There are three principal reasons to hold that there is no fundamental right of citizens to carry on trade or to do business in liquor. First, there is the police power of the State to enforce public morality to prohibit trades in noxious or dangerous goods. Second, there is power of the State to enforce an absolute prohibition of manufacture or sale of intoxicating liquor. Article 47 states that the State shall endeavour to bring about prohibition of the consumption except for medicinal purpose of intoxicating drinks and of drugs which are injurious to health. Third, the history of excise laws shows that the State has the exclusive right or privilege of manufacture or sale of liquor.
In our country the history of excise shows that the regulations issued between 1790-1800 prohibited manufacture or sale of liquors without a licence from a Collector.. In 1808 a regulation was introduced in the Madras Presidency which provided that the exclusive privilege of manufacturing and selling arrack should be farmed in each district. in 1820 the law was amended to authorise the treatment of toddy and other fermented liquors in the same way as spirits by allowing Collectors to retain the manufacture and sale under direct management if deemed preferable to farming. In 1884 a Committee was appointed to investigate the excise system. The recommendations of the Committee were adopted. Under the new system the monopoly of manufacture was let separately from that of sale. The former was granted on condition of payment of a fixed duty per gallon. The right of sale was given on payment of a fee per shop or a number of shops, or on payment of a fee determined by auction. In the Bombay Presidency the monopoly of the retail sale of spirits and the right to purchase spirits was farmed. In 1857 the Government declared its future policy to be the letting by auction of each shop, with its still, separately. In 1870-71 a change was made. The rule at that time was that the Collector would fix the number and locality of the different shops and determine their letting value according to the advantages possessed by each. It was not intended that they should, as a rule, be put up to public competition; but competition might be resorted to by the Collector and taken into account in determining the sum at which each would be leased. This rule remained in force for many years. The practice of putting the shops up to auction was, thereafter followed. The history of excise administration in our country before the Independence shows that there was originally the farming system and thereafter the central distillery system for manufacture. The retail sale was by auction of the right and privilege of sale. The Government of India appointed an Excise Committee in 1905. The measures recommended- by the Committee were the advances of taxation, the concentration of distillation, the extended adoption of the contract distillery system. The Committee suggested among other things the replacement of the then existing excise law by fresh legislation on the lines of the Madras Abkari Act.
The excise revenue arising out of manufacture and sale of intoxicating liquors is one of the sources of the State Exchequer. One of the principal sources of State revenue is customs and excise. In England sale of intoxicating liquors although perfectly lawful at common law is subject to certain statutory restrictions. These restrictions are primarily of two kinds; those designed for the orderly conduct of the retail trade and those designed to obtain revenue from the trade whether wholesale or retail. Trade in liquor has historically stood on a different footing from other trades. Restrictions which are not permissible with other trades are lawful and reasonable so far as the trade in liquor is concerned. That is why even prohibition of the trade in liquor is not only permissible but is also reasonable. The reasons are public morality, public interest and harmful and dangerous character of the liquor. The State possesses the right of complete control over all aspects of intoxicants, viz., manufacture, collection, sale and consumption. The State has exclusive right to manufacture and sell liquor and to sell the said right in order to raise revenue-.
The grant of a lease either by public auction or for a sum is a regulation pertaining to liquor one of the purposes of regulation is to raise revenue. Revenue is collected by the grant of contracts to carry on trade in liquor. These contracts are sold by auction. The grantee is given a licence on payment of auction price is to raise revenue. Revenue is collected by the grant of contracts to carry on trade in liquor. These contracts are sold by auction. The grantee is given a licence on payment of auction price. For these reasons we hold that the State has the exclusive right or privilege of manufacturing and selling liquor. The State grants such right or privilege in the shape of a licence or a lease. The State has the power to hold a public auction for grant of such right or privilege and accept payment of a sum in consideration of grant of lease……..Nashirwar Etc. Etc. Vs. The State of Madhya Pradesh, 1975 AIR 360, 1975 SCR (2) 861, 1975 SCC (1) 29