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CASE NO.: Appeal (civil) 690-92 1991

PETITIONER: STATE OF ASSAM & ORS.

       Vs.

RESPONDENT: SHRI NARESH CHANDRA GHOSE (D) BY LRS.

DATE OF JUDGMENT:       01/12/2000

BENCH: V.N.Khare, S.N.Hegde

JUDGMENT:

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     J U D G M E N T

     SANTOSH HEGDE, J.

     The    medicinal       preparation    Mritasanjibani manufactured  by  the respondent was assessed  to  sales-tax under  the Assam Finance (Sales Tax) Act, 1956  (hereinafter referred  to as the Act) under Item 67 of the Schedule  to the  Act by the assessing authorities.  The challenge to the said  assessment  order  being dismissed  by  the  appellate authority,  the respondents filed 3 writ petitions before  a Division  Bench  of  the  Gauhati High  Court  which,  while allowing  the said writ petitions, declared the said Item 67 of the Schedule to the Act as violative of Article 14 of the Constitution.   The  State of Assam is in appeal before  us, challenging  the said judgment of the Division Bench of  the High  Court made in Civil Rule Nos.368, 369 of 1978 and  310 of  1982 dated 11.4.1990.  The High Court while entertaining the  abovesaid  writ petitions, considered the  following  3 arguments  of the respondents and held the same against them :

     1.   That  no spirit being used in the preparation  of Mritasanjibani, it cannot be termed as spirituous medicinal preparation;    2.    That  there    being   no   Ayurvedic Pharmacopoeia  in existence, in the absence of any machinery to   determine  the  alcoholic   contents  of  a   medicinal preparation,  Item  67 cannot be given effect to;  3.   That there  is no finding in the instant case that Mritasanjibani contains more than 12% alcohol.

     However,  it proceeded to consider the  constitutional validity  of  Item 67 of the Schedule to the Act, as  stated above,  and following the judgment of this Court in Ayurveda Pharmacy  & Anr.  v.  State of Tamil Nadu (1989 2 SCC  285), it  declared  Item  67 of the Schedule to the Act  as  being

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violative  of  Article 14 of the Constitution of  India  and directed the assessing authorities to re-assess the turnover of  the respondent by treating Mritasanjibani as all other Ayurvedic  medicines  which are exempt from sales-tax  under the  Act.  The State in these appeals has contended that the finding of the High Court that the said Item of the Schedule is  violative  of  Article  14 is erroneous.   It  was  also contended  that  the  judgment  of this  Court  in  Ayurveda Pharmacy  (supra) does not apply to the facts of the case in hand,  hence the High Court has erred in placing reliance on the   said  judgment.   Per  contra,   on  behalf   of   the respondents, it is contended that the judgment of this Court in  Ayurveda  Pharmacy (supra) applies on all fours  to  the facts   of  this  case.   There  is  no  dispute  that   the Legislature  has a wide discretion in selecting the  persons or  objects  it  wants to tax and that a Statute  cannot  be challenged  on  the  ground it levies tax on  one  class  of articles  and  not  on others.  Bearing this  well-  settled principle in mind, we will now examine the provisions of the Assam  Act as also the applicability of the judgment of this Court  in Ayurveda Pharmacy (supra).  For the said  purpose, it  is necessary for us to notice the two relevant Items  in the  Schedule  to  the Act.  Item 28 which  deals  with  the medicines  and  drugs for the purpose of levy  of  sales-tax under the Act reads thus :- No.  Name of taxable goods Rate of tax

     28.  Medicines and drugs other than the following :-

     (a)  x  x  x  (b)  x x x (c)  x  x  x  (d)  Ayurvedic, Homeopathic  and  7  paise in the  rupee.   Unani  Medicines except those covered by Item No.67 of this schedule.

     As per this Item, the various drugs enumerated in sub- clauses  (a)  to  (c)  are exempted from the  levy  of  tax, subject  to the exceptions found therein.  Under  sub-clause (d)  above,  it is seen that all Ayurvedic, Homeopathic  and Unani  medicines  are generally exempt from the levy of  tax with an exception in regard to those medicinal preparations; be  it  Ayurvedic, Homeopathic or Unani, if it comes  within the realm of Item 67 of the same Schedule.  Therefore, it is to  be  noted  here  that the exemption granted  is  not  an absolute  exemption.  It is subject to the Entry in Item  67 which Entry reads thus :-

     No.  Name of taxable goods Rate of tax

     67.   Spirituous  medical  prepara- 20  paise  in  the rupee.  tion under any pharmacopoeia containing more than 12@@         JJJJJJJJJJJJJJJJJJJJJJJJJJJJ percent by volume of alcohol (but other than those which are declared  by  the  State Government by notification  in  the official Gazette to be not capable of causing intoxication.

