2007 (7) TMI 309 - HC - Central Excise

Taxing provisions - whether levy of 4% ad valorem rate of duty in respect of Clause 2(i) of preparations in the schedule appended to the Medical and Toilet Preparations (Excise Duties) Act, 1955, as amended by Finance Act, 2000, is null and void as affecting Article 14 and 19(1)(g) of the Constitution of India? Whether restricted preparations and spirituous preparations cannot be made applicable to ayurveda drug manufacturers for imposing any restrictions prescribed therein? Held that - Ad valorem rate of duty as levied for other medical preparations containing alcohol. In respect of Allopathic medicinal preparations and for similar medicinal preparations containing alcohol, which are not capable of being consumed as ordinary alcoholic beverage, 20% ad valorem duty has been prescribed under the same schedule of the M & TP Act. There are other medicinal preparations for which much more than 4% ad valorem rate of duty has been prescribed and, thus, 4% ad valorem duty, as prescribed vide amended clause 2(i) of Schedule, cannot be held to be arbitrary or excessive. t the petitioner has failed to highlight any cause of action to entertain the second writ petition and for giving any declaration as sought for. There is nothing on record to suggest that on any particular day, at a particular time, district authorities or the Superintendent of Police, Kanyakumari District, or any officer empowered under Act, 1937 or Rules, 1984, visited the premises of the petitioner or any other ayurveda drug manufacturer. In these circumstances, and in absence of cause of action, this Court is not deciding the issue as raised in the second writ petition. W.P.s dismissed.

Issues:
1. Challenge to the levy of 4% ad valorem rate of duty under the Medical and Toilet Preparations (Excise Duties) Act, 1955.
2. Direction sought to prevent interference with trade in unrestricted medical preparations under the Tamil Nadu Spirituous Preparations (Control) Rules, 1984.

Analysis:

Issue 1: Challenge to the levy of 4% ad valorem rate of duty
- The petitioner challenged the imposition of 4% ad valorem duty under Clause 2(i) of the schedule appended to the M & TP Act, claiming it violated Articles 14 and 19(1)(g) of the Constitution of India. The petitioner contended that the imposition was excessive and arbitrary, especially considering the historical absence of duty on such preparations for over 45 years.
- The petitioner argued that treating restricted and unrestricted preparations equally under the same duty rate was discriminatory and against Article 14. The petitioner highlighted conflicting judgments on the duty liability of unrestricted preparations in the past.
- The Court emphasized the distinction between charging provisions and machinery provisions in taxing statutes. While charging provisions are construed strictly, machinery provisions are interpreted to ensure the tax imposition is not defeated. The Court noted that the absence of duty in the past did not imply a permanent exemption, and the State had the authority to impose duty as deemed necessary.
- Referring to the constitutional validity test established by the Supreme Court, the Court found that the petitioner did not challenge the legislative competence or fundamental rights violation. The Court compared the 4% ad valorem duty on medicinal preparations with alcohol to other similar preparations, noting that the rate was not arbitrary or excessive.

Issue 2: Direction to prevent interference with trade in unrestricted medical preparations
- The petitioner sought direction to prevent interference with trade in unrestricted medical preparations under the Tamil Nadu Spirituous Preparations (Control) Rules, 1984. The petitioner argued that the provisions meant for restricted preparations should not be applied to ayurveda drug manufacturers.
- The petitioner contended that ayurveda medical preparations containing alcohol below 10% did not meet the criteria for restricted preparations under the Rules, 1984. Therefore, the petitioner claimed that such preparations should be classified as "unrestricted" and not subject to the restrictions imposed on other preparations.
- However, the Court found that the petitioner failed to establish a cause of action to entertain the writ petition. There was no evidence of district authorities visiting the premises or taking action against the petitioner. Due to the absence of a cause of action, the Court declined to decide on the issues raised in the second writ petition, W.P. No. 3261/04.
- Ultimately, the Court found no merit in either writ petition and dismissed them without costs.

This detailed analysis of the judgment from the High Court of Judicature at Madras covers the challenges to the levy of duty and the direction sought regarding trade in unrestricted medical preparations under the relevant laws and regulations.

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