Adhyaksha Mathur Babu's Sakti Oushadhalaya (P) Ltd. vs Union of India

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: supreme-court

Case Number: Petitions Nos. 344 and 350 to 354 of 1961

Decision Date: 07/09/1962

Coram: K.N. Wanchoo, Bhuvneshwar P. Sinha, Syed Jaffer Imam, J.C. Shah, N. Rajagopala Ayyangar

In the matter titled Adhyaksha Mathur Babu’s Sakti Oushadhalaya (P) Ltd. versus Union of India, the judgment was delivered on 7 September 1962 by Justice K.N. Wanchoo, who also authored the opinion. The bench that heard the case consisted of Justices Bhuvneshwar P. Sinha, Syed Jaffer Imam, J.C. Shah and N. Rajagopala Ayyangar. The decision is recorded in the reports 1963 AIR 622 and 1962 SCR (3) 957, and it has been cited in later cases such as R 1989 SC 1230 (6) RF and 1990 SC 1927 (70). The statutory framework relevant to the dispute was the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 (Act 16 of 1955), particularly sections 2(g), 18(2) and 21, together with the constitutional provision of Article 277 of the Constitution of India and the entry of item 84 in List I of the Seventh Schedule.

The petitioners, who were engaged in the manufacturing of Ayurvedic medicinal preparations, produced three specific products – Mritasanjibani, Mritasanjibani Sudha and Mritasanjibani Sura – by employing the distillation techniques described in ancient Ayurvedic treatises such as the Ayurvedic Sangraba, Bhaisajya Ratna‑bali and Arka Prakash, texts that are accepted throughout India as part of the Ayurvedic pharmacopoeia. When Parliament enacted the 1955 Act, the three items were included in the Schedule to the Rules framed under section 18(2) and were taxed at the rate of rupees 17 and 8 paise per unit as “medicinal preparations” within the meaning of section 2(g). After a subsequent amendment removed those items from the Schedule, the various State Governments began to demand excise duties on the same preparations at substantially higher rates under their respective State Excise Acts. The petitioners argued that such State levies were unconstitutional because the power to impose excise duty on medicinal preparations resides exclusively with the Union under item 84 of List I, and the omission of the products from the Schedule did not alter their character as medicinal preparations. They further contended that the Central Government could not authorize State taxation based on the recommendation of the Standing Committee appointed under rule 68, and they supported their position with numerous affidavits from qualified Ayurvedic practitioners affirming that the three products were indeed Ayurvedic medicines. The respondents, the Union of India, opposed this view by relying on the Standing Committee’s report, which classified the products as mere beverages, and they submitted no expert Ayurvedic affidavits. The Court held that, according to standard Ayurvedic texts, the three preparations unmistakably qualified as “medicinal preparations” under section 2(g) of the 1955 Act, and that the later omission from the Schedule did not change this classification. Moreover, the Court found that the Standing Committee’s opinion was not conclusive on the essential question of the nature of the preparations. Consequently, the Court concluded that the State Governments were not entitled to levy excise duties on these items under their State Excise Acts, because the enactment of the 1955 Act removed the constitutional saving for State taxation under Article 277, and section 21 of the Act expressly repealed any prior State power to tax such medicinal and toilet preparations.

The Court held that the three preparations, although they could also be consumed as ordinary alcoholic beverages, fell within the definition of “medicinal preparations” under section 2(g) of the Medicinal and Toilet Preparations (Excise Duties) Act, 1955. Consequently, they attracted duty under item I of the Schedule to that Act, and no Excise Duty could be imposed on them under any State Excise Act. The opinion of the Standing Committee could not be treated as decisive on the question of whether the preparations qualified as medicinal preparations, and the Committee’s omission of these items from the list annexed to the Rules could not affect the legal conclusion. Furthermore, the Court rejected the proposition that, even if the preparations were medicinal, they could simultaneously be liable to duty under both the central Act and the various State Excise Acts. With the enactment of the 1955 Act, the constitutional protection afforded to the States by Article 277 ceased to operate, and the States were no longer authorized to levy any duty on medicinal or toilet preparations. In addition, section 21 of the 1955 Act repealed the corresponding provisions in the State Excise Acts that related to medicinal and toilet preparations.

