Regulating Industrial Alcohol | Day 4: Constitution framers intended for Union to control industries, Solicitor General argues

Attorney General: Drinking and industrial alcohol historically distinct

Entry 8 of the State List vests the power to regulate “Intoxicating liquors, that is to say, the production, manufacture, possession, transport, purchase and sale of intoxicating liquors” to the state governments. Venkataramani interpreted the phrase “that is to say” to mean that it only regulates “activities concerning one class of alcohol, namely intoxicating liquors.” Senior Advocate Arvind Datar, appearing for Uttar Pradesh had argued that the phrase “that is to say” refers more to the “exhaustive” list of activities mentioned in the entry—not just “intoxicating liquor.”

Further, he argued that the framers of the Constitution knew that there were classes of liquor that were “neither consumable by humans nor intoxicating in nature.” He referred to the Bombay Abkari Act, 1878, and a report on the legislation titled Reports on the Administration of the Abkari Department of the Bombay Presidency. Here, they had noted that the “progressive increase in Abkari Revenue” was “accompanied by decrease in drunkenness.” This showed that the distinction between potable and non-potable alcohol was made. On Day 1, Senior Advocate Dinesh Dwivedi had argued that the Bombay Abkari Act, 1878 showed how the words “liquor” and “spirit” were defined in the Act to include “all liquids containing alcohol.” 

Lastly, Venkataramani referred to a report filed by the Industrial Alcohol Committee in 1920, which had expressed “difficulty in finding a satisfactory definition of the term ‘industrial alcohol’”. Venkataramani argued that the definition of liquor is “inappropriate and dated” and highlighted the lack of clarity on the difference between the two kinds of alcohol. 

Mehta: The case has a ripple effect on all industries

The Solicitor General began his arguments by stating that the impact of the Court’s interpretation of Entry 52 in this case will not be confined to the alcohol industry. It will impact all industries included in the Schedule I of the Industries Act. It is not “desirable or possible” for the Court to “confine its legal scrutiny,” he said.

Further he explained that any assessment of an Entry in the Seventh Schedule of the Constitution must take into account the evolution of that Entry through the Government of India Acts of 1919 and 1935, along with the Draft Constitution placed before the Constituent Assembly for its deliberations, and the debates in the Constituent Assembly. This will clarify the “manifest intent” behind the scope of each entry and its allocation between states and Union. With this premise, he took off into his contentions. 

Mehta: “Tika Ramji is wrong”

The 1956 judgement in Ch. Tika Ramji v State of Uttar Pradesh defined the scope of “Industry” under Entry 24 State List and Entry 52 Union List as limited to “manufacture and or production.” During the Tika Ramji hearings, Mehta argued, the Court was “not assisted” with the history of the evolution of the Seventh Schedule and the Constituent Assembly debates. All the judgements on this topic since this judgement “may not be treated as good law.” 

Entry 52 of the Union List reads: “Industries, the control of which by the Union is declared by Parliament by law to be expedient in the public interest.”

Mehta referred to the debates held on 31 August 1949 where Kaka Bhagwant Roy, member of the Constituent Assembly, had argued that the “Centre should not be vested with such authority” as to control all industries. “Provinces have their own difficulties and can understand their problem much better than the Centre,” Bhagwant Roy had said, seeking an amendment to the current Entry 52. He suggested that the word “control” be substituted with “the development and control.” Dr. B.R. Ambedkar had rejected this proposition, stating that the “entry as it stands is perfectly all right.”

He had reasoned that when “an industry becomes subject to the jurisdiction of Parliament it so becomes in all its aspects—not merely development but it may be in other aspects”.

Mehta argued that the interpretation of the scope of Entry 52 in Tika Ramji, did not consider the reasoning behind the choice of words in the Entry and was therefore wrong. Tika Ramji offers “no logic, no rationale” as to why industry refers to manufacturing, he said. 

Mehta: Union has control over industries even under the Concurrent List 

Entry 33 of the Concurrent List refers to the “Trade and commerce in, and the production, supply and distribution of” “products of any industry where the control of such industry by the Union is declared by Parliament.” 

CJI Chandrachud stated that even after an industry is added to the schedule under the Industries Act, its trade, commerce, production, supply and distribution “gets taken out” under Entry 33. He suggested that Entry 33 of the Concurrent List seemed to indicate that Entry 52 of the Union list was “confined” to manufacture and production. By simply mentioning these other aspects of the industry, it had taken it out of the default scope of the Union. “Entry 52 is comprehensive. However comprehensive, it is still subject to Entry 33, as it extracts from Entry 52” Mehta said. Justice B.V. Nagarathna added that even in Section 18G of the Industries Act, which is where the Union’s power to control Industries under Entry 52 is enacted, the words are that of Entry 33—”Power to control supply, distribution, price, etc., of certain articles.”

