Regulating Industrial Alcohol | Day 3: Union’s power to regulate alcohol at a higher pedestal than states’ powers, Attorney General argues
State’s power to regulate industrial alcoholJudges: 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
Today, a nine-judge Constitution Bench led by Chief Justice D.Y. Chandrachud continued to hear arguments in the case to determine the extent of state governments powers to regulate “industrial alcohol”. In today’s hearing, state governments completed arguments for the appellant side; in favour of their power to regulate industrial alcohol. The Union commenced arguments.
Resuming his contentions from yesterday, Senior Advocate V. Giri, appearing for the state of Kerala, argued that even though “denatured spirit” fell outside the scope of “intoxicating liquor” as stated under Entry 8 of the State List, state governments still had power to regulate them as per Entry 24 of the same list which dealt with industries.
Senior Advocate Balbir Singh argued next, representing the state of Maharashtra. He argued that Entry 52 of the Union List regulated industries as a whole and therefore, allowed the making of “industry based legislations.” In contrast, Entry 8 of the State List permits states to make “product based legislations”.
Advocate Shadan Farasat, Additional Advocate General for the state of Punjab argued next. He contended that the term “intoxicating liquor” must be interpreted keeping in mind the intention of the framers of the Constitution in understanding the word “liquor”. This would show that “intoxicating liquor” meant any liquid with alcohol in it.
Advocate on Record Vivek Sharma appearing for an intervenor was the last counsel to argue on the appellants’ side.. He submitted that states’ power to regulate alcohol should also include their power to check the use of industrial alcohol as intoxicating liquor. He expressed concern that industrial alcohol, which can be toxic, is often used by humans.
Attorney General R. Venkataramani opened arguments for the Union. He made three key propositions: that Entry 52 of Union List was not carved out of Entry 24 of State List; that the Industries Act has blocked states’ power over industries under the Concurrent List; and finally that “intoxicating liquor” under Entry 8 of State List only refers to human consumption.
Towards the end of the hearing, a bee entered the Courtroom and flew over the judges. Justice Hrishikesh Roy joked that it was “like an intoxicated bee.”
Background
Entry 8 of the State List vests state governments the power to make laws on “Intoxicating liquors, that is to say, the production, manufacture, possession, transport, purchase and sale of intoxicating liquors.” In Synthetics & Chemicals Ltd. v State of Uttar Pradesh (1990) the Supreme Court had held that “intoxicating liquors” only referred to potable (drinkable) alcohol, and that industrial alcohol (also called rectified or denatured spirit) was outside of the scope of state government’s powers. It also took away states’ powers under Entry 33 of the Concurrent List, citing that Parliament by declaration (law making) can allow the Union government to “cover the field” of industrial alcohol regulation.
On 27 October 2007, a Division Bench of the Supreme Court in State of U.P. v Lalta Prasad Vaish held that Synthetics & Chemicals had interpreted Section 18G of the Industries (Development and Regulation) Act, 1951 to remove the powers of the state legislature from Entry 33 of Concurrent list. Section 18G empowers the Union to control supply, distribution, price, etc. of certain articles in scheduled industry for securing the equitable distribution and availability at fair prices.
The Bench noted that the seven-judge Bench in Synthetics & Chemicals had missed referring to Ch. Tika Ramji v State of Uttar Pradesh (1956) where the Court had noted that the state’s legislative competence under Concurrent list was not ousted by Section 18G. The Court finally noted that if the decision in Synthetics & Chemicals “was allowed to stand”, it would render Entry 33(a) of Concurrent list “nugatory or otiose.”
On 8 December 2010, after noting that the views expressed by the seven-judge Bench in Synthetics & Chemicals had “been distinguished” in several subsequent decisions of the Court, a five-judge Bench finally referred the matter to a nine-judge Constitution Bench.
Giri: “Denatured Spirit” falls under states’ scope, but not through the Entry 8 route
Giri reiterated his arguments from Day 2 of hearings, stating that “denatured spirits” should not fall under “intoxicating spirits” under Entry 8 of the State List. Denatured spirits, he said, refers to adulterated alcohol that is unfit for human consumption and is used primarily for industrial purposes. This, however, does not mean that states cannot control denatured spirits. Denatured spirits fell outside of the scope of Entry 8 of State List, he said. However, states had the power to regulate it under Entry 24 of the same List. Entry 24 broadly deals with industries. States, therefore, continue to control denatured spirits.
Relying on the 1997 judgement in Bihar Distillery v Union of India, Giri agreed with Senior Advocate Arvind Datar’s submissions that the delineation of power between Union and states over alcohol should be done at the point when the alcohol is removed from the place it is manufactured. At this stage, alcohol (of any kind) becomes a “product.” In Bihar Distillery, the Court had held that if the alcohol is being removed for “industrial purposes” the power to “levy of duties of excise and all other control shall be of the Union.” However, if the removal is “for obtaining or manufacturing potable liquors,” state governments should levy excise duty and regulate it.
