New Delhi: The Supreme Court Wednesday held that states, not the Centre, are empowered to regulate industrial alcohol or denatured spirit. The ruling by a nine-judge bench will likely give states increased financial autonomy and legislative competence.
This comes months after another nine-judge bench gave states an upper hand over the Centre to govern mining operations in their respective jurisdictions. The July verdict by an 8:1 majority gave states the authority to levy taxes on minerals under the Mines and Minerals (Development and Regulation) Act, 1957.
On Wednesday, a different nine-judge bench, by an 8:1 majority, broadened the definition of “intoxicating liquor” to say that industrial alcohol would fall under its scope. Under the Constitution, states already had the legislative competence to administer control over “intoxicating liquor”.
Led by Chief Justice D.Y. Chandrachud, the bench ruled against the narrow interpretation of “intoxicating liquor”, which generally means alcohol fit for human consumption. It emphasised that all forms of alcohol, including industrial alcohol, could pose a risk to public health.
Therefore, the bench held the states’ authority to oversee and regulate such substances.
The bench held that the state’s regulatory power extends to the raw materials used in “intoxicating liquor” production, not just the final product. That would include all alcohol that can harm public health, not just potable alcohol.
Justice B.V. Nagarathna, the sole dissenter in Wednesday’s judgment, was also on the bench in the mining regulation case and stood out even then. In the industrial alcohol case, Justice Nagarathna argued that giving states legislative supremacy over the Centre is legally unsound. She suggested that certain aspects of industrial alcohol regulation should remain within Union jurisdiction.
Speaking to ThePrint, Rajasthan’s additional advocate general Shiv Mangal Sharma welcomed the verdict. “This ruling empowers states to regulate the entire alcohol production process. It addresses broader concerns of the state about public health and safety. With the judgment, the states can now ensure public health is protected through stringent oversight and taxation measures,” Sharma said.
Wednesday’s ruling overruled a 1990 judgment of the Supreme Court. It had said that “intoxicating liquor” would only mean potable alcohol. With that said, the seven-judge bench had ruled against the power of states to control industrial alcohol manufacturing.
Entry 52 vs Entry 8
The arguments in the latest case hinged on who has jurisdiction to legislate on industrial alcohol.
The Seventh Schedule of the Constitution draws distinctions between the areas falling within the exclusive domain of the Parliament and state legislatures. The subjects earmarked for Parliament are in List I, whereas the ones under the scrutiny of state legislatures are in List II. List III, known as the concurrent list, contains subjects in which both the Centre and states can legislate. In the case of two promulgated, conflicting statutes, the one framed by the Centre supersedes the state law.
Before the nine-judge bench, the states claimed their right to legislate on industrial alcohol under Entry 8 in List II. The Union asserted its supremacy under Entry 52 of List I.
Entry 8 of List II allows the states to regulate “intoxicating liquor”, and its production, manufacture, possession, transport, and purchase and sale. On the other hand, Entry 52 of List I permits the Centre to draw laws for industries in the public interest.
In 1990, a seven-judge bench of the Supreme Court approved the Centre’s power to regulate industrial alcohol based on the interpretation of Section 18G of the Industries (Development and Regulation) Act, 1951.
According to this pronouncement, the definition of “intoxicating liquor” would include only drinkable alcohol, so regulation of industrial alcohol was not within the state’s purview.
At the time, the court interpreted Entry 33 of the concurrent list to declare the task to regulate industrial alcohol lay with the Centre. Entry 33 of the concurrent list deals with trade and commerce, production, and supply and distribution of products of any industry. The entry, it opined, was to secure equitable distribution of the products and their availability at fair prices.
However, in October 2007, a two-judge bench of the Supreme Court doubted the correctness of the 1990 decision, while recalling a 1956 five-judge bench decision that had already recognised the states’ jurisdiction to legislate on industrial alcohol manufacturing.
Considering the 1990 decision to be an inaccurate reading of the law and several subsequent decisions that did not adopt its line of reasoning, a five-judge bench in December 2010 referred the turf war between the states and the Centre over industry liquor to a nine-judge Constitution bench.
States Vs Centre
Before the nine-judge SC bench, the states challenged the Centre’s dominance over laws on industrial alcohol, in the backdrop of the power to tax this product assuming significance after the GST era and becoming a crucial revenue-generation source. If this power lies with the Centre, the ability of the states to deal with illegal consumption of industrial alcohol would be affected, the states also submitted.
They asserted their regulatory power in terms of Entry 8 of List II and said their control over the regulation of industrial alcohol was exclusive. As for the Centre, the states claimed that its powers under Entry 52 of List I were broad and carved out as a general one, and hence, the Centre was required to issue a notified order specifying in what field it had that power. However, no such order existed in the case of industrial liquor, and the Centre, in its absence, could not claim its legislative competence to rule over its use, the states also submitted.
