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PETITIONER: HYDERABAD CHEMICAL AND PHARMACEUTICALWORKS LTD.  ETC.

       Vs.

RESPONDENT: STATE OF ANDHRA PRADESH AND ORS.

DATE OF JUDGMENT: 20/03/1964

BENCH: WANCHOO, K.N. BENCH: WANCHOO, K.N. GAJENDRAGADKAR, P.B. (CJ) SHAH, J.C. AYYANGAR, N. RAJAGOPALA SIKRI, S.M.

CITATION:  1964 AIR 1870            1964 SCR  (7) 376  CITATOR INFO :  R          1981 SC1863  (16,22,29)  RF         1992 SC1256  (13)

ACT: Medicinal and Toilet Preparation (Excise Duties) Act No.  16 of  1955,  s.  21--Whether  repeals  rule  36  framed  under Hyderabad Abkari Act-If Act No. 16 is a law "otherwise  made by Parliament’ within the meaning of Art. 277--Hyderabad Act and Rule 36 repealed-Constitution of India, Art. 277,  Entry 84,  List 1 of VII Schedule-Hyderabad  Medical  Preparations and Spirituous Rules 1345 F, r. 36.

HEADNOTE: The  appellants are manufacturers of medicine in which  they have  to  use alcohol.  According to r. 36  of  the  Medical Preparation  and Spirituous Rules, 1345 F framed  under  the Hyderabad  Abkari  Act,  1316 F the appellant  used  to  pay certain fees to the State Government for the supervision  of the use of alcohol by the appellants.  After the coming into force  of  the  Medical and.   Toilet  Preparations  (Excise Duties)  Act,  1955  and the  Rules  framed  thereunder  the appellants  contended that since R. 36 was repealed by  this Act  they  had not to pay that fee.  On the refusal  of  the State  Government to accept their contention the  appellants filed  writ petitions before the High Court challenging  the power of the Government to levy the fee.  But the High Court held  that  R. 36 was not repealed and  dismissed  the  writ petitions.   Thereupon  the  appellant  filed  the   present appeals on certificates granted by the High Court. Before  this Court it was contended on behalf of the  appel- lant  that  s.  21 of the 1955 Act  in  terms  repealed  any corresponding State law and therefore R. 36 stood  repealed. The  respondent contended that the proviso to  that  section saved  all previous rules which were not  inconsistent  with the Act and hence R. 36 should be deemed to be in force.  It was  further  contended by the respondent-State that  R.  36 remained  in  force because it was meant to  carry  out  the general  purpose  of the Hyderabad Abkari Act  which  was  a general Act relating to alcohol and intoxicating drugs.

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Held:(i)  By  virtue  of Entry 84 List  I  of  the  VII Schedule  to the Constitution no charge could be  levied  on the  manufacture  of medicinal preparations  except  by  the Union  of  India  and  since the 1955  Act  is  a  law  made otherwise  by Parliament within the meaning of Art. 277  the duties  and  other charges which used to be  levied  by  the State  in  connection with medicinal preparations  could  no longer be levied by it.  Further the effect of s. 21 of  the Act  is that so far as the Hyderabad Act applied to the  use of  alcohol  in  the manufacture  of  medicinal  and  toilet preparations, the Hyderabad Act must be deemed to have  been repealed. (ii)By reasons R. 143 of the 1956 Rules r. 36 must be  held to  have  been repealed after the coming into force  of  the 1955 Act and the rules framed thereunder.  The purpose of R. 36  is clearly covered by the 1955 Act and the rules  framed thereunder  and it cannot survive the said Act and Rules  in view of s. 21 of the Act and r. 143 and the proviso to s. 21 cannot be availed of by the State.                             377 (iii)The field covered by R. 36 is completely covered by the Rules framed under the Act and therefore R. 36 can no longer be  justified  as  good under the general  law  relating  to alcohol  and  in-,,  toxicating drugs as  contended  by  the State.

