Judges
D.Y. Chandrachud CJI
Hrishikesh Roy J
A.S. Oka J
B.V. Nagarathna J
J.B. Pardiwala J
Manoj Misra J
Ujjal Bhuyan J
S.C. Sharma J
A.G. Masih J
Parties
Appellant: State of Uttar Pradesh through the Principal Secretary UP Government Excise Department; the Excise Commissioner UP; District Excise Officer/Collector
Lawyers: Senior Advocate Dinesh Dwivedi, Advocate on Record Samar Vijay Singh
Respondent: Lalta Prasad Vaish through its partners Avinash Chandra Vaish
Lawyers: Ambhoj Kumar Sinha
Impleader: Jubilant Life Sciences Ltd.
Lawyers: Advocates Pallavi Langa, Dhananjai Mishra, Nishit Agrawal, Manish Kumar, Mukesh Kumar Maroria, Jatinder Kumar Bhatia, Aaditya Aniruddha Pande, Mahfooz Ahsan Nazki, Rajiv Kumar Choudhry, Swati Ghildiyal, Sabarish Subramaniam
1. FACTS
This Case tries to answer the question about whether the Legislative competence of State of Uttar Pradesh to charge fees for sale of Industrial Alcohol, specifically the denatured Alcohol. The State of Uttar Pradesh foisted an ad valorem license fees of the sale of denatured alcohol. This fee was relevant to the sales made by wholesale vendors, which included corporations like M/S Lalta Prasad Vaish and Sons who were selling denatured alcohol under a license Form FL41. The appellant which was the State of U.P. put forward argument that denatured alcohol was under the umbrella of intoxicating liquors and the State has exclusive powers to control and impose fees on its sale. The respondent which was M/S Lalta Prasad Vaish and Sons challenged this claim citing the precedent set in the case of ‘Synthetics and Chemicals Ltd. v. State of U.P. where The Court held that while states possess the power to regulate potable alcohol which is intended for human consumption, their regulating authority does not extend to industrial alcohol, which is primarily used for industrial and medicinal purposes.
2. ISSUES RAISED
In this case the Supreme Court of India inspected some key legal issues:
What Authority does the state have in regulating Industrial Alcohol?
The term “intoxicating liquor” in entry 8 of List II which is the State List, of the seventh schedule of the Indian Constitution, does it include Industrial Alcohol? If it does then does the List II of Seventh schedule of the C.O.I. grant the legislature of the State authority to regulate and impose fees on the sale and production of Industrial Alcohol?
What is the effect of Central Legislation on State Powers?
Does Section 18G of the Industries (Development and Regulation) Act, 1951 (IDRA) curb the state legislature’s authority to construct laws relat5ed to Industrial Alcohol? Specifically when there is an absence of a notification by the Central Government under Section 18G, are the State governments allowed to legislate on this matter?
What is the definition of ‘Intoxicating Liquors”?
Ought “Intoxicating Liquor” to be interpreted to incorporate both potable (drinkable) and industrial (non drinkable) alcohol? How does this definition affect to what extent does the state have its regulating power?
What are the overlap between State and Central Legislative Powers?
How does the convergence between Entry 8 of State List which relates to “Intoxicating Liquor” and Entry 52 of Union List which pertains to Industries which are under the control of the Centre, be addressed in the matter of regulating Industrial Alcohol?
3. CONTENTION
Both Parties in the case of State of U.P. vs M/S Lalta Prasad Vaish and Sons made detailed arguments with respect to the States authority to impose fees and regulate Industrial Alcohol.
Appellants – State of Uttar Pradesh:
Interpretation of the terms ‘Intoxicating liquors’. State of U.P. argued that the terminology “Intoxicating liquors” which comes under List II, Entry 8 of the 7th Schedule of the Indian Constitution should have a broad interpretation to consider all forms of alcohol including both consumable and industrial types. This would give the competence of industrial alcohol to the State Legislature.
The State of U.P. also argued that it does have the exclusive authority to regulate Production, Manufacture and Sale of all forms which comes under the jurisdiction of the State. This authority would obviously include authority to encompass fees on the sale of a denatured spirit, because this regulation falls under the ambit of list II, Entry 8 of the Constitution.
It was also emphasised by the State that in absence of a government notification by the Centre under section 18G of Industries Act 1951, the State government withhold the authority to make laws related to Industrial Alcohol. An argument was made that when there is no explicit regulation by the centre, the State should be allowed to exercise their powers under the 33rd Entry of the Concurrent list.