On the other hand, the Centre argued it was empowered to control industrial alcohol — an area that concerns “necessities of life” — which needs dealing with at the national, not the provincial level. The Centre further told the court that its control over industries was embedded in the constitutional framework, enabling it to take charge of key industrial resources in case of a national crisis or an urgent need to work on a long-term development plan.
What industrial alcohol is
A substantial part of the hearing saw the two sides debating the intent behind the words “intoxicating liquor” and its “meaning”.
The two sides competed on whether it just meant drinking alcohol or included alcohol produced for industrial purposes.
According to the states’ interpretation, drawn from the colonial-era laws, industrial alcohol was a “catch-all phrase” for all types of alcohol. They took the court through the technical process involved in the production of industrial alcohol to stress the point that all liquor was “intoxicating”, whether or not it was potable.
Petitioners also took the court through the technical process of producing industrial alcohol to drive home the point that all liquor was “intoxicating”, no matter if it was potable or not.
The Centre, however, disputed this interpretation and said that a beverage that has an intoxicating effect, specifically on humans, can be defined as “intoxicating alcohol”, whose regulation would be with the state. Entry 8 of List I mentioned the “vice of consumption of intoxicating liquor” and had nothing to do with liquor that was not drinkable, the Centre submitted.
The Centre later expressed its reservations over the court favouring the states in the matter, submitting that its outcome would have significant implications for its power over all industries.
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‘Intoxicate could mean poison & includes industrial alcohol’
The majority opinion concluded that “intoxicating liquor” in Entry 8 of List II of the Seventh Schedule of the Constitution would also include alcohol, not just potable alcohol.
Referring to an earlier SC verdict, the bench opined that the phrase, intoxicating liquor, in the said entry has already been expanded beyond the definition of alcoholic beverages that produce an intoxicating effect upon consumption.
Liquids — which contain alcohol and can possibly be used (or misused) as intoxicating liquor — have been included within the meaning of the phrase. Therefore, the bench said the purpose of Entry 8 is to cover alcohol that could noxiously be used to the detriment of public health.
The judgment carries detailed deliberations on the phrase “intoxicating liquor”. In common parlance, the court said, it means liquor, which could cause someone to lose control.
“Intoxicate” makes someone lose control of their behaviour — which could also mean poison — the bench held while dissecting the language of Entry 8 of List II. The entry uses the expression “intoxicating”, not alcoholic, as the adjective for liquor, noted the bench, concluding that the terminology showed that the scope of the provision hinged on the effect of the material. In its view, the purpose behind substituting the adjective, which indicates the impact of the ingredient (the alcohol), only enhances the scope of the entry to cover liquor that impacts the health of citizens.
In deciphering this explanation of Entry 8, List II, the court upheld the states’ primacy in regulating industrial alcohol. It then ruled that regulation would not just mean control over the final product’s/alcohol’s consumption but also its production, manufacture, possession, transport, purchase and sale, and beyond.
By this virtue, the court said states would control every stage of industrial alcohol production. The bench likened alcohol to narcotic drugs and opium, saying they are products, which, since they serve as the raw materials in the production of other products, could noxiously be used. Hence, the bench, in the public interest, ruled its control should vest with the states.
‘Entry 8 of List II can’t be given restricted meaning’
The moot question before the court was whether Entry 52 of List I overrides Entry 8 of List II. Since the court found the two distinct entries overlapped on the aspect of the industry of “intoxicating liquor”, it sought to reconcile it. However, it observed that such reconciliation “must maintain” federal balance and advised against applying any parliamentary supremacy at the time of doing so. Such an exercise would tilt the federal balance towards the Union, it said.
While Entry 52 of List I extended control of the industry to the Union, it was subject to the condition that the same must be in the public interest, the court held. Therefore, the Parliament can legislate on any industry, provided it satisfies the condition prescribed in the entry.
When read independently, Entry 52 of List I did not preclude the inclusion of the industry of intoxicating liquor. Similarly, a standalone reading of Entry 8 of List II did not include the production and manufacturing of intoxicating liquor within the meaning of industry.
Through a harmonious interpretation of the two entries, the bench declared the state legislature has the exclusive competence to enact a law on the field since Entry 8 of List I is not subject to Entry 52 of List II.
The court’s conclusion hinged on the exclusivity in Entry 8 of List II. It said that while Entry 52 of List I was general, Entry 8 of the state list gave exclusive competence to states to legislate upon the industry product.
Moreover, Entry 52 of List I did not include the production and manufacturing part of an industrial process, whereas Entry 8 of List II did. To give supremacy to the Parliament in this field would render the power of the states under Entry 8 of List II redundant, which is impermissible under constitutional jurisprudence.
(Edited by Madhurita Goswami)