V.S. Deshpande, C.J.
(1) Has the Parliament power under Article 246(4) to authorise the levy of duty on the import of alcoholic liquor in the Union Territory of Delhi even though such liquor is not manufactured in Delhi and the duty would not, thereforee, be a countervailing duty within the meaning of Entry 51 of List Ii of the Seventh Schedule of the Constitution. This question arises for decision in the following circumstances:
(2) Section 31 of the Punjab Excise Act, 1914 (the Act) as applied to Delhi before its amendment by the impugned ordinance authorises the imposition of an excise duty or countervailing duty on any excisable article imported into Delhi in accordance with the provisions of section 16 or is manufactured in Delhi under license granted under section 20 or manufactured in any distillery established under section 21. The petitioners were granted license in Form 1 10 for 1978-79 under section 35 for the sale of country liquor after the petitioners were declared to be the highest bidders for the liquor shop situated in Okhla. at that auction the break-up of the sale price of Rs. 15 per bottle of 750 ml. given by the respondents to the petitioners was as follows:
(i) Wholsale price issuer from Bonded Warehouse Rs. 1.79 (ii) Excise Duty Rs. 10.23 (iii)Sales Tax Rs. O.98 (iv) Profit of the Licensee Rs. 2.00 ------ Rs. 15.00
According to the terms and conditions of the auction accepted by both the parties the said excise duty component of the sale price was termed as still-head duty but such country liquor was never and is not manufactured or produced in Delhi. Under Entry 51 List Ii of the Seventh Schedule of the Constitution the State Legislature is authorised to levy duties of excise on alcoholic liquor manufactured inside Delhi and countervailing duty at the same or lower rate on similar goods manufactured or produced elsewhere in India. The petitioners and some other 1 10 licensees challenged the levy and collection of the said excise duty of still-head duty in Civil Writ 716 of 1978 on the ground that either an excise duty or a countervailing duty could have been levied only if such liquor was manufactured in Delhi. Since this was not so the levy of this duty was contrary to section 31 of the Act read with Entry 51 of list Ii of the Seventh schedule of the Constitution. This contention was accepted by the learned single Judge who daclared that the countervailing duty levied and collected from the petitioners and others is illegal. Letters Patent Appeals 2 to Ii of 1979 preferred by the respondents against this judgment are pending to be disposed of with this writ petition.
(3) On 20th January, 1979 the President of India promulgated the Punjab Excise (Delhi Amendment) Ordinance, 1979 (annexure A). amending the said Act as it applied to Delhi. The preamble to this ordinance clearly admitted that countervailing duty was not livable on liquor imported into Delhi because such liquor was not being manufactured in Delhi. It then stated that the consumption of liquor is injurious to health and, thereforee, the levy of a special duty on the import of liquor into Delhi with a view to bring about prohibition on consumption of liquor would be enabled to be levied by the following changes in the Act : Among the definitions given in section 3 are inserted the following new relevant provisions:
'(5A)'duty' means the excise duty or countervailing duty, or as the case may be, special duty :' '(18a) 'special duty' means a tax on the import of any excisable article being an article on which countervailing duty as is mentioned in entry 51 of List Ii in the Seventh Schedule to the Constitution is not imposable on the ground merely that such article is not being manufactured or produced in the territory of Delhi to which this Act extends.'
In section 31 which authorises the imposition of duties were inserted the words 'or a special duty' after the words 'excise duty, or a countervailing duty'. By section 6 of the ordinance the amendment of the Act was made retrospective and any action taken under the unamended Act was to be deemed to have been taken under the Ordinance amending the Act.
(4) The present writ petition is filed against the Ordinance amending the Act on the ground that the said Ordinance is unconstitutional. The writ petition is resisted by the respondents who point out that the power of Parliament under article 246(4) read with Entry 97 of List I of the Seventh Schedule of the Constitution authorised the amendment of the Act by the Ordinance and the levy of a special duty when countervailing duty is not imposable on liquor imported into Delhi.
(5) Shri P. P. Rao, learned counsel for the petitioner advanced the following propositions as to the legislative competence of Parliament to impose the special duty by amending the Act by the Ordinance :
(1)Entry 97 of List 1 is subject to Entries in Lists Ii and III. (2) Entry 51 of List Ii squarely includes alcoholic liquor for human consumption subject to the limitation that it has to be a countervailing duty. Since this field is covered by Entry 51 of List Ii it is excluded from Entry 97 of List 1. (3) Entry 51 of List Ii is confined to imposition of a duty on excisable articles. No other article can be subjected to duty by legislation covered by Entry 51. (4) The judgment of the learned single Judge could be got over only either by amending Entry 51 of List Ii by removing the instructions found therein or by starting manufacture of alcoholic liquor in Delhi. (5) Neither Entry 62 of List Ii authorising imposition of tax on luxuries nor Entry 97 which is the residuary Entry in List I can include the special duty imposed by the Ordinance amending the Act since it is virtually a duty under Entry 51 of List II.
