Adhyaksha Mathur Babu'S Sakti... vs Union Of India

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

Court: Supreme Court of India

Case Number: Not extracted

Decision Date: 7 September, 1962

Coram: B.P. Sinha, J.C. Shah, K. Subba Rao, K.N. Wanchoo, N. Rajgopala Ayyangar, S.J. Imam

In the matter titled Adhyaksha Mathur Babu’s Sakti versus Union of India, decided on 7 September 1962, the Supreme Court of India heard a group of six petitions that were filed under article 32 of the Constitution. All six petitions raised the same substantive issue, and the Court therefore considered them together. The central question presented to the Court was whether the various State governments possessed the authority to impose tax on three specific Ayurvedic preparations—Mirtasanjibani, Mritasanjibani Sudha and Mritasanjibani Sura—produced by the petitioners, pursuant to the excise statutes that were then operating in each State. The petitions also raised ancillary questions concerning the legality of certain restrictions that had been placed on the import, export, possession and sale of these preparations. However, counsel for the petitioners clarified before the Court that they were electing to press only the primary issue, namely whether the State‑level excise statutes could lawfully be applied to these three Ayurvedic medicines. The Court accordingly limited its analysis to this point alone and resolved to address solely the question of State taxation of the preparations in the present proceedings.

The petitioners explained that they were engaged in the manufacture of medicinal products in accordance with the traditional Ayurvedic system of medicine, and that among the items they produced were the three preparations in dispute. These medicines were prepared by means of fermentation and distillation, strictly following the formulae set out in the recognized Ayurvedic texts known as Ayurvedic Sangraha, Bhaisajya Ratnabali and Arka Prakash. According to the petitioners, these works incorporate extracts from all the authoritative ancient Ayurvedic treatises that are accepted throughout India and function as the standard pharmacopoeias for Ayurvedic medicine in the several States. Although the three products bear distinct names, the petitioners asserted that they are, in reality, a single medicine prepared from one common formula as prescribed in those texts. They further contended that the medicines are prepared in conformity with the prevailing Ayurvedic pharmacopoeias of the various States and that they are effective in treating several conditions, including typhoid fever in a collapsed state, cholera, loss of appetite with weakened digestion, rheumatism and sciatica, and that they serve to remove weakness, impart strength and vigor, and act as a general tonic and restorative for convalescent patients. Prior to 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 distribution of legislative powers concerning excise. Under item 51 of List II of the Seventh Schedule, the States were given the power to levy excise duty on alcoholic liquor for human consumption and on opium, Indian hemp and other narcotic drugs and narcotics, but not including

In this case, the Court observed that the Constitution assigned the power to levy excise duties on medicinal and toilet preparations that contain alcohol or substances such as opium to the Union government. Specifically, under item 84 of List I of the Seventh Schedule, the Union was given authority to impose excise duties on tobacco and other goods produced in India, with two explicit exclusions: alcoholic liquors for human consumption and opium, Indian hemp, and other narcotic drugs. However, the provision expressly included medicinal and toilet preparations that contain alcohol or any substance like opium. Consequently, the constitutional arrangement removed the right of the States to charge excise on such preparations and transferred that authority to the Union. The Court also noted that Article 277 of the Constitution preserved the continuance of any taxes, duties, cesses, or fees that had been lawfully levied by a State or local authority immediately before the Constitution came into force, even if those levies fell within the Union List, until Parliament enacted a law to the contrary. Accordingly, State governments continued to levy excise duties on medicinal and toilet preparations containing alcohol or opium until 1957, because Parliament had not yet passed any legislation altering that situation.

