8-April-2024-Editorial

CAN STATES REGULATE ‘INDUSTRIAL ALCOHOL’ 

The Supreme Court, led by the Chief Justice of India (CJI), is examining a pivotal case involving a 9-judge Constitution Bench. The focus is on determining whether states possess the authority to regulate and levy excise duty on industrial alcohol. 

Constitutional Framework: 

State List (Entry 8): 

• Grants state governments the power to legislate on intoxicating liquors, encompassing production, manufacturing, possession, transportation, purchase, and sale. 

Union List (Entry 52): 

• Empowers the Parliament to legislate on industries deemed beneficial for public interest. 

Concurrent List (Entry 33): 

• Permits both states and the Centre to legislate on industries, but state laws must align with central laws to avoid contradictions. 

Industrial Alcohol Regulation: 

Industries (Development and Regulation) Act, 1951 (IDRA): Lists industrial alcohol as a regulated subject, granting regulatory powers to the central government. 

Central Question: 

Autonomy Over Regulation: 

• The core issue revolves around whether states possess the authority to regulate industrial alcohol or if this power exclusively rests with the Centre. 

Legal Interpretation: 

• While Concurrent List subjects can be regulated by both entities, the IDRA, 1951, implies central dominance over industrial alcohol. 

Arguments by the States: 

Interpretation of Entry 8: 

• The term “intoxicating liquors” in Entry 8 is seen as encompassing all alcohol-containing liquids. 
• Historical references from pre-constitutional excise laws support this interpretation. 

Scope of Union’s Power: 

• Entry 52 doesn’t extend to regulating post-denatured “finished products” like industrial alcohol. 
• Control over industrial alcohol falls under Entry 33 of the Concurrent List. 
• Exclusive central authority requires an order under Section 18-G of the IDRA; otherwise, states maintain jurisdiction. 

Preservation of States’ Powers: 

• Caution against reducing states’ authority is emphasized, referencing the ITC Ltd v Agricultural Produce Market Committee Case, 2002. 
• Upholding states’ constitutional powers is crucial to avoid weakening their autonomy. 

Other Relevant Cases: 

Synthetics & Chemicals Ltd v. State of Uttar Pradesh Case, 1989: 

• Held that states’ authority, as per Entry 8, is confined to “intoxicating liquors,” distinguishing them from industrial alcohol. 
• Centre retains the exclusive right to impose levies or taxes on industrial alcohol. 

Ch Tika Ramji versus State of Uttar Pradesh Case, 1956: 

• Upheld Uttar Pradesh’s legislation regulating the sugarcane industry against challenges. 
• Affirmed states’ legislative authority even in the presence of central laws, setting a vital precedent. 

About Excise Duty: 

What is Excise Duty? 

• An indirect tax on goods for their production, licensing, and sale. 
• Producers remit this tax to the Government of India. 

Changes post-GST: 

• With the introduction of GST in July 2017, various excise duties were combined. 

• Currently, excise duty applies primarily to petroleum and liquor. 

Role in State Revenue: 

• Excise duty on alcohol significantly contributes to state revenue. 
• States often adjust excise duty rates to boost income; for instance, Karnataka increased the Additional Excise Duty (AED) on Indian Made Liquor (IML) by 20% in 2023. 

This case before the Supreme Court carries immense significance for federal governance and the balance of power between the Centre and states concerning industrial alcohol regulation and excise duty imposition.