2024 (11) TMI 281 - SC - Indian Laws

States can regulate both industrial and potable alcohol including raw materials under Entry 8 powers

The SC held that Entry 8 of List II encompasses both industry-based and product-based regulation of intoxicating liquor, including alcohol used as raw ... Scope of the power of the State Legislatures under Entry 8 and the meaning of the phrase “intoxicating liquor” - Doctrine of Occupied Field - whether “intoxicating liquor” in Entry 8 only includes potable alcohol, such as alcoholic beverages or also includes alcohol which is used in the production of other products? - Entry 52 of List I of the Seventh Schedule to the Constitution overrides Entry 8 of List II or not - expression ‘intoxicating liquors’ in Entry 8 of List II of the Seventh Schedule to the Constitution includes alcohol other than potable alcohol or not - notified order under Section 18G of the IDRA is necessary for Parliament to occupy the field under Entry 33 of List III of the Seventh Schedule to the Constitution or not. As held by the Judges, CJI [Dr Dhananjaya Y Chandrachud], J [Hrishikesh Roy], J [Abhay S Oka], J [J B Pardiwala], J [Manoj Misra], J [Ujjal Bhuyan] and J [Satish Chandra Sharma]:- a. Entry 8 of List II of the Seventh Schedule to the Constitution is both an industry-based entry and a product-based entry. The words that follow the expression “that is to say” in the Entry are not exhaustive of its contents. It includes the regulation of everything from the raw materials to the consumption of ‘intoxicating liquor’; b. Parliament cannot occupy the field of the entire industry merely by issuing a declaration under Entry 52 of List I. The State Legislature’s competence under Entry 24 of List II is denuded only to the extent of the field covered by the law of Parliament under Entry 52 of List I; c. Parliament does not have the legislative competence to enact a law taking control of the industry of intoxicating liquor covered by Entry 8 of List II in exercise of the power under Article 246 read with Entry 52 of List I; d. This Court in THE STATE OF BOMBAY AND ANOTHER VERSUS FN. BALSARA [1951 (5) TMI 3 - SUPREME COURT] and SOUTHERN PHARMACEUTICALS & CHEMICALS TRICHUR & ORS. VERSUS STATE OF KERALA [1981 (9) TMI 275 - SUPREME COURT] did not limit the meaning of the expression ‘intoxicating liquor’ to its popular meaning, that is, alcoholic beverages that produce intoxication. All the three judgments interpreted the expression to cover alcohol that could be noxiously used to the detriment of health; e. The expression ‘intoxicating liquor’ in Entry 8 has not acquired a legislative meaning on an application of the test laid down in THE STATE OF MADRAS VERSUS GANNON DUNKERLEY & CO. (MADRAS) LTD. [1958 (4) TMI 42 - SUPREME COURT]; f. The study of the evolution of the legislative entries on alcohol indicates that the use of the expressions “intoxicating liquor” and “alcoholic liquor for human consumption” in the Seventh Schedule to the Constitution was a matter well-thought of. It also indicates that the members of the Constituent Assembly were aware of use of the variants of alcohol as a raw material in the production of multiple products; g. Entry 8 of List II is based on public interest. It seeks to enhance the scope of the entry beyond potable alcohol. This is inferable from the use of the phrase ‘intoxicating’ and other accompanying words in the Entry. Alcohol is inherently a noxious substance that is prone to misuse affecting public health at large. Entry 8 covers alcohol that could be used noxiously to the detriment of public health. This includes alcohol such as rectified spirit, ENA and denatured spirit which are used as raw materials in the production of potable alcohol and other products. However, it does not include the final product (such as a hand sanitiser) that contains alcohol since such an interpretation will substantially diminish the scope of other legislative entries; h. The judgment in SYNTHETICS & CHEMICALS LTD., ETC. VERSUS STATE OF UP. [1989 (10) TMI 214 - SUPREME COURT] is overruled in terms of this judgment; i. Item 26 of the First Schedule to the IDRA must be read as excluding the industry of “intoxicating liquor”, as interpreted in this judgment; j. The correctness of the judgment in CH. TIKA RAMJI & OTHERS, ETC. VERSUS THE STATE OF UTTAR PRADESH & OTHERS [1956 (4) TMI 55 - SUPREME COURT] on the interpretation of word ‘industry’ as it occurs in the legislative entries does not fall for determination in this reference; and k. The issue of whether Section 18G of the IDRA covers the field under Entry 33 of List III does not arise for adjudication in view of the finding that denatured alcohol is covered by Entry 8 of List II. The reference is answered in the above terms. The Registry is directed to obtain administrative instructions from the Chief Justice for placing the matters before an appropriate Bench. The order of above judges have been differed in few points by NAGARATHNA, J. - The decision as given by him are as follows:- a. Entry 8 – List II deals with “intoxicating liquors”. The misuse, diversion or abuse of “industrial alcohol” as “intoxicating liquors” can also be controlled and prevented under Entry 8 – List II by the State Legislatures having regard to Article 47 of the Constitution. It is also made clear that the IDRA which has been enacted by the Parliament by virtue of Entry 52 – List I has taken control of “Fermentation Industries” as a scheduled industry. Such “Fermentation Industries” would exclude “intoxicating liquors”. b. Parliament can occupy the field of the entire industry by merely issuing a declaration under Entry 52 – List I and the State Legislature’s competence under Entry 24 – List II is denuded to the field of the entire industry and specifically to the extent of the field covered by the law of Parliament under Entry 52 – List I. c. The decision as given by above judges agreed. d. The context of the controversy must be borne in mind in the said cases. The aforesaid decisions in substance limited the meaning of the expression “intoxicating liquors” to its popular meaning i.e. “alcoholic beverages” that produce intoxication. Therefore, in the context of prohibition of “intoxicating liquor” as a beverage, there could not have been prohibition of