STATE OF U.P. & ORS versus M/S LALTA PRASAD VAISH AND SONS
[2024] 10 S.C.R. 1931, Supreme Court of India, 2024
Outcome: Unknown
Segment: Issues
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85.	 The judgment of this Court in Gannon Dunkerley (supra) must be 
read in the context of the settled principle of interpreting legislative 
entries, that the entries must be conferred the widest meaning 
possible. Interpreting a phrase or words in the Legislative Lists based 
on the legal import of the phrase is, thus, in many ways an exception 
to the settled principle of interpreting entries. This is for the simple 
reason that the legislative entries delimit the scope of competence 
of the legislative bodies. If the entries are interpreted based on the 
meanings or definitions in a legislation, the purpose of the Seventh 
Schedule may become redundant. Further, the statute does not 
define phrases based on popular or common parlance meaning but 
rather based on the scope of the legislation and the manner in which 
the provisions are drafted. A deeming fiction is often used to define 
phrases by conferring artificial meanings.152 The interpretation based 
on ‘legislative meaning’ elucidated in Gannon Dunkerley (supra), 
which narrows the interpretation of entries, thereby creating an 
exception to the rule of wide interpretation should only be employed 
by Courts when the twin tests highlighted above. The tests are (a) 
the phrase should have acquired a well-recognised, definite and 
precise meaning in law; and (b) the legal import of the word must 
be practically unanimous. Additionally, we also are of the view that
the legislative meaning interpretation should be adopted only when 
the deviation from the popular meaning of the phrase is not too 
wide. The legislative meaning cannot be used to artificially narrow 
legislative entries. We also deem it necessary to note that we must 
be cognizant that the standard of ‘legislative meaning’ is employed 
to identify the ‘intent’ of the framers of the Constitution and belongs 
to the originalist school of thought, which has been consistently 
opposed by this Court over the years.153 For these reasons, the 
principle of interpretation elucidated in Gannon Dunkerley (supra) 
must be used cautiously by Courts. 
152	 See Ahmedabad Municipal Corporation v. GTL Infrastructure Limited (2017) 3 SCC 545 [13] “13. “… 
it would be self-defeating to understand the meaning and scope of Entry 49 of List II by reference to 
the definition clauses in the Gujarat Act. Definitions contained in the statute may at times be broad and 
expansive; beyond the natural meaning of the words or may even contain deeming provisions. Though 
the wide meaning that may be ascribed to a particular expression by the definition in a statute will have 
to be given effect to, if the statute is otherwise found to be valid, it will, indeed, be a contradiction in terms 
to test the validity of the statute on the touchstone of it being within the legislative entry, by a reference 
to the definition contained in the statute”
153	 See Gannon Dunkerley (supra) : “… Sales tax was not a
subject which came into vogue after the 
Government of India Act 1935. It was known to the framers of that statute and they made express 
provision for it under Entry 48.”
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State of U.P. & Ors. v. 
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86.	 Let us now proceed to determine if the phrase ‘intoxicating liquor’: 
(a) has a definite and precise meaning in law; (b) is unanimous; and 
(c) has a legal meaning that is not widely different from its popular 
meaning. We must refer to the pre-constitutional statutes for this 
purpose because the expression ‘intoxicating liquor’ was first used 
in the 1935 Act. The table below indicates the definition of ‘Liquor’, 
‘intoxicating liquor’, and ‘spirits’ in numerous pre-constitutional 
statutes: 
Bombay Abkari Act 
1878
Liquor is defined in an inclusive manner. It 
includes “all liquid consisting of or containing 
alcohol…denatured or not.”154
Madras Abkari Act 
1886
Liquor includes ….all liquid consisting of or 
containing alcohol.155
Spirits means any liquor containing alcohol 
and obtained by distillation, whether it is 
denatured or not.156
Abkari Act 1077
Liquor includes …. all liquid consisting of or 
containing alcohol.157
Bengal Excise Act 
1909158
Intoxicant means any liquor.159 Liquor means 
liquid consisting and containing alcohol.160 
Spirit means any liquor containing alcohol, 
whether denatured or not.161
Madhya Pradesh 
Excise Act 1915162
Liquor means ‘intoxicating liquor’ and includes 
…. all liquid consisting of or containing 
alcohol.163
154	 Bombay Abkari Act 1978; Section 3(7)
155	 Madras Abkari Act 1886; Section 3(9)
156	 Madras Abkari Act 1886; Section 3(8)
157	 Abkari
Act 1077; Section 3(10)
158	 Similar definitions in Bihar and Orissa Excise Act 1915; Sections 2(14); 2(19)
159	 The Bengal Excise Act 1909; Section 2(12a)
160	 The Bengal Excise Act 1909; Section 2(14)
161	 The Bengal Excise Act 1909; Section 2(19)
162	 Similar definitions in The Punjab ‘article’ Excise Act 1914; Section 2(14); The Chhattisgarh Excise Act 
1915; Section 2(13); United Province Excise Act 1910; Section 3(11)
163	 MP Excise Act 1916; Section 2(13)
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National Prohibition 
Act 
The word ‘liquor’ or the phrase ‘intoxicating 
liquor’ shall be construed to include alcohol, 
brandy, whisky, rum, gin, beer, ale, porter, and 
wine, and in addition thereto any spirituous, 
vinous, malt, or fermented liquor, liquids, and 
compounds, whether medicating, proprietary, 
patented, or not and by whatever name called, 
containing one-half of 1 per centum or more 
of alcohol by volume which are fit for use for 
beverage purposes.
T h e  L i c e n s i n g 
(Consolidating Act) 
1872
Intoxicating liquor means (unless inconsistent 
with the context) spirits, wine, beer, porter, 
cider, perry and sweets, and any fermented, 
distilled, or spiritous liquor which cannot, 
according to any law for the time being in 
force, be legally sold without an excise law.164
Spirits Act 1880
Spirits means spirits of any description, and 
includes all liquids mixed with spirits, and all 
mixtures, compounds, or preparations made 
with spirits.165 
87.	 The Abkari Acts have generally defined the phrase ‘liquor’ to mean 
liquids containing alcohol including denatured alcohol. However, the 
Abkari Acts do not define the phrase ‘intoxicating liquor’. In Excise 
Acts, ‘liquor’ was defined to mean ‘intoxicating liquor’ and included 
liquids containing alcohol. Thus, none of the pre-constitutional 
statutes have defined the phrase ‘intoxicating liquor’ for it to have 
acquired a legal meaning. The phrase was
defined in the Licensing 
(Consolidating Act) 1910 which regulated the United Kingdom. It 
cannot be concluded that the phrase used in the Indian Constitution 
has acquired a legal meaning based on a definition clause in one 
statute which applied to the United Kingdom. The definition of ‘liquor’ 
in pre-constitutional statutes as liquids containing alcohol cannot be 
transposed to interpret the legislative entry. The phrase used in the 
legislative entry is ‘intoxicating liquor’. The definition of one part of the 
expression in statutes cannot be used to interpret expressions that are 
164	 The Licensing (Consolidating Act) 1872; Section 74
165	 Spirits Act 1880; Section 3
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State of U.P. & Ors. v. 
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used to indicate a collective meaning, particularly when the common 
parlance definition starkly varies. The common parlance meaning of 
‘intoxicating liquor’ means liquor which causes intoxication, that is, 
which causes someone to lose control. Thus, the three-prong test 
to identify if “Intoxicating Liquor” has acquired legislative meaning 
has not been satisfied. 
c.	
Evolution of the legislative lists on ‘intoxicating liquor’
88.	 We proceed to consider the evolution of the legislative field relating 
to ‘intoxicating liquor’ to determine the meaning of the expression. 
The evolution of the legislative entries must be traced from the 
Devolution Rules formulated under the 1919 Act.166 The Devolution 
Rules classified legislative subjects for the purpose of distinguishing 
the functions of the local legislatures from those of the federal 
legislature. Alcohol was placed in the ‘Provincial List’ of the First 
Schedule to the Devolution Rules (equivalent to List II or the State 
List in the Seventh Schedule to the Constitution). Entry 16 of the 
Provincial List concerned alcohol. It is reproduced below:
“16. Excise, that is to say, the control of production, 
manufacture, possession, transport, purchase and sale of 
alcoholic liquor and intoxicating drugs, and the levying 
of excise duties and licence fees on or in relation to such 
articles, but excluding, in the case of opium, control of
cultivation, manufacture and sale for export.”
(emphasis supplied)
89.	 Instead of two distinct entries, one which covered taxation and the 
other which covered regulation, the Devolution Rules contained a 
single entry in the Provincial List which extended to both aspects. 
The Entry related to (a) levy of excise duties; (b) levy of fee; and 
(c) general regulation. That it concerned taxation is evident from 
the term ‘excise’ and the ‘levying of excise duties’. The words “the 
control of production, manufacture, possession, transport, purchase 
and sale” indicate that the Entry extended to regulation as well. 
The expression used in Entry 16 was ‘alcoholic liquor’ as opposed 
166	 The Devolution Rules were made by the Governor General in Council with the sanction of the Secretary 
of State in Council in exercise of the powers conferred by Sections 45A and 129A of the Government of 
India Act 1919.
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to ‘intoxicating liquor’. However, it must be noted that the provision 
deals with both ‘alcoholic liquor’ and ‘intoxicating drugs’.
90.	 The approach adopted in the 1935 Act differed from the 1919 Act. 
Entry 45 of List I of the Seventh Schedule to the 1935 Act stipulated 
the federal domain over duties of excise. It is reproduced below:
“45. Duties of excise on tobacco and other goods 
manufactured or produced in India except — 
(a) alcoholic liquor for human consumption; 
(b) opium, Indian hand and other narcotic drugs and 
narcotics; non-narcotic drugs; 
(c) medicinal and toilet preparations containing alcohol or 
any substance included in sub-paragraph (b) of this entry.”
91.	 Alcoholic liquor for human consumption was among the three 
categories which was excluded from the ambit of legislative 
competence of the Federal legislature. Entries 31 and 40 of List II 
of the Seventh Schedule to the 1935 Act stipulated the Provincial 
legislative domain over intoxicating liquors and narcotics, and duties 
of excise respectively. They are reproduced below: 
“31. Intoxicating liquors and narcotic drugs, that is to 
say, the production, manufacture, possession, transport, 
purchase and sale of intoxicating liquors, opium and other 
narcotic drugs, but subject, as respects opium, to the 
provisions of List I and, as respects poisons and dangerous 
drugs, to the provisions of List III.
…
40. Duties of excise on the following
goods manufactured 
or produced in the Province and countervailing duties at 
the same or lower rates on similar goods manufactured 
or produced elsewhere in India- 
(a) alcoholic liquors for human consumption; 
(b) opium, Indian hemp and other narcotic drugs and 
narcotics; non-narcotic drugs; 
(c) medicinal and toilet preparations containing alcohol or 
any substance included in sub-paragraph (b) of this entry.” 
(emphasis supplied)
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State of U.P. & Ors. v. 
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92.	 The three categories which were excluded from duties of excise 
on goods produced or manufactured in India (in Entry 45 of List I) 
were incorporated in Entry 40 of List II. Thus, duties of excise on 
alcoholic liquors for human consumption was a subject assigned to 
the Provinces. The following changes on the legislative scope on 
‘alcoholic liquors’ were introduced in the 1935 Act:
a.	
Taxation and regulation were placed in separate entries. Entry 
40 of List II concerned duties of excise, inter alia, on ‘alcoholic 
liquors for human consumption.’ On the other hand, Entry 31 of 
List II covered the regulation of ‘intoxicating liquors’ and other 
substances;
b.	
The Federal legislature could levy duties of excise on tobacco 
and other goods manufactured in India but not on alcoholic 
liquor for human consumption, medicinal and toilet preparations 
containing alcohol, and other specified goods;
c.	
The Provincial legislatures could levy duties of excise on 
alcoholic liquor for human consumption, medicinal and toilet 
preparations containing alcohol, and other specified goods 
produced in the province; and
d.	
Entry 31 of List II was a regulatory entry covering intoxicating 
liquors and narcotic drugs and the production, manufacture, 
possession, transport, purchase and sale of intoxicating liquors, 
opium and other narcotic drugs. Hence, the regulatory power in 
relation to intoxicating
liquor lay with the Provincial legislatures 
and not the Federal legislature. Where Entry 16 of the Provincial 
List of the Devolution Rules as well as Entries 45 of List I and 
40 of List II of the Seventh Schedule to the 1935 Act used the 
term ‘alcoholic liquors’, Entry 31 of List II used the expression 
‘intoxicating liquors’. This term was first used in the 1935 Act. 
93.	 The Seventh Schedule to the Constitution also placed the regulatory 
powers and the taxing powers relating to alcohol in separate entries. 
Entry 8 of List II of the Seventh Schedule to the Constitution deals 
with ‘intoxicating liquors’. Entry 8 of List II of the Seventh Schedule 
to the Constitution varies from Entry 31 of List II of the 1935 Act in 
a significant manner. Entry 8 only deals with ‘intoxicating liquor’. It 
does not cover narcotic drugs and opium. Entry 31 conferred the 
Provincial Legislature, the competence to legislate with respect to
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narcotic drugs which included opium. It was subject to Entries in 
List I and List II which dealt with opium167 and ‘poison and dangerous 
drugs’.168 The Seventh Schedule to the Constitution placed opium in 
List I169 and List III,170 completely removing it from List II.
94.	 Entry 84 of List I deals with duties of excise of goods except a few. 
The Entry read as follows before the Constitution (One Hundred and 
First Amendment) Act 2016:
“84. Duties of excise on tobacco and other goods 
manufactured or produced in India except-
(a) Alcoholic liquors for human consumption
(b) Opium, Indian hemp and other narcotic drugs and 
narcotics,
But including medicinal and toilet preparations containing 
alcohol or any substance included in sub-paragraph (b) 
of this entry.”
(emphasis supplied)
95.	 Entry 51 of List II deals with duties of excise, inter alia, on alcoholic 
liquor:
“51. Duties of excise on the following goods manufactured 
or produced in the State and countervailing duties at the 
same or lower rates on similar goods manufactured or 
produced elsewhere in India:-
(a) alcoholic liquors for human consumption;
(b) opium, Indian hemp and other narcotic drugs and 
narcotics;
but not including medicinal and toilet preparations 
containing alcohol or any substance included in sub-
paragraph (b) of this entry.”
(emphasis supplied)
167	 Government of India Act 1935, Entry 31 of List I
168	 Government of India Act 1935, Entry
19 of List III
169	 Constitution of India 1950, Entry 59 of List I
170	 Constitution of India 1950, Entry 19 of List III
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96.	 The only change with respect to the legislative competence on 
duties of excise from the 1935 Act is that Parliament (and not the 
State Legislature as it was envisaged under the 1935 Act) has 
the competence to enact laws with respect to medicinal and toilet 
preparations containing alcohol or narcotic substances, opium and 
Indian hemp.171
97.	 The Constituent Assembly Debates which the Union of India referred 
to ascertain the meaning of the phrase ‘intoxicating liquor’ are not of 
assistance. The phrases ‘alcoholic liquor for human consumption’ and 
‘intoxicating liquor’ were used for the first time in the 1935 Act. Entry 
16 of the Provincial List of the Devolution Rules dealt with ‘alcoholic 
liquor and intoxicating drugs’. The provision dealt both with regulatory 
power and excise power. It is necessary to trace the development 
between the 1909 Rules and the 1935 Act to understand the context 
of substituting the expression ‘alcoholic liquor’ with ‘intoxicating liquor’ 
in the regulatory entry but retaining it in the taxing entry. 
98.	 The 1935 Act was based on the White Paper (1931) on the proposals 
for Indian Constitutional Reform172 and the Report of the Joint 
Select Committee on Indian Constitutional Reform173 which was 
constituted to examine and report upon the proposals contained in 
the White Paper. The White Paper recommended the demarcation 
of regulatory and taxation
powers relating to alcohol. However, both 
the entries used the words ‘alcoholic liquor’.174 The Report of the 
Joint Committee suggested the following two revisions to the entries 
171	 The reason for providing Parliament the power to enact laws with respect to the excise duty on 
medicinal and toilet preparations containing alcohol is reflected in the footnote to Entry 86 of List I in 
the Draft Constitution of India 1948 as follows: “The committee is of the opinion that duties of excise on 
medicinal and toilet preparation containing alcohol or any substance included in sub-paragraph (b) of 
this entry should be included in this entry as duties leviable by the Union, as it thinks that uniform rates 
of excise duty should be fixed in respect of these goods in all states for the sake of development of the 
pharmaceutical industry. The levy of different rates in different States is likely to lead to discrimination 
in favour of goods imported from foreign countries which would be detrimental to the interest of Indian 
manufacturers as was pointed out by the Drugs Enquiry Committee in their report in 1931.”; See Shiva 
Rao (Vol II) pg. 666
172	 “White Paper”; See Command Paper 4268
173	 “Joint Committee”; See Report of the Joint Select Committee on Indian Constitutional Reform
174	 See Joint Committee on Indian Constitutional Reform (Volume 1 Part I) 369; “26. Control of production, 
manufacture, possession, transport, purchase and sale of alcoholic liquors, drugs and
narcotics.”; 
“27. Imposition and regulation of duties of excise on alcoholic liquors, drugs and narcotics other than 
tobacco.”
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related to alcohol: (a) the relevant entry in the Federal List provided 
that the Union did not have the competence to levy excise duty on 
“potable alcoholic liquor”175 and the Provincial List conferred States 
the competence to levy excise duty on “potable alcoholic liquor”;176 
and (b) the regulatory provision in List II dealt with the “production, 
manufacture, possession, transport, purchase and sale of liquors, 
opium and other drugs and narcotics not covered by item 19 of List 
III.”177 
99.	 Two revisions were further made to the entries as they appear in the 
Government of India Bill 1935 which were subsequently reflected in 
the Government of India Act 1935. The phrase ‘potable alcoholic liquor’ 
was substituted with the phrase ‘alcoholic liquor’ in the taxing entry 
and the phrase ‘liquor’ was substituted with the phrase ‘intoxicating 
liquor’ in the regulatory entry. The table below reflects the evolution 
of the Legislative entries relating to alcohol: 
Enactment
Taxing Entry
Regulatory Entry
Devolution Rules 
‘alcoholic liquor’178
White Paper 
‘alcoholic liquor’179
‘alcoholic liquor’180
Joint Select Committee 
on Indian Constitutional 
Reform 
‘potable alcoholic 
liquor’181 
‘liquor’182
175	 List I, Entry 49 of the Revised Lists; See Joint Committee on Indian Constitutional Reform (Volume 1 Part 
I) 152 “46. Duties of excise on the manufacture and production of tobacco and other articles except- 
(i) Potable
alcoholic liquors; 
(ii) Toilet and medicinal preparations containing alcohol, Indian hemp, opium or other drugs or narcotics;
(iii) Opium, Indian hemp, and other drugs and narcotics. 
176	 List II, Entry 19 of the Revised Lists; See Joint Committee on Indian Constitutional Reform (Volume 1 
Part I) 155 “19. Duties of excise on the manufacture and production of –
(i) Potable alcoholic liquors; 
(ii) Toilet and medicinal preparations containing alcohol, Indian hemp, opium or other drugs and narcotics;
(iii) Opium, narcotics, hemp and other drugs.
177	 List II, Entry 18 of the Revised Lists; See Joint Committee on Indian Constitutional Reform (Volume 1 
Part I) 155 “18. Production, manufacture, possession, transport, purchase and sale of liquors, opium and 
other drugs and narcotics not covered by item 19 of List III.”
178	 Devolution Rules; Entry 16 of the Provincial List
179	 Command paper 4268; Entry 26 of List II: “26. Control of production, manufacture, possession, transport, 
purchase and sale of alcoholic liquors, drugs and narcotics.” 
180	 Command paper 4268; Entry 27 of List II: “27. Imposition and regulation of duties of excise on alcoholic 
liquors, drugs and narcotics other than tobacco.”
181	 Report of the Joint Committee on Indian Constitutional Reform; Entry 49 of List I
182	 Report of the Joint Committee on Indian Constitutional Reform; Entry 19 of List II
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Government of India 
Act 1935
‘alcoholic liquor 
for human 
consumption’183
‘intoxicating 
liquor’184
Constitution of India 
‘alcoholic liquor 
for human 
consumption’185
‘intoxicating 
liquor’186
100.	Before we proceed to lay down our inferences upon a study of the 
evolution of legislative entries, we clarify that the issue before this 
Bench is squarely related to the interpretation of the expression 
‘intoxicating liquor’. The meaning of the expression ‘alcoholic liquor 
for human consumption’ and whether it can be read as ‘alcoholic 
liquor fit for human consumption’ is not before this Bench.
101.	The Report of the Joint Committee does not explain why the 
expression ‘alcoholic liquor’ was substituted with the phrases ‘liquor’ 
in the regulatory entry and ‘potable alcoholic liquor’ in the taxing entry. 
While the Report explains the reasons for a few revisions from the 
White Paper, the entries relating to alcohol are not one of them.187 
However, the paragraph extracted below provides some clarity: 
“241. It would extend this chapter to an unreasonable 
length if we were to set out in detail all the changes 
which a revision of the three Lists has involved. We 
are less willing to do so, because we recognise that 
the revised Lists themselves will require further expert 
scrutiny before they are finally submitted to Parliament 
as part of the legislative proposals of His Majesty’s
Government. We think, however, that if the revised 
Lists are compared with the Lists in the White Paper, 
such changes as have been made, in addition to those 
already mentioned will, for the most part, be found to 
speak for themselves.” 