The Court further explained that Parliament enacted the Medicinal and Toilet Preparations (Excise Duties) Act, No. 16 of 1955, which came into force on 1 April 1957. The present dispute concerned only medicinal preparations, and the Act defined a “medicinal preparation” in section 2(g) as any drug that is a remedy or prescription prepared for internal or external use by humans or animals, as well as any substance intended for use in the treatment, mitigation, or prevention of disease in humans or animals. Section 3 of the Act prescribed that excise duties be levied at the rates specified in the Schedule on all dutiable goods manufactured in India. Section 19 empowered the Central Government to make rules to implement the Act, and clause 19(2)(xx) specifically authorized the government to publish in the Official Gazette lists of names and descriptions of preparations that would fall under any particular item of the Schedule, or to regulate their manufacture, transport, and distribution. The Schedule, excluding the explanatory notes that were irrelevant to the present matter, set out the duty rates as follows: Item 1 covered medicinal and toilet preparations containing alcohol that were prepared by distillation or by the addition of alcohol, possessed the strength of London proof spirit, and were capable of being consumed as ordinary alcoholic beverages; the duty for such preparations was fixed at Rs. 17 per gallon. Item 2 dealt with medicinal and toilet preparations not otherwise specified that contained alcohol, the details of which continued in the subsequent text of the judgment.

In the schedule that classified goods for excise duty, the provisions concerning Ayurvedic preparations were expressed in three categories. The first category listed Ayurvedic preparations that contained self‑generated alcohol but were not capable of being consumed as ordinary alcoholic beverages; no duty was prescribed for these items. The second category covered Ayurvedic preparations that also contained self‑generated alcohol but were capable of being consumed as ordinary alcoholic beverages, for which a duty of rupees three per gallon was prescribed. The third category applied to all other preparations, and a duty of rupees five per gallon of the strength of London proof spirit was prescribed. A separate entry dealt with medicinal and toilet preparations that did not contain alcohol but that contained opium, Indian hemp, or other narcotic drugs; no duty was prescribed for those items. The Central Government framed Rules under the Act in 1956, and the administration of both the Act and the Rules was assigned to the State Governments. Alongside the Rules, a list of medicinal preparations that could be used as ordinary alcoholic beverages was published, and rule 65 stipulated that until a standard Ayurvedic pharmacopoeia was prepared by the Central Government, the pharmacopoeias presently in use in the various States would be recognised as standard Ayurvedic pharmacopoeias.

The petitioners argued that three specific Ayurvedic preparations—Mritasanjibani Sura, Mritasanjibani, and Mritasanjibani Sudha—fell within the definition of “medicinal preparation” contained in section 2(g) of the Act. According to the Schedule to the Rules, Mritasanjibani Sura was listed as a medicinal preparation in 1957, and in 1958 the other two names were added under the same heading, the petitioners noting that the three denominations referred to the same medicine. The Act and the Rules became effective on 1 April 1957 as authorized by section 1(3), which empowered the Central Government to fix the commencement date by Gazette notification. After the commencement, the petitioners paid excise duty on the three medicines under item 1 of the Schedule to the Act at a rate of rupees 17.50 per gallon of the strength of London proof spirit, because the preparations were considered medicinal preparations containing alcohol, prepared by distillation or to which alcohol had been added, and capable of being used as ordinary alcoholic beverages. This arrangement continued until August 1960, when the Central Government, invoking section 19 of the Act, amended the Rules and removed Mritasanjibani and Mritasanjibani Sudha from the Schedule to the Rules. A further amendment in December 1960 eliminated Mritasanjibani Sura from the Schedule. Following these deletions, various State Governments began to demand excise duties on the three preparations at rates considerably higher than the rupees 17.50 per gallon previously prescribed. The petitioners contended that, because the levy of excise duties on these medicinal preparations fell within item 84 of List I at the time the Act came into force, the State Governments were not entitled to impose additional duties under the separate Excise Acts in force in the States.

In the petitions the applicants argued that the State excise statutes could not lawfully impose duties on the three preparations because the central legislation already covered those items under item 84 of List I. They maintained that if the preparations truly fell within the meaning of “medicinal preparation” as defined in section 2(g) of the Act and were therefore listed in the Schedule to the Act, the removal of the three items from the schedule annexed to the Rules would be irrelevant. Consequently, such removal could not create any authority for the State governments to tax the preparations under the various State Excise Acts that were then in force. The petitioners further pointed out that Rule 68 of the Rules establishes a Standing Committee to advise the Central Government on technical matters relating to the administration of the Act and the Rules. In particular, the Committee is to advise whether a specific preparation should be treated, or continue 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 an unrestricted preparation. The petitioners contended that even if the Committee had been consulted, it could not have lawfully advised the Government to treat the three preparations as non‑medicinal when, in fact, they satisfy the definition of a medicinal preparation in section 2(g). Accordingly, the petitioners argued that the Central Government lacked the power to issue the notifications of August 1960 and December 1960 that removed the three preparations from the list attached to the Rules. They sought a writ, direction or order directing the Central Government not to give effect to those notifications, to restore the three preparations to the list, and to direct the State governments not to levy excise duty on them under the State Excise Acts. The petitioners also asked that the States be prohibited from collecting excise duties in excess of the rate fixed by the Act and that any duty already collected in excess be refunded.

