# APHALI PHARMACEUTICALS LTD v. STATE OF MAHARASHTRA & ORS

- **Citation:** [1989] Supp. 1 S.C.R. 129
- **Court:** Supreme Court of India
- **Decided:** 1989-09-19
- **Bench:** G.L. Oza, K.N. Saikia
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/aphali-pharmaceuticals-ltd-v-state-of-maharashtra-ors-10428
- **Pages:** 24

## Headnote

Medicinal and Toilet Preparations (Excise Duties) Act 1955Amendment Act 19 of 1961-Finance Act 1962-Section 18 thereofLevy of excise duty on the product "Ashvagandharist" manufactured by
the appellant-Whether permissible under the schedule to the Act as
amended-Effect and Interpretation of Explanation I added to the
Schedule of the Act by Finance Act 1962-Circular dated May 31, 1962
issued by the Government of Maharashtra-Whether in conformity with
the provisions of the Act and Explanation I of the Schedule.
Medicinal and Toilet Preparation (Excise Duties) Rules 1956Rules 64 to 66 whether consistent with the schedule and the circular
dated 31.5. 1962.
The appellant is a company having its registered office at
Ahmednagar in Maharashtra. It carries on business as manufacturers
of Ayurvedic preparations including "Asvas" and "Aristhas ". At the
material time the appellant was manufacturing and selling an
Ayurvedic product "Ashvagandharist" which is a medicinal prepara·
tion containing self-generated alcohol but not capable of being con·
sumed as ordinary alcoholic beverages.
Medicinal and Toilet Preparations (Excise Duties) Act 1955 came
into force on 1.4. 1957. The schedule to the said Act contained two items
specifying "medicinal and toilet preparations containing alcohol"
which are prepared by distillation or to which alcohol has been added
and which are capable of being consumed as ordinary "alcoholic beverage" and "medicinal and toilet preparations not otherwise specified
containing alcohol" as the commodities excisable under the provisions
of the Act. The said "Ashvagandharist'" was treated and accepted by
the Excise .Authorities as being exempt from the payment of excise duty
upon the basis and footing that the same was an Ayurvedic preparation
containing self-generated alcohol which was not capable of being consumed as ordinary alcoholic beverage and which fell under item 2(i) of
the schedule in respect of which, the rate of excise duty prescribed in
the schedule was "Nil".
129
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130
SUPREME COURT REPORTS
[1989] Supp. 1 S.C.R.
The Act was amended by Amendment Act 19 of 1961 whereby
A concept of "patent and proprietary" medicine was introduced in the
schedule. The Amendment Act, by an Explanation introduced in the
schedule the definition of "patent and proprietary" medicine contained
in the Drugs Act 1940. Despite the said amendment in the schedule the
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appellants' product continued to be treated as exempt from the liability
to"pay excise duty on the ground that it was covered under item 2(i) of
the schedule which item was re-numbered as item 3(i) of the schedule.
Thereafter by section 18 of the Finance Act 1962, the Act was further
amended by substitution of Explanation I to the schedule of the Act. By
the said explanation, a "patent and proprietary" medicine was defined
as a medicinal preparation of the description and the type specified in
the Explanation. The said Explanation was given retrospective effect
from April 23, 1962. In pursuance of the said Explanation I brought by
the Finance Act, Director of Prohibition and Central Excise, Govt. of
Maharashtra, Bombay issued a circular dated May 31, 1962, which
inter alia directed that the medicinal preparations containing selfgenerated alcohol but not capable of being consumed as alcoholic beverD age were to be treated as products falling under Item No. I and not Item
3 of the schedule. As a result of that circular, the Respondents levied
excise duty on the appellants' product amounting to Rs.2,18,282.16p.
and realized the same from the appellant. The appellant paid the
amount "under pr9test".
El
With a view to recover the aforesaid amount, which according to
the appellant, was illegally recovered by the Respondents, the appellant
filed a suit, being special suit No. 23 of 1965 in the Court of Civil Judge
Sr. Division, Ahmednagar.
The Civil Judge by his order dated 27.3.69 decreed the appellantF
plaintiff's suit with interest at 6% per annum from the dat