(emphasis supplied)
183	 Government of India Act 1935; Entry 45 of list I
184	 Government of India Act 1935; Entry 31 of list II
185	 Constitution of India 1950; Entry 84 of List I
186	 Constitution of India 1950; Entry 8 of List II
187	 Joint Committee on Indian Constitutional Reform (Volume I Part I) 148-149.
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102.	While the revisions are not accompanied by any reasons, it is clear 
that the intention of the Joint Committee was to differentiate between 
the product covered by the regulatory entry and the taxing entry. It is 
also clear that the Committee was aware of the possibility of alcohol 
not being understood as just a final ‘consumable product’ but also 
as a raw material in the production of other products. The Report of 
the Joint Committee specifically conferred the States, competence 
over “toilet and medicinal preparations containing alcohol, Indian 
help, opium or other drugs and narcotics.”188 While the taxing entry 
recognised the distinction between liquor that is used as a beverage 
and is a product in itself by using the words ‘potable alcoholic liquors’, 
and other products that contain alcohol, the regulatory entry does 
not create that distinction. The regulatory entry only refers to ‘liquor’, 
which is a much larger all-encompassing phrase. 
103.	We are unable to trace the discussions that led to a further revision in 
the 1935 Act, where the expression ‘potable liquor’ was substituted with 
‘alcoholic liquor for human consumption’, and ‘liquor’ was substituted 
with the expression ‘intoxicating liquor’. However, it is clear that the 
use of the phrases as they appear in the relevant entries of the 1935 
Act and the Constitution of India was a matter well-thought of. 
104.	Another point that needs to be
noted based upon a study of 
the evolution of legislative entries is that until the 1935 Act, the 
regulatory entry covered narcotic drugs and opium along with 
‘alcoholic liquor’/‘liquor’/‘intoxicating liquor’. There are two possible 
interpretations of the expression “intoxicating liquor”, as it appeared 
in the 1935 Act, on an application of the principle of noscitur a 
sociss, that is, the principle by which the meaning of an ambiguous 
expression may be ascertained by reference to the meaning of the 
words associated with it.189 It could be interpreted to mean liquor that 
has an intoxicating effect upon consumption since narcotic drugs and 
opium also produce intoxication. The expression ‘intoxicating liquor’ 
could also mean the regulation of alcohol used in the production of 
other products since opium and narcotic drugs are also used as 
raw materials in the production of other products (like pain relivers)
188	 Report of the Joint Committee on Indian Constitutional Reform; Entry 19(ii) of List II
189	 See Rainbow Steels v. Sales Tax Commissioner, UP AIR 1981 SC 2010; State of Bombay v. Hospital 
Mazdoor Sabha, AIR 1960 SC 610, 613; Rohit Pulp and Paper Mills Ltd v. Collector of Central Excise, 
AIR 1991 SC 754
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State of U.P. & Ors. v. 
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105.	Mr TT Krishnamachari moved an amendment to delete references to 
narcotic drugs and opium in Entry 40 of List II of the Draft Constitution 
1948 (which correspondes to Entry 31 of List II of the 1935 Act). 
The amendment was adopted by the Assembly. Mr Krishnamachari 
submitted that it was necessary to delete references to opium and 
narcotic drugs because they were covered by other entries in List 
I and List III:
“This amendment is necessary because we have shifted 
poisons and drugs to the Concurrent List and opium 
happens to be in the Central List. This entry, therefore, 
will suffice for the purposes of State Governments.”190
106.	An analysis of the evolution of the legislative entries relating to 
alcohol does not provide an unambiguous interpretation. While the 
evolution of the entries does indicate that the drafters were aware 
of the distinction between potable alcohol and alcohol used as a 
raw material in the production of other products, there is no clear 
answer to whether ‘intoxicating liquor’ includes both. The evolution 
of the entries provides us with some context and background but not 
a conclusive answer. We now proceed to apply the third principle of 
interpretation, the workability or harmonious interpretation principle. 
d.	
The harmonious interpretation 
107.	The expression ‘intoxicating liquor’ can possibly be interpreted to 
mean the following: 
a.	
Alcohol which
is used as a beverage for human consumption 
such as beer or gin, that is, potable liquor; 
b.	
If liquor means liquid, then Entry 8 of List II includes all liquids 
which contain alcohol; and
c.	
Alcohol which is used as a raw material to prepare other products 
such as pharmaceutical products and cosmetic drugs. This could 
include denatured alcohol but also other types of alcohol that 
are used in the production of products without denaturing it. 
108.	A preliminary observation needs to be made. It may be recalled that 
the State does not have the competence to levy excise duty with 
190	 Constituent Assembly Debates (2 September 1949) Volume IX
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respect to toilet and medical preparations containing alcohol. However, 
this cannot influence the interpretation of the phrase ‘intoxicating 
liquor’ in Entry 8 of List II. The Seventh Schedule demarcates the 
legislative competence on taxes and regulation. It is settled law that the 
Legislature cannot derive taxation powers from a general regulatory 
entry.191 Thus, the lack of competence to levy tax on products other 
than alcoholic beverage cannot influence the interpretation of the 
regulatory entry. They operate in separate spheres. We now proceed 
to interpret the phrase ‘intoxicating liquor’. 
109.	The Oxford English Dictionary provides multiple meanings of the 
word ‘Liquor’. They include: (a) alcoholic drinks, especially spirits; 
(b) water used in brewing; (c) liquid that has been produced in or 
used for cooking; and (d) liquid from which a substance has been 
crystallized or extracted. Liquor thus broadly takes two meanings, 
of an alcoholic beverage or liquid. The word ‘intoxicate’ is defined to 
mean: (a) cause someone to lose control of their senses; (b) poison; 
and (c) excite or exhilarate. 
110.	The dictionary meanings of the phrases ‘liquor’ and ‘intoxicate’ are 
variable. If liquor is interpreted to mean ‘liquid’ instead of an alcoholic 
beverage and intoxication a reference to alcohol, the Entry would 
cover all liquids that contain alcohol. However, if liquor is interpreted 
to mean alcoholic
beverage, the Entry would only cover alcoholic 
beverages for human consumption which causes intoxication, that 
is, potable alcohol. 
111.	 Entry 51 of List II refers to duties of excise on, inter alia, “alcoholic 
liquors for human consumption”. Article 47 which is placed in the 
Part on the Directive Principles of State Policy stipulates that the 
State shall endeavour to bring prohibition of the consumption 
of intoxicating drinks and drugs injurious to health, except for 
medicinal purposes. The provision lists this as one of the aspects of 
the duty of the State to improve public health. The phrase liquor is 
also used in multiple places in the 6th Schedule to the Constitution. 
The 6th Schedule stipulates provisions on the administration of Tribal 
Areas in the States of Assam, Meghalaya, Tripura and Mizoram. 
Paragraphs 12, 12AA and 12B provide for the application of Acts of 
Parliament and of the Legislature of the State to the autonomous 
191	 MPV Sundararamier & Co. v. State of Andhra Pradesh (1958) 9 STC 298
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districts and regions in the States of Assam, Tripura and Mizoram. 
The provisions stipulate that the enactments of the Legislature of 
the State “prohibiting or restricting the consumption of any non-
distilled alcoholic liquor” would not apply to the autonomous Districts 
or autonomous regions.192 The expressions in the 6th Schedule will 
not be of aid to interpret Entry 8 because it refers to a legislation 
enacted by the State Legislature under Entry 8. 
112.	Thus, the Constitution uses three distinct expressions relating to 
alcohol: “intoxicating liquor”, “alcoholic liquor for human consumption” 
and “intoxicating drinks”. The evolution of the entries in the legislative 
Lists indicate that it was a conscious decision to substitute ‘alcoholic 
liquor’ with ‘intoxicating liquor’ in the regulatory provision. It was also 
a conscious decision to use different phrases in the taxing entry and 
the regulatory entry. We do not think that it is necessary for us to lay 
down the contours of the different phrases used in the Constitution. 
That is a decision for another day and in another case. However, 
it is still possible to draw some inferences from the different uses. 
The expressions “alcoholic liquor for human consumption” and 
‘intoxicating drink’ are used in the context of ‘consumption’. However, 
the provision relating to “intoxicating liquor” is not limited to its 
consumption. It
stretches to its ‘production, manufacture, possession, 
transport, purchase and sale of intoxicating liquors’ and beyond. The 
second difference is the use of the expression ‘intoxicating’ instead 
of ‘alcoholic’ as the adjective to liquor. The following inferences can 
be drawn from the above differences: 
a.	
‘Alcoholic liquor’ defines the scope of the provision based on 
the ingredient, that is, ‘alcohol’. In contrast, ‘intoxicating liquor’ 
defines the scope of the provision based on the effect, that is, 
intoxication. Thus, even liquor which colloquially or traditionally 
is not considered as alcoholic liquor may be covered by the 
phrase ‘intoxicating liquor’ if it produces the effect of intoxication;
b.	
“Intoxicate” means the ability of someone to lose control of their 
behaviour. It could also mean poison. Thus, the purpose of 
substituting the adjective which indicates the ingredient (alcohol) 
192	 Unless the District Council by a public notification directs to give effect to the Act. The District Council 
may also direct that the Act shall have effect subject to ‘exceptions or modifications’; See Paragraphs 12, 
12AA and 12B of the 6th Schedule.
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with the impact (intoxication) seems to be enhance the scope 
of the Entry to cover liquor which has an impact on health; and
c.	
The public interest purpose of the provision is evident from 
the accompanying words in the provision which includes every 
stage from its production to consumption within the scope of 
the Entry. The public interest purpose of the provision is also 
evident from the evolution of the Entry. The relevant entry in 
the 1935 Act also regulated narcotic drugs and opium along 
with intoxicating liquor. References to narcotic drugs and opium 
were deleted to prevent its overlap with entries in the Concurrent 
list. As highlighted in the previous section, a common thread 
that runs through alcohol, narcotic drugs and opium is that they 
are products which can be noxiously used because they are 
also used as raw materials in the production of other products. 
It is clear from the above analysis that the meaning of the phrase 
‘intoxicating liquor’ cannot be restricted to potable alcoholic liquor, 
that is, alcohol that is sold as a beverage. 
113.	 At this juncture, it is relevant to recall that all entries in the Seventh 
Schedule must be given a wide interpretation and Entry 8 of List II 
when interpreted widely covers everything from the raw materials 
required for the production to the consumption of ‘intoxicating liquor’. 
It must also be recalled that a few of the materials that are used to
prepare potable alcohol (such as rectified spirit and ENA) are also 
used to prepare other pharmaceutical and cosmetic products. For 
example, ENA and rectified spirit are also used to prepare products 
such as varnish and hand sanitizer. Hand sanitizer is a pharmaceutical 
product which is covered by Entry 19 of List III of the Concurrent 
List which deals with “drugs”. Since all entries must be interpreted 
widely, Entry 19 will also include the production and manufacture of 
drugs and will thus cover the materials (ENA or rectified spirit) used 
for the preparation. Usually the entries cover the materials used for 
the purpose of producing the product covered by that Entry. However, 
alcohol is an inherently noxious substance that is prone to misuse 
affecting public health at large. The purpose of Entry 8 is to cover 
alcohol that could be used noxiously to the detriment of public health. 
The Entry covers all alcohol that could be ‘prone’ to noxious use. It 
also covers variants of alcohol that are not used for the preparation 
of potable alcohol but which could be misused to harm public health.
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This interpretation is in consonance with the mischief sought to be 
covered by the Entry. Thus, while the entry covers ENA and rectified 
spirit which are used in the preparation of potable alcohol, it also covers 
variants of alcohol such as denatured alcohol which though are not 
used in the preparation of potable alcohol, are prone to be misused. 
114.	It is not disputed that denatured alcohol is prepared by adding 
substances which are called denaturants to give the alcohol a foul 
smell and taste. The very purpose of denaturing ethanol to prepare 
denatured alcohol is to make it undrinkable. This Court in VAM 
Organic (II) (supra) held that the State can regulate the process of 
preparing denatured alcohol because it is done to ensure that the 
public is protected from consuming illicit liquor but not the product of 
denatured spirit even if it can be renatured and converted to potable 
liquor.193 The petitioners further sought to make a classification 
between Specially Denatured Alcohol and Completely Denatured 
Alcohol. It was argued that though Specially Denatured Alcohol is 
not fit for human consumption, it can be made potable by certain 
recovery processes while there is no such possibility in Completely 
Denatured Alcohol.194 It was argued that Entry 8 must at the least 
cover Specially Denatured Alcohol. The issue of whether denatured 
alcohol can be renatured to produce potable
alcohol is immaterial 
for the purposes of delineating the field of Entry 8 of List II. As held 
above, Entry 8 does not only cover potable alcohol but alcohol which 
may be used noxiously also. Thus, the test to be adopted is not 
whether the alcohol could be converted and used for the preparation 
of alcoholic beverages but whether it could be mischievously used 
for its preparation or as a substitute. 
115.	It was also argued by the petitioners that the phrase ‘intoxicating 
liquor’ must be interpreted to mean liquid containing alcohol. The 
consequence of this interpretation would be that it would include 
liquid products which may be covered by other entries, thereby, 
causing an overlap of the entries. For example, if interpreted in the 
above manner, the product of ‘hand sanitizer’ will be covered by both 
193	 “43. […] But this power stops with the denaturation of the industrial alcohol. Denatured spirit has been 
held in Vam Organic-I to be outside the seism of the State Legislature. Assuming that denatured spirit 
may by whatever process be renatured (a proposition which is seriously disputed by the respondents) 
and then converted into potable liquor, this would not give the State the power to regulate it.[…]”
194	 See Alcohol Denaturants-Specification (Second Revision), ICS 71.100.80
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Entry 8 of List II (‘intoxicating liquor’) and Entry 19 of List III (‘drugs’). 
Since the Entry must be read widely, it will then cover everything 
relating to the production of the drug, substantially reducing the 
scope of Entry 19 because other products of the pharmaceutical and 
cosmetic industry will be covered by Entry 8. This interpretation will 
not be in consonance with the settled principle of interpretation that 
an interpretation that promotes the workability of provisions must 
be adopted. This interpretation of the phrase is also in consonance 
with the precedents that we have analysed in section E(iv)(a) of 
this judgment. 
v.	
The correctness of the decision in Synthetics (7J)
116.	Having interpreted Entry 8 of List II, we now turn to the decision in 
Synthetics (7J) (supra). This Court in Synthetics (7J) (supra) did 
not undertake an independent analysis of the meaning of the phrase 
‘intoxicating liquor’. Without any discussion, the seven-Judge Bench 
readily concluded that the interpretation of the Bombay High Court 
and not this Court in FN Balsara (supra) is the correct approach. The 
only reasoning that this Court offered was that when the Constitution 
Bench in FN Balsara (supra) interpreted the phrase, it was not aware 
of the full potentiality of industrial alcohol: 
“74. […] It appears that in the light of the new experience 
and development, it is necessary to state that “intoxicating 
liquor”
must mean liquor which is consumable by human 
being as it is and as such when the word “liquor” was used 
by Fazl Ali J., they did not have the awareness of full use of 
alcohol as industrial alcohol. It is true that alcohol was used 
for industrial purposes then also, but the full potentiality 
of that user was not comprehended or understood. With 
the passage of time, meanings do not change but new 
experiences give new color to the meaning.”
117.	These observations are erroneous for the following reasons: 
a.	
The High Court in FN Balsara v. State of Bombay (supra) 
did not limit the meaning of ‘intoxicating liquor’ to its common 
parlance meaning, that is, potable alcoholic liquor. It also 
included alcoholic liquids which are not normally consumed 
as drinks. On appeal, the Constitution Bench held that a wider 
definition of intoxicating liquor is necessary to cover other
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products which may be used as substitutes for intoxicating 
drinks. [See section E (iv)(a) of this judgment]. This Court held 
that the expression must be given a wide meaning precisely 
because it recognised the potentiality of the wide use of alcohol 
for industrial purposes and its consequent misuse; and
b.	
The Constitution itself recognises the industrial use of alcohol. 
Entries 84 of List I (before the amendment in 2016) and 51 
of List II specifically refer to medicinal and toilet preparations 
containing alcohol. 
Thus, the use of alcohol for industrial preparations was well within 
the knowledge of this Court in FN Balsara (supra). 
118.	This Court in Synthetics (7J) (supra) did not determine the meaning 
of the expressions ‘intoxicating’ or ‘liquors’ or ‘intoxicating liquors’ 
independently. It did not compare the difference in the language used 
to describe alcohol or liquor in different provisions of the Constitution 
to understand the significance of the difference. Only Article 47 was 
referred to in the following terms: 
“77. Article 47 of the Constitution imposes upon the State 
the duty to endeavour to bring about prohibition of the 
consumption except for medicinal purpose of intoxicating 
drinks and products which are injurious to health. If the 
meaning of the expression “intoxicating liquor” is taken in 
the wide sense adopted in Balsara case, it would lead to an 
anomalous
result. Does Article 47 oblige the State to prohibit 
even such industries as are licensed under the IDR Act 
but which manufacture industrial alcohol? This was never 
intended by the above judgements or the Constitution.”
119.	Although Article 47 was mentioned, the distinction between the 
purpose of a constitutional provision in Part IV and a legislative entry 
was not appreciated. This leads to an incorrect inference, namely, 
that holding Entry 8 of List II includes non-potable alcohol would 
amount to placing an obligation on the state to prohibit non-potable 
alcohol in terms of Article 47. There is no doubt that Article 47 refers 
only to intoxicating drinks which means potable alcohol. However, an 
analysis of the differences in the terminologies without appreciating 
that the reference in Article 47 is made in the context of consumption 
leads to an erroneous conclusion.
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120.	Further, in Synthetics (7J) (supra), this Court concluded that the 
impugned fees are in the nature of a tax. In that case, the only 
entries that this Court ought to have dealt with are Entries 84 of List 
I and Entry 51 of List II. Entry 8 deals with regulatory power and is 
not a taxing entry. It is a settled principle that a tax cannot be levied 
under a general entry.195
121.	In spite of holding that the fee charged was a tax and that the State 
Legislature does not have the competence to levy tax on industrial 
alcohol, the Bench proceeded to analyse the relationship between 
Entry 52 of List I196 and Entry 8 of List II in paragraph 84 of the 
judgment. The Bench noted that the “levy of impost” is not possible 
in view of the occupation of the field by IDRA and that in view of 
IDRA, the power to issue licences to manufacture both potable and 
non-potable alcohol is vested in the Central Government.197 These 
observations are erroneous for the following reasons: 
a.	
Under Entry 52 of List I, Parliament has the competence to enact 
laws with respect to certain industries, the control of which by 
the Union is necessary in public interest. It is a general entry. It 
does not confer any taxing power. Thus, Entry 52 of List I may 
only impact the entries in List II that deal with the regulatory 
aspect of industries as we have explained in the previous 
section of this judgment. It does not have any impact on
taxing 
entries. Thus, the observation in paragraph 84 of Synthetics 
(7J) (supra) is overruled; and 
b.	
We have also held that Parliament in exercise of the power 
under Article 246 read with Entry 52 of List I cannot legislate with 
respect to the field covered by Entry 8 of List II. The observations 
in paragraph 85 of Synthetics (7J) (supra) that after the 
amendment to IDRA in 1956 bringing fermentation industries 
within the scope of the enactment, the Union has competence 
over both potable and non-potable alcohol is overruled. The law 
enacted in terms of Entry 52 of List I cannot render any entry 
of List II (including Entry 8) otiose. Thus, Parliament cannot 
take over the field covered by Entry 8.
195	 See MPV Sundararamier & Co. v. State of AP, AIR 1958 SC 468
196	 See Synthetics (7J) [84]
197	 See Synthetics (7J) [85]
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122.	In paragraph 86 of the judgment, this Court in Synthetics (7J) 
(supra) held that after the inclusion of the fermentation industry in 
the schedule to IDRA, the State only had legislative competence to:
a.	
enact any legislation in the nature of prohibition of potable 
liquor referable to Entry 6 of List II and regulating powers;
b.	
lay down regulation to ensure that non-potable alcohol is not 
diverted and misused as a substitute for potable alcohol;
c.	
levy excise duty and sales tax on potable alcohol under 
Entry 52 of List II. However, the State cannot levy sales tax 
on industrial alcohol because “under the Ethyl Alcohol (Price 
Control) Orders, sales tax cannot be charged by the State on 
industrial alcohol”; and
d.	
in case the State is rendering any service, it may charge fees 
based on quid pro quo. Reliance was placed on observations 
in Indian Mica (supra). 
123.	Since this Court in Synthetics (7J) (supra) held that the State lost 
the competence to enact a legislation on potable alcohol because 
IDRA occupies the field and that it did not have the competence to 
enact a law on non-potable alcohol, it traced regulations relating to 
alcohol to Entry 6 of List II which deals with “public health”. Viewing 
the consumption of potable alcohol as a public health concern on 
a reading of Article 47 along with Entry 6 of List II, this Court held 
that the State has the competence to
deal with (a) and (b) above. 
In view of our holding that : (a) the expression ‘intoxicating liquor’ 
in Entry 8 is not limited to alcoholic beverages; and (b) Entry 52 
of List II cannot occupy the field covered by Entry 8 of List II, the 
observations in Synthetics (7J) (supra) by which alcohol was only 
traced to the entry on public health is erroneous. It cannot be denied 
that there is a degree of overlap between Entry 8 and Entry 6 of List 
II. However, Entry 8 of List II cannot be rendered redundant for all 
purposes by a declaration by parliamentary law under Entry 52 of 
List I. Such as interpretation, as held above, would completely tilt 
the federal balance in the favour of Parliament. 
