Manufacture and Sale of Liquor — Licensing (Sections 13–25)

Chapter IV of the Chhattisgarh Excise Act, 1915 is the operative heart of the statute: it converts the State's abstract right over intoxicants into a concrete grid of licences, leases and exclusive privileges. Sections 13 to 25 forbid manufacture, possession beyond limits, and sale except under licence, and they empower the State to lease or auction those privileges for a price. Because liquor is treated as res extra commercium, the citizen has no fundamental right to trade in it; the licence is therefore not a recognition of any pre-existing freedom but a grant of the State's own monopoly. This note works through each provision and the Supreme Court doctrine built around it.

The scheme of Chapter IV: licence as the gateway

Sections 13 to 25 form Chapter IV, headed "Manufacture, Possession and Sale." The architecture is prohibitory-with-exceptions: every productive or commercial dealing in an intoxicant is barred unless it is covered by a licence, permit, pass or lease issued under the Act. Section 13 governs manufacture, Section 16 possession, and Section 17 sale; Sections 14, 15 and 25 attach the fiscal machinery of distilleries, warehouses and excise duty; and Sections 18, 18-A and 19 supply the State's power to lease or exclusively reserve these privileges. The remaining sections (20-24) regulate the manner of the licensed trade. The unifying premise was settled in Nashirwar v. State of Madhya Pradesh, AIR 1975 SC 360, which construed Section 18 of this very Act (then the Central Provinces Excise Act) and held that the State has the exclusive right or privilege of manufacturing and selling liquor, which it parts with through a licence or lease. The terms "liquor," "intoxicant" and "excisable article" that recur throughout are defined in Section 2.

Section 13: licence required for manufacture of intoxicants

Section 13 prohibits, except under the authority and on the terms of a licence, a wide set of productive acts: manufacturing any intoxicant; cultivating the hemp plant; collecting any portion of the hemp plant from which an intoxicating drug can be produced; tapping or drawing tari from any tree; constructing or working a distillery or brewery; and bottling liquor for sale. The provision thus criminalises clandestine production at source rather than waiting for the point of sale. In State of M.P. v. Nandlal Jaiswal, (1986) 4 SCC 566, the Supreme Court expressly read Sections 13 and 14 together as the source of the State's power to grant or refuse licences for the manufacture of intoxicants, and upheld a policy that disposed of distillery licences on a fixed-fee basis to selected entrepreneurs. The Court held that economic and excise policy is a matter for the executive, and that courts will not interfere merely because a more profitable method of disposal was conceivable. The Court in Nandlal Jaiswal also cautioned that judicial review of such policy is confined to Wednesbury grounds — illegality, irrationality or procedural impropriety — and that the writ court is not an appellate authority over the wisdom of excise policy. Manufacture without a Section 13 licence is an offence under the penal provisions of the Act, and the equipment used is liable to confiscation.

Sections 14-15: distilleries, warehouses and duty on removal

Section 14 empowers the Excise Commissioner to establish, or to license, a distillery or brewery where any intoxicant may be manufactured, and a warehouse where intoxicants may be deposited and kept without payment of duty. This creates the bonded-warehouse system: duty is deferred, not waived, while the article remains within the supervised premises. Section 15 supplies the trigger for collection: no intoxicant may be removed from any distillery, brewery, warehouse or other place of storage established or licensed under the Act unless the duty (if any) payable under Section 25 has been paid or a bond has been executed for its payment. The combined effect is that the taxable event is removal from bond, a structure the Supreme Court relied on in Nandlal Jaiswal when treating Sections 13-14 as integral to the State's revenue and regulatory control over manufacture. These sections are policed by the excise officers empowered to inspect bonded premises.

Section 16: possession of intoxicants and prescribed limits

Section 16 makes possession of an intoxicant in excess of the quantity that the State Government may prescribe by notification dependent on a licence, permit or pass; below the prescribed limit, possession for personal consumption is generally lawful. The State may also, for any local area or class of persons, prohibit possession altogether. Common carriers and warehousemen in possession of foreign liquor in the ordinary course are excepted. Possession is the most litigated head because conviction turns on conscious possession of a quantity over the limit. The interpretation of the possession limits and their interaction with the licensing scheme is developed in the companion note on possession limits. Possession beyond the notified quantity without authority is one of the principal offences under the Act.

Section 17: licence required for sale of intoxicant

Section 17 is the sale counterpart to Section 13: no intoxicant shall be sold except under the authority and subject to the terms and conditions of a licence granted under the Act. The section carries narrow exceptions — a cultivator licensed under Section 13 may sell, without a separate licence, those portions of the hemp plant from which an intoxicating drug is manufactured to a person licensed to deal in the same; and a person having the right to draw tari may sell it to a licensed manufacturer or vendor. Beyond these, every retail or wholesale transfer needs a licence. Because there is no right to trade in liquor, the conditions a licence may impose are wide. In Har Shankar v. Dy. Excise & Taxation Commr., AIR 1975 SC 1121, a Constitution Bench held that the amount a successful bidder pays is the price or consideration for the State parting with its exclusive privilege of sale, and that a bidder who has taken the licence with open eyes cannot later resile from its onerous terms.

