State of U.P & Ors. v. M/s Lalta Prasad Vaish and sons

“Intoxicating liquor” falls within the legislative domain of the State Legislatures under Entry 8 of the State list, List II, of the Seventh Schedule to the Constitution. The issues which arise for adjudication in this reference pertain to the scope of the power of the State Legislatures under Entry 8 and the meaning of the phrase “intoxicating liquor”. The question is 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. In Synthetics and Chemicals Ltd. v. State of UP,1 (“Synthetics [7J]), a seven-Judge Bench delineated the scope of the regulatory powers of State Legislatures on “intoxicating liquor”. The correctness of Synthetics [7J] (supra) has been referred to a larger bench. We answer the reference in this judgment. i. Constitutional provisions

The State has the legislative competence under Entry 24 of List II over ‘industries’ but this is subject to entries 7 and 52 of List I.2 Under Entry 52 of List I, Parliament has legislative competence over such industries, the control of which by the Union is declared by 1 2 [1989] Supp. 1 SCR 623 : (1990) 1 SCC 109 “24. Industries subject to the provisions of Entries 7 and 52 of List I” Digital Supreme Court Reports [2024] 10 S.C.R. 1957

Parliament by law to be expedient in the public interest.3 Entry 7 of List I deals with industries which are declared by Parliament by law to be necessary for the purpose of defence or for the prosecution of war.4 Under Entry 33 of List III, the State Legislatures and Parliament can legislate on trade and commerce in, and the production, supply and distribution of the products of industries controlled by Parliament under Entry 52 of List I.5 Entry 8 of List II deals with ‘intoxicating liquors’.6 These words are followed by the expression “that is to say, the production, manufacture, possession, transport, purchase and sale of intoxicating liquors”. The Seventh Schedule also demarcates taxing powers related to alcohol separately. Entry 84 of List I (before it was amended by the Constitution (One Hundred and First Amendment) Act 2016) enabled Parliament to levy duties of excise on tobacco and other goods manufactured or produced in India except alcoholic liquors for human consumption but including medicinal and toilet preparations containing alcohol.7 Entry 51 of List II confers the State Legislature the competence to levy duties of excise, inter alia, on alcoholic liquors for human consumption but not including medicinal and toilet preparations containing alcohol.8 3 4 5 6 7 “52.

Industries, the control of which by the Union is declared by Parliament by law to be expedient in the public interest.” “7. Industries declared by Parliament by law to be necessary for the purpose of defence or for the prosecution of war.”

33. Trade and commerce in, and the production, supply and distribution of – (a) The products of any industry where the control of such industry by the Union is declared by Parliament by law to be expedient in the public interest, and imported goods of the same kind as such products; (b) Foodstuffs, including edible oilseeds and oils; (c) Cattle fodder, including oilcakes and other concentrates; (d) Raw cotton, whether grinned or ungrinned, and cotton seed; and (e) Raw jute.

“8. Intoxicating liquors, that is to say, the production, manufacture, possession, transport, purchase and sale of intoxicating liquors” “84. Duties of excise on tobacco and other goods manufactured or produced in India except- (a) Alcoholic liquors for human consumption; (b) Opium, Indian hemp and other narcotic drugs and narcotics, But including medicinal and toilet preparations containing alcohol or any substance included in sub-paragraph (b) of this entry.

But including medicinal and toilet preparations containing alcohol or any substance included in sub-paragraph (b) of this entry.” 8 “51. Duties of excise on the following goods manufactured or produced in the State and counterveiling duties at the same or lower rates on similar goods manufactured or produced elsewhere in India:- (a) Alcoholic liquors for human consumption; (b) Opium, Indian hemp and other narcotic drugs and narcotics, But not including medicinal and toilet preparations containing alcohol or any substance included in sub-paragraph (b) of this entry. State of U.P. & Ors. v. M/s Lalta Prasad Vaish and sons 1958 [2024] 10 S.C.R.

In exercise of the power under Article 2469 read with Entry 52 of List I, Parliament enacted the Industries (Development and Regulation) Act 1951.10 Section 2 of IDRA stipulates that it is expedient in public interest that the Union should take control of the industries specified in the First Schedule to the enactment. Item 26 of the First Schedule read as follows: “26. Fermentation industries: (1) Alcohol (2) Other products of fermentation industries”

In 2016, Item 26 of the First Schedule to the IDRA was amended to exclude potable alcohol from the ambit of the Item.11 Item 26 reads as follows after the amendment: “26. Fermentation industries (other than potable alcohol): (1) Alcohol (2) Other products of fermentation industries”

Section 18-G of IDRA12 grants the Central Government the power to regulate the supply and distribution “of any article or class of articles relatable to a scheduled industry” for securing equitable distribution and availability at fair prices. 9 10 11 12 “246. Subject matter of laws made by Parliament and by the Legislatures of States.” “IDRA” The Industries (Development and Regulation) Amendment Act 2016 “18G. Power to control supply, distribution, price, etc., of certain articles.— (1) The Central Government, so far as it appears to it to be necessary or expedient for securing the equitable distribution and availability at fair prices of any article or class of articles relatable to any scheduled industry, may, notwithstanding anything contained in any other provision of this Act, by notified order, provide for regulating the supply and distribution thereof and trade and commerce therein. (2) Without prejudice to the generality of the powers conferred by sub-section (1), a notified order made thereunder may provide— (a) for controlling the prices at which any such article or class thereof may be bought or sold; (b) for regulating by licences, permits or otherwise the distribution, transport, disposal, acquisition, possession, use or consumption of any such article or class thereof; (c) for prohibiting the withholding from sale of any such article or class thereof ordinarily kept for sale; (d) for requiring any person manufacturing, producing or holding in stock such article or class thereof to sell the whole or the part of the articles so manufactured or produced during a specified period or to sell the whole or a part of the article so held in stock to such person or class of persons and in such circumstances as may be specified in the order; (e) for regulating or prohibiting any class of commercial or financial transactions relating to such article or class thereof which in the opinion of the authority making the order are, or if unregulated are likely to be, detrimental to public interest; Digital Supreme Court Reports [2024] 10 S.C.R. 1959 ii. The judgment in Synthetics (7J)

The United Provinces Excise Act 191013 was enacted to “consolidate and amend the law in force in the United Provinces relating to the import, export, transport, manufacture, sale and possession of intoxicating liquor and of intoxicating drugs”. In exercise of the powers under the UP Excise Act, the Government of the United Provinces levied vend fee14 on ‘denatured spirit’ from the wholesale dealer of denatured spirit. The UP Excise Act was amended to include Section 24-A. Section 24-A provided that the Excise Commissioner may grant licence for the manufacture or sale of any ‘foreign liquor’. ‘Foreign Liquor’ was defined in the subordinate Rules to include “all rectified, perfumed, medicated and denatured spirit.” 15 The constitutional validity of the amendment including Section 24-A was challenged before the Allahabad High Court. The High Court upheld the challenge. The UP State Legislature enacted the U.P Excise (Amendment) (Re-enactment and Validation) Act 1976 including Section 24-A relying on the decisions of this Court (f) for requiring persons engaged in the distribution and trade and commerce in any such article or class thereof to mark the articles exposed or intended for sale with the sale price or to exhibit at some easily accessible place on the premises the price-lists of articles held for sale and also to similarly exhibit on the first day of every month, at such other time as may be prescribed, a statement of the total quantities of any such articles in stock; (g) for collecting any information or statistics with a view to regulating or prohibiting any of the aforesaid matters; and (h) for any incidental or supplementary matters, including, in particular, the grant of issue of licences, permits, or other documents and charging of fees therefor.