The judgment originated in the original jurisdiction of the Supreme Court and concerned Petitions Nos. 344 and 350‑354 of 1961, which were filed under Article 32 of the Constitution of India for the enforcement of fundamental rights. Counsel for the petitioners included A. V. Viswanatha Sastri, A. N. Sinha, N. H. Hingorani and B. P. Jha, while the respondents were represented by B. Sen and B. H. Dhebar for respondents 15, 2 and 7‑8, by B. Sen, S. C. Bose and P. K. Bose for respondent 3, by Lal Narayan Sinha, D. P. Singh, M. K. Ramamurthi, R. K. Garg and S. C. Agarwala for respondent 4, by K. S. Hajela and C. B. Lal for respondent 5, and by Ranadeb Chaudhuri, L. R. Das Gupta, S. N. Andley and Rameshwer Nath as interveners. The judgment was delivered on 7 September 1962 by Justice Wanchoo. The six petitions raised a common issue that the Court addressed collectively: whether the State Governments were entitled to tax the three Ayurvedic preparations—Mirtasanjibani, Mritasanjibani Sudha and Mritasanjibani Sura—manufactured by the petitioners, under the Excise Acts applicable in the respective States. Although the petitions also raised ancillary questions concerning the legality of restrictions on the import, export, possession and sale of these preparations, the petitioners’ counsel limited the argument to the single question of taxability under State Excise laws. The Court therefore confined its analysis to that point. The petitioners’ case, in brief, was that they engaged in the manufacture of medicinal preparations according to the Ayurvedic system of medicine and that the three preparations at issue were among the Ayurvedic medicines they produced.

In the petitioners’ case, the three Ayurvedic preparations at issue were produced by means of fermentation and distillation in conformity with the Ayurvedic system of medicine. The manufacturing process followed the formulae set out in the standard reference works identified as Ayurved Sangraha, Bhaisajya Ratnabali and Arka Prakash. According to the petitioners, these books contain excerpts drawn from all the authoritative ancient Ayurvedic treatises that are accepted throughout India and that serve as the prevailing Ayurvedic pharmacopoeias in the various States. Although the three products bear three distinct names, the petitioners maintained that they are, in reality, a single medicinal composition prepared according to one common formula described in the aforesaid texts. The petitioners further asserted that the preparations are manufactured in accordance with the standard Ayurvedic pharmacopoeias that are currently in use in several States and that they are efficacious for a variety of conditions, namely: (a) typhoid fever (Sannipatik Jwara) in a collapsed condition; (b) cholera; (c) loss of appetite, wherein they are claimed to increase digestive power; (d) rheumatism, sciatica and related disorders; and (e) general weakness, whereby the preparations are said to impart strength and vigor, function as a tonic and act as a restorative for convalescent patients. Before the commencement of the Constitution, all three preparations were subject to Provincial excise duty under item 40 of List II of the Seventh Schedule to the Government of India Act, 1935. The Constitution, however, altered the allocation of excise powers among the three legislative lists. Under item 51 of List II of the Seventh Schedule, the States were granted authority to levy excise duty on alcoholic liquor for human consumption, on opium, Indian hemp and other narcotic drugs, but expressly excluded medicinal and toilet preparations containing alcohol or any substance such as opium. Conversely, under item 84 of List I of the Seventh Schedule, the Union was empowered to impose excise duties on tobacco and other goods manufactured or produced in India, except for alcoholic liquors for human consumption and opium, Indian hemp and other narcotic drugs, while expressly including medicinal and toilet preparations that contain alcohol or any substance like opium. Accordingly, the constitutional scheme removed the States’ power to impose excise duties on such medicinal and toilet preparations and vested that power in the Union. Nevertheless, Article 277 of the Constitution provided that any taxes, duties, cesses or fees that were lawfully levied by a State government, municipality or other local authority immediately before the Constitution came into force could continue to be levied for the same purposes until Parliament enacted a law to the contrary. By virtue of this provision, the State governments persisted in levying excise duties on medicinal and toilet preparations containing alcohol, opium and similar substances up to the year 1957, because Parliament had not yet enacted any legislation to override the continued levying of such duties.