## Text

_Characters 0–39,910 of 59,082. This is a partial read: ask again with offset=39910 for what follows._

APHALI PHARMACEUTICALS LTD.
v.
STATE OF MAHARASHTRA & ORS.
SEPTEMBER 19, 1989
[G.L. OZA AND K.N. SAIKIA, }J.]
Medicinal and Toilet Preparations (Excise Duties) Act 1955Amendment Act 19 of 1961-Finance Act 1962-Section 18 thereofLevy of excise duty on the product "Ashvagandharist" manufactured by
the appellant-Whether permissible under the schedule to the Act as
amended-Effect and Interpretation of Explanation I added to the
Schedule of the Act by Finance Act 1962-Circular dated May 31, 1962
issued by the Government of Maharashtra-Whether in conformity with
the provisions of the Act and Explanation I of the Schedule.
Medicinal and Toilet Preparation (Excise Duties) Rules 1956Rules 64 to 66 whether consistent with the schedule and the circular
dated 31.5. 1962.
The appellant is a company having its registered office at
Ahmednagar in Maharashtra. It carries on business as manufacturers
of Ayurvedic preparations including "Asvas" and "Aristhas ". At the
material time the appellant was manufacturing and selling an
Ayurvedic product "Ashvagandharist" which is a medicinal prepara·
tion containing self-generated alcohol but not capable of being con·
sumed as ordinary alcoholic beverages.
Medicinal and Toilet Preparations (Excise Duties) Act 1955 came
into force on 1.4. 1957. The schedule to the said Act contained two items
specifying "medicinal and toilet preparations containing alcohol"
which are prepared by distillation or to which alcohol has been added
and which are capable of being consumed as ordinary "alcoholic beverage" and "medicinal and toilet preparations not otherwise specified
containing alcohol" as the commodities excisable under the provisions
of the Act. The said "Ashvagandharist'" was treated and accepted by
the Excise .Authorities as being exempt from the payment of excise duty
upon the basis and footing that the same was an Ayurvedic preparation
containing self-generated alcohol which was not capable of being consumed as ordinary alcoholic beverage and which fell under item 2(i) of
the schedule in respect of which, the rate of excise duty prescribed in
the schedule was "Nil".
129
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130
SUPREME COURT REPORTS
[1989] Supp. 1 S.C.R.
The Act was amended by Amendment Act 19 of 1961 whereby
A concept of "patent and proprietary" medicine was introduced in the
schedule. The Amendment Act, by an Explanation introduced in the
schedule the definition of "patent and proprietary" medicine contained
in the Drugs Act 1940. Despite the said amendment in the schedule the
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appellants' product continued to be treated as exempt from the liability
to"pay excise duty on the ground that it was covered under item 2(i) of
the schedule which item was re-numbered as item 3(i) of the schedule.
Thereafter by section 18 of the Finance Act 1962, the Act was further
amended by substitution of Explanation I to the schedule of the Act. By
the said explanation, a "patent and proprietary" medicine was defined
as a medicinal preparation of the description and the type specified in
the Explanation. The said Explanation was given retrospective effect
from April 23, 1962. In pursuance of the said Explanation I brought by
the Finance Act, Director of Prohibition and Central Excise, Govt. of
Maharashtra, Bombay issued a circular dated May 31, 1962, which
inter alia directed that the medicinal preparations containing selfgenerated alcohol but not capable of being consumed as alcoholic beverD age were to be treated as products falling under Item No. I and not Item
3 of the schedule. As a result of that circular, the Respondents levied
excise duty on the appellants' product amounting to Rs.2,18,282.16p.
and realized the same from the appellant. The appellant paid the
amount "under pr9test".
El
With a view to recover the aforesaid amount, which according to
the appellant, was illegally recovered by the Respondents, the appellant
filed a suit, being special suit No. 23 of 1965 in the Court of Civil Judge
Sr. Division, Ahmednagar.
