含羞草社区

India has a unique system of federal and unitary powers. The constitutional federal framework distinguishes central and state government powers, although it gives significant authority to the central government, particularly in national emergencies or matters of paramount public interest. This division has led to many disputes.

The constitution delineates matters in which the central and state governments have exclusive power, but both levels of government have made laws in the same area. Enactments have been challenged as ultra vires the constitution because only the other level had the power to make them.

The recent Supreme Court case of held that states have exclusive regulation of industrial alcohol. It overturned the 1989 case in the same court of , which held that states could not regulate industrial alcohol because it was produced by a controlled industry. The government regulated the sector through the Industries (Development and Regulation) Act, 1951. Manufacture and production of intoxicating liquor was an industrial activity in the act’s schedule. Alcohol intended for human consumption fell under the states’ jurisdiction under entry 8 of list II of the constitution but could not include industrial alcohol. The wider issue was whether the central government’s power under entry 52 of the union list to control any industry through a parliamentary declaration superseded the state’s power to control the industry of intoxicating liquor under entry 8 of the state list.

Lalta Prasad held that an overlap occurs when two or more legislative fields partially intersect, while a conflict arises when both entries deal with the same subject matter. Federal supremacy through the legislative competence of parliament can only be invoked where there is an irreconcilable and direct conflict. Lalta Prasad is significant for the principle of federalism and a vital development of the occupied field doctrine.

If there are two possible interpretations of the entries, the reconciliation method maintains federal balance. Lalta Prasad applied the principle that generalities do not derogate from specifics, holding that courts must harmonise entries in competing lists so that no entry becomes redundant. A special entry takes precedence over a general entry otherwise the special entry will become redundant. Entry 8 of list II is the special entry for a particular industry. If entry 52 were interpreted to include the intoxicating liquor industry, states would lose their exclusive competence to legislate for it, rendering entry 8 redundant.

The Supreme Court held that although alcoholic liquor for human consumption and intoxicating drink refer to consumption, entry 8 of the state list, using intoxicating liquor, has a broader scope, including production, transport and sale. The word intoxicating instead of alcoholic supported a broader interpretation that intoxicating liquor was not confined to potable alcohol and included industrial alcohol. Thus, the states have the authority to regulate industrial alcohol.

States have further benefitted this year in controlling alcohol. Extra neutral alcohol (ENA) is a significant raw material in alcoholic beverages. The government levied goods and service tax on the supply of denatured alcohol, including ENA. The states claimed the exclusive power to levy value-added tax on ENA. Both GST and VAT were therefore imposed. A recurring problem has been getting input tax credits because the GST paid on ENA cannot be offset against non-GST state duties on the final product. A GST Council meeting recently removed ENA from the scope of GST from November 2024.

Lalta Prasad may allow states to impose additional or increased duties on industrial alcohol, changing the alcoholic beverage tax regime. Industries relying on industrial alcohol, such as pharmaceuticals, chemicals and biofuels, may face regulations and costs of each state. States may be able to levy excise duty on industrial alcohol because it is now defined as intoxicating liquor.

The Supreme Court also recently allowed states to tax mineral rights. The extension of states’ powers is welcome. However, cautionary views on the need for central oversight may require a balance to be found between state autonomy and national interest.

Shankey Agrawal is a partner, Harsh Shukla is managing associate, and Lopamudra Mahapatra is an associate at BMR Legal.