In 1955 Parliament enacted the Medicinal and Toilet Preparations (Excise Duties) Act, No 16 of 1955, which the Court refers to simply as “the Act.” The Act was brought into operation on 1 April 1957. The present dispute concerns only medicinal preparations, and the Act defines a “medicinal preparation” in section 2(g) as “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.” Section 3 authorises the levy of excise duties at the rates specified in the Schedule on every dutiable good that is manufactured in India. Section 19 empowers the Central Government to make rules for giving effect to the purpose of the Act, and clause 19(2)(xx) specifically authorises the Central Government to publish in the Official Gazette the names and descriptions of preparations that shall fall under any particular item of the Schedule or that require regulation of their manufacture, transport or distribution.

The Schedule, excluding explanatory notes that are not material for the present discussion, sets out the duty structure as follows. Item 1 covers medicinal and toilet preparations containing alcohol that are prepared by distillation or to which alcohol has been added and that are capable of being consumed as ordinary alcoholic beverages. Item 2 deals with medicinal and toilet preparations not otherwise specified but containing alcohol, and it is subdivided into two categories: (i) Ayurvedic preparations containing self‑generated alcohol that are not capable of being consumed as ordinary alcoholic beverages, and (ii) Ayurvedic preparations containing self‑generated alcohol that are capable of being consumed as ordinary alcoholic beverages. The rates of duty for Item 2 are articulated in three sub‑paragraphs: (1) a duty of Rs 17 and ½ per gallon of the strength of London proof spirit; (2)(i) nil duty for the first sub‑category; (2)(ii) a duty of Rs 3 per gallon for the second sub‑category; and (2)(iii) a duty of Rs 5 per gallon for all other preparations of this class. Item 3 pertains to medicinal and toilet preparations that do not contain alcohol but do contain opium, Indian hemp or other narcotic drugs or narcotics.

In 1956 the Central Government framed Rules under the Act and assigned the administration of both the Act and those Rules to the State Governments. Along with the Rules, a list of medicinal preparations that could be used as ordinary alcoholic beverages was published. Rule 65 provides that, until a standard Ayurvedic Pharmacopoeia is prepared by the Central Government, the pharmacopoeias currently in use in the various states shall be recognised as standard Ayurvedic pharmacopoeias. The petitioners argue that three specific Ayurvedic preparations satisfy the definition of medicinal preparations contained in section 2(g) of the Act. They further maintain that the Schedule to the Rules listed “Mritasanjibani Sura” as a medicinal preparation in 1957, and that in 1958 the preparations “Mritasanjibani” and “Mritasanjibani Sudha” were also added under the heading “medicinal preparations” because, according to the petitioners, the three names refer to essentially the same medicine. The Act and the Rules therefore, the petitioners contend, encompass these preparations within the scope of the excise duty provisions.

The Rules were deemed to have commenced on the first day of April in the year 1957, pursuant to the authority conferred by clause 1(3) of the Act. That clause empowers the Central Government to bring the Act into operation on any date it chooses, by means of a notification published in the official gazette. The petitioners assert that, following the commencement of the Rules, they started remitting excise duties on the three Ayurvedic medicines in question. These duties were paid under item I of the Schedule to the Act at the rate of Rs 17.50 per gallon of the strength of London proof spirit, because the preparations were regarded as medicinal products containing alcohol that had been either distilled or had alcohol added, and which were capable of being consumed as ordinary alcoholic beverages. This mode of levy continued until August 1960, when the Central Government, invoking the powers provided under section 19 of the Act, amended the Rules and removed two of the three medicines—namely, Mritasanjibani and Mritasanjibani Sudha—from the Schedule attached to the Rules. Subsequently, in December 1960, the Central Government effected a further amendment, this time deleting the third medicine, Mritasanjibani Sura, from the same Schedule. As a result of those deletions, the various State Governments began to demand excise duties on the three medicines at rates that were considerably higher than the previously prescribed Rs 17.50 per gallon. The petitioners contend that, when the Act came into force, the levy of excise duty on these medicinal preparations fell within item 84 of List I of the Constitution, and that consequently the State Governments were not empowered to impose additional excise duties on the preparations under the separate Excise Acts that were operative in the States. They further argue that, even assuming the preparations satisfy the definition of “medicinal preparation” contained in section 2(g) of the Act and are therefore covered by the Schedule to the Act, the subsequent omission of the three medicines from the list annexed to the Rules should have no legal effect and should not confer upon the State Governments any authority to tax them under their respective Excise Acts. The petitioners also point out that rule 68 of the Rules establishes a Standing Committee to advise the Central Government on all technical aspects relating to the administration of the Act and the Rules, particularly on whether a specific preparation ought to be treated as a genuine medicinal or toilet preparation for the purposes of the Act, and whether it should be classified as a restricted or unrestricted preparation. They submit that, even if the Committee had been consulted on the matter, it was not within its power to advise the Government that the three medicines were not medicinal preparations, should they in fact qualify as such under the definition contained in section 2(g). Accordingly, the petitioners maintain that the Central Government’s action in August and December 1960, which removed the three medicines from the Schedule, was beyond its authority if those medicines are indeed medicinal preparations within the meaning of the statute.