The respondents, comprising the Central Government and the State governments concerned, opposed the petitions. The Central Government filed a principal counter‑affidavit, which the State governments adopted with certain additions. Their principal contention was that the three preparations could not be classified as “medicinal preparations containing alcohol” within entry 84 of List I because they were not mentioned in any recognised Ayurvedic pharmacopoeia. They further denied that the preparations were made according to the specifications alleged by the petitioners, asserting that the proper ingredients were not used and that the manufacturing did not follow the recipes or directions given in the three Ayurvedic textbooks relied upon by the petitioners. In addition, the respondents denied that the preparations satisfied the definition of a medicinal preparation under section 2(g) of the Act, and they rejected the claim that the preparations were efficacious remedies for any human ailment. The respondents also emphasized that the Central Government has authority, based on the advice of the Standing Committee, to decide whether any preparation should be treated as a genuine medicinal or toilet preparation for the purposes of the Act, and whether it should be classified as restricted or unrestricted. According to the respondents, the Central Government may, on the Committee’s advice, amend the Schedule of medicinal and toilet preparations of the restricted category by issuing notifications. If a preparation is found to fall outside the scope of the Act, the State governments would then be competent to levy excise duties on it under the applicable State Excise Acts.

The respondents asserted that the three preparations did not satisfy the definition contained in section 2(g) of the Act. They further denied that the preparations qualified as remedies, let alone effective remedies, for any human disease. Their submissions emphasized that the Central Government possessed authority, based on the advice of the Standing Committee, to determine whether any preparation should be regarded as a genuine medicinal and 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, acting on the Standing Committee’s advice, could from time to time amend the Schedule of medicinal and toilet preparations of the restricted category by issuing notifications. If a particular preparation were found to fall outside the scope of the Act, the State Governments would then be competent to levy excise duties on it under the various Excise Acts operative in the States. The respondents contended that the Central Government’s decision to omit the three preparations from the list annexed to the Rules framed under the Act was based on the Standing Committee’s opinion that the preparations were not genuine medicinal preparations. Consequently, the omission meant that the Act did not apply to them, and the State Governments were consequently free to impose excise duties on the preparations under the respective State Excise Acts. The principal issue for determination, the Court observed, was whether the three preparations were indeed medicinal preparations containing alcohol falling within item 84 of List I of the Seventh Schedule to the Constitution, the constitutional basis for the Act, and therefore whether they qualified as medicinal preparations under section 2(g) of the Act. The Court noted that if the preparations met the definition in section 2(g), they would be governed by the Act irrespective of their omission from the list appended to the Rules. Before addressing this core question, the Court considered a contention raised by the State of Bihar that, even if the preparations were medicinal, they could still be subject to excise duty both under the Act and under the various State Excise Acts. The Court recalled that under the Government of India Act, 1935, medicinal and toilet preparations were liable to excise duty under entry 40 of List II of the Seventh Schedule to that Act. Conversely, item 45 of List I of the same schedule, which dealt with excise on tobacco and other goods manufactured in India, expressly excluded medicinal and toilet preparations. Accordingly, until the Constitution came into force, the State Governments retained the power to levy excise duties on such preparations.

