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Source-This post on State vs. Centre: Control Over Industrial Alcohol Excise Duty is based on the article “Before SC’s 9-judge bench, question of whether states can levy excise duty on industrial alcohol” published in “The Indian Express” on 5th April 2024.
Why in the News?
The Supreme Court Constitution Bench started hearing arguments on whether states or the Centre holds exclusive control over regulating industrial alcohol excise Duty.
Excise Duty Levied on Alcohol
Excise duty on alcohol is a major part of a state’s income. States often raise additional excise duty on alcohol to boost their revenue. For example, in 2023, Karnataka increased the Additional Excise Duty (AED) on Indian Made Liquor (IML) by 20%.
Note– Currently, excise duty applies only on petroleum and liquor.
However when it comes to ‘industrial alcohol,’ do states have the authority to regulate and tax it?
| Industrial alcohol 1. It is also known as denatured alcohol or ethanol, is alcohol that is not meant for human consumption. 2. It is typically used for industrial purposes such as solvent extraction, fuel, antifreeze, and as a precursor in the production of chemicals and pharmaceuticals. |
What are the arguments presented before the bench?
1. States– They argue that they possess authority under Entry 8 of the State List in the Constitution, which pertains to “intoxicating liquors,” to regulate all types of alcohol, including industrial varieties.
2. Centre– The Centre asserts exclusive control over it through the Industries (Development and Regulation) Act, 1951 (IDRA). Entry 52 of the Union List and Entry 33 of the Concurrent List pertain to industries regulated by Parliament in the interest of the public.
Note– Subjects in the Concurrent List can be legislated upon by both states and the Centre. However, if there is a central law, state laws cannot contradict it.
Supreme Court previous judgements
1. In the case of Synthetics & Chemicals Ltd. v. State of Uttar Pradesh (1989), it was established that states do not have the authority to levy taxes on industrial alcohol. However, they retain the power to regulate its usage to prevent misuse for drinking purposes.
2. In the case of Ch Tika Ramji v State of UP (1956), it was affirmed that states possess the authority to regulate industries listed in the Concurrent List (Entry 33), even if the Centre holds some level of control.
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