In the proceedings, the petitioners asked the Court for a writ, direction, or order that would prevent the Central Government from implementing the notifications issued in August and December 1960, which had removed three specific preparations from the list annexed to the Rules. They further sought an order directing the State Governments not to levy excise duty on those preparations under the various Excise Acts in force in the different States, prohibiting the collection of any duty that exceeded the rates fixed by the Act, and directing that any duty already collected in excess of those rates be refunded. The Central Government and the several State Governments opposed the petitions. The principal counter‑affidavit was filed on behalf of the Central Government, and the State Governments adopted that document with certain additions. The respondents contended that the three preparations could not be classified as “medicinal preparations containing alcohol” within entry 84 of List I because the preparations were not listed in any recognised Ayurvedic Pharmacopoeia. They further argued that the petitioners had not demonstrated that the preparations were made according to the prescribed specifications, that the proper ingredients were used, or that they were manufactured following the recipes or directions contained in the three Ayurvedic textbooks relied upon by the petitioners. Moreover, the respondents denied that the preparations satisfied the definition of section 2(g) of the Act, asserting that they were not remedies nor efficacious remedies for any human ailment. They emphasized that the Central Government possessed the authority to act on the advice of the Standing Committee concerning whether any preparation should be treated, or continue to be treated, as a genuine medicinal or toilet preparation for the purposes of the Act, or whether it should be classified as a restricted or unrestricted preparation. According to the respondents, the Central Government could, following the Standing Committee’s advice, amend the schedule of medicinal and toilet preparations of the restricted category by issuing notifications, and if a particular preparation fell outside the scope of the Act, the State Governments would be competent to levy excise duties on it under the Excise Acts applicable in their respective jurisdictions. The respondents therefore maintained that the Central Government’s decision to omit the three preparations from the list annexed to the Rules was based on the Standing Committee’s opinion that the preparations were not genuine medicinal preparations, leading to their exclusion from the list and rendering the Act inapplicable to them.

The respondents further asserted that, because the three preparations were omitted from the list annexed to the Rules on the basis of the Standing Committee’s advice, the Act did not apply to them, and consequently the State Governments were free to subject them to excise duties under the various Excise Acts in force in the different States. This position formed the basis of their opposition to the petitioners’ prayer for a writ directing the Central Government not to give effect to the notifications and for a direction to the State Governments to refrain from levying duty on the preparations. The contention was that the omission, being grounded on the Standing Committee’s advice that the preparations were not genuine medicinal preparations, removed them from the regulatory ambit of the Act, thereby allowing the State Governments to impose the duties as provided by their respective Excise statutes.

The Court observed that, because the three preparations were omitted from the list appended to the Rules, the State Governments were consequently free to levy excise duties on them under the various Excise Acts that were in force in the different States. The central issue that required determination, therefore, was whether these three preparations qualified as medicinal preparations containing alcohol that fell within item 84 of List I of the Seventh Schedule to the Constitution – the item on which the Act is based – and consequently whether they satisfied the definition of a medicinal preparation contained in section 2(g) of the Act. The Court noted that if the preparations were indeed medicinal preparations as defined in the statute, they would be subject to the provisions of the Act, and their omission from the schedule annexed to the Rules would not alter their status as medicinal preparations within the meaning of the Act.

