Source: Supreme Court  

Why in News? 

A nine-judge Constitution Bench of the Supreme Court ruled 8:1 that States have the authority to regulate denatured spirit or industrial alcohol, classifying it under "intoxicating liquor" as per Entry 8 of the State List. 

• The majority opinion observed that the term should not be narrowly defined, including substances that could be misused for human consumption.  
• In dissent, Justice Nagarathna argued that industrial alcohol is specifically not meant for human consumption, stated differing interpretations of the term "intoxicating liquor." 

What was the Background of State Of U.P. V. M/S. Lalta Prasad Vaish? 

• The case revolves around a constitutional dispute between the States and Union regarding who has the power to regulate industrial alcohol/denatured spirit. 
• There are multiple relevant constitutional provisions : 
  • Entry 8 of List II (State List) deals with "intoxicating liquors" and gives States power over production, manufacture, possession, transport, purchase and sale 
  • Entry 52 of List I (Union List) gives Parliament power over industries declared to be under Union control 
  • Entry 33 of List III (Concurrent List) allows both State and Union to regulate trade and commerce of products from industries under Union control 
• The Industries (Development and Regulation) Act, 1951 (IDRA) was enacted by Parliament under Entry 52 of List I. Section 18G of this Act gives the Central Government power to regulate supply and distribution of products from scheduled industries. 
• In 2016, the First Schedule of IDRA was amended to specifically exclude "potable alcohol" from Union control, while keeping other alcohol under its purview. 
• Previously, in the Synthetics and Chemicals Ltd. v. State of U.P. case, a seven-judge bench had dealt with the interpretation of Section 18G of IDRA but didn't fully address its interference with State powers. 
• The main contentions raised by States were: 
  • The term "intoxicating liquor" should be interpreted broadly to include denatured spirit/industrial alcohol 
  • States should have regulatory power over all forms of alcohol 
  • Central laws shouldn't diminish State powers through notifications 
  • The Union's key arguments were: 
  • There's a clear distinction between industrial alcohol and potable alcohol 
  • The Union has control over industrial alcohol through IDRA 
  • Entry 52 (Union List) and Entry 33 (Concurrent List) should be read together to give Union complete control over regulated industries 
• Main issue raised  
  • Whether Entry 52 of List I of the Seventh Schedule to the Constitution overrides Entry 8 of List II;  
  • Whether the expression ‘intoxicating liquors’ in Entry 8 of List II of the Seventh Schedule to the Constitution includes alcohol other than potable alcohol;  
  • 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. 

What were the Court’s Observations? 

Majority Opinion (8:1) 

• On Entry 8 Of List II (State List):  
  • The entry is both industry-based and product-based in nature.  
  • The words following "that is to say" in Entry 8 are not exhaustive of its contents.  
  • The scope extends from raw materials to consumption of 'intoxicating liquor'. 
• On Legislative Competence:  
  • Parliament cannot occupy the entire industry field merely through a declaration under Entry 52 of List I.  
  • State Legislature's competence under Entry 24 of List II is limited only to the extent covered by Parliamentary law under Entry 52 of List I.  
  • Parliament lacks legislative competence to control the intoxicating liquor industry under Article 246 read with Entry 52 of List I. 
• On Interpretation Of 'Intoxicating Liquor':  
  • The term is not limited to its popular meaning of alcoholic beverages producing intoxication.  
  • It encompasses alcohol that could be noxiously used affecting public health. 
  • The term includes:  
    • Rectified spirit 
    • ENA (Extra Neutral Alcohol) 
    • Denatured spirit d) Excludes final products containing alcohol (e.g., hand sanitizers) 
• On Precedents and Prior Judgments:  
  • The Synthetics (7J) judgment stands overruled. 
  • Item 26 of First Schedule to IDRA must exclude "intoxicating liquor" as interpreted in this judgment. 

Dissenting Opinion (Justice Nagarathna) 

• On Scope of Entry 8 List II:  
  • Deals exclusively with "intoxicating liquors" in the traditional sense. 
  • Industrial alcohol falls outside its purview. c) Misuse potential cannot be basis for interpretation. 
• On Legislative Intent:  
  • Constituent Assembly clearly distinguished between potable and non-potable alcohol.  
  • Intoxicating liquors" represents only a segment of "Fermentation Industries." 
  • No intention to include industrial or non-potable alcohol within Entry 8. 
• On Regulatory Framework:  
  • Denatured alcohol belongs to the "industrial alcohol" family.  
  • Section 18G of IDRA governs industrial alcohol under Entry 33(a) List III.  
  • Parliament alone competent to legislate on articles related to scheduled industry of "Fermentation Industries."

