1. Application for licence under Medicinal and Toilet Preparation (Excise Duties) Act, 1955 — Rejection based on under-utilisation of installed capacity by other manufacturers — Writ petition dismissed. (Para 3 , 4 )
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1998 Supreme(SC) 1099
SUPREME COURT OF INDIA
G.T.Nanavati : S.P.Kurdukar
Dilip K.Singh
Versus
State Of Bihar
Case No. : 5464 of 1998
Date of Decision : 10/30/98
A licence application must be decided on its own merits and in accordance with law. Rejection based on extraneous considerations, such as the under-utilisation of installed capacity by other manufacturers in the region, is legally unsustainable.
Headnote:(A) Medicinal and Toilet Preparation (Excise Duties) Act, 1955 - Grant of licence - Rejection of application based on under-utilisation of installed capacity by other manufacturers - Application for licence must be decided on its own merits and in accordance with law - Rejection based on extraneous considerations is unsustainable. (Para 6)
Facts of the case:
An entity engaged in manufacturing ayurvedic medicines applied for a licence to manufacture medicinal preparations containing alcohol. The licensing authority rejected the application on the ground that other manufacturers in the region were not utilizing their installed capacity, which indicated that there was no requirement for such medicinal preparations. This order was upheld by the State Government and subsequently by the High Court, which held that the licensing authority could consider the object of the statute and the nature of the products.
Findings of Court:
The application made by the applicant was required to be decided on its own merits and in accordance with law. The authority was required to consider whether the requirements of law were complied with or not by the applicant. Since the application was rejected based on an extraneous consideration, the order deserved to be set aside. (Para 6)
Issues: Whether the rejection of a licence application on the ground that other manufacturers in the district were not manufacturing preparations to their full installed capacity constitutes an extraneous consideration.
Ratio Decidendi: A licence application must be evaluated based on the applicant's compliance with the legal requirements and decided on its own merits; it cannot be rejected based on extraneous considerations such as the production capacity or market demand relative to other manufacturers in the region.
Result: Appeal allowed.
Legal Category Hierarchy
Table of Contents
2. Whether a licence application must be decided on its own merits or can be rejected based on the production capacity of other manufacturers in the region. (Para 5 )
3. The licensing authority must determine if legal requirements are complied with; rejection based on the production capacity of other manufacturers constitutes an extraneous consideration. (Para 6 )
4. A licence application must be decided on its own merits and in accordance with law, without reliance on extraneous considerations. (Para 6 )
5. Appeal allowed — Orders of High Court, State Government, and Commissioner set aside — Direction to consider the application afresh on its own merits and in accordance with law. (Para 7 )
6. Can a licence application be rejected based on the production capacity of other manufacturers in the same district?
No. The court held that such a reason is an extraneous consideration. An application must be decided on its own merits and based on whether the requirements of the law have been complied with. (Para 6 )
7. What is the standard for the licensing authority when deciding on a licence application under the Medicinal and Toilet Preparation (Excise Duties) Act?
The authority is required to consider whether the requirements of the law have been complied with by the applicant and decide the application on its own merits. (Para 6 )
8. Is a defect-free application sufficient for the grant of a licence, or can the authority consider other factors?
While the High Court suggested the authority could consider the object of the statute and nature of products, the Supreme Court clarified that the decision must be based on legal compliance and merits, not extraneous considerations. (Para 4 , 6 )
(1) LEAVE granted.
(2) HEARD learned counsel for the parties.
(3) THE appellant is engaged in the business of manufacturing ayurvedic medicines. He and his brother Vinay Kumar Singh are the proprietors of M/s Vishwanath Indian Herb Products. They obtained a licence under the Drugs and Cosmetics Act, 1940 for manufacturing ayurvedic medicines in Form No. 25D. On 24-3-1995, they applied to the Commissioner of Excise for a licence in Form L-1 under the Medicinal and Toilet Preparation (Excise Duties) Act, 1955 and the Rules made thereunder for manufacturing medicinal preparations containing alcohol. This application was rejected by the Commissioner on the ground that the manufacturers of ayurvedic medicines in the districts of Saran and Vaishali have not been manufacturing medicinal preparations containing alcohol according to their installed capacity. It was further observed by the Commissioner in his order that non-utilisation by the licence-holders of their installed capacity indicated that there was no requirement for such medicinal preparations. This order was challenged by the appellant by filing an appeal to the State Government. It was dismissed.
(4) THE appellant then filed a writ petition in the Patna High Court challenging the orders passed by the State Government and the Commissioner of Excise. The High Court held that merely because a manufacturer of medicines makes a defects-free application for grant of licence under the Excise Act and the Rules, his application need not be granted as the licensing authority has also to take into consideration the object of the statute, nature of the products etc. Taking this view, the High Court dismissed the writ petition. The observation made by it that when the Commissioner for Excise decides to grant licences to others, the case of the appellant should also be considered is really of no avail.
(5) IT was contended by the learned counsel for the appellant that the Commissioner of Excise rejected the appellants application on a totally extraneous consideration. He submitted that the application of the appellant should have been decided on its own merits and could not have been rejected on the ground that other manufacturers in the districts of Saran and Vaishali were not manufacturing ayurvedic preparations containing alcohol to their full-installed capacity.
(6) IN our opinion, the contention raised on behalf of the appellant deserves to be accepted. The application made by the appellant was required to be decided on its own merits and in accordance with law. What the authority was required to consider was whether the requirements of law were complied with or not by the appellant. Since the application of the appellant was rejected by the Commissioner on an extraneous consideration, the order passed by him deserved to be set aside. The High Court was wrong in dismissing the writ petition filed by the appellant.
(7) WE, therefore, allow this appeal, set aside the judgment and order passed by the High Court and also the orders passed by the State Government and the Commissioner of Excise and direct him to consider the application of the appellant afresh and decide the same on its own merits and in accordance with law.
