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CASE NO.: Appeal (civil)  1543-1547 of 1999

PETITIONER: State of Bihar & Others

RESPONDENT: Shree Baidyanath Ayurved Bhawan Private Ltd. & Others

DATE OF JUDGMENT: 11/01/2005

BENCH: S.N. VARIAVA, Dr. AR. LAKSHMANAN & S.H. KAPADIA

JUDGMENT: J U D G M E N T

KAPADIA, J.

       The main question in these appeals by grant of  special leave relates to the legislative competence of the  State Legislature in redefining the word "intoxicant" in  section 2(12a) of the Bihar Excise Act, 1915 (hereinafter  referred to for the sake of brevity as "the Bihar Act,  1915") by including therein "medicinal and toilet  preparations" containing alcohol as defined under the  Medicinal & Toilet Preparations (Excise Duties) Act,  1955, by Bihar Amending Act No.6 of 1985.

       Some of the manufacturers of Ayurvedic medicinal  preparations containing alcohol like Mritsanjivani Sura  and Mritsanjivani Sudha, challenged the validity and  constitutionality of section 2(12a)(iv) of the Bihar Act,  1915 (as amended), as also the power of the State  Government and the Board of Revenue to license and  regulate the use and possession of the aforestated  preparations vide notifications/communications no.2/23- 3-88/1, 2/23-3-88/2, and 2/23-3-88/3 all dated 3rd August,  1988.         The main ground of challenge before the High  Court was that the State Legislature had no competence  to levy duty on the manufacture of medicinal and toilet  preparations containing alcohol under the Bihar Act,  1915 after enactment of the Medicinal & Toilet  Preparations (Excise Duties) Act, 1955 (hereinafter  referred to for the sake of brevity as "the Medicinal Act,  1955"), which Act is relatable to Entry 84 List-I of the  Seventh Schedule to the Constitution and consequently,  the State Government and the Board of Revenue had no  authority to license and regulate manufacture of such  preparations.  Reliance was also placed on the provisions  of the Drugs & Cosmetics Act, 1940 (hereinafter referred  to for the sake of brevity as "the Drugs Act, 1940")  enacted to regulate import, manufacture, distribution and  sale of drugs.  It was the case of the manufacturers that  the Bihar Act, 1915, as amended, was repugnant to the  provisions of the Drugs Act, 1940.  In short, according to  the manufacturers, the entire field stood occupied by the  Central enactments and, therefore the Bihar Act, 1915, as  amended, was repugnant to the Drugs Act, 1940 as well  as the Medicinal Act, 1955.

       On consideration of various provisions of the  Constitution as well as the scheme of the Bihar Act,

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1915, the High Court came to the conclusion that the  State Legislature was wrong in including "medicinal  preparation" within the meaning of the word "intoxicant"  under section 2(12a) of the Bihar Act, 1915, by amending  Act No.6 of 1985 as the said item has been set apart by  the Constitution for Parliamentary legislation; that this  exercise by the State Legislature amounted to colourable exercise of the power, which could have been avoided;  that the medicinal and toilet preparations are subjected to  taxes and duties under the Medicinal Act, 1955 and,  therefore, these very products cannot be subjected to  double taxation, one by the Central Government under  the Medicinal Act, 1955 and other under the Bihar Act,  1915.  According to the High Court, the levy of fees  under the impugned notifications, under the licensing  procedure, was in substance an excise duty, which  violated Article 301 of the Constitution, which  guarantees free trade, commerce and intercourse  throughout the territory of India.  It was further held, that,  the State had failed to show any intelligible differentia  with a clear cut nexus with the objects sought to be  served for excluding Unani medicines from the operation  of the impugned notifications and consequently, the High  Court came to the conclusion that the impugned  notifications were discriminatory and violative of Article  14 of the Constitution.  Consequently, the High Court  held, that, the impugned notifications were issued  without authority of law and they suffered from  arbitrariness and discrimination.  Accordingly, the  impugned notifications/communications were set aside as  unconstitutional, illegal, unreasonable and arbitrary.   Hence, these civil appeals.

       Shri Dinesh Dwivedi, learned senior counsel  appearing on behalf of the State inter alia submitted that  the State Legislature possessed the exclusive power to  enact a law with respect to Entry 8 read with Entry 6 of  List-II to the Seventh Schedule of the Constitution, which  entries in no manner impinged upon Entry 84 or any  other entry in List-I.  Learned senior counsel submitted  that whenever the question of legislative competence is  raised, the matter has to be examined applying the  doctrine of pith and substance, as repeatedly stated by  this Court.  Learned senior counsel submitted that  incidental trenching upon the field reserved for the Union  cannot be characterized as travelling beyond the assigned  field. He submitted that the Amending Act No.6 of 1985  by which medicinal and toilet preparation containing  alcohol is brought within section 2(12a) of the Bihar Act,  1915, did not impinge upon the Medicinal Act, 1955 nor  upon the Drugs Act, 1940, because by the said Amending  Act No.6 of 1985, the State Legislature has sought to  license and regulate the use, possession and consumption  of medicinal preparation within the State as alcoholic  beverage.   Learned senior counsel further submitted that  under the impugned notifications, the State as well as the  Board of Revenue is seeking to regulate and control the  use of Ayurvedic preparations containing alcohol for  which license is required to be obtained by the  manufacturers on payment of fees and consequently,  such a fee is regulatory in nature and cannot violate  Article 301 of the Constitution.  Learned senior counsel  further submitted that the State is entitled to proceed step  by step; that in the inception, the State has attempted to  regulate and control the use of medicinal preparation as

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alcoholic beverage and as a first step, the State has  attempted to cover Ayurvedic medicines.  Hence, it is a  case of "under classification" and, therefore, there is no  violation of Article 14 of the Constitution, as alleged.   Learned senior counsel submitted that the regulatory fees  do not attract the principle of quid pro quo and  consequently, such fee is not hit by Article 301 of the  Constitution.                   Our attention was drawn to notification nos.2/23- 3-88/1 dated 3.8.1988, which refers to levy of license fee  for vend of medicinal preparation in wholesale @  Rs.3000/- and for retail sale @ Rs.1000/-, and that for  retail sale of medicinal preparation containing alcohol  prepared by distillation, the fee of Rs.1000/- is made  payable in advance.  It was urged on behalf of the  manufacturers that the said impugned notification seeks  to levy license fee for all types of medicinal preparations  with or without alcohol and consequently, the impugned  notification impinges on the field occupied by the  Medicinal Act, 1955 referable to Entry 84 List-I.  On  instructions, Shri Dinesh Dwivedi, learned senior  advocate for the State stated before us that the fees shall  be charged and recovered for vend of medicinal  preparations containing alcohol and that no fees shall be  levied, charged and recovered for vend of medicinal  preparations which do not contain alcohol.  This  clarification shall form part of our judgment.

