State Lacks Legislative Competence to Regulate Non-Intoxicant Molasses Trade: Chhattisgarh HC

The Chhattisgarh High Court has held that the State cannot compel traders dealing in molasses for non-intoxicant purposes to obtain excise licences, ruling that such regulation travels beyond the legislative competence of the State under the Excise Act and violates constitutional limitations governing taxation and control over intoxicants.

A Division Bench comprising Chief Justice Ramesh Sinha and Justice Ravindra Kumar Agrawal allowed the batch of writ petitions and held that the Chhattisgarh Molasses Control and Regulation Rules, 2022, insofar as they are applied to traders dealing in molasses for non-intoxicant purposes, are ultra vires the Constitution.

The Court declared that such traders cannot be subjected to excise licensing requirements or coercive action and clarified that the State’s regulatory powers are confined to intoxicants and activities directly connected with manufacture of liquor.

The batch of petitions challenged the constitutional validity of the Chhattisgarh Molasses Control and Regulation Rules, 2022, framed under the Chhattisgarh Excise Act, 1915.

The petitioners, comprising traders and industrial entities, contended that they deal in molasses exclusively for non-intoxicant purposes such as cattle feed, gudakhu, industrial use, and other commercial applications, and are not engaged in manufacture or sale of liquor.

They argued that despite this, the State authorities were compelling them to obtain excise licences under Rule 8 and threatening coercive action including inspections, seizures, and penal consequences.

The petitioners asserted that molasses, in its natural form, is neither an intoxicant nor fit for human consumption and only becomes capable of producing alcohol after undergoing a complex fermentation process.

They further contended that legislative competence over industrial products and non-intoxicant uses of molasses lies with the Union, particularly in light of the Goods and Services Tax regime, under which molasses is taxed as a commodity.

It was argued that treating ordinary traders on par with liquor manufacturers was arbitrary and violative of Articles 14 and 19(1)(g) of the Constitution.

The State, on the other hand, defended the Rules by contending that molasses is a key raw material in the manufacture of alcohol and therefore falls within the regulatory domain of the State under Entry 8 of List II of the Seventh Schedule.

It was argued that the State has the authority to regulate all aspects connected with production of intoxicating liquor, including raw materials, to prevent misuse and revenue loss.

After considering the rival submissions, the High Court undertook a detailed examination of the constitutional scheme governing legislative competence.

It noted that Entries 8 and 51 of the State List empower the State to legislate on intoxicating liquors and levy excise duty on alcoholic liquor for human consumption.

However, these powers do not extend to substances which are not intoxicants in themselves and are used for non-intoxicant purposes.

The Court observed that molasses is a by-product of the sugar industry with diverse applications, including use in cattle feed, agriculture, industrial processes, and manufacturing of products like gudakhu.

It held that while molasses may serve as a raw material for production of alcohol, it does not become an intoxicant merely by virtue of such potential use.

Importantly, the Court drew a distinction between molasses used for distillation of alcohol and molasses used for non-intoxicant purposes.

It held that the State may regulate molasses insofar as it is linked to production of intoxicating liquor, but cannot extend its regulatory framework to ordinary trade in molasses unrelated to such activities.

The Court further held that bringing non-intoxicant traders within the ambit of excise licensing amounts to an unreasonable restriction on the right to carry on trade under Article 19(1)(g).

It also found that equating such traders with liquor manufacturers lacks any rational nexus with the object of regulating intoxicants, thereby offending Article 14.

The High Court also took note of the GST regime, observing that molasses is treated as a taxable commodity under central legislation, which reinforces the conclusion that it is not an intoxicant per se.

It held that the State cannot, under the guise of excise regulation, encroach upon fields not constitutionally assigned to it.

On a reading of the Rules of 2022, the Court found that while they purport to regulate molasses both for distillation and other uses, the application of the Rules to non-intoxicant uses is beyond the scope of the parent statute and constitutional competence.

It held that such overreach renders the Rules unconstitutional to that extent.

Accordingly, the Court declared that traders dealing in molasses for non-intoxicant purposes cannot be compelled to obtain excise licences and are not subject to coercive action under the impugned Rules. The Rules were held to be ultra vires insofar as they extend to such activities.

Case Title: M/s Kedia Trading & Ors. v. State of Chhattisgarh & Ors. (Batch Matters)

Bench: Chief Justice Ramesh Sinha and Justice Ravindra Kumar Agrawal

Date of Judgment: 27.03.2026