124.	Paragraph 86(d) must be read along with paragraph 88 extracted 
in the earlier part of the judgment. The Bench only placed reliance 
on the decision in Indian Mica (supra) to arrive at this conclusion. 
In paragraph 3 of Indian Mica (supra), the Constitution Bench held 
as follows:
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“Denatured spirit though an alcoholic liquor is not fit for 
human consumption. The power to levy duty on the same 
was and is given to the Central Legislature. But the same 
being intoxicating liquor, the Provincial Legislature under 
the 1935 Act and at present the State Legislature has 
power to levy fee. The power of any Legislature to levy 
fee is conditioned by the fact that it must be by and large 
a quid pro quo for the services rendered.”
(emphasis supplied)
125.	The conclusion in Indian Mica (supra) that the State Legislature 
has the competence to levy fees on denatured alcohol (which 
this Court in Synthetics (7J) (supra) interchangeably uses with 
industrial alcohol) is premised on the wide interpretation of the 
phrase intoxicating liquor in Entry 8 of List II to include denatured 
alcohol. However, this Court in Synthetics (7J) (supra) expressly 
rejected this interpretation. The State Legislature would have the 
competence to levy fees in terms of Entry 66 of List II in respect 
of any of the matters in the List. Thus, the conclusion in paragraph 
86(d) creates an inherent inconsistency within the judgment. We 
have overruled the interpretation in Synthetics (7J) (supra) on the 
scope of Entry 8 and the interaction between Entry 8 and Entry 52 
of List. The phrase ‘intoxicating liquor’ in Entry 8 includes denatured 
alcohol. Thus, the State will have the competence to levy fees with 
respect to denatured
alcohol, but for the reasons in this judgment. 
126.	Reference may be made to judgments of this Court interpreting 
Synthetics (7J) which are summarised in Section A(iii) of this 
judgment. This Court interpreted Synthetics (7J) (supra) in the 
following manner: 
a.	
The State has the competence to legislate upon industrial 
alcohol as a product of the controlled industry under Entry 33 
of List III;198
b.	
The State has the competence to legislate upon the process 
of producing denatured spirit but not the product of denatured 
spirit because the process is related to preventing the diversion 
of non-potable liquor to potable liquor;199
198	 Shri Bileshwar Khand Udyog Khedut Sahakari Mandali (supra)
199	 See VAM Organic(I) (supra) and VAM Organic (II) (supra)
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c.	
The State does not have the competence to legislate upon 
rectified spirit;200 and
d.	
The State has the competence to legislate upon rectified spirit 
that is used for the purpose of preparing potable alcohol.201
127.	Before we proceed to analyse the correctness of these observations 
based on the law that we have laid down in this judgment, it is 
necessary to expound upon how this Court in Bihar Distillery (supra) 
drew a purpose based demarcation of the legislative fields. The heart 
of the reasoning of the Court is reproduced below: 
“23. … Take a case where two industries ‘A’ and ‘B’ come 
forward with proposals to manufacture rectified spirit; ‘A’ 
says that it proposes to manufacture rectified spirit and then 
denature it immediately and sell it as industrial alcohol while 
‘B’ says that it will manufacture rectified spirit and utilise it 
entirely for obtaining country liquor (arrack or by whatever 
other name, it may be called) or for manufacturing IMFLs 
from out of it or to supply it to others for the said purpose. 
According to Synthetics [(1990) 1 SCC 109 : 1989 Supp 
(1) SCR 623] , ‘A’ is under the exclusive control of the 
Union and the only powers of the State are those as are 
enumerated in para 86 quoted above. But what about ‘B’? 
The rectified spirit manufactured by it is avowedly meant 
only for potable purposes. Can it yet be called “industrial 
alcohol”? Can it still
be said that the State concerned has 
no power or authority to control and regulate industry ‘B’ 
and that the Union alone will control and regulate it until the 
potable liquors are manufactured? The Union is certainly not 
interested in or concerned with manufacture or process of 
manufacture of country liquor or IMFLs. Does this situation 
not leave a large enough room for abuse and misuse of 
rectified spirit? It should be remembered that according to 
many States before us, bulk of the rectified spirit produced 
in their respective States is meant for and is utilised for 
obtaining or manufacturing potable liquors. Can it be said 
200	 Deccan Sugar (supra)
201	 Bihar Distillery (supra)
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even in such a situation that the State should fold its hands 
and wait and watch till the potable stage is reached. … It is 
these and many other situations which have to be taken into 
consideration and provided for in the interests of law, public 
health, public revenue and also in the interests of proper 
delineation of the spheres of the Union and the States. The 
line of demarcation can and should be drawn at the 
stage of clearance/removal of the rectified spirit. Where 
the removal/clearance is for industrial purposes (other than 
the manufacture of potable liquor), the levy of duties of excise 
and all other control shall be of the Union but where the 
removal/clearance is for obtaining or manufacturing potable 
liquors, the levy of duties of excise and all other control 
shall be that of the States. This calls for a joint control and 
supervision of the process of manufacture of rectified spirit 
and its use and disposal.” 
(emphasis supplied)
128.	This Court in Bihar Distillery (supra) held that where rectified spirit 
is manufactured only for the purpose of converting it into potable 
alcohol, it cannot be termed ‘industrial alcohol’. It was of the opinion 
that it was ill-conceived to allow for a legal structure where the States 
would step in only after alcohol was made potable as this would either 
result in a lacuna in regulation or permit the Union to regulate a field 
which it was not empowered to in
terms of the Seventh Schedule. 
The three-Judge Bench held that the line of demarcation should be 
drawn at the stage of clearance or removal of rectified spirit. Put 
differently, the Bench held that the purpose for which the rectified 
spirit was manufactured would determine whether the Union or the 
States would tax and control it. It elaborated that:
a.	
Industries which manufactured rectified spirit exclusively for 
supply to industries other than those which manufactured 
potable liquor would be under the total and exclusive control 
of the Union including for the purpose of levying excise duty. 
This extended to denatured alcohol as well. The power of the 
States with respect to this category was limited to ensuring that 
such alcohol was not illegally diverted to create potable alcohol. 
The States could levy regulatory fees to defray the costs of the 
staff deployed for this purpose;
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b.	
Industries which manufactured rectified spirit exclusively for the 
purpose of manufacturing potable alcohol would be under the 
total and exclusive control of the States in all respects and at 
all stages including levying excise duty; and
c.	
The power to permit the establishment of industries which 
manufactured rectified spirit for both the purposes delineated 
above as well as the regulation of such industries would be 
exclusively with the Union. The Union could levy excise duty 
on rectified spirit which was cleared or removed for supply to 
industries and the States could levy excise duty on rectified 
spirit which was cleared or removed for manufacturing potable 
alcohol. The removal or clearance of alcohol would be under 
the joint supervision of the Union and the States to ensure that 
excise duty was not evaded. 
129.	In Bihar Distillery (supra), the issue before this Court was whether 
the State has the competence to regulate raw material (“rectified 
spirit”) for the preparation of “intoxicating liquor” which was interpreted 
to only mean potable liquor. Justice Jeevan Reddy, writing for the 
three-Judge Bench, saw it fit to draw a purpose based delineation 
because rectified spirit could be used to prepare both potable alcohol 
and other products. The shortcoming of this reasoning is evident in 
the manner in which the Bench deals with composite industries, that 
is,
industries which manufacture both rectified spirit for the purpose of 
potable alcohol and the production of other products. The regulation 
of such composite industries was held to be with the Union though 
there was no constitutional basis for such a division. This Bench, 
having expounded on the meaning of “intoxicating liquor” to include 
variants of alcohol which are prone to be misused, the interpretations 
of Synthetics (7J) summarised in paragraph 126 of this judgment are 
overruled. The classification of alcohol into potable and non-potable (or 
industrial alcohol) is oversimplistic. Alcohol (such as ENA or rectified 
spirit) which is used to prepare potable alcohol is also used to prepare 
other products of the pharmaceutical industry. An interpretation that 
ENA or rectified spirit which is used in the preparation of potable 
liquor is ‘industrial alcohol’ and is thus outside the scope of Entry 
8 limits the field covered by the Entry even if ‘intoxicating liquor’ 
is interpreted to only mean potable liquor. Further, we also see no
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merit in the classification between the process of making denatured 
spirit and the product of denatured spirit since we have held that the 
expression intoxicating liquor includes denatured spirit. 
vi.	
The impact of the decision on Item 26 of the First Schedule 
of IDRA
130.	The Law Commission of India in its 158th Report on the amendment 
of the IDRA, released in 1998 noted that the decision in Synthetics 
(7J) (supra) created “several practical problems” and that “there is no 
such thing as industrial alcohol”. The Law Commission recommended 
that Item 26 of the IDRA which read “Fermentation industries” be 
substituted to read “Fermentation industries but not including alcohol”. 
Item 26 was substituted in 2016 to read “Fermentation industries (other 
than potable alcohol)”.202 While the Law Commission recommended 
removing alcohol as a whole from the scope of the IDRA, Parliament 
by the 2016 amendment only removed potable alcohol from the scope 
of the enactment. The Statement of Objects and Reasons indicates 
that the amendment to the IDRA was to harmonise the Act with the 
decision of this Court in Bihar Distillery (supra). The relevant portion 
of the Statement of Objects and Reasons is reproduced below: 
“The Supreme Court of India, in the case of Bihar Distillery 
v. Union of India (AIR 1997 SC 1208), has held that in the 
interest of proper delineation of the spheres of the Union 
and the States, the line of
demarcation should be drawn 
at the stage of clearance or removal of the rectified spirit. 
Where the removal or clearance is for industrial purposes 
(other than the manufacture of potable liquor), the levy of 
duties of excise and all other control shall be with the Union 
and where the removal or clearance is for obtaining or 
manufacturing potable liquors, the levy of duties of excise 
and all other control shall be with the States.
In the backdrop of the above judgment of the Supreme 
Court, the Law Commission of India had recommended in 
its 158th Report that the Heading 26 of the First Schedule 
to the Act be substituted as “Fermentation Industries but 
not including Alcohol”.
202	 See the Industries (Development and Regulation) Amendment Act 2016.
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The recommendation of the Law Commission of India was 
examined in depth by the Government. If the subject 
“Alcohol” is taken out of the First Schedule to the 
Act, both industrial alcohol and potable alcohol would 
come under the purview of the State Government 
which is not in consonance with the judgment of the 
Supreme Court. Moreover, the effect of implementation of 
the recommendation of the Law Commission would be that 
the subject “Alcohol” which covers both industrial alcohol 
and potable alcohol would no longer be a Central subject.”
(emphasis supplied)
131.	The Statement of Objects and Reasons indicates that the 
recommendation of the Law Commission was not accepted because 
the effect of accepting the recommendation would be that both 
‘industrial alcohol’ and potable alcohol would be in the domain of the 
States, and that this would be contrary to Bihar Distillery (supra). 
Hence, the IDRA was amended to remove only potable alcohol from 
Item 26 of IDRA.
132.	We have held above that Parliament under Entry 52 of List I does 
not have the legislative competence to enact a law taking control of 
the industry of intoxicating liquor. The State Legislatures will have 
control over the industry of ‘intoxicating liquor’. Parliament could not 
have taken control of the field covered by Entry 8 since we have 
interpreted intoxicating liquor to include alcohol other than potable 
alcohol as
well. Therefore, Item 26 of the First Schedule to the IDRA 
must be read as excluding the industry of “intoxicating liquor”, as 
interpreted in this judgment. 
vii.	 The (ir)relevance of the decision in Tika Ramji to the dispute
133.	In Tika Ramji (supra), sugarcane farmers instituted proceedings 
under Article 32 of the Constitution challenging the constitutional 
validity of the Uttar Pradesh Sugarcane (Regulation of Supply 
and Purchase) Act 1953203 and two notifications issued by the 
State government under the Act. The constitutional validity of the 
UP Sugarcane Act was challenged on the ground that the State 
Legislature did not have the competence because Item 8 of the 
203	 “UP Sugarcane Act”.
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Schedule to the IDRA notified ‘sugar’ as one of the controlled 
industries, and that the legislation regulating sugarcane was in pith 
and substance related to ‘sugar’. The Constitution Bench, inter alia, 
held that:
a.	
Industry in the wide sense of the term comprises of three 
different aspects: (i) raw materials which are an integral part 
of the industrial process; (ii) the process of manufacture or 
production; and (iii) the distribution of the products of the 
entries;204
b.	
The Seventh Schedule creates a demarcation based on the 
above three stages. Entry 27 of List II deals with the production, 
supply and distribution of goods subject to the provisions of Entry 
33 of List III. The term ‘goods’ is defined by Article 366(12) of the 
Constitution and includes materials, commodities and articles. 
‘Materials’ includes raw materials. Thus, the raw materials for 
industries would be covered by Entry 27 of List II. The products 
would also fall under Entry 27 of List II, except in the case of 
a controlled industry in which case they would be covered by 
Entry 33 of List III. Entry 24 of List II would deal with the process 
of manufacture or production, unless it is a controlled industry 
under Entry 52 of List I.205 Thus, the phrase ‘industry’ in Entry 
24 of List II and Entry 52 of List I takes the narrow meaning of 
process of production and manufacture;
c.	
Section 18G of the IDRA enables the Union Government to
regulate supply and distribution, and trade and commerce of 
certain ‘articles’. It does not extend to the production of articles. 
Raw materials are essential ingredients for manufacture or 
production but they are not of the same nature or description 
as the articles produced by the process of manufacture. The 
articles or class of articles relatable to the scheduled industry 
could only comprise of finished products of a cognate character. 
Raw materials, not being finished products, are not articles 
which are relatable to the scheduled industry covered by 
Section 18G;206
204	 Tika Ramji (supra) [24]
205	 ibid
206	 Tika Ramji (supra) 32
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State of U.P. & Ors. v. 
M/s Lalta Prasad Vaish and sons
d.	
Sugarcane is a raw material for the production of sugar. 
Consequently, it is not an article relatable to the sugar industry 
and does not fall within the scope of Section 18G. The IDRA 
did not affect the legislative powers of the State Legislature 
with respect to sugarcane. Therefore, the UP Sugarcane Act 
was not repugnant to the IDRA;207 and
e.	
Even if it were assumed that sugarcane was relatable to the 
sugar industry under Section 18G, the Central Government had 
not issued a notified order, as required by the provision. The 
mere possibility that a notified order may be issued could not 
lead to repugnancy. Such an order was an essential prerequisite 
for repugnancy to arise.208
134.	The decision in Tika Ramji (supra) was relied upon by this Court 
in Calcutta Gas (supra), Kannan Devan Hills Produce v. State 
of Kerala,209 Ganga Sugar Corporation v. State of UP,210 B 
Viswanathiah & Co. v. State of Karnataka211 and the majority in 
ITC (supra) on the aspect of the meaning of industry covered by 
Entry 24 of List II. The dissenting opinion of Justice Pattanaik for 
himself and Justice Bharucha in ITC (supra) doubted the correctness 
of Tika Ramji (supra) on that aspect. 
135.	The Union of India submitted that the inclusion of ‘raw materials’ 
in Entry 27 of List II (and their consequential exclusion from the 
definition of ‘industry’ in Entry 24 of List II and Entry 52 of List I) 
in
Tika Ramji (supra) must be overruled. It was submitted that 
‘industry’ as it features in the legislative lists includes raw materials 
as well. The learned Solicitor General submitted that if the restrictive 
meaning in Tika Ramji (supra) is overruled, then the State will not 
have competence to legislate on ENA used for the preparation of 
potable alcohol under Entry 8.
136.	We have in the preceding section held that the industry of intoxicating 
liquor is covered by Entry 8 and not Entry 52. Thus, even if a broad 
207	 id
208	 id
209	 [1973] 1 SCR 356 : (1972) 2 SCC 218
210	 [1980] 1 SCR 769 : (1980) 1 SCC 223
211	 [1991] 1 SCR 305 : (1991) 3 SCC 258
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meaning is given to the word ‘industry’ in Entry 52, it will not impact 
the decision in this case because Entry 8 is the specific entry which 
applies to the industry of intoxicating liquor.
137.	The meaning of the phrase ‘industry’ in Entry 52 will only impact 
this decision if (a) Entry 52 of List I includes raw materials 
necessary for the industry; and (b) Entry 8 of List II includes the 
process of manufacture but does not include the stage anterior to 
it (that is, raw materials). If an expansive meaning is given to the 
word ‘industry’, the raw materials to an industry will be covered 
by Entry  24 of List  II and Entry 52 of List I (if it is a controlled 
industry). It will not be covered by Entry 27 of List II. If Entry 8 
of List II does not include raw material but only the process to 
manufacture and final product, it is only then that the competence 
to enact laws on the raw material for the industry (in this case, 
ENA) will lie with Parliament.
138.	We are of the opinion that the holding in Tika Ramji (supra) is not 
relevant to the dispute for the following reasons: 
a.	
We have interpreted the phrase ‘intoxicating liquor’ in Entry 8 
to include ENA since it could be noxiously used; and
b.	
Notwithstanding the above, if the ground for overruling the 
holding in Tika Ramji (supra) is that manufacture/production 
cannot be disconnected from raw materials, it would equally 
apply to the industry of
intoxicating liquor covered by Entry 8 
of List II. In Section C (iii)(a) of this judgment, we have 
concluded that the words ‘that is to say’ are illustrative. They 
are not exhaustive of the contents of the Entry. Thus, Entry 8 
cannot be interpreted to exclude raw materials used for the 
production of intoxicating liquor merely because the Entry 
does not expressly provide for them. On an application of the 
principle that entries ought to be interpreted widely, the raw 
materials for the production and manufacture of intoxicating 
liquor, as interpreted in this judgment will be covered by 
Entry 8.
viii.	 Section 18G of IDRA and Entry 33 of List III
139.	To recall, this Court in Synthetics (7J) (supra) held that the State 
cannot regulate ‘industrial alcohol’ as a product of the controlled
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State of U.P. & Ors. v. 
M/s Lalta Prasad Vaish and sons
industry because the Union has occupied the field by Section 18G of 
IDRA.212 The questions referred by the three-Judge Bench in Lalta 
Prasad (supra) all relate to the issue of whether Section 18G of the 
IDRA occupies the field in Entry 33 of List III or whether the field is 
occupied only when an order is notified under Section 18G. There is 
no necessity to determine the correctness of this observation in this 
reference since the Legislature of the State will have the competence 
to regulate denatured alcohol in view of our interpretation of the 
expression ‘intoxicating liquor’ in Entry 8 of List II. 
F.	
Conclusion 
140.	In view of the discussion above, the following conclusions emerge:
a.	
Entry 8 of List II of the Seventh Schedule to the Constitution is 
both an industry-based entry and a product-based entry. The 
words that follow the expression “that is to say” in the Entry 
are not exhaustive of its contents. It includes the regulation 
of everything from the raw materials to the consumption of 
‘intoxicating liquor’; 
b.	
Parliament cannot occupy the field of the entire industry merely 
by issuing a declaration under Entry 52 of List I. The State 
Legislature’s competence under Entry 24 of List II is denuded 
only to the extent of the field covered by the law of Parliament 
under Entry 52 of List I;
c.	
Parliament does not have the legislative competence to enact a 
law taking
control of the industry of intoxicating liquor covered 
by Entry 8 of List II in exercise of the power under Article 246 
read with Entry 52 of List I;
d.	
The judgments of the Bombay High Court in FN Balsara v. 
State of Bombay (supra), this Court in FN Balsara (supra) and 
Southern Pharmaceuticals (supra) did not limit the meaning 
of the expression ‘intoxicating liquor’ to its popular meaning, 
that is, alcoholic beverages that produce intoxication. All the 
three judgments interpreted the expression to cover alcohol that 
could be noxiously used to the detriment of health;
212	 Synthetics (7J) [85]
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e.	
The expression ‘intoxicating liquor’ in Entry 8 has not acquired 
a legislative meaning on an application of the test laid down in 
Ganon Dunkerley (supra);
f.	
The study of the evolution of the legislative entries on alcohol 
indicates that the use of the expressions “intoxicating liquor” 
and “alcoholic liquor for human consumption” in the Seventh 
Schedule to the Constitution was a matter well-thought of. It 
also indicates that the members of the Constituent Assembly 
were aware of use of the variants of alcohol as a raw material 
in the production of multiple products;
g.	
Entry 8 of List II is based on public interest. It seeks to enhance 
the scope of the entry beyond potable alcohol. This is inferable 
from the use of the phrase ‘intoxicating’ and other accompanying 
words in the Entry. Alcohol is inherently a noxious substance 
that is prone to misuse affecting public health at large. Entry 8 
covers alcohol that could be used noxiously to the detriment of 
public health. This includes alcohol such as rectified spirit, ENA 
and denatured spirit which are used as raw materials in the 
production of potable alcohol and other products. However, it 
does not include the final product (such as a hand sanitiser) that 
contains alcohol since such an interpretation will substantially 
diminish the scope of other legislative entries;
h.	
The judgment in Synthetics (7J) (supra) is overruled in terms 
of this judgment;
i.	
Item 26 of the First Schedule to the IDRA must be read as 
excluding the industry of “intoxicating liquor”, as interpreted in 
this judgment;
j.	