production of alcohol used for medicinal and toilet preparation as well as “industrial alcohol” or non-potable alcohol. e. The expression “intoxicating liquor” in Entry 8 has acquired a legislative and judicial meaning over the decades. f. The members of the Constituent Assembly were clear in what they envisaged within the scope and ambit of the expression “intoxicating liquors” in Entry 8 – List II. This is also evident from Item 26 of the First Schedule of the IDRA. “Intoxicating liquors” is only a segment of the “Fermentation Industries”, namely, potable alcohol. There was no intention on the part of the members of the Constituent Assembly to read within the expression “intoxicating liquors” non-potable or “industrial alcohol”. Further, in order to have a consistency between what was envisaged under Entry 84 – List I and Entry 51 – List II in the context of alcoholic liquors for human consumption, the taxing Entry in List II which is within the legislative competence of the States follows the regulatory Entry in Entry 8 – List II. Therefore, the use of the expression “industrial alcohol” or non-potable alcohol in Synthetics and Chemicals (7J) was only to crystallise all variants of alcohol which were non-potable and to distinguish the same from potable alcohol meant only for human consumption as a beverage. g. The entire controversy cannot be viewed from the point of view of alcohol being used as a raw material and final product such as hand sanitizer containing alcohol. The potential misuse of alcohol cannot be the basis for interpreting an Entry such as Entry 8 – List II. Ultimately, the “Fermentation Industries” have to be borne in mind which takes within its canvas only non-potable /“industrial alcohol”. The aspect of public health having a corelation to Entry 8 – List II dealing with “intoxicating liquor” and the misuse of alcohol cannot be a guide while interpreting the content of the said Entry and therefore, its scope and ambit being amplified beyond what it really envisages as a field of legislation for the States to legislate upon. h. The judgment in SYNTHETICS & CHEMICALS LTD. need not be overruled in relation to Section 18G of the IDRA and it continues to be good law in the context of what is comprised in the expression “industrial alcohol” and “intoxicating liquors” except what has been clarified above in Entry 8 – List II. i. Item 26 of the First Schedule of the IDRA must be read excluding only what is contained in the expression “intoxicating liquors” as interpreted above in Entry 8 – List II. j. Tika Ramji is held to be not good law insofar as the requirement of issuance of a notified order as a condition precedent for the field to be occupied, has been mandated therein. k. Denatured alcohol belongs to the family of “industrial alcohol” and therefore, Section 18G of the IDRA has a bearing on the said product. Section 18G occupies the field under Entry 33(a) – List III and, thereby, only Parliament is competent to legislate on all articles or class of articles related to a scheduled industry i.e. “Fermentation Industries”. Issues Involved:1. Whether Entry 52 of List I of the Seventh Schedule to the Constitution overrides Entry 8 of List II.2. Whether the expression 'intoxicating liquors' in Entry 8 of List II includes alcohol other than potable alcohol.3. Whether a notified order under Section 18G of the IDRA is necessary for Parliament to occupy the field under Entry 33 of List III.Detailed Analysis:1. Entry 52 of List I vs. Entry 8 of List II:The judgment explores the interplay between Entry 52 of List I and Entry 8 of List II. It is concluded that Entry 8 of List II, which pertains to 'intoxicating liquors', is both an industry-based and product-based entry. This means it covers the regulation of everything from raw materials to the consumption of intoxicating liquor. It is emphasized that Parliament cannot occupy the field of the entire industry merely by issuing a declaration under Entry 52 of List I. The State Legislature's competence under Entry 24 of List II is denuded only to the extent of the field covered by the law of Parliament under Entry 52 of List I. Therefore, Parliament does not have the legislative competence to enact a law taking control of the industry of intoxicating liquor covered by Entry 8 of List II.2. Meaning of 'Intoxicating Liquors':The judgment clarifies that the expression 'intoxicating liquors' in Entry 8 of List II does not include alcohol other than potable alcohol. It is concluded that 'intoxicating liquors' refers to alcoholic beverages that produce intoxication. The judgment emphasizes that the scope of Entry 8 of List II is based on public interest and seeks to enhance the scope of the entry beyond potable alcohol. This includes alcohol such as rectified spirit, ENA, and denatured spirit, which are used as raw materials in the production of potable alcohol and other products. However, it does not include the final product (such as a hand sanitizer) that contains alcohol.3. Section 18G of IDRA and Entry 33 of List III:The judgment examines whether a notified order under Section 18G of the IDRA is necessary for Parliament to occupy the field under Entry 33 of List III. It is concluded that the mere presence of Section 18G of the IDRA implies that the Parliament has intended to occupy the field demarcated under the aforesaid provision. Thus, the power of the State to legislate in respect of matters enumerated in Entry 33 of List III is ousted, even in the absence of a notified order by the Central Government under Section 18G of the IDRA. The judgment in Synthetics (7J) is overruled to the extent that it suggested otherwise.Conclusion:The judgment concludes that Entry 8 of List II is both an industry-based and product-based entry, and Parliament cannot occupy the field of the entire industry merely by issuing a declaration under Entry 52 of List I. The expression 'intoxicating liquors' in Entry 8 of List II is limited to alcoholic beverages that produce intoxication and does not include alcohol other than potable alcohol. The mere presence of Section 18G of the IDRA implies that the Parliament has intended to occupy the field under Entry 33 of List III, and the power of the State to legislate in respect of matters enumerated in Entry 33 of List III is ousted.