       Shri V.A. Mohta, learned counsel for respondent  no.2 herein submitted that the amending Act No.6 of  1985 insofar as it includes medicinal and toilet  preparations containing  alcohol into section 2(12a) of  the Bihar Act, 1915 is beyond the legislative competence  of the Bihar Legislature.  Learned senior counsel  submitted that by virtue of the enactment of the  Medicinal Act, 1955 and the Drugs Act, 1940, both being  Central laws, the State Legislature is denuded of its  powers to license and regulate the manufacture of  Ayurvedic medicinal preparations and drugs.  Learned  counsel submitted that fees charged under the impugned  notifications, in substance, amounted to tax.  He  submitted that duty or tax could not be imposed by the  State as the field was covered by the Medicinal Act, 1955  relatable to Entry 84 of List-I of the Seventh Schedule to  the Constitution.  Learned counsel laid stress on clauses  (1) (2) & (3) of Article 246 and submitted that the power  of the State Legislature to make a law with reference to  matters in List-II vide Article 246(3) is subject to  Parliament’s power under Article 246(1) and Article  246(2).  Learned counsel contended that once the  Parliament enacted the Medicinal Act, 1955 and included  therein the power in the Central Government to license  and regulate manufacture of medicinal and toilet  preparations, the Parliament must be deemed to have  expressed its intention to occupy the entire field of Entry  84 List-I.  If so, the State Legislature has no power to  make any law with respect to manufacture of medicinal  and toilet preparations after coming into force of the said  1955 Act.  Learned counsel further submitted that the  entire exercise of bringing in medicinal and toilet  preparations within the ambit of section 2(12a) of the  said 1915 Act was to change the source of power.  He  submitted that after enactment of the 1955 Act, referable  to Entry 84 List-I, the State Legislature was denuded of

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its legislative power to enact a law regulating preparation  and manufacture of medicinal preparation and by  bringing medicinal and toilet preparation within section  2(12a), the State Legislature is trying to usurp the power  of the Parliament to tax the manufacture of medicinal and  toilet preparations, referable to Entry 84 List-I.  Hence, it  is a case of colourable exercise of power by the State  Legislature, which is against the scheme of the  Constitution.  The next submission of Shri Mohta was  that State law and impugned notifications are violative of  Article 14 insofar as they do not regulate and control  Unani drugs; that no reasons have been given for  regulating only Ayurvedic medicinal preparation and not  Unani drugs and that even after amending the said 1915  Act, several classes of other medicines remain outside the  regulatory provisions of the 1915 Act.  Learned senior  counsel submitted that by not regulating Unani  medicines, the Act and the notifications have brought  about an invidious distinction which is a negation of the  equality clause in Article 14.  Learned senior counsel  next submitted that in the absence of quid pro quo the  fees imposed on medicinal preparations under the  impugned notifications constituted duty or tax and  consequently, violated Article 301 of the Constitution.   For the aforestated reasons, no interference is called for  in these civil appeals.    

       The scheme of the Bihar Act as reflected in the  preamble is that it is an Act to consolidate and amend the  law relating to import, export, transport, manufacture,  sale and possession of intoxicating liquor and all  intoxicants in the State of Bihar.  Section 2(6) defines  "excisable article" to mean alcoholic liquor for human  consumption or any intoxicating drug.  Section 2(6-a)  defines "excise duty" to mean such excise duty as  mentioned in Entry 51 of List-II.  Section 2(10) defines  the word "export" to mean to take out of the State of  Bihar otherwise than across the customs frontier as  defined by the Central Government.  Section 2(12a)  defines the word "intoxicant" to mean any liquor or any  substance from which liquor is distilled or intoxicating  drug or medicinal preparation as defined under Medicinal  Act, 1955.  Section 2(13) defines "intoxicating drugs" to  mean charas, bhang, ganja and any other intoxicating or  narcotic substance which the State Government may by  notification declare to be an intoxicating drug.  Section  2(14) defines the "liquor" to include all liquids  containing alcohol and any other substance which the  State Government may by notification declare to be  liquor.  Section 2(15) defines the word "manufacture" to  include every process by which any intoxicant is  produced or prepared and every process for rectification,  blending or colouring.  In other words, the word  "manufacture" is defined to mean such transformation  that brings about a new and different article with a  distinctive name and character for use.  Section 2(19)  defines the word "spirit" to mean any liquor containing  alcohol obtained by the distillation.  Under section 5, the  Board of Revenue is empowered to declare by issuing  notification the limits of a retail sale of any intoxicant.   Chapter III deals with import, export and transport of  intoxicants.  Chapter IV deals with manufacture,  possession and sale of intoxicants.  Under section 13(a),  no intoxicant shall be manufactured except under the  authority and subject to the terms and the conditions of