(6) summarizing these contentions Shri Rao argued that the taxable event decides the nature of the tax. The taxable event in this case is the import of liquor into Delhi. Only one tax or duty can be levied on import. Entry 51 of List Ii authorises the imposition only of a countervailing duty which could be imposed only if such liquor is manufactured in Delhi. The learned single Judge has rightly held that it could not be imposed as no such liquor is manufactured here. His decision cannot be circumvented by the imposition of a mere import duty which will not be subject to the limitation imposed upon it by Entry 51 of List Ii, namely that it has to be a countervailing duty. In substance the special duty was a subject-matter of Entry 51 of List Ii and since it does not comply with the limitations contained therein it is imposed without legislative competence.
(7) In our view, the argument is based on a misconception of the true constitutional position. It needlessly takes recourse to technicalities when the position is simple. We may explain the position plainly so that it is not capable of being misunderstood.
(8) Firstly, the legislative competence of Parliament has to be considered under Article 246(4) of the Constitution. It is as follows :
'PARLIAMENThas power to make laws with respect to any matter for any part of the territory of India not included in a State notwithstanding that such matter is a matter enumerated in the State List.'
As observed in T. M. Kanniyan v. Income-tax Officer. Pondicherry and another, (1968) 2 Scr at 109(1). 'There is no distribution of legislative power with respect to Union territories. That is why Parliment is given power by Article 246(4) to legislate even with respect to matters enumerated in the State List.' In other words, power of Parliament to legislate with regard to Union territories is simply unlimited. Article 246(4) does not even state that the subject of legislation there under must be included in any of the Lists in the Seventh Schedule of the Constitution. The words 'notwithstanding that such matter is a matter enumerated in the State List' only emphasise the unrestricted nature of the legislative power of Parliament under article 246(4). They do not require that in construing that Article we must first consider whether the subject-matter of legislation falls in the State List and apply that Article only when the subject is not included in the State List. On the contrary, the correct approach is first to ascertain whether the legislation is to apply to any matter in any part of the territory of India not included in a State. The next enquiry is the nature of 'the matter' which is the subject of the legislation. Shri Rao submits that in the context of Chapter Xi the word 'the matter' mean's such subject as is included in the Seventh Schedule. This may be so. Nevertheless, this does not mean that it must be a matter which must fall within the existing language of any of the entries in any of the List in the Seventh Schedule. It is well-known that the Entries are to be broadly construed. They merely indicate the field of legislation but do not define it. We have, thereforee, to first consider the subject matter of legislation and then find out if any one or more Entries in the List would cover it. It is necessary to emphasise that the subject of legislation under Article 246(4) may not be covered only in one of the Entries but may be covered by more than one Entries.
(9) In Union of India v. H. S. Dhillon : 83ITR582(SC) , the question was in which Entry or Entries would fall the subject of imposition of tax on the capital value of the net wealth of an assessed including the agricultural land in the assets for the purpose of computing the net wealth. Sikri C. J. speaking for the majority observed as follows:
'WEare clearly of the opinion that no part of the impuguned legislation falls within entry 86 List 1. However, assuming that the Wealth Tax Act, as originally enacted is held to be legislation under entry 86 List I, there is nothing in the Constitution to prevent Parliament from combining its powers under entry 86 List I with its powers under entry 86 List I with its powers under entry 97 List 1. There is no principle that we know of which debars Parliament from relying on the powers under specified entries 1 to 96, List I and supplement them with the powers under entry 97 List I and Art. 248 and for that matter powers under entries in the Concurrent List.'