Respondents – M/S Lalta Prasad Vaish and Sons:
There was a precedent cited by the respondents which was the Supreme Court’s decision in Synthetics and Chemicals Ltd. v. State of U.P, which considers that the terminology ‘intoxicating liquors’ will refer exclusively to consumable alcohol which are intended for human consumption. The Argument was made that this precedent curtails the State government’s authority over Industrial alcohol and places it under the umbrella of the Central government.
The Contention was made that Entry II of the State List is hold captive to intoxicating liquors which are meant for the consumption of human’s and doesn’t extend to Industrial Alcohol. Hence, the State government doesn’t have the powers and competence to impose fees and regulate the sale of ‘specially denatured spirits’ which are used for Industrial purpose.
The respondent also made an Argument that Section 18G of the IDRA gives the Union Government exclusive authority over industries that produces Industrial Alcohol. They also argued that regardless of the presence or absence of a notification from the central government, the State is prevented from making laws on matters that concerns Industrial Alcohol, as it falls within the umbrella of the Union under 52nd Entry of Union List.
4. RATIONALE
The Supreme Court of India in the case of State of U.P. vs M/S Lalta Prasad Vaish and Sons did a comprehensive analysis to calculate the limit of the State’s law making competence over Industrial Alcohol. The reasoning of the court was based on interpreting constitutional provisions, previous precedents and the linkages between the legislative power of the Centre and the State.
a. Interpreting the term “Intoxicating Liquors”: The Supreme Court revisited the definition of “Intoxicating liquors” under the 8th entry of State List under the Seventh Schedule of the Constitution of India. In Synthetics and Chemicals Ltd. v. State of U.P. the Court interpreted the term to exclusively refer to alcohol intended for human consumption, hence ruling out Industrial alcohol from regulations by the state. However the Court present case revaluated this in a broader perspective which considered the need for harmony in construction of the legislative entries.
b. Overlap in the legislative entries: The Court understood the convergence between the 8th entry of the State list and the 52nd entry of the Union List. This pertains to the Industries under Union Control. It stressed that even though the Centre has the power to regulate industries which are of national importance, this does not debar the legislation of the state’s competence in matters incorporated in the State list. The Court also stressed on the importance of keeping a balance between both central and state government to make laws in their respective domain.
c. Impact of IDRA, 1951 on Industries: Section 18G of the IDRA authorise the Central Government to control the pricing, distribution and supply of the products from Industries specifically mentioned in the Act. The Court gave a note that when there is an absence of a notification by Centre under section 18G which regulates industrial alcohol, the state preserve their law making competence under the 33rd entry of Concurrent list. This allows states to male rules regarding industrial alcohol unless explicitly occupied by central legislation.
d. Re-examining precedents: The precedent set in Synthetics and Chemicals Ltd. v. State of U.P., had limited powers of the state over industrial alcohol. But, the Court also took notice that consequent judgements had deviated from this ruling which indicated a necessity to revisit the earlier interpretation. Here the federal structure needs to be upheld which means the constitutional provisions should be expressed in such a way that allows both centre and the state to legislate their respective powers effectively.
5. DEFECTS OF LAW
Several legal ambiguities were highlighted by the Supreme Court in its decision on State of U.P. vs M/S Lalta Prasad Vaish and Sons. Firstly the term “Intoxicating liquors” under the 8th entry of state list lacks a clear explanation. Which leads to ambiguous interpretation regarding the scope whether it includes only drinkable alcohol or it extends to industrial alcohol. Next there is an Overlap between the 8th entry of the State list and 52nd entry of the Union list which creates confusion regarding jurisdiction especially with respect to industries which are declared to be of national importance. Section 18G of the Industries (Development and Regulation) Act, 1951 which is a Central legislation introduces ambiguity regarding the extent to which central legislations have effect on the legislative powers of the state over Industrial alcohol. Lastly we also have precedential inconsistencies. Differing interpretations between Synthetics and Chemicals Ltd. v. State of U.P. and consecutive judgements have resulted in complications in understanding the State and Central authority over industrial alcohol.
6. INFERENCE
The Supreme Court granted the state authority to regulate and levy fees on the production and sale of Industrial alcohol after examining both entries in the State and Union list of the 7th Schedule of the Indian Constitution. A nine-judge Constitution Bench led by the CJI Chandrachud commenced hearing the case on 2 April 2024 and reserved judgement on 18 April 2024, after six days of hearing. On 23 October 2024, eight out of nine judges upheld state governments’ power to regulate industrial alcohol, opening up a massive source of revenue for states. Justice B.V. Nagarathna dissented, holding that the supremacy of the Union government in controlling Scheduled Industries is clear in the constitutional and legislative framework.
Name: Satirtha Basak
College name: Faculty of Law, Delhi University