1961 (8) TMI 23 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to sales tax assessment on medicinal preparations containing alcohol under Central Provinces and Berar Sales Tax Act, 1947.
Interpretation of legislative powers of State Government to levy sales tax on medicinal and toilet preparations.
Effect of the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 on the power of the State Government to charge excise duty on medicinal preparations.
Severability of the repeal clause in the Excise Act and its impact on the levy of excise duty on medicinal preparations.

Detailed Analysis:
The petition challenges the sales tax assessment on medicinal preparations containing alcohol under the Central Provinces and Berar Sales Tax Act, 1947. The petitioner, a distributor, contests the correctness of the order assessing sales tax on sales made in the year 1957-58. The sales tax assessment on medicinal preparations is the focal point of the dispute, with the amount in question being approximately Rs. 900. The petitioner argues that the State Government had the power to levy excise duty on these preparations under the Central Provinces and Berar Excise Act, 1915, thereby contending that the sales should not be subject to sales tax under the Sales Tax Act (Para 3).

The primary contention raised is regarding the legislative powers of the State Government to levy sales tax on medicinal and toilet preparations. The petitioner argues that the State Government lacks the authority to impose sales tax on such products, relying on Entry 84 in List 1 of the Seventh Schedule of the Constitution. Despite the absence of power to impose excise duty on these preparations under Entry 51, the State Government's authority to charge sales tax under Entry 54 remains unaffected, rendering the challenge on legislative grounds meritless (Para 6).

The impact of the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 on the State Government's power to levy excise duty on medicinal preparations is crucial. The Act, enacted under Entry 84 of List I, repealed existing State laws imposing similar duties. This repeal effectively nullified the State Government's authority to impose excise duty on medicinal and toilet preparations, as continued under Article 372 of the Constitution. The Act of 1955 terminated the State law's force, rendering the State excise duty inapplicable to such preparations (Para 10).

The judgment also addresses the severability of the repeal clause in the Excise Act concerning medicinal preparations. The repeal clause's effect on excise duty specifically on medicinal preparations is deemed separable, with the repeal negating the State excise duty on these products while leaving the Act intact for other subjects. This interpretation aligns with the distribution of legislative powers between the Centre and States, ultimately leading to the conclusion that medicinal preparations are no longer subject to State excise duty post the Act of 1955 (Para 12).

In conclusion, the petition challenging the sales tax assessment on medicinal preparations is dismissed on merits. The court upholds that post the enactment of the Act of 1955, the State Government lost the authority to levy excise duty on medicinal preparations, thereby making the petitioner liable to pay sales tax on such products. The dismissal of the petition is accompanied by a cost order and the refund of the remaining security deposit to the petitioner (Para 15).