New Delhi: Supreme Court judge Justice B V Nagarathna, dissenting from the majority verdict, on Wednesday said states’ lacked the legislative competence to regulate production, manufacture, and supply of industrial alcohol.
Justice Nagarathna said in her view, Entry 8 – List II deals with “intoxicating liquors” and the misuse, diversion or abuse of “industrial alcohol” as “intoxicating liquors” can also be controlled and prevented under Entry 8 – List II by the state legislatures having regard to Article 47 of the Constitution. She said states are not empowered to tax industrial alcohol by resorting to Entry 8 of List II (the State List) of the Constitution.
She said if industries of critical importance to the Indian economy which are scheduled industries under the IDRA which are under the control of the Union by a declaration made by Parliament by law are allowed to be legislated upon by the state legislatures, the whole object of taking control of such industries by the Union for ensuring uniformity in their development and for ensuring the object and purpose of the IDRA would be defeated.
She said it is also made clear that the IDRA which has been enacted by the Parliament by virtue of Entry 52 – List I has taken control of “Fermentation Industries” as a scheduled industry, and such “Fermentation Industries” would exclude “intoxicating liquors”.
In an 8:1 majority ruling, the Chief Justice of India D Y Chandrachud along with seven other judges, held that states will have regulatory power over industrial alcohol. The majority ruling said 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.
Justice Nagarathna, in a 241-page dissenting minority judgement, who was also part of the nine-judge bench, said Parliament can occupy the field of the entire industry by merely issuing a declaration under Entry 52 – List I and the state legislature’s competence under Entry 24 – List II is denuded to the field of the entire industry and specifically to the extent of the field covered by the law of Parliament under Entry 52 – List I.
She said that only because industrial alcohol, by a process, can be converted to alcohol for human consumption as a beverage, it did not entitle the state legislature to tax or regulate it. "Denatured alcohol belongs to the family of industrial alcohol and, therefore, Section 18G of the Industries (Development and Regulation) Act (IDRA) has a bearing on the said product," she said.
“Section 18G occupies the field under Entry 33(a) – List III and, thereby, only Parliament is competent to legislate on all articles or class of articles related to a scheduled industry i.e. Fermentation Industries”, said Justice Nagarathna.
She said the judgment in Synthetics and Chemicals, by seven-judge, need not be overruled in relation to Section 18G of the IDRA and it continues to be good law in the context of what is comprised in the expression “industrial alcohol” and “intoxicating liquors” except what has been clarified above in Entry 8 – List II.
She said merely because “industrial alcohol” by a process can be converted to alcohol for human consumption as a beverage does not entitle the State Legislature to tax or regulate “industrial alcohol”.
She said if products of any industry where the control of such industry by the Union has been declared by Parliament by law to be expedient in the public interest are manufactured in India or imported into India, then as per Entry 33(a) – List III, on the production, supply and distribution of and trade and commerce of such industrial products, the state legislature would not have any exclusive power to pass a law under Entries 26 and 27 – List II as they are subject to Entry 33(a) – List III.
“In view of the passing of the IDRA, under Entry 52 – List I and the inclusion of, inter alia, products of ‘Fermentation Industries’ such as ‘industrial alcohol’ in Item 26 of the First Schedule of the IDRA, the State Legislatures would be subject to the powers of the Parliament to pass a law in the matter of production, supply, distribution, trade and commerce of such industrial product”, she said.
She said In the context of “industrial alcohol” and in terms of Item 26 of the First Schedule of the IDRA i.e. “Fermentation Industries”, it is only the Central Government which has the powers to act under Section 18G of the said Act. “So long as an industry is a scheduled industry under the IDRA and Section 18G of the said Act remains on the statute book, the State Legislatures are denuded of their powers to pass a legislation or to take any action (taxing or regulatory) in respect of the products of a scheduled industry under Entry 33(a) – List III”, she said.
Several state governments including Uttar Pradesh had challenged the seven-judge bench judgement and challenged the Centre’s position that it had exclusive control over industrial alcohol.
The seven-judge bench had ruled that the central government had the regulatory power over the production of industrial alcohol. In 2010, the matter was referred to the nine-judge bench. The case was first raised in a 1990 ruling. It has seen conflicting interpretations before being referred to the nine-judge bench.