The appellants in Synthetics & Chemicals v. State of UP19 (“Synthetics [2J]”), held licenses for wholesale vend of ‘denatured spirit’. They instituted proceedings under Article 226 of the Constitution before the Allahabad High Court for seeking a direction to quash the notification by which vend fee was levied from a wholesale licence dealer of ‘denatured spirit’. The High Court dismissed the petitions. It held that the phrase ‘intoxicating liquors’ in Entry 8 of List II of the Seventh Schedule to the Constitution includes denatured spirit and that the State was, therefore, competent to levy the vend fee on denatured spirit.

Proceedings under Article 136 were instituted for challenging the decision of the High Court. Proceedings were also initiated under Article 32 challenging the constitutional validity of the levy of vend fee. A two-Judge Bench of this Court in Synthetics (2J) (supra) heard the writ petition and the appeals against the judgments of the Allahabad High Court together. Three issues arose before the Bench. On the issue of the meaning of the phrase ‘intoxicating liquor’ in Entry 8, the two-Judge Bench referred to the decisions of this Court in State of Bombay v. FN Balsara,20 Nashirwar (supra) and Har Shanker (supra) and held that the decisions indicate that the phrase ‘intoxicating liquor’ in Entry 8 of List II comprises of liquor which contains alcohol, both potable and non-potable.21 The second issue was whether in view of IDRA, the power of the State to regulate alcohol (both potable and non-potable) was denuded. In particular, reference was made to the notification issued by the Union under Section 18-G of the IDRA prescribing the price of various types of alcohol and rectified spirit. The two-Judge Bench referred to the decision of a three-Judge Bench of this Court in Tika 16 [1975] 2 SCR 861 : 1975 AIR 360 17 AIR 1957 SC 414 18 19 20 21 1976 ALJ 436 (FB) [1980] 2 SCR 531 : (1980) 2 SCC 441 [1951] 1 SCR 682 : (1951) SCC 860 (1980) 2 SCC 441 [18] Digital Supreme Court Reports [2024] 10 S.C.R. 1961 Ramji v. State of UP22 and entry 33 of List III to hold that the State Legislature had the power to legislate regarding the production, supply and distribution of the products of the industries notified by Parliament under Entry 52 of List I.23 The two-Judge Bench further held that the Ethyl Alcohol (Price Control) Order issued by the Central Government in exercise of the power under Section 18G of IDRA did not take away the exclusive rights of the State Government relating to intoxicating liquor.24 The third issue was whether the phrase ‘foreign liquor’ in Section 24-A includes denatured spirit or only alcohol for human consumption. The Bench held that the meaning of the phrase cannot be restricted to alcohol for human consumption since “when liquor is put to any use such as manufacture of other articles, the liquor is all the same consumed.” 25

Review petitions were filed against the decision of this Court in Synthetics (2J) (supra). Writ petitions were also filed for challenging the rules by which vend fees were levied in Uttar Pradesh, and provisions of various laws enacted by the then State of Bombay, and the States of Tamil Nadu and Andhra Pradesh by which exclusive privilege of dealing with any intoxicant was vested in the State. The matters were heard by a seven-Judge Bench in Synthetics (7J) (supra).

Justice Sabyasachi Mukharji, writing for himself and five other judges framed the following issues for consideration:

2. The main question that falls for consideration in these matters is whether the vend fee in respect of the industrial alcohol under different legislations and rules in different States is valid. […] The questions with which we are mainly concerned are the following: Whether the power to levy excise duty in case of industrial alcohol was with the State legislature or the Central legislature; What is the scope and ambit of Entry 8 of List II of the Seventh Schedule of the Constitution? 22 23 24 25 [1956] 1 SCR 393 : AIR 1956 SC 676 (1980) 2 SCC 441 [25-28] (1980) 2 SCC 441 [28] (1980) 2 SCC 441 [34] State of U.P. & Ors. v. M/s Lalta Prasad Vaish and sons 1962 [2024] 10 S.C.R. Whether, the State Government has exclusive right or privilege of manufacturing, selling, distributing etc. of alcohols including industrial alcohol. In this connection, the extent, scope and ambit of such right or privilege has also to be examined.

The decision, first, laid down the meaning of the terms, ‘rectified spirit’, ‘industrial alcohol’, and ‘ethyl alcohol’. The decision noted that the petitioners and appellants were manufacturers of ‘ethyl alcohol’ and that ‘ethyl alcohol’, which is also known as rectified spirit is an industrial alcohol. The judgement, used the three phases interchangeably: “74. It has to be borne in mind that by common standards ethyl alcohol (which has 95 per cent) is an industrial alcohol and is not fit for human consumption. The petitioners and the appellants were manufacturing ethyl alcohol(95 per cent) (also known as rectified spirit) which is an industrial alcohol. ISI specification has divided ethyl alcohol (as known in the trade) into several kinds of alcohol. Beverage and industrial alcohols are clearly and differently treated. Rectified spirit for industrial purposes is defined as “spirit purified by distillation having a strength not less than 95 per cent of volume by ethyl alcohol”. Dictionaries and technical books would show that rectified spirit (95 per cent) is an industrial alcohol and is not potable as such. It appears, therefore, that industrial alcohol which is ethyl alcohol (95 per cent) by itself is not only non-potable but is highly toxic. The range of spirits of potable alcohol is from country spirit to whisky and the ethyl alcohol content varies between 19 to about 43 per cent. These standards are according to the ISI specifications. In other words ethyl alcohol (95 per cent) is not alcoholic liquor for human consumption but can be used as a raw material input after processing and substantial dilution in the production of whisky, gin, country liquor, etc.”

This Court allowed the challenge on the following grounds: a. The phrase ‘intoxicating liquor’ in Entry 8 means ‘liquor which is consumable by human being as it is” for the following reasons: (i) In FN Balsara (supra), this Court was not aware Digital Supreme Court Reports [2024] 10 S.C.R. 1963 of the full use of alcohol as industrial alcohol;26 and (ii) Only two decisions of this Court have dealt with industrial alcohol. One was the decision in Synthetics (2J) (supra) and the other was the decision in Indian Mica and Micancite Industries v. State of Bihar27 in which this Court held that Parliament had the legislative competence to levy tax on alcoholic liquor not fit for human consumption;28 b. The provisions that are challenged are not regulatory but seek to levy a tax.29 List II does not confer the State Legislature the power to levy of tax on industrial alcohol;30 c. In view of Item 26 of the First Schedule to IDRA, the control of alcohol industries vests exclusively in the Union.

