Rawat said the distillery is 40 kms away from the sacred site in Devprayag that is home to the the confluence of the Bhagirathi and Alaknanda rivers which meet to form the Ganga.
For the past week, villagers in Devprayag have been protesting against the distillery claiming the liquor would be consumed by local youths.
As former Chief Minister Harish Rawat launched a scathing attack on what he called the BJP government's decision to allow setting up of the bottling plant by a private company at Devprayag, the Chief Minister hit back saying the licence for the liquor plant was issued by Harish Rawat's government.
"The licence was issued by (Harish) Rawat himself. First he plants the sapling and when the tree grows he makes it an issue," said the Chief Minister.
But he said the company which is setting up the plant would produce only export quality liquor. "This distillery will help create employment opportunities in the area and also help the farmers to get a better price for their produce," he said.
However, state BJP President Ajay Bhatt said the decision to produce liquor at Devprayag is wrong.
Right wing organisations such as the Vishwa Hindu Parishad and others also attacked the government on the issue.
The issue heated up when former Chief Minister Harish Rawat in a tweet stated that a bottling plant is being set up at Devprayag to produce 'Hill Top' brand of whisky.
Significantly, the BJP had vehemently opposed the move to set up the bottling plant at Devprayag in 2016 when the Congress was in power in the state.
( With inputs from IANS )