Supreme Court Constitution Bench Clarifies "Intoxicating Liquor" Scope, Upholds State Legislative Powers Over Alcohol Industry

In landmark judgment, the Supreme Court overrules earlier precedent, holding that Entry 8 of List II includes both potable and non-potable alcohol, and that Parliament cannot assume control over the entire intoxicating liquor industry under Entry 52 of List I.

The Supreme Court of India, in a nine-judge Constitution Bench decision delivered on 23rd October 2024, has issued a definitive ruling on the contentious legal question concerning the scope of the phrase "intoxicating liquor" as appearing in Entry 8 of List II of the Seventh Schedule to the Constitution. The case titled State of U.P. & Ors. v. M/s Lalta Prasad Vaish and Sons settles a long-standing dispute over the legislative competence of State Legislatures and Parliament in regulating and taxing the alcohol industry, including the so-called "industrial alcohol."

### Background and Context

The controversy centered around whether the phrase "intoxicating liquor" includes only potable alcohol—i.e., alcoholic beverages intended for human consumption—or whether it also encompasses other alcohol-containing substances such as rectified spirit, Extra Neutral Alcohol (ENA), and denatured spirit used as raw materials in the manufacture of potable alcohol and other products.

Entry 8 of List II grants States legislative power over intoxicating liquors, including their "production, manufacture, possession, transport, purchase and sale." Meanwhile, Entry 52 of List I empowers Parliament to control industries it declares expedient in the public interest, under which the Industries (Development and Regulation) Act, 1951 (IDRA) was enacted, listing "Fermentation Industries" (which includes alcohol production) as scheduled industries under Union control.

The question arose whether Parliament, under Entry 52, can override State powers in regulating intoxicating liquors and whether industrial alcohol falls within Entry 8 or is subject to Union control under the IDRA.

### Key Findings of the Supreme Court

1. Wide Interpretation of "Intoxicating Liquor":

 The Court held that the phrase "intoxicating liquors" in Entry 8 of List II is comprehensive, covering both the product and the industry — from raw materials to consumption. The words following "that is to say" in the Entry are illustrative, not exhaustive. This interpretation includes alcohol such as rectified spirit, ENA, and denatured spirit, which are raw materials used to manufacture potable alcohol and other products. However, the phrase does not include the final products like hand sanitizers containing alcohol, as that would conflict with other legislative entries.

2. State Legislature’s Exclusive Competence:

 The Court ruled that Parliament does not have the legislative competence to take control of the entire industry of intoxicating liquor covered by Entry 8 of List II by merely issuing a declaration under Entry 52 of List I. The States retain the exclusive power to legislate on intoxicating liquors.

3. Overruling of Synthetics (7J) Judgment:

 The landmark 1990 Constitution Bench judgment in *Synthetics and Chemicals Ltd. v. State of UP* ("Synthetics (7J)"), which restricted Entry 8’s scope to potable alcohol and excluded industrial alcohol, was overruled. The Court criticized *Synthetics (7J)* for not adequately considering the wide statutory and constitutional context and for misinterpreting the phrase "intoxicating liquor."

4. Legislative Entries and Federal Balance:

 The Court emphasized the unique constitutional placement of Entry 8 as a specific entry that removes the intoxicating liquor industry from the general industry Entry 24 of List II, which is subject to Entry 52 of List I. This means Entry 52 cannot be used to override Entry 8, preserving the federal balance and State autonomy in this sector.

5. Impact on IDRA and Section 18G:

 The Court held that Item 26 of the First Schedule of the IDRA must be read as excluding the intoxicating liquor industry as interpreted. The insertion of Section 18G of IDRA, which empowers the Central Government to regulate supply, distribution, and trade of scheduled industries, including fermentation industries (other than potable alcohol), occupies the field under Entry 33 of List III. The Court found that the issuance of a notified order under Section 18G is not a prerequisite for Parliament’s occupation of the field, overruling the earlier *Tika Ramji* decision in this respect.

6. Public Health and Legislative Intent:

 The Court underscored that Entry 8 is grounded in public interest, reflecting the noxious nature of alcohol and the potential for misuse affecting public health. The constitutional framers were aware of alcohol’s multiple uses and deliberately differentiated between intoxicating liquors and alcohol used for other industrial or medicinal purposes.

7. Dissenting View:

 Justice B.V. Nagarathna dissented on key aspects, maintaining that the State Legislature lacks competence over industrial alcohol under the constitutional scheme and statutory framework of IDRA.

### Practical Implications

- State Legislatures retain exclusive rights to regulate and legislate on intoxicating liquors, including industrial alcohol, preventing Parliament from overriding this field via Entry 52 of List I.

- Parliamentary Control under IDRA pertains to fermentation industries excluding intoxicating liquors (potable alcohol), but includes industrial alcohol and related products.

- Taxation and Regulation powers are distinct; States can levy excise on potable alcohol, whereas industrial alcohol taxation and control fall within the Union’s competence under IDRA.

- Prevention of Misuse: States have powers to regulate the misuse of industrial alcohol as intoxicating liquor, consistent with public health objectives.

- Legal Clarity: The ruling resolves decades of uncertainty and conflicting decisions, harmonizing constitutional entries and statutory laws.

### Conclusion

The Supreme Court’s Constitution Bench has clarified the legislative domain over intoxicating liquors, rejecting the narrow interpretation that limited Entry 8 of List II to only potable alcohol. By overruling *Synthetics (7J)*, the Court has affirmed the States’ exclusive jurisdiction over intoxicating liquor industry and products, including industrial alcohol, and restricted Parliament’s power under Entry 52 of List I. The judgment strikes a balance between federalism, public health, and economic regulation, reinforcing the constitutional framework of legislative powers.

Statutory provisions

Article 246, Article 254, Entry 8 of List II, Entry 24 of List II, Entry 26 of List II, Entry 27 of List II, Entry 33 of List III, Entry 51 of List II, Entry 52 of List I, Entry 84 of List I, Section 2 of Industries (Development and Regulation) Act, 1951, Section 18G of Industries (Development and Regulation) Act, 1951

State of U.P. v. M/s Lalta Prasad Vaish (SC)(Constitution Bench) : Law Finder Doc Id # 2658081