     As  could  be seen, this Item carves out an  exception from  Item  28  in regard to  those  medicinal  preparations@@       JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ prepared  under  any  pharmacopaeia;    be  it   Allopathic,@@ JJJJJJJJ Ayurvedic,  Homeopathic  or Unani medicines if  it  contains more  than 12% by volume, of alcohol.  An analysis of  these two  Items  of  the Schedule to the Act clearly  shows  that generally all Ayurvedic, Homeopathic and Unani medicines are

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exempt from the levy of tax.  However, this exemption is not available  to  a  specific class  of  medicinal  preparation including  Allopathic,  Ayurvedic,   Homeopathic  and  Unani medicines  if  it contains 12% by volume of  alcohol.   This class  of spirituous medicinal preparation is to be taxed  @ 20  paise  in  a rupee.  The question,  therefore,  for  our consideration  is whether this type of classification  which differentiates  medicinal preparations based on the  content of alcohol in such preparations is a valid classification or not.   If the accepted principle in law that the Legislature has a wide discretion in selecting the persons or objects it wants  to  tax  is  correct  then  in  our  opinion  such  a classification   cannot  be  construed   as   an   arbitrary classification.    Definitely,   a   medicinal   preparation containing over 12% of alcohol stands as a separate class of medicinal  preparation  as  compared   to  other   medicinal preparations  which  either do not contain any alcoholic  or contains  less  than  12%.   It is to  be  noted  that  this classification   based  on  the   alcohol  contents  of  the medicinal   preparation  is  not   confined  to   Ayurvedic, Homeopathic  or Unani medicines alone but it encompasses all spirituous  medicinal preparations which are prepared  under any  Pharmacopoeia and containing more than 12% by volume of alcohol.   Therefore, the Legislature or its delegates  have not  made  any arbitrary classification for the  purpose  of levy  impugned.   The  said classification  being  based  on intelligible  differentia  is, therefore, in our opinion,  a valid  classification.   It  is  true that in  the  case  of Ayurveda  Pharmacy (supra), this Court declared that the two Ayurvedic  preparations  termed as Arishtams and Asavas  are medicinal  preparations, and even though they contain a high alcohol  content, so long as they continue to be  identified as  medicinal preparations (emphasis supplied) they must  be treated,  for  the  purposes of the sales tax law,  in  like manner  as medicinal preparations generally, including those containing  a lower percentage of alcohol.  In that case, it is  to  be noted that while all other patent or  proprietory medicinal  preparations  belonging to different  systems  of medicines  were taxed @ 7% only without any  classification, Arishtams  and  Asavas prepared under the  Ayurvedic  system alone were made subject to 30% levy.  The Court also noticed the  fact that there were at relevant point of time over 130 Allopathic  medicines containing alcohol which were  potable as against only 3 Ayurvedic medicines out of which Arishtams and  Asavas  were  alone subject to 30%  tax.   While  other medicinal  preparations  which also contained  alcohol  were subjected  to a tax @ 7% alone.  Therefore, this Court  came to  the conclusion that while Arishtams and Asavas continued to  be  identified as medicinal preparations, they  must  be treated alike for the purpose of sales-tax.  The law in this case  is different from the law that was considered by  this Court  in  Ayurveda Pharmacys case (supra).  It is  already noticed  that  for  the  purpose   of  Item  28,  Ayurvedic, Homeopathic  and  Unani  medicines   either  not  containing alcohol  or  containing  less  than 12%  alcohol  have  been exempted  from  the  levy of sales-tax but  the  Legislature thought  that  in  regard  to  the  medicinal   preparations irrespective  of  the  fact  whether  they  are  Allopathic, Ayurvedic,  Homeopathic  or  Unani  have  to  be  separately classified  as  spirituous  medicinal preparations  if  it contained  more than 12% by volume of alcohol (See Item 67). Therefore,  so far as the Assam Act is concerned, unlike the Tamil  Nadu  General Sales Tax Act, 1959, it identified  the medicinal preparations containing more than 12% alcohol as a separate  class  vis-Ã -vis  such   preparations         either  not

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containing  alcohol  or  containing less than  12%  alcohol. This  difference distinguishes the basis of the judgment  of this  Court in Ayurveda Pharmacys case (supra) inasmuch  as the  Assam Act does not identify the medicinal  preparations containing  more than 12% alcohol as being the same as other medicinal  preparations  not  containing  alcohol.   On  the contrary,  as  could  be  seen  these  types  of  spirituous medicinal preparations which contained 12% alcohol have been separately  classified for the levy of tax under Item 67  of the Schedule to the Act.  We are of the considered view that the  classification founded in the impugned Act in regard to the  medicinal preparations based on the strength of alcohol contents  in  the same, cannot be said to be  arbitrary  and violative  of  Article 14 as held by the High Court  in  its impugned  judgment.   For  the reasons stated  above,  these appeals  succeed,  the impugned judgments of the High  Court are   set  aside  and  the   writ  petitions  filed  by  the respondents before the High Court stand dismissed.