Before addressing that principal question, the Court considered a submission made on behalf of the State of Bihar. The submission argued that even if the three preparations were medicinal preparations, they would nonetheless be liable to duty both under the Act and under the various Excise Acts that operated in the States. The Court referred to the Government of India Act, 1935, under which medicinal and toilet preparations were liable to excise duties under entry 40 of List II of the Seventh Schedule to that Act. At the same time, item 45 of List I, which provided for excise duties on tobacco and other goods manufactured or produced in India, expressly excepted medicinal and toilet preparations from that entry. Consequently, until the Constitution came into force, the State Governments possessed the power to impose excise duties on medicinal and toilet preparations.

The Court then explained that the Constitution altered this position. Under the Constitution, medicinal and toilet preparations were excepted from entry 51 of List II of the Seventh Schedule and were placed in entry 84 of List I, which authorises excise duties levied by the Union. Article 277 of the Constitution, however, provides that any tax or duty that was lawfully levied by a State immediately before the commencement of the Constitution may continue to be levied for the same purpose, even though it now falls within the Union List, until Parliament enacts a law to the contrary. Accordingly, the Court held that, so long as Parliament had not enacted any legislation concerning medicinal and toilet preparations, the pre‑Constitution position persisted and the States retained the authority to continue imposing excise duties on such preparations to the same extent as they had before the Constitution’s commencement.

Finally, the Court noted that Parliament enacted the Excise Act concerning medicinal and toilet preparations in 1955, and that Act came into force on 1 April 1957. The Court indicated that the effect of this enactment was to change the earlier legal position, although the detailed consequences of that change were to be examined subsequently.

In this case the judgment observed that the authority of the States to continue levying duties on medicinal and toilet preparations terminated once Parliament enacted a provision that contradicted the saving clause of Article 277 of the Constitution. Article 277 preserved the right of the States to levy excise duties mentioned in the Union List until Parliament made a contrary law; therefore, when Parliament passed the central legislation, the protective effect of Article 277 ceased and the State governments could no longer persist in imposing any duty that they had previously levied under that article. The court further explained that this principle is made explicit by section 21 of the central Act, which states that any law existing in a State at the moment the Act commenced, if it corresponds to the central Act, is repealed. The effect of this repeal is that the various State Excise Acts, under which duties were being imposed on medicinal and toilet preparations containing alcohol, are deemed to have been repealed to the extent that they related to such preparations. The court noted that a separate State law specifically dealing with duties on medicinal and toilet preparations is not required for section 21 to operate; the existing State Excise Acts themselves constitute the corresponding legislation and therefore are repealed for the purpose of taxing those preparations. The State of Bihar contended that the primary aim of its Excise Acts was not merely revenue generation but also the regulation of liquor consumption, which justified the imposition of a heavy duty to curb use. It further argued that the central Act was intended solely to raise revenue and bore no regulatory purpose, and consequently the State Excise Acts, having a dual purpose of revenue and consumption control, could not be considered corresponding laws that were repealed by a statute whose sole purpose was fiscal. The court, however, indicated that it could not discern how the purpose behind a fiscal measure would affect the question of whether the statutes corresponded. Consequently, the court rejected the argument that the regulatory motive of the State statutes barred their repeal under section 21, holding that the correspondence between the central Act and the State Excise Acts was established solely on the basis of their fiscal character.