At this juncture, Justice Manoj Misra asked: what happens “in case of an integrated unit?” He was referring to instances where the alcohol is manufactured, but not as a potable liquor or a denatured spirit. Here, alcohol is directly used to produce other products like Monoethylene Glycol (MEG); MEG is a chemical intermediate used to manufacture polyester. In these cases, the end product neither falls in the category of “intoxicating liquor” nor “denatured spirit”, and hasn’t been removed from the stage of manufacture.
Datar, who was present in Court, was called in to lend his expertise and answer the question. He explained that the Union excise law requires the declaration of the nature of the final product being manufactured. In the example presented by Justice Misra, the scope would be of the “fermentation industry other than alcohol.” This would not come under the scope of the states’ powers under Entry 8, as it does not deal with alcohol manufacturing per se.
Singh: Entry 8 of State List covers the “entire field of legislation” of intoxicating liquor
Singh walked broadly on the same path as Senior Advocates Dinesh Dwivedi and Datar. He argued that Entry 8 of the State List had a “wide amplitude” which covered “all aspects” of intoxicating liquor. This entry, he submitted, is “product-specific” whereas Entry 52 of Union List is “industry-based”. This distinction, he said, was another reason why there is no conflict between the powers delineated under the Union and State Lists.
Further, Singh asserted that the language of Entry 8 was evidence enough that “intoxicating liquor” included “denatured spirit.” “Intoxicating liquors,” was used as a plural word twice here, which proved that it was meant to be a wide umbrella term to include all types of alcohol within it.
Farasat: “Intoxicating liquors” should be understood the way it was intended by the Constitution framers
Inspired by the originalist interpretative tradition, Farasat suggested that the interpretation of “liquor” had to be made through the lens of the Constitution framers. He argued that when the Constitution was framed and the term “intoxicating liquor” was added to the Seventh Schedule, it was perceived to mean “all fluids.” CJI Chandrachud added that in the southern cities of Bengaluru and Chennai people even referred to coffee decoction as “liquor”.
Building on the arguments made by the states of Uttar Pradesh and West Bengal on day 1 and 2 of the hearings, Farasat contended that if liquor was understood to broadly mean “all fluids”, then, intoxicating liquor would clearly include all fluid that has alcohol content in it.
Farasat also referred to legal dictionaries such as the Law Lexicon of British India, 1940; Webster’s Third New International Dictionary of the English Language, 1961 to buttress his point. He highlighted that these dictionaries defined liquor as “a liquid or fluid substance.” Intrigued, the Chief asked where Farasat got these old dictionaries. Farasat shared that he accessed them for the Judges library on the Supreme Court premises which recently opened its doors to the members of the bar.
Sharma: States must have the power to regulate industrial alcohol to curb the misuse of human consumption
Sharma represented Ms. Sheila Sharma, a resident of Uttar Pradesh. Justice B.V. Nagarathna jokingly asked “Is she a teetotaler? She must have locus standi.”
Sharma explained that “consumption” of alcohol does not simply mean eating or drinking of alcohol. It also included several other ways in which it can come in direct contact with humans, such as wood varnish and nail paint remover. He stated that sometimes industrial alcohol that is unfit for such consumption, or is toxic is used in these forms. He sought for the scope of the state governments’ power to regulate alcohol to extend to regulating the misuse of industrial alcohol for human consumption.
Venkataramani: Intoxicating alcohol only refers to drinking alcohol
First, the Attorney General submitted that Entry 24 of the State List was on a “lesser pedestal” than Entry 52 of the Union List. This is because Entry 52 “provides for control aspects from a national perspective” and serves the “common good, equitable distribution, fair prices, utility of products of industry for serving the interests of all the states.”
Entry 54 of Union List, is therefore an “independent subject and is not a matter carved out of the subset of Industries under Entry 24” of the State List.
Second, he argued that the three Lists under the Seventh Schedule were not rigid divisions “like the Berlin wall.” Rather, they intermingled. Countering the argument that “industry” under the Concurrent List could only be taken away by an express declaration from the Union, he argued that the Industries Act already did this. The Industries Act, Venkataramani said, sufficiently excluded states’ powers, or in other words, ensured that the Union occupied the field.
Thirdly, he argued that the phrase “intoxicating” must only be interpreted to refer to human consumption. “That which is not consumable by humans will not fall within the meaning of intoxicating,” he wrote in his written submissions. This interpretation ensured that states cannot rely on Entry 8 to regulate industrial alcohol.
The case will be heard again on Tuesday, 9 April 2024.