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 ... Interpretation of Entry 8 (List II) - scope of 'intoxicating liquors' - denatured/industrial alcohol versus potable alcohol - industry versus product distinction in the Seventh Schedule - Entry 52 (List I) and parliamentary control of scheduled industries - doctrine of occupied field and Section 18G of the IDRA - harmonious construction of overlapping entries - quid pro quo regulatory fees and State regulatory competenceEntry 52 (List I) and parliamentary control of scheduled industries - interpretation of Entry 8 (List II) - scope of 'intoxicating liquors' - industry versus product distinction in the Seventh Schedule - Whether Entry 52 of List I overrides Entry 8 of List II - HELD THAT: - The Court held that Entry 8 (List II) is a distinct, specific head dealing with 'intoxicating liquors' and that it cannot be displaced by a general declaration under Entry 52 (List I) so as to convert the State's exclusive field into a Parliamentary one. The Seventh Schedule differentiates industry-entries and product-entries; special entries (like Entry 8) exclude the sweep of general entries (like Entry 24). Accordingly Parliament cannot, by a declaration under Entry 52 alone, take over the field of 'intoxicating liquors' as contemplated by Entry 8. The judgment therefore preserves State legislative competence over intoxicating liquors as so interpreted, while recognising that Entry 52 denudes State power only to the extent of the field covered by a valid Parliamentary law enacted under that entry. [Paras 140]Parliament cannot occupy the field of intoxicating liquor (Entry 8, List II) merely by invoking Entry 52 (List I); State competence under Entry 8 remains unimpaired.Interpretation of Entry 8 (List II) - scope of 'intoxicating liquors' - denatured/industrial alcohol versus potable alcohol - harmonious construction of overlapping entries - Whether the expression 'intoxicating liquors' in Entry 8 of List II includes alcohol other than potable alcohol - HELD THAT: - The Court construed Entry 8 as both industry-based and product-based: the phrase 'that is to say' is illustrative, not exhaustive, and Entry 8 extends beyond only the popular notion of potable beverages. The term 'intoxicating liquor' covers alcohol that can be noxiously used to the detriment of public health, and therefore includes rectified spirit, ENA and denatured spirit insofar as they are capable of being misused as intoxicants; it does not, however, include downstream final products (e.g. a finished hand sanitizer) whose inclusion would unduly trench on other entries. On this basis the Court overruled the earlier seven-Judge Synthetics (7J) holding to the extent that it confined Entry 8 to potable alcohol. [Paras 140]The expression 'intoxicating liquors' in Entry 8 includes non potable forms of alcohol (such as rectified spirit, ENA and denatured spirit) insofar as they can be noxiously used, and Entry 8 is both industry- and product-based.Doctrine of occupied field and Section 18G of the IDRA - Entry 33 (List III) - concurrent powers over products of scheduled industries - harmonious construction of overlapping entries - Whether a notified order under Section 18G of the IDRA is necessary for Parliament to occupy the field under Entry 33 of List III - HELD THAT: - The Court observed that because Entry 33(a) (List III) and Section 18G of the IDRA arise from Parliament's power under Entry 52 (List I), the insertion of Section 18G manifests Parliamentary control over products of scheduled industries. Having interpreted Entry 8 to cover denatured/industrial alcohol, the Court declined to decide the full correctness of earlier observations about Section 18G occupying Entry 33; nonetheless it held that, in any event, the question of Section 18G occupying the field need not be adjudicated for denatured alcohol because denatured alcohol falls within Entry 8 as interpreted. The judgment therefore leaves open broader Section 18G/Entry 33 issues but records that, given the Entry 8 conclusion, the notified-order issue does not arise for denatured alcohol. [Paras 139, 140]No necessity to adjudicate the requirement of a notified order under Section 18G for Parliament to occupy Entry 33 in respect of denatured alcohol because denatured alcohol is covered by Entry 8 as interpreted.Final Conclusion: The Reference is answered: Entry 8 (List II) is to be read as both an industry based and product based entry whose illustrative phrase 'that is to say' does not exhaust its scope; 'intoxicating liquors' includes alcohol forms (rectified spirit, ENA, denatured spirit) capable of noxious use, though not downstream final products. Parliament cannot, by a declaration under Entry 52 alone, displace the field of 'intoxicating liquors'; because denatured/industrial alcohol falls within Entry 8 as construed, questions about occupation of the field under Section 18G/Entry 33 do not arise for denatured alcohol in this reference. The earlier seven Judge Synthetics (7J) passage limiting Entry 8 is modified in the terms stated. 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.