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the license granted by the Collector.  Section 18 provides  inter alia that no person shall possess any intoxicant  which has not been obtained from a licensed vendor.   Under section 19(1), no person not being licensed to  manufacture, cultivate, collect or sell any intoxicant shall  possess any intoxicant in excess of such quantity as the  Board has, under section 5, declared to be a limit of a  retail sale.  Under section 19(4), the State Government  may by notification prohibit possession, consumption or  both of intoxicants by any person or class of persons  subject to such exceptions, if any, as may be specified in  the notification.  Under section 20, no intoxicant can be  manufactured or produced from an intoxicating drug and  sold except under the authority and subject to license  granted in that behalf by the Collector.  Section 22 deals  with grant of exclusive privilege of manufacture and sale  of country liquor or intoxicating drugs or any other  intoxicant.  In other words, the State can levy duty in the  form of a payment for grant of exclusive privilege in  respect of country liquor or intoxicating drugs or any  other intoxicants under section 22 of the Act.  Under  section 27, the State is empowered to impose excise duty  on any excisable article imported into the State or on any  excisable article exported out of the State or on any  excisable article transported within the State or on any  excisable article manufactured under a license granted  under section 13 of the Act or on any excisable article  manufactured in any distillery or brewery licensed under  the Act.  Under section 30 of the Act, the Collector is  required to prepare a List indicating licenses proposed to  be granted for retail sale of spirit for consumption during  the next settlement period.  Under section 38 of the Act,  every license, permit or pass granted under the Act shall  be granted on payment of fees and subject to such  restrictions and conditions, as may be prescribed by the  Board.  The form of license shall be issued in such form  and contain such particulars as the Board may direct.   The license/permit or pass shall be granted for such  period, as may be prescribed by rule  made by the  State Government under section 89(e).  Section 56  prescribes penalty for consumption of any intoxicant as  defined under section 2(12a), in any shop belonging to a  chemist, druggist or keeper of a dispensary.  Section 58  prescribes penalty for importation, exportation,  transportation, manufacture or sale of any intoxicant by  one person on account of any other.  Section 66 refers to  liability for intoxication.  Section 89 refers to the power  of the State Government to make rules to carry out the  object of the Bihar Act.  Section 89(2) empowers the  State Government to make rules for regulating the  import, export or transport of any intoxicant.  It also  empowers the State Government under section 89(2)(f) to  make rules prohibiting grant of licenses for retail sale of  any intoxicant, at any place or within any local area.   Section 90 empowers the Board of Revenue to make  rules to regulate the manufacture, supply or storage of  any intoxicant.  Under section 90(7), the Board is  empowered to make rules prescribing fees in respect of  any privilege granted under section 22 or in respect of  issuance of any license, permit or pass granted under the  Act.    Under section 90(9), the Board is empowered to  make rules prescribing the restrictions under which  license or permit may be granted, prohibiting the  admixture with any intoxicant.  It also empowers the  Board of Revenue to prohibit the quantity of liquor by a

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licensed manufacturer in the preparation of the  intoxicants.  It also empowers the Board to regulate the  transfer of license on payment of fees.  Similarly, under  section 90 of the Bihar Act, 1915, the Board has framed  Rules, known as the Bihar Excise Rules, 1919.  These  rules refer to blending, licensing of distilleries, licenses  given to warehouses, blending of potable foreign liquors,  licensing of breweries, manufacturing of Indian  medicinal liquor etc.   

       On reading the scheme of the Bihar Act, 1915 as  amended, it is clear that the Act seeks to license and  regulate use (including consumption) and possession of  medicinal preparations containing alcohol as alcoholic  beverages.  The said 1915 Act, as amended, takes over  from where the 1955 Act or 1940 Act ends.  

       However, it was suggested that the provisions of  the Bihar Act are in conflict with the provisions of  Medicinal Act, 1955, hence, we may examine its  provisions.          The legislative history of the Medicinal Act, 1955  is well known.  Under Entry 40 List-II of the Seventh  Schedule to the Government of India Act, 1935,  medicinal and toilet preparations containing alcohol were  subjected to provincial excise duties.  Under the  Constitution, the entry relating to excise duty on  medicinal and toilet preparations containing alcohol was  transferred to Union List.  Parliament accordingly  enacted the Medicinal Act, 1955 to provide for the levy  and collection of duties of excise on medicinal and toilet  preparations containing alcohol.    The said Act, 1955 is  relatable to Entry 84 List-I of the Seventh Schedule to the  Constitution, which reads as under:  

"Duties of excise on tobacco and other  goods manufactured or produced in India  except\027

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 included in sub-paragraph (b) of  this entry."

The scheme of the Central Act is, therefore, to provide  for the levy and collection of duties of excise on  medicinal and toilet preparations containing alcohol,  opium or any other narcotic drugs.  Section 2 is the  definition section and the expression "dutiable goods" is  defined in section 2(c) to mean medicinal and toilet  preparations as specified in the Schedule.  The expression  "medicinal preparation" is defined in section 2(g)  including all drugs which are a prescription made for  internal or external use of human beings.  Section 3 is the

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charging section, which levies excise duties on all  dutiable goods manufactured in India.  It also lays down  the mode of collection of said duties.  Section 6 prohibits  any person from engaging in the production or  manufacture of any dutiable goods, without authority and  without license granted in the Act.  Section 19 empowers  the Central Government to make rules to carry out the  purposes of the Act.  Under section 19(1), the Central  Government has framed the Central Rules which deal  with manufacture and production of medicinal  preparations, with the ultimate object of providing a  machinery for collection of duty on the preparations.   Rule 18 of the Rules provides that the rectified spirit  shall be supplied to a manufacturer from a distillery of the  State.  Rule 21 provides that rectified spirit shall be  issued for manufacture of medicinal preparations  containing alcohol.  Rule 33 provides for taking of  sample of the manufactured product for analysis to  determine the strength of the alcohol.  These rules are  intended to carry out the object of the Medicinal Act,  1955 i.e. to levy and collect duties of excise on medicinal  and toilet preparations containing alcohol.

       On reading the scheme of the Medicinal Act, 1955,  referable to Entry 84 of List-I, it is clear that the charging  section 3 of the said 1955 Act seeks to levy a duty of  excise on medicinal preparations containing alcohol and  not on its use and possession as alcoholic beverage,  which is dealt with by the said 1915 Act, referable to  Entry 8 read with Entry 6 of List-II.  Hence, the two Acts  operate in different fields.  The said 1915 Act regulates  use, possession, transport, import and export of  intoxicants.  It regulates use and possession of medicinal  and toilet preparation as alcoholic beverage.  In  Mritsanjivani Sura, level of alcohol, though self  generated, is so high that it can be consumed as alcoholic  beverage.  The subject matter of the impugned State law,  therefore, cannot conflict with the 1955 Act.  The power  of the State to regulate and control the use and possession  of medicinal preparation containing alcohol as alcoholic  beverage falls under Entry 6 (Public Health) as well as  Entry 8 (Intoxicating Liquor) of List-II in the Seventh  Schedule to the Constitution, whereas the 1955 Act is  referable to Entry 84 of List-I which deals with taxation.   The object of the impugned notifications and  communications dated 3.8.1988 is to license and regulate  on payment of fees the activity of use (including  consumption) and possession of such preparations  containing alcohol as beverages and, therefore, they fall  within the ambit of sections 5, 19(4), 38, 39 and section  90 of the 1915 Act.   