However, the judgment in paragraph 88 makes the following observations:

On an analysis of the aforesaid decisions and practice, we are clearly of the opinion that in respect of industrial alcohol the States are not authorised to impose the impost they have purported to do. In that view of the matter, the contentions of the petitioners must succeed and such impositions and imposts must go as being invalid in law so far as industrial alcohol is concerned. We make it clear that this will not affect any impost so far as potable alcohol as commonly understood is concerned. It will also not affect any imposition of levy on industrial alcohol fee where there are circumstances to establish that there was quid pro quo for the fee sought to be imposed. This will not affect any regulating measure as such.

Paragraph 88 lays down the following three principles: a. States do not have the competence to levy tax on industrial alcohol; b. States have the competence to levy tax on potable alcohol; and c. States have the competence to levy fee on industrial alcohol.

Justice Oza in his concurring opinion held: a. The legislative entries in List I and List II clearly demarcate the taxing powers of Parliament and State Legislature. Entry 84 of List I covers levy of excise duty on alcoholic liquor for other than human consumption and Entry 51 of List II covers levy of excise duty on alcoholic liquor for human consumption;34 34 (1990) 1 SCC 109 [97] Digital Supreme Court Reports [2024] 10 S.C.R. 1965 b. Parliament controls the alcohol industry since Item 26 of IDRA deals with industry based on fermentation and alcohol. The competence of the State Legislature under Entry 8 can only be subject to IDRA;35 and c. The regulation of the State under Entry 8 of List II can only be limited to prevent the conversion of alcoholic liquors for industrial use for human consumption. Regulatory fee can be levied by the State for this limited purpose. iii. The aftermath of Synthetics (7J)

Subsequently, the interpretation of the decision in Synthetics (7J) (supra) came up before this Court in numerous occasions. In Shri Bileshwar Khand Udyog Khedut Sahakari Mandali v. State of Gujarat,36 the constitutional validity of Section 58-A of the Bombay Prohibition Act 1949 was challenged. Section 58-A enabled the State Government to direct that “the manufacture, import, export, transport, storage, sale, purchase, use, collection or cultivation of any intoxicant, denatured spiritous preparations, hemp, mhowra flowers or molasses” would be in the supervision of persons appointed by them and the costs of such staff were required to be borne by the person engaged in the activity. This Court rejected the challenge. Relying on Synthetics (7J) (supra), the two-Judge Bench observed that though industrial alcohol is not covered by the regulatory powers under Entry 8 or the taxing power under Entry 51 of List II, the State has powers to ensure that industrial alcohol is not diverted to be used as potable alcohol and this is covered by Entry 33 of List III.37 35 36 37 (1990) 1 SCC 109 [100] [1992] 1 SCR 391 : (1992) 2 SCC 42 “4. […] Levy as a fee under Entry 8 of List II of Seventh Schedule or excise duty under Entry 51 are different than cost of supervision charged under Section 58-A. The former has to stand the test of a levy being in accordance with law on power derived from one of the constitutional entries.

This decision was followed by another two-Judge Bench in Gujchem Distillers India v. State of Gujarat.38 In State of AP v. McDowell,39 the prohibition of sale and consumption of intoxicating liquor in the State of Andhra Pradesh was challenged. The petitioners submitted that the State did not have the competence to prohibit consumption. For this purpose, reference was made to the observations in paragraph 85 of Synthetics (7J) (supra), where the Court had observed that after the enactment of IDRA, the power to issue licenses to manufacture both potable and non-potable liquor vested in Parliament. The three-Judge Bench rejected the argument by referring to observations in paragraph 86(a) Synthetics (7J) (supra) that States have the power to enact legislation in the nature of prohibiting potable liquor.40 In Vam Organic Chemicals v. State of UP41 [“Vam Organic I”], the rules issued under the UP Excise Act providing for power to issue licenses for denaturation of spirit and levy of denaturing fee was challenged. Justice A M Ahmadi (as the learned Chief Justice then was) writing for the two-Judge Bench noted that Synthetics (7J) (supra) did not hold that the State will not have any power over ‘industrial alcohol’.42 Specifically, the two-Judge Bench referred to the observations in paragraph 86(b) that the State may lay down regulations to ensure that non-potable alcohol is not misused as a substitute for potable alcohol. Justice Ahmadi observed that the process of denaturing was to ensure it was not misused as potable alcohol which would be covered by the observations in Synthetics (7J) (supra).43

In Bihar Distillery v. Union of India,44 the petitioner challenged the State’s cancellation of their license for preparing “rectified spirit” on the ground that the State lacked competence in view of 38 39 40 41 42 43 [1992] 1 SCR 675 : (1992) 2 SCC 399 [1996] 3 SCR 721 : (1996) 3 SCC 709 (1996) 3 SCC 709 [33] [1997] 1 SCR 403 : (1997) 2 SCC 715 [1997] 1 SCR 403 : (1997) 2 SCC 715 [13] (1997) 2 SCC 715 [13,14] “14. It is to be noticed that the States under Entries 8 and 51 of List II read with Entry 84 of List I have exclusive privilege to legislate on intoxicating liquor or alcoholic liquor for human consumption. Hence, so long as any alcoholic preparation can be diverted to human consumption, the States shall have the power to legislate as also to impose taxed etc. In this view, denaturation of spirit is not only an obligation on the States but also within the competence of the States to enforce. [ emphasis supplied] 44 [1997] 1 SCR 680 : (1997) 2 SCC 727 Digital Supreme Court Reports [2024] 10 S.C.R. 1967 Synthetics (7J) (supra).

The decision further elucidated the realm of competence of the State and the Union with respect to (a) industries engaged in manufacturing rectified spirit meant exclusively for supply to industries; (b) industries engaged exclusively in manufacturing rectified spirit for production of potable alcohol; and (c) industries engaged in both of the above. This demarcation will be discussed in detail in the subsequent sections of the judgment. To understand the manner in which Bihar Distillery (supra) interpreted the judgment in Synthetics (7J) (supra), it is sufficient at this stage to know that the demarcation of the competence was based on the purpose for which the rectified spirit was used. 45 46 (1997) 2 SCC 727 [12] (1997) 2 SCC 727 [23] State of U.P. & Ors. v. M/s Lalta Prasad Vaish and sons 1968 [2024] 10 S.C.R.

