{"id":43114,"date":"2024-10-24T07:00:41","date_gmt":"2024-10-24T01:30:41","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=43114"},"modified":"2025-05-05T23:16:33","modified_gmt":"2025-05-05T17:46:33","slug":"sc-expands-states-power-to-tax-industrial-alcohol","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/sc-expands-states-power-to-tax-industrial-alcohol\/","title":{"rendered":"SC Expands States&#8217; Power to Tax Industrial Alcohol"},"content":{"rendered":"<h2><strong>What\u2019s in today\u2019s article?<\/strong><\/h2>\n<ul>\n<li>Why in News?<\/li>\n<li>Background of the Dispute of Taxing Industrial Alcohol<\/li>\n<li>The SC\u2019s Verdict on Taxing Industrial Alcohol<\/li>\n<li>Implications of SC\u2019s Verdict on Taxing Industrial Alcohol<\/li>\n<\/ul>\n<h2><strong>Why in News?<\/strong><\/h2>\n<ul>\n<li>A nine-judge Bench of the Supreme Court of India (SC), in an 8:1 decision, ruled that states have the authority to impose taxes not only on alcoholic beverages but also on &#8216;industrial&#8217; alcohol.<\/li>\n<li>This decision expands states&#8217; revenue-generating capabilities, with significant implications for both taxation and federalism.<\/li>\n<\/ul>\n<h2><strong>Background of the Dispute of Taxing Industrial Alcohol:<\/strong><\/h2>\n<ul>\n<li><strong>Background:<\/strong><\/li>\n<li><strong>Why is the taxation of industrial alcohol controversial?<\/strong>\n<ul>\n<li><strong>Overlapping constitutional entries:<\/strong>\n<ul>\n<li>The dispute involved<strong> two entries in the Seventh Schedule<\/strong> of the Constitution.<\/li>\n<li><strong>Entry 8 of List II(State List)<\/strong> gives states authority over intoxicating liquors, while <strong>Entry 52 of List I (Union List)<\/strong> grant the Centre the power to regulate industries.<\/li>\n<li>Additionally, <strong>Entry 33 of List III (Concurrent List)<\/strong> grants the Centre authority over any industry that Parliament has legally determined to be in the public interest.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Centre claims its jurisdiction:<\/strong>\n<ul>\n<li>According to the central government, industrial alcohol falls under its jurisdiction due to its inclusion in <strong>the Industries (Development and Regulation) Act, 1951.<\/strong><\/li>\n<li>The Act was passed by Parliament under the above two heads of the Union and Concurrent Lists.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2><strong>The SC\u2019s Verdict on Taxing Industrial Alcohol:<\/strong><\/h2>\n<ul>\n<li><strong>The main question before the court:<\/strong>\n<ul>\n<li>The court&#8217;s primary concern was whether the term &#8220;intoxicating liquor&#8221; could also encompass &#8220;industrial alcohol.&#8221;<\/li>\n<li>States argued that they should regulate industrial alcohol, given its potential misuse in creating illegal consumable alcohol.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Majority opinion:<\/strong>\n<ul>\n<li>The majority, led by Chief Justice of India (CJI) D Y Chandrachud, along with eight other justices, <strong>ruled in favour of the states<\/strong>.<\/li>\n<li>They reasoned that the term \u201cintoxicating liquor\u201d <strong>under Entry 8 of List II (State List) <\/strong>should be interpreted broadly, covering everything from the production of raw materials to consumption.<\/li>\n<li>The court affirmed that <strong>states have the power to tax both alcoholic beverages and industrial alcohol<\/strong>, which can produce intoxication or pose health risks.<\/li>\n<li>The court disagreed with the Centre\u2019s argument that industrial alcohol falls under its jurisdiction due to its inclusion in the 1951 Act.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Dissenting opinion:<\/strong>\n<ul>\n<li>Justice B V Nagarathna dissented, arguing that the Centre should retain control over industrial alcohol.<\/li>\n<li>She maintained that <strong>industrial alcohol, by its nature, should not fall under the definition of intoxicating liquor<\/strong>, despite its potential misuse.<\/li>\n<li>In her view, the Centre&#8217;s control over industries, as outlined in the 1951 Act, should prevent states from regulating industrial alcohol.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2><strong>Implications of SC\u2019s Verdict on Taxing Industrial Alcohol:<\/strong><\/h2>\n<ul>\n<li><strong>Overturned a previous judgement:<\/strong>\n<ul>\n<li>The majority ruling overturned the SC&#8217;s <strong>1990 <\/strong>judgement in <strong>Synthetics &amp; Chemicals Ltd vs State of Uttar Pradesh<\/strong>, which had held that states could not tax industrial alcohol.<\/li>\n<li>The latest decision affirms that states have the legislative competence to regulate and tax industrial alcohol, even though it is non-potable.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Impact on States&#8217; revenue:<\/strong>\n<ul>\n<li>The court\u2019s decision significantly impacts state revenues, with <strong>alcohol taxation already being a major source of income<\/strong>.<\/li>\n<li><strong>For example<\/strong>, Karnataka raised its Additional Excise Duty (AED) on Indian-made liquor by 20% in 2023.<\/li>\n<li>The ruling <strong>reaffirms states&#8217; ability to control this critical revenue stream<\/strong>.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Federal balance and Centre-State relations:<\/strong>\n<ul>\n<li>The ruling addressed the <strong>delicate balance<\/strong> between state and central powers.<\/li>\n<li>The majority emphasised that, when constitutional entries overlap, the <strong>interpretation that preserves federal balance should prevail.<\/strong><\/li>\n<li>In this case, giving states the power over industrial alcohol aligns with maintaining that balance, <strong>avoiding redundancy in constitutional provisions<\/strong>.<\/li>\n<li>This decision follows a similar 8:1 majority ruling (in July 2024), which upheld <strong>states&#8217; authority to levy royalties on mineral extraction<\/strong> and tax the lands where mines are located.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<hr \/>\n<h3><strong>Q.1. How does the seventh schedule of the Indian Constitution ensure federal balance?<\/strong><\/h3>\n<p>The Seventh Schedule of the Indian Constitution ensures federal balance by dividing powers between the Union and State governments, and by providing a clear separation of powers between the center and states.<\/p>\n<h3><strong>Q.2. What is the Industries (Development and Regulation) Act, 1951?<\/strong><\/h3>\n<p>The Industries (Development and Regulation) Act 1951 controls the activities, performance and results of industrial undertakings in the public interest.<\/p>\n<p><strong>News: <\/strong><a href=\"https:\/\/timesofindia.indiatimes.com\/india\/states-have-legislative-say-over-all-alcohol-including-industrial-sc-rules-8-1\/articleshow\/114521066.cms\" target=\"_blank\" rel=\"nofollow noopener\">States have legislative say over all alcohol, including industrial, SC rules 8-1<\/a> | <a href=\"https:\/\/indianexpress.com\/article\/explained\/explained-law\/sc-states-industrial-alcohol-what-is-the-case-9634404\/lite\/\" target=\"_blank\" rel=\"nofollow noopener\">IE<\/a> | <a href=\"https:\/\/indianexpress.com\/article\/india\/supreme-court-verdict-states-industrial-alcohol-9634295\/\" target=\"_blank\" rel=\"nofollow noopener\">IE<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>A nine-judge Bench of the SC ruled that states have the authority to impose taxes not only on alcoholic beverages but also on &#8216;industrial&#8217; alcohol<\/p>\n","protected":false},"author":5,"featured_media":43115,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[],"class_list":{"0":"post-43114","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/43114","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=43114"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/43114\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/43115"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=43114"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=43114"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=43114"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}