Applying this reasoning to our case, we are of the view that the Parliament can impose a duty on imports of liquor into the Union territory without such duty being the countervailing duty. Firstly, the subject-matter of this duty does not fall under Entry 51 of List II. The argument that merely because the duty is on import it must fall under Entry 51 of List Ii is not correct. This would be clear from the analogy furnished by the following two decisions of the Supreme Court. In Patel Gordhandas Hargovindas v. Municipal Commissioner, Ahmedabad, : 2SCR608 it was held that the meaning of the word 'rate' as used in the Bombay Municipal Boroughs Act, 1925, and the rules framed there under was the same as in the English law and, thereforee, it could be imposed only on the annual letting value of the property. It could not be levied on the capital value of the property. The relevant rules were, thereforee, held to be ultra virus of the Act. Thereupon the Gujarat legislature passed the Gujarat Imposition of Taxes by Municipalities (Validation) Act, 1963. By section 3 of this Act past assessment and collection of 'rate' on lands and buildings on the basis of capital value or a percentage of capital value was declared valid by providing that the tax on lands and buildings may be imposed either on the basis of annual value or on the basis of capital value. Hidyatullah C. J. observed in Shri Prithvi Cotton Mills Ltd. & another v. Broach Borough Municipality & others, : 79ITR136(SC) that to get rid of the decision in Patel Gordhandas's case (supra) 'the legislature exercised its undoubted powers of redefining 'rate' so as to equate it to a tax on capital value and convert the tax purported to be collected as a 'rate' into a tax on Lands and buildings.' He proceeded to observe on page 395 that 'the exercise of power by the legislature was valid because the legislature does possess the power to levy tax on lands and buildings based on capital value thereof and in validating the levy on that basis, the implication of the use of the word 'rate' could be effectively removed and the tax on lands and buildings imposed instead.'
(10) In the present case the duty levied as countervailing duty was covered by Entry 53 List Ii because of the name 'countervailing duty' given to it. The legislature, thereforee, wanted to impose a duty which would not be a countervailing duty, but would be simply an import duty. The legal Adviser to the Government and the draughtsman seem to have taken the clue from the decision in Shri Prithvi Cotton Mills. The validating legislation in that case reproduced on page 392 expressly stated that it 'shall not be called in question merely on the ground that the assessment of the tax or rate on the basis of the capital value of the building or land.' The impugned ordinance defines in section 2(18a) 'special duty' to mean a tax on the import of any excisable article being an article on which countervailing duty as is mentioned in Entry 51 of List Ii in the Seventh Schedule to the Constitution is not imposable on the ground merely that such article is not being manufactured or produced in the territory to which this Act extends. The decision in Shri Prithvi Cotton Mills thus directly bear on the validity of the impugned ordinance. As in the Supreme Court case so in the present case the legislature has changed the basis of the duty. While validly imposed duty was based on It being a countervailing duty, while the very basis of the present duty is that it is a mere import duty and not a countervailing duty. If the basis of the new duty is different then that of the old one the ground on which the old one was held to be invalid cannot apply to the validity of the new duty. In Shri Prithvi Cotton Mills the supreme Court expressly authorised such a change of basis as being the right method to validate the new duty and to deem that the old duty will be regarded as being imposed under the new basis even if the name of the duty is not changed. In the present case even the name is changed.
(11) Secondly, the contention of Shri Rao that Parliament is not empowered to impose a duty on import of liquor into the Union territory ignoring the limitation placed by Entry 51 List Ii of such duty is negatived by the decision of the Supreme Court in Mithan Lal v. The State of Delhi and another, : 1SCR445 where it was observed :
'BUTit is contended by the learned Solicitor-General that that decision Gramai Dewkerly & Co v. State of Madras : 1SCR379 , has no application to the present petitions, because the impugned law was enacted not by a State Legislature in exercise of the power conferred by Entry 4 in List Ii, but by Parliament by virtue of the authority granted by Art. 246(4) of the Constitution and that it was within the competence of Parliament acting under that Article to impose a tax on the supply of materials in building contracts, even though there was no sale of those materials within Entry 54'..........Under Art. 246(4) it is Parliament that has the power to legislature for part C States, and that power is untrammelled by the limitations prescribed by Art. 246, Cls. (2) and (3), and Entry 54 of List It, and is plenary and absolute, subject only to such restrictions as are imposed by the Constitution.' The whole basis of the argument for the petitioners thus disappears. For, the special duty can be imposed by Parliament as a new durty untrammelled by the limitations of Entry 51 of List Ii for the simple reason that these limitations have no relevance to the power of Parliament exercised under Article 246(4).
(12) Thirdly, once it is held that the special duty is not covered by Entry 51 of List Ii but is an independent duty it falls under Entry 97 of List I which includes not only subjects outside Lists Ii and Iii but also taxes which are outside those Lists. Article 248(2) expressly empowers Parliament to impose taxes not mentioned in the said list or the concurrent List. The special duty is such a tax. All that is necessary for Parliament is to show that the tax is not comprised in Entry 51 of List Ii and it must be taken to be the stand of both the parties that the special duty as it stands is not the countervailing duty in Entry 51 of List II.