The correctness of the judgment in Tika Ramji (supra) on the 
interpretation of word ‘industry’ as it occurs in the legislative 
entries does not fall for determination in this reference; and
k.	
The issue of whether Section 18G of the IDRA covers the field 
under Entry 33 of List III does not arise for adjudication in view 
of the finding that denatured alcohol is covered by Entry 8 of 
List II. 
141.	The reference is answered in the above terms. 
142.	The Registry is directed to obtain administrative instructions from the 
Chief Justice for placing the matters before an appropriate Bench.
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State of U.P. & Ors. v. 
M/s Lalta Prasad Vaish and sons
* Ed. Note: Pagination as per the original Judgment.
ORDER ON REFERENCE
Nagarathna, J.
Table of Contents*
S. 
No.
Particulars
Page 
No.
1.
Opening Paragraphs
5
2.
Genesis of the controversy
6
3.
Conclusions arrived at by the learned Chief Justice
9
4.
Submissions
12
5.
Relevant Constitutional Framework
18
6.
Interpretation of Legislative Entries
22
a.
Prafulla Kumar Mukherjee
24
b.
FN Balsara
24
c.
Atiqa Begum
24
d.
Calcutta Gas Company
25
e.
RMDC
26
f.
MPV Sundararamier
27
7.
Scheme of IDRA
30
8.
Article 47: Directive Principle of State Policy
37
a.
Cooverjee B. Bharucha
38
b.
Sristikar Dowerah
39
c.
FN Balsara
40
d.
Nagendra Nath
43
e.
Amar Chandra Chakraborty
43
f.
Harinarayan Jaiswal
43
g.
Nashirwar
44
h.
Har Shankar
44
i.
Khoday Distilleries
48
9.
Survey of Judicial Precedents
51
a.
Synthetics and Chemicals (7J)
51
b.
Synthetics and Chemicals (2J)
65
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c.
Bileshwar Khand Udyog
69
d.
Gujchem Distillers
70
e.
Modi Distillery
71
f.
Shree Krishna Gyanoday Sugar Ltd.
73
g.
Bihar Distillery
76
h.
McDowell
90
i.
Vam Organic I
92
j.
Haryana Brewery Ltd.
96
k.
Industrial Corporation (P) Ltd.
98
l.
Vam Organic II
100
10.
Analysis of Judicial Dicta
103
a.
Indian Mica
103
b.
Southern Pharmaceuticals
104
c.
Synthetics and Chemicals (7J)
105
d.
Synthetics and Chemicals (2J)
107
e.
Bileshwar Khand Udyog
109
f.
Shree Krishna Gyanoday Sugar Ltd
110
g.
Bihar Distillery
111
h.
Vam Organic I
113
i.
Vam Organic II
114
11.
Further Analysis
115
12.
Meaning of “intoxicating liquors”
119
13.
A Historical Perspective
122
14.
Constituent Assembly Debates
124
15.
Analysis of relevant Entries in the three Lists
138
a.
Ishwari Khetan
139
b.
Meaning of “subject to”
147
c.
Hingir Rampur
148
d.
Shri Krishna
148
e.
South India Corporation
149
f.
Ashok Leyland Ltd.
150
g.
Calcutta Gas Company
152
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State of U.P. & Ors. v. 
M/s Lalta Prasad Vaish and sons
16.
Entry 33(a) – List III vs. Entry 52 - List I: Observations 
in Synthetics and Chemicals (7J)
172
17.
Article 254, Repugnancy and Doctrine of Occupied Field
183
18.
Mineral Area and Development Authority
195
19.
Mar Appraem Kuri Company
204
20.
Importance of “Industrial Alcohol” to the Indian 
Economy
213
21.
Conclusion on interplay of legislative Entries
221
22.
Effect of overruling Synthetics and Chemicals (7J)
224
23.
My answers to the questions formulated
231
24.
My answers to the conclusions of learned Chief Justice
235
I have perused the comprehensive and erudite opinion authored by 
Hon’ble the Chief Justice of India Dr. Dhananjaya Y. Chandrachud 
on the questions referred to this nine-Judge Bench. I respectfully 
dissent on certain aspects of the said opinion and express my 
reasons therefor.
1.1	 The sum and substance of all the questions referred to this Bench 
could be crystallised on the short point for consideration, namely, 
whether the expression “intoxicating liquors” in Entry 8 -List II 
of the Seventh Schedule of the Constitution of India includes 
within its scope and ambit “industrial alcohol” and consequently, 
whether a State Legislature has the competence to legislate 
on “industrial alcohol”. My short answer is that there is a lack 
of legislative competence in the State Legislature when viewed 
from the constitutional framework and statutory framework of 
the
Industries (Development and Regulation) Act, 1951 (for 
short, “IDRA”) passed by the Parliament on the strength of 
Entry 52 – List I of the Seventh Schedule of the Constitution of 
India and having regard to Section 2 of the said Act read with its 
various provisions and the First Schedule thereto, particularly, 
Item 26 which deals with “Fermentation Industries” (other 
than potable alcohol). However, the discussion on scope and 
ambit of Entry 33(a) – List III of the Seventh Schedule of the 
Constitution is distinct and shall be discussed later. Therefore, 
Synthetics and Chemicals Ltd. vs. State of Uttar Pradesh,
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AIR 1990 SC 1927 (“Synthetics and Chemicals (7J)”), has 
been correctly decided by the seven-Judge Bench of this Court. 
On the aspect of Section 18G of the IDRA occupying the field 
and consequently, whether the State Legislatures are denuded 
of their powers on the content of the subject matter of the said 
Section in the context of Entry 33(a) – List III as per first part 
of Article 254(1) shall be adverted to later. I propose to discuss 
the reasons for aforesaid view.
1.2	 Since the Entries under discussion are in their respective Lists 
of the “Seventh Schedule of the Constitution”, it would be 
unnecessary to refer to them as being part of “Seventh Schedule 
of the Constitution” in the following discussion.
Genesis of the controversy:
2.	
The genesis of this present controversy insofar as the reference to 
the nine-Judge Bench is concerned, emanates from the judgment of 
the seven-Judge Bench of this Court in Synthetics and Chemicals 
(7J). The said judgment authored by Sabyasachi Mukharji, J. (as His 
Lordship then was) held that the scope of the expression “intoxicating 
liquors” in Entry 8 – List II did not extend to “industrial alcohol” and 
regulation of the same by State Legislature is impermissible in law 
having regard to the constitutional framework, particularly the relevant 
Entries of Lists I and II of the Seventh Schedule to the Constitution 
of India. The said dictum of the seven-Judge Bench was
doubted 
by a three-Judge Bench of this Court in State of UP vs. M/s Lalta 
Prasad Vaish vide order dated 25.10.2007 and the following questions 
were formulated for consideration by a larger Bench:
“Q. 1. Does Section 2 of the Industries (Development and 
Regulation) Act, 1951, have any impact on the field covered 
by Section 18-G of the said Act or Entry 33 of List III of 
the Seventh Schedule of the Constitution?
Q. 2. Does Section 18-G of the aforesaid Act fall under Entry 
52 of List I of the Seventh Schedule of the Constitution, 
or is it covered by Entry 33 of List III thereof?
Q. 3. In the absence of any notified order by the Central 
Government under Section 18-G of the above Act, is 
the power of the State to legislate in respect of matters 
enumerated in Entry 33 of List III ousted?
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State of U.P. & Ors. v. 
M/s Lalta Prasad Vaish and sons
Q. 4. Does the mere enactment of Section 18-G of the 
above Act, give rise to a presumption that it was the 
intention of the Central Government to cover the entire 
field in respect of Entry 33 of List III so as to oust the 
States’ competence to legislate in respect of matters 
relating thereto?
Q. 5. Does the mere presence of Section 18-G of the 
above Act, oust the State’s power to legislate in regard 
to matters falling under Entry 33(a) of List III?
Q. 6. Does the interpretation given in Synthetics and 
Chemicals case (1990) 1 SCC 109 in respect of Section 
18-G of the Industries (Development and Regulation) Act, 
1951, correctly state the law regarding the States’ power 
to regulate industrial alcohol as a product of the scheduled 
industry under Entry 33 of List III of the Seventh Schedule 
of the Constitution in view of Clause (a) thereof?”
2.1	 A similar view was expressed by a five-Judge Bench in very 
same case wherein this Court was of the view that the matter 
has to be considered by a Bench of nine-Judges. 
2.2	 In view of the nature of questions raised by the three-Judge 
Bench as well as the five-Judge Bench of this Court, the 
correctness or otherwise of judgment of this Court in Synthetics 
and Chemicals (7J) is being considered by this nine-Judge 
Bench.
Conclusions arrived at by the learned Chief Justice:
3.	
His Lordship, the Chief Justice has overruled the judgment in
Synthetics and Chemicals (7J) and has arrived at the following 
conclusions: 
“In view of the discussion above, the following conclusions 
emerge:
a.	
Entry 8 of list II of the Seventh Schedule to the 
Constitution is both an industry-based entry and 
a product-based entry. The words that follow the 
expression “that is to say” in the Entry are not
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exhaustive of its contents. It includes the regulation of 
everything from the raw materials to the consumption 
of ‘intoxicating liquor’;
b.	
Parliament cannot occupy the field of the entire 
industry merely by issuing a declaration under Entry 
52 of List I. The State Legislature’s competence under 
Entry 24 of List II is denuded only to the extent of the 
field covered by the law of Parliament under Entry 
52 of List I;
c.	
Parliament does not have the legislative competence 
to enact a law taking control of the industry of 
intoxicating liquor covered by Entry 8 of List II in 
exercise of the power under Article 246 read with 
Entry 52 of List I;
d.	
The judgments of the Bombay High Court in FN 
Balsara v. State of Bombay (supra), this Court in 
FN Balsara (supra) and Southern Pharmaceuticals 
(supra) did not limit the meaning of the expression 
‘intoxicating liquor’ to its popular meaning, that is, 
alcoholic beverages that produce intoxication. All 
the three judgments interpreted the expression to 
cover alcohol that could be noxiously used to the 
detriment of health;
e.	
The expression ‘intoxicating liquor’ in Entry 8 has 
not acquired a legislative meaning on an application 
of the test laid down in Ganon Dunkerley (supra);
f.	
The study of the evolution of the legislative entries 
on alcohol indicates that the use of the expressions 
“intoxicating liquor” and “alcoholic liquor for human 
consumption” in the
Seventh Schedule was a matter 
well-thought of. It also indicates that the members of 
the Constituent Assembly were aware of use of the 
variants of alcohol as a raw material in the production 
of multiple products;
g.	
Entry 8 of List II is based on public interest. It seeks 
to enhance the scope of the entry beyond potable 
alcohol. This is inferable from the use of the phrase
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State of U.P. & Ors. v. 
M/s Lalta Prasad Vaish and sons
‘intoxicating’ and other accompanying words in the 
Entry. Alcohol is inherently a noxious substance that is 
prone to misuse affecting public health at large. Entry 
8 covers alcohol that could be used noxiously to the 
detriment of public health. This includes alcohol such 
as rectified spirit, ENA and denatured spirit which are 
used as raw materials in the production of potable 
alcohol and other products. However, it does not 
include the final product (such as a hand sanitiser) 
that contains alcohol since such an interpretation 
will substantially diminish the scope of multiple other 
legislative entries;
h.	
The judgment in Synthetics (7J) (supra) is overruled 
in terms of this judgment;
i.	
Item 26 of the First Schedule to the IDRA must be 
read as excluding the industry “intoxicating liquor”, 
as interpreted in this judgement;
j.	
The correctness of the judgment in Tika Ramji 
(supra) on the interpretation of word ‘industry’ as 
it occurs in the Legislative entries does not fall for 
determination in this reference; and
k.	
The issue of whether Section 18G of the IDRA covers 
the field under Entry 33 of List III does not arise for 
adjudication in view of the finding that denatured 
alcohol is covered by Entry 8 of List II.”
3.1	 While coming to the aforesaid conclusions, His Lordship, 
the Chief Justice of India has held that the entire industry of 
“intoxicating liquors” including
raw materials is covered by 
Entry 8 – List II and is completely out of Entry 52 – List I; that 
the scope and ambit of Entry 8 – List II covers both potable 
and non-potable alcohol and therefore, only State Legislatures 
have the power to regulate the subject. I respectfully disagree.
3.2	 While coming to the aforesaid conclusions, significant judgments 
of this Court in State of Bombay vs. FN Balsara, AIR 1951 
SC 318 (“FN Balsara”); Ch. Tika Ramji vs. State of Uttar 
Pradesh, AIR 1956 SC 676 (“Tika Ramji”); Calcutta Gas 
Company (Proprietary) Ltd. vs. State of West Bengal, AIR
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1962 SC 1044 (“Calcutta Gas Company”); Indian Mica 
and Micanite Industries vs. State of Bihar (1971) 2 SCC 
236 (“Indian Mica”); Ishwari Khetan Sugar Mills (P) Ltd. 
vs. State of Uttar Pradesh, AIR 1980 SC 1955 (“Ishwari 
Khetan”); State of AP vs. McDowell & Co. (1996) 3 SCC 709 
(“McDowell”); Bihar Distillery vs. Union of India (1997) 2 
SCC 727 (“Bihar Distillery”); Vam Organic Chemicals Ltd. 
vs. State of U.P. (1997) 2 SCC 715, (“Vam Organic I”); and 
State of UP vs. Vam Organic Chemicals Ltd. (2004) 1 SCC 
225 (“Vam Organic II”), amongst others, have been discussed.
Submissions:
4.	
As the learned Chief Justice has recorded the submissions of the 
respective parties in detail, I need not be repetitive except highlighting 
the submissions of the learned senior counsel Sri Rakesh Dwivedi, Sri 
Datar and Sri Jaideep Gupta and other counsel for the appellants. The 
main contention of the appellants is that the States have jurisdiction 
over “industrial alcohol” and therefore the judgment of this Court 
in Synthetics and Chemicals (7J) is incorrect. The expression 
“intoxicating liquors” in Entry 8 – List II of the Seventh Schedule of 
the Constitution cannot be restricted to alcoholic liquors for human 
consumption by a deduction from a reading of Entry 84 – List I with 
Entry 51 – List II. In other words, “intoxicating liquors” cannot be 
equated with only “alcoholic liquors for human consumption”. On the 
other hand, it
is contended that the expression “intoxicating liquors” 
has attained a specific meaning over the passage of time which is 
more expansive than “alcoholic liquors for human consumption”. 
4.1	 The further submission was that only the production and 
manufacture of “industrial alcohol” would be governed by the 
Union List even if the requirement of a declaration under Section 
2 of the IDRA read with Item 26 of the First Schedule thereto 
is as per Entry 52 – List I. However, when it comes to Entry 
33 – List III, there is need for a notified order to claim exclusive 
jurisdiction on a product of a scheduled industry. If no such order 
has been issued, the legislative powers of the State would remain 
exclusive. It was further submitted that alcoholic liquors for human 
consumption means it is capable of being consumed by humans 
and it would fall under Entry 51 – List II, while denatured alcohol 
such as ethyl alcohol or rectified spirit which usually undergoes
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State of U.P. & Ors. v. 
M/s Lalta Prasad Vaish and sons
denaturation for the purposes of their use in industries would fall 
under Entry 84 – List I. That everything, except denatured spirit 
is alcohol for human consumption because it has the potential to 
be consumed by humans. That Extra Neutral Alcohol (‘ENA’, for 
short) and rectified spirit may therefore be understood to be for 
human consumption and ceases to be such only upon undergoing 
denaturation. But according to the judgment in Synthetics and 
Chemicals (7J), the States do not have the power to levy tax 
on ENA despite being fit for human consumption. This position 
of law in the aforesaid decision has restricted the competence of 
the States to levy tax under Entry 51 – List II. That pursuant to 
the aforesaid decision, the Law Commission in its 158th Report 
suggested an amendment to the IDRA by which Item 26 in the 
First Schedule has been amended to mean that “Fermentation 
Industries” would not include “potable alcohol” with retrospective 
effect. It was contended that this amendment does not in any 
way clear the confusion created in the aforesaid case and hence, 
Synthetics and Chemicals (7J) may be overruled. It was also 
contended that in Tika Ramji, this Court has devised a three-fold 
classification as pre-production, production and post-production 
and it was only in the second category i.e. production which 
would be covered by the word “industry”.
4.2	 Taking a different
stance, Sri V. Giri submitted that denatured 
alcohol is excluded from the scope of the term “intoxicating 
liquors” in Entry 8 – List II and is covered under Entry 24 – 
List II. Further, unless a notified order under Section 18G of the 
IDRA is issued, the Parliament cannot occupy the field under 
Entry 33 – List III merely on the strength of the said provision 
being brought on the statute book. 
4.3	 On the other hand, Sri R. Venkataramani, learned Attorney 
General, leading the arguments for the Union of India and other 
respondents contended that Entry 52 – List I and Entry 33 – 
List III are interrelated as they touch upon matters relating to 
a scheduled industry under the provisions of the IDRA, whose 
control is with the Union. It was contended that Entry 52 – List I 
is provided in order to ensure a uniform control and development 
of an industry throughout the length and breadth of the country. 
This is not only in the interest of the scheduled industry but 
also to achieve equitable distribution of the products of such
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industry and as an economic measure. As a result, in respect of 
a scheduled industry, the powers of the State under Entries 26 
and 27 - List II are denuded. Also, if the field is occupied by the 
Parliament (Union) and the States are denuded of their powers 
under Entry 33 – List III. Therefore, the judgment in Synthetics 
and Chemicals (7J) would not call for a reconsideration as it 
was correctly decided. It was further contended that all liquids 
containing alcohol would fall under two categories, namely, 
those meant for human consumption (potable alcohol) and 
non-potable alcohol. Entry 8 – List II deals with only potable 
alcohol meant for human consumption as a beverage. Thus, 
non-potable alcohol is outside the scope of Entry 8 – List II. The 
amendment to Item 26 of First Schedule of IDRA has clarified 
this position. Further, the use of the expression “that is to say” 
in Entry 8 – List II refers to the various activities concerning 
potable alcohol and does not refer to any other class of liquor. 
4.4	 Learned Solicitor General of India submitted that the controversy 
in this case must be tread carefully as it would have a bearing 
on other legislation. That having regard to national interest, 
there is a requirement for a uniform development throughout 
the country in respect of the products of an industry that are 
sought to be equally distributed, and, therefore, the control of 
such industries is taken
over by the Union exercising powers 
in relation to Entry 52 – List I. That the IDRA is an instance 
of such legislation. It was contended that the judgment in 
Tika Ramji insofar as it held that there must be a notified 
order in force pursuant to Section 18G for the doctrine of 
repugnancy to apply is not correct and in Synthetics and 
Chemicals (7J), the judgment in Tika Ramji was rightly not 
considered. The expression “intoxicating liquors” in Entry 8- List 
II means a beverage which has the effect of intoxication upon 
consumption. In Synthetics and Chemicals (7J), this Court 
held that “intoxicating liquors” is “alcoholic liquors fit for human 
consumption”. Other learned counsel for the respondents have 
adopted the above arguments. 
5.	
On enumerating the questions for opinion of this nine-Judge Bench, 
the following issues have been crystallised for consideration in 
paragraph 42 of the judgment of the learned Chief Justice of India 
which read as under:
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“42. With the above preliminary observations, we have 
formulated the following issues:
a.	
Whether Entry 52 of List I of the Seventh Schedule 
to the Constitution overrides Entry 8 of List II;
b.	
Whether the expression ‘intoxicating liquors’ in Entry 8 
of List II of the Seventh Schedule to the Constitution 
includes alcohol other than potable alcohol; and
c.	
Whether a notified order under Section 18G of the 
IDRA is necessary for Parliament to occupy the field 
under Entry 33 of List III of the Seventh Schedule to 
the Constitution.”
Relevant Constitutional Framework:
6.	
Article 265 of the Constitution mandates that no tax shall be levied or 
collected except by authority of law. Article 366 is a definition clause 
and it states that in the Constitution, unless the context otherwise 
requires, the expressions mentioned therein have the meanings 
thereby respectively assigned to them. For the purpose of this case, 
Article 366(12) and (28) are relevant and the same read as under:
“Article 366. Definitions.- In this Constitution, unless 
the context otherwise requires, the following expressions 
have the meanings hereby respectively assigned to them, 
that is to say –
xxx
(12) “goods” includes all materials, commodities and 
articles;
xxx
(28) “taxation” includes the imposition of any tax or impost, 
whether general or local or special and “tax” shall be 
construed accordingly;”
The aforesaid
definition of ‘taxation’ is not exhaustive but inclusive 
in nature to include not only any tax in the usual understanding of 
the said expression or tax stricto senso but also any levy akin to a 
tax. There can be no cavil to the proposition that before any tax or 
impost could be levied or collected, it must have the authority of law 
vide Article 265 including legislative competence.
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6.1	 Article 246 of the Constitution deals with distribution of legislative 
powers between the Parliament and State Legislature, while 
Article 254 speaks of inconsistency between the laws made 
by Parliament and laws made by the Legislatures of States. 
They read as under:
“246. Subject-matter of laws made by 
Parliament and by the Legislatures of States. —  
(1) Notwithstanding anything in clauses (2) and 
(3), Parliament has exclusive power to make laws 
with respect to any of the matters enumerated in 
List 1 in the Seventh Schedule (in this Constitution 
referred to as the “Union List”).
(2) Notwithstanding anything in clause (3), Parliament 
and subject to clause (1), the Legislature of any State 
also, have power to make laws with respect to any 
of the matters enumerated in List III in the Seventh 
Schedule (in this Constitution referred to as the 
“Concurrent List”).