In Government of Haryana v. Haryana Brewery,47 a two-Judge Bench noted the dissonance in multiple decisions interpreting the judgment in Synthetics (7J) (supra) and directed that the papers may be placed before the Chief Justice for listing the matters before the Constitution Bench. In particular, the Bench noted the observations in (i) McDowell (supra) that the State has competence over production to sale of “intoxicating liquor”; (ii) Vam Organic I (supra), that State has competence over “denatured spirit”; and (iii) Bihar Distillery (supra) that the State’s competence over “rectified spirit” depended on the purpose for which spirit was going to be used. The Bench also noted the observations of a three-Judge Bench in State of UP v. Modi Distillery48 that the State does not have the legislative competence to levy excise duty on the material or input that is used in the process of producing alcoholic liquor for human consumption by relying on Synthetics (7J) (supra).49 However, it must be noted that the Bench in Modi Distillery (supra), specifically recorded that it does not “express any opinion in regard to the power of the State to regulate the manufacture of alcoholic liquors for human consumption.” 50

Meanwhile, another two-Judge Bench51 referred the decision in Bihar Distillery (supra) to a larger Bench on the ground that it was prima facie contrary to the scheme of legislative competence as examined by the Constitution Bench of this Court and the three- Judge Bench decision of this Court in Modi Distillery (supra). The three-Judge Bench in Deccan Sugar & Abkari v. Commissioner of Excise, AP,52 without overruling the decision in Bihar Distillery (supra) observed that this Court in Synthetics (7J) held that the State Legislature does not have the competence to levy any excise 47 48 49 (1997) 5 SCC 758 [1995] Supp. 3 SCR 119 : (1995) 5 SCC 753 In this case, the challenge was to the levy of excise duty on wastage in the preparation of Indian Made Foreign Liquor (IMFL), pipeline wastage and obscuration (which is the process of adding caramel to spirit for the preparation of rum. The Bench relied on the observations in Synthetics (7J) that the phrase ‘alcoholic liquor for human consumption’ means the liquor that is consumable “as it is” to hold that the State does not have the power to levy excise duty on the stages of manufacture or preparation of the liquor.

Separately, the State of UP levied an ad valorem licence fee on the sale of specially denatured alcohol by a wholesale vendor to those holding a licence under Form FL 4155 of the UP Excise Act. The fee was levied under the provisions of the UP Spirit Rules. The petitioner in RP Sharma v. State of UP56 instituted a writ petition before the Allahabad High Court, inter alia, for challenging the relevant rule and for a refund of the fee collected by the state.

A Division Bench of the Allahabad High Court allowed the petition, relying on the decision in Vam Organic-II (supra) since the fee was levied on the sale of denatured spirit and not to ensure that rectified spirit was not diverted for human consumption. The State of UP preferred an appeal against the decision before this Court, resulting in the present proceedings. The Court issued notice on the matter and granted an interim stay of the judgment of the High Court on 27 August 2004. By its order dated 25 October 2007, a three-Judge Bench of this Court in State of UP v. Lalta Prasad57 agreed with the submissions advanced by counsel for the appellants on the need for reconsideration by a larger bench. Numerous decisions were relied on to argue that Section 18G of the IDRA would not deprive the States of the power to enact laws with respect to Entry 33 of List III. The appellants argued that a notification ought to be issued under Section 18G for the field under Entry 33 to be occupied. Justice Altmas Kabir, writing for the three-Judge Bench observed that that the question of whether Section 18G occupies the field of Entry 33 on the alcohol industry needs to be referred to a Constitution Bench: “26. … The 7 Judge Bench did not also have the benefit of the reasoning in Ch. Tikaramji’s case (supra) which had held that in the absence of any notified order under Section 18-G of the 1951 Act no question of repugnancy could arise, which Mr. Dwivedi urged, recognised the State’s power to legislate with regard to matters under Entry 33 of List III notwithstanding the provisions and existence of Section 18-G in the 1951 Act. 55 Form FL 41 is meant for those industries where alcohol is used as a solvent but some alcohol continues to remain in final products such as lacquers, varnish, polishes, adhesives, anti-freezers and brake fluids. 56 57 2004 SCC OnLine All 159. [2007] 11 SCR 670 : (2007) 13 SCC 463 Digital Supreme Court Reports [2024] 10 S.C.R. 1971

Mr. Dwivedi then went on to refer to the judgment of this Court in SIEL Limited v. Union of India (1998) 7 SCC 26 wherein the learned Judges relying on the policy decision in Ch. Tikaramji’s case (supra) explained and distinguished the decision of the 7 Judge Bench in Synthetics and Chemicals case (supra). […]

Yet another case referred to by Mr. Dwivedi was the decision of a Constitution Bench of 5 Judges of this Court in Belsund Sugar v. State of Bihar (1999) 9 SCC 620 […]. In the said case also it was observed by the Constitution Bench that in the absence of promulgation of any statutory order covering the filed under Section 18-G it could not be said that mere existence of a statutory provision for entrustment of such power would result in regulation of purchase and sale of flour even if it is a scheduled industry. It may be noted that even while noting the decision of the 7 Judge Bench in Synthetics and Chemicals case (supra) the Court placed reliance on the decision rendered in the SIEL Ltd. Case (supra). …

On consideration of the aforesaid submissions made on behalf of the respective parties, we are of the view that Mr. Dwivedi’s submissions have a good deal of force, since by virtue of the interpretation of Section 18-G in the Synthetics and Chemicals case (supra) the power of the State to legislate with matters relating to Entry 33 of List III have been ousted, except to the extent as explained in the Synthetics and Chemicals case in paragraphs 63-64 of the judgment, where the State’s power to regulate, as far as regulating the use of alcohol, which would include the power to make provisions to prevent and/ or check industrial alcohol being used as intoxicant liquor, had been accepted. … As submitted by Mr. Dwivedi, the 7 Judge Bench did not have the benefit of the views expressed by this Court earlier in Ch. Tikaramji case (supra) where the State’s power to legislate under the Concurrent List stood ousted by legislation by the Central Government under Entry 52 of List I and also State of U.P. & Ors. v. M/s Lalta Prasad Vaish and sons 1972 [2024] 10 S.C.R. in view of Section 18-G of the Industries (Development and Regulation) Act, 1951.

In our view, if the decision in the Synthetics and Chemicals case (supra) with regard to the interpretation of Section 18-G of the 1951 Act is allowed to stand, it would render the provisions of Entry 33 (a) of List III nugatory or otiose.

We are, therefore, also of the view that this aspect of the matter requires reconsideration by a larger Bench of this Court, particularly, when the views expressed by 7 Judge Bench on the aforesaid question have been distinguished in several subsequent decisions of this Court, including the two decisions rendered by Constitution Benches of five Judges.” (emphasis supplied)

This Court formulated six questions for adjudication by a larger Bench. They are reproduced below: a. Does Section 2 of the IDRA have any impact on the field covered by Section 18G of the same or Entry 33 of List III of the Seventh Schedule? b. Does Section 18G of the aforesaid Act fall under Entry 52 of List I of the Seventh Schedule of the Constitution, or is it covered by Entry 33 of List III thereof? c. In the absence of any notified order by the Central government under Section 18G of the above Act, is the power of the State to legislate in respect of matters enumerated in Entry 33 of List III ousted? d. Does the mere enactment of Section 18G of the IDRA, give rise to a presumption that it was the intention of the Central government to cover the entire field in respect of Entry 33 of List III so as to oust the States’ competence to legislate in respect of matters relating thereto? e. Does the mere presence of Section 18G of the IDRA, oust the State’s power to legislate in regard to matters falling under Entry 33(a) of List III? Digital Supreme Court Reports [2024] 10 S.C.R. 1973 f. Does the interpretation given in Synthetics (supra), in respect of Section 18G of the IDRA correctly state the law regarding the States’ power to regulate industrial alcohol as a product of the Scheduled industry under Entry 33 of List III in view of clause (a) thereof?

