STATE OF U.P. & ORS versus M/S LALTA PRASAD VAISH AND SONS (23/10/2024) — Supreme Court headnote

AI-generated headnote. Verify against the judgment before relying on it. Paragraph numbers refer to the judgment.

Summary

A nine-Judge Bench answered a reference on the scope of 'intoxicating liquors' in Entry 8 of List II. The lead opinion of the Chief Justice held that the entry covers both the industry and the product, from raw materials to consumption, and extends to alcohol that could be noxiously used to the detriment of public health, including rectified spirit, ENA and denatured spirit, but not finished products such as hand sanitiser. It also held that Parliament cannot take control of that industry under Entry 52 of List I. Synthetics and Chemicals (7J) was overruled. Nagarathna J. dissented.

Issues

Whether Entry 52 of List I overrides Entry 8 of List II, so that Parliament can take control of the industry of intoxicating liquor by a declaration under the IDRA.
Whether 'intoxicating liquors' in Entry 8 of List II includes alcohol other than potable alcohol, such as rectified spirit, ENA and denatured (industrial) 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.
Whether Synthetics and Chemicals Ltd. v. State of UP (seven Judges, 1990) and the later decisions interpreting it were correctly decided.

Provisions considered

Article 246, Constitution of IndiaRead the non obstante clause in Article 246(1) and the 'subject to' clause in Article 246(3) together with the grant of 'exclusive power' in each. Held that federal supremacy applies only where entries in Lists I and II are in irreconcilable conflict, not where they merely overlap. Overlaps must first be harmonised so that no entry is made redundant. (¶¶ 43, 44, 45, 46, 50, 51, 71)
Seventh Schedule, List II, Entry 8, Constitution of IndiaThe words after 'that is to say' were held to be illustrative, not exhaustive. Entry 8 is both an industry-based and a product-based entry, covering everything from raw materials to the consumption of intoxicating liquor. It is a special entry that is not subject to any List I entry. 'Intoxicating liquor' was read to cover alcohol that could be noxiously used to the detriment of public health. (¶¶ 52, 53, 54, 55, 57, 58, 71, 73, 107, 110, 112, 113, 114, 115, 138, 140)
Seventh Schedule, List I, Entry 52; List II, Entry 24, Constitution of IndiaHeld that Entry 52, unlike Entry 54, lacks the words 'to the extent to which', but a declaration alone does not take over a whole industry. The parliamentary law must specify the extent of control, and the State's power under Entry 24 is denuded only to that extent. Entry 52 is a general industry entry. It cannot reach the intoxicating liquor industry, which falls under the special Entry 8. (¶¶ 59, 60, 61, 64, 65, 71, 72, 140)
Section 2 and First Schedule, Item 26 (Fermentation industries), Industries (Development and Regulation) Act, 1951Considered the Section 2 declaration and Item 26, which was amended in 2016 to exclude potable alcohol. Since Parliament cannot take control of the field in Entry 8, Item 26 must be read as excluding the industry of 'intoxicating liquor' as interpreted in the judgment, not just potable alcohol. (¶¶ 3, 4, 62, 130, 131, 132, 140)
Section 18G, Industries (Development and Regulation) Act, 1951Noted that the referred questions concerned whether Section 18G occupies the field under Entry 33 of List III without a notified order. Held that the question need not be answered, because denatured alcohol falls within Entry 8 of List II. (¶¶ 5, 24, 139, 140)
Seventh Schedule, List III, Entry 33; List II, Entries 26 and 27, Constitution of IndiaExplained that a law under Entry 52 of List I moves the products of a controlled industry from Entries 26 and 27 of List II to Entry 33 of List III. Treating Entry 52 as covering the intoxicating liquor industry would therefore also remove the product from the State's exclusive field and make Entry 8 redundant. (¶¶ 56, 57, 71, 139)
Seventh Schedule, List I, Entry 84; List II, Entry 51, Constitution of IndiaTreated these as the taxing entries, separate from the regulatory Entry 8. A tax cannot be levied under a general entry, and the absence of State taxing power over non-beverage alcohol cannot narrow Entry 8. The meaning of 'alcoholic liquor for human consumption' was expressly left open. (¶¶ 94, 95, 100, 108, 120, 121)
Seventh Schedule, List II, Entry 66, Constitution of IndiaHeld that because denatured alcohol is within Entry 8, the State may levy fees on it under Entry 66. Paragraph 86(d) of Synthetics (7J) was found internally inconsistent, since it relied on Indian Mica, which had read Entry 8 widely, while itself rejecting that reading. (¶¶ 124, 125)
Article 47, Constitution of IndiaHeld that Article 47 refers to intoxicating drinks in the context of consumption, that is, potable alcohol. Synthetics (7J) erred in reasoning that a wide reading of Entry 8 would oblige States to prohibit industrial alcohol. (¶¶ 111, 112, 118, 119)
Seventh Schedule, List III, Entry 19, Constitution of IndiaRelied on the 'drugs' entry to reject reading Entry 8 as covering every liquid containing alcohol. Including finished products such as hand sanitiser would substantially reduce Entry 19 and offend the principle of workability. (¶¶ 113, 115, 140)