(3) Subject to clauses (1) and (2), the Legislature of 
any State has exclusive power to make laws for such 
State or any part thereof with respect to any of the 
matters enumerated in List II in the Seventh Schedule 
(in this Constitution referred to as the ‘State List’).
(4) Parliament has power to make laws with respect 
to any matter for any part of the territory of India not 
included in a State notwithstanding that such matter 
is a matter enumerated in the State List.
xxx
254. Inconsistency between laws made by 
Parliament and laws made by the
Legislatures of 
States.—(1) If any provision of a law made by the 
Legislature of a State is repugnant to any provision 
of a law made by Parliament which Parliament is 
competent to enact, or to any provision of an existing 
law with respect to one of the matters enumerated in 
the Concurrent List, then, subject to the provisions 
of clause (2), the law made by Parliament, whether 
passed before or after the law made by the Legislature
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of such State, or, as the case may be, the existing law, 
shall prevail and the law made by the Legislature of the 
State shall, to the extent of the repugnancy, be void.
(2) Where a law made by the Legislature of a State 
with respect to one of the matters enumerated in the 
Concurrent List contains any provision repugnant to 
the provisions of an earlier law made by Parliament 
or an existing law with respect to that matter, then, 
the law so made by the Legislature of such State 
shall, if it has been reserved for the consideration of 
the President and has received his assent, prevail 
in that State: 
Provided that nothing in this clause shall prevent 
Parliament from enacting at any time any law with 
respect to the same matter including a law adding 
to, amending, varying or repealing the law so made 
by the Legislature of the State.”
6.2	 With regard to the allocation of subjects under the three Lists, 
namely, List I - Union List; List II - State List and List III - Concurrent 
List, it may be useful to refer to the Devolution Rules drawn 
under the Government of India Act, 1919 and the Government 
of India Act, 1935 which are the precursors to the distribution 
of legislative powers between the Union and the States under 
the Seventh Schedule of the Constitution of India. Some of the 
salient aspects concerning the distribution of the legislative powers 
between Parliament and State
Legislature as per the three Lists 
in the backdrop of the provisions could be alluded to. 
6.3	 Article 246 of the Constitution deals with the distribution of 
legislative powers between the Union and the States. The said 
Article has to be read along with the three Lists, namely, the 
Union List, the State List and the Concurrent List. The taxing 
powers of the Union as well as the States are also demarcated 
as separate Entries in the Union List as well as the State List 
i.e. List I and List II respectively. The Entries in the Lists are 
fields of legislative powers conferred under Article 246 of the 
Constitution. In other words, the Entries define the areas of 
legislative competence of the Union and the State Legislature. 
(vide: State of Karnataka vs. State of Meghalaya (2023) 4 
SCC 416 para 56), (“State of Karnataka”).
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Interpretation of Legislative Entries:
6.4	 On the aspect of interpretation of legislative Entries in the 
three Lists, the following principles are apposite as discussed 
in State of Karnataka: 
(i)	
The power to legislate, which is dealt with under Article 
246 has to be read in conjunction with the Entries in the 
three Lists which define the respective areas of legislative 
competence of the Union and State Legislatures. While 
interpreting these Entries, they should not be viewed 
in a narrow or myopic manner but by giving the widest 
scope to their meaning, particularly, when the vires of a 
provision of a statute is assailed. In such circumstances, a 
liberal construction must be given to the Entry by looking 
at the substance of the legislation and not its mere form. 
However, while interpreting the Entries in the case of an 
apparent conflict, every attempt must be made by the 
Court to harmonise or reconcile them. Where there is an 
apparent overlapping between two Entries, the doctrine of 
pith and substance is applied to find out the true character 
of the enactment and the Entry within which it would fall. 
The doctrine of pith and substance, in short, means, if an 
enactment substantially falls within the powers expressly 
conferred by the Constitution upon the Legislature which 
enacted it, the same cannot be held to be invalid merely 
because it incidentally encroaches on matters assigned 
to another
Legislature. Also, in a situation where there is 
overlapping, the doctrine has to be applied to determine 
to which Entry, a piece of legislation could be related to. In 
order to examine the true character of an enactment or a 
provision thereof, due regard must be had to the enactment 
as a whole and to its scope and object. It is said that the 
question of invasion into another legislative territory has 
to be determined by substance and not by degree.
(ii)	
In case of any conflict between Entries in List I and List 
II, the power of Parliament to legislate under List I will 
supersede when, on an interpretation, the two powers 
cannot be reconciled. But if a legislation in pith and 
substance squarely falls within any of the Entries of List II, 
the State Legislature’s competence cannot be questioned
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on the ground that the field is covered by the Union list or 
the Concurrent list vide Prafulla Kumar Mukherjee vs. 
Bank of Commerce Limited, Khulna, AIR 1947 P.C. 60 
(“Prafulla Kumar Mukherjee”). According to the pith and 
substance doctrine, if a law is, in its pith and substance 
within the competence of the Legislature which has made 
it, it will not be invalid because it incidentally touches 
upon the subject lying within the competence of another 
Legislature vide FN Balsara.
(iii)	 Once the legislation is found to be ‘with respect to’ the 
legislative Entry in question, unless there are other 
constitutional prohibitions, the power would be unfettered. 
It would also extend to all ancillary and subsidiary 
matters which can fairly and reasonably be said to be 
comprehended in that topic or category of legislation vide 
United Provinces vs. Atiqa Begum, AIR 1941 FC 16 
(“Atiqa Begum”). 
(iv)	 Another important aspect while construing the Entries in the 
respective Lists is that every attempt should be made to 
harmonise the contents of the Entries so that interpretation 
of one Entry should not render the entire content of another 
Entry nugatory vide Calcutta Gas Company. This is 
especially so when some of the Entries in a different List 
or in the same List may overlap or may appear to be in 
direct conflict with each other. In such a situation, a duty 
is cast on the Court to
reconcile the Entries and bring 
about a harmonious construction. Thus, an effort must be 
made to give effect to both Entries and thereby arrive at 
a reconciliation or harmonious construction of the same. 
(v)	
In short, the Entries in the different Lists should be read 
together without giving a narrow meaning to any of them. 
The powers of the Union and the State Legislature are 
expressed in precise and definite terms. Hence, there can 
be no broader interpretation given to one Entry than to 
the other. Even where an Entry is worded in wide terms, it 
cannot be so interpreted as to negate or override another 
Entry or make another Entry meaningless. In case of an 
apparent conflict between different Entries, it is the duty 
of the Court to reconcile them in the first instance.
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(vi)	 Further, where one Entry is made “subject to” another 
Entry, all that it means is that out of the scope of the 
former Entry, a field of legislation covered by the latter 
Entry has been reserved to be specially dealt with by the 
appropriate Legislature. 
(vii)	 Also, when one Entry is general and another is specific, 
normally, the latter will exclude the former on a subject 
of legislation. 
6.5	 The sequitur to the aforesaid discussion is that if the Legislature 
passes a law which is beyond its legislative competence, it is 
a nullity ab-initio. The Legislation is rendered null and void for 
want of jurisdiction or legislative competence vide RMDC vs 
Union of India, AIR 1957 SC 628 (“RMDC”).
6.6	 On a close perusal of the Entries in the three Lists, it is discerned 
that the Constitution has divided the topics of legislation into 
the following three broad categories: 
(i)	
Entries enabling laws to be made;
(ii)	
Entries enabling taxes to be imposed; and
(iii)	 Entries enabling fees and stamp duties to be collected.
6.7	 Thus, the Entries on levy of taxes are specifically mentioned. 
Therefore, as such, there cannot be a conflict of taxation 
power of the Union and the State. In substance, the taxing 
power can be derived only from a specific taxing Entry in an 
appropriate List. Such a power has to be determined by the 
nature of the tax and not the measure or machinery set up by 
the statute. In this
context, reliance could be placed on MPV 
Sundararamier vs. State of Andhra Pradesh, AIR 1958 SC 
468 (“MPV Sundararamier”), wherein at paragraph 51 it was 
observed as under:
“51. In List I Entries 1 to 81 mention the several 
matters over which Parliament has authority to 
legislate. Entries 82 to 92 enumerate the taxes 
which could be imposed by a law of Parliament. An 
examination of these two groups of entries shows 
that while the main subject of legislation figures in 
the first group, a tax in relation thereto is separately
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mentioned in the second. Thus, Entry 22 in List I is 
“Railways”, and Entry 89 is “Terminal taxes on goods 
or passengers, carried by railway, sea or air; taxes 
on railway fares and freights”. If Entry 22 is to be 
construed as involving taxes to be imposed, then 
Entry 89 would be superfluous. Entry 41 mentions 
“Trade and commerce with foreign countries; import 
and export across customs frontiers”. If these 
expressions are to be interpreted as including duties 
to be levied in respect of that trade and commerce, 
then Entry 83 which is “Duties of customs including 
export duties” would be wholly redundant. Entries 43 
and 44 relate to incorporation, regulation and winding 
up of corporations. Entry 85 provides separately for 
corporation tax. Turning to List II, Entries 1 to 44 
form one group mentioning the subjects on which 
the States could legislate. Entries 45 to 63 in that 
List form another group, and they deal with taxes. 
Entry 18, for example, is “Land” and Entry 45 is 
“Land revenue”. Entry 23 is “Regulation of mines” 
and Entry 50 is “Taxes on mineral rights”. The above 
analysis—and it is not exhaustive of the entries in 
the Lists—leads to the inference that taxation is 
not intended to be comprised in the main subject 
in which it might on an extended construction be 
regarded as included, but is treated as a distinct 
matter for purposes of legislative competence. And 
this
distinction is also manifest in the language of 
Article 248 clauses (1) and (2) and of Entry 97 in 
List I of the Constitution. Construing Entry 42 in the 
light of the above scheme, it is difficult to resist the 
conclusion that the power of Parliament to legislate 
on inter-State trade and commerce under Entry 42 
does not include a power to impose a tax on sales 
in the course of such trade and commerce.”
6.8	 What falls for interpretation in these cases is the content, 
interplay and meaning of Entries 52 and 84 – List I, Entries 8, 
24, 26, 27, 51 – List II and Entry 33 – List III. The aforesaid 
Entries read as under:
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“List – I
52. Industries, the control of which by the Union is 
declared by Parliament by law to be expedient in the 
public interest.
xxx
84. Duties of excise on tobacco and other goods 
manufactured or produced in India except:— 
(a)	 alcoholic liquors for human consumption; 
(b)	 opium, Indian hemp and other narcotic drugs 
and narcotics, 
but including medicinal and toilet preparations 
containing alcohol or any substance included in sub-
paragraph (b) of this entry.
List – II
8. Intoxicating liquors, that is to say, the production, 
manufacture, possession, transport, purchase and 
sale of intoxicating liquors.
xxx
24. Industries subject to the provisions of Entries 7 
and 52 of List I.
xxx
26. Trade and commerce within the State subject to 
the provisions of entry 33 of List III. 
27. Production, supply and distribution of goods 
subject to the provisions of entry 33 of List III. 
xxx
51. Duties of excise on the following goods 
manufactured or produced in the State and 
countervailing duties at the same or lower rates on 
similar goods manufactured or produced elsewhere 
in India:—
(a)	 alcoholic liquors for human consumption;
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(b)	 opium, Indian hemp and other narcotic drugs 
and narcotics,
but not including medicinal and toilet preparations 
containing alcohol or any substance included in sub-
paragraph (b) of this entry.
List – III
33. Trade and commerce in, and the production, 
supply and distribution of,— 
(a)	 the products of any industry where the control 
of such industry by the Union is declared by 
Parliament by law to be expedient in the public 
interest, and imported goods of the same kind 
as such products; 
(b)	 foodstuffs, including edible oilseeds and oils; 
(c)	
cattle fodder, including oilcakes and other 
concentrates; 
(d)	 raw cotton, whether ginned or unginned, and 
cotton seed; and
(e)	 raw jute.”
For a better understanding of the discussion to follow, it would 
be relevant to refer to the scheme of the IDRA.
Scheme of IDRA:
7.	
The Preamble of the IDRA states that it is an Act to provide for the 
development and regulation of certain industries. Section 2 declares 
that it is expedient in the public interest that the Union should take 
under its control the industries specified in the First Schedule to the 
said Act. Hence, the question would be, whether, the Parliament 
by law has declared it expedient in public interest that the Union 
should take control of certain industries. Section 2 of the IDRA, for 
immediate reference, reads as under:
“2. Declaration as to expediency of control by the
Union.- It is hereby declared that it is expedient in the 
public interest that the Union should take under its control 
the industries specified in the First Schedule.”
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In the First Schedule to the said Act, Item 26 reads as under:
“26. Fermentation Industries:
(1)	 Alcohol.
(2)	 Other products of fermentation industries.”
Item 26 of the First Schedule to the Act was amended on 
14.05.2016 by Act 27 of 2016 with retrospective effect from 
08.05.1952 and it reads as under:
“26. Fermentation Industries (Other than Potable 
Alcohol):
(1)	 Alcohol.
(2)	 Other products of fermentation industries.”
7.1	 Section 3 of the IDRA is the definition clause and the relevant 
definitions read as under:
“3. Definitions. – In this Act, unless the context 
otherwise requires,-
xxx
(d) “industrial undertaking” means any undertaking 
pertaining to a scheduled industry carried on in one 
or more factories by any person or authority including 
Government; 
(dd) “new article”, in relation to an industrial 
undertaking which is registered or in respect of which 
a licence or permission has been issued under this 
Act, means—
(a) any article which falls under an item in the 
First Schedule other than the item under which 
articles ordinarily manufactured or produced 
in the industrial undertaking at the date of 
registration or issue of the licence or permission, 
as the case may be, fall; 
(b) any article which bears a mark as defined 
in the Trade Marks Act, 1940 (5 of 1940), or 
which is the subject of a patent, if at the date of 
registration or issue of the licence or permission,
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as the case may be, the industrial undertaking 
was not manufacturing or producing such article 
bearing that mark or which is the subject of 
that patent; 
(e) “notified order” means an order notified in the 
Official Gazette;
xxx
(g) “prescribed” means prescribed by rules made 
under this Act;
(h) “Schedule” means a Schedule to this Act; 
(i) “scheduled industry” means any of the industries 
specified in the First Schedule; 
xxx
(k) words and expressions used herein but not defined 
in this Act and defined in the Companies Act, 1956 (1 
of 1956), have the meanings respectively assigned 
to them in that Act.”
7.2	 Chapter II of the Act deals with the Central Advisory Council and 
Development Councils while Chapter III speaks of regulation 
of scheduled industries. The headings of Sections 10 to 18 
are noted within Chapter III. The said provisions deal with, 
inter alia, registration of existing industries, issuance of licence 
for producing or manufacturing of new articles, conducting 
investigation to be made into scheduled industries. Chapter IIIA 
speaks of direct management or control of industrial undertakings 
by Central Government in certain cases while Chapter IIIAA 
speaks of management or control of industrial undertakings 
owned by companies in liquidation. Chapter IIIAB deals with 
the power to provide relief to certain industrial undertakings 
while Chapter IIIAC speaks of
liquidation or reconstruction of 
companies. Chapter IIIB deals with control of supply, distribution, 
price, etc., of certain articles was inserted by Act 26 of 1953. 
7.3	 Section 18G which is in the said Chapter is relevant for the 
purpose of this case, reads as under:
“18G. Power to control supply, distribution, 
price, etc., of certain articles.—(1) The Central
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Government, so far as it appears to it to be necessary 
or expedient for securing the equitable distribution 
and availability at fair prices or any article or class 
of articles relatable to any scheduled industry, may, 
notwithstanding anything contained in any other 
provisions of this Act, by notified order, provide of 
regulating the supply and distribution thereof and 
trade and commerce therein. 
(2) Without prejudice to the generality of the powers 
conferred by sub-section (1), a notified order made 
thereunder may provide—
(a)	 for controlling the prices at which any such 
article or class thereof may be bought or sold;
(b)	 for regulating by licences, permits or otherwise 
the distribution, transport, disposal, acquisition, 
possession, use or consumption of any such 
article or class thereof; 
(c)	
for prohibiting the withholding from sale of any 
such article or class thereof ordinarily kept for sale; 
(d)	 for requiring any person manufacturing, 
producing or holding in stock any such article 
or class thereof to sell the whole or part of the 
articles so manufactured or produced during a 
specified period or to sell the whole or a part 
of the articles so held in stock to such person 
or class of persons and in such circumstances 
as may be specified in the order; 
(e)	 for regulating or prohibiting any class of 
commercial or financial transactions relating 
to such article or class thereof which in the
opinion of the authority making the order are, 
or if unregulated are likely to be, detrimental to 
public interest; 
(f)	
for requiring persons engaged in the distribution 
and trade and commerce in any such article 
or class thereof to mark the articles exposed 
or intended for sale with the sale price or to 
exhibit at some easily accessible place on the
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premises the price-lists of articles held for sale 
and also to similarly exhibit on the first day of 
every month, or at such other time as may be 
prescribed, a statement of the total quantities 
of any such articles in stock; 
(g)	 for collecting any information or statistics with 
a view to regulating or prohibiting any of the 
aforesaid matters; and 
(h)	 for any incidental or supplementary matters, 
including, in particular, the grant or issue of 
licences, permits or other documents and the 
charging of fees therefor. 
(3) Where, in pursuance of any order made with 
reference to clause (d) of sub-section (2), any person 
sells any article, there shall be paid to him the price 
therefor— 
(a)	 where the price can consistently with the 
controlled price, if any, be fixed by agreement, 
the price so agreed upon; 
(b)	 where no such agreement can be reached, the 
price calculated with reference to the controlled 
price, if any, fixed under this section; 
(c)	
where neither clause (a) nor clause (b) applies, 
the price calculated at the market rate prevailing 
in the locality at the date of sale. 
(4) No order made in exercise of any power conferred 
by this section shall be called in question in any court. 
(5) Where an order purports to have been made 
and signed by an authority in exercise of any power 
conferred by this section, a court shall, within the 
meaning of the Indian Evidence
Act, 1872 (1 of 
1872), presume that such order was so made by 
that authority.
Explanation.— In this section, the expression “article 
or class of articles” relatable to any scheduled industry 
includes any article or class of articles imported into 
India which is of the same nature or description as the
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article or class of articles manufactured or produced 
in the scheduled industry.”
7.4	 The reason as to why Section 18G was inserted to the IDRA 
must be noted. In paragraph 3 of the Statement of Objects and 
Reasons, it has been stated as under:
“At present, the power to control prices and distribution 
of various goods under this Act is confined to industrial 
undertakings registered or licensed under the Act. 
In all other cases, it is necessary to have recourse 
to powers derived from the Essential Supplies 
(Temporary Powers) Act, 1946 and the Supply and 
Prices of Goods Act, 1950. Both these enactments 
have a limited period of life. It is proposed to add a 
chapter taking power to control the distribution and 
price of goods produced in scheduled industries 
and of similar goods even, though they may be of 
imported origin.”
The aforesaid reflects that the IDRA has brought under Central 
control the development and regulation of a number of important 
industries, the activities of which affect the country as a whole and 
the development of which must be governed by economic factors 
of all-India import. 
Similarly, in the Statement of Objects and Reasons of Amendment 
Act 72 of 1971, it has been stated as under:
“The industries included in the First Schedule to the 
Industries (Development and Regulation) Act, 1951 
are those the control of which by the Union has been 
considered to be expedient in the public
interest. The 
proper development of these industries is vital to the 
economic development of the country. These industries 
not only substantially contribute to the Gross National 
Product of the country, but also afford gainful employment 
to millions of people.”
7.5	 Section 29E was inserted with effect from 14.05.2016 by Act 
27 of 2016. As already noted, Item 26 of the First Schedule 
deals with “Fermentation Industries” and after amendment 
by Act 27 of 2016 with retrospective effect from 08.05.1952, 
“Fermentation Industries” have been clarified as “other than
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potable alcohol”. Therefore, alcohol and other products of 
“Fermentation Industries” would refer to products which are 
“other than potable alcohol”.
Article 47: Directive Principle of State Policy: 
8.	
Since we are trying to ascertain the true meaning of “intoxicating 
liquors” in Entry 8 – List II, Article 47 of the Constitution of India, 
which is a Directive Principle of the State Policy, is relevant as the 
said Article deals, inter alia, with intoxicating drinks. The same reads 
as under: 
“47. Duty of the State to raise the level of nutrition and 
the standard of living and to improve public health
The State shall regard the raising of the level of nutrition and 
the standard of living of its people and the improvement of 
public health as among its primary duties and, in particular, 
the State shall endeavour to bring about prohibition of the 
consumption except for medicinal purposes of intoxicating 
drinks and of drugs which are injurious to health.”
What is significant are the words “the State shall endeavour to 
bring about prohibition of the consumption, except for medicinal 
purposes of intoxicating drinks which are injurious to health”. It is on 
the basis of the said Directive Principle that several prohibition and 
excise laws have been enacted in several States as a constitutional 
goal to improve the health of the people of India in the context of 
prevention and prohibition
of consumption of “intoxicating liquors”. 
The manufacture, export, import, transport or sale of “intoxicating 
liquors” is prohibited except in accordance with a licence, permit or 
pass granted in that behalf. The State legislations confer power on 
State Governments in matters concerning liquor licensing and also 
with regard to imposition of excise duty. 
