Case Note & Summary
The Supreme Court heard five connected civil appeals on certificate from the Andhra Pradesh High Court involving a common question of law. The appellants were manufacturers of medicines that required alcohol. Before the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 came into force, they operated under licences granted under the Hyderabad Abkari Act, 1316 F. Rule 36 of the Medical Preparations and Spirituous Rules, 1345 F, framed under that Act, required the pharmaceutical laboratory (licensee) to bear the expenses of the establishment for supervision of the work. The State Government posted supervisory excise staff at the bonded manufactories and levied charges under Rule 36 to reimburse these expenses. After the 1955 Act and its Rules came into force on April 1, 1957, the appellants took licences under the new central law and contended that Rule 36 stood repealed and they were no longer liable to pay the supervisory charges. The State refused to accept this and insisted on payment. The appellants filed writ petitions before the High Court challenging the levy. The High Court dismissed the petitions, holding that Rule 36 was not repealed and remained good law because the Hyderabad Abkari Act was a general excise law dealing with alcohol and intoxicating drugs, and the State was entitled to ensure that alcohol supplied for medicinal manufacture was not diverted for human consumption. The Supreme Court reversed that view. It first noted that after the Constitution, Entry 84 of List I of the Seventh Schedule gave the Union exclusive power to levy duties of excise on medicinal and toilet preparations containing alcohol. Under Article 277, any pre-Constitution State levies could continue only until Parliament made a law to the contrary. The 1955 Act was such a law. Section 21 of the Act repealed any corresponding State law, and the Hyderabad Abkari Act, to the extent it applied to alcohol used in manufacturing medicinal and toilet preparations, stood repealed. The Court held that the proviso to Section 21 could not save Rule 36 because Rules 1956 framed under the Act contained Rule 143, which expressly repealed all rules made under any corresponding State law. The Court also analysed the purpose of Rule 36 and found that the expenses were for supervision of the manufacture of medicinal preparations, a field completely covered by the central Act and Rules. Therefore Rule 36 could not survive, and the State's alternative argument that Rule 36 remained valid under general excise law to prevent unauthorised sale of alcohol was rejected. The appeals were allowed, the High Court judgment was set aside, and the State was barred from levying or realising the supervisory charges under Rule 36.
Headnote
A) Constitutional Law - Distribution of Legislative Powers - Duty of excise on medicinal preparations - Constitution of India, 1950, Article 277, Seventh Schedule List I Entry 84 - After the Constitution, only the Union could levy duties of excise on medicinal and toilet preparations containing alcohol; pre-Constitution State levies could continue only until Parliament made law to the contrary; the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 was such a law. Held that the State ceased to have power to levy supervisory charges under Rule 36 after the Act came into force on April 1, 1957. B) Excise Law - Repeal of Corresponding State Laws - Section 21, Medicinal and Toilet Preparations (Excise Duties) Act, 1955 - Section 21 repealed any State law corresponding to the Act in force immediately before commencement; the Hyderabad Abkari Act, 1316 F, to the extent it applied to alcohol used in manufacturing medicinal and toilet preparations, was repealed. Held that Rule 36, being part of rules framed under that Act for supervision of medicinal preparations manufacture, fell within this repeal and could not be saved by the proviso to Section 21. C) Excise Law - Repeal of Prior Rules - Rule 143 of Medicinal and Toilet Preparations (Excise Duties) Rules, 1956 - Rule 143 expressly repealed all rules made under any law corresponding to the Act; the field covered by Rule 36 was completely covered by the new Rules; therefore the old rule could not survive under the general law relating to alcohol and intoxicating drugs as contended by the State. Held that Rule 36 stood repealed and the State could not realize supervisory establishment expenses from manufacturers.
Issue of Consideration
Whether Rule 36 of the Medical Preparations and Spirituous Rules, 1345F framed under the Hyderabad Abkari Act, 1316F survived the coming into force of the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 and the Rules framed thereunder
Final Decision
The Supreme Court allowed the appeals, set aside the High Court judgment, and held that Rule 36 of the Medical Preparations and Spirituous Rules, 1345-F stood repealed after the coming into force of the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 and the 1956 Rules. The State of Andhra Pradesh could not levy or realize the expenses of supervisory staff from the appellants.
Law Points
- Article 277 of Constitution allows pre-Constitution State levies only until Parliament makes contrary law
- Entry 84 List I vests exclusive excise duty on medicinal preparations in Union
- Section 21 of Medicinal and Toilet Preparations (Excise Duties) Act 1955 repeals corresponding State laws
- Rule 143 of Medicinal and Toilet Preparations (Excise Duties) Rules 1956 repeals prior rules
- Rule 36 of Medical Preparations and Spirituous Rules 1345F fell within field covered by central act and rules and hence repealed
