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Report No. 158

Chapter III

The Need for Amending Item 26, First Schedule of The IDR Act, 1951

3.1. Having observed in the preceding chapter, the apparent conflict in the Supreme Court decisions on the import of the important subject relating to item 26 of the First Schedule to the IDR Act, 1951, it is quint essential to do away with the doubts as early as possible so that the conflicts in the discharge of functions of the Central and State Governments are reconciled as held in M/s Murari Lal Mahavir Parsad v. B.R. Vad, (1975) 2 SCC 736 quoted under para. 1.1 supra.

3.2. Before embarking upon the effort to seek a solution to the problem, it is pertinent to refer to arguments advanced by the State Governments in Bihar Distillery case (supra) as follows:-

During the hearing of the case in Bihar Distillery, all the States uniformly contended that rectified spirit is "intoxicating liquor" within the meaning of Entry 8 of List II, that the decision in Synthetics is confined to industrial denaturant alcohol only and that if it is understood as applying to non-denatured alcohol too, the decision requires reconsideration. They pleaded for exclusive control over alcohol viz., for the position obtaining before the Synthetics judgment. The following extracts from the judgment bear out the strength and justification behind the submissions made by the State Governments of West Bengal, Uttar Pradesh, Bihar, Karnataka, Maharashtra, Tamil Nadu, Andhra Pradesh, Kerala, Goa, Orissa and Himachal Pradesh:

"6. Accordingly, notices have been issued to all the State Governments. We have directed notice to learned Attorney-General as well. We have heard Shri Bimal Kumar Sinha, learned counsel for the writ petitioner, Shri Shanti Bhushan for the State of West Bengal, Shri Rakesh Dwivedi, Additional Advocate General for the State of Uttar Pradesh and Bihar, Shri Santosh Hegde for the State of Karnataka, Shri M.S. Nargolkar for the State of Maharashtra, Shri V. Krishnamurthi for the State of Tamil Nadu. Shri K. Ram Kumar for the State of Andhra Pradesh, Shri G. Prakash for the State of Kerala, Ms Subhashini for the State of Goa, Shri P.N. Misra for the State of Orissa and Shri T. Sridharan for the State of Himachal Pradesh. Shri M.S. Usgaocar, learned Additional Solicitor General appeared for the Union of India. We also requested Shri Harish N. Salve who was appearing in the connected matter [Special Leave Petition (C) No. 9863 of 1996 - involving inter alia the question at issue herein] to address us on the general question which he has agreed gracefully to do."

"13. The several State Governments, to whom notices have been given, have responded. Some of them have filed very elaborate counters setting out their case. The first and foremost contention urged on their behalf is that rectified spirit is "intoxicating liquor" within the meaning of Entry 8 of List IL In other words, their contention, based upon the ratio in McDowell, is that rectified spirit is "intoxicating liquor" within the meaning of Entry 8 of List II, and hence, outside the purview of Entry 24 of List II, which in turn means that the Union cannot take over its control by making a declaration in terms of Entry 52 of List and further that item 26 of the Schedule to IDR Act is ineffective and invalid in so far as it seeks to regulate the production, manufacture et al of rectified spirit.

In support of their submission, they have relied upon the legislative history of the several State enactments in India apart from a wealth of material including technical data. They submit that the decision to the contrary in Synthetics is not correct and requires reconsideration. They have also assigned several reasons why the holding in Synthetics in so far as the meaning of "intoxicating liquor" is concerned should be held to be obiter. They submitted that in the interests of maintaining the balance between the Centre and the States and to preserve the federal nature of our Constitution - which is one of its basic features -the matter must be referred to a larger Bench to consider the correctness of Synthetics.

They submitted that the relevant words in Entry 51 of List H and Entry 84 of List I are "alcohol liquors for human consumption" and not "alcoholic liquors fit for human consumption". They complained with a good amount of emotion that the decision in Synthetics reads the word "fit" into the said entries and makes it a basis for curtailing the legislative power of the States. There is no warrant for such addition, they submitted. In addition to the above submissions, the following facts are stated in the affidavit filed on behalf of the State of Uttar Pradesh: the reduction process of converting rectified spirit into country liquor involves mixing of water and stirring.

By adding water, the alcoholic content is reduced to 35% v/v to make it country liquor. Adding of spices is optional. Rule 45 of the Uttar Pradesh Excise Rules defines the expression "reduction of liquor". According to the definition, it means "the reduction of liquor from a higher to a lower strength by the addition of water". Mere mixing of water, it is submitted, makes rectified spirit country liquor. On this basis too, it is submitted, rectified spirit is really and essentially an intoxicating liquor and merely because water is required to be added to make it country liquor, it does not cease to be intoxicating liquor.

By way of analogy, it is submitted that even the whiskies and brandies are not ordinarily consumed as such but only after mixing water or soda. Addition of water or soda, it is submitted, does not change the character of whisky or brandy either. It is next submitted that bulk of rectified spirit manufactured in Uttar Pradesh is used for the purpose of obtaining country liquor or IMFLs. Only a small quantity is used for industrial purposes. Having regard to the predominant use to which rectified spirit is put, it is submitted, it must be understood as intoxicating liquor.

The adding of denaturants is only with a view to ensure that the rectified spirit is not used for potable purposes. Yet another submission put forward by the State of Uttar Pradesh is that even during the course of manufacture of rectified spirit, potable liquor comes into existence. It is submitted that the main raw material for rectified spirit is molasses. The process of manufacture is elaborately set out, supported by technical literature. The samples taken from certain distilleries by the excise staff and the result of the analysis of the said samples is also relied upon. It is submitted that the process of manufacture of rectified spirit involves increasing the alcoholic content by repeatedly processing it.

The alcoholic content keeps on rising from stage to stage. It is submitted that at several intermediary stages, the liquor can be taken out and used for drinking purposes, whether as it is or after mixing water, as the case may be. Shri Rakesh Dwivedi, learned Additional Advocate General for the State of Uttar Pradesh, placed strong reliance upon the reasoning and conclusions in the judgment of the Allahabad High Court in Vam Organic Chemicals Ltd. v. State of U.P., which, it is brought to our notice by written submissions, has since been affirmed by this Court in Vam Organic Chemicals Ltd. v. State of Uttar Pradesh, by a Bench consisting of the Hon'ble Chief Justice and Sert, J."

It may be remembered that these submissions were made as late as in 1996-97.

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