2005 (1) TMI 122 - SC - Central Excise

Whether the State Legislature was competent to include medicinal and toilet preparations containing alcohol governed by the provisions of Medicinal Act, 1955 into the definition of the word intoxicant in section 2 (12a) of the Bihar Act, 1915, as amended by Act No. 6 of 1985? Held that - Medicinal Act, 1955 levies duty on the manufacture of Ayurvedic medicines containing alcohol. However, when the Ayurvedic preparation is diverted to human consumption the State shall have the power to regulate and control such use which has been done in the present case by amending Act No. 6 of 1985, which is a law relatable to Entry 8 read with Entry 6 of List-II. On reading the provisions of the Drugs Act, 1940, as analyzed hereinabove, it is clear that as long as Ayurvedic or Unani drug is used as a drug for diagnosis/treatment/mitigation or prevention of diseases the activity falls within the ambit of the said Act. However, the Drugs Act, 1940 like Medicinal Act, 1955 does not deal with diversion of drugs to human consumption as alcoholic beverages which subject is dealt with by the Bihar Act, 1915, which regulates such use, possession and consumption by issuance of license on payment of fees. Hence, the State and the Board were competent to issue the impugned notifications. The question of quid pro quo is necessary when a fee is compensatory, for every fee quid pro quo is not necessary. In the case of regulatory fee it is not necessary to establish the factum of rendering of service. Therefore, there is no question of regulatory fee being invalidated on the ground that quid pro quo has not been established. Since we have held with reference to Entry 8 read with Entry 6 of List-II that the Bihar Legislature was competent to enact the said 1915 Act as amended, there is no merit in the contention advanced on behalf of the manufacturers that section 2(12a) of the Bihar Act, 1915 constituted colourable exercise of power. The appeals are allowed and the validity of the Bihar Excise Act, 1915 as well as the validity of the impugned notifications/communications, all dated 3-8-1988.

Issues Involved:
1. Legislative competence of the State Legislature in redefining "intoxicant" in the Bihar Excise Act, 1915.
2. Validity and constitutionality of section 2(12a)(iv) of the Bihar Excise Act, 1915.
3. Authority of the State Government and the Board of Revenue to license and regulate the use and possession of Ayurvedic medicinal preparations containing alcohol.
4. Conflict with the Medicinal & Toilet Preparations (Excise Duties) Act, 1955 and the Drugs & Cosmetics Act, 1940.
5. Alleged violation of Article 14 and Article 301 of the Constitution.
6. Nature and validity of the fees levied under the impugned notifications.

Issue-wise Detailed Analysis:

1. Legislative Competence of the State Legislature:
The main question was whether the State Legislature had the competence to redefine "intoxicant" in the Bihar Excise Act, 1915, to include "medicinal and toilet preparations" containing alcohol. The Court held that the Bihar Act, 1915, as amended, is relatable to Entry 8 read with Entry 6 of List-II in the Seventh Schedule to the Constitution, which pertains to public health and intoxicating liquors. The Court ruled that the State Legislature was competent to enact laws regulating the use and possession of such preparations as alcoholic beverages.

2. Validity and Constitutionality of Section 2(12a)(iv):
The manufacturers challenged the validity of section 2(12a)(iv) on the grounds of repugnancy to Central laws and double taxation. The Court held that the Bihar Act, 1915, as amended, does not conflict with the Medicinal Act, 1955, or the Drugs Act, 1940, as these Central Acts deal with the manufacture and sale of medicinal preparations, while the Bihar Act regulates their use and possession as alcoholic beverages.

3. Authority to License and Regulate:
The Court upheld the authority of the State Government and the Board of Revenue to license and regulate the use and possession of Ayurvedic medicinal preparations containing alcohol. The Court noted that the State law operates in a different field than the Central laws and is aimed at regulating the misuse of such preparations as alcoholic beverages.

4. Conflict with Central Laws:
The manufacturers argued that the Bihar Act, 1915, was repugnant to the Medicinal Act, 1955, and the Drugs Act, 1940. The Court found no conflict, stating that the Medicinal Act, 1955, levies excise duty on the manufacture of medicinal preparations containing alcohol, while the Bihar Act regulates their use and possession. The Court emphasized that the two Acts operate in different fields, with the Bihar Act focusing on public health and intoxicating liquors.

5. Alleged Violation of Articles 14 and 301:
The High Court had held that the impugned notifications were discriminatory and violated Article 14 of the Constitution by excluding Unani medicines from regulation. The Supreme Court disagreed, stating that the State is entitled to proceed step by step and that the initial regulation of Ayurvedic medicines does not violate Article 14. Regarding Article 301, the Court held that the fees levied are regulatory in nature and do not violate the freedom of inter-state trade and commerce.

6. Nature and Validity of Fees:
The manufacturers contended that the fees levied under the impugned notifications amounted to a tax and lacked quid pro quo. The Court clarified that the fees are regulatory in nature and do not require quid pro quo. The Court found the fees reasonable and necessary for the regulation and control of the use of Ayurvedic preparations containing alcohol.

Conclusion:
The Supreme Court allowed the appeals, set aside the High Court's judgment, and upheld the validity of the Bihar Excise Act, 1915, as well as the impugned notifications. The Court directed the State to fix a period for manufacturers to apply for licenses and comply with the notifications, during which they would not be prosecuted. If manufacturers fail to comply within the stipulated period, the State Government would be entitled to proceed against them in accordance with the law.

← Previous Next →