1981 (9) TMI 275 - SC - Central Excise

Whether a medicinal preparation is a bona fide medicinal preparation or not and as to the total requirement of the medicinal preparations containing alcohol or intoxicating drug or in which alcohol is self-generated during the process of their manufacture for the whole of the State during one year? Whether there is demand for the petitioner s medicinal preparations not only in the State but throughout the country and to limit the quantity to be manufactured taking into account the requirements of the State alone is but an abridgment on the freedom of inter-State trade and commerce Held that - The restrictions imposed by s. 12B as to the alcoholic content of medicinal and toilet preparations and the requirement that they shall not be manufactured except and in accordance with the terms and conditions of a licence granted by him are nothing but reasonable restrictions within the meaning of Art. 19(6). The impugned provisions therefore cannot be struck down as offending Art. (1) (g) of the Constitution. It is to be observed that restriction imposed by s. 12A of the Act as to the quantity of medicinal preparations to be manufactured relates not only to such preparations to which alcohol is added but also to medicinal preparations in which alcohol is self-generated. There can be no doubt that ayurvedic asavas and aristhas which are capable of being misused as alcoholic beverages can come within the purview of the definition of liquor contained in s. 3(10) of the Act being of the Spirituous Preparations (Control) Rules 1969 liquids containing alcohol The contention that Note to r. 3(1) is an unreasonable restriction on the freedom of trade guaranteed under Art. 19(1) (g) of the Constitution has no substance. It provides that unless otherwise declared by the Expert Committee asavas and aristas and other preparations containing alcohal are deemed to be spurious if their self-generated alcohol content exceeds 12% by volume. It is a matter of common knowledge that such preparations are always likely to be misused as a substitute for alcoholic beverages and therefore the restriction imposed by s. 12A is a reasonable restriction within the meaning of s 19(6) of the Constitution S 12A has no such effect. As already stated the expression shall have regard to means shall take into consideration . All that the provision enjoins is that the Commissioner shall have regard to the total requirements for consumption and use in the State while fixing the quantity of the medicinal preparations to be manufactured. Furthermore the challenge with regard to Art. 301 does not arise as admittedly the Bill was reserved for the assent of the President and is therefore protected by Art. 304(b) of the Constitution. It is not disputed that the provisions are regulatory in nature and they impose reasonable restrictions on the freedom of trade. Appeal dismissed.

Summary

Issues Involved:
1. Legislative Competence of State Legislature
2. Violation of Fundamental Rights under Article 19(1)(g)
3. Conflict with Central Legislation
4. Levy of Supervisory Charges
5. Levy of Excise Duty on Excess Wastage

Issue-wise Detailed Analysis:

1. Legislative Competence of State Legislature:
The primary contention was whether the State Legislature had the competence to enact the impugned provisions under Entry 8, List II of the Seventh Schedule to the Constitution. The appellants argued that the field was occupied by the Central Act and Rules, thus precluding the State from legislating on the matter. The judgment clarified that the enactment of the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 by Parliament under Entry 84, List I, or the framing of the Central Rules, does not prevent the State Legislature from making a law under Entry 8, List II concerning 'intoxicating liquors'. The court emphasized that the impugned legislation is confined to 'intoxicating liquor' and seeks to regulate the manufacture of bona fide medicinal preparations, thus falling within the powers granted to the State Legislature under Entry 8, List II.

2. Violation of Fundamental Rights under Article 19(1)(g):
The appellants contended that the impugned provisions violated their fundamental right to practice any profession or to carry on any occupation, trade, or business guaranteed under Article 19(1)(g) of the Constitution. The court held that no citizen has a fundamental right to trade in noxious and dangerous goods like intoxicating drugs or liquors. The power to legislate on intoxicating liquor includes the power to regulate the manufacture and sale of medicinal preparations containing alcohol to prevent their misuse as alcoholic beverages. The court found that the restrictions imposed by Sections 12A and 12B of the Act were reasonable and necessary to prevent misuse, thereby not violating Article 19(1)(g).

3. Conflict with Central Legislation:
The appellants argued that the impugned provisions conflicted with the Central Act and Rules, particularly Rule 45(1) of the Central Rules, which provides for supervision to ensure proper use of alcohol in medicinal preparations. The court found no merit in this contention, stating that the Central and State Legislations operate in different fields. The Central Act aims to levy and collect excise duties on medicinal and toilet preparations containing alcohol, while the State Act regulates the proper utilization of rectified spirit in such preparations. The court concluded that any incidental encroachment by the State Act on the field occupied by the Central Act does not invalidate the State legislation.

4. Levy of Supervisory Charges:
The appellants challenged the validity of Section 14(e) of the Act, which provides for the collection of supervisory charges, arguing that it conflicted with Rule 45(1) of the Central Rules and lacked quid pro quo. The court distinguished this case from the Hyderabad Chemical and Pharmaceutical Works Ltd. case, where supervisory charges were levied at the stage of manufacture. Here, the charges were for supervision at the stage of supply and utilization of rectified spirit. The court upheld the validity of Section 14(e), stating that the State has the power to prescribe the mode of supervision and recover the cost from the licensee. The court also noted that the element of quid pro quo is not always necessary for a fee and that the supervisory charges could be justified as a fee for services rendered by the State.

5. Levy of Excise Duty on Excess Wastage:
The appellants contended that Rule 13 of the Kerala Rectified Spirit Rules, 1972, which provides for the levy of excise duty on excess wastage of alcohol, could not be supported by Section 17 of the Act. The court found this contention untenable, stating that Rule 13(2) is a corollary of Rule 13(1), which exempts duty on alcohol present in the finished product. The court held that beyond the permissible limit of wastage, the State has the right to levy duty on excess wastage of alcohol, thereby supporting the validity of Rule 13(2).

Conclusion:
The court dismissed the appeal and the special leave petition, upholding the constitutional validity of the impugned provisions of the Abkari Act and the Kerala Rectified Spirit Rules. The court found that the State Legislature had the competence to enact the provisions, which did not violate fundamental rights under Article 19(1)(g), and that the provisions did not conflict with the Central legislation. The levy of supervisory charges and excise duty on excess wastage was also upheld.