Power Over Industrial Alcohol Reserved For Union, AG Tells Supreme Court [Day 3]

Anmol Kaur Bawa

9 April 2024 4:48 AM GMT

  • Power Over Industrial Alcohol Reserved For Union, AG Tells Supreme Court [Day 3]

    The Supreme Court Constitution Bench last week( on April 4) resumed its third day of hearing the issue relating to the State's power to regulate and levy tax on industrial alcohol. The underlying issue is whether 'intoxicating liquor' over which the States have power, includes 'industrial alcohol'. The Union in its opening arguments countered the earlier contention of the appellants that the...

    The Supreme Court Constitution Bench last week( on April 4) resumed its third day of hearing the issue relating to the State's power to regulate and levy tax on industrial alcohol. The underlying issue is whether 'intoxicating liquor' over which the States have power, includes 'industrial alcohol'. The Union in its opening arguments countered the earlier contention of the appellants that the term 'liquor' should be given the widest interpretation possible. As per the Union, what is important is to understand simple terms like 'liquor' from the perspective of the framers of the Constitution when interpreting different entries within the 7th Schedule.

    It was contended that Entry 52 List I (Industries controlled by the Union in Public Interest) and Entry 33 List III (Concurrent Powers of Union and State over trade, commerce, production, supply etc of a Union-controlled industry) exist in a symbiosis. The symbiotic relationship is established by the fact that there co-exists a dependency between the said entries. While Entry 52 List I declares the Union of controlling industry in the public interest, Entry 33 List III has to be seen as an extension of the former, where it species concurrent control over the processes that entail within the 'controlled industry'. None of the two can be understood without relying upon each other. 

    Attorney General (AG) Mr R Venkataramani appearing on behalf of the Union contended that the present case requires seeing meanings of terms like liquor and intoxicating liquor from a constitutional lens, with due regard to the distribution of powers and duties between the Union and the States.

    Taking the example of the term 'telegraph', he argued that when the telegraph was invented, society was not developed to envision the telephone which came subsequently with technological and scientific advancements. However, the Court have in previous decisions interpreted the term 'Telegraph' to also mean telephone. He placed emphasis on the fact that the framers of the constitution made a conscious effort to use a different terminology under Entry 8 List II (regulation powers to the state with regards to 'Intoxicating Liquor') - 'intoxicating liquor' as opposed to the general term 'liquor' used otherwise. The prevalence of a different choice of terminology in itself shows the intention of the framers to distribute Union-State powers on different subjects - liquor and intoxicating liquor respectively.

    The AG stressed that the correct way of understanding the 7th schedule is, to see how the governments at the centre and state approach the process of lawmaking or carve a public policy out of the want of necessity. The main question posed by the AG was the purpose of the existence of a division of authority between the Union and the States under Entry 33 List III. He suggested that the rationale behind this framework either was an objective which remains untapped so far or the broadening of the application of an existing objective.

    “Therefore the necessity element will always be built in Entry 52 List I. Entry 33 List III could not have been brought in List III if Parliament thought that bringing in the concept of an industry under Union control was sufficient to deal with all matters relating to Union control, then it could have ended so. So is there a purpose in saying that both parliament and the state will have a concurrent competence under Entry 33 List II, and If so, what purpose will it serve? either it was for a new purpose or serve a purpose already in existence and expands its use or its exercise.”

    The CJI noted that the scope of Entry 52 List I ( Industries controlled by the Union in Public Interest) was clear. It only concerned itself with the production or manufacturing processes of the industry, since Entry 33 List III gives the power to the State to regulate trade, production, and distribution of products from industries under Union control and similar imported goods.

    “The extent of Entry 52 in List I itself is in a restricted area, it at least excludes trade, commerce, production, supply, and distribution which is taken to List III. “

    The AG replied that there are two ways of seeing industry, one is to separate the product of an industry and the trade, commerce, supply and distribution processes that go into making the product; the second perspective is we see all these processes as “one continuum of activity, an economic activity of production and thereafter supply , distribution etc.”

    Explaining in the present context of the working of the market, the AG submitted that production alone does not stop at making the product but also includes “the next series of actions - trade, commerce, supply and distribution”.

    He asserted, “There is a continuum of economic activity”.

    Entry 33 List III & Entry 52 List I Have A Symbiotic Relationship - AG Analyses

    The Union submitted that there exists a symbiotic relationship between Entry 33 List III and Entry 52 List I. Entry 33 List III brings within its ambit those products, which are subjected to the post-production processes of industry - trade, commerce, supply and distribution.

    Dwelling upon his earlier argument of seeing the concept of 'production' as continued economic activity in today's scenario where producers themselves engage in the post-production processes to sell the goods, the AG contended that both Entry 52 List I and Entry 33 List III were to be seen as two branches of the same tree- control of Union over the complete 3 stages of an industry - the pre-production and production as implied under Entry 52 List I and the post-production (trade, commerce, supply, distribution etc) as expressly provided under Entry 33 List III. 