The batch was placed before a Constitution Bench pursuant to the above order. By an order dated 8 December 2010, the Constitution Bench observed that the decision in Synthetics (7J) (supra) requires to be considered by a Bench of nine Judges and directed the matter be placed before a larger Bench:

Having meticulously examined the judgment of the Constitution Bench of seven learned Judges in the case of Synthetics and Chemical Limited & Ors. vs. State of Uttar Pradesh & Ors., reported in 1990 (1) SCC 109, we are of the view that the matter requires consideration by a Bench of nine Judges.

Though the three-Judge Bench by an order 25 October 2007 only referred the issue of the interplay between Section 18-G of the IDRA and Entry 33 of List III to the Constitution Bench, the order of the Constitution Bench categorically noted that the correctness of the decision in Synthetics (7J) ought to be reconsidered by a nine Judge Bench. Thus, this Bench is not limited to the questions framed by the three-Judge Bench. B. Submissions i. Appellants’ submissions

27. This Court held in Synthetics (7J) (supra) that denatured spirit is industrial alcohol and is outside the jurisdiction of States under Entry 8, List II of the Seventh Schedule to the Constitution. It held that Entry 8, List II deals only with potable alcohol. Mr Dinesh Dwivedi, learned senior counsel representing the State of UP assailed the reasoning in Synthetics (7J) (supra) and argued that the States have jurisdiction over industrial alcohol. He submitted that: a. Legislative entries are fields of legislation and must be read widely and construed liberally to maintain the federal balance. The exclusive jurisdiction of the States cannot be ousted by a Parliamentary enactment. Article 245 of the Constitution is State of U.P. & Ors. v. M/s Lalta Prasad Vaish and sons 1974 [2024] 10 S.C.R. subject to Article 246 and therefore the division of legislative powers must be given their full effect; b.

The term ‘intoxicating liquors’ appearing in Entry 8 of List II of the Seventh Schedule to the Constitution has a rich history and legislative practice accompanying it; c. d. The term ‘intoxicating liquors’ in Entry 8 of List II is borrowed from Entry 31, List II of the 1935 Act. The 1935 Act was enacted by the British Parliament when the term ‘intoxicating liquors’ had attained a specific meaning. This meaning can be discerned from Section 110 of the License Consolidation Act 1910 and Sections 3, 4, 5, 116 of the Spirit Act 1880; In British legislations, the words ‘intoxicating liquors’ were defined to include spirit of all kinds including fermented and distilled spirits. The terms ‘intoxicating liquors’ and ‘spirit’ or ‘liquor of all kinds’ were used interchangeably in laws in England; e. Various provincial statutes defined the words ‘liquor’ and ‘sprit’ to include all liquids containing alcohol.58 These legislations were enacted with the knowledge that alcohol is used for industrial purposes. ‘Intoxicating liquors’ in Entry 8 of List II of the Seventh Schedule to the Constitution is a comprehensive phrase which connotes all liquids containing alcohol.

Therefore, liquor and spirit including industrial alcohol have always been under the jurisdiction of States; f. The 1935 Act used different phrases in Entries 31 and 40 of List II of its Seventh Schedule. These entries are relatable to Entries 8 and 51 of List II of the Seventh Schedule to the Constitution respectively. Whereas the phrase ‘alcoholic liquor for human consumption’ is used in Entry 51 List II for taxation purposes, Entry 8 of List II uses the word ‘intoxicating liquors’. Similarly, Entry 84 of List I uses the phrase ‘alcoholic liquor not for human consumption’ and Article 47 uses the phrase ‘intoxicating drinks’. It would be irrational to presume that the framers of the Constitution used different phrases to mean the same thing; 58 Bombay Abkari Act 1878, Madras Abkari Act 1886, Bengal Excise Act 1909, Bihar Excise Act 1915, MP Excise Act 1915, Punjab Excise Act 1914, Chhattisgarh Excise Act 1915 and UP Excise Act 1910.

Digital Supreme Court Reports [2024] 10 S.C.R. 1975 g. The term ‘liquors’ used in a legislation under Entry 31 of List II of the Seventh Schedule to the 1935 Act was accepted to mean all alcoholic liquids by this Court in FN Balsara (supra). The language of Entry 8 of List II of the Seventh Schedule to the Constitution is borrowed from Entry 31 of List II of the Seventh Schedule to the 1935 Act and must be deemed to have the same meaning; h. Entry 84 of List I of the Seventh Schedule to the Constitution uses the phrase ‘alcoholic liquor not for human consumption’. Usage of widely different terms in the Constitution would appear irrational if ‘intoxicating liquors’ was understood to exclude alcohols used in industries; i. j. k. Entry 8 of List II includes alcohols used in industries. Since it is a specific entry in List II, alcohols used in industries will be excluded from the general entry on industries in Entry 24 of List II. The Union cannot take over any industry in pursuance of Entry 52 of List I unless the industry falls under Entry 24 of List II. Therefore Parliament cannot takeover industrial alcohol by making a declaration under the IDRA, which relates to Entry 52 of List I; Entry 8 of List II is not subject to any other entry in the Seventh Schedule.

The Constitution makes specific mention where it intends a legislative field to be subject to other entries in the Seventh Schedule; and Synthetics (7J) (supra) fell into error by not considering the traditional meaning of ‘intoxicating liquors’. It also failed to notice all previous decisions, like Ch Tika Ramji v. State of UP,59 which defined ‘industry’ for the purpose of Entry 24 of List II and Entry of 52 List I and delineated its scope. It held that the product of an industry notified under the IDRA falls under Entry 33 of List III.

28. Mr Dwivedi submitted that Entry 8 of List II governs the production, manufacture, possession, transport, purchase and sale of intoxicating liquors. Since alcohols used in industries fall within the remit of ‘intoxicating liquors’ the State legislature has exclusive and inalienable 59 [1956] 1 SCR 393 : 1956 SCC OnLine SC 9 State of U.P. & Ors. v. M/s Lalta Prasad Vaish and sons 1976 [2024] 10 S.C.R. jurisdiction in this field. However, in the alternative, the industry i.e. the production and manufacture of alcohols used in industries, would be governed by the general entry, Entry 24 of List II, which can be taken over by the Union upon a declaration under Entry 52, List I. The product of the industry would be governed by Entries 26 and 27 of List II and would require a declaration under Entry 33 of List III for the Union to occupy the field. He argued that only the production and manufacture of industrial alcohol would be governed by the Union List even if the requirement of a declaration under Entry 52 of List I is met by Section 2 of the IDRA read with Entry 26 of the First Schedule to the IDRA. However, no corresponding declaration is made under Section 18G of the IDRA to satisfy the requirements of Entry 33, List III. The Central government would be required to issue a notified order under Section 18G of the IDRA to claim control over the product. No such order has been issued and therefore the product remains in the exclusive domain of the State. Therefore, the Union has not occupied the field under Entry 33, List III.

Mr Arvind Datar, learned senior counsel took us through the process of making denatured alcohol and potable liquor from molasses or grains. He argued that a license is required to make ENA and another license is required to make denatured spirit out of ENA. The process of denaturation is done before a State Excise Officer and the excise or duty payable against ENA and denatured spirit changes drastically. He argued that States can regulate potable alcohol as well as denatured spirits because the process of denaturing takes place within the same premises.