In this case, the Court observed that the Constitution had altered the position that existed under the Government of India Act. Under the Constitution, medicinal and toilet preparations were removed from entry 51 of List II of the Seventh Schedule, which dealt with duties of excise that could be imposed by the States. Instead, those preparations were placed in entry 84 of List I of the same Schedule, a provision that authorised duties of excise to be levied only by the Union. The Court then explained the operation of Article 277, which preserved any tax or duty that had been lawfully collected by a State immediately before the Constitution came into force. According to Article 277, such a tax could continue to be imposed even though it now fell within the Union List, unless Parliament later enacted a law providing otherwise. Consequently, the Court held that, for as long as Parliament failed to enact legislation dealing with medicinal and toilet preparations, the rule that had operated under the Government of India Act remained in effect. This meant that the States retained the authority to continue levying excise duties on medicinal and toilet preparations to the same extent to which they had been collected at the moment the Constitution commenced.

The Court further noted that Parliament exercised its power in 1955 by passing an Act that imposed excise duties on medicinal and toilet preparations. That Act became operative on 1 April 1957. The Court explained that the commencement of the Act terminated the States’ power to levy any further excise duty on such preparations, as the constitutional saving in Article 277 ceased to operate once Parliament made a contrary provision. The Court emphasized that the cessation of the saving clause was clear and absolute, and that after the Act’s commencement the State governments could no longer levy any duty that they might previously have collected under Article 277. To reinforce this conclusion, the Court referred to section 21 of the Act, which expressly provided that any State law existing immediately before the Act’s commencement, if it corresponded to the new Act, was repealed. The effect of that repeal, the Court held, was that the various State Excise Acts that had been used to levy duty on medicinal and toilet preparations containing alcohol were deemed repealed to the extent that they applied to those preparations. The Court clarified that a separate State law specifically covering excise duty on medicinal and toilet preparations was not necessary for section 21 to operate; the existing Excise Acts were sufficient to bring the repeal into effect, and those Acts had undeniably been the basis for the duty that had been collected.

The Court held that the excise statutes of the States which imposed duty on medicinal and toilet preparations containing alcohol must be regarded as statutes that correspond to the Central Act for the purpose of levying duty on such preparations, and that, consequently, those State statutes were repealed to the extent that they dealt with medicinal and toilet preparations by virtue of section 21 of the Central Act. The State of Bihar argued that the State excise legislation was not enacted solely to raise revenue, asserting instead that a primary objective was to regulate liquor consumption and that the statutes therefore imposed a heavy duty as a deterrent. The State further contended that the Central Act was intended only to impose duties for revenue purposes and bore no connection with any regulatory aim of reducing liquor consumption. On the basis of that contentions, it was submitted that because the State statutes served a dual purpose—(i) revenue generation and (ii) curbing liquor consumption—they could not be classified as “corresponding law” that was superseded by the Central Act, which was said to have a single purpose of raising revenue. The Court, however, expressed that it could not discern how the underlying purpose of a fiscal measure could affect the determination of whether a law corresponded to the Central Act. It observed that, insofar as the State statutes imposed duties on medicinal and toilet preparations containing alcohol, they functioned as fiscal statutes that taxed those preparations. The Central Act, enacted by Parliament under entry 84 of List I of the Seventh Schedule of the Constitution, is likewise a fiscal statute for taxing the same items. Consequently, the Court concluded that the State excise statutes were indeed the corresponding taxing statutes for such preparations, and therefore they were repealed by section 21 to the extent of any taxation. There was no doubt, the Court said, that a correspondence existed between the Central Act and the various State excise statutes with respect to the levying of duty on medicinal and toilet preparations, and that section 21 of the Central Act repealed all such State statutes in that regard. Accordingly, there could be no situation in which the preparations were liable to duty under both the Central Act and the State laws simultaneously, and the State’s contention was rejected.

The Court then turned to the question of whether the three preparations in issue qualified as “medicinal preparations” under section 2(g) of the Central Act. That definition, the Court noted, is an inclusive one and embraces “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.” Referring to the West Bengal Excise Rules that govern the manufacture of these three preparations, the Court observed that the rules require the preparations to be produced in accordance with a specific recipe. The Court therefore considered the statutory definition and the manufacturing regulations together in determining the status of the preparations under the Act.

