[Day 3] 9-Judge Bench|| Union's Authority Supersedes State's Power In Industrial Alcohol Regulation, Says AG

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Attorney General R. Venketaramani emphasized that Entry 52 of the Union List holds a higher significance compared to Entry 24 of the State List, as it addresses control aspects from a national perspective and serves the common good and equitable distribution of products for all states.

[Day 3] 9-Judge Bench|| Union's Authority Supersedes State's Power in Industrial Alcohol Regulation, Says AG — [Day 3] 9-Judge Bench|| Union’s Authority Supersedes State’s Power in Industrial Alcohol Regulation, Says AG

NEW DELHI: On Thursday (4th April): The nine-judge Constitution Bench led by CJI D.Y. Chandrachud continued hearing arguments in a case regarding the scope of state governments’ authority to regulate “industrial alcohol.” During today’s session, the state governments presented arguments supporting their position to regulate industrial alcohol. Subsequently, the Union began presenting its arguments.

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

Arguments by Senior Advocate V. Giri
Senior Advocate V. Giri, representing the state of Kerala, contended that although “denatured spirit” might fall outside the definition of “intoxicating liquor” as stated in Entry 8 of the State List, State Governments still possess the power to regulate it under Entry 24, which pertains to industries.

In the Bihar Distillery v. Union of India case from 1997, Giri concurred with Senior Advocate Arvind Datar’s arguments.

Datar suggested that the division of authority between the Union and states regarding alcohol should occur when the alcohol is taken away from its manufacturing site. At this juncture, alcohol transforms into a “product.” Referring to the Bihar Distillery case, the court previously ruled that if alcohol is moved for “industrial purposes,” the authority to impose excise duties and control lies with the Union. Conversely, if the alcohol is removed for the purpose of making potable liquors, state governments should impose excise duties and oversee regulation.

Arguments by Senior Advocate Balbir Singh:
Senior Advocate Balbir Singh, representing the state of Maharashtra, argued that Entry 52 of the Union List governs industries as a whole and allows for industry-specific legislation. In contrast, Entry 8 of the State List permits states to enact legislation based on specific products.

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 the 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.

Advocate Shadan Farasat, Additional Advocate General for the state of Punjab, asserted that the term “intoxicating liquor” should be interpreted in light of the framers’ intention, which would encompass any liquid containing alcohol. He further cited legal dictionaries to support the broader definition of “liquor.”

Farasat argued that the term “liquor” in the Constitution should be interpreted based on the framers’ understanding. He pointed out that when the Constitution was drafted and the term “intoxicating liquor” was included in the Seventh Schedule, it was intended to encompass “all fluids.”

Chief Justice Chandrachud added an anecdote from southern cities where even coffee decoction is colloquially referred to as “liquor.”

Farasat, in earlier arguments from states like Uttar Pradesh and West Bengal, asserted that if “liquor” is broadly interpreted as “all fluids,” then “intoxicating liquor” logically includes any fluid with alcohol content.

To support his stance, Farasat referenced legal dictionaries such as the Law Lexicon of British India (1940) and Webster’s Third New International Dictionary of the English Language (1961), which define liquor as “a liquid or fluid substance.” He also mentioned accessing these dictionaries from the judges’ library at the Supreme Court, recently opened to members of the bar, in response to the Chief Justice’s inquiry.

Advocate on Record Vivek Sharma, appearing as an intervenor, emphasized that states’ power to regulate alcohol should encompass the control of industrial alcohol to prevent its misuse for human consumption. He expressed concerns about the potential toxicity of industrial alcohol

Sharma, representing Ms. Sheila Sharma from Uttar Pradesh, addressed Justice B.V. Nagarathna’s light-hearted inquiry about Ms. Sharma’s drinking habits by explaining that the concept of alcohol consumption extends beyond just drinking or eating alcohol.

It includes various ways alcohol can come into direct contact with humans, such as through products like wood varnish and nail polish remover. Sharma highlighted the use of industrial alcohol, which may be unfit or toxic for consumption, in such products. He argued for an extension of state governments’ authority to regulate alcohol to also encompass the misuse of industrial alcohol for human contact.

Attorney General R. Venkataramani presented three key propositions:

i) Entry 52 of the Union List is not carved out of Entry 24 of the State List;

ii) The Industries Act limits states’ power over industries under the Concurrent List;

iii) “Intoxicating liquor” under Entry 8 of the State List only refers to alcohol intended for human consumption.

He emphasized that Entry 52 of the Union List holds a higher significance compared to Entry 24 of the State List, as it addresses control aspects from a national perspective and serves the common good and equitable distribution of products for all states.

He argued that Entry 54 of the Union List stands independently and is not a subset of Entry 24 of the State List related to industries.

He highlighted that the division of powers among the three lists in the Seventh Schedule is not rigid and allows for intermingling. He countered the notion that the Concurrent List’s “industry” aspect can only be overridden by an express declaration from the Union, stating that the Industries Act already accomplishes this.

Regarding the interpretation of “intoxicating,” he asserted that it should strictly relate to human consumption. This interpretation prevents states from using Entry 8 to regulate substances not consumable by humans as “intoxicating.”

During the discussion, Justice Manoj Misra raised a question about situations involving integrated units where alcohol is manufactured but not intended for potable liquor or denatured spirit purposes. Instead, it is used directly in the production of other substances like monoethylene glycol (MEG), which is crucial for making polyester.

Datar, summoned for his expertise, clarified that under Union excise law, the final product’s nature must be declared. In cases like those mentioned by Justice Misra, where alcohol is used in manufacturing processes unrelated to intoxicating liquor or denatured spirit, it falls under a different category, not within the purview of state powers as outlined in Entry 8.

The hearing witnessed a thorough examination of the constitutional provisions related to the regulation of industrial alcohol by state governments. While the state governments argued for broader regulatory powers, the Union contended for a narrower interpretation of “intoxicating liquor.”

The next hearing is scheduled for Tuesday, April 9, 2024.