8.1	 The following decisions of this Court could be considered at 
this stage as they are of relevance to the controversy under 
consideration: 
a)	
In Cooverjee B. Bharucha vs. Excise Commissioner 
and the Chief Commissioner, Ajmer, AIR 1954 SC 
220 (“Cooverjee B. Bharucha”), the right of a citizen to 
carry on trade and business in liquor under Article 19(1)
(g) of the Constitution was considered. The impact of
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liquor on a person who consumes it as well as on the 
society was discussed. With reference to an American 
decision in Crowley vs. Christensen (1890) 34 Law Ed. 
620 (“Crowley”) at p. 623, it was observed that when 
liquor is consumed, first of all it affects the person who 
consumes it, and subsequently, it affects those who are 
immediately connected and dependent upon him. Hence, 
there is a need to regulate the business of manufacture 
and trade in liquor. It was observed that no citizen has an 
inherent right to sell “intoxicating liquors” in retail. This is 
because the business of liquor is attended with danger to 
the community. It can, therefore, be entirely prohibited or 
regulated as per the discretion of the Government and the 
Authority concerned. It was held that Regulation could also 
be in the form of issuance of licences to eligible persons 
under a particular legislation. The provisions of regulation 
of liquor, which permit certain eligible persons to carry on 
the trade to the exclusion of the general public and thereby 
possibly create a monopoly, is also permissible in law. 
b)	
In State of Assam vs. Sristikar Dowerah, AIR 1957 SC 
414 (“Sristikar Dowerah”), it was observed as under:
“no person has any absolute right to sell liquor 
and that the purpose of the Act and the rules 
is to control and restrict the consumption of 
intoxicating liquors, such control and restriction 
being obviously
necessary for the preservation of 
public health and morals, and to raise revenue.”
The above observation is in line with Article 47 of the 
Constitution of India which is a Directive Principle. 
c)	
The constitutional validity of the Bombay Prohibition Act, 
1949 was challenged in FN Balsara. One of the arguments 
raised was that the said Act could be justified under 
Entry I -List II which relates to public order. This was by 
placing reliance on a tendency in Europe and America 
with regard to alcoholism as a menace to public order. 
However, the said submission was not pursued further 
before this Court as there were other express provisions 
under the pertinent Entry which dealt with “intoxicating 
liquors”. The short question considered was whether the
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Bombay Prohibition Act, 1949 in pith and substance was 
a law relating to possession and sale, etc. of “intoxicating 
liquors” or whether it related to import and export of 
“intoxicating liquors”. Dealing with the validity of the 
aforesaid Act, this Court noted the word “liquor” ordinarily 
means “a strong drink as opposed to soft drink” but it must 
in any event be a beverage which is ordinarily drunk as 
noted by the Bombay High Court. The High Court further 
noted that although the State Legislature may prevent 
the consumption of non-intoxicating beverages and also 
prevent the use as drinks of alcoholic liquids which are 
not normally consumed as drinks, it cannot prevent the 
legitimate use of alcoholic preparations which are not 
beverages nor the use of medicinal and toilet preparations 
containing alcohol. This view was challenged before this 
Court. Noting the several meanings of “liquor” from the 
Oxford English Dictionary, it was observed that as a 
general meaning it is a liquid but as a special meaning it 
means a drink or beverage produced by fermentation or 
distillation. It was observed that this is the popular and 
most widely accepted meaning and the basic idea of 
beverage prominently ran through the main provisions of 
the various Acts of this country as well as America and 
England, relating to “intoxicating liquor”. Reference was 
made to the definition of “intoxicating
liquors” in various 
overseas jurisdiction and also Bombay Abkari Act, 1878 as 
well as other provincial Acts such as the Punjab Excise Act, 
1914; the UP Excise Act, 1910; Madras Abkari Act, 1886, 
etc. It was observed that the framers of the Government 
of India Act, 1935 could not have been entirely ignorant 
of the acceptance in which the word “liquor” covers not 
only those alcoholic liquids which are generally used for 
beverage purposes and produce intoxication, but also all 
liquids containing alcohol. It may be that the latter meaning 
is not the meaning which is attributed to the word “liquor” 
in common parlance especially when that word is prefixed 
by the qualifying word “intoxicating”, but in my opinion 
having regard to the numerous statutory definitions of that 
word, such a meaning could not have been intended to be 
excluded from the scope of the term “intoxicating liquor” 
as used in Entry 31 – List II. Consequently, on analysing
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the provisions of the impugned Act, it was observed that 
only those provisions which affected the possession, selling 
and consumption of any medicinal and toilet preparations 
and commendation of any intoxicant or hemp were invalid.
d)	
In Nagendra Nath vs. Commissioner of Hills Division, 
AIR 1958 SC 398 (“Nagendra Nath”), it was reiterated 
that there is no inherent right in a citizen to sell liquor and 
that the control and restriction over the consumption of 
“intoxicating liquors” was necessary for the preservation 
of public health and morals and to raise revenue.
e)	
The question, whether Section 43 of the Bengal Excise Act, 
1909, under which the licence of a liquor contractor was 
withdrawn, violated Articles 14 and 19 of the Constitution 
of India was considered in Amar Chandra Chakraborty 
vs. Collector of Excise, Government of Tripura, AIR 
1972 SC 1863 (“Amar Chandra Chakraborty”). It was 
observed that in view of the injurious effect of excessive 
consumption of liquor on health, the trade or business must 
be treated as a class by itself and it cannot be treated 
on par with other trades while testing the matter from the 
angle of Article 14 of the Constitution. 
f)	
In State of Orissa vs. Harinarayan Jaiswal, AIR 1972 
SC 1816 (“Harinarayan Jaiswal”), it was observed that 
one of the important purposes of selling the exclusive 
right to vend liquor was to raise revenue and since the 
Government had the
power to sell exclusive privileges, 
there was no basis for contending that the owner of the 
privileges could not decline to accept the highest bid if it 
thought that the price offered was inadequate. 
g)	
Similarly, in Nashirwar vs. State of Madhya Pradesh, 
AIR 1975 SC 360 (“Nashirwar”), it was observed that 
there was no fundamental right of citizens to carry on 
trade or to do business in liquor. It was observed in the 
said case as under: 
“There are three principal reasons to hold that 
there is no fundamental right of citizens to 
carry on trade or to do business in liquor. First, 
there is the police power of the State to enforce 
public morality to prohibit trades in noxious or
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dangerous goods. Second, there is power of 
the State to enforce an absolute prohibition of 
manufacture or sale of intoxicating liquor. Article 
47 states that the State shall endeavour to bring 
about prohibition of the consumption except for 
medicinal purposes of intoxicating drinks and of 
drugs which are injurious to health. Third, the 
history of excise law shows that the State has 
the exclusive right or privilege of manufacture 
or sale of liquor.”
h)	
In Har Shankar vs. The Deputy Excise and Taxation 
Commissioner, AIR 1975 SC 1121 (“Har Shankar”), this 
Court, speaking through Y.V. Chandrachud, C.J, observed 
that the State has the power to prohibit trades which 
are injurious to the health and welfare of the public, that 
elimination and exclusion from business is inherent in the 
nature of liquor business as no person has an absolute 
right to deal in liquor. Also, all forms of dealings in liquor 
have, due to their inherent nature, been treated as a class 
by themselves by all civilized communities. Therefore, the 
contention that the persons who carry on trade or business 
in liquor have an unrestricted fundamental right as such 
was rejected. Thus, it was observed that while a citizen 
has a right to do business in liquor, the State can make 
law imposing reasonable restrictions on the said right in 
public interest.
Summarising the aforesaid judgments in Har Shankar, it 
was
observed that there is no fundamental right to carry 
out trade or business in intoxicants. The State, under its 
regulatory powers, has the right to prohibit absolutely every 
form of activity in relation to intoxicants, its manufacture, 
storage, export, import, sale and possession. In all their 
manifestations, these rights are vested in the State and 
indeed without such vesting there can be no effective 
regulation of various forms of activities in relation to 
intoxicants. Therefore, the States’ right to regulate activities 
in relation to intoxicants to the extent of prohibiting would 
imply that even when permission to deal with intoxicants 
is granted, the same can be regulated. This is because 
the rights in regard to intoxicants belong to the State and
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it is open to the Government to part with those rights for a 
consideration. The power of the Government to charge a 
price for parting with its rights and not the mode of fixing 
that price is what constitutes the essence of the matter. 
It was also held that neither does the label affixed to the 
price determine the true nature of the charge levied by the 
Government nor its right to levy the same. By use of the 
expression “licence fee” or “fixed fee”, what is meant is 
the price or consideration which the Government charges 
to the licencees for parting with its privileges and granting 
them the licences. That the object of imposing licence 
fee is for the purpose of regulation so that the number 
of persons who wish to engage in liquor trade are kept 
under check and within reasonable limits. It was also 
observed that the Government can, on its own, trade in its 
own rights or privileges and can deal with liquor or grant 
leases of its rights and issue requisite permits or licences 
or passes on payment of such fees as may be prescribed. 
Ultimately, it was observed that the amount payable by 
the licencees on the basis of the bids offered by them in 
auctions is neither a fee in the technical sense, nor a tax, 
but is in the nature of the price of a privilege. It was also 
held that the State has the power to grant liquor licences 
on payment of such fees as the consideration for parting 
with the privileges that
the State has. That the payment 
demanded is in the form of excise revenue, which could 
be in the form of any payment, duty, fee, tax or fine 
ordered under the provisions of a particular enactment or 
Rules made thereunder relating to liquor or intoxicating 
drugs but would not include a fine imposed by a Court of 
law. That such an imposition could be recovered in the 
manner authorised by law. Consequently, in Har Shankar, 
this Court repelled the contention of the retailed vendors 
of country liquor holding licences for the sale of liquor in 
specified vends. 
i)	
In Khoday Distilleries Ltd. vs. State of Karnataka (1995) 
1 SCC 574 (“Khoday Distilleries”), the Constitution 
Bench of this Court summarised the law on the subject 
relating to right to carry on trade or business in “potable 
liquor” as under:
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“(a) The rights protected by Article 19(1) are not 
absolute but qualified. The qualifications are 
stated in clauses (2) to (6) of Article 19. The 
fundamental rights guaranteed in Article 19(1)(a) 
to (g) are, therefore, to be read along with the 
said qualifications. Even the rights guaranteed 
under the Constitutions of the other civilized 
countries are not absolute but are read subject 
to the implied limitations on them. Those implied 
limitations are made explicit by clauses (2) to 
(6) of Article 19 of our Constitution.
(b) The right to practise any profession or to 
carry on any occupation, trade or business 
does not extend to practising a profession or 
carrying on an occupation, trade or business 
which is inherently vicious and pernicious, and 
is condemned by all civilised societies. It does 
not entitle citizens to carry on trade or business 
in activities which are immoral and criminal 
and in articles or goods which are obnoxious 
and injurious to health, safety and welfare of 
the general public, i.e., res extra commercium, 
(outside commerce). There cannot be business 
in crime.
(c) Potable liquor as a beverage is an intoxicating 
and depressant drink which is dangerous and 
injurious to health and is, therefore, an article 
which is res extra commercium being inherently 
harmful. A citizen has, therefore, no fundamental 
right to do trade or business in liquor. Hence the
trade or business in liquor can be completely 
prohibited.
(d) Article 47 of the Constitution considers 
intoxicating drinks and drugs as injurious 
to health and impeding the raising of level 
of nutrition and the standard of living of the 
people and improvement of the public health. 
It, therefore, ordains the State to bring about 
prohibition of the consumption of intoxicating
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drinks which obviously include liquor, except 
for medicinal purposes. Article 47 is one of 
the directive principles which is fundamental in 
the governance of the country. The State has, 
therefore, the power to completely prohibit the 
manufacture, sale, possession, distribution and 
consumption of potable liquor as a beverage, 
both because it is inherently a dangerous article 
of consumption and also because of the directive 
principle contained in Article 47, except when it 
is used and consumed for medicinal purposes.
(e) For the same reason, the State can create 
a monopoly either in itself or in the agency 
created by it for the manufacture, possession, 
sale and distribution of the liquor as a beverage 
and also sell the licences to the citizens for the 
said purpose by charging fees. This can be done 
under Article 19(6) or even otherwise.
(f) For the same reason, again, the State can 
impose limitations and restrictions on the trade or 
business in potable liquor as a beverage which 
restrictions are in nature different from those 
imposed on the trade or business in legitimate 
activities and goods and articles which are res 
commercium. The restrictions and limitations 
on the trade or business in potable liquor can 
again be both under Article 19(6) or otherwise. 
The restrictions and limitations can extend to the 
State carrying on the trade or business itself to 
the exclusion of and elimination of others
and/
or to preserving to itself the right to sell licences 
to do trade or business in the same, to others.
(g) When the State permits trade or business 
in the potable liquor with or without limitation, 
the citizen has the right to carry on trade or 
business subject to the limitations, if any, and 
the State cannot make discrimination between 
the citizens who are qualified to carry on the 
trade or business.
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(h) The State can adopt any mode of selling 
the licences for trade or business with a view 
to maximise its revenue so long as the method 
adopted is not discriminatory.
(i) The State can carry on trade or business 
in potable liquor notwithstanding that it is an 
intoxicating drink and Article 47 enjoins it to 
prohibit its consumption. When the State carries 
on such business, it does so to restrict and 
regulate production, supply and consumption 
of liquor which is also an aspect of reasonable 
restriction in the interest of general public. The 
State cannot on that account be said to be 
carrying on an illegitimate business.
(j) The mere fact that the State levies taxes or 
fees on the production, sale and income derived 
from potable liquor whether the production, sale 
or income is legitimate or illegitimate, does not 
make the State a party to the said activities. The 
power of the State to raise revenue by levying 
taxes and fees should not be confused with 
the power of the State to prohibit or regulate 
the trade or business in question. The State 
exercises its two different powers on such 
occasions. Hence the mere fact that the State 
levies taxes and fees on trade or business in 
liquor or income derived from it, does not make 
the right to carry on trade or business in liquor 
a fundamental right, or even a legal right when 
such trade or business is completely prohibited.
(k)
The State cannot prohibit trade or business 
in medicinal and toilet preparations containing 
liquor or alcohol. The State can, however, under 
Article 19(6) place reasonable restrictions on 
the right to trade or business in the same in 
the interests of general public.
(l) Likewise, the State cannot prohibit trade 
or business in industrial alcohol which is not 
used as a beverage but used legitimately for
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industrial purposes. The State, however, can 
place reasonable restrictions on the said trade 
or business in the interests of the general public 
under Article 19(6) of the Constitution.
(m) The restrictions placed on the trade or 
business in industrial alcohol or in medicinal and 
toilet preparations containing liquor or alcohol 
may also be for the purposes of preventing their 
abuse or diversion for use as or in beverage.”
(underlining by me)
Survey of Judicial Precedents:
Synthetics and Chemicals (7J):
9.	
Since the main controversy in this case turns on the correctness of 
the decision in Synthetics and Chemicals (7J), it is necessary to 
advert to the same in some detail. 
9.1	 In the said case, the main contour of the controversy was 
whether vend fee in respect of “industrial alcohol” under different 
legislations and rules in different States was valid. In this context, 
the following three questions were considered:
"(i)	 whether the power to levy excise duty in case of 
industrial alcohol was with the State Legislature 
or the Central Legislature?
(ii)	
what is the scope and ambit of Entry 8 of List 
II of the Seventh Schedule of the Constitution?
(iii)	 whether, the State Government has exclusive 
right or privilege of manufacturing, selling, 
distributing, etc. of alcohols including industrial 
alcohol. In this connection, the extent, scope 
and ambit of such right or privilege has also to 
be examined.”
9.1.1	
In this background, the expressions “intoxicating liquors” 
and “alcoholic liquors for human consumption” were 
considered and also Article 47 of the Constitution which 
deals with the State’s duty regarding the improvement 
of public health and to bring about prohibition of 
the consumption except for medicinal purposes of
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intoxicating drinks and of drugs which are injurious to 
health. Reference was also made to Entry 52 – List I 
which deals with industries, the control of which by the 
Union is declared by Parliament by law to be expedient 
in public interest. 
9.1.2	
It was the contention of the petitioners therein that 
the IDRA was enacted with a view to developing and 
controlling various important industries. Section 2 of the 
IDRA declares that it is expedient in the public interest 
that Union should take under its control the industries 
specified in the First Schedule. 
9.1.3	
The said case did not concern primarily with potable 
alcohol for the purpose of human consumption but 
with ethyl alcohol (rectified spirit) as an industrial raw 
material for manufacture of downstream products. This 
Court concerned itself with the taxing power of the 
States to impose and levy excise duty on “industrial 
alcohol” and/or imposts such as vend fees. “Power 
Alcohol” was defined as ethyl alcohol containing not 
less than 95.5 per cent volume of ethanol measured at 
60°F, corresponding to 74.4 over proof strength. That 
rectified spirit was ethyl alcohol or ethanol with 96 per 
cent alcohol. On dehydration, ethyl alcohol with 99.5 
per cent volume of ethanol is produced. 
9.1.4	
This Court noted that on 08.05.1952, the Parliament 
enforced the IDRA which contains, inter alia, Section 
18G which was inserted w.e.f.
01.10.1953, whereby 
the Central Government was empowered for securing 
equitable distribution and availability at fair prices of any 
article or class of articles relatable to any scheduled 
industry to provide for regulating the supply and 
distribution thereof, and trade and commerce therein by 
a notified order. The notified order was also to provide 
for controlling the prices at which such article or class 
of articles could be bought or sold. The said Act was 
amended in 1956. Item 26 was inserted in the First 
Schedule to the said Act and empowered the Central 
Government to control the “Fermentation Industries” 
including alcohol industries.
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Under the UP Licences for the Possession of Denatured 
Spirit and Specially Denatured Spirit Rules, 1976, 
special licence for possession of denatured spirit for 
industrial purposes was required. “Special denatured 
spirit” was defined as spirit rendered “unfit for human 
consumption”. As per the Rules, licences for possession 
of denatured spirit including specially denatured spirit 
for industrial purposes were to be of three kinds – (i) 
Form FL 39; (ii) Form FL 40; and (iii) Form FL 41.
9.1.5	
In that background, it was submitted on behalf of the 
Union of India that the legislative competence of the 
State enactments in various States will have to be 
determined with reference to following Entries in List I – 
7, 52, 59, 84, 96, 97 and Entries in List II - 8, 24, 26, 
27, 51, 52, 54, 56, 62 and Entries in List III - 19 and 
33. That there is a dichotomy between Entry 84 – List I 
and Entry 51 – List II but this would not control the 
interpretation of other Entries. It was urged that there 
was no such dichotomy as regards Entry 8 – List II 
as it is not subject to Entry 52 – List I as the subject 
matters of these two Entries are different. That Entry 
52 – List I deals with industries while Entry 8 – List II 
deals with “intoxicating liquors”. The power to levy 
taxes is to be read from the Entry relating to taxes 
and not from the general Entry. That industry is a topic 
of legislation left to the Parliament and
to the State. 
Identifying of Entries is by reference to a declaration 
under Entry 7 – List I and Entry 52 – List I. The aspect 
of legislation with regard to subject matter of Entries 
is the topic “industry”. On the other hand, the subject 
matter of legislation under Entry 8 – List II is the topic 
“intoxicating liquors”. Therefore, according to the Union 
of India, there was no conflict.
9.1.6	
In view of the above submission on behalf of the Union 
of India, the only question which was to be determined 
was, whether, “intoxicating liquors” in Entry 8 – List 
II is confined to potable liquor or includes all liquors. 
That the State Legislature had no power to levy excise 
duty on “industrial alcohol” as the latter is “not fit for 
human consumption” and the State Legislature will have
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power to levy fee in respect of all alcohol (see Entry 
66 read with Entry 6 - List II). The State Legislature 
has power to legislate on the topic “intoxicating liquors” 
under Entry 8 - List II. It being a general Entry, will not 
comprehend a power of taxation but will comprehend 
a power to levy fee read with Entry 66 – List II. 
9.1.7	
According to the Union of India, with regard to industries 
the control of which by the Union is declared by 
Parliament by law to be expedient in public interest, 
Parliament will have exclusive legislative competence 
vide Entry 52 - List I. This power includes the power 
to declare by Parliament that control by the Union of 
industries relating to all types of alcohol is expedient 
in public interest. Once Parliament makes such a 
declaration, the State Legislature will be denuded of its 
power under Entry 24 - List II on the aspect “industry” 
with respect to all subject matters. 
9.1.8	
It was also contended that the power to collect the lump 
sum amount by way of auction by any right or otherwise 
conferring the right to sell alcohol is neither a power 
to levy tax nor a power to levy fee but it will fall within 
the legislative competence of the State Legislature 
under Entry 8 – List II. But this power will extend only 
to alcohol for human consumption. Also, there can be 
a complete prohibition with regard to manufacture and 
sale of alcohol fit for
human consumption because there 
is no fundamental right to carry on business in alcohol 
even for human consumption (see Article 47 of the 
Constitution and other judgments already discussed). 
The State can, therefore, collect an amount called 
vend fee, shop rent etc. for conferring on a citizen 
the right to manufacture and sell alcoholic liquors if 
it is fit for human consumption. This power cannot 
extend to “industrial alcohol” or “alcohol contained in 
the medicinal or toilet preparations”. According to the 
Union of India, there was no power to levy such rent 
or fee with regard to “industrial alcohol” because (a) 
“industrial alcohol” and “alcoholic liquors for medicinal 
and toilet preparations” cannot be completely prohibited; 
(b) as there is a right to carry on business in “industrial
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alcohol”, any prohibition on manufacture of “industrial 
alcohol”, would be violative of Article 19(1)(g) of the 
Constitution. Therefore, in the absence of a power to 
completely prohibit, there will be no power to collect 
sums for conferring rights to manufacture or sell except 
the levy of taxes and fees.