In the matter before the Court, it was observed that the manufacture of the three preparations must follow the directions and procedures set out in the Ayurvedic texts Arka Prakash, Ayurved Sangraha and Bhaisajya Ratnabali. The law requires that such manufacture be carried out only in bond and under the supervision of a qualified Kabiraj, or by a Kabiraji firm that engages a qualified Kabiraj to oversee the manufacturing operations. The Court further noted that the alcoholic strength of the preparations must not exceed forty‑two percent. According to the recipes described in these Ayurvedic books, the principal ingredient is gur, and the formula calls for forty‑two additional ingredients, all of which are classified as medicinal drugs under Ayurveda. Water is added to the mixture, which is then sealed for a period of twenty days, a step that appears intended to allow fermentation. After the fermentation period, the mixture is distilled, producing a final product that contains approximately forty‑two percent alcohol. The same texts state that the resulting preparation is employed as a tonic to strengthen the body, improve physique, increase strength and appetite, and to give a healthy and bright appearance. It is also prescribed for use in the critical stages of Sannipat Jwara (typhoid fever), for frequent dosing in cholera, and more generally in all conditions of collapse.

The Court recorded that the counter‑affidavits submitted by the Union and the States opposing the petitions do not unequivocally declare that these preparations are non‑medicinal. For instance, the affidavit filed on behalf of the State of West Bengal acknowledged that it was not admitted that the preparations are solely for medicinal purposes and also suggested that the alcoholic preparations could be used as ordinary alcoholic beverages. Similarly, the Union’s affidavit stated that it was not admitted that the preparations constitute effective remedies for any human ailment. Conversely, a series of affidavits were filed on behalf of the petitioners by registered Kabirajas, indicating that the preparations are produced in accordance with the three cited Ayurvedic books and are employed for specific diseases, including cholera. The respondents, however, relied on the opinion of a Standing Committee comprising the Drugs Controller of the Government of India and the Chief Chemist of the Central Revenues Control Laboratory. After examining the formulas, analytical data, label claims, and conducting a tasting test, the Committee concluded that the three preparations should be regarded as straightforward beverages rather than medicinal preparations. This opinion led to the removal of the three preparations from the list annexed to the Rules framed under the Act. The Court observed that the two members of the Standing Committee did not appear to be experts in Ayurvedic medicines and that no affidavit from an Ayurvedic expert was submitted on behalf of the respondents. In contrast, affidavits from qualified Ayurvedic practitioners (series F to F 16) were filed by the petitioners. These practitioners are independent of the petitioners, and the Court found no reason to reject their affidavits.

In the affidavits filed on behalf of the petitioners, qualified Ayurvedic practitioners affirmed that the statements made in their affidavits corresponded with the uses prescribed for the three preparations in the three Ayurvedic textbooks previously cited. Consequently, the Court found it impossible to hold that these preparations are not remedies intended for internal consumption by humans and that they are not meant to be employed in the treatment, mitigation, or prevention of disease. If, as the affidavits demonstrate, the preparations are indeed remedies prepared for internal use and are intended for therapeutic purposes, they fall squarely within the definition of a “medicinal preparation” contained in section 2(g) of the Act. Under that definition, the preparations are subject to taxation according to the Schedule to the Act rather than under the various Excise Acts of the individual States concerned. Moreover, the definition of “medicinal preparation” in section 2(g) does not diverge from the meaning of the same expression in item 84 of List I of the Constitution. Accordingly, when the Act came into force, the States lost the authority to levy excise duty on these items, and the appropriate tax liability shifted to the central schedule provided by the Act.