Mr Datar argued that the Synthetics (7J) (supra) must be overruled because: a. In para 74 of the judgment, this Court erred in assuming that industrial alcohol and rectified spirit are the same substance. Rectified spirit or ethyl alcohol, which is per se for human consumption, cannot be used interchangeably with industrial alcohol which has undergone denaturation. Ethyl alcohol or rectified spirit usually undergoes denaturation for the purpose of their use in industries. This would involve payment of fees and obtaining of licenses for the process; b. The expression ‘alcoholic liquor for human consumption’ in Entry 51 of List II was mistakenly read as ‘alcoholic liquor Digital Supreme Court Reports [2024] 10 S.C.R. 1977 fit for human consumption’ which has a widely different meaning.60 For example, molasses despite not being capable of final consumption, as it is, would be alcohol for human consumption.

Mr Datar submitted that the phrase ‘that is to say’ featuring in Entry 8 of List II of the Seventh Schedule connotes that the entry is exhaustive. Such a reading would mean that the entire journey of intoxicating liquor – from production to purchase and sale will fall within the remit of Entry 8 of List II. Since Entry 8 of List II is exhaustive and is not subject to any other entry in List I or List III, it cannot be transgressed by a law made by Parliament.

Relying on the State of Madras v. Gannon Dunkerley,62 Mr Datar argued that to understand the meaning of ‘intoxicating liquors’, which has not been defined in the Constitution, the Court may identify if the expression is nomen juris and adopt the meaning which the word has obtained over a passage of time. The British law i.e. the Spirits Act 1880 includes denatured alcohol. Similarly, this Court in India Mica (supra) and FN Balsara (supra) held that intoxicating liquor includes denatured spirits. Mr Datar also presented a list of legislation enacted at around the same time which included denatured alcohol in the same category as liquor. Mr Datar relied on the judgment of this Court in SIEL Ltd v. Union of India63 to argue that the subjects enumerated in Entry 33, List III are excluded from Entry 52, List I. 61 Para 86. Synthetics (supra) 62 63 [1959] SCR 379 [1998] Supp. 1 SCR 560 : (1998) 7 SCC 26 Digital Supreme Court Reports [2024] 10 S.C.R. 1979 Lastly, he urged that since Section 18G of the IDRA does not specify that it extends to ‘production’, even the issuance of a notified order would not result in the occupation of the field by the Union with respect to production.

Mr Jaideep Gupta, learned senior counsel, supplemented the case of the appellants. He submitted that if this Court were not inclined to hold that all alcohol falls under Entry 8 of List II then, in the alternative, the judgment of this Court in Synthetics (7J) (supra) must be overruled on the ground that the three-fold classification of Tika Ramji (supra) has not been followed. This Court in Tika Ramji (supra) devised a threefold classification as pre-production, production and post-production. It held that only the second category i.e. production would be covered by the word ‘industry’. He submitted that the State therefore has the power to regulate the manufacture of ENA which would fall under the pre-production category. The State would also have the power to regulate the distribution of denatured alcohol. Buttressing this point, Mr Jaideep Gupta argued that it becomes imperative for the State to regulate the distribution of denatured alcohol because it may be renatured and distributed as potable alcohol which will lead to tragedies. He argued that it becomes imperative for the State to regulate such instances under Entry 8 of List II as well as Entry 6 of List II which deals with public health.

Mr V Giri, learned senior counsel, differed from other counsel for the appellants and submitted that denatured alcohol would be excluded from the ambit of the term ‘intoxicating liquors’ and would therefore fall under Entry 24 of List II. However, he supported the arguments of the other counsel on a notified order under Section 18G of the IDRA being a prerequisite for Parliament to occupy the field under Entry 33 of List III.

35. Mr Balbir Singh, learned senior counsel, and Mr Shadan Farasat and Dr. Vivek Sharma, learned counsel, have supported the above arguments on behalf of the appellants. ii. Respondent’s submissions

36. Mr R Venkataramani, learned Attorney General for India appearing for the Union of India submitted that: State of U.P. & Ors. v. M/s Lalta Prasad Vaish and sons 1980 [2024] 10 S.C.R. a. The production, manufacture, trade and commerce, supply and distribution constitute a chain of economic activity and may not be looked at separately. Therefore, the process of production necessarily includes the series of actions of trade, commerce, supply and distribution. This implies that there is a symbiotic relationship between Entry 52 of List I and Entry of 33 List III and they may not be looked at separately. Entry 52 of List I and Entry 33 of List III are a family of entries which are interconnected. Entry 52 of List I can also include and touch upon all matters relating to an industry that is brought under the control of the Union. These matters can be production, trade, commerce, supply and distribution, etc.; b.

Entry 52 of List I is a special entry uncontrolled by any other entry including Entry 8 of List II. It envisages the possibility of uniform control at the federal level of any declared industry by removing it from the individual jurisdiction of the States. Such uniform control serves the purpose of subserving the common good, equitable distribution, fair prices, utility of the products of an industry for serving the interests of all the States, etc.; c. To the extent that Parliament legislates with respect to an industry, the powers of the States under Entries 26 and 27 of List II are denuded. Similarly, the powers of the States under Entry 33 of List III are denuded if Parliament has occupied the field. Merely because a notified order is not issued would not leave the subject to be legislated upon by the States. This is because the lack of regulation or notification may be to serve the interest of the industry.

The principle elucidated in Tika Ramji (supra) is not a principle of universal application i.e., in the absence of a notified order under Section 18G, the IDRA will not be a dormant law and the States will not derive their competence to deal with all or any matters otherwise exhaustively dealt with by Section 18G; d. The observations in SIEL (supra) and Tika Ramji (supra) are incorrect in completely separating Entry 52 of List I from Entry 33 of List III. It is open to Parliament to enact laws in respect of trade and commerce, production, supply, distribution. The fact that the IDRA touches upon a certain field is enough to oust the jurisdiction of the State completely; Digital Supreme Court Reports [2024] 10 S.C.R. 1981 e. All uses of liquids containing alcohol, other than those meant for human consumption, would fall under one category which is non-potable alcohol. Non-potable alcohol must fall outside Entry 8 of List II. Accordingly, the 2016 amendment to Entry 26 of Schedule I of the IDRA must be taken to have validly taken over non-potable alcohol; f.

The focus of the framers while drafting the provisions concerning alcohol in the Constitution was temperance, regulation of trade and commerce in consumable alcohol preparations and to raise revenue; g. Entry 8 of List II cannot be interpreted to carve anything out of Entry 52, List I and Entry 33, List III. The judgment of this Court in ITC Ltd v. Agricultural Produce Market Committee,64 is inapplicable to the present case because ITC (supra) was determined in the context of overlapping entries. The ‘fermentation industry’ has been dealt with under the IDRA, which is a self-contained legislation; h. The term ‘intoxicating liquors’ in Entry 8 of List II does not include all classes of alcoholic liquids. The use of the phrase ‘that is to say’ occurring in Entry 8 of List II only refers to the range of activities concerning one class of alcohol, namely potable alcohol, and is not referable to other classes of liquor; i. j.