9.1.9	
On behalf of the State of UP, it was submitted that in 
order to appreciate the controversy, it was necessary 
to realise that the real problem arises from the fact 
that the denaturants can be converted into renaturants 
through an illicit process. Therefore, they supported the 
levy. It was submitted that the vend fee on denatured 
alcohol or denatured spirit or what is known as “industrial 
alcohol” has been challenged on mainly two grounds, 
namely, (a) States lack legislative competence, and (b) 
after the enactment of the IDRA, the States’ power is 
completely lost.
9.1.10	 The contention of the State was that there is no dichotomy 
between ethyl alcohol to be used for beverages and to 
be used for “industrial purposes”. The levy, in any case, 
was on manufacture of ethyl alcohol and not on its use. 
The levy was stipulated jointly or severally both under 
Entries 8 and 51 - List II; Entry 33 - List III, and as per 
police powers, regulatory and other incidental charges 
were collected. That levy was a regulatory power under 
Articles 19(6) and 19(6)(ii) of the Constitution. 
9.1.11	 According to the
State, Parliament has no power to 
legislate on “industrial alcohol”, since “industrial alcohol” 
was also “alcoholic liquors for human consumption”. It 
was contended that Entry 84 - List I expressly excludes 
alcoholic liquors for human consumption and therefore, 
the residuary Entry 97 - List I will not operate as against 
its own legislative interest. The aforesaid submissions 
were made on the assumption that “industrial liquor” or 
“ethyl alcohol” is fit for human consumption. 
9.1.12	 This Court stated that the expression must be 
understood in its common and normal sense. “Industrial 
alcohol” as it is, is incapable of being consumed by a 
normal human being. The expression ‘consumption’
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must also be understood in the sense of direct physical 
intake by human beings in this context. That utilisation 
in some form or the other is consumption for the benefit 
of human beings if “industrial alcohol” is utilised for 
production of rubber tyres, etc. It was held that the 
utilisation of those tyres in the vehicles used by human 
beings cannot, in the context in which the expression 
has been used in the Constitution, be understood to 
mean that alcohol has been for human consumption.
9.1.13	 This Court observed that when the framers of the 
Constitution used the expression “alcoholic liquors 
for human consumption”, they meant and still 
the expression means, that “liquor which as it is 
consumable in the sense capable of being taken by 
human beings as such as a beverage or a drink” and 
Entry 84 - List I must be understood in that sense. It 
was contended that denatured spirit could also be by 
appropriate cultivation or application or admixture with 
water etc., transformed into ‘alcoholic liquors for human 
consumption’ and as such, transformation would not 
entail any process of manufacture as such. There is no 
organic or fundamental change in this transformation. 
However, this aspect was not examined, the reason 
being that the Constitutional provisions specially 
dealing with the delimitation of powers in a federal polity 
must be understood in a broad commonsense point 
of
view as understood by common people for whom 
the Constitution is made. Alcoholic or “intoxicating 
liquors” must be understood as these are, not what 
these are capable of or able to become. Consequently, 
in paragraph 86 it was concluded as follows:
“86. The position with regard to the control of 
alcohol industry has undergone material and 
significant change after the amendment of 1956 
to the IDR Act. After the amendment, the State 
is left with only the following powers to legislate 
in respect of alcohol:
(a)	
It may pass any legislation in the nature of 
prohibition of potable liquor referable to Entry 
6 of List II and regulating powers.
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(b)	
It may lay down regulations to ensure that 
non-potable alcohol is not diverted and 
misused as a substitute for potable alcohol.
(c)	
The State may charge excise duty on potable 
alcohol and sales tax under Entry 52 of List 
II. However, sales tax cannot be charged 
on industrial alcohol in the present case, 
because under the Ethyl Alcohol (Price 
Control) Orders, sales tax cannot be charged 
by the State on industrial alcohol.
(d)	
However, in case State is rendering any 
service, as distinct from its claim of so-called 
grant of privilege, it may charge fees based 
on quid pro quo. See in this connection, the 
observations of Indian Mica case [(1971) 
2 SCC 236 : 1971 Supp SCR 319 : AIR 
1971 SC 1182].”
9.1.14	 Oza, J. gave a concurring separate opinion wherein 
he considered the question relating to validity of the 
levies made by the States on alcohol which is utilised 
by the industries for manufacturing the products where 
alcohol is a raw material. Some of these industries 
themselves (i) manufacture alcohol as they have 
their own distilleries and from their distilleries through 
pipelines it goes to their industrial units where this is 
used as a raw material (ii) whereas some are industries 
which purchase alcohol or denatured spirit on being 
allotted by the Government. 
9.1.15	 On a comparison of the language of Entry 84 – List I 
and Entry 51 – List II, it was observed by Oza, J. that 
the powers of
taxation on alcoholic liquors have been 
based on the way in which they are used, as admittedly 
alcoholic liquors is a very wide term and may include 
variety of types of alcoholic liquors but the Constitution-
makers distributed them into two heads:
(a)	
for human consumption
(b)	
other than for human consumption
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9.1.16	 Alcoholic liquors which are for human consumption were 
put in Entry 51 - List II authorising the State Legislature 
to levy tax on them whereas alcoholic liquors other than 
for human consumption have been left to the Central 
Legislature under Entry 84 – List I for levy of duty of 
excise. This scheme of the Entries in two Lists clearly 
indicates the line of demarcation for purposes of taxation 
of alcoholic liquors. What has been excluded in Entry 
84 has specifically been put within the authority of the 
State for purposes of taxation.
9.1.17	 Speaking about Entry 8 – List II, it was observed that 
this Entry talks about “intoxicating liquors” and further 
it refers to production, manufacture, possession, 
transport, purchase and sale of “intoxicating liquors”. 
From the scheme of Entries in the three Lists, it is 
clear that taxing Entries have been specifically enacted 
conferring powers of taxation whereas other Entries 
pertain to the authority of the Legislature to enact 
laws for purposes of regulation. That the declaration is 
made by the Parliament and this industry, i.e., industry 
based on fermentation and alcohol has been declared 
to be an industry under the IDRA and, therefore, is 
directly under the control of the Centre, and in respect 
of regulation the authority of the State Legislature in 
Entry 8 - List II could only be subject to the IDRA or 
Rules made
thereunder by the Centre.
9.1.18	 It was observed that high concentration of ethyl alcohol 
which is a product of distillation after fermentation is 
extracted in various concentrations and can also be 
extracted in a very high concentration above 90 per 
cent which is generally termed as rectified spirit. It is 
used as raw material for various industries. It is often 
supplied after being mixed with methylated alcohol or 
being denatured by other processes only to safeguard 
against its use for conversion into alcoholic beverages 
for human consumption. Ethyl alcohol is diluted by water 
and its percentage is brought to 40 or 45 or below then 
it becomes fit for human consumption. 
9.1.19	 The contention of the States was that various duties 
for purposes of regulation were imposed to prevent
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the conversion of rectified spirit or methylated alcohol 
to be diverted from industrial to potable use. In other 
words, the contention was that these levies had been 
imposed in order to prevent the conversion of alcoholic 
liquors which are not fit for human consumption to those 
which are fit for human consumption. Therefore, the 
levies could be justified as regulatory fees.
9.1.20	 The said contention was repelled and it was concluded 
that Entry 8 – List II could not be invoked to justify the 
levy by the State in respect of alcoholic liquors which 
are not made for human consumption. Thus, the Court 
held that alcoholic liquors which are made for human 
consumption would not include alcoholic liquors not 
made for human consumption or “industrial alcohol”.
Synthetics and Chemicals (2J):
9.2	 In State of U.P. vs. Synthetics and Chemicals Ltd. (1991) 
4 SCC 139 (“Synthetics and Chemicals (2J)”), a two-Judge 
Bench of this Court (speaking through Sahai J. who also wrote 
the concurring judgment along with Thommen, J.) observed 
that the High Court relied upon the observations in paragraph 
86 of the judgment of the Constitution Bench in Synthetics 
and Chemicals (7J), namely, “sales tax cannot be charged on 
“industrial alcohol” and, therefore, held that due to operation of 
the Ethyl Alcohol (Price Control) Orders, sales tax cannot be 
charged by the State on “industrial alcohol” and struck down 
the levy. 
9.2.1	
In
Synthetics and Chemicals (2J), it was categorically 
argued by the learned Advocate General appearing for 
the State of Uttar Pradesh that the reference to “sales 
tax” in the judgment of this Court between the same 
parties (before seven-Judge Bench) was accidental 
and did not arise from the judgment. This was because 
the levy of sales tax was not in question at any stage 
of the arguments nor was the question considered as 
it was not in issue. In fact, the question which arose 
for consideration in the earlier litigation was in regard 
to the validity of “vend fee and other fees” charged by 
the States. This Court held that vend fee or transport
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fee and similar fees, unless supported by quid pro quo, 
interfered with the control exercised by the Central 
Government under IDRA and the various orders made 
thereunder with respect to prices, licences, permits, 
distribution, transport, disposal, acquisition, possession, 
use, consumption, etc., of articles related to a controlled 
industry, “industrial alcohol” being one of them. The 
casual reference to sales tax in the concluding portion 
of the judgment was accidental and per incuriam was 
the submission. 
9.2.2	
While considering the said plea, this Court observed that, 
the only question which had to be determined between 
the same parties in Synthetics and Chemicals (7J) 
was, “whether “intoxicating liquors” in Entry 8 - List II 
was confined to potable liquor or includes all liquors.” 
Answering this question, this Court categorically held 
that “intoxicating liquors” within the meaning of Entry 
8 - List II was confined to “potable liquor” and did not 
include “industrial liquor”. 
9.2.3	
Therefore, the only question that was considered by 
the seven-Judge Bench of this Court was whether the 
State could levy “excise duty” or “vend fee” or “transport 
fee” and the like by recourse to Entry 51 or 8 - List 
II in respect of “industrial alcohol”. This Court by a 
detailed discussion in the seven-Judge Bench decision 
had observed that the impugned statutory provisions 
purportedly
levying fees or enforcing restrictions in 
respect of “industrial alcohol” were impermissible in view 
of the control assumed by the Central Government in 
exercise of its power under Section 18G of the IDRA 
in respect of a declared industry falling under Entry 
52 - List I, read with Entry 33 - List III.
9.2.4	
In this decision, it was observed that the aforesaid 
decision of this Court was not an authority for the 
proposition canvassed by the assessee in challenging 
the provision. This Court could not have intended to 
say that the Price Control Orders made by the Central 
Government under the IDRA imposed a fetter on the 
legislative power of the State under Entry 54 - List II
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to levy taxes on the sale or purchase of goods. The 
reference to sales tax in paragraph 86 of that judgment 
was merely accidental or per incuriam and therefore, 
had no effect.
9.2.5	
In the earlier litigation of Synthetics and Chemicals 
(7J), the question was whether the State Legislature 
could levy vend fee or excise duty on “industrial alcohol”. 
The seven-Judge Bench answered in the negative as 
“industrial alcohol” being unfit for human consumption, 
the State Legislature was incompetent to levy any duty 
of excise either under Entry 51 or Entry 8 - List II of 
the Seventh Schedule. 
The judgment of this Court in Synthetics and Chemicals 
(7J) has been considered in later decisions and they could be 
adverted to at this stage itself.
Bileshwar Khand Udyog:
9.3	 In Shri Bileshwar Khand Udyog Khedut Sahakari Mandali 
Ltd. vs. State of Gujarat (1992) 2 SCC 42 (“Bileshwar Khand 
Udyog”), it was observed that Synthetics and Chemicals (7J) 
finally brought down the curtain in respect of “industrial alcohol” 
by taking it out of the purview of both Entry 8 and Entry 51 - 
List II and the competency of the State to frame any legislation 
to levy any tax or duty was excluded. But by that a provision 
enacted by the State for supervision which is squarely covered 
under Entry 33 – List III which deals with production, supply 
and distribution which includes regulation cannot be assailed. 
It was further observed as under:
“4. …The Bench in Synthetic & Chemical’s case 
made it clear that even though the power to levy tax 
or duty on industrial alcohol vested in the Central 
Government the State was still left with power to 
lay down regulations to ensure that non-potable 
alcohol, that is, industrial alcohol, was not diverted 
and misused as substitute for potable alcohol. … 
In paragraph 88 of the decision it was observed 
that in respect of industrial alcohol the States, were 
not authorised to impose the impost as they have 
purported to do in that case but that did not effect
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any imposition of fee where there were circumstance, 
to establish that there was quid pro quo for the fee 
nor it will affect any regulatory measure.”
9.4	 It was further observed that the principle of occupied field 
precluded States from trenching on any power which was 
already covered by a Central legislation. But in absence of any 
provision in IDRA touching upon regulation or ensuring that 
“industrial alcohol” was not diverted the State was competent 
to legislate on it under Entry 33 – List III.
Gujchem Distillers:
9.5	 In Gujchem Distillers India Ltd. vs. State of Gujarat (1992) 2 
SCC 399 (“Gujchem Distillers”), the judgment in Synthetics 
and Chemicals (7J) was followed and the fee of 7 paise per litre 
was held to be a regulatory measure, namely, for denaturation 
of spirit and supervision of the said process.
Modi Distillery:
9.6	 In State of UP vs. Modi Distillery (1995) 5 SCC 753 (“Modi 
Distillery”), the facts were that the Allahabad High Court had 
allowed the writ petitions filed by the respondents therein who 
are manufacturers of Indian-made foreign liquor and quashed the 
orders impugned demanding excise duty from them. Referring 
to the provisions of the UP Excise Act, 1910 and the definitions 
therein on the different types of liquor, this Court speaking 
through Bharucha, J. (as he then was) observed in paragraphs 
9, 10 and 11 as under:
“9. It is convenient now to note
the judgment of 
a Bench of seven learned Judges of this Court in 
Synthetics and Chemicals Ltd. v. State of U.P. 
[(1990) 1 SCC 109] This Court stated that it had 
no doubt that the framers of the Constitution, when 
they used the expression “alcoholic liquors for 
human consumption”, meant, and the expression 
still means, that liquor which, as it is, is consumable 
in the sense that it is capable of being taken 
by human beings as such as a beverage or 
drink. Alcoholic or intoxicating liquors had to be 
understood as they were, not what they were
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capable of or able to become. Entry 51 of List II was 
the counterpart of Entry 84 of List I. It authorised 
the State to impose duties of excise on alcoholic 
liquors for human consumption manufactured or 
produced in the State. It was clear that all duties 
of excise save and except the items specifically 
excepted in Entry 84 of List I were generally within 
the taxing power of the Central Legislature. The 
State Legislature had limited power to impose 
excise duties. That power was circumscribed 
under Entry 51 of List II. It had to be borne in 
mind that, by common standards, ethyl alcohol 
(which had 95 per cent strength) was an industrial 
alcohol and was not fit for human consumption. 
The ISI specifications had divided ethyl alcohol 
(as known in the trade) into several kinds of 
alcohol. Beverages and industrial alcohols were 
clearly and differently treated. Rectified spirit for 
industrial purposes was defined as spirit purified by 
distillation having a strength not less than 95 per 
cent by volume of ethyl alcohol. Dictionaries and 
technical books showed that rectified spirit (95 per 
cent) was an industrial alcohol and not potable as 
such. It appeared, therefore, that industrial alcohol, 
which was ethyl alcohol (95 per cent), by itself 
was not only non-potable but was highly toxic. 
The range of potable alcohol varied from country 
spirit to whisky and the ethyl alcohol content 
thereof varied between 19
to about 43 per cent, 
according to the ISI specifications. In other words, 
ethyl alcohol (95 per cent) was not an alcoholic 
liquor for human consumption but could be used 
as a raw material or input, after processing and 
substantial dilution, in the production of whisky, 
gin, country liquor, etc. In the light of experience 
and development, it was necessary to state that 
“intoxicating liquor” meant only that liquor which 
was consumable by human beings as it was.
10. What the State seeks to levy excise duty upon 
in the Group ‘B’ cases is the wastage of liquor
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after distillation, but before dilution; and, in the 
Group ‘D’ cases, the pipeline loss of liquor during 
the process of manufacture, before dilution. It is 
clear, therefore, that what the State seeks to levy 
excise duty upon is not alcoholic liquor for human 
consumption but the raw material or input still in 
process of being rendered fit for consumption by 
human beings. The State is not empowered to 
levy excise duty on the raw material or input that 
is in the process of being made into alcoholic 
liquor for human consumption.
11. That the measure of excise duty upon alcoholic 
liquor for human consumption is the alcoholic 
strength thereof does not make any difference in 
this behalf. It is only the alcoholic strength of the 
final product which is relevant.”
In paragraph 14, it was further observed as under:
14. … The demand for excise duty is not a regulatory 
measure. The power of the State to levy excise duty 
cannot be expanded with reference to its power 
to regulate manufacture. We are not required to 
and do not express any opinion in regard to the 
power of the State to regulate the manufacture of 
alcoholic liquors for human consumption.
9.6.1	
Consequently, the appeals were allowed with regard to 
levy of excise duty upon wastage of Indian-made foreign 
liquor exported outside the State of Uttar Pradesh. Rest 
of the appeals were dismissed.
Shree Krishna Gyanoday Sugar Ltd.:
9.7	 In Shree Krishna Gyanoday Sugar Ltd. vs. State of Bihar 
(1996) 10 SCC 11, (“Shree Krishna Gyanoday Sugar Ltd.”), 
the question was whether Rule 9 of the Bihar & Orissa Excise 
Rules, 1990, framed under the Bihar and Orissa Excise Act, 
1915, was ultra vires the said Act. In the alternative, the question 
was whether the said Rule covered the appellants’ distilleries 
which were manufacturing not only denatured spirit but also 
potable liquor.
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9.7.1	
It was contended that the distilleries of the appellants 
therein were having composite licences to manufacture 
not only denatured spirit and other spirits for industrial 
use but were also manufacturing potable spirit or country 
liquor and that for these distilleries the State had no 
power or jurisdiction to invoke Rule 9 of the Rules. The 
High Court repelled the contention of the appellants 
therein. It was held that Rule 9 was not ultra vires 
the provisions of the aforesaid Act. It was cautioned 
that if a distillery which manufactures denatured spirit 
attempts to alter any denatured spirit with the intention 
that such spirit may be used for human consumption, 
whether as a beverage or internally as a medicine, it 
would be committing an offence which is punishable 
under Section 49 of the aforesaid Act. Therefore, it 
was permissible for the Excise Authorities under the 
Act to supervise the working of such distilleries so that 
they may not commit such offences and to oversee 
their manufacturing activities. This was because the 
denatured spirit, if illegally altered and made fit for 
human consumption, would have a devastating effect 
on the health of consumers and may even result in fatal 
consequences or loss of vision and other pernicious 
physical handicaps. Therefore, supervision was 
provided at the cost of distilleries and the licencees of 
the distilleries will have to bear the cost of
maintenance 
of such supervision. The same would squarely fall 
within the regulatory powers for framing Rules with a 
view to see that the provisions of the aforesaid Act are 
not stifled or tinkered with by such licencee distilleries. 
9.7.2	
It was observed that the expression “commercial” 
would fall in the same category as denatured spirit, 
meaning thereby those spirits which are not fit for human 
consumption. They would not cover potable spirits even 
assuming that they are commercial spirits. That, the 
expression “other commercial spirits” as contemplated 
by the Rule are those spirits which are unfit for human 
consumption and they do not cover potable liquor which 
cannot fall in line with denatured spirit. Thus, it was 
observed that the expression “or any other commercial
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spirit” must mean those spirits which fall in the category 
of spirits unfit for human consumption like denatured 
spirits which are used for “industrial purposes” or any 
other purpose other than for human consumption. It 
was held that Rule 9 of the aforesaid Rule would apply 
to only those distilleries which were licenced solely 
and wholly for the purpose of manufacturing either 
denatured spirit or any other commercial spirit unfit 
for human consumption but would not include those 
distilleries which are licenced for manufacturing along 
with denatured spirit or other industrial spirits unfit for 
human consumption, also potable liquor which is fit 
for human consumption. Hence, it was observed that 
the appellant therein, who had composite and multiple 
licences to manufacture potable liquor, was outside 
the sweep of second part of Rule 9 of the aforesaid 
Rules. That to such distilleries the first part of the Rule 
may apply wherein the State will have to bear the cost 
of providing supervisors and establishments for that 
purpose but the cost of such establishment cannot be 
foisted on such distilleries. 
Bihar Distillery:
9.8	 In Bihar Distillery, narrating the history with regard to the 
legislations on rectified spirit and in the context of the IDRA, 
and the incorporation of Item 26 in the First Schedule of the 
said Act which deals with “Fermentation Industries”: (i) Alcohol,
(ii) other products of “Fermentation Industries”, this Court, 
speaking through Jeevan Reddy, J., noted that the decision in 
Synthetics and Chemicals (7J) called for demarcation of the 
spheres of the Union and the States, particularly in the matter 
of alcoholic liquors.