       It was urged on behalf of the manufacturers that  the said 1915 Act (as amended) is in conflict with the  provisions of the Drugs Act, 1940.  Hence, we are  required to examine the scheme of the Drugs Act, 1940.   The said Act, 1940 is enacted to regulate import,  manufacture, distribution and sale of drugs and  cosmetics.  The Act came to be enacted on 10.4.1940,  pursuant to a resolution passed by the Legislatures of all  the provinces in terms of section 103 of the Government  of India Act, 1935.  Under section 2, it has been stated  that the provisions of the Drugs Act shall be in addition  to and not in derogation of the Dangerous Drugs Act,1930  and any other law for the time being in force.  Section

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3(a) defines "Ayurvedic or Unani drug" to include all  medicines intended for diagnosis, treatment, mitigation  or prevention of diseases manufactured exclusively in  accordance with the formulae described in authoritative  books consisting Ayurvedic and Unani system of  medicines, specified in the First Schedule. Section 3(b)  defines "a drug" to include all medicines and all  substances intended to be used for diagnosis, treatment,  mitigation or prevention of any disease. Chapter-III deals  with import of drugs.  Chapter IVA makes provisions  relating to Ayurvedic and Unani drugs.  Sections 33E,  33EE and 33EEA refer to Ayurvedic and Unani drugs  which shall be deemed to be misbranded, adulterated and  spurious respectively.  Under section 33EEB, no person  shall manufacture for sale or distribution any Ayurvedic  or Unani drugs except in accordance with the prescribed  standards.  Section 33EEC prohibits manufacture and  sale of certain Ayurvedic and Unani drugs.  Section 33-I  imposes penalty for manufacture, sale or distribution of  any Ayurvedic or Unani drug in contravention of Chapter  IVA.  Rule 153 of the Drugs & Cosmetics Rules, 1945  deals with application for license to manufacture for sale  any Ayurvedic or Unani drugs.  Rule 158 provides for  conditions of license for manufacture for sale of such  drugs.  In the Rules, so far as Ayurvedic and Unani drugs  are concerned, there is no provision for licensing of use  and possession of Ayurvedic drugs as under the 1915  Act.  The Rules under the Drugs Act regulate only  manufacture of Ayurvedic drugs for sale and not for  consumption, use or possession.         On reading the provisions of the Drugs Act with  the Rules, we find that the Act is confined to use of  Ayurvedic medicines containing alcohol for diagnosis,  treatment, mitigation or prevention of disease and not to  its use as alcoholic beverages.  Under the rules, the  manufacture of Ayurvedic drug for sale alone is  regulated.  There is no provision in the Rules regulating  the use of such drugs as alcoholic beverages.  The object  of the Drugs Act is to maintain the quality of drugs as  drugs.  Its use as any other commodity in the hands of the  consumer is not regulated.  Hence, the Drugs Act is  relatable to Entry 19 of List-III, which deals with drugs  and poisons, subject to Entry 59 of List-I regarding  opium.  Lastly, the said Act regulates the manufacture of  drug for sale and distribution as a drug.  If a druggist sells  a drug across the counter, he cannot be faulted.  His  license cannot be cancelled.  He has not converted the  drug into an alcoholic beverage, which activity can be  resorted to by a consumer.  The consumer can misuse or  abuse the drug after he buys the same from chemist.   Such an activity falls within the provisions of the Bihar  Act, 1915, as amended and not under the Drugs Act,  1940.         In order to appreciate the contentions advanced  before us on both sides, it is necessary to reproduce the  relevant entries in the Lists of the Seventh Schedule to  the Constitution.    "List-I : Union List "Entry 84: Duties of excise on tobacco and  other goods manufactured or produced in  India except\027

a)      alcoholic liquors for human  consumption;

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b)      opium, Indian hemp and other  narcotic drugs and narcotics,

but including medicinal and toilet  preparations containing alcohol or any  substance included in sub-paragraph (b) of  this entry.

List-II : State List Entry 6.  Public health and sanitation;  hospitals and dispensaries.

Entry 8.  Intoxicating liquors, that is to say,  the production, manufacture, possession,  transport, purchase  and sale of intoxicating   liquors.

List-III : Concurrent List

Entry 19.   Drugs and poisons, subject to the  provisions of entry 59 of List-I with respect  to opium."

       A question of constitutional importance arises in  these appeals,  namely, whether the State Legislature   was competent to include medicinal and toilet   preparations containing alcohol governed by the  provisions of  Medicinal Act, 1955 into the definition of  the word  "intoxicant"  in section  2 (12a) of  the Bihar  Act, 1915, as amended by Act No.6 of 1985.

       Part XI of the Constitution deals with relations  between the Union and the States.  Chapter-I in this part  bears the heading "Legislative Relations: Distribution of  Legislative Powers."  Clause (1) of Article 245 declares  that "subject to the provisions of this Constitution,  Parliament may make laws for the whole or any part of  the territory of India, and the Legislature of a State may  make laws for the whole or any part of the State."  Clause  (1) of Article 246 declares that "notwithstanding  anything contained in Clauses (2) and (3), Parliament has  exclusive power to make laws with respect to any of the  matters enumerated in List-I in the Seventh Schedule (in  this Constitution referred to as the ’Union List’).  Clause  (2) of Article 246 declares that "notwithstanding  anything in Clause (3), Parliament and, subject to Clause  (1), the Legislature of any State also have power to make  laws with respect to any of the matters enumerated in  List-III in the Seventh Schedule (in this Constitution  referred to as the ’Concurrent List’)".  Clause (3) of  Article 246 then declares that "subject to Clauses (1) and  (2), the Legislature of any State has exclusive power to  make laws for such State or any part thereof with respect  to any of the matters enumerated in List-II in the Seventh  Schedule (in this Constitution referred to as the State  List)."  Clause (4) says that "Parliament has power to  make laws with respect to any matter for any part of the  territory of India not included in a State, notwithstanding  that such matter is a matter enumerated in the State List".   Article 248 vests the residuary legislative power in the  Union.  Article 249 empowers the Parliament to legislate  with respect to a matter in the State List in national

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interest while Article 250 empowers the Parliament to  legislate with respect to any matter in the State List if a  proclamation of emergency is in operation.  Article 251  says that the provisions of Articles 249 and 250 do not  restrict the power of the Legislature to make any law  which it is competent to make but if such law is  repugnant to any of the provisions of the law made by the  Parliament under the said Articles, the law made by the  Parliament shall prevail so long only as the law made by  the Parliament continues to have effect.  Article 252  empowers the Parliament to legislate for two or more  States by their consent.  It also provides for adoption of  such legislation by other States.  Article 254 declares that  if any provision of law made by the Legislature of a State  with respect to matters enumerated in the Concurrent List  is inconsistent with the provisions of any law made by  the Parliament, whether made earlier to the State  enactment or later, the State enactment shall to the extent  of repugnancy be void.  If, however, the State enactment  is reserved for and receives the assent of the President,  such law will prevail in that State notwithstanding its  repugnancy with a Parliamentary enactment.

