SC says states have power to make laws on industrial alcohol: What is the case

Tax levied connected intoxicant is simply a cardinal constituent of a state’s revenue, with governments often adding an further excise work connected intoxicant depletion to thrust their income up. For example, successful 2023, Karnataka hiked the Additional Excise Duty (AED) connected Indian Made Liquor (IML) by 20%.

In the existent case, the bulk sentiment was authored by Chief Justice of India D Y Chandrachud for himself and 7 different judges. Justice Nagarathna authored a dissenting opinion.

What was the lawsuit astir concern intoxicant earlier the SC?

The Bench began proceeding arguments connected April 2 connected whether authorities governments person the powerfulness to modulate and power the sale, distribution, pricing and different factors relating to ‘industrial’ alcohol. Industrial intoxicant is utilized arsenic a earthy worldly to make different products, and is not meant for quality consumption.

Entry 8 successful the State List nether the Seventh Schedule gives states the powerfulness to legislate connected the production, manufacture, possession, transport, acquisition and merchantability of “intoxicating liquors”. At the aforesaid time, Entry 52 of the Union List, and Entry 33 of the Concurrent List notation industries, whose power is “declared by Parliament by instrumentality to beryllium expedient successful nationalist interest”.

Notably, subjects successful the Concurrent List tin beryllium legislated upon by some states and the Centre, but wherever a cardinal instrumentality exists, the authorities instrumentality cannot beryllium repugnant to it. Industrial intoxicant is listed successful the Industries (Development and Regulation) Act, 1951 (IDRA).

Essentially, the question earlier the apex tribunal was whether states tin modulate concern intoxicant oregon whether the Centre exercises exclusive power connected the subject.

What was the earlier case?

In 1989, a 7-judge Constitution Bench successful Synthetics & Chemicals Ltd v. State of Uttar Pradesh held that states’ powers, arsenic per Entry 8 of the State List, were constricted to regulating “intoxicating liquors” that are antithetic from concern alcohol.

The SC acknowledged that states’ powerfulness to modulate consumable intoxicant indispensable see the powerfulness to “prevent and/ oregon cheque concern intoxicant being utilized arsenic intoxicating oregon drinkable alcohol”. But the tribunal recovered that the taxes and levies successful question were designed chiefly to summation the gross collected by the state, not arsenic measures to modulate the usage of concern alcohol, oregon forestall its conversion to drinkable alcohol.

Essentially, the SC said that lone the Centre tin enforce levies oregon taxes connected concern alcohol.

However, successful a constituent that would beryllium brought up decades later, the SC did not see its anterior Constitution Bench determination successful Ch Tika Ramji v State of UP (1956), wherever 5 judges upheld a authorities enacted successful UP to modulate the proviso and acquisition of sugarcane. This Act was challenged connected the grounds that nether Section 18-G of the IDRA, the Centre had exclusive jurisdiction implicit regularisation of the sweetener industry.

In opposition to its Synthetic & Chemicals Ltd decision, the tribunal held that Section 18-G is not meant to “cover the full field” and the authorities inactive had powerfulness to legislate connected matters relating to the sweetener manufacture nether Entry 33 of the Concurrent List.

How did this pb to the lawsuit present earlier the SC?

In 1999, the UP authorities issued a notification introducing a 15% interest for immoderate merchantability made to licence holders nether the UP Excise Act, 1910 for “alcohol utilized straight or…as solvent for vehicles and appear[ing] successful the last merchandise to immoderate extent”. This was challenged by a centrifugal lipid and diesel distributor, who claimed that the Centre exercised exclusive jurisdiction implicit concern intoxicant arsenic per Section 18-G of the IDRA.

In February 2004, the Allahabad High Court struck down the 1999 notification, holding that the authorities legislature did not workout powerfulness implicit the wide regularisation of denatured spirits, but lone implicit drinkable alcohol. It directed the authorities to refund immoderate interest collected with a 10% per annum involvement from the day the interest was deposited. This determination was challenged successful the SC, which past stayed the Allahabad HC judgement successful August that aforesaid year.

In 2007, the tribunal referred the lawsuit to a larger Bench, noting that the Tika Ramji lawsuit “had not been brought to the announcement of the seven-Judge Bench which decided the Synthetics and Chemicals case”.

What were the state’s arguments?

Senior Advocate Dinesh Dwivedi, appearing for the State of UP, said that the operation “intoxicating liquors” successful Entry 8 of the State List includes “all liquids containing alcohol”. He said that ‘liquor’, ‘spirit’, and ‘intoxicant’ were utilized successful excise laws earlier the Constitution came into force.

He besides argued that the Union’s powerfulness nether Entry 52 of the Union List does not see power implicit “finished products” (such arsenic concern intoxicant aft the denaturation process), arsenic that is specifically covered by Entry 33 of the Concurrent List. In bid to workout exclusive power implicit regularisation of concern alcohol, the Centre would archetypal person to contented an bid to that effect nether Section 18-G of the IDRA.

Dwivedi besides cautioned against adopting an attack that would trim states’ powers, relying connected Justice Ruma Pal’s concurring sentiment successful ITC Ltd v Agricultural Produce Market Committee (2002). The SC had held that states are not “mere appendages of the Centre… The Centre cannot tamper with their powers. More particularly, the courts should not follow an approach, an interpretation, which has the effect of oregon tends to person the effect of whittling down the powers reserved to the States”.

What was the Centre’s response?

Attorney General R Venkataramani and Solictor General Tushar Mehta appeared for the Centre. The AG argued that ‘intoxicating liquors’ nether Entry 8 is constricted to intoxicant meant for quality consumption, stating that the framers of the Constitution were alert that determination was a quality betwixt intoxicant nether Entry 8 and intoxicant which was not ‘intoxicating’ oregon consumble.

The SG focused connected showing however the apex court’s 1956 judgement successful Tika Ramji was incorrect, arguing that it had constricted the Centre’s powerfulness implicit industries to issues concerning ‘manufacture’ and ‘production’ of goods, which is contradictory to what helium said the Constitution framers intended.