1962 (9) TMI 6 - SC - Central Excise

Whether the State Governments are entitled to tax the three Ayurvedic preparations namely Mirtasanjibani, Mirtasanjibani Sudha and Mirtasanjibani Sura, which are manufactured by these petitioners, under the various Excise Act in force in the respective States? Held that - Allow the petitions and direct that these three medicinal preparations should not be taxed under the various Excise Acts in force in various States and can only be taxed in accordance with the provisions of the Medicinal and Toilet Preparations (Excise Duties) Act.

Issues Involved:
1. Whether the State Governments are entitled to tax the three Ayurvedic preparations under the various Excise Acts in force in the respective States.
2. Whether the three Ayurvedic preparations are medicinal preparations as defined in Section 2(g) of the Medicinal and Toilet Preparations (Excise Duties) Act, 1955.
3. Whether the omission of these preparations from the list appended to the Rules under the Act affects their status as medicinal preparations.
4. Whether the State Governments can levy duties of excise on these preparations under the various Excise Acts in force in the States.
5. Whether the preparations are genuinely prepared according to the formulae in the Ayurvedic text books.

Detailed Analysis:

1. Taxation by State Governments under Various Excise Acts:
The main question raised was whether the State Governments could tax the Ayurvedic preparations under the various Excise Acts in force in the States. The petitioners argued that these preparations fell within the definition of "medicinal preparations" under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, and thus should be taxed under this Act and not under the State Excise Acts. The court concluded that once the Act came into force, the power of the States to levy duties of excise on medicinal and toilet preparations came to an end.

2. Definition as Medicinal Preparations:
The court examined whether the three Ayurvedic preparations are medicinal preparations as defined in Section 2(g) of the Act. The definition includes "all drugs which are a remedy or prescription prepared for internal or external use of human beings or animals and all substances intended to be used for or in the treatment, mitigation or prevention of disease in human beings or animals." The court found that these preparations were indeed medicinal preparations as they were manufactured according to the Ayurvedic system and were used for treating various diseases.

3. Omission from the List Appended to the Rules:
The petitioners contended that the omission of these preparations from the list appended to the Rules did not affect their status as medicinal preparations. The court agreed, stating that if the preparations are medicinal preparations within the meaning of the Act, their omission from the list would make no difference. The court emphasized that the decision of the Standing Committee, which led to the omission, was not conclusive on the question of whether these are medicinal preparations.

4. Levy of Duties by State Governments:
The court addressed the contention of the State of Bihar that even if the preparations are medicinal preparations, they would be liable to duty both under the Act and the various State Excise Acts. The court rejected this argument, clarifying that once the Act was enacted, the power of the States to levy duties on medicinal and toilet preparations ceased. Article 277 of the Constitution, which allowed States to continue levying duties until Parliament made a contrary provision, was no longer applicable after the Act came into force.

5. Preparation According to Ayurvedic Text Books:
The respondents argued that the preparations were not made according to the Ayurvedic text books. The court found no categorical evidence to support this claim. The court noted that the preparations were made in bond and under supervision, as per the West Bengal Excise Rules, and there was no evidence to show that the rules were being contravened. The court concluded that these preparations were indeed made according to the Ayurvedic text books and were medicinal preparations.

Conclusion:
The court allowed the petitions, directing that the three Ayurvedic preparations should not be taxed under the various State Excise Acts but only in accordance with the Medicinal and Toilet Preparations (Excise Duties) Act. The court did not pass any order regarding the claim for a refund, leaving it to the petitioners to take up with the State Governments according to law. The petitioners were awarded costs from the respondents.

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