       In the case of Adhyaksha Mathur Babu’s Sakti  Oushadhalaya Dacca (P) Ltd. & Others v. Union of  India, reported in [AIR 1963 SC 622], one of the  questions  which arose for determination  was whether   Mritsanjivani Sura was medicinal  preparation under the   said Medicinal  & Toilet Preparations (Excise Duties)  Act, 1955.  Mritsanjivani Sura and Mritsanjivani Sudha   were mentioned in the Schedule annexed to the  Medicinal & Toilet Preparations (Excise Duties) Rules,  1956.  Placing reliance on the affidavit of the Chemical  Examiner, this Court found that the aforestated two  preparations contained 42 per centum of alcohol.  This  Court further found that the aforestated preparations were  medicinal preparations, however, they were also capable  of being used as ordinary alcoholic beverages.  At this  stage, it may be mentioned that after 1960, the  aforestated preparations have been omitted from the  Schedule.  On consideration of the entire matter this  Court came to the conclusion that since the aforestated  two preparations were medicinal preparations under the  said Medicinal Act, 1955, the Central Government was  entitled to impose excise duty on their manufacture.  The  important point to be noted is that the said judgment did  not deal with use and possession of the aforestated two  substances.  As stated above, both the substances were  capable of being used as alcoholic beverages.  The only  question before this Court was with regard to levy of  excise duty on these two substances under the said 1955  Act.  The said judgment did not deal with the question of  competence of the State Legislature to enact the law  regulating use and possession of these two substances as  alcoholic beverages.  Suffice it to state, that, these two  substances were not only medicinal preparations, they  were also capable of being used as alcoholic beverages.   Therefore, regulation of distribution and supply of the  aforestated substances was not in issue in the said case.

       In the case of State of U.P. & Another v.  Synthetics & Chemicals Ltd. & Another reported in  [(1991) 4 SCC 139], this Court has held that the power of  regulation and control is separate and distinct from the  power of taxation.  Legislative exercise of regulation or

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control referable to Entry 8 of List-II is distinct and  different from the taxing power attributable to Entry 84  in List-I.  The legislative field for levying tax by the  Central Government is set out in Entries 82 to 91 of List- I whereas the legislative field for levying tax by the State  is set out in Entries 45 to 63 in List-II of the Seventh  Schedule. There is no overlapping.   Fields are clearly  demarcated.  The general entry for regulating distribution  and supply is different from exercise of taxing power.    The difference does not remotely touch each other.  Entry  8 of List-II is a general entry for regulating the  distribution and supply of substances.  The said entry  stands on its own.  It is not limited or restricted by any  entry in List-I or in List-III.   

       In the case of The Hyderabad Chemical &   Pharmaceutical Works Ltd. v. State of Andhra Pradesh  & Another,  reported in [AIR 1964 SC 1870], the  question of medicinal and toilet preparations  again came  up for consideration before this Court.  Prior to the  enactment of Medicinal & Toilet Preparations (Excise  Duties) Act, 1955 which came into effect from 1.4.1957,  the appellant used to manufacture medicines containing  alcohol under the license granted under the Hyderabad  Abkari Act.  After enactment of the Medicinal Act, 1955,  the appellant stood covered by that Act.  The State  Government however demanded duty for manufacture of  medicines by the appellant under the Hyderabad Abkari  Act.  The appellant, therefore, contended that the State  Government was not entitled to charge under Hyderabad  Abkari Act as the said Act stood repealed after the  Central Government had enacted the Medicinal & Toilet  Preparations (Excise Duties) Act 1955.  The question  which arose before this Court was whether after coming  into force of the Medicinal & Toilet Preparations (Excise  Duties) Act, the rules framed under the Hyderabad  Abkari Act can be said to survive.  It was held that before  the Constitution came into force the Hyderabad Abkari  Act was a general Act.  However, under the Constitution,  the Medicinal & Toilet Preparations Act came under  Entry 84 List-I which provides for duty of excise on  medicinal and toilet preparations containing alcohol and  therefore no charge could be levied on the manufacture  of medicinal preparation except by the Central  Government in the shape of duty in Entry 84 List-I.  It  was further held that as long as the Centre did not enact  the Medicinal & Toilet Preparations Act, 1955, the State  was entitled to charge duty under Article 277 of the  Constitution.  However, with the coming into force of  Medicinal & Toilet Preparations Act, on and from  1.4.1957, the State could not levy any charge or duty on  manufacture of medicinal preparation containing alcohol.   This judgment on which heavy reliance is placed by the  respondent Nos.1 and 2 has no application to the present  case.  In the present case, we are concerned with use and  possession of substances containing alcohol capable of  being used as alcoholic beverages.  They may be  medicinal preparations  for the purposes of excise duty,  however, these substances are  also capable  of  being  used as alcoholic  beverages and,  therefore, the question  which  arises  for decision before this Court is whether  the  State Legislature  was entitled to regulate the use and  possession of these substances  which are capable  of  being used as alcoholic beverages under the Bihar Act,  1915 as amended.  In our view, the said   Bihar Act is

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relatable to Entry 8 read with Entry 6 of List-II in the  Seventh Schedule to the Constitution.  As stated above  section 2 (12a) of the Bihar Act defines the word   ’intoxicant’ to mean liquor or any substance  from which  liquor may be distilled or intoxicating drug or medicinal  preparation as defined under the Medicinal  & Toilet  Preparations Act, 1955.  Under the said Act, liquor is also  defined vide section 2(14) to include all liquids  consisting or containing alcohol such as wine, spirit, tari  and any other substance which the State may by  notification declare to be liquor.  Hence, the 1915 Act  covers use and possession of medicinal preparations  containing alcohol, which subject matter is not covered  by the 1955 Act.

