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Informist, Wednesday, Oct. 23, 2024

 

--SC says states have power to regulate industrial alcohol 

 

NEW DELHI – The Supreme Court Wednesday held that states have the power to levy tax, and regulate the sale, distribution, pricing, and other factors relating to 'industrial' alcohol. In a majority 8:1 judgement, a nine-judge Constitution Bench led by Chief Justice of India D.Y. Chandrachud said that 'industrial alcohol' comes within the meaning of 'intoxicating liquor' under Entry 8 of List II (State List) of the Constitution. The court said that the meaning of intoxicating liquor under Entry 8 List II is beyond the narrow definition of alcoholic beverages.

 

The top court said industrial alcohol under Entry 8 List II cannot be taken over by Parliament under Entry 52 List I (Union List).  The term 'intoxicating liquor' includes the production, manufacture and distribution of liquor, said the court. An alcohol which doesn't traditionally cause intoxication will also be considered as intoxicating liquor, the top court added. Industrial alcohol is used as a raw material to make other products, and is not meant for human consumption. 

 

The apex court set aside its 1990 verdict, which had held that intoxicating liquors only referred to potable (drinkable) alcohol. Overturning the 1990 judgement, the court said that the earlier verdict was "wrong". Along with Chief Justice Chandrachud, Justices Hrishikesh Roy, Abhay S. Oka, J.B. Pardiwala, Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine George Masih supported the states' power to regulate industrial alcohol. However, Justice B.V. Nagarathna had a dissenting opinion.

 

Upholding the 1990 verdict, Justice Nagarathna said that Entry 8 List II cannot be stretched to include such industrial alcohols. The state legislature lacks competence to decide on industrial alcohol. Merely because industrial alcohol can be misused, does not give the powers to the states over it, said Justice Nagarathna. Entry 52 of List 1 (Union List) in the Indian Constitution talks about industries that the Centre can control if Parliament deems it to be in public interest. 

 

The case has its genesis from a 1999 notification of the Uttar Pradesh government, which imposed a licence fee on the sale of specially denatured spirit under Uttar Pradesh Excise Act, 1910. Specially denatured spirits, used for a variety of products and industries, are alcohol or rum that has been treated with denaturing materials to make it unfit for human consumption. R.P. Sharma, the sole proprietor of Bimal Paints and Chemical Industries in Aligarh, challenged the notification saying the state government did not have powers to regulate specially denatured spirits or industrial alcohol. 

 

In 2004, the Allahabad High Court held the licence fee as illegal and asked the state government to refund the collected fee. The high court, relying on earlier top court judgements, said that industrial alcohol regulation was totally outside the purview of states' powers. Challenging this, the Uttar Pradesh government moved the Supreme Court.

 

Ultimately, the case was referred to a nine-judge Constitution bench after noting some issues in the apex court's earlier judgements in 1990 and 1956. It is to be noted that in 1990 the apex court had held that intoxicating liquors only referred to potable (drinkable) alcohol, and that industrial alcohol was outside the scope of a state government's powers. The 1990 judgement had said that Parliament can, by declaration, permit the Centre to "cover the field" of industrial alcohol regulation. Earlier, in 1956, the top court had held that state governments were not deprived of their powers to make laws under Entry 33 of the Concurrent List.  

 

The Centre has argued that industrial alcohol was an "industry" controlled by it in public interest under a parliamentary law. The Centre said states' power extended only to intoxicating liquors fit for human consumption. The power to regulate industrial alcohol had always been theirs, the Centre added.

 

However, Punjab, Kerala, Maharashtra, Uttar Pradesh and other states have argued about situations where industrial alcohol can be used to make intoxicating liquor. The states have said that in such cases, they cannot remain mute spectators and wait for tragedy to strike. The states have said that the power to tax industrial alcohol was particularly crucial in the post-goods and services tax era as a significant source of income.  End

 

Reported by Surya Tripathi

Edited by Vandana Hingorani

 

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