Under Article 246 of the Constitution of India 

• Fundamental Framework 
  • Article 246 Distribution Scheme:  
    • Parliament has exclusive power over Union List (List I)  
    • State Legislatures have exclusive power over State List (List II) 
    • Both Parliament and State Legislatures have power over Concurrent List (List III) 
    • Parliament has power to legislate for Union Territories 
• Hierarchical Structure 
  • Parliamentary Powers:  
    • Exclusive power over List I matters  
    • Power operates "notwithstanding" anything in Lists II or III  
    • Predominant power in case of irreconcilable conflict with State legislation 
  • State Legislature Powers:  
    • Exclusive power over List II matters 
    • Power operates "subject to" clauses (1) and (2) of Article 246  
    • Sovereign within allocated sphere except where expressly limited 
• Principles Of Interpretation 
  • Federal Balance Principles:  
    • Each legislative body is sovereign within its allocated sphere  
    • Parliamentary predominance applies only in case of irreconcilable conflict
    • Non-obstante clause in Article 246(1) does not permit Parliament to directly legislate on List II subjects 
  • Conflict Resolution Framework:  
    • Entries must be read together without restricted meaning  
    • Harmonious interpretation to be attempted first  
    • Federal supremacy applicable only in case of "irreconcilable direct conflict" 
• Overlap And Conflict Resolution 
  • Treatment of Overlapping Entries:  
    • Distinction between 'overlap' and 'conflict' must be maintained  
    • Courts must endeavor to diminish overlap rather than enhance conflict  
    • Federal supremacy applies only at stage of actual conflict 
  • Interpretation Guidelines:  
    • Entries to be given wide meaning 
    • Incidental and ancillary matters included within scope  
    • Harmonious interpretation preferred to maintain federal balance 
    • No entry should be rendered redundant 
• Specific Limitations 
  • State List Restrictions:  
    • Entries may be subject to specific provisions of List I or List III  
    • May be subject to entire list provisions  
    • May exclude matters specified in List I  
    • May be subject to Parliamentary law limitations 
  • Taxation Powers:  
    • Cannot be derived from general entries 
    • Require specific taxation entries  
    • Clear distinction between general and taxation entries maintained 
• Legislative Discretion 
  • Power Exercise: 
    • Entries do not cast obligation to legislate  
    • Legislature has plenary power within constitutional confines 
    • Discretion in manner of legislation preserved 
• Constitutional Safeguards 
  • Federal Balance Protection:  
    • Language devices prevent conflict between entries  
    • Clear demarcation of fields maintained  
    • Express subordination required for limitation of state power  
    • Harmonious interpretation mandated to preserve federal structure

What is the Scope and Significance of Entry 8 Of List II in Relation to The Regulation of Intoxicating Liquors and Industrial Alcohol? 

• Entry 8 of List II is both an industry-based and product-based entry, covering everything from the stage of raw materials to the consumption of 'intoxicating liquor'. The Entry itself indicates this broad scope by including "production, manufacture, possession, transport, purchase and sale" of intoxicating liquors. 
• The phrase "that is to say" in Entry 8 of List II is explanatory and illustrative rather than limiting. The Supreme Court has held that for legislative entries (unlike taxing statutes), this phrase should be interpreted broadly and liberally rather than as a restrictive enumeration. 
• Entry 52 of List I (Union List) notably lacks the phrase "to the extent to which" that appears in other entries like Entry 54. This means Parliament's control over industries under Entry 52 does not require specifying the extent of control, unlike regulations under Entry 54. 
• The term "intoxicating liquors" in Entry 8 extends beyond just beverages that cause intoxication. Based on the Supreme Court's interpretation in FN Balsara, it includes all liquids containing alcohol that could potentially be used as substitutes for intoxicating drinks. 
• Entry 8 is a special entry that specifically enumerates 'intoxicating liquors' as a legislative field to the exclusion of all other general entries under which it might otherwise have been subsumed. 
• The Supreme Court has interpreted Entry 8's scope in light of both its legislative history and Article 47's constitutional directive regarding prohibition of intoxicating drinks, leading to a broader interpretation that encompasses health and public order concerns. 
• While Entry 24 of List II (State List) deals with industries generally and is subject to Entry 52 of List I, Entry 8 stands as a specific entry dealing with intoxicating liquor and does not follow the same industry-product distinction found in other entries. 
• The constitutional framework provides that when Parliament takes control of an industry under Entry 52 of List I, the products of that industry shift to the Concurrent List (Entry 33 of List III) from the State List, though this general principle must be considered alongside Entry 8's special status.