1967 Supreme(Mad) 36

Madras High Court
P. RAMAKRISHNAN
Pharm Products Ltd, Thanjavur - Appellant
Versus
District Revenue Officer, Thanjavur - Respondent
Decided On : 01/24/1967

The court held that the petitioners' preparations contained alcohol as defined in the Act, and that the levy of excise duty was legal. It rejected the arguments of double taxation, discrimination, and limitation. However, the court found that the petitioners had not been given an opportunity to put forward their representations against the proposed levy and that they had sold their products without adding the burden of the duty to the prices charged to the customers. It also noted that the higher authorities of the Department had at one time taken a view which would imply that the products were to be treated as restricted preparations with a liability to pay duty under Item 2 of the Schedule at Rs.3.85 on the volumetric content of alcohol.

Headnote:

MEDICINAL AND TOILET PREPARATIONS EXCISE DUTIES ACT, 1955 - SECTION 3 - SCHEDULE - AMENDMENT ACT XIX OF 1961 - ALCOHOLIC CONTENT - PREPARATION CONTAINING ALCOHOL - MANUFACTURE IN BOND - MANUFACTURE OUTSIDE BOND - RULE 20 - FORM L-2 - DOUBLE TAXATION - DISCRIMINATION - LIMITATION - RULE 6, 9, 11, 12 - RULE 60 (3) - PRESUMPTION - RESTRICTED PREPARATION - WRIT PETITION - QUASHING OF ORDERS - SHOW CAUSE NOTICE - L-2 LICENCE - DISMISSAL OF WRIT PETITIONS - NO ORDER AS TO COSTS.

Fact of the Case:

The petitioners, manufacturers of patent or proprietary medicines, challenged the levy of excise duty on their products containing alcohol under the Medicinal and Toilet Preparations Excise Duties Act, 1955 (Central Act 16 of 1955) as amended in 1961. They contended that their preparations did not contain alcohol as defined in the Act and that the levy was illegal due to double taxation, discrimination, and limitation. They also argued that the presumption under Rule 60 (3) of the Rules framed under the Act should be applied, and that they should be assessed under Item 2 of the Schedule, which provided for a lower rate of duty.

Finding of the Court:

The court held that the petitioners' preparations contained alcohol as defined in the Act, and that the levy of excise duty was legal. It rejected the arguments of double taxation, discrimination, and limitation. However, the court found that the petitioners had not been given an opportunity to put forward their representations against the proposed levy and that they had sold their products without adding the burden of the duty to the prices charged to the customers. It also noted that the higher authorities of the Department had at one time taken a view which would imply that the products were to be treated as restricted preparations with a liability to pay duty under Item 2 of the Schedule at Rs.3.85 on the volumetric content of alcohol.

Issues: 1. Whether the petitioners' preparations contained alcohol as defined in the Act? 2. Whether the levy of excise duty was illegal due to double taxation, discrimination, and limitation? 3. Whether the presumption under Rule 60 (3) of the Rules framed under the Act should be applied? 4. Whether the petitioners should be assessed under Item 2 of the Schedule, which provided for a lower rate of duty?

Ratio Decidendi: 1. The court held that the petitioners' preparations contained alcohol as defined in the Act because they contained tinctures and spirits, which are solutions of other substances in alcohol. The court found that the alcohol in these preparations had not undergone a chemical change and was still present in a liquid form, retaining its properties of smell, taste, and capacity to vaporise. 2. The court rejected the argument of double taxation because the tax on the alcoholic content of the tinctures or spirits was paid by the manufacturers of these tinctures or spirits and not by the petitioners. It also rejected the argument of discrimination because the distinction between Items 1 and 2 of the Schedule, based on the potability of the preparations, was a valid basis for drawing a distinction between them. The court further rejected the argument of limitation because Rule 12 of the Rules provided a residuary power for the recovery of sums due to the Government, and there was no period of limitation for the application of this rule. 3. The court found that the petitioners could take advantage of the presumption under Rule 60 (3) that their preparations manufactured after 1st April, 1957 were restricted preparations, and therefore, capable of being misused as ordinary alcoholic beverages. However, the court held that this presumption could be rebutted by contra evidence, and that the petitioners should be given an opportunity to put forward their representations against the proposed levy and to adduce evidence to support their claim. 4. The court held that the petitioners should be assessed under Item 1 of the Schedule, which provided for a 10% ad valorem duty on preparations containing alcohol and which were not capable of being consumed as ordinary alcoholic beverages.

Final Decision: The court allowed the writ petitions (other than W. P. Nos. 1093, 1095, 1098 and 1156 of 1964) and quashed the orders making demands for the payment of the duty. It directed the authorities to call upon the petitioners to show cause against the levy of the duty and to proceed to make the proper levy after hearing their representations contra and in the light of the observations made in the judgment. The court dismissed the excepted writ petitions, W. P. Nos. 1093, 1095, 1098 and 1156 of 1964, which were directed against the demand for taking out L-2 licences, on the ground that the preparations manufactured by the petitioners contained alcohol and therefore, licences were necessary under Section 6 (2) of the Act. There was no order as to costs.