    “ Therefore I find there is a symbiotic relationship between Entry 52 List I and Entry 33 List III. You cannot see them in isolation. And I don't think Parliament will simply say I will enact a law under Entry 52 List I, with a mere declaration that it is in the public interest. No law would probably do that, it will go further and how will I achieve the declaration for Entry 33, and Entry 52, if they were to be seen as two branches of one family.”

    'Synthetic Chemicals' Decision Erred In Changing The Semantic Meaning Of 'Liquor'- Mr Farasat Explains

    Advocate Mr Shadan Farasat appearing on behalf of the state of Punjab contended that the semantic meaning of 'intoxicating liquor' should interpreted from the lens of constitutional purpose, which according to him was a wider connotation of all alcoholic fluid universally recognised.

    “ The semantic meaning of intoxicating liquor includes at the time of the constitution coming into force, the entire universe of alcoholic fluids, and that is the meaning your lordships should give to intoxicating liquor.”

    He stressed that the meaning of liquor in common parlance has changed over time. The meaning imparted to the term at the time of the framing Constitution has evolved in the social sense, however, that cannot lead to a change in the literal meaning of the term.

    Justice Nagarathna weighed in to observe, “Intoxicating liquor is a species of liquor”

    Agreeing to the same, Mr Farsat explained that the term 'intoxicating' prefixed before liquor, qualifies the word 'liquor'. The counsel explained the two possible views which the bench could take, (1) to interpret all types of alcohol irrespective of its drinking suitability as 'liquor'; or (2) limiting the understanding of liquor to non-drinkable alcohol, while fitting drinkable alcohol strictly in the four corners of 'intoxicating liquor'.

    “If my lords take the view that liquor is all possible fluids, then it is certainly possible for us to argue that intoxicating liquor includes all liquor that has alcohol in them, that is , which have the capability to intoxicate whether they are drinkable by humans or not. But if your lordships take the view that liquor itself means only alcoholic fluids then attachment of 'intoxicating' to it will certainly have a different meaning, which may indicate that it has to be fit for human consumption.”

    The main contention of Mr Farasat was the decision in Synthetic Chemicals changes the semantic meaning of liquor, which is contrary to the original essence of the term. As per the original etymology 'liquor' stems from its Latin meaning 'Fluidity/ fluid/ liquid'.

    Paragraph 74 of Synthetic Chemicals however provides the meaning of 'Intoxicating Liquor' to be liquor consumable by humans and nothing beyond. The said observation is as follows :

    “74. …..The meaning of the expression “intoxicating liquor” has been rightly interpreted by the Bombay High Court in the Balsara case. The decision of the Bombay High Court is reported in Nusserwanji Balsara v. State of Bombay [AIR 1951 Bom 210, 214 : 52 Bom LR 799 : 52 Cr LJ 80 : ILR (1951) Bom 17] . In that light, perhaps, the observations of Fazl Ali, J. in Bal- sara case [1951 SCC 860 : 1951 SCR 682 : AIR 1951 SC 318 : 52 Cri LJ 1361] requires consideration. It appears that in the light of the new experience and development, it is necessary to state that “intoxicating liquor” must mean liquor which is consumable by human being as it is and as such when the word “liquor” was used by Fazl Ali, J., they did not have the awareness of full use of alcohol as industrial alcohol. It is true that alcohol was used for industrial purposes then also, but the full potentiality of that user was not then comprehended or understood. With the passage of time, meanings do not change but new experiences give new colour to the meaning…”

    Objecting to such an analysis given by the court, Mr Farsat said that while the meaning of a term may expand with changing times, it could not be the case that the meaning changes all altogether by the import of a judicial decision. Illustrating the same with the example of the Supreme Court's decision in Navtej Singh Johar, Mr Farasat submitted that therein the court interpreted 'sex' to include 'sexual orientation', the expansion of the meaning was done in tandem with the changing social needs, but in holding so the Court did not completely change the semantic meaning of 'sex'.

    Mr Farasat expressed, “ It is nobody's case that something has changed, so the liquor or liquor meaning is any fluid, the constitution originally had any fluid and today's situation has changed so we have to bring in something. That's not the way. They said that the language has changed.”

    Entry 52 List I Is Industry-Based, While Entry 8 List II Is Product-Based - State Of Maharashtra

    Senior Advocate Balbir Singh, for the State of Maharashtra, mainly contended that Entry 8 List II does not clash with Entry 52 List I because it deals specifically with the subject matter of 'industries' under Schedule 1 of the Industries (Development and Regulation) Act, 1951(IDR Act).The 'industry-based legislative competence is to be seen'. On the other hand, Entry 8 List II 'a product-based legislative matter' is provided and does not entail the whole industry per se.