       In the case of State of Bihar & Others v.  Industrial Corporation (P) Ltd. & Others reported in  [(2003) 11 SCC 465], the respondents companies were  engaged in the manufacture of  rectified spirit from  molasses allotted to them by Controller  in terms of   Bihar Molasses (Control)  Act, 1947.  The companies  were granted licenses under the Bihar Act 1915.  While  carrying on such manufacture of spirit, some loss had  occurred allegedly in the quantity of molasses supplied  by the controller.  The Auditor General in his report  found loss of revenue by reasons of aforestated loss in  the quantity of molasses supplied by the controller.  The  department issued notices alleging breach of licenses  conditions.  The companies were threatened with penal  duty on the ground that they had diverted molasses  towards manufacturing liquor fit for human consumption.   The companies filed writ petitions before the Patna High  Court. The writ petitions were allowed.  The levy was set  aside.  The State came to this Court by filing special  leave petition.  The impugned levy was sought to be  justified on the ground that the State Legislature was  competent to levy duty on the outcome of the molasses.   Following the judgment of this Court in Synthetics  and Chemicals Ltd. v. State of U.P., reported in  [(1990) 1 SCC 109], this Court held that the State  Legislature was not entitled to levy excise duty on  rectified spirit or industrial alcohol useable for  industrial purposes.  However, it was clarified that if  any rectified spirit was diverted or used for  manufacturing potable liquors, the State was  empowered to impose duty if it found that rectified  spirit was being removed from the distillery for the  purposes of manufacturing potable liquor.  In coming  to the said conclusion, this Court placed reliance on the  definition of the word ’intoxicant’ under section 2(12a);  the word ’liquor’ in section 2(14) and also the word  ’spirit’ in section 2 (19) of the Bihar Act, 1915.  On  construction of these three words this Court  held that the   total effect of the definition ’intoxicant’ read with the  words ’liquor’ and ’spirit’ meant that the substance used  for human consumption can be subjected to duty by the  State.  However, duty cannot be imposed by the State on  manufacture of industrial alcohol.          

In the case of Bihar Distillery & Another  v.  Union of India & Others reported in [(1997) 2 SCC  727], a distillery was established.  It sold rectified spirit

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produced by it.  The distillery got its license from the  State Government up to the year 1991-1992 under the  Bihar Act.  In 1992 the department proposed to cancel  the license.  The distillery objected on the ground that it  was manufacturing rectified spirit which came within the  exclusive province of the Central Government.  With this  contention the distillery approached this Court.  After  noticing the relevant entries in the Seventh Schedule to  the Constitution this Court took the view that Entry 84 in  List-I and Entry 51 in List-II complemented each other.     Both provide   for duties of excise.  But while the States  are empowered to levy  duties of excise  on alcoholic   liquor for human consumption and on opium and  narcotics products in the State  but excluding  medicinal  and toilet preparations  containing alcohol, the Union is  empowered to levy  excise duty on tobacco and others   goods, except  alcoholic liquor   for human consumption.   This Court further held that Entry 8 of List-II covers all  aspects of intoxicating liquors within the State; it covers  production, manufacture, possession, transport, purchase  and sale.  Entry 6 speaks of public health.  It furnishes a  ground of prohibiting consumption of intoxicating liquor.   On reading Entries 6, 8 and 51 in List-II, this Court held  that so far as potable alcohols are concerned, they are  squarely covered by Entry 8.  They are within the  exclusive domain of the State.  It was further held that  rectified spirit was an industrial alcohol.  The State has  no power whatsoever to legislate in relation to industrial  alcohol.  However, the Court observed that in many cases  the rectified spirit was an ingredient for intoxicating  liquor or alcoholic liquor for human consumption.   Hence, so long as alcoholic preparation can be diverted  to human consumption, the States shall have the power to  legislate as also to impose taxes on such diversion.  This  is  also  the ratio of  the judgment of  this Court in the  case of Vam Organic Chemicals Ltd. & Another v. State  of U.P. & Others, reported in [(1997) 2 SCC 715] .  

Applying the test laid down by this Court in the  case of Bihar Distillery (supra) to the facts of the present  case, we hold that Medicinal Act, 1955 levies duty on the  manufacture of Ayurvedic medicines containing alcohol.   However, when the  Ayurvedic preparation  is diverted   to  human  consumption the State  shall have the power  to regulate and control such use  which has been done  in  the present case by  amending Act No.6 of 1985, which   is  a law relatable to Entry 8 read with Entry 6 of List-II.

       In American Jurisprudence Volume-30, it is stated  that in the matter of liquor traffic the power of control by  the State is an incident of the society’s right to self- protection.  It rests upon the right of the State to care for    the health, moral and welfare of the people.  This is the  very purpose behind Entry 6 of List-II in the Seventh  Schedule of the Constitution.  In the case of Har  Shankar & Others v. Deputy Excise & Taxation  Commissioner & Others, reported in [(1975) 1 SCC  737], this Court observed   that the State under its  regulatory powers has a right  to prohibit absolutely   every form of  activity  in relation to   intoxicants \026 its   manufacture, storage, export, import, transport, sale and  possession.  Applying the above tests, it is clear that the  Bihar Act is relatable to Entry 8 read with Entry 6 of  List-II in the Seventh Schedule to the Constitution.  

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       In the case of State of Andhra Pradesh & Others  v. Mcdowell & Co. & Others, reported in [(1996) 3 SCC  709], this Court held that once the impugned enactment  falls within the four corners of Entry 8 read with Entry 6,  no Central law made with respect to any Entry in List-I  or with reference to any Entry in List-III can affect the  validity of such State enactment.  The argument of  occupied field in such a case is totally out of place.  If a  particular matter is within the exclusive competence of  the State Legislature, that is, in List-II, that represents the  prohibited field for the Union.  Similarly, if any matter is  within the exclusive competence of the Union, it  becomes a prohibited field for the States.  The concept of  occupied field is relevant in the case of laws made with  reference to Entries in List-III.  The several entries in the  List-III in the Seventh Schedule are mere legislative  heads and it is quite likely that very often they overlap.   Wherever such a situation arises, the issue must be  resolved by applying the rule of pith and substance.    Whenever, a piece of  legislation is said to be beyond  the  legislative competence  of a  State Legislature,  what one  must do is to find out,  by  applying  the rule of pith and  substance, whether  that legislation  falls within any of  the Entries in List-II.  If it does, no further question  arises; the attack upon the ground of legislative  competence shall fail.  In such a case, Article 246 (3)  cannot be employed to invalidate the legislation on the  ground of legislative incompetence of State Legislature.   Once an enactment in pith and substance is relatable to  Entry 8 in List-II, Article 246(3) cannot be brought in to  hold that State Legislature is not competent to enact that  law.  However, if on the other hand, the State legislation    in question is relatable to an Entry in List-III, then,  applying the rule of pith and substance, the legislation  would still be valid, subject to the parliamentary  enactment being inconsistent with it, a situation dealt  with by Article 254.  Any incidental trenching does not  amount to encroaching upon the field reserved for  Parliament, though the extent of trenching beyond the  competence of the legislating body may be an element in  determining whether the legislation is colourable.  No  such question arises in this case.