The framers of the Constitution may not have been aware of many industrial uses of alcohol and that all alcohol is neither consumable by humans nor intoxicating in nature; and The Report of the Industrial Alcohol Committee in 1920 observed that it was difficult to define ‘intoxicating liquors’ since there was no intrinsic difference between alcohol intended for potable and non-potable purposes.

37. Mr Tushar Mehta, learned Solicitor General of India, argued that the adjudication on the interplay of Sections 2 and 18G of the IDRA with Entry 52 of List I and Entry 33 of List III will have a bearing on other legislation and therefore the ruling in this case may not be restricted to the industry of alcohol. The division of legislative 64 [2002] 1 SCR 441 : (2002) 9 SCC 232 State of U.P. & Ors. v. M/s Lalta Prasad Vaish and sons 1982 [2024] 10 S.C.R. powers has undergone four stages: (a) the devolution of powers to the Federal legislature and the Provincial legislatures under the Devolution Rules, Government of India Act 1919;65 (b) the division of subjects between the Centre and the Provinces under the 1935 Act; (c) the draft Constitution which was placed before the Constituent Assembly; and (d) the entries as they were finally adopted in the Constitution. The Solicitor General submitted that: a.

Some industries have always been considered as necessarily under Union control. This may be because it is in national interest, requires uniform regulation throughout the country, or when the industry or its products are sought to be equitably distributed. Entry 52 of List I is in furtherance of the federal principle; b. Entry 20 of the Central Subject List in the Devolution Rules framed under the 1919 Act which corresponds to Entry 52 of List I of the Seventh Schedule to the Constitution used the term ‘development’. A similar provision was inserted as Entry 34, List I of the Seventh Schedule to the 1935 Act which also used the term ‘development’. This entry was further retained as Entry 64 of List I of the Seventh Schedule to the draft Constitution. However, after debates in the Constituent Assembly the entry gained the form in which it appears today in Entry 52 of List I. The word ‘development’ was dropped from the entry but the word ‘control’ was retained.

Therefore, the term ‘control’ must have been intended to connote a wider meaning than its earlier versions; c. This is borne out by the Constituent Assembly debates where Dr BR Ambedkar responded to amendments which sought to introduce the term ‘development and control’ in draft Entry 64, List I. He stated that the intention of the Drafting Committee was not merely to allow the Union to take over the development of an industry but also other aspects; d. Tika Ramji (supra) must be overruled because: i. It did not consider the Constituent Assembly debates and wrongly restricted the meaning of industry to manufacturing and production only; 65 “1919 Act” Digital Supreme Court Reports [2024] 10 S.C.R. 1983 ii. All aspects from the sourcing of raw materials to the distribution of products must fall within the powers of the Union to take control of an industry under Entry 52 of List I; iii. Article 366(12) did not define the term ‘goods’ to include raw materials in particular; iv.

Entry 27 of List II is subject to Entry 33 of List III. The implication of this aspect was not sufficiently dealt with by the Court in Tika Ramji (supra); and v. It is expedient in public interest that alcohol is regulated by a Central legislation. Currently, the IDRA occupies the field, and any State law on alcohol, other than potable alcohol, will be repugnant to the IDRA. The holding in Tika Ramji (supra), that there must be a notified order in force pursuant to Section 18G for there to be repugnancy is not correct. Further, it was obiter dicta; e. f. Synthetics (7J) (supra) rightly did not consider the observations in Tika Ramji (supra) regarding the absence of a notified order by the Union government; The debates in the Constituent Assembly would show that the framers of the Constitution intended the Union to have some control over the trade and commerce, production, supply and distribution which led to the introduction of a concurrent list entry which is identifiable as Entry 33 of List III; g.

The power of taxation over potable alcohol has always been with the States and the power of taxation over non-potable alcohol has always been with the Union. This is borne out by the evolution of Entry 84 of List I and Entry 52 of List II of the Seventh Schedule to the Constitution. The control and the taxing power were cumulatively given to the provinces under Entry 16 of the provincial subject list of the Devolution Rules under the 1919 Act. Under the 1935 Act, Entry 45 of List I specifically excluded ‘alcoholic liquor for human consumption’ from the domain of the Union and correspondingly included it under the State list as Entry 40 of List II; h. The term ‘intoxicating liquors’ in Entry 8 of List II means a beverage which has the effect of intoxication upon consumption. State of U.P. & Ors. v. M/s Lalta Prasad Vaish and sons 1984 [2024] 10 S.C.R. The term is not used elsewhere in the Seventh Schedule and instead the term ‘alcoholic liquor for human consumption’ is used in taxing entries.

The terminological variation is because the incidence of tax is relevant in a taxing entry. Accordingly, since intoxication is not the incidence of taxation but the effect of consuming alcoholic liquor, it is not used in the taxing entries; Similarly, in Article 47, the term ‘intoxicating drinks’ is used to connote all drinks which have the effect of intoxication regardless of its alcoholic content, for example, Indian hemp; This Court, in Synthetics (7J) (supra), held that ‘intoxicating liquors’ is limited to ‘alcoholic liquor fit for human consumption’. FN Balsara (supra) defined liquor in a different context and did not deal with legislative competence; and Industrial alcohol is a subject which affects the entire nation and requires a uniform approach. This is evidenced by national laws and policies such as the Indian Power Alcohol Act 1948, Ethyl Alcohol (Price Control) Order 1966 and the National Biofuel Policy 2018. i. j. k.

Mr Dhruv Agrawal, learned senior counsel; Mr Abhimanyu Bhandari; Mr Omar Ahmad; Ms Tahira Karanjawala; Ms Sansriti Pathak; Mr Pawan Shree Agarwal; Mr S Nandakumar; and Mr Akash Bajaj, learned counsel, have supported the above arguments on behalf of the respondent. C. The distinction between potable and non-potable alcohol

Before delineating the issues that fall for the consideration of this Court, certain preliminary remarks on the process of preparation of potable alcohol, that is, alcohol that is used as a beverage must be made. The raw material for potable alcohol is generally molasses and grain,66 which is fermented and distilled to produce rectified spirit. Rectified spirit, also known as ethyl alcohol, contains about 95% alcohol and some impurities which can affect flavour and aroma. Rectified spirit is used as a solvent in pharmaceutical and cosmetic products. Though rectified spirit is not generally used in 66 See FB Wright, Distillation of Alcohol and De-Naturing (2nd ed. 1907) Digital Supreme Court Reports [2024] 10 S.C.R. 1985

the preparation of alcoholic beverages, it may be used to produce home-made liqueurs.67 Extra Neutral Alcohol is a highly purified form of ethanol which contains more than 96% alcohol. ENA has a neutral taste and smell and is mostly used as a base for the preparation of premium beverages. Additionally, it is also used in the production of products like perfumes and mouthwashes. Absolute alcohol is ethanol that contains less than 1% water and more than 99% alcohol.68 The high purity of the alcohol makes it ideal for the preparation of pharmaceutical products, cosmetics and chemical manufacturing that require a water-free solvent.69 ‘Industrial alcohol’ is a common term that is used to denote the alcohol that is used in industries. As indicated above, all the above three variants of ethanol are used in various industrial preparations. While ENA is usually used for the preparation of alcoholic beverages, rectified spirit is also used to prepare certain alcoholic beverages. Denaturation is a process by which ethanol is deliberately made undrinkable by adding chemicals known as ‘denaturants’ to make it poisonous or foul smelling and unsuited for ingestion by humans. Denaturants can be added to any of the three forms of ethanol (ENA, rectified spirit and absolute alcohol). Denatured alcohol is also further classified into ‘Completely Denatured Alcohol’ and ‘Specially Denatured Alcohol’. Both these formulations contain denaturants making it unconsumable. However, in completely denatured alcohol, the denaturants cannot be easily removed while in ‘specially denatured alcohol’, they can be easily removed.70 In view of this complexity, where the materials for the preparation of potable alcohol are also used for the preparation of other products, a simplistic classification of ‘potable’ and ‘non-potable’ alcohol cannot be made for the purposes of this judgment.