JUDGMENT: CIVIL  APPELLATE  JURISDICTION:  Civil  Appeals  Nos.   399- 403/1962.  Appeal from the judgment and order dated February 17, 1961 of the Andhra Pradesh High Court in Writ  Petitions Nos. 400, 431 to 433 and 495 of 1958. K.Srinivasamurthy and Naunit Lal, for the appellants  (in all the appeals). K.R.  Chaudhuri and B. R.  G. K. Achar, for  the  respon- dents (in all the appeals). March 20, 1964.  The Judgment of the Court was delivered by WANCHOO,  J.---These  are five connected appeals  on  certi- ficates  granted by the High Court of Andhra Pradesh.   They involve a common question of law and will be dealt with  to- gether.   The  brief  facts  necessary  to  understand   the question  of  law raised in these appeals  are  these.   The appellants  manufacture medicines in which they have to  use alcohol.  Before Parliament passed the Medicinal and  Toilet Preparations   (Excise   Duties)  Act,  No.  16   of   1955, (hereinafter  referred to as the Act), the  appellants  were working  under licences granted -under the Hyderabad  Abkari Act,  No. 1 of 1316-F.  Under that Act certain rules  called the  Medical Preparations and Spirituous Rules, 1345-F  were framed and r. 36 thereof provided that "the expenses of  the establishment for the supervision of the work shall be borne by  the  pharmaceutical  laboratory (licensee)  as  per  the decision  of the Commissioner Excise".  It appears that  for the  manufacture  of medicines, the appellants  used  to  be supplied with alcohol.  Further the State Government  posted on  the  bonded  manufacturies  of  the  appellants  certain supervisory excise staff, and r. 36 was obviously framed  to reimburse  the  Government  for expenses  incurred  in  that behalf.   After the Act came into force from April 1,  1957, the appellants who were manufacturing medicinal preparations were governed by it and the Rules framed thereunder and took licences under the Act.  The appellants then contended  that as the Act had repealed all previous provisions with respect to medicinal preparations, they were no longer bound to  pay

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the  charges prescribed under r. 36 of 1345-F Rules.   Their contention was that this rule along with such provisions  of the Hyderabad Abkari Act, which concerned medicinal prepara- tions  were repealed by the Act and the Rules framed  there- under.   The State Government could therefore no longer  ask them to pay the costs of the establishment posted at their 378 bonded  manufacturies  for  supervision*.   The   appellants thereupon filed writ petitions in the High Court challenging the levy of these charges. The  petitions were opposed on behalf of the State  and  its contention was that even though the Act and the Rules framed thereunder had come into force from April 1, 1957, r. 36  of the  1345-F Rules continued and was not repealed by the  Act and the Rules framed thereunder, and the State was  entitled to  the expenses of the supervisory staff and could  realise it from the appellants. The  High  Court held that r. 36 could not be said  to  have been repealed by the Act and the Rules framed thereunder and was  still  good  law.  In this connection  the  High  Court pointed out that the Hyderabad Abkari Act was not  concerned only  with  medicinal  preparations but was  a  general  Act dealing  with excise including alcohol, and that alcohol  in the  ultimate  analysis  was  liquor;  therefore  the  State Government which supplied alcohol to the appellants for  the purpose  of  making medicinal and  toilet  preparations  for which no duty was paid was entitled to see that the  alcohol was  not used for purposes other than that for which it  was supplied to the appellants.  Accordingly the High Court held that r. 36 of the 1345-F Rules was designed to achieve  this object,  under  the general law of excise contained  in  the Hyderabad   Abkari   Act,  and  was  therefore   good.    In consequence   the  writ  petitions  were   dismissed.    The appellants  then applied for certificates to appeal  to  his Court,  which were granted; and that is how the  matter  has come up before us The only question that falls for consideration therefore  is whether  after  the  coming into force of the  Act  and  the Rules,r.  36  of  the  1345-F Rules can  still  be  said  to survive.  There is no    doubt that the Hyderabad Abkari Act was a general Act and    before  the Constitution came  into force,  r. 36 of the 1345-F Rules would be good law.   Under the Constitution, however, medicinal and toilet preparations came  under entry 84, List I of the Seventh Schedule to  the Constitution, which provides for duties of excise on tobacco and other goods manufactured or produced in India, except-- (a)  alcoholic liquors for human consumption; (b)  opium,  Indian  hemp  and  other  narcotic  drugs   and narcotics, but  including medicinal and toilet preparations  containing alcohol  or any substance containing opium, Indian hemp  and other  narcotic  drugs  and  narcotics.   No  charge   could thereafter  be  levied  on  the  manufacture  of   medicinal preparations  except  by the Union in the  shape  of  duties under item 84 of List I. * The State Government however insisted on the payment of the charges. 379 But  under Art. 277 of the Constitution "any taxes,  duties, cesses  or fees, which, immediately before the  commencement of  this  Constitution  were being lawfully  levied  by  the Government  of  any State may,  notwithstanding  that  those taxes,  duties,  cesses or fees are mentioned in  the  Union List,  continue to be levied and to be applied to  the  same purposes  until  provision  to  the  contrary  is  made   by

