On Wednesday, the Supreme Court delivered a landmark ruling affirming that ‘industrial alcohol’ is encompassed within the definition of ‘intoxicating liquor’ as stated in Entry 8 of List II (State List) of the Constitution. This decision empowers state governments to regulate and impose taxes on industrial alcohol, as determined in the case *State of Uttar Pradesh and Ors v. Lalta Prasad Vaish*. The ruling was issued by a nine-judge Constitution Bench led by Chief Justice of India (CJI) DY Chandrachud, which included Justices Hrishikesh Roy, Abhay S Oka, BV Nagarathna, JB Pardiwala, Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma, and Augustine George Masih.
The majority opinion of the Bench clarified that the term ‘intoxicating liquor’ under Entry 8 is not limited to alcoholic beverages intended for consumption. Instead, it extends to include all forms of alcohol, including industrial alcohol, that can pose risks to public health. The Court explained that while ‘alcoholic liquor’ is defined based on its intended consumption, ‘intoxicating liquor’ is characterized by its effects on health, thus broadening its applicability to include industrial uses.
The primary question considered by the Bench was whether states have the authority to regulate industrial alcohol and denatured spirits under Entry 8, which grants states the power to control intoxicating liquors. In contrast, Entry 52 of the Union List allows the Central government to regulate industries deemed of public interest. The Court acknowledged that there may be overlaps between these two entries but emphasized the importance of reconciling them so that neither is rendered redundant.
In a significant development, the Court overruled its earlier 1990 judgment in *Synthetics & Chemicals Ltd. v. State of Uttar Pradesh*, which had restricted the definition of ‘intoxicating liquor’ to only potable alcohol and stated that states could not tax industrial alcohol. The current ruling establishes that the phrase ‘intoxicating liquor’ encompasses all forms of alcohol that can harm public health, effectively allowing states to tax industrial alcohol as well.
Furthermore, the Court asserted that Entry 8 of the State List should not exclude raw materials used to produce intoxicating liquor. Justice BV Nagarathna provided a separate dissenting opinion on the matter.
To provide some context, the Supreme Court’s involvement dates back to October 2007, when it highlighted in *State of UP v. Lalta Prasad Vaish* that the earlier *Synthetics & Chemicals* ruling had overlooked a precedent set by a five-judge Bench in the 1956 case *Ch. Tika Ramji v. State of Uttar Pradesh*. This led to the referral of the case to a nine-judge Constitution Bench on December 8, 2010.
During the hearings, state representatives argued that the authority to tax industrial alcohol is essential in the post-GST indirect tax regime, particularly for monitoring public health concerns. Solicitor General Tushar Mehta represented the Union government and advocate Kanu Agrawal during the proceedings, emphasizing the significance of the ruling in terms of public health and state autonomy in regulation.