This is also evident from the submissions by counsel on the scope of Entry 8 of List II. The counsel made the following submissions: 67 Stuart Walton, Norma Miller, An Encyclopedia of Spirits & Liqueurs and How to Cook with Them (2000) 68 See FB Wright, Distillation of Alcohol and De-Naturing (2nd ed. 1907) 69 See KA Jacques, TP Lyons, DR Kelsall (ed), The Alcohol Textbook: A reference for the beverage, fuel and industrial alcohol industries (4th ed. Nottingham University Press) 70 See Alcohol Denaturants-Specification (Second Revision), ICS 71.100.80 State of U.P. & Ors. v. M/s Lalta Prasad Vaish and sons 1986 [2024] 10 S.C.R. a. Entry 8 only includes the final product of potable alcohol, that is alcoholic beverages for human consumption. Entry 8 does not include ENA which is a raw material for the preparation of beverage;71 b. Entry 8 includes ENA and potable alcohol;72 c. Entry 8 includes ENA, potable alcohol and the process of ‘denaturing’ ENA;73 and d. Entry 8 includes ENA, potable alcohol and denatured alcohol.74 D. Issues

With the above preliminary observations, we have formulated the following issues: a. Whether Entry 52 of List I of the Seventh Schedule to the Constitution overrides Entry 8 of List II; b. Whether the expression ‘intoxicating liquors’ in Entry 8 of List II of the Seventh Schedule to the Constitution includes alcohol other than potable alcohol; and c. Whether a 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. E. Analysis i. The constitutional distribution of legislative power

One of the prominent features of a federal Constitution is the distribution of legislative powers between the Union and the States. Article 246 provides for the distribution of legislative powers between Parliament and the State Legislatures. Clause (1) of Article 246 stipulates that Parliament has exclusive power to make laws with respect to any matter enumerated in the Union List (List I to the Seventh Schedule) notwithstanding anything in the State or the 71 See submissions of Mr Tushar Mehta, learned SG. 72 See submissions of V Giri, counsel for petitioner 73 See Vam Organic (II) 74 See submissions of Mr Dwivedi and Mr Datar senior counsel Digital Supreme Court Reports [2024] 10 S.C.R. 1987 Concurrent Lists. Clause (2) stipulates that Parliament and the State Legislatures have the power to legislate on any matter enumerated in the Concurrent List (List III of the Seventh Schedule) subject to the power of Parliament under Clause (1) but notwithstanding the power of the State Legislatures under Clause (3). Clause (3) provides that subject to clauses (1) and (2), the State Legislatures have the power to legislate on any matter enumerated in the State List (List II of the Seventh Schedule) of the Seventh Schedule. Further, Clause (4) provides for the power of Parliament to enact laws for Union Territories. It states that Parliament may enact laws for any part of the territory of India which is not included in a State. This power includes the power of Parliament to make laws with respect to entries enumerated in the State list, for Union Territories.

The federal balance of the distribution of legislative powers between the Union and the States rests on the interpretation of the phrase “notwithstanding” in Clause (1) of Article 246 and “subject to” in Clause (3) of Article 246. It is more than clear that the phrases provide predominance to Parliament over State Legislatures. The federal balance lies not on the recognition that the Constitution grants Parliament predominant legislative power but on the identification of the scope of such predominance. The scope of the non-obstante clause in Article 246(1) and the subjugation clause in Article 246(3) must not be interpreted in isolation but along with the substantive provisions of the clauses. Clause (1) of Article 246 grants Parliament the “exclusive power” to enact laws with respect to matters in List I. Similarly, Clause (3) of Article 246 grants the Legislature of States, the “exclusive power” to enact laws with respect to matters in List II. On a holistic interpretation of the provisions, it is clear that the non- obstante clause in Article 246(1) and the subjugation clause in Article 246(3) do not permit Parliament to enact laws with respect to the entries in List II. Each of the legislative bodies are sovereign and supreme within the sphere that is allocated to them in the Seventh Schedule.75 What then is the purpose of the non-obstante and subjugation clause? It is crucial to note that Clause (1) of Article 246 stipulates that the power of Parliament to make laws with respect to entries in List I is ‘notwithstanding’ not just the power to make laws with respect to matters in the Concurrent list but also the power to 75 Jindal Stainless Steel v. State of Haryana (2017) 12 SCC 1 [617] State of U.P. & Ors. v. M/s Lalta Prasad Vaish and sons 1988 [2024] 10 S.C.R. make laws with respect to matters in the State List. A combined reading of the non-obstante clause and the subjugation clause along with the use of the phrase “exclusive power” means only one thing, that when there is a conflict between the entries in List I and List II, the power of Parliament supersedes.

The judgment of this Court in Hoechst Pharmaceuticals v. State of Bihar76 is the locus classicus on the constitutional scheme of legislative distribution. The decision holds that when there is a conflict between an entry in List I and entry in List II which is not ‘capable of reconciliation’,77 the power of Parliament to legislate with respect to a field covered by List I must supersede the exercise of power by the State legislature to that extent.78 The judgment also proceeded to lay down the manner in which the entries in List I and List II must be reconciled79: a. b. In case of a seeming conflict between the entries in the two lists, the entries must be read together without giving a narrow and restricted meaning to either of the entries in the Lists; and If the entries cannot be reconciled by giving a wide meaning, it must be determined if they can be reconciled by giving the entries a narrower meaning.

In State of WB v. Committee for Protection of Democratic Rights,80 a Constitution Bench held that the principle of federal supremacy in Article 246 can be resorted to only when there is an ‘irreconcilable direct conflict’ between the entries in List I and List II.81 ii. Scheme of legislative entries

The lists in the Seventh Schedule demarcate the legislative fields between Parliament and the State Legislatures. They do not confer power but stipulate broad fields of legislation.82 The source 76 [1983] 3 SCR 130 : (1983) 4 SCC 45 77 Also see In re Central Provinces and Berar Act 14 of 1938, AIR 1939 FC 1 78 (1983) 4 SCC 45 [38] 79 AIR 1939 FC 1 [41] 80 81 [2010] 2 SCR 979 : (2010) 3 SCC 571 (2010) 3 SCC 571 [27]; Also see In re C.P & Berar Taxation Act, AIR 1939 FC 1 82 See Calcutta Gas Co. (Proprietary) Ltd. v. State of W.B., 1962 SCC OnLine SC 60; Union of India v. HS