Union supremacy or state autonomy? | The industrial alcohol judgement

Transcript:

Hello everyone and welcome to SCO explains! On 23rd October 2024, a Supreme Court judgment opened up a massive source of revenue for state governments. This came from allowing states to have control over the regulation of industrial alcohol. In an 8:1 majority in State of Uttar Pradesh v. Lalita Prasad Vaish, the Supreme Court held that a state government and not the Union has the power to regulate industrial alcohol. It also held that states’ power to make laws on intoxicating liquor also included alcohol used for industrial purposes. Justice B.V. Nagarathna dissented and held that the supremacy of the Union government in controlling scheduled industries is clear in the constitutional and legislative framework.

This seemingly technical case had some interesting moments including a sprinkling of quintessential booze humour. Justice Hrishikesh Roy led the bench on this front. In the mix was a reference to an “intoxicated bee” and a lighthearted call for “material exhibits.” In fact, after the judgment pronouncement, Justice Roy even suggested to the winning side to go and enjoy happy hour. But in any case the judgment is now delivered and since the case relates to intoxicating liquor, so I would suggest to the winning side that happy hour begins now.

But this case is worth understanding for several other reasons. One is that it marked Justice B.V. Nagarathna’s second dissent in a Constitution bench case this year. The first was in Mineral Area Development Authority v. Steel Authority of India where the Court had to consider the extent of state government’s power to impose tax on mines and minerals. The nine judge bench in Mineral Area was deciding if the Mines Act of 1957 amounted to a declaration curbing the state governments’ power. The majority found that there needed to be an expressed and specified limitation even as Parliament exercises power under Entry 54 of the Union List. You couldn’t simply stretch the Mines Act to limit lawmaking power under Entry 50 of the State List.

Justice Nagarathna had sounded a warning bell in her dissent. She pointed out that with the majority’s view, states could impose taxes, cesses and surcharges despite the Union having legislated on those aspects. She saw it as a breakdown of the federal structure which provided for Union supremacy in instances of conflicting or overlapping laws. A similar issue was at play in the industrial alcohol case. Entry 8 of the State List vests the power to regulate intoxicating liquors. Entry 52 of the Union List allows the Union to take control of industries through law made by Parliament. The Industries Act is one such law. “Fermentation industries” finds a place in the First Schedule (of the Industries Act) here, which is defined as “industries dealing with alcohol other than portable alcohol.”

In her dissent in Lalita Prasad, Justice Nagarathna echoed her concerns from Mineral Area. She noted that industrial alcohol was a key element in the alcohol-based chemical industry. They’re building blocks in the production of synthetic fibres, synthetic yarn, drugs and pharmaceuticals, agrochemicals, personal care products, dye stuffs, pigments, flavors, fragrances, etc. During the hearings, the Union argued on the practical need for Parliament to legislate on industrial alcohol. Solicitor General Tushar Mehta had referred to the National Policy on Biofuels 2018. Justice Nagarathna noted that the constitutional framework that recognized parliamentary supremacy was designed keeping in mind larger national interest. “It is all important that this edifice was not dislodged while attempting to dynamically interpret the Constitution,” she wrote. Acknowledging Mehta’s biofuel policy example, she cited a Ministry of Petroleum publication which suggests that the increasing use of ethanol blended petrol had led to a savings of 53,894 crores in the import bill and a reduction of 318 lakh tonnes of greenhouse gas emissions over eight years.

Beyond the semantic debate around the meaning of intoxicating liquor, the majority and minority were looking at the big picture from different ways. The majority felt that allowing an interpretation where the Union could mark its territory with an umbrella legislation could set a dangerous precedent. The minority felt that the danger came from letting state governments legislate on critical industrial resources and potentially jeopardize even economic development in the country.

These two rounds of legislative turf war between the Union and States seem to have gone to the latter, but this is surely not the last we have heard of it. Federal balance will remain one of the most compelling and eternal dilemmas of the Republic and its institutions. Visit scobserver.in for reports on each day of the hearing, for a breakdown of key arguments and summaries of the 341 page judgment. Thank you for watching. I’ll see you soon.