Supreme Court Ruling on Industrial Alcohol: A Landmark for Fiscal Federalism

The Supreme Court of India recently delivered a landmark judgment clarifying the legislative boundaries between the Centre and the States regarding the taxation and regulation of industrial alcohol, specifically Extra Neutral Alcohol (ENA). The verdict, delivered by a nine-judge Constitution Bench, has significant implications for India's fiscal federalism and the interpretation of the Seventh Schedule. The core of the dispute lay in the interpretation of 'intoxicating liquor' under Entry 8 of List II (State List). Previously, following the 1990 Synthetics & Chemicals Ltd. case, it was understood that states only had the power to regulate potable alcohol (alcohol fit for human consumption), while industrial alcohol fell under the Union's jurisdiction via Entry 52 of List I (Union List) and the Industries (Development and Regulation) Act, 1951. However, the Supreme Court has now overturned this precedent, ruling that 'intoxicating liquor' is a broad term encompassing all liquids containing alcohol that can potentially be misused as intoxicants.