       As stated above, use/misuse of Ayurvedic  preparations as alcoholic beverage can become the  subject matter of regulation and control by the State.  It is  the subject of the Bihar Act, 1915.  Hence, the State Act  is relatable to Entry 8 read with Entry 6 of List-II.   The  State law operates in a different field vis-‘-vis Medicinal  Act, 1955 which is relatable to Entry 84 List-I.  We have  examined the scheme of the two Acts.  Medicinal Act,  1955 levies excise duty on the manufacture of medicinal  and toilet preparations.  The said 1955 Act is a taxing  statute.  Entry 84 List-I is an entry which deals with  taxing power. On the other hand, Entry 8 read with Entry  6 of List-II refers to general subject of legislation.  It  refers to regulation and control of substances in public  interest.  The Act is enacted in public interest to secure  good health for the citizens.  Therefore, the two Acts are  in different spheres. There is no trenching even  incidentally by the Bihar Rules and the impugned  notifications into the provisions of the Medicinal Act,  1955 read with the Rules.  It is well settled that even if at  all there is any trenching or incidental encroachment    such encroachment will not affect the competence of the

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Legislature to enact the law nor will it affect its validity.   [See: State of Bombay v. Narothamdas Jethabai &  Another reported in [1951 SCR 51].  In the case of  Gallagher v. Lynn reported  in [1937 A.C. 863], the  Privy Council  held  that although the  impugned Act was  in pith and substance an  Act to protect the health  of  the   inhabitants of Northern Ireland and though  incidentally  it affected  trade, which came  in the Union List, the State  law was not  passed in respect of the trade and was  therefore not subjected to attack on that ground.                   As stated above, an Ayurvedic medicinal  preparation containing alcohol is capable of being used  as an alcoholic beverage, just as an industrial alcohol is  capable of being diverted to human consumption.  It is  now well settled by a catena of decisions that the  manufacture of industrial alcohol is covered by the  Central laws, however, its diversion can be regulated by  State laws enacted with reference to Entries 6 & 8 of  List-II. Similarly, duty on manufacture of medicinal  preparations containing alcohol would fall under the said  1955 Act, however, use and possession thereof will fall  under the State law, like the said 1915 Act.  Similarly,  manufacture for sale of a substance containing alcohol as  a drug would stand covered by the said 1940 Act,  however, its use and possession as an alcoholic beverage  would fall under the State law.  Licensing and regulation  of an activity like use/misuse of medicine is an enormous  activity involving heavy expenditure.  Hence, it is open  to the State Government to delegate some of its powers  to the Board of Revenue to prescribe forms of license,  license fees, regulation of retail sales etc.  In the  circumstances, the State as well as the Board was  competent to issue the impugned notifications/  communications under sections 5, 19(4), 38, 39 and 90 of  the said 1915 Act (as amended) to license and regulate  the use of such preparations as alcoholic beverages.  In  the circumstances, we hold, that, the High Court had  erred in holding that the impugned notifications/  communications had encroached upon the filed occupied  by the said 1940 Act and the said 1955 Act and the Rules  framed thereunder.  

       Before concluding, we may point out that in the  case of Southern Pharmaceuticals & Chemicals,  Trichur & Others v. State of Kerala & Others, reported  in [AIR 1981 SC 1863], this Court has taken the view,  which we have taken hereinabove.  In that case, this  Court held, that, by enactment of  Medicinal Act, 1955  by Parliament under Entry 84 List-I of the Seventh  Schedule of the Constitution or by the framing of rules  by the Central Government thereunder  for recovery of  excise duty on manufacture of medicinal and toilet  preparations containing alcohol, a State Legislature is not  prevented from making a law under Entry 8 List-II with  respect to intoxicating liquor or a law under Entry 51  List-II levying excise duties on alcoholic liquors for  human consumption.   In that case it was held that the  Abkari Act of Kerala is relatable to the State’s power to  make a law under Entry 8 and Entry 51 List-II of the  Seventh Schedule to the Constitution.  There is a  difference between the word "on" and the expression  "with respect to".  When we refer to levy on excise duty  under Entry 84 List-I, we emphasize the word "on".  On  the other hand, when we refer to Entry 8 List-II, which is

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a general entry, relating to "intoxicating liquor", we refer  to a wider activity.  The words "in respect of" or the  words "with respect to" used in the aforestated judgment  in the context of Entry 8 List-II bring out the above  difference.  Entry 8 List-II is an entry on general subject  unlike Entry 84 List-II which deals with taxation.   Keeping in mind the difference between the two, we hold  that the State law under Entry 8 List-II covers a wider  field of use, consumption, possession, diversion etc. vis- ‘-vis Entry 84 List-I, which deals with duty on  manufacture of medicinal preparation, as such.  This  difference is lost sight of by the High Court in the  impugned judgment.

       As stated above, one of the grounds of attack  before the High Court was that the Board of Revenue as  well as the State was not competent to enact a law as well  as the impugned notifications as Ayurvedic preparation  containing alcohol was a drug as defined under section  3(a) of the Drugs Act, 1940, which was relatable to Entry  19 of List-III of the Seventh Schedule to the Constitution.   In this connection it was urged that the impugned  notifications were in conflict with the Drugs Act, 1940.   We do not find any merit in this argument.  The Drugs  Act, 1940 is to regulate import, manufacture, distribution  and sale of drugs.  Under section 3(a), Ayurvedic or  Unani drug is defined to include all medicines intended  for use in diagnosis/treatment/mitigation or prevention of  diseases.  Chapter IVA of the Drugs Act, 1940,  exclusively deals with provisions relating to Ayurvedic  and Unani Drugs.  It refers to making of regulations in  respect of manufacture for sale of Ayurvedic and Unani  drugs.  On reading the provisions of the Drugs Act, 1940,  as analyzed hereinabove, it is clear that as long as  Ayurvedic or Unani drug is used as a drug for  diagnosis/treatment/mitigation or prevention of diseases  the activity falls within the ambit of the said Act.   However, the Drugs Act, 1940 like Medicinal Act, 1955  does not deal with diversion of drugs to human  consumption as alcoholic beverages which subject is  dealt with by the Bihar Act, 1915, which regulates such  use, possession and consumption by issuance of license  on payment of fees.  Hence, the State and the Board were  competent to issue the impugned notifications.   