Mehta stated that as soon as there was a law under Entry 52, that industry was “taken over” by the Union. As part of its exercise of power, the Union could choose not to take control of a certain activity of the industry. Through this choice of omission, it would leave states the power to regulate it. However, the field is deemed to be occupied by the Union. 

The Bench seemed unconvinced by this broad reading of the Union’s powers under Entry 52 of the Union List. The Chief stated that if Parliament is making a law under Entry 33 of the Concurrent List, one cannot interpret that it is made under Entry 52 of the Union List. The Industries Act and its scope too, would then have to be interpreted by understanding the area of control that is left to states and what it reserved for the Union. Justice Nagarathna stated that the the Industries Act requires that the field is occupied through a notification, without which the state’s control remains untouched. “It may sound to be an ambitious argument,” Mehta said, but continued to stand his ground. 

He then explained that Shri Shibban Lal Saxena, member of the Constituent Assembly had argued that “it is necessary to invest the Union Government with certain powers over trade and commerce in respect of and the production, supply, price and distribution of the goods produced by the industries…” Saxena had stated that regulation of the “necessaries of life” could not solely “be tackled on a mere provincial basis, and they must be tackled on an all-India scale.” Mehta argued that it was evident that even though regulation of trade and commerce within an industry was vested in the Concurrent List, framers of the Constitution always envisaged greater deal of control over these items to the Union. 

Mehta: Evolution of Entry 8 of State List shows a clear distinction between potable and industrial alcohol

Entry 8 of the State Lists reads: “Intoxicating liquors, that is to say, the production, manufacture, possession, transport, purchase and sale of intoxicating liquors.”

Relying once again on the history of the Entries, Mehta argued that the scope of Entry 8 was to regulate “the “vice of consumption of intoxicating liquor.” The phrase “intoxicating liquor,” he said, has always been clubbed with other substances hazardous to health like opium, narcotic drugs and Indian hemp. Article 47 of the Constitution, a Directive Principle, also refers to intoxicating drinks and drugs together.

Further, the term “intoxicating” itself requires that the drink has an intoxicating effect, and specifically on humans. On Day 1 of arguments, Senior Advocate Dinesh Dwivedi appearing for Uttar Pradesh had argued that the Entries create a distinction between “alcoholic liquors for human consumption” and “intoxicating liquor.” This was proof that the framers of the Constitution did not refer to the latter as solely potable alcohol. Mehta responded that the “simple and obvious” reason for distinction was for the purposes of taxation. The phrase “alcoholic liquors for human consumption” only appears in Entry 84 of the Union List and 51 of State List which are both Entries that vest the power to tax the manufacture of certain products. This, Mehta argued, is because taxation doesn’t concern itself with actual consumption—it is at the “point of time when the incidence of tax takes place.”

The “incidence of tax is manufacturing, that is the stage at which nobody needs to be intoxicated even in case of a potable liquor,” he said.

The reason “intoxicating liquor” is used as a different category of liquor, Mehta argued, is to ensure that it applies to non-alcoholic beverages which have an intoxicating effect such as bhang. Further, Entry 8 of State List, he said, refers to beverages that can be had “as is” and not something that has to be converted to an intoxicating drink. He referred to a series of British laws where “intoxicating liquor” was used to refer only to potable beverages. The list of such laws is available in his written submissions. Therefore, the broad reading of “intoxicating liquor” in State Of Bombay v F.N. Balsara (1951) and Synthetics & Chemicals v State of U.P (1989) are erroneous, he said. 

CJI Chandrachud made an observation “in support of” the Solicitor General’s arguments. He stated that “alcoholic liquors for human consumption” is a species of “intoxicating liquor” which includes a variety of potable liquor. The distinction is made in tax related entries. The regulatory power over this, however “is couched in much wider terms than taxing power.” He stated that this distinction has been made to ensure that states can regulate both legal and illegal intoxicating liquors in the interest of public health. States would have lost the power to regulate abuse had framers of the constitution used “alcoholic liquors” instead of “intoxicating liquor.” “The regulatory domain of the states was widened” to ensure that they could control non-alcoholic intoxicants as well, he said. 

Mehta will resume arguments in the case on 16 April 2024.