The Court also examined the counter‑affidavit filed on behalf of the State of Uttar Pradesh, which asserted that, based on the formulae set out in the petitioners’ schedules, no standard medicinal preparation could be produced because the mode of preparation allegedly contravenes all settled laws of biochemistry. That statement was sworn by an Excise Inspector of the Excise and Intelligence Bureau of Uttar Pradesh. The Court noted, however, that the counter‑affidavit did not disclose the deponent’s qualifications, rendering it unclear whether the deponent possessed the expertise necessary to make a definitive biochemistry claim. Furthermore, the affidavit failed to specify which particular biochemistry laws were allegedly violated by the preparation methods described in the three Ayurvedic textbooks. In contrast, the Court referred to the report of the Chopra Committee on Indigenous Drugs of India. Paragraph 265 of the Committee’s report observed that up to nine hundred indigenous drugs—vegetable, mineral, and metallic—and more than one thousand preparations derived from them are used by Ayurvedic physicians across the country, and that many of these have earned a reputation as cures. Paragraph 266 highlighted two major difficulties in assessing the value of such indigenous drugs: first, modern scientists are often unfamiliar with the precise terminology of Indian pharmacology; second, while Western medicine explains a drug’s action in terms of isolated chemical constituents such as alkaloids, glucosides, essential oils, antibiotics, or hormones, Indian medicine evaluates the action of the whole drug, believing that the overall effect may differ from that of any single constituent. These observations undermine the assertion in the Uttar Pradesh counter‑affidavit that settled biochemistry laws categorically preclude the medicinal nature of the compound preparations in question.

The Court observed that the Committee emphasized the view that a drug should be considered in its entirety because the overall action of the whole drug often differs from the action of any single constituent taken alone. The Committee affirmed that this observation contained a considerable degree of truth. In the discussion of compound preparations, the Committee identified an additional difficulty faced by pharmacologists. Frequently, compound medicines are employed more often than single‑ingredient drugs, yet the investigation of their pharmacological properties and therapeutic value is regarded as concerning the specific combination rather than each individual component. Consequently, the Committee urged that research should focus on the combination as a whole, although it noted that no modern scientific methods were presently available to accomplish this.

The Court held that these findings of the Chopra Committee demonstrated that the contention advanced in the counter‑affidavit filed on behalf of the State of Uttar Pradesh, which relied on so‑called settled laws of biochemistry, could not be accepted—particularly with respect to the three compound preparations under consideration—because research on Ayurvedic medicines had been extremely limited. The Court also referred to the report of the Udupa Committee on the Ayurvedic system of medicines. At page 132, that Committee observed that the Central Government lacked technical personnel possessing detailed knowledge of Ayurvedic drugs, even though many Ayurvedic scholars with expertise in pharmacy were available to assist in drafting appropriate legislation. The Committee therefore recommended that an adviser on Ayurvedic drugs be appointed immediately, with an Ayurvedic Drugs Advisory Committee under his supervision, to facilitate the drafting of a suitable bill and to aid the Government in resolving the numerous disputed points concerning Ayurvedic drugs and medicines that were emerging. The Udupa Committee had been constituted in July 1958, but the Court noted that the Government of India had not acted upon the Committee’s suggestions.

In light of these circumstances, the Court noted that on one side there existed three standard Ayurvedic textbooks describing how the preparations in question were formulated, together with affidavits from a large number of reputed Ayurvedic practitioners affirming that these preparations were medicinal products intended to alleviate human suffering in certain conditions. On the other side, there was no affidavit from an Ayurvedic expert supporting the respondents. The Court, however, referred to an affidavit submitted by the Assistant Chemical Examiner of the Government of West Bengal, an individual experienced in examining and analysing alcoholic liquors. According to that affidavit, the chief bases of the three preparations were molasses and gur, a fact already indicated by the recipes in the Ayurvedic textbooks. The affidavit further stated that the preparations contained several steam‑volatile substances such as furfural, aldehydes, ketones and acids, but that the presence of these substances did not diminish or eliminate the intoxicating effect of the alcohol in the preparations. It also affirmed that the taste or smell of the preparations did not render them unsuitable for consumption in large quantities and that they could be used as alcoholic beverages. Importantly, the affidavit did not assert that the preparations were not medicinal; it merely observed that the preparations contained approximately forty‑two percent alcohol and could be consumed as ordinary alcoholic drinks. Accordingly, the Court concluded that if the preparations were medicinal yet also capable of being used as ordinary alcoholic beverages, they would fall within the scope of the Act and would be liable to duty under item No. 1 of the Schedule at the rate of Rs 17.50 per gallon of London proof spirit.

