[DAY 1] 9-Judge Bench|| State's Authority In Industrial Alcohol Regulation

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The nine-judge Constitution Bench will determine whether the power to regulate industrial alcohol can be exercised jointly by both the Union and state governments or if it exclusively belongs to one of them.

[DAY 1] 9-Judge Bench|| State’s Authority in Industrial Alcohol Regulation

NEW DELHI: On Tuesday, April 2: The nine-judge Constitution Bench will determine whether the power to regulate industrial alcohol can be exercised jointly by both the Union and state governments or if it exclusively belongs to one of them. The Supreme Court commenced the hearing on the regulation of “industrial alcohol” by state governments.

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

During the hearing, Senior Advocate Dinesh Dwivedi, representing the State of Uttar Pradesh, presented arguments before the Bench. Chief Justice D.Y. Chandrachud commented that the case appeared to be relatively straightforward and might not require an extensive hearing.

However, Dwivedi contended that the case was of utmost importance and would necessitate more time than anticipated by the bench. Although the Court had initially requested Dwivedi to conclude his arguments by lunch on the same day, he is still scheduled to continue his submissions the following day, implying that the Court’s expectations of expediency may need adjustment.

Background

According to Entry 8 of the State List, state governments possess the authority to enact laws concerning “intoxicating liquors,” encompassing the production, manufacture, possession, transport, purchase, and sale of such liquors. In the case of Synthetics & Chemicals Ltd. v. State of Uttar Pradesh (1990), the Supreme Court held that “intoxicating liquors” pertained only to potable alcohol, while industrial alcohol (also known as rectified or denatured spirit) fell outside the purview of the state government’s powers.

The Court also curtailed the states’ authority under Entry 33 of the Concurrent List, stating that Parliament could grant the Union government the exclusive power to regulate industrial alcohol by means of a declaration.

However, in the case of State of U.P. v. Lalta Prasad Vaish on October 27, 2007, a Division Bench of the Supreme Court determined that the interpretation of Section 18G of the Industries (Development and Regulation) Act, 1951, in Synthetics & Chemicals, had resulted in the removal of the state legislature’s powers from Entry 33 of the Concurrent List. Section 18G empowers the Union government to control the supply, distribution, price, etc., of certain articles in scheduled industries to ensure equitable distribution and availability at fair prices.

The Bench observed that the seven-judge Bench in Synthetics & Chemicals overruled the case of Ch. Tika Ramji v. State of Uttar Pradesh (1956), where the Court acknowledged that the state’s legislative competence under the Concurrent List was not removed by Section 18G.

Dwivedi then proposed an alternative argument to the Bench. He suggested that

if “industry” mentioned in Entry 24 of the State List or Entry 52 of the Union List is interpreted to encompass industrial alcohol, then the Union’s jurisdiction would be limited to manufacturing and other aspects specified in Entry 8 of the State List. Once industrial alcohol becomes a product, it would fall under Entry 33 of the Concurrent List, which pertains to:

Trade and commerce in, as well as the production, supply, and distribution of—

(a) the products of any industry where Parliament has declared it expedient for the Union to control such industry in the public interest, and imported goods of the same kind as those products.

The Court also pointed out that upholding the decision in Synthetics & Chemicals would make Entry 33(a) of the Concurrent List useless.

Subsequently, on December 8, 2010, a five-judge bench referred the matter to a nine-judge Constitution Bench after recognizing that the views expressed by the seven-judge bench in Synthetics & Chemicals had been distinguished in several subsequent decisions.

Dwivedi argued that

The term “intoxicating liquor” in Entry 8 was intentionally chosen by the framers of the Constitution. He referred to the legislative history predating the Constitution, such as pre-Constitution excise laws in various states, to demonstrate that the terms “liquor” and “spirit” encompassed all liquids containing alcohol. He contended that these laws recognized industrial alcohol as a part of the category of spirits and liquor.

Dwivedi asserted that

The phrase “intoxicating liquor” was included in the Constitution to encompass industrial alcohol, as the term “industrial alcohol” did not appear in any of the lists. Additionally, he highlighted that Entry 51 specifically referred to “alcoholic liquors for human consumption,” indicating a distinction between “intoxicating liquor” and potable alcohol.

Dwivedi further argued that Entry 8 of the State List represented a distinct entry and not a general industry.

He explained

The Union government’s power to regulate industries under Entry 52 of the Union List, exercised through Section 18-G of the Industries Act, pertained to scheduled industries in the interest of the public. In contrast, Entry 24 of the State List granted state governments the authority to regulate industries subject to the provisions of entries 7 and 52 of List I.

Dwivedi then referenced Justice Ruma Pal’s concurring opinion in the case of ITC Ltd. v. Agricultural Produce Market Committee (2002).

Justice Pal asserts:

“While our Constitution does confer greater authority upon the Centre compared to the States, this does not render the States subordinate entities to the Centre. Within their designated jurisdiction, States possess paramount authority. The Centre cannot encroach upon their powers. Especially, courts should refrain from adopting interpretations that diminish the powers reserved for the States.”

Justice B.V. Nagarathna raised a concern regarding the state governments’ power to regulate a declared industry like intoxicating liquor.

Dwivedi responded that Entry 8 conferred exclusive jurisdiction to states for the regulation of industrial alcohol, emphasizing that intoxicating liquor was a specific entry mentioned in Entry 24 or Entry 52.

He argued

The framers of the Constitution intended for the production, manufacture, possession, transport, purchase, and sale of intoxicating liquor to be regulated by the states and not treated as a general industry.

Dwivedi presented an alternative argument, suggesting that if industrial alcohol were considered part of the industry under Entry 24 or Entry 52, the Union’s control would be limited to manufacturing and other aspects mentioned in Entry 8.

Dwivedi remarked,

“I’ll return tomorrow morning armed with new arguments.”

As the day’s proceedings concluded, Justice Hrishikesh Roy made a lighthearted comment, suggesting that since the case involved various types of alcohol, some members of the Bench might not be familiar with them.