closed at such times or for such period as he considers necessary for the preservation of public peace. Sub-section (2) confers an emergency power: where a riot or unlawful assembly occurs or is apprehended, a Magistrate of the first or second class may require closure of intoxicant shops for such period as he thinks proper. Sub-section (3) provides the licensee's only relief — a proportionate refund of the licence fee for the period of compelled closure, but no other compensation. The constitutionality of compelling closure and restricting trading hours, and of denying any larger compensation, is squarely supported by P.N. Kaushal v. Union of India, (1978) 3 SCC 558, where the Supreme Court (per Krishna Iyer J.) upheld the imposition of weekly 'dry' days, holding that regulating the number of days and hours during which liquor may be sold is eminently reasonable given the deleterious character of the commodity and the prohibitionist mandate of Article 47.
Section 21: Excise Duty and Countervailing Duty
Section 21 is the principal taxing provision attached to sale and manufacture. It empowers the Government to levy an excise duty on any excisable article manufactured or produced in the State, and a countervailing duty on any such article imported into the State, at such rate not exceeding the rate specified in the Schedule as may be prescribed — the countervailing duty being designed to neutralise the advantage an imported article would otherwise enjoy over the locally produced, duty-bearing article. The constitutional anchor is Entry 51 of List II of the Seventh Schedule, which confines the State to duties of excise and countervailing duties on alcoholic liquors and narcotics. This boundary was tested and respected in Government of A.P. v. Anabeshahi Wine & Distilleries (P) Ltd., (1988) 2 SCC 25, where the Court analysed whether 'establishment charges' demanded from a licensee were a disguised non-excise levy and upheld them not as a tax but as a permissible condition of the privilege. The distinction between excise duty (on local production) and countervailing duty (on imports) is a frequent examination point and connects to the cross-border rules in our note on transport, import and export of liquor.
Section 22: Modes of Levying Duty
Section 22 prescribes how the duty under Section 21 may actually be collected, conferring flexibility on the State to match the levy to the article. Duty may be levied ratably on the quantity of the excisable article; or, in the case of spirit or beer, by reference to its strength or quality; or, in the case of toddy and other intoxicants drawn from trees, as a tax on the excise trees from which the article is drawn; or by way of fees on licences for sale or for the exclusive privilege under Section 17. The provision matters because the mode of levy determines the licensee's actual liability and the State's collection mechanism: a tree tax operates regardless of how much toddy is drawn, while a quantity-based duty tracks production. The Har Shankar and Devans Modern Breweries line confirms that even where the State chooses the 'fee on licence' mode, the charge retains its character as the price of the privilege rather than a fee demanding quid pro quo, so the licensee cannot escape it by proving he derived no commensurate benefit.
Section 23: Payment for the Exclusive Privilege
Section 23 supplies the fiscal counterpart to Section 17 and completes the cluster. It provides that, instead of or in addition to any duty or fee leviable under Sections 21 and 22, the Commissioner or an authorised officer may accept payment of a sum in consideration of the grant of a lease or licence or both for the exclusive privilege under Section 17, and that different rates may be fixed for different purposes. This is the statutory embodiment of the Har Shankar principle: the 'privilege amount' is consideration for the State parting with its monopoly, conceptually distinct from the excise duty on the article itself. The practical upshot, reinforced by State of Punjab v. Devans Modern Breweries Ltd., (2004) 11 SCC 26, is that a licensee may simultaneously owe excise duty under Section 21, a mode-of-levy fee under Section 22, and a privilege price under Section 23 — three distinct exactions resting on three distinct legal bases, none of which the licensee can defeat merely by pointing to the others.
Conditions, Breach and the Precarious Licence
The conditions imposed under and around Sections 15 to 22 are not advisory; breach engages the disciplinary machinery of the Act and exposes the licensee to cancellation or suspension, ordinarily after an opportunity to be heard. The combined teaching of Nashirwar, Khoday Distilleries, Har Shankar and P.N. Kaushal is that the licence is a precarious, terminable permission, not a vested right: the State may attach onerous conditions, close shops, fix dry days, demand establishment charges, and price the privilege as it sees fit, and the licensee who accepted the grant 'with open eyes' is bound by the bargain. Anabeshahi shows that even a condition compelling the licensee to pay for the State's own supervisory staff is valid as a condition of the privilege rather than an unconstitutional levy. For the closely related quantitative controls on holding stock, which interact with the sale regime, see our note on possession of liquor and limits, and for the meaning of the goods being sold, our note on the definitions of liquor, intoxicant, beer and spirit.
Frequently asked questions
Is there any fundamental right to sell liquor under the AP Excise Act?
No. In Nashirwar v. State of M.P., (1975) 1 SCC 29, and the Constitution Bench in Khoday Distilleries v. State of Karnataka, (1995) 1 SCC 574, the Supreme Court held that liquor is res extra commercium and that there is no fundamental right under Article 19(1)(g) to trade in it. Sale is lawful only under a licence the State chooses to grant on its own terms.
What does Section 15 of the AP Excise Act prohibit?
Section 15 prohibits any person from selling or buying any intoxicant except under the authority and terms of a licence. It applies broadly — even clubs and hotels supplying liquor to members or customers need a licence — subject to narrow carve-outs such as limited toddy dealings and bona fide disposal of private stock.
Is the amount paid by a liquor licensee a tax or a price?
It is a price for the privilege, not a tax. Har Shankar v. Dy. Excise & Taxation Commissioner, (1975) 1 SCC 737, held it is the consideration the State charges for parting with its exclusive privilege, and State of Punjab v. Devans Modern Breweries, (2004) 11 SCC 26, reaffirmed that it is neither a tax nor a fee but a levy for granting permission. A successful auction bidder is therefore bound by his bid.
Can the State close liquor shops, and must it compensate the licensee?
Yes. Under Section 20 the District Magistrate may order closure for public peace, and a Magistrate may order closure during riots or unlawful assemblies. The licensee gets only a proportionate refund of licence fee for the closure period and no other compensation. P.N. Kaushal v. Union of India, (1978) 3 SCC 558, upheld such closures and weekly dry days as reasonable.
What is the difference between excise duty and countervailing duty under Section 21?
Excise duty under Section 21 is levied on excisable articles manufactured or produced within the State; countervailing duty is levied on like articles imported into the State, to neutralise the advantage an untaxed import would otherwise have. Both flow from Entry 51, List II, and cannot exceed the scheduled rate. Govt. of A.P. v. Anabeshahi Wine & Distilleries, (1988) 2 SCC 25, examined this fiscal boundary.
How may excise duty be collected under Section 22?
Section 22 allows duty to be levied ratably by quantity; by the strength or quality of spirit or beer; as a tax on the excise trees from which toddy or other intoxicants are drawn; or as fees on licences, including the exclusive-privilege licence under Section 17. The mode chosen determines the licensee's actual liability and the State's collection mechanism.