A nine-judge Constitution Bench of the Supreme Court continued hearing arguments regarding the jurisdictional control over the regulation of industrial alcohol by state and Union governments. Senior Advocates Dinesh Dwivedi and Arvind Datar presented arguments on behalf of the states of Uttar Pradesh and other states, respectively. Dwivedi emphasized that there is no conflict between Union and State Lists regarding the control of industrial alcohol.
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NEW DELHI: Today (4th April): The Supreme Court’s nine-judge Constitution Bench continued hearings on the issue of State Governments’ authority to regulate industrial alcohol. The question revolves around whether the power to regulate industrial alcohol lies solely with the Union government, state governments, or can be shared harmoniously between them.
The bench led by D.Y. Chandrachud CJI, Hrishikesh Roy J, A.S. Oka J, B.V. Nagarathna J, J.B. Pardiwala J, Manoj Misra J, Ujjal Bhuyan J, S.C. Sharma J, A.G. Masih J
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Senior Advocate Dinesh Dwivedi, representing the State of Uttar Pradesh, presented arguments before the Bench. representing various states presented arguments, emphasizing the balance between Union and state powers as delineated in the Constitution. The bench will conclude hearings by April 9, 2024, after which a decision will be reached.
Background:
Entry 8 of the State List grants State Governments the authority to legislate on matters related to “intoxicating liquors,” encompassing various aspects such as production, manufacture, possession, transport, purchase, and sale of such liquors.
However, in the landmark case of Synthetics & Chemicals Ltd. v. State of Uttar Pradesh (1990), the Supreme Court interpreted “intoxicating liquors” to refer solely to potable alcohol, excluding industrial alcohol (also known as rectified or denatured spirit) from the ambit of State Government’s jurisdiction.
Furthermore, the Court restricted the powers of states under Entry 33 of the Concurrent List, suggesting that Parliament could confer exclusive authority to regulate industrial alcohol upon the Union Government through a formal declaration.
Subsequently, in the case of State of U.P. v. Lalta Prasad Vaish on October 27, 2007, a Division Bench of the Supreme Court noted that the interpretation of Section 18G of the Industries (Development and Regulation) Act, 1951, as per Synthetics & Chemicals, resulted in the exclusion of state legislature’s powers from Entry 33 of the Concurrent List. Section 18G empowers the Union government to oversee various aspects such as supply, distribution, and pricing of specific articles in scheduled industries, aiming to ensure equitable distribution and availability at fair prices.
The Bench highlighted that the ruling in Synthetics & Chemicals contradicted the earlier decision in Ch. Tika Ramji v. State of Uttar Pradesh (1956), where the Court recognized that the state’s legislative authority under the Concurrent List remained intact despite the presence of Section 18G.
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Senior Advocates representing different states provided their arguments before the Bench, highlighting the intricate interplay between Union and state powers as enshrined in the Constitution. The discussions delved into the interpretation of various constitutional provisions, particularly Entries 8 and 52 of the State and Union Lists, respectively.
Notably, Senior Advocates Dinesh Dwivedi, Arvind Datar, Jaideep Gupta, and V. Giri presented compelling arguments on behalf of the states of Uttar Pradesh, West Bengal, and Kerala, shedding light on the historical context and legal precedents relevant to the case.
Dwivedi commenced the day’s proceedings by addressing the Bench’s concerns regarding the delineation of powers between Union and state governments, offering comprehensive insights into the constitutional framework governing industrial regulation. He emphasized the nuanced relationship between Entries 24, 52, and 8 of the State and Union Lists, elucidating how these provisions interact to shape the regulatory landscape.
Datar, in his argument, scrutinized previous judicial pronouncements, particularly the case of Synthetics & Chemicals Ltd. v State of Uttar Pradesh, highlighting inconsistencies and inaccuracies in the interpretation of key legal principles. He emphasized the need to rectify past errors to ensure clarity and coherence in regulatory frameworks.
Additionally, he referenced the 158th Law Commission of India’s report from 1998, which advocated for amendments to the Industries (Development and Regulation) Act, 1951. This report emerged following numerous challenges to the Synthetic Chemicals case brought forth by various states. The Law Commission’s recommendations aimed at fostering equilibrium between the Union and the States while addressing concerns regarding the misuse of alcohol laws.
It proposed allowing states to maintain their authority to impose excise duties on alcohol, akin to the pre-Synthetic Chemicals era, thereby mitigating legal conflicts and potentially enhancing state revenue.
Gupta and Giri further reinforced the states’ stance on the issue, emphasizing the importance of preserving state autonomy in regulating industrial activities while ensuring compatibility with Union laws and regulations.
During the proceedings, Giri, representing the state of Kerala, presented arguments that differed slightly from those put forth by other states. He contended that “denatured spirits” should not be categorized under Entry 8, as they do not serve as raw materials for any other product.
Giri asserted that states should have jurisdiction over all aspects related to potable alcohol, including the imposition of excise duties, rather than the Union government. According to him, denatured spirits do not fall within the purview of potable alcohol and should be governed by states.
Giri echoed Datar’s argument regarding the “legal territory” between the powers of the Union and the states, emphasizing that the point of “removal” from manufacturing premises should be the determining factor. If the removal is for industrial purposes and the denatured spirit is used as a product, it would fall under the jurisdiction of the Union government.
He further explained that this principle is applicable to the case of special spirits imported for the manufacture of Indian Made Foreign Liquor (IMFL) in Kerala. In such cases, industries engaged in the production of alcohol for potable purposes should be under the exclusive control of the states in all respects.
Justice B.V. Nagarathna and Chief Justice Chandrachud clarified
denatured spirits can still fall under the purview of the states as they are considered a “product” under Entry 26 of the State List, subject to Entry 33 of the Concurrent List.
At the end of a long day of arguments, Justice A.S. Oka lightened the mood by asking Giri, who had been present since the previous day,
whether the arguments presented by Mr. Dwivedi had an intoxicating effect on him.
Justice Hrishikesh Roy joined
Mr. Giri, you are suggesting that Entry 8 gets kicked in, only when the liquid has the potential to give a kick.”