       The next part of the case relates to question of quid  pro quo between the services rendered by the State and  the rate of levy of fee charged.   It was submitted that the  vend fee for the grant of license had no connection or co- relationship with the services rendered by the  Government.  On this point, the High Court held vide  impugned judgment that there was nothing to show that  the levy was set apart for the performance of some work.   The High Court observed there was nothing to show that  the fee had not merged in the public revenue and  therefore the State of Bihar was not entitled to charge any  amount in the form of fees or fixed payment.  According  to the High Court, the State in the garb of fees or fixed  payment was trying to impose tax/excise duty which  could not be done as the State was not competent to levy  excise duty on medicinal and toilet preparations which  are   already subjected to duty under the provisions of  1955 Act.  According to the High Court the same  products cannot be subjected to double taxation.  The  reasoning of the High Court is erroneous.  As held

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hereinabove, the State was competent to enact a law in  respect of use and possession of Ayurvedic preparations  containing alcohol as alcoholic beverages.  As a part of  regulation and control of such activity, the State was  entitled to call upon the manufacturers to obtain a license  on payment of fees.  The State has to incur expenses  incidental to regulation and control of such activities.   Hence, the fee leviable and payable by the manufacturers  under the impugned notification is in the nature of  regulatory fee for which quid pro quo is not necessary.   We also find the rate of fee to be reasonable.  

       In the case of Vam Organic Chemicals Ltd.&  Another v. State of U.P. & Others, reported in [(1997) 2  SCC 715], the distinction between regulatory fee and fee  for services rendered has been succinctly brought out.  It  was held that there is a difference between regulatory  fees and compensatory fees.  In the case of regulatory  fees, like license fees, existence of quid pro quo is not  necessary although such fees must not be excessive.    Keeping in view the quantum of nature of work involved  in supervising the activities under the Bihar Act, we are  of the view that the fee mentioned in the impugned  notification is reasonable and proper.    

       Similarly, in the case of State of U.P. & Others v.  Sitapur Packing Wood Suppliers & Others, reported in  [(2002) 4 SCC 566], this Court held that the question of  quid pro quo is necessary when a fee is compensatory,  for every fee quid pro quo is not necessary.  In the case  of regulatory fee it is not necessary to establish the  factum of rendering of service.   Therefore, there is no  question of regulatory fee being invalidated on the  ground that quid pro quo has not been established.

       The next point which arises for determination is  whether the fees levied under the impugned notifications  violated Article 301 of the Constitution.  We have held  that the fees levied under the impugned notifications are  regulatory in nature.  In the case of State of Karnataka &  Another v. M/s Hansa Corporation, reported in [(1980)  4 SCC 697], this Court has held that if a measure is  regulatory in character, it would be immune from  challenge under Article 301 of the Constitution.  In the  circumstances, by levy of fees under the impugned  notifications, there is no violation of freedom of inter  state trade and commerce, as held by the impugned  judgment.          As stated above, the impugned notifications have  been challenged by respondent nos.1 & 2 on the ground  of discrimination.  The respondents have challenged the  impugned notifications on the ground that they seek to  regulate and control use and possession of only  Ayurvedic preparations and not Unani medicinal  preparations and consequently the impugned notifications  violate Article 14 of the Constitution.  We do not find  any merit in these arguments.  In the case of State of  Gujarat & Another v. Shri Ambika Mills Ltd.,  Ahmedabad & Another, reported in [(1974) 4 SCC 656],  Mathew, J. speaking for the Court pointed out that  classification is inherent in legislation.  Article 14 does  not require that every regulatory statute should apply to  all in the same business: where size is an index,  discriminations between large and small are permissible,  and it is also permissible for reform to take one step at a

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time.   In the case of Municipal Corporation of the City  of Ahmedabad & Others v. Jan Mohammed Usmanbhai  & Another, reported in [(1986) 3 SCC 20], this Court  held that while Article 14  forbids class legislation it does  not forbid reasonable classification for the purposes  of  legislation and that  in order to pass the test of  permissible classification two conditions must be  fulfilled, namely, the classification must be founded on  an intelligible differentia which  distinguishes persons or  class that are grouped together from other left out of the  group and  secondly  such differentia must have rational  relation to the object sought to be  achieved by the statute  in  question.  It must be borne in mind that the legislature  is free to recognize degrees of harm and may confine its  restrictions to those cases where the need is deemed to be  the clearest.  In the present case, an experiment is tried,  on trial basis, to license and regulate Ayurvedic  medicines containing alcohol in the first instance.   Hence, there is no violation of Article 14 of the  Constitution.                                      Since we have held with reference to Entry 8 read  with Entry 6 of List-II that the Bihar Legislature was  competent  to enact the said 1915 Act as amended, there  is no merit in the contention advanced on behalf of the  manufacturers that section 2(12a) of the Bihar Act, 1915  constituted colourable exercise of power.    

       Before concluding, we may clarify, that, the State  will fix a period within which the manufacturers will  apply for license on payment of fees (including arrears)  in terms of the impugned notifications/communications  no.2/23-3-88/1, 2/23-3-88/2, and 2/23-3-88/3, all dated  3rd August, 1988.  During this period, they will not be  prosecuted.  However, if the manufacturers fail to  comply with the impugned notifications/communications  within the stipulated period, then, the State Government,  on expiry of such period, would be entitled to proceed  against the manufacturers in accordance with law.  

       Subject to above, the appeals are allowed and the  impugned judgment and order of the High Court dated  23.10.1989 passed in CWJC Nos.7865, 7191, 7219, 8294  and 7864 of 1988, is set aside.  We uphold the validity of  the Bihar Excise Act, 1915 as well as the validity of the  impugned notifications/communications, all dated  3.8.1988.  However, in the facts and circumstances of the  case, there will be no order as to costs.