The bandh was also meant to protest a proposal to convert the Union Territory's loss-making electricity board into a corporation, which, it was alleged, will lead to hike in tariff.
Protesters took out a peaceful march through the town.
Gujarat High Court had recently made a comment that Daman should be merged with Gujarat, as the UT has become the largest source of illegal liquor supply to the state where prohibition is in place.
The court was hearing a petition seeking quashing of FIR registered against some licenced liquor vendors for allegedly supplying liquor to bootleggers.
"Daman has a different culture and it is not at all possible to merge it with Gujarat. The city will never like to merge with Gujarat. We protest the idea," said Khurshid Manjra, who led the protest march.
Umesh Patel, one of the protesters, said people were also opposed to the proposal to convert electricity board into a corporation. "This will raise electricity charges. There are several other ways to check the losses," he said.
However, S S Yadav, adviser to the administration of Union Territory, said these fears were unfounded.
"There is no proposal to merge Daman with Gujarat, it is only a comment made by the High Court....Before converting electricity department into a corporation, views of every stakeholder will be sought," he told reporters.