Can States Levy Tax Only On Alcohol Fit For Human Consumption? Supreme Court 9-Judge Bench Considers [Day 2 ]

The 9-Judge Constitution Bench on Wednesday continued its second day of hearing the issue of whether industrial alcohol be considered as 'intoxicating liquor' under the law-making powers of the state legislature. The court dwelled into deeper nuances of the state and union list entries concerning alcohol. The focal point of discussion revolved around the interpretation and interplay between Entry 8 List II (regulation powers to the state with regards to 'Intoxicating Liquor') and Entry 52 List I ( Industries controlled by the Union in Public Interest). At the outset, Senior Advocate Mr Dinesh Dwivedi (for State of UP) addressed the question posed by the bench yesterday on the issue of there being a direct clash between Entry 52 List I and Entry 8 List II. Mr Dwivedi in addressing the distinction between the two entries underscored how Entry 52 List I was intrinsically connected to the scope of Entry 24 List II (Industries subject to the provisions of [entries 7 and 52] of List I).Mr Dwivedi highlighted that while Entry 8 List II is a specific provision expressly mentioning the sector of 'intoxicating liquor', Entry 52 List I though not only general in nature, only gets activated by virtue of Entry 24 List II which provides the term “ Industries” but except those which are consumed under Entrt 52 List I. Thus it was submitted that Entry 52 List I has to be seen as a part and parcel of Entry 24 List II, mirroring the same limitations as Entry 24 List II would have.Mr Dwivedi expressed: “When we compare the two entries, Entry 8 List II and Entry 52 List I there is a vast difference in the language. … If you have to see the expanse of the scope of Entry 52 List I, you have to see that Entry 52 List I is by itself not a field of legislation, it becomes only when a declaration is made with regards to that Industry. Then that industry, it is transported from Entry 24 List II and comes to Entry 52 List I, so the source of the power of the field is Entry 24 List II ….so whatever is dragged out of Entry 24 List II that comes to Entry 52 List I nothing more. So there are two ways of looking at this, when we want to see the expanse of the word industry, then we must go back to the source, which is Entry 24 List II, because whatever is contained there can possibly come here, Entry 52 cannot possibly drag more than what is there in the well or the source.” The senior counsel further added that to understand the expression ' Industry' used in Entry 52 List I, one has to see the scope within which the said expression is used under Entry 24 List II.“Now this word 'industry' under Entry 24 List II what is the expanse of that ? As your lordships have seen all the cases were unanimous that the word ' industry' in Entry 52 List I would mean the same as Entry 24 List II. There is an intricate and intimate link between the two which cannot be snapped. Now if the word 'Industry' is of limited expanse, then we cannot expand the scope of Industry in Entry 52 List I beyond what is there in Entry 24 List II.” During the hearing, the CJI highlighted how there was considerable clarity between the Union and State List when it comes to the levy of excise duties on alcohol. It was observed that the central government can collect taxes - excise duties, on all manufactured goods. However, there's an exception for alcohol meant for drinking. The right to collect taxes on this type of alcohol has been handed over to state governments.“ The bifurcation in regards to the centre on one hand and states on the other is in respect of the levy of the duties of excise. What the central list does is, the power to levy duties of excise on all goods manufactured in India excluding alcohol fit for human consumption. The duty of excise on alcohol which is fit for human consumption which is taken out from Entry 84 List I (Union's power on duties of excise on tobacco and other goods except for alcohol for human consumption) is given to Entry 51 List II(State's powers on duties on excise on goods manufactured in the state including human consumption alcohol). This is bifurcation as to the taxing power.” However, on the contrary, the CJI stressed that there was no clarity in the division for the substantive law-making aspects of alcohol as an industry. It was also noted that while Entry 8 List II mentions the expression “ Intoxicating liquor”, the state only has the power to levy excise duties for alcohol which is drinkable. Now in so far as the substantive power to regulate is concerned, there is no division at all. The only reference to substantive power to legislate on intoxicating liquor is with regards to Entry 8 List II. Entry 8 List II would therefore cover the broad gamet whether it is fit for human consumption or unfit. Even though you have the power under Entry 8 List II, the state cannot levy the duty of excise on alcohol which is not fit for human consumption. The CJI further pointed out that there is no clarification as to whether the...

Can States Levy Tax Only On Alcohol Fit For Human Consumption? Supreme Court 9-Judge Bench Considers [Day 2 ]

Anmol Kaur Bawa

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