Held

Under Article 246, each legislature is supreme within its allotted sphere. Federal supremacy arises only on an irreconcilable conflict, where entries operate in exactly the same field. A mere overlap must be resolved by harmonious construction, applying generalia specialibus non derogant and avoiding any reading that makes an entry redundant, before parliamentary supremacy is invoked. (¶¶ 44, 45, 46, 50, 51, 69, 71)
In Entry 8 of List II, the words following 'that is to say' are illustrative and explanatory, not limiting. Legislative entries are construed widely, unlike taxing statutes. Entry 8 is both an industry-based and a product-based entry and covers everything from raw materials to the consumption of intoxicating liquor, including raw materials such as ENA. (¶¶ 53, 54, 55, 57, 58, 138, 140)
A declaration under Entry 52 of List I does not by itself take over an entire industry. Agreeing with D.A. Desai J. in Ishwari Khetan, the Court held that the parliamentary law must specify the extent of control assumed in the public interest. The State's competence under Entry 24 of List II is denuded only to the extent of that control. Any other reading would tilt the federal balance and effectively turn Entry 24 into a concurrent entry. (¶¶ 61, 64, 65, 140)
Entry 8 of List II is a special entry dealing with one particular industry and is not subject to Entry 52 of List I. Reading Entry 52 to cover the intoxicating liquor industry would delete 'production, manufacture' from Entry 8 and, through Entry 33 of List III, take away the State's exclusive power over the product too. Parliament therefore lacks competence to take control of the industry of intoxicating liquor under Article 246 read with Entry 52. The contrary observations in paragraph 85 of Synthetics (7J) were overruled. (¶¶ 71, 72, 121, 140)
'Intoxicating liquor' has not acquired a legislative meaning under the Gannon Dunkerley test. Pre-Constitution statutes defined 'liquor' but not the composite phrase, and the legal sense differs widely from the popular one. That test narrows entries and must be used cautiously. The history of the entries shows that the choice of words was deliberate and that the drafters knew of industrial uses of alcohol, but it gives no conclusive answer. (¶¶ 85, 86, 87, 102, 103, 106, 140)
Entry 8 is based on public interest and extends beyond potable alcohol. It covers alcohol that could be noxiously used to the detriment of public health, including rectified spirit, ENA and denatured spirit used as raw materials for potable alcohol and other products. Whether denatured alcohol can be renatured does not matter. The test is whether it could be used mischievously to prepare, or as a substitute for, alcoholic beverages. The entry does not cover finished products containing alcohol, such as hand sanitiser, which would otherwise swallow other entries such as Entry 19 of List III. (¶¶ 112, 113, 114, 115, 140)
Synthetics and Chemicals (7J) was overruled. It adopted the Bombay High Court's narrow view without independent analysis, wrongly assumed that FN Balsara overlooked industrial uses of alcohol (which the Constitution itself recognises), and misread Article 47. Having treated the impost as a tax, it should have confined itself to the taxing entries. It also wrongly held that Entry 52 affects taxing entries (paragraph 84) and wrongly traced the State's power only to the public health entry. Because denatured alcohol is within Entry 8, the State may levy fees on it under Entry 66 of List II. (¶¶ 116, 117, 118, 119, 120, 121, 123, 125, 140)
Later readings of Synthetics (7J) were also overruled. These included the view that States may regulate industrial alcohol only as a product under Entry 33 of List III, the distinction between the process of denaturing and the product (denatured spirit), the denial of State competence over rectified spirit, and the purpose-based demarcation in Bihar Distillery, which placed composite distilleries under Union control without constitutional basis. Dividing alcohol simply into potable and industrial was held to be oversimplistic. (¶¶ 126, 128, 129)
Item 26 of the First Schedule to the IDRA must be read as excluding the industry of 'intoxicating liquor' as interpreted in the judgment, not merely potable alcohol as stated in the 2016 amendment. The correctness of Tika Ramji on the meaning of 'industry' did not arise, because Entry 8 in any case covers the raw materials of intoxicating liquor. The Court also did not decide whether Section 18G occupies the field under Entry 33 of List III, given its finding that denatured alcohol falls within Entry 8. (¶¶ 132, 136, 138, 139, 140)
Nagarathna J. dissented in a separately numbered opinion. She agreed that Parliament cannot take control of the intoxicating liquor industry under Entry 52. In her view, however, 'intoxicating liquors' means only alcohol meant for direct human consumption as a beverage. States can regulate only to prevent industrial alcohol being diverted as a beverage, and industrial alcohol falls under Entry 24 of List II and the IDRA. A declaration under Entry 52 can take over an entire industry. The mere enactment of Section 18G occupies the field under Entry 33(a) of List III even without a notified order, and Tika Ramji was wrong on that point. Synthetics (7J) needed only clarification, not overruling (her paras 12.14-12.22, 17-17.4, 30-33).

Result

Reference answered. Synthetics and Chemicals (7J) overruled in terms of the lead opinion. Item 26 of the IDRA First Schedule is to be read as excluding the industry of intoxicating liquor. The Registry was directed to obtain the Chief Justice's administrative instructions for listing the matters before an appropriate Bench. Nagarathna J. dissented.