The expert affidavit stated that the three Ayurvedic preparations contained several steam‑volatile substances, specifically furfural, aldehydes, ketones and acids, and that the presence of these compounds did not diminish or lessen the intoxicating effect of the alcohol contained in the preparations. The affidavit further observed that the taste and odor of the preparations did not render them unsuitable for consumption in large quantities and that they could be used as an alcoholic beverage. Importantly, the affidavit did not declare that the preparations were not medicinal; it merely recorded that the preparations contained approximately forty‑two per cent alcohol and could be consumed as ordinary alcoholic drinks. Consequently, the Court observed that if the preparations qualified as medicinal yet were also capable of being drunk as ordinary alcoholic beverages, they would fall within the ambit of the Act and would be subject to duty under item 1 of the Schedule at the rate of Rs 17.50 nP per gallon of the strength of London proof spirit.

After reviewing all the material placed before it, the Court concluded that, according to the standard Ayurvedic textbooks already cited, the preparations qualified as medicinal preparations, even though they could also be used as ordinary alcoholic beverages. Accordingly, the preparations clearly fell within the definition of “medicinal preparation” and were liable to duty under item 1 of the Schedule to the Act. The Court noted that the decision of the Standing Committee, which had omitted these three preparations from the list annexed to the Rules, did not settle the question of whether they were medicinal preparations. Moreover, the omission from the Rules did not alter their status as medicinal preparations within the meaning of the Act, provided they were indeed medicinal, a position the Court affirmed. Therefore, the preparations were unquestionably liable to duty under item 1 of the Schedule, as they were capable of consumption as ordinary alcoholic beverages, although they could not be taxed under the various State Excise Acts because they were governed by the Act as medicinal preparations.

The respondents contended that the preparations were not produced according to the formulas set out in the referenced Ayurvedic textbooks. The Court identified this issue as a factual dispute that could not be resolved on the basis of the evidence before it. The Court also observed that the respondents’ allegation was not definitive; for example, 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 prescribed in the Ayurvedic texts.

The Court observed that no material had been placed on record to show that the three preparations had been chemically analysed and found to lack the ingredients specified in the Ayurvedic texts. It further noted that, according to the West Bengal Rules cited from the West Bengal Excise Compilation Part Two, the preparations were manufactured under bond and were subject to several restrictions before the manufacturer could issue them. The Court found that none of the submissions demonstrated that the preparations were in fact produced contrary to the directions contained in the Ayurvedic textbooks. It reasoned that, if the manufacturers had deviated from the prescribed recipes, the excise officers would have inspected the process and reported the deviation. The Court highlighted that the first rule in the West Bengal Excise Compilation expressly required that the preparations be produced according to the recipes and directions given in Arka Prakash, Ayurved Sangraha and Bhaisajya‑Ratnabali. The Court added that, had the rule been disobeyed, it would have expected some official to testify that, despite the rule, the preparations were not made according to those texts. It further stated that any contravention of the rule would give the State Government authority to take action against violators, yet no evidence of such action had been presented. Consequently, the Court declined to hold that the preparations were not prepared in accordance with the Ayurvedic textbooks. It based its finding that the three items were medicinal preparations on their compliance with both the Ayurvedic directions and the West Bengal Excise rules. The Court presumed that a similar situation existed in other states where the preparations were manufactured, observing that the petitioners were primarily from Calcutta and that the manufacturing seemed to occur there.

The Court therefore allowed the petitions and directed that the three medicinal preparations should not be taxed under any of the Excise Acts currently in force in the various states. It held that taxation of these preparations could only be pursued under the provisions of the Medicinal and Toilet Preparations (Excise Duties) Act. The Court declined to issue any order regarding a claim for refund, stating that the petitioners could pursue that matter against the respective State Governments according to law. It ordered that the petitioners be awarded costs against the respondents, limited to one set of hearing fees. The Court clarified that the absence of a refund order did not prejudice the petitioners, because the legal mechanism for obtaining any refund lay with the respective State authorities. It emphasized that this cost award was intended to compensate the petitioners for the expenses they had necessarily incurred in presenting their case before the Court. It further stated that the respondents were liable to pay these costs promptly, and that the amount would be calculated in accordance with the standard rates applicable to hearing fees. By allowing the petitions, the Court affirmed that the three preparations would be treated solely as medicinal and toilet preparations for the purpose of excise taxation.