The Court observed that the various State Excise Acts, insofar as they imposed duties on medicinal and toilet preparations containing alcohol, functioned as fiscal statutes that taxed those preparations. It noted that the central legislation, enacted by Parliament under entry 84 of List I of the Seventh Schedule to the Constitution, was likewise a fiscal statute intended to tax the same preparations. Consequently, the Court held that the State Excise Acts, which had served as the corresponding taxing statutes, were repealed to the extent that they dealt with the taxation of such preparations. The Court emphasized that there was no doubt about the correspondence between the central legislation and the State Excise Acts regarding the levy of duty on medicinal and toilet preparations, and that section 21 of the central Act expressly repealed all State Excise statutes insofar as those levies were concerned. Accordingly, the Court rejected any suggestion that medicinal and toilet preparations could be liable to duty under both the central Act and the State Excise Acts simultaneously. Turning to the next issue, the Court examined whether the three preparations in question fell within the definition of “medicinal preparation” contained in section 2(g) of the central Act. The definition was described as inclusive and encompassed “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 referred to the West Bengal Excise Rules governing the manufacture of these three preparations. According to those rules, the preparations had to be produced according to the recipes and directions set out in the Ayurvedic texts Arka Prakash, Ayurved Sangraha and Bhaisajya Ratnabali. Manufacture was permitted only in bond and only under the supervision of a qualified Kabiraj or a Kabiraji firm employing a qualified Kabiraj. The rules also required that the alcoholic content of the preparations be below forty‑two per cent. The Court explained that the recipes in the mentioned Ayurvedic books identified gur as the basic ingredient, with an additional forty‑two other ingredients that were themselves classified as medicinal drugs under Ayurveda. Water was added to the mixture, which was then sealed for twenty days, presumably to allow fermentation, after which the preparation was obtained by distillation and contained approximately forty‑two per cent alcohol. The texts further described the preparation as a tonic intended to build the body and physique, increase strength and appetite, and promote a healthy, bright appearance. The preparation was also said to be used in critical stages of typhoid fever (SanniPat Jwara), prescribed frequently for cholera, and employed in all conditions of collapse. Finally, the Court noted that the counter‑affidavits filed by the Union and the States in opposition to the petitions did not unequivocally declare that these preparations were not medicinal. The Court pointed out that, for example, the affidavits did not contain a definitive statement denying the medicinal nature of the preparations.

In the affidavit filed by the State of West Bengal, it was asserted that the preparations in question were not solely intended for medicinal purposes and that they could also be used as ordinary alcoholic beverages. In a similar manner, the Union’s affidavit declared that the preparations were not admitted to be effective remedies for any human ailment. Conversely, a series of affidavits were submitted on behalf of the petitioners by registered Kabirajas, indicating that the preparations were manufactured in accordance with the three Ayurvedic texts previously cited and that they were employed for specific diseases, including cholera. The respondents, however, relied upon the opinion of the Standing Committee composed of the Drugs Controller of the Government of India and the Chief Chemist of the Central Revenues Control Laboratory. After examining the formulae, the analytical data, the claims printed on the label, and conducting a tasting test, the Committee concluded that the three preparations should be regarded as simple alcoholic beverages rather than medicinal preparations. As a result of that conclusion, the three items were removed from the list annexed to the Rules framed under the Act. The two members of the Standing Committee did not appear to be experts in Ayurvedic medicine, and no affidavit from any Ayurvedic specialist was filed on behalf of the respondents. Consequently, there was no justification for rejecting the affidavits filed by the petitioners from qualified Ayurvedic practitioners, identified as series F to F‑16. These practitioners were independent of the petitioners and their statements corresponded with the uses prescribed for the preparations in the three Ayurvedic textbooks already referred to. In these circumstances, it was impossible to say that the preparations were not remedies prepared for internal use by human beings, nor that they were not intended to be employed for the treatment, mitigation or prevention of disease in humans. If, therefore, they were remedies prepared for internal consumption and intended for such therapeutic purposes, they would clearly fall within the meaning of clause a.2(g) of the Act and would be subject to taxation under the Schedule to the Act rather than under the various Excise Acts of the respective States. Moreover, the definition of “medicinal preparation” contained in clause a.2(g) did not depart from the meaning of the same expression in item 84 of List I, and thus, upon the Act’s commencement, the States lost the authority to levy excise duty on these preparations. The Court also noted the counter‑affidavit filed on behalf of the State of Uttar Pradesh in this regard.