(13) Shri Rao then argued that even if the Parliament was competent to amend the Act by the impugned ordinance the imposition of the duty on imports of liquor in the Union territory has to be shown lo be a reasonable restriction on the petitioners' right to freedom of occupation under Article 19(1)(g) and the general freedom of trade under Article 304(b) of the Constitution. Firstly, as to the right of the petitioners under Article 19(1)(g) it has to be seen in the context of Article 47 of the Constitution which requires the State to bring about prohibition of the consumption of intoxicating drinks injurious to health. Article 31-C ensures that laws giving effect to Directive Principles shall not be deemed to be void on the ground that they are inconsistent with the fundamental rights conferred by Articles 14 and 19. Secondly, a series of Supreme Court decisions have taken note of the deleterious effects of consumption of liquor on health and have denied the status of the fundamental right to trade or business in intoxicants, These decisions are reviewed and confirmed in Har Shankar and others v. The Deputy Excise and Taxation Commissioner and others, : 3SCR254 by the Constitution Bench of five Judges.
(14) Thirdly, the right to freedom of trade under Chapter Xiv of the Constitution has been regarded to be an independent right apart from Article 19(1)(g) because Article 301 of the Constitution conferring the freedom opens with the words 'Subject to the other provisions of this Part,' implying that it is not subject to Part Iii of the Constitution. We may, thereforee, consider independently of rest of the Constitution whether the restriction imposed on the freedom of trade by the impugned import duty is reasonable and in public interest under Article 304(b). What is 'public interest'. It is the State which is in possession of information as to the health of the people and the effects of alcohol on them. We can also take judicial notice of the fact that the effects of alcohol are injurious to health. For, this is established medical knowledge. It may be said that consumption of alcohol in a very small quantity may be medicinal to its effect. But medicines containing alcohol are already exempted from prohibition. Rest of the consumption of alcohol cannot be regarded as medicinal. It has, thereforee, to be prohibited in public interest. We are satisfied, thereforee, that the policy of prohibition resulting in the imposition of import duties on alcohol imported into Delhi is a reasonable restriction in public interest and the special duty is not, thereforee, contrary to Article 304(b). We are supported in this view by the analogy by which the prohibition of inter-state gambling was upheld by the Supreme Court on the ground that it did not violate either Article 246(4) or the freedom of inter-state trade under Article 301 of the Constitution in The State of Bombay v. R. M. D. Chamarbaugwala, : 1SCR874 . The observations of Das, C. J. in that case were cited with approval recently by the Supreme Court in Fatehchand Himmatlal & others v. State of Maharashtra, etc. : 2SCR828 and P. N. Kaushal etc. v. Union of India and others, : 1SCR122 .
(15) A few minor points raised by Shri Rao may now be disposed of. It was said that under the Punjab Excise Act as amended by the impugned Ordinance the duty including the special duty can be imposed only on an excisable article. The meaning of 'exsisable article' has been defined in the Act to include liquors and spirits. This is so without the qualification that such liquors and spirits are produced in the State. The special duty can, thereforee, be imposed on them even if they are imported from outside into Delhi. In this context 'excisable article' means only an article on which excise duty could be imposed on its manufacture in the State or place in which it is manufactured. It does not mean that it must be manufactured in Delhi.
(16) It was then said that in Kalyani Stores v. The State of Orissa and others, : 1SCR865 the duty of enhanced levy was regarded as the purely fiscal measure and, thereforee, not complying with the requirements of Article 304(a) and (b). That may be so in that case. But in the present case the special duty has been imposed expressly with a view to bring about prohibition. It is not, thereforee, a purely fiscal measure. Its dominant intention is to bring about prohibition in accordance with the declared policy of the State. Reference was also made to Entry 52 of List II. Firstly, the words 'local area' used therein do not seem to apply to a Union territory or a State. They seem to apply to an area subject to a local authority. Such a local area has to be distinguished from a State or a Union territory. For instance, the Municipal Corporation is a local authority but is neither a State nor a Union territory. Secondly, the reasoning stated above for the non-application of Entry 51 List Ii to the impugned special duty is equally applicable to Entry 52 of List II. For those reasons Entry 52 of List Ii is not attracted. Lastly, even if it is attracted, the Parliament acts as the State in a Union territory in view of the definition of a 'State' in section 2(58)(b) of the General Clauses Act and has all the powers of State legislation in the Union territories. The special duty is, thereforee justifiable even if it fell under Entry 52 of List II. But, since the Union territory is local area it would fall only it at all under Entry 51 List Ii as stated by us above.
(17) For the above reasons, we uphold the validity of the ordinance as also its retrospective application. The result is that this writ petition and the connected writ petitions are dismissed and for the same reasons the letters Patent Appeals are allowed and the judgments of the learned single Judge against which they are filed are set aside. There will be no order as to costs.