    “If you see the 2016 amendment it says that under the 1951 IDR Act, we have to look at the policies which are being made with regards to the industries enumerated in Schedule I, not with regards to the product. There is no provision in the IDR Act which deals with the product or a product which is to be regulated.”

    He further added under Entry 52 List I, there needs to exist a law specifying this industry will be taken under the control of the Parliament. The Entry by itself does not delegate any open-ended power to the Union. On the other end, Entry 8 List II is an unconditional provision, “ A clear open power is given to the state.”

    The CJI then reverted to inquire that at what point does the product 'intoxicating alcohol' ceases to come under the ambit of the State list.

    At what point does it cross Entry 8 List II and what is comprehended under Entry 8 List II?”

    The senior counsel replied explaining that just like Entry 25 List II covers gas and gasworks, Entry 8 List II takes care of the trade and commerce aspect of the 'intoxicating liquor'.

    Justice Roy further observed that the key argument of the counsel was a provision providing for a takeover of an industry by the Union may not necessarily imply a takeover of the product of the industry. To do so, there must be express specifications to that extent.

    So far as Entry 8 List II is concerned it is a product-based enumeration, and the term 'intoxicating liquor' has been used twice in Entry 8 List II, so there has to be given some meaning and understanding that it is a product-based Entry and so far as the industry itself is concerned, (referring to the IDR Act), you are trying to make a distinction that when you take over industries it may have nothing to do with the product unless it says that this particular industry and this particular product”

    The CJI weighed in to further observe that S.18 G of the IDR Act comes within the Parliament's power under Entry 33 List III.

    He analysed that S.18 G falls under Chapter IIIB. - Control Of Supply, Distribution, Price Etc., Of Certain Articles, which is referrable to Entry 33 List III, except for the fact that Entry 33 List III also covers production. It was highlighted that S.18G does not cover production but trade, commerce, supply and distribution.

    “Though you are saying that IDR is industry-based and Entry 8 List II is product-based, S.18 G is product-based. (with regards to certain articles referred to in Schedule 1), so in relation to 18G, the IDR Act also becomes product-based”

    The bench recalled the arguments made by other counsels which was that only when there is a notified order, would S.18 G come into existence and not otherwise. The CJI expressed that overlooking that argument and accepting the present alternative view that S.18G is a product-based law and hence coincides with Entry 8 which is also product based would be “ a little extreme” as that would imply that Entry 8 List II covers even 'denatured alcohol' (not for human consumption). The CJI also theoretically analysed that the moment the Union notifies an industry to be a controlled industry, it also refers to the products of such an industry to be controlled.

    Senior Advocate Mr V Giri representing the State of Kerala expanded his previous submission, which briefly was that apart from industrial alcohol which is a matter of difference in manufacturing, all other alcohols forming part of intoxicating liquor would come under the ambit of Entry 8 List II. He argued that every activity which would be comprehended by an industry relating to any product is textually covered by Entry 8 List II to the context of intoxicating liquors. Thus Entry 24 List II will have to exclude intoxicating liquors.

    The bench will continue the hearing on April 9.


    The present matter was referred to a nine-judge bench in 2007 and pertains to the interpretation of Section 18G of the Industries (Development and Regulation) Act, 1951(IDR Act). Section 18G allows the Central Government to ensure that certain products related to scheduled industries are distributed fairly and are available at reasonable prices. They can do this by issuing an official notification to control the supply, distribution, and trade of these products. However, as per Entry 33 of List III of the Seventh Schedule to the Constitution, the State legislature has the power to regulate trade, production, and distribution of products from industries under Union control and similar imported goods. It was argued that in Synthetics and Chemical Ltd. vs. State of U.P., a seven-judge bench had failed to address Section 18G's interference with the concurrent powers of the State. Accordingly, the Supreme Court held–

    "If the decision in the Synthetics and Chemicals case (supra) with regard to the interpretation of Section 18-G of the 1951 Act is allowed to stand, it would render the provisions of Entry 33 (a) of List III nugatory or otiose."

    The matter was then referred to a nine-judge bench. It may be noted that apart from Entry 33 List III, Entry 8 List II also provides regulation powers to the state with regards to 'Intoxicating Liquor'. As per Entry 8 List II, the state has law-making powers over - “ Intoxicating liquors, that is to say, the production, manufacture, possession, transport, purchase and sale of intoxicating liquors”

    The bench hearing the matter is led by CJI DY Chandrachud and comprises Justices Hrishikesh Roy, Abhay S. Oka, B.V. Nagarathna, J.B. Pardiwala, Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma And Augustine George Masih.

    Case Details : STATE OF U.P. vs. M/S. LALTA PRASAD VAISH C.A. No. 000151 / 2007 & Other Connected Matters

    Does 'Intoxicating Liquor' Include 'Industrial Alcohol'? Supreme Court 9-Judge Bench Analyses Overlapping Powers Of Union & States [Day 1]

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

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