In the counter‑affidavit filed on behalf of the State of Uttar Pradesh, it was asserted that, based on the formulae alleged by the petitioners in the Schedules, no standard medicinal preparation could be produced because the method of preparation allegedly violated all settled laws of biochemistry. This assertion was supported by a sworn statement of an Excise Inspector belonging to the Excise and Intelligence Bureau of the State of Uttar Pradesh. However, the affidavit does not disclose the professional qualifications or scientific expertise of the deponent that would enable him to make such a definitive statement. Moreover, the affidavit fails to specify which particular laws of biochemistry are said to be contravened by the mode of preparation described in the three Ayurvedic textbooks that have already been referred to in these proceedings. To contrast the position taken in the counter‑affidavit, the Court examined the findings of the Chopra Committee on Indigenous Drugs of India. In paragraph 265, the Committee observed that across different regions of India as many as nine hundred indigenous drugs—including vegetable, mineral and metallic substances—and more than one thousand preparations derived from these drugs are employed by Ayurvedic physicians. The Committee further noted that there is “little doubt” that among the large number of drugs used by Hindu physicians for centuries, some have earned a reputation as genuine cures. This observation establishes that indigenous drugs have long been accepted within the Ayurvedic tradition and that their therapeutic value is recognized, even if modern scientific validation remains limited.

Continuing with paragraph 266, the Committee identified two principal difficulties that hinder the proper assessment of the value of indigenous drugs. The first difficulty is that modern scientists are often unfamiliar with the precise meanings of terms used in Indian pharmacology. The second difficulty arises because western medicine typically attempts to explain the action of a drug by analyzing its individual chemical constituents—such as alkaloids, glucosides, essential oils, antibiotics, or hormones—whereas Indian medicine evaluates the drug as a whole, maintaining that the overall effect of the entire preparation may be distinct from the effect of any single constituent taken in isolation. The Committee affirmed that there is considerable truth to this claim. In paragraph 268, dealing specifically with compound preparations, the Committee highlighted an additional obstacle: pharmacologists frequently encounter challenges when investigating the value of compound medicines, which are used more often than single‑ingredient drugs. The Committee explained that the pharmacological properties and therapeutic value of a combination are often considered in the context of the particular mixture rather than in relation to each individual component studied separately. Consequently, the Committee urged that investigations should focus on the combination as an integrated whole, noting that, at present, no modern scientific methods are available to accomplish this task. These observations demonstrate that the allegation in the Uttar Pradesh counter‑affidavit—that the preparations in question are invalid because they violate settled biochemistry laws—cannot be accepted, especially with regard to the compound preparations under consideration, given the limited research that has been conducted on Ayurvedic medicines to date. The Court also referred to the report of the Udupa Committee concerning the Ayurvedic system of medicines, which at page 132 makes similar observations about the need for specialized expertise in evaluating such preparations.

The Court observed that the question of enacting a Drugs Act for Indian medicines was hindered by the absence of any technical person in the Central Government who possessed detailed knowledge of Ayurvedic drugs, even though a large number of Ayurvedic scholars existed on the pharmacy side whose assistance could be obtained for drafting the necessary legislation. In this regard, the Committee had recommended that an adviser on Ayurvedic drugs be appointed immediately, and that this adviser should have an Ayurvedic Drugs Advisory Committee under his supervision, a step that would facilitate the preparation of the draft bill and also enable the Government to resolve the disputed points concerning Ayurvedic drugs and medicines that were frequently arising. The Committee, which had been constituted in July 1958, noted that the Government of India had not apparently taken any action in line with its suggestions. Consequently, the Court considered that on one side there were three standard Ayurvedic textbooks that described how the questioned preparations were to be made, and there were affidavits from a large number of Ayurvedic practitioners of recognized repute stating that these preparations were medicinal preparations used to alleviate human suffering in certain conditions. On the other side, the Court noted that no affidavit from an Ayurvedic expert had been submitted on behalf of the respondents. The Court, however, referred to an affidavit filed by the Assistant Chemical Examiner of the Government of West Bengal, who possessed experience in examining and analysing alcoholic liquors. According to that affidavit, the chief basis of the three preparations was molasses and gur, a fact already identified from the recipes in the Ayurvedic textbooks. The Examiner further stated that the preparations contained several steam‑volatile products such as furfural, aldehydes, ketones and acids, but that the presence of these substances did not destroy or diminish the alcoholic intoxication effect of the preparations. He also observed that the taste or smell of the preparations did not render them unfit for consumption in large doses and that they could be used as alcoholic beverages. The affidavit did not assert that the preparations were not medicinal; it merely described that they contained about forty‑two percent alcohol and could be used as ordinary alcoholic drinks. The Court therefore concluded that if the preparations are medicinal in nature yet also capable of being used as ordinary alcoholic beverages, they fall within the definition of “medicinal preparation” under the Act and are liable to duty at the rate of Rs 17.50 per gallon of London proof spirit as specified in item I of the Schedule. After considering all the material placed before it, the Court held that the only logical conclusion was that the preparations are indeed medicinal preparations according to the standard Ayurvedic textbooks, even though they may also be consumed as ordinary alcoholic beverages, and consequently they clearly fall within the statutory definition of “medicinal preparation.”