9.8.1	
This Court observed that insofar as “intoxicating 
liquors”/potable liquors are concerned, it is the 
exclusive province of the States. But for manufacturing 
“intoxicating liquors”, or for manufacturing “industrial 
alcohol”, as the case may be, one must have to 
manufacture or purchase alcohol. It is only thereafter 
that the alcohol is either converted into “industrial 
alcohol” (by denaturing it) or into “potable liquors” by
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reducing the strength of alcohol (which is normally of 
95% purity or above). Alcohol can however be used 
for industrial purposes even without denaturing it. To 
say that the States step in only when alcohol becomes 
potable and not before it, creates a doubt and enough 
room for abuse apart from difficulties of supervision 
and regulation, such as, in the matter of licensing such 
industries — whether the Centre alone or the States 
or both should do it. Therefore, notices were issued 
to all the State Governments as well as Union of India 
and the interplay between the Entries of Lists I, II and 
III which are under consideration here and which are 
extracted above, were discussed. 
9.8.2	
It was opined that Entry 51 - List II and Entry 84 - List 
I complement each other inasmuch as both provide for 
duties of excise. However, Entry 51 - List II empowers 
the State to levy duties of excise on alcoholic liquors 
for human consumption, which is expressly excluded 
from Entry 84 - List I. Therefore, alcoholic liquors may 
be used for several purposes, one of which is meant 
for human consumption. It was further observed that 
Entry 8 – List II does not use the expression “alcoholic 
liquors for human consumption” but employs the 
expression “intoxicating liquors” and significantly, the 
words “for human consumption” is conspicuous by its 
absence. According to Jeevan Reddy, J., this is for 
the obvious reason that the very
word “intoxicating” 
signifies “for human consumption”. Thus, Entry 8 - 
List II emphasizes all aspects of “intoxicating liquors” 
within the State’s sphere, i.e., to say production, 
manufacture, possession, transport, purchase and 
sale of “intoxicating liquors”. In this context, Entry 
6 - List II was relied upon to observe that the said 
Entry, which, inter alia, deals with “public health”, has 
a close nexus to prohibiting or regulating consumption 
of “intoxicating liquors”. 
9.8.3	
It was next opined that clause (a) in Entry 33 – List III 
is also significant. That though the control of certain 
industries may have been taken over by the Union by 
virtue of a declaration made by Parliament in terms of
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Entry 52 - List I, yet the “trade and commerce in, and 
the production, supply and distribution of the products 
of such industry” is placed in the Concurrent List. 
According to Jeevan Reddy, J., this would mean that 
it could be regulated by both by the Union as well as 
by the States, subject, of course, to Article 254 of the 
Constitution. 
9.8.4	
It was observed that insofar as the field is not occupied 
by the laws made by the Union, the States are free 
to legislate. It was further observed that Entry 24 - 
List II is in the nature of a general Entry. It deals with 
industries but is made expressly subject to Entries 7 
and 52 - List I. That by making a declaration in terms 
of Entry 52 - List I in Section 2 of the IDRA, the Union 
has taken control of the several industries mentioned 
in the Schedule to the Act. As a result, the States have 
been denuded of their power to legislate with respect to 
those industries on that account. It was further observed 
that a three-Judge Bench in McDowell had held that 
Entry 52 overrides only Entry 24 - List II and no other 
Entry in List II. That Entry 8 – List II is not overborne 
in any manner by Entry 52 – List I, which means that 
so far as “intoxicating liquors” are concerned, they are 
within the exclusive sphere of the States. 
9.8.5	
Referring to the judgment of Sabyasachi Mukharji, 
J. ( as he then was) in Synthetics and Chemicals 
(7J),
particularly paragraph 85, it was observed that 
the expression “both potable and” is an accidental 
error as the judgment in its earlier paragraphs had 
stated that so far as potable alcohol is concerned, they 
are governed by Entry 8 – List II and are within the 
exclusive domain of the States. The said judgment did 
not intend to convey that the industries engaged in the 
manufacture or production of potable liquors have been 
controlled by the Union by virtue of Item 26 of the First 
Schedule to the IDRA. So far as potable liquors are 
concerned, their manufacture, production, possession, 
transport, purchase and sale are within the exclusive 
domain of the States and the Union of India has no 
say in the matter.
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9.8.6	
In this case, the Court further noted the contentions 
urged on behalf of the State to the effect that rectified 
spirit is “intoxicating liquors” within the meaning of Entry 
8 - List II and hence outside the purview of Entry 24 - 
List II, which would in turn mean that the Union cannot 
take over its control by making a declaration in terms 
of Entry 52 - List I. Further Item 26 of the Schedule to 
the IDRA is ineffective and invalid insofar as it seeks 
to regulate the production and manufacture, etc. of 
rectified spirit. The State submitted that the decision 
to the contrary in Synthetics and Chemicals (7J) is 
not correct and requires reconsideration. 
9.8.7	
The State next contended that Entry 51 - List II and 
Entry 84 - List I speak of “alcoholic liquors for human 
consumption” and not “alcoholic liquors “fit” for human 
consumption”. That the judgment in Synthetics and 
Chemicals (7J), read the word “fit” in the Entries and 
thus curtailed the legislative power of the States. It 
was further contended that rectified spirit is really and 
essentially “intoxicating liquors” and by the process 
of “reduction of liquor” by adding water and spices 
(optional) does not cease it to be “intoxicating liquors”. 
In the State of U.P., bulk of the rectified spirit is used 
for the purpose of obtaining country liquor or IMFLs 
and a small quantity is used for industrial purposes. 
Therefore, the expression
“intoxicating liquors” must 
include rectified spirit. It was further submitted that 
during the course of manufacture of rectified spirit, 
potable liquor comes into existence and the main raw 
material for rectified spirit is molasses. 
9.8.8	
However, on behalf of the distilleries, it was contended 
that there is no good reason for doubting the correctness 
of the decision in Synthetics and Chemicals (7J) or 
for referring the issue to a larger Constitution Bench of 
nine or more Judges. This was because if the States’ 
submission were to be accepted, then Item 26 in the 
Schedule to the IDRA would become superfluous and 
meaningless. Therefore, this Court in Synthetics and 
Chemicals (7J) speaking through Sabyasachi Mukharji, 
J., drew a line between the respective spheres of the
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Union and the States. It was also contended that despite 
the insertion of Item 26 in the IDRA, the State was not 
totally denuded of any power to make a law with respect 
to rectified spirit or for that matter “industrial alcohol”. 
In this regard, Entry 33 - List III and Section 18G read 
with other provisions of the IDRA were considered and 
by placing reliance on Tika Ramji, it was observed that 
“the possibility of an order under Section 18G being 
issued by the Central Government would not be enough. 
The existence of such an order would be the essential 
prerequisite before any repugnancy could ever arise”. 
9.8.9	
On a conspectus consideration, this Court held that 
the decision in Synthetics and Chemicals (7J), did 
not deal with the aspects which arose for consideration 
in this case and that it was mainly concerned with 
“industrial alcohol”, i.e., denatured rectified spirit. 
While holding that rectified spirit is “industrial alcohol”, 
it recognised at the same time that it can be utilised 
for obtaining country liquor (by diluting it) or for 
manufacturing Indian Made Foreign Liquor (“IMFL”). 
When the decision says that rectified spirit with 95% 
alcohol content v/v is “toxic”, what it meant was that if 
taken as it is, it is harmful and injurious to health. By 
saying “toxic”, it did not mean that it cannot be utilised 
for potable purposes either by diluting it or by blending
it with other items. The Court in Bihar Distillery noted 
that the undeniable fact is, that rectified spirit is both 
“industrial alcohol” as well as a liquor which can be 
converted into country liquor just by adding water. 
It is also the basic substance from which IMFL are 
made. Denatured rectified spirit, of course, is wholly 
and exclusively “industrial alcohol”. It was observed 
that this basic factual premise which was not and 
could not be denied by any one raised certain aspects 
for consideration therein which were not raised or 
considered in Synthetics and Chemicals (7J).
9.8.10	 It was noted that Synthetics and Chemicals (7J) did 
not deal with rectified spirit which could be converted 
into potable alcohol and was merely concerned with 
“industrial alcohol” which could not be so converted,
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i.e., denatured rectified spirit. A distinction was drawn 
between industries engaged in manufacturing rectified 
spirit meant exclusively for supply to industries 
(industries other than those engaged in obtaining 
or manufacturing of potable liquor), whether after 
denaturing it or without denaturing it, and industries 
engaged in manufacturing rectified spirit exclusively for 
the purpose of obtaining or manufacturing potable liquor. 
In the first case, the industry was to be under “the total 
and exclusive control of the Union and be governed 
by the IDRA and the rules and regulations made 
thereunder”. As far as the second case is concerned, 
it was noted that “they shall be under the total and 
exclusive control of the States in all respects and at 
all stages including the establishment of the distillery”.
9.8.11	 It was thus noted that Synthetics and Chemicals 
(7J) was mainly concerned with “industrial alcohol”, 
i.e., denatured rectified spirit. This Court raised 
several questions with regard to the supervision of the 
manufacture of country liquor or IMFL, which is not 
the concern of the Union but the bulk of the rectified 
spirit produced in many States is meant for and is 
utilised for obtaining or manufacturing potable liquors. 
The question was then at what stage, would the State 
intervene in the process of manufacture of potable 
liquor - whether until the stage of potable liquor is 
reached, or whether
there has to be supervision even 
at a stage prior thereto by the States. This Court took 
into consideration the fact that under Entry 33(a) - List 
III, the States do have the power to legislate on this 
field, provided the field is not occupied by any law 
made by the Union. Further, in the interests of law, 
public health, public revenue and also in the interests of 
proper delineation of the spheres of the Union and the 
States, it was noted that there has to be a clear line of 
demarcation drawn at the stage of clearance or removal 
of rectified spirit. In the matter of the levies, when the 
removal or clearance is for industrial purpose, the levy 
of duties of excise and all other control is with the 
Union but when the removal/clearance is for obtaining
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or manufacturing potable liquors, the levy of duties and 
all other control is with the States. It was observed that 
there is a need for joint control and supervision of the 
process of manufacture of rectified spirit and its use 
and disposal. Hence, certain observations were made 
by way of elaboration by taking into consideration the 
nature of the product and its use, namely supply for 
industries or “industrial alcohol” or use for potable 
purposes and the circumstances of misuse of rectified 
spirit (for industrial purposes) by diverting it for potable 
purposes, which are as under: 
(1)	 (a) So far as industries engaged in manufacturing 
rectified spirit meant exclusively for supply to 
industries (industries other than those engaged 
in obtaining or manufacture of potable liquors), 
whether after denaturing it or without denaturing 
it, are concerned, they shall be under the total and 
exclusive control of the Union and be governed 
by the IDR Act and the rules and regulations 
made thereunder. In other words, where the 
entire rectified spirit is supplied for such industrial 
purposes, or to the extent it is so supplied, as the 
case may be, the levy of excise duties and all 
other control including establishment of distillery 
shall be that of the Union. 
(b) The power of the States in the case of such 
an industry is only to see and ensure that rectified 
spirit, whether in the
course of its manufacture or 
after its manufacture, is not diverted or misused 
for potable purposes. They can make necessary 
regulations requiring the industry to submit 
periodical statements of raw material and the 
finished product (rectified spirit) and are entitled 
to verify their correctness. For this purpose, the 
States will also be entitled to post their staff in 
the distilleries and levy  reasonable regulatory 
fees to defray the cost of such staff.
(2)	 So far as industries engaged in the manufacture 
of rectified spirit exclusively for the purpose of
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obtaining or manufacturing potable liquors — or 
supplying the same to the State Government or its 
nominees for the said purpose — are concerned, 
they shall be under the total and exclusive control 
of the States in all respects and at all stages 
including the establishment of the distillery. In other 
words, where the entire rectified spirit produced is 
supplied for potable purposes — or to the extent 
it is so supplied, as the case may be — the levy 
of excise duties and all other control shall be that 
of the States. 
(3)	 So far as industries engaged in the manufacture 
of rectified spirit, both for the purpose of (a) 
supplying it to industries (other than industries 
engaged in obtaining or manufacturing potable 
liquors/ intoxicating liquors) and (b) for obtaining 
or manufacturing or supplying it to Governments/ 
persons for obtaining or manufacturing potable 
liquors are concerned, the following is the position: 
(a) The power to permit the establishment and 
regulation of the functioning of the distillery is 
concerned, it shall be the exclusive domain of the 
Union. But so far as the levy of excise duties is 
concerned, the duties on rectified spirit removed/ 
cleared for supply to industries (other than 
industries engaged in obtaining or manufacturing 
potable liquors), shall be levied by the Union; 
b) the duties of excise on rectified spirit cleared/
removed for the purposes of obtaining or
manufacturing potable liquors shall be levied by 
the State Government concerned. The disposal, 
i.e., clearance and removal of rectified spirit in the 
case of such an industry shall be under the joint 
control of the Union and the State concerned to 
ensure evasion of excise duties on rectified spirit 
removed/cleared from the distillery. 
c) It is obvious that in respect of these industries 
too, the power of the States to take necessary 
steps to ensure against the misuse or diversion of
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rectified spirit meant for industrial purposes (supply 
to industries other than those engaged in obtaining 
or manufacturing potable liquors) to potable 
purposes, both during and after the manufacture 
of rectified spirit, continues unaffected. 
d) Any rectified spirit supplied, diverted or 
utilised for potable purposes, i.e., for obtaining or 
manufacturing potable liquors shall be supplied to 
and/or utilised, as the case may be, in accordance 
with the State excise enactment concerned and 
the rules and regulations made thereunder. If the 
State is so advised, it is equally competent to 
prohibit the use, diversion or supply of rectified 
spirit for potable purposes.
(4)	 It is advisable and necessary that the Union 
Government makes necessary rules/regulations 
under the IDR Act directing that no rectified 
spirit shall be supplied to industries except after 
denaturing it save those few industries (other than 
those industries which are engaged in obtaining or 
manufacturing potable liquors) where denatured 
spirit cannot be used for manufacturing purposes.
(5)	 So far as rectified spirit meant for being supplied 
to or utilised for potable purposes is concerned, it 
shall be under the exclusive control of the States 
from the moment it is cleared/removed for that 
purpose from the distillery — apart from other 
powers referred to above.
(6)	 The power to permit the establishment of any
industry engaged in the manufacture of potable 
liquors including IMFLs, beer, country liquor and 
other intoxicating drinks is exclusively vested in 
the States. The power to prohibit and/or regulate 
the manufacture, production, sale, transport or 
consumption of such intoxicating liquors is equally 
that of the States.
9.8.12	 The aforesaid decision in Bihar Distillery was 
doubted in Deccan Sugar and Abkari Co. Ltd. vs.
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Commissioner of Excise (1998) 3 SCC 272 (“Deccan 
Sugar and Abkari Co. Ltd.”), and the appeals were 
referred to a larger Bench which followed Synthetics 
and Chemicals (7J) and Modi Distillery without 
expressly overruling the decision in Bihar Distillery. 
Opining that Synthetics and Chemicals (7J) continued 
to hold the field, it was noted that the State’s power 
was limited to regulation of non-potable alcohol for 
the limited purpose of preventing its use as alcoholic 
liquors. Ultimately, the appeal filed by the state was 
dismissed as the levies could not be treated as a 
regulatory measure.
McDowell:
9.9	 In McDowell, the State of Andhra Pradesh had prohibited 
the manufacture of liquor by an amendment in the Andhra 
Pradesh Prohibition Act, 1995. The appellants therein who were 
manufactures of “intoxicating liquors” challenged the constitutional 
validity of the Act by which the Prohibition Act was amended to 
include Section 7-A by which the manufacture of liquor came to be 
prohibited. This was owing to the lack of legislative competence 
in view of Item 26 in the First Schedule of the IDRA, which 
according to the writ petitioners therein, vested the control of 
alcohol industries exclusively in the Union and denuded the State 
Legislature of its power to licence or regulate the manufacture 
of liquor. This argument was further based on the fact that 
“Fermentation Industries” were included in the Schedule of
the 
IDRA and hence the State was denuded of its power to licence 
and regulate manufacture of liquor which industry and its product 
were within the exclusive province of the Union and hence the 
State lost its competence to grant, refuse or renew the licences 
The position of law was reiterated as under: -
“It follows from the above discussion that the 
power to make a law with respect to manufacture 
and production and its prohibition (among other 
matters mentioned in Entry 8 in List-II) belongs 
exclusively to the State Legislatures. Item 26 in 
the First Schedule to the IDR Act must be read 
subject to Entry 8 and for that matter, Entry 6 in 
List II. So read, the said item does not and cannot,
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deal with manufacture, production of intoxicating 
liquors. All the petitioners before us are engaged in 
the manufacture of intoxicating liquors. The State 
Legislature is, therefore, perfectly competent to make 
a law prohibiting their manufacture and production 
in addition to their sale, consumption, possession 
and transport with reference to Entries 8 and 6 in 
List-II of the Seventh Schedule to the Constitution 
read with Article 47 thereof.”
The Civil Appeals were dismissed by this Court.
Vam Organic I:
9.10	In Vam Organic I, the Notification dated 18.05.1990 issued by 
the Excise Commissioner, Uttar Pradesh, was assailed before 
the High Court and the writ petition was dismissed. By the 
said Notification, certain amendments were made to the Rules 
published vide Notification dated 26.09.1910. Section 41 of the 
UP Excise Act, 1910 gave power to the Excise Commissioner 
to make Rules, inter alia, for regulating the manufacture, 
supply, storage or sale of any intoxicant. The earlier Rule 2 was 
substituted by a new Rule 2 titled “Denaturation of Spirit”. The 
amended Rule provided for a new licence for denaturation of 
spirit in a prescribed form to be issued by the Collector to all 
distilleries situated within his district holding licence PD-1 or PD-2 
and persons holding licences FL-16, FL-39, FL-40 and FL-41 to 
denature the spirit. A licence fee for denaturation of spirit at the
rate of 7 paise per litre was levied in advance. The appellants 
in this case who were manufacturers of vinyl acetate monomer 
(a basic organic chemical for which “industrial alcohol” was the 
main feed stock being produced in the distillery) contended 
that the entire “industrial alcohol” produced was denatured as 
per the method approved by the State Excise Authorities and 
was being used in their factory for manufacturing vinyl acetate 
monomer. The appellants held licences in the form of FL-39 
to enable them to use the “industrial alcohol” as the main raw 
material for their product. The notification was challenged on two 
grounds: firstly, that the State of Uttar Pradesh has no power 
to legislate in respect of “industrial alcohol” or to levy taxes in 
respect thereof. Secondly, that the levy being not based on 
quid pro quo was otherwise bad.
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9.10.1	 In this case, before considering the legal contentions, 
this Court highlighted the difference between “industrial 
alcohol”, denatured spirit and potable liquor. Ethyl 
alcohol was noted to be rectified spirit of 95% v/v in 
strength. Rectified spirit was highly toxic and unfit for 
human consumption. However, rectified spirit diluted 
with water was noted to be country liquor. Rectified spirit, 
as it was, can be used for manufacture of various other 
products like chemicals, etc. Rectified spirit, produced 
for industrial use was required by a Notification issued 
under the Act to be denatured in order to prevent the 
spirit from being directed to human consumption. 
Rectified spirit was denatured by adding denaturants 
which made the spirit unpalatable and nauseating. 
As such rectified spirit could be converted to potable 
liquor but once denatured it could be used only as 
“industrial alcohol”.
9.10.2	 It was observed that in Synthetics and Chemicals 
(7J) the question of legislative competence of the 
State to impose tax or levy on “industrial alcohol” 
was ruled in the negative, so far as ethyl alcohol/
rectified spirit is concerned. Further, even if the 
State had the regulatory power to prevent misuse of 
“industrial alcohol” for potable purposes, such power 
did not include power to levy any impost. It was further 
observed that denaturation is a statutory duty imposed 
by a notification under the U.P.
Excise Act and as no 
service by the State was being provided for the same, 
no fee could be charged and even if the State had to 
incur any expenses for enforcement of the requirement 
of denaturation, there is no quid pro quo between the 
expenses incurred and the fees charged. This Court 
noted that the term “industrial alcohol” is not used in 
any of the Lists and whether alcoholic liquors other 
than “alcoholic liquors for human consumption” or 
“intoxicating liquors” was a State subject or a Union 
subject should be the real controversy. It was with a 
view to describing that particular kind of liquor the 
term “industrial alcohol” is used. It was observed that 
after an analysis of all the provisions of law giving the
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Union Parliament and the State Legislature jurisdiction 
to legislate on alcohol, this Court in Synthetics and 
Chemicals (7J) held that the impugned notifications 
therein, imposing certain fees as vend fee or transport 
fee, etc. were within the legislative competence of the 
State. That this Court was fully aware of the fact that 
rectified spirit was the ingredient for “intoxicating liquors” 
or alcoholic liquors for human consumption although 
rectified spirit/ethyl alcohol as well as denatured spirit 
are referred to as “industrial alcohol” in that judgment. 
This Court did not hold that the State will have no 
power whatsoever in relation to “industrial alcohol”. In 
fact, in the judgment in Synthetics and Chemicals 
(7J), the Court has enumerated the various areas 
relating to “industrial alcohol” in which the State could 
still legislate or make rules. In that regard paragraph 
86 of the judgment in Synthetics and Chemicals (7J) 
was quoted. Of course, the same has been explained 
in Synthetics and Chemicals (2J), discussed above. 
This Court observed in this case that denaturation 
of spirit meant for industrial use is meant to prevent 
misuse of non-potable alcohol for human consumption 
and as such was specifically mentioned by the Court 
to be within the legislative competence of the State. 
This Court observed in para 14 as under:
“14. It is to be noticed that the States under