Intoxicating liquor includes industrial alcohol, states can regulate it: Supreme Court

NEW DELHI: States will have the regulatory power over the production, manufacture and supply of industrial alcohol, the Supreme Court held on Wednesday as it also rejected the Centre's stand that regulating the same was under its exclusive domain.

The top court further observed Parliament did not have the legislative competence to enact a law taking control of the industry of intoxicating liquor.

The judgement assumes significance as it effectively opens up another window of a major revenue source for the state governments.

In a 8:1 majority ruling, the top court held that the phrase "intoxicating liquor" in Entry 8 of the State List in the Seventh Schedule of the Constitution would include industrial alcohol within its ambit.

The majority bench comprised Chief Justice of India (CJI) D Y Chandrachud and Justices Hrishikesh Roy, Abhay S Oka, J B Pardiwala, Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine George Masih,

Justice B V Nagarathna, however, dissented and held states did not have the legislative competence to regulate industrial alcohol or denatured spirit.

The apex court's majority verdict overturned its 1990 seven-judge bench judgment holding that Centre had the regulatory power over the production of industrial alcohol.

"Irrespective of whether the term 'industry' is interpreted in a narrow or a wide manner (a point that is vehemently contested by both sides), the industry of intoxicating liquor cannot be taken over by Parliament under Entry 52 of List I," the CJI said.

The CJI, who authored the majority verdict, also writing on behalf of the seven judges, said Entry 8 sought to regulate everything from "raw materials to production of intoxicating liquor".

"Parliament cannot occupy the field of the entire industry merely by issuing a declaration under Entry 52 of List I. The State Legislature’s competence under Entry 24 of List II is denuded only to the extent of the field covered by the law of Parliament under Entry 52 of List I," the bench said in a 364-page judgement.

Parliament does not have the legislative competence to enact a law taking control of the industry of intoxicating liquor, it added.

The majority judgment said the phrase "intoxicating liquor" in Entry 8 included all alcoholic liquids which could harm public health.

The apex court said when two entries on power of the state and the Centre overlap, the court must reconcile them but the method of reconciliation must maintain the federal balance.

"The only limitation in Entry 52 is that the control of the industry by the Union must be necessary for public interest. Parliament can legislate on any industry, provided that it satisfies the condition prescribed in the Entry."

Therefore, in view of the top court, Entry 52 when read independently of any other entry of List I, List II and List III did not preclude the inclusion of the industry of intoxicating liquor (provided that the Union was able to prove that its control is necessary in public interest).

"Similarly, Entry 8 of List II, when read independently also includes, inter-alia, the production and manufacture of intoxicating," it said.

Observing that Entry 8 of List II of the Seventh Schedule was both an industry and product based entry, the majority verdict said the words that follow the expression “that is to say” in the Entry includes the regulation of everything from the raw materials to the consumption of "intoxicating liquor".

Parliament cannot occupy the field of the entire industry merely by issuing a declaration under Entry 52 of List I, it said.

"Entry 8 of List II is based on public interest. It seeks to enhance the scope of the entry beyond potable alcohol. This is inferable from the use of the phrase 'intoxicating' and other accompanying words in the Entry," the top court added.

The CJI further said, "Alcohol is inherently a noxious substance that is prone to misuse affecting public health at large. Entry 8 covers alcohol that could be used noxiously to the detriment of public health. This includes alcohol such as rectified spirit, ENA (extra neutral alcohol) and denatured spirit which are used as raw."

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 has primacy over the state law.

Several state governments including Uttar Pradesh, West Bengal and Kerala had challenged the seven-judge bench judgement and challenged that Centre’s position that it had exclusive control over industrial alcohol.

The Union government referred to its power in Entry 52 of the Union List and said that framers of the Constitution intended to give the Centre complete control over any industry through enactment of Industrial (Development and Regulation) Act, 1951 in "public interest".

The seven-judge bench had, in 1990, observed that through the Industries (Development and Regulation) Act, 1951, the Union had "evinced a clear intention to occupy" legislative competence on the subject and hence, Entry 33 could not empower a state government.