The Court observed that the three preparations were liable to duty under item 1 of the Schedule to the Act. It held that the decision of the Standing Committee, which had resulted in the omission of these preparations from the list annexed to the Rules, did not resolve the issue of whether the preparations qualified as medicinal preparations. Moreover, the Court stated that the omission from the Rules list did not affect the classification of the preparations as medicinal under the Act, and therefore they remained subject to duty under item 1 of the Schedule because they unquestionably fell within that category and could be consumed as ordinary alcoholic beverages. The Court further explained that, because the preparations were medicinal, they could not be taxed under the various Excise Acts operating in the respective States; instead, they were governed solely by the Medicinal and Toilet Preparations (Excise Duties) Act.

Finally, the Court noted that the respondents had contended that the preparations were not prepared according to the formulae prescribed in the Ayurvedic textbooks cited earlier. The Court described this issue as one of fact that could not be resolved on the basis of the materials before it. It observed that the respondents’ allegation was not definitive; indeed, the Union of India had asserted that it was not admitted that the preparations were made using the proper ingredients and in accordance with the recipes and directions set out in the Ayurvedic texts. No evidence had been produced to show that the preparations had been analysed and found to lack the ingredients specified in those texts. The Court referred to the West Bengal Rules, as quoted earlier, which indicated that the preparations were manufactured in bond and that several restrictions applied before they could be issued by the manufacturer. No material had been presented to demonstrate that the preparations were not made in accordance with the directions contained in the Ayurvedic textbooks. The Court reasoned that, if the preparations were not made as prescribed, the excise staff would have inspected and identified any non‑compliance. It pointed out that the first rule in the West Bengal Excise Compilation required that the preparations be produced according to the recipes and directions found in Arka Prakash, Ayurved Sangraha, and Bhaisajya‑Ratnabali. If this rule were being ignored, the Court expected someone to have sworn that, despite the rule’s requirement, the preparations were not made accordingly. Moreover, the Court noted that any contravention of the rule would give the State Government authority to take action against those who violated it, but no such action had been documented.

There has been no material placed before the Court that shows any notice of action having been taken against the manufacturers. Consequently, the Court is not prepared to hold that the three preparations in question fail to conform to the Ayurvedic textbooks. Moreover, the Court’s determination that these three items constitute medicinal preparations rests upon the finding that they have been produced in accordance with the directions set out in the Ayurvedic textbooks and also in compliance with the rules prescribed in the West Bengal Excise Compilation. The Court further presumes that a similar situation prevails in other States where such preparations are manufactured. Although the petitioners in the present proceedings appear to be largely based in Calcutta and the manufacturing of the questioned preparations is likely to be occurring in Calcutta, the Court is satisfied that the same principles apply. Accordingly, the petitions are allowed and the Court directs that the three medicinal preparations shall not be subject to taxation under the various Excise Acts that are operational in the different States. Their taxation may be levied only pursuant to the provisions of the Medicinal and Toilet Preparations (Excise Duties) Act. The Court makes no order whatsoever concerning any claim for refund, leaving that matter to be pursued by the petitioners before the respective State Governments as provided by law. The petitioners are awarded costs against the respondents, with each side bearing its own legal fees. The petitions are therefore allowed.