Author: Ashwarya Sharma, Advocate & Co-Founder, RB LawCorp
Date: 15/04/2026
Introduction: When Power Extends Beyond Its Source
In public law, every exercise of power-whether legislative, executive, or delegated-must trace its origin to constitutional authority.
Yet, in practice, regulatory frameworks often expand in the name of control and compliance, sometimes stepping beyond their legitimate field.
This raises a foundational question:
Can the State regulate a product merely because it may be used for an excisable purpose?
The Chhattisgarh High Court, in Kedia Trading & Ors. vs. State of Chhattisgarh, revisits this principle—reaffirming that legislative competence is the starting point of all valid regulation.
The Controversy: Regulation of Molasses Beyond Excise
The dispute centred around the Chhattisgarh Molasses Control and Regulation Rules, 2022.
The petitioners were engaged in the trade of molasses, supplying it for:
- Cattle feed
- Gudakhu manufacturing
- Other non-intoxicant uses
Molasses, in its natural form:
- Is a by-product of sugar production
- Is not fit for human consumption
- Does not possess intoxicating properties
Despite this, the State sought to regulate its trade under excise law, treating it as part of the liquor control framework.
This led to a key legal issue:
Does the mere potential of molasses to produce alcohol bring it within the State’s excise jurisdiction?
Legislative Competence: The Constitutional Boundary
The challenge was grounded in Entries 8 and 51 of List II (State List), which deal with:
- Intoxicating liquors
- Excise duties on alcoholic substances
The petitioners argued that:
- Molasses is neither an intoxicant nor an excisable article
- Their activities had no nexus with liquor manufacture
- The State had exceeded its constitutional field
The Court agreed, emphasizing that legislative entries cannot be stretched to cover subjects merely because of their potential use.
Nature of Molasses: Substance Over Possibility
A key aspect of the judgment was the Court’s analysis of the intrinsic nature of molasses.
It held that:
- Molasses is not an intoxicant in its raw form
- It becomes capable of producing alcohol only after fermentation
- Its industrial and agricultural uses lie outside excise regulation
The Court drew a clear distinction between:
What a product is vs what it can become
Only the former determines legislative competence.
Limits of Delegated Legislation
The State relied on its rule-making powers under the Excise Act to justify the 2022 Rules.
However, the Court reiterated a settled principle:
Delegated legislation cannot expand the scope of the parent statute.
It held that:
- Rules must operate within the framework of the Act
- They cannot introduce new subjects of regulation
- Any such expansion is ultra vires
By extending excise control to non-intoxicant uses, the Rules were found to exceed statutory authority.
Interpreting the Seventh Schedule: Harmony, Not Overreach
The Court also revisited principles governing interpretation of constitutional entries:
- Entries must be given wide amplitude—but not unlimited scope
- Overlaps must be resolved using the doctrine of pith and substance
- The Constitution must be read harmoniously as an integrated whole
Importantly, the Court cautioned that:
Expansive interpretation cannot be used as a tool for legislative overreach.
Accepting the State’s argument would mean that any fermentable substance—fruits, grains, sugar—could fall under excise control, which is constitutionally untenable.
Excise Power: Defining Its Limits
The Court clarified that:
- State excise power is confined to intoxicating liquor for human consumption
- Inputs or raw materials do not automatically fall within its ambit
- Nexus with alcohol manufacture is essential
In the absence of such nexus, regulatory control cannot be justified.
Key Findings of the Court
The ruling crystallises the legal position as follows:
- Molasses, in its natural form, is not an intoxicant
- It does not fall within the scope of the Excise Act
- Delegated legislation cannot enlarge statutory boundaries
- Potential use does not determine legislative competence
- The 2022 Rules, insofar as they regulate non-intoxicant use, are ultra vires
Implications in the GST Era
The judgment carries significant relevance beyond excise law.
In the GST framework, similar disputes often arise where authorities:
- Classify goods based on potential or end use
- Expand taxability beyond statutory definitions
- Attempt overlapping regulation
This ruling reinforces that:
Taxability and regulation must align with the true nature of goods—not hypothetical possibilities.
It strengthens the principle that jurisdictional competence cannot be stretched on grounds of administrative convenience or revenue protection.
Conclusion: Drawing the Line Between Possibility and Power
The decision in Kedia Trading is a reaffirmation of constitutional discipline.
It reminds us that:
- The power to regulate is not the power to overreach
- Legislative competence defines the outer limits of authority
- Possibility cannot replace legality
At a broader level, the ruling serves as a caution against expanding regulatory frameworks based on apprehension rather than authority.
If constitutional boundaries are to retain meaning, they must be enforced not only in theory—but in everyday regulatory practice.
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(The author is a practicing advocate, Co-Founder and Legal Head of RB LawCorp.
He specializes in GST law. Suggestions or queries can be directed to
ashsharma@rblawcorp.in. The views expressed in this article are strictly
personal.)
