The Supreme Court of India, in an 8:1 majority decision on October 23, ruled that states have the authority to regulate denatured spirit or industrial alcohol. The judgment broadens the definition of “intoxicating liquor” under Entry 8 of List II in the Seventh Schedule of the Constitution, to include industrial alcohol. This expands state regulatory powers over alcohol beyond just those meant for human consumption
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NEW DELHI: In a landmark ruling Today (Oct 23) , the Supreme Court of India held that ‘industrial alcohol‘ falls under the definition of ‘intoxicating liquor‘ as per Entry 8 of List II in the Indian Constitution, thereby granting states the authority to regulate and tax it.
This decision, made by a nine-judge Constitution Bench, fundamentally reshapes the understanding of state powers over alcohol regulation.
The bench, led by Chief Justice of India (CJI) DY Chandrachud and comprising Justices Hrishikesh Roy, Abhay S Oka, BV Nagarathna, JB Pardiwala, Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma, and Augustine George Masih, emphasized that the meaning of ‘intoxicating liquor’ extends beyond the narrow definition of alcoholic beverages meant for human consumption.
In a critical observation, the Chief Justice of India (CJI) stated,
“The majority opinion has overturned the decision in the Synthetic Chemicals case.”
This reference highlights the reversal of a previous legal interpretation, signaling a shift in how the court views the regulation of industrial alcohol and its relation to state and central powers.
The Court clarified,
“Alcoholic liquor and intoxicating liquor is used for consumption but the entry of intoxicating liquor stretches to its manufacturing etc. Alcoholic liquor is defined by the ingredient and intoxicating is defined by effect. Thus, alcoholic liquor can be covered by latter if it causes intoxication. The public interest purpose is evident from the construct and evolution of the entry.”
With this interpretation, the court overturned its earlier 1990 judgment in Synthetics & Chemicals Ltd. v. State of Uttar Pradesh, which had held that “intoxicating liquor” only referred to potable alcohol and thus excluded industrial alcohol from state taxation and regulation. In the 1990 case, the court had ruled that states could not tax industrial alcohol.
However, Wednesday’s decision rejected that interpretation, concluding that industrial alcohol can harm public health and, therefore, falls within the ambit of ‘intoxicating liquor.’
The Court declared,
“The meaning of the phrase intoxicating liquor cannot be limited to potable liquor and it signifies all alcohol which can be used to harm public health.” Furthermore, the ruling underscored that “Entry 8 List II cannot be used to exclude raw materials that go into production of intoxicating liquor.”
Justice BV Nagarathna dissented from the majority opinion, delivering a separate judgment.
The case revolved around whether state governments had the authority to tax and regulate industrial alcohol or denatured spirits, given the overlapping powers between Entry 52 of the Union List and Entry 8 of the State List. The states argued that the ability to tax industrial alcohol is crucial under the post-GST indirect tax regime and for public health oversight.
The court’s decision also addressed prior rulings, particularly pointing out that the 1990 decision in Synthetics & Chemicals Ltd. ignored an important precedent set by a 1956 five-judge bench in Ch. Tika Ramji v. State of Uttar Pradesh. This inconsistency led to the matter being referred to the current nine-judge Constitution Bench on December 8, 2010.
The Solicitor General of India, Tushar Mehta, along with advocate Kanu Agrawal, represented the Union government in this case.
This ruling has significant implications, not only on the legal framework governing alcohol production and taxation but also on the broader context of state powers and public health regulations across the country.
The ruling addresses long-standing debates over the overlapping authority of the Centre and the states concerning the production, manufacture, supply, and regulation of industrial alcohol. By affirming the states’ regulatory role, the judgment provides clarity on this matter, which has significant implications for both state governance and industrial operations involving alcohol.
This landmark judgment emphasizes the role of states in controlling not only the sale of liquor meant for consumption but also substances like industrial alcohol that may pose risks if misused for intoxication purposes.
BACKGROUND
On April 18, the bench had reserved its verdict after hearing arguments from Attorney General R Venkataramani, Solicitor General Tushar Mehta, senior advocates Dinesh Dwivedi and Arvind P Datar, who appeared in the court on behalf of the Uttar Pradesh government, apart from lawyers who represented the other states.
Industrial alcohol is not meant for human consumption. While Entry 8 in the State List under the 7th Schedule of the Constitution gives the states the power to legislate on the manufacture, possession, transport, purchase and sale of “intoxicating liquors”, Entry 52 of the Union List and Entry 33 of the Concurrent List mention industries whose control was
“declared by Parliament by law to be expedient in public interest”.
While both Parliament and state legislatures can enact laws on the subjects mentioned in the Concurrent List, a central law will have primacy over the state law.
The nine-judge Constitution bench was hearing a batch of petitions after a seven-judge Constitution bench ruled against the state governments.
In 1997, the seven-judge bench ruled that the Centre has regulatory power over the production of industrial alcohol and the case came to be referred to the nine-judge bench in 2010.
In 1990, the seven-judge bench observed through the Industries (Development and Regulation) Act, 1951, the Centre had “evinced a clear intention to occupy” the legislative competence on the subject and, therefore, Entry 33 could not empower a state government.
CASE TITLE:
State of Uttar Pradesh and ors v Lalta Prasad Vaish
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