Supreme Court Constitution Bench Rules By 8:1 Majority: States Can Regulate Industrial Alcohol, Overturns 1990 Judgement

(MENAFN- Live Mint) A nine-judge constitution bench of the Supreme Court on Wednesday upheld the authority of state governments to regulate industrial alcohol, clarifying that it falls under the category of“intoxicating liquor”.

In an 8:1 majority ruling, the bench asserted that industrial alcohol, despite not being intended for human consumption, is still considered an intoxicating substance, which states are allowed to tax those under Entry 8 of List II (State List) of the Seventh Schedule of the Constitution.

The Seventh Schedule of the Indian Constitution divides powers between the Union and state governments into three lists, which define the areas on which each can regulate and legislate.

In the State List (List II), the term“intoxicating liquors” includes the production, manufacture, possession, transport, purchase, and sale of such substances, allowing states to formulate laws according to local conditions and requirements.

The court highlighted a common thread among alcohol, opium, and drugs: Their potential misuse as harmful substances.

It ruled that Parliament cannot usurp states' legislative powers regarding intoxicating liquors.

Chief Justice D.Y. Chandrachud, who authored the majority judgement, said "intoxicating" can also be understood as "poisonous", indicating that liquor not traditionally seen as alcohol could still be classified as "intoxicating liquor" under the Constitution.

While the majority-the CJI and Justices Hrishikesh Roy, A.S. Oka, J.B. Pardiwala, Ujjal Bhuyan, Manoj Misra, S.C. Sharma, and A.G. Masih-supported state powers, Justice B.V. Nagarathna dissented, arguing for parliamentary supremacy in regulating industrial alcohol.

She emphasized the importance of industrial alcohol in the Indian economy, particularly in its use for blending with petrol and manufacturing chemicals.

Justice Nagarathna cautioned that the ruling has significant implications for the federal principle of unity in diversity, and central control could undermine state authority.

With this ruling, the apex court has overruled a 1990 seven-judge bench decision in the Synthetics & Chemicals Ltd vs State of Uttar Pradesh case, which limited state regulation to potable alcohol and placed industrial alcohol under central authority.

States like Kerala, Maharashtra, Punjab, and Uttar Pradesh voiced serious concerns about central control, as taxation powers over industrial alcohol are crucial for generating revenue, especially in the post-GST (goods and services tax) era.

They also argued that centralizing control could hinder their ability to combat illegal consumption, stressing that they could not afford to remain passive until a tragedy occurred.

The Centre contended that industrial alcohol should be classified as an“industry” under its jurisdiction, based on parliamentary law to protect the public interest. This assertion was rooted in Entry 52 of the Union List of the Seventh Schedule of the Indian Constitution, which allows the Centre to regulate industries deemed to be in the public interest.

Moreover, the Centre claimed that trade, commerce, supply, and distribution of industrial alcohol fell under Entry 33(a) of the Concurrent List.

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