DC Edit | Alcohol tax: States clinch win
It is celebration time for state governments. The nine-judge bench of the Supreme Court in an 8:1 majority judgment held that state governments have the power to regulate taxes on industrial alcohol. This judgment will improve the finances of state governments, whose ability to raise additional revenue was getting constricted because of the Central government’s indiscriminate use of non-shareable cess and surcharge to boost its revenue.
Apart from improving the finances of the state government, the majority judgment seals the issue of regulatory overlap in the Union List, State List and Concurrent List. The litigation over this began in 1956 over the regulation of sugarcane, which came under different heads of State List, Concurrent List and Union List.
Though the five-judge bench of the Supreme Court ruled that an entry in the Concurrent List does not take away powers of the state government under the State List, several Supreme Court judgements, especially Synthetics & Chemicals (1989) and Vam Organics Chemicals (1997) which were pronounced subsequently, expressed different opinions on this issue. Therefore, the matter was referred in 2010 for adjudication by the larger bench.
The nine-judge bench led by Chief Justice of India D.Y. Chandrachud heard the matter for six days in April 2024 and delivered the judgment on October 23. The majority judgment held that Entry 8 of the State List was designed to cover all aspects of “intoxicating liquor”, which means all kinds of liquor that is produced — not just alcohol for human consumption.
Recognising the overlap of entries in the State List and Union List, the majority judgment held that if Entry 52 of the Union list is read to give the Union complete control over industrial alcohol, Entry 8 would be rendered redundant. Harmonious reading, therefore, would require that the specific scope outlined in Entry 8 of the State List is given precedence over Entry 52 of the Union List.
It is the second judgment in recent months after the one on tax on mines in which the Supreme Court has ruled in favour of state governments, highlighting robustness of checks and balance