Section 18: power to grant lease and auction of privileges

Section 18 authorises the State Government to lease, to any person, the right of manufacturing, or of supplying by wholesale, or of selling by retail, any liquor or intoxicating drug within any specified local area, for a fixed period and on fixed conditions. This is the textual fountainhead of the auction system. In Nashirwar v. State of M.P., AIR 1975 SC 360, the Court upheld the disposal of foreign-liquor vend rights by public auction under Section 18, reasoning that the State holds an exclusive privilege and may part with it by competitive sale; the price realised is the consideration for that privilege, not a tax requiring quid pro quo. The same logic anchors Har Shankar, where the auction-purchasers' challenge to their bid liabilities failed. The State's discretion is wide but not lawless: in State of M.P. v. Nandlal Jaiswal the Court accepted that the State may rationally choose a fixed-fee route over auction where it serves a legitimate policy, provided the choice is not arbitrary.

Section 18-A: exclusive privilege to the State Beverages Corporation

Section 18-A, inserted by C.G. Act No. 11 of 2002, allows the State Government to grant the exclusive privilege of manufacturing, or of selling by wholesale or retail, Indian-made foreign liquor within the State to the Chhattisgarh State Beverages Corporation Limited, a corporation wholly owned and controlled by the State. The Excise Commissioner, subject to rules, grants the requisite licence, and the Corporation may open branches or depots as the State specifies. This statutory channelling of the entire IMFL trade through a State undertaking is the strongest expression of the monopoly principle. Its constitutional footing rests on Khoday Distilleries Ltd. v. State of Karnataka, (1995) 1 SCC 574, where a Constitution Bench held that the State may carry on the liquor trade itself, to the exclusion of citizens, either departmentally or through a corporation, because there is no fundamental right to trade in intoxicants and the activity may be completely prohibited.

Sections 19-20: tari permission and military cantonments

Section 19 provides that where the right of manufacturing tari has been leased under Section 18, the State Government may declare that the written permission of the lessee to draw tari shall have the same force and effect as a licence granted by the Collector for that purpose. The lessee's permission is thus elevated to the status of statutory authority, integrating the tapping trade into the leasing scheme. Section 20 carves out a special regime for military cantonments: no licence for the retail sale of liquor or intoxicating drugs within a cantonment, or within such distance of it as may be prescribed, may be granted without the knowledge and consent of the officer commanding the station. This subordinates ordinary excise discretion to military administration in sensitive zones, recognising the disciplinary concerns of the armed forces. Read together, Sections 19 and 20 illustrate the flexibility of the licensing scheme: it can both delegate authority downward, to a lessee whose written permission acquires statutory force, and subordinate it sideways, to a non-excise authority where overriding public interests are engaged.

Sections 21-24: measurement, employment, minors and public peace

Sections 21 to 24 regulate the conduct of the licensed trade. Section 21 obliges every licensed vendor to keep prescribed measures, weights and testing instruments on the premises and to allow excise officers to measure, weigh or test the intoxicants. Section 22 prohibits the employment, in any part of the licensed premises where liquor is consumed, of any person under twenty-one years of age or of any woman, during hours of business, except family members. Section 23 forbids sale of liquor or any intoxicating drug to a person who is, or appears to be, under twenty-one years, whether for that person's consumption or another's. Section 23-A (inserted later) penalises advertisements inducing liquor consumption, with imprisonment up to six months or fine up to two thousand rupees, sparing only price-lists on vends and out-of-State publications. Section 24 empowers the District Magistrate to order closure of liquor shops by written notice where necessary to preserve the public peace, and permits any Magistrate to order immediate closure during a riot or unlawful assembly. These conditions are enforceable as licence terms, breach of which attracts cancellation and the penal consequences detailed in the offences note.

Section 25: excise and countervailing duty on excisable articles

Section 25 is the charging provision that animates Sections 14-15. It empowers the imposition of an excise duty, or a countervailing duty, on any excisable article imported, exported, transported, manufactured, cultivated or collected under any licence, or manufactured in any distillery or brewery licensed under the Act. The duty may be levied at different rates according to the place of import or destination, and according to the strength, quality or kind of the article, or its intended use. The provision interlocks with the transport, import and export regime, since duty is the consideration for movement across the duty line. In State of Punjab v. Devans Modern Breweries Ltd., (2004) 11 SCC 26, the Supreme Court, treating potable liquor as res extra commercium, held that the freedom of trade under Article 301 does not protect the liquor trade, so the State's power to levy import duty on liquor is not fettered by Part XIII of the Constitution. The decision confirms that the fiscal and regulatory powers in this chapter draw their unusual width from the same source as the licensing monopoly — the noxious character of the article and the State's plenary control over it.

The constitutional doctrine: no right to trade in liquor

The licensing chapter cannot be understood apart from the doctrine that no citizen has a fundamental right to trade in intoxicants. The line begins with Cooverjee B. Bharucha v. Excise Commissioner, Ajmer, AIR 1954 SC 220, where the Court upheld the auction of country-liquor vends under the Ajmer Excise Regulation, holding that the trade in liquor may be restricted or even prohibited in the interest of public health and morals without offending Article 19(1)(g). Nashirwar and Har Shankar (both 1975) entrenched the exclusive-privilege theory. The doctrine was authoritatively consolidated in Khoday Distilleries (1995), which laid down propositions that the State may completely prohibit the trade, may create a monopoly in itself or its corporation, and may charge a price for parting with the privilege. Devans Modern Breweries (2004) extended the same reasoning to Article 301. For the licensee, the practical consequence is stark: the licence is a privilege held on the State's terms, revocable and conditional, never a vested right — a theme introduced in the introduction to this Act.