In Landmark Verdict, Top Court Says States Can Rule On 'Industrial Liquor'

The Supreme Court on Wednesday ruled that state governments can legislate on the sale of 'industrial alcohol', otherwise called 'denatured spirits', by including it under the term 'intoxicating liquor' in the State List, i.e., the list of subjects on which States can pass laws.

Eight members of the Chief Justice DY Chandrachud-led nine-judge Constitution Bench found in favour of petitioning states - led by Uttar Pradesh and including Maharashtra, Bengal, and Kerala - while the ninth, Justice BV Nagarathna, dissented. The majority ruled that the term 'intoxicating liquor' cannot be understood to mean only that fit for human consumption.

Instead, it will include all liquids that contain alcohol, even if not meant for human consumption, can be included in the term 'intoxicating liquor'.

The Chief Justice said states' power to legislate could not be challenged since the law covers 'intoxicating' and 'industrial' products, and that the union could not take over this subject.

The majority ruling overturned a 34-year decision by a seven-judge bench in Synthetics and Chemicals Pvt Ltd vs State of Uttar Pradesh. It was referred to a nine-judge bench in 2007.

Justice BV Nagarathna, however, ruled on the principle that 'industrial alcohol' means it is not fit for human consumption, and that there was a "lack of competence for the state legislature". She said the decision in the Synthetics case had been "correctly decided by this court".

The verdict had been reserved in April after a marathon six-day hearing.

In that hearing, petitioners argued that if the power to regulate 'industrial alcohol' goes to the centre, their hands would be tied when dealing with illegal consumption of 'industrial alcohol'.

Justice Nagarathna's dissenting opinion countered that argument, stating that just because 'industrial alcohol' could be illegally consumed the State List could not be "stretched".

The centre, however, argued the power to regulate 'industrial alcohol' had always been theirs.

The other judges on the bench were Justices Hrishikesh Roy, Abhay S Oka, JB Pardiwala, Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma, and Augustine George Masih.

The court was asked to decide if the Industries (Development and Regulation) Act, or the IRDA, of 1951 allowed the union government to pass laws on the subject of 'industrial alcohol'.

The court was asked to rule on two key questions: a) should 'industrial alcohol' be considered as 'intoxicating alcohol' and therefore come under jurisdiction of States, and b) can state governments have control over 'industrial alcohol' as it does with 'intoxicating alcohol'?

The law in question was Section 18G of the IRDA, which allows the union government to ensure fair distribution and pricing of products from industries in scheduled lists, i.e., from the list of subjects on which it is allowed to rule.

The challenge was to Entry 33 of the third list, or the concurrent list, which gives state governments the power to regulate the trade, production, and distribution of 'industrial alcohol'.

Also, under Entry 8 of the second list, States are empowered to regulate 'intoxicating alcohol', including production, possession, transport, purchase, and sale.