E-cigarettes hang displayed in a tobacco shop in New York Thomson Reuters VIENNA (Reuters) - Austria's e-cigarette retailers exhaled in relief after a constitutional court overturned a planned amendment to tobacco laws that would have limited the sale of most products to officially licensed tobacco shops.

The government had proposed that sales of e-cigarettes be limited to the Alpine republic's licensed tobacconists from October to protect young people and for public health reasons.

Specialist sellers of e-cigarettes objected because they would have been allowed only to sell re-usable devices, but not the liquid to fill them or disposable cigarettes.

The court ruled on Monday however, that the proposed amendment was unconstitutional, saying that the health arguments put forward were not solid enough to justify blocking the retailers' right to trade freely and that e-cigarettes should not be treated the same as other tobacco products.

"We are relieved that we can carry on our business and don't have to shut up shop," said Thomas Baburek, head of e-cigarette association VFFED and owner of an e-cigarette shop.

Austrian supermarkets, restaurants, cafes and petrol stations are also allowed to sell cigarette products, but at a higher price than in the officially-licensed tobacconists.

Many experts believe e-cigarettes, which heat nicotine-laced liquid into an inhalable vapor, are a lower-risk alternative to smoking but opponents say they could encourage young people to take up regular cigarettes.

Austrian tobacconists responded by saying such products should not be allowed to be sold in an uncontrolled manner, "as though at any flea market," according to comments reported by the APA news agency.

(Reporting by Victoria Bryan; Editing by Mark Heinrich)