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Parliament  by law".  In view of this provision, all  duties and charges levied by the State before the coming into force of   the  Constitution  on  the  manufacture  of   medicinal preparations could continue to be levied until law was  made by Parliament otherwise.  It is not in dispute that the  Act came  into  force  from  April 1, 1957 and  is  a  law  made otherwise by Parliament within the meaning of Art. 277,  and therefore  duties and other charges levied by the  State  in connection  with medicinal preparations could no  longer  be levied  by it.  Further the Act specifically provides in  s. 21  that  "if, immediately before the commencement  of  this Act, there is in force in any State any law corresponding to this Act, that law is hereby repealed".  It is true that the Hyderabad  Abkari Act was a general law which was  concerned with  liquor  and  intoxicating  drugs  generally;  it  thus applied  to  alcohol also (treating it as liquor)  used  for manufacturing  medicinal preparations.  The effect of s.  21 therefore is that so far as the Hyderabad Abkari Act applied to  the  use of alcohol, treating it to be  liquor,  in  the manufacture  of  medicinal  and  toilet  preparations,   the Hyderabad Abkari Act must be deemed to have been repealed to that extent only by s. 21. Reliance is placed on behalf of the State on the proviso  to S.  21, which lays down that "all rules made under  any  law hereby  repealed shall, so far as they are not  inconsistent with this Act, have the same force and effect as if they had been  respectively made under this Act and by the  authority empowered  hereby is in that behalf." It is  therefore  con- tended that by virtue of the proviso to s. 21, r. 36 of  the 1345-F Rules must be deemed to continue.  We are of  opinion that  there  is  no force in this  contention.   Rules  were framed under the Act in 1956 and came into force along  with the  Act.  Rule 143 of these Rules provides that  all  rules made under any law corresponding to the Act in force in  any State are hereby repealed except as respects things done  or omitted  to  be done before such repeal.   Consequently  all rules framed for the purpose of the manufacture of medicinal preparations came to an end in view of r. 143 of 1956 Rules. Therefore  r.  36  of 1345-F Rules,  which  appears  in  the Medicinal Preparations and Spirituous Rules must be held  to be  no  longer good law so far as it  applies  to  medicinal preparations.  That is one reason why we consider that r. 36 must  be  held to have been repealed after the  coming  into force  of  the  Act and the Rules  framed  thereunder.   The proviso to s. 21 on which reliance has been placed 380 cannot  change the position ciew of the new Rules framed  in 1956 with respect to medicinal preparations.  As soon as the new Rules came into force the old rules must fall and  there is  a  specific provision in the new Rules (namely  r.  143) which  says that all rules made under any law  corresponding to the Act are hereby repealed. We may refer in this connection to the construction of r. 36 of the Rules of 1345F.  It provides that the expenses of the establishment  for  the super-vision of the  work  shall  be borne  by the pharmaceutical laboratory.  The  establishment which  has to be paid for under r. 36 therefore is  for  the supervision   of  the  work  done  by   the   pharmaceutical laboratories.   Now  the  work  done  by  a   pharmaceutical laboratory  is to manufacture medicinal preparations.   Rule 36 therefore provides that expenses of the establishment for the  supervision  of  the  work  of  medicinal  preparations manufactured by pharmaceutical laboratories have to be  paid by  the laboratory concerned.  The supervisory  staff  which has  to be paid for under r. 36 therefore is meant  for  the

