A nine-judge Constitution bench of the Supreme Court on Wednesday held that the States have the power to regulate ‘denatured spirit or industrial alcohol’. The SC held that the state’s powers cannot be narrowed only to tax alcoholic beverages.
The verdict, held by the 8:1 majority, concluded by holding that the term “intoxicating liquor” in Entry 8 of List II (State List) of the Seventh Schedule of the Constitution will include industrial alcohol.
Eight of the nine judges — Chief Justice of India DY Chandrachud and Justices Hrishikesh Roy, Abhay S Oka, BV Nagarathna, JB Pardiwala, Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine George Masih – on the Constitution bench backed the interpretation, Justice B V Nagarathna dissented.
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Excise duty levied on alcohol is a key component of a state’s revenue, with states often adding an additional excise duty on alcohol consumption to drive its income up. For example, in 2023, Karnataka hiked the Additional Excise Duty (AED) on Indian Made Liquor (IML) by 20 per cent.
The bench in a majority held that the term “intoxicating liquor” cannot be interpreted narrowly to include only alcohol which is fit for human consumption. It was held that liquids which contain alcohol which can be used or misused for human consumption can be included within the term “intoxicating liquor”, Live Law reported.
CJI DY Chandrachud, who wrote the judgment for the majority, stated the term “intoxicating” can also be understood as poisonous. Liquor which is not colloquially or traditionally considered as alcohol may be covered as “intoxicating liquor” within the meaning of Entry 8 of List 2.
This ruling also sets aside a 1990 judgment in Synthetics & Chemicals Ltd. v State of Uttar Pradesh which held that “intoxicating liquor” refers only to potable alcohol and therefore, states cannot tax industrial alcohol.
In his dissenting opinion, Justice Nagarathna said that ‘industrial alcohol’ means alcohol which is not fit for human consumption and that an artificial interpretation cannot be adopted to give a different meaning to the term ‘intoxicating liquor’ which is contrary to the intention of the constitution makers.
What is industrial alcohol?
Industrial alcohol is essentially impure alcohol that is used as an industrial solvent. Ethyl Alcohol that is made by fermenting goods such as grains, fruits, sugarcane molasses, and other chemicals to turn it into industrial alcohol.
This process of mixing it with methanol, benzene, pyridine, castor oil or ethanol is called ‘denaturation’ which makes it unpalatable for human consumption and also significantly lowers the prices. Industries then use this to manufacture products such as pharmaceuticals, perfumes, cosmetics, and cleaning liquids.