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supervision of the manufacture of medicinal preparations and it  is for that purpose only that expenses have to be  borne by  the  laboratory  concerned.  The  purpose  of  the  rule therefore is clearly covered by the Act and the Rules framed thereunder  and it cannot survive the Act and the  Rules  in view  of s. 21 of the Act and r. 143 of the 1956-Rules,  and the proviso to s. 21 cannot be availed of by the State. This brings us to the alternative argument on behalf of  the State, namely, that in any case the rule still remains  good because it is meant to carry out the general purpose of  the Hyderabad  Abkari Act, namely to see that unauthorised  sale of alcohol is not made for human consumption by the  labora- tory to which it is supplied for purposes of manufacture  of medicinal preparations.  Therefore it is said that the  rule is good inasmuch as it is concerned with the enforcement  of the  general law relating to alcohol and intoxicating  drugs contained  in the Hyderabad Abkari Act.  We are  of  opinion that  there is no force in this contention either.   In  the first  place, as we have already indicated, the main  object of the supervisory staff mentioned in r. 36 is to  supervise the   manufacture  of  medicinal  preparations.    In   that connection the supervisory staff will certainly see that the alcohol  supplied  is used for the purpose for which  it  is supplied  and is not used in any other manner.  Rule  36  is only concerned with seeing that the manufacture of medicinal preparations  is  made  properly  and  is  done  under   the supervision   of   the  establishment   attached   to   each laboratory,,  and  it  is only  incidentally  that  in  that connection the establishment is also to see that the alcohol supplied  is  not  used otherwise than for  the  purpose  of manufacture.  That however will not make the rule good under the  Hyderabad  Abkari  Act, which deals  with  alcohol  and intoxicating drugs generally. 381 What we have said above is borne out if we look at the 1956- Rules.  Rule 20 provides that in case of manufacture in bond (and  we  are  concerned in the present  appeals  with  such manufacture)  alcohol on which duty has not been paid  shall be used under excise supervision.  Rule 42 provides that "it shall  be open to the Excise Commissioner to  determine  the size  of  the  supervisory staff in  consultation  with  the licencee."  It is clear therefore that under the 1956  Rules supervisory staff is attached to bonded manufacturies  which manufacture  medicinal  preparations.   This  is  also   the purpose  of  r.  36.   Further r.  141  provides  that  "the licencee  of a bonded manufactory or warehouse shall,  where so required by the Excise Commissioner, provide the  officer and the staff posted to the manufactory or bonded  warehouse with  suitable lodging conveniently situated to the  factory or bonded warehouse premises at a rent not exceeding 10  per cent of the pay of each officer so accommodated.  If for any reason   the   licencee  is  not  able   to   provide   such accommodation he shall provide suitable accommodation to the satisfaction of the Excise Commissioner near the manufactory or  bonded warehouse recovering only 10 per cent of the  pay of the occupant." Then r. 45 provides that "tile officer-in- charge  shall  exercise such supervision as is  required  to ensure  that  alcohol issued for a  certain  preparation  is added to the materials which go to make that preparation and that  no  portion  of  such alcohol  is  diverted  to  other purpose."  It is clear therefore from these rules  that  the supervisory  staff is attached to a bonded  manufactory  for the  purpose of supervision to see that the  manufacture  is carried on properly and also to see that alcohol issued  for the purpose of manufacture is not diverted to any other use.

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We cannot therefore accept the argument that simply  because the supervisory staff has got to see that alcohol  supplied, assuming  it  to be liquor, is not misused, r. 36  is  still good law because its purpose is to see that the general  law relating to alcohol and intoxicating drugs contained in  the Hyderabad Abkari Act is carried out.  As the 1956-Rules show it is the duty of the supervisory staff attached to a bonded manufactory to see that the manufacture is properly made and that alcohol supplied is not diverted to any use except that of  the  manufacture  of the preparation.   This  being  the purpose  of the 1956-Rules, the levy under r. 36  of  1345-F cannot  be justified on the ground that under that rule  the supervisory  staff has to see that the general law  relating to alcohol and intoxicating drugs is not violated.  There is no doubt that the field covered by r. 36 of the 1345-F Rules is completely covered by the Rules framed under the Act  and therefore r. 36 can no longer be justified as good under the general law relating to alcohol and intoxicating drugs.   We may add that the Act or the 1956 Rules make no provision for any such charge as is provided in r. 36 of 1345-F Rules, the intention  being that the duty under the Act will cover  all expenses 382 for enforcing it.  The fact that members of the  supervisory staff      are  the  servants  of  the  respondent  makes no difference because they function under the Act and the rules framed  thereunder and not under the Hyderabad Act.  We  are therefore  of opinion that reading s. 21 of the Act  and  r. 143  of the Rules framed thereunder, r. 36 of  1345-F  Rules must be held to have been repealed and that it is not  saved by  the proviso to s. 21.  We therefore allow  the  appeals, set aside the orders of the High Court, and direct the issue of writs as prayed for.  The appellants will get their costs from the respondents--One set of hearing costs. Appeals allowed. 383