The Civil Judge by his order dated 27.3.69 decreed the appellantF
plaintiff's suit with interest at 6% per annum from the date of the suit
till realisation.
The Respondents appealed to the High Court against the Order of
the Civil Judge and the High Court allowed the appeal, reversed the
Judgment and decree passed b.r the Civil Judge and dismissed the
o appellant's suit. Hence this appeal by the plaintiff-appellant by special
leave.
Allowing the appeal, this Court,
HELD: From Explanation I of the Schedule of the Act as subH stituted by Act S of 1964 it is clear that patent or proprietary medicine
A. PHARMACEUTICALS v. STATE OF MAHARASHTRA
131
means any medicinal preparation which is not specified in a monograph
'in a Pharmacopoeia, Formulary or other publications notified in this
behalf by the Central Government in the Official_ Gazette. [144C]
To be a patent medicine one would be required to have a patent.
A patented article means an article in respect of which a patent is in
force. [1440]
A patent medicine will, therefore, mean medicine in respect of
which a patent is in force. [144E]
Patent means a grant of some privilege, property, or authority,
made by the Government or sovereign of a country to one or more
individuals. A proprietor is one who has the legal right or exclusive
title to anything. It is synonymous with owner. A person entitled to
a trade mark or a design under the Acts for the registration or
patenting of trade mark or design is called a proprietor of the trade
mark or design. [144E-F]
A Schedule in an Act of Parliament is a mere-question of drafting ..
It is the legislative intent that is material. An Expl_anation to the
Schedule amounts to an Explanation in the Act itself. [147F]
The Schedule may be used in construing provisions in the body of
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t_he A<t. It js as much an Act of the Legislature as the Act itself and it
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must be ~ead together with the Act for all purposes of construction.
Expressions in the Schedule c1c1nnot control or prevail against express
enactment and in case of any inconsistency between the schedule and the
enactment, the enactment is to prevail and if any part of the, schedule
cannot be made to correspond it must yield to the Act. [147H; 148A-B]
An explanation is different in nature form a proviso, for a
proviso excepts, excludes or restricts while an explanation explains
or clarifies. Such explanation or clarification may be in respect of
matt~rs whose meaning is implicit and not explicit in the main section
itself. l149F]
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Bihta Marketing Union v. Bank of Bihar, AIR 1967 SC 389:
[1967] 1 SCR 848; State of Bombay v. United Motors, AIR 1953 SC
252:-(1953] SCR 1069;-Collector of Customs v. G. Dass & Co., AIR
1966 SC 1577; Burmah Shell Oil Ltd. v. Commercial Tax Officer, AIR
1961 SC 315: [1961] 1 SCR 902; Dattatraya Govind Mahajan v. State of
Maharashtra, AIR 1977 SC 915 (928): [1977] 2 SCR 790 and Hiralal
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132
SUPREME COURT REPORTS
[1989] Supp. 1 S.C.R.
A Ratanlalv.StateofU.P., [i973] iSCC2!6.
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Ex praecedentibus et consequentibus optima fit interpretatio. The
best interpretation is made from the context. lnjustum est nisi tota lege
inspecta, de una aliqua ejus particula proposita judicare Ve/ respondere. It is unjust to decide or respond as to any particular part of
a law without examining the whole of the law. lnterpretare et concordare leges ligibus, est optimus interpretendi modus. To interpret
and in such a way as to harmonize laws with laws, is the best mode of
interpretation. [ISIG-H]
Jura eodem modo distituentur quo constitutuntur. Laws are abrogated by the same means (authority) by which they are made. [152A]
Every word in a Statute is to be given a meaning. A construction
which would leave without effect any part of the language of a statute
will normally be rejected. Every clause of a statute is to be construed
with reference to the context and other clauses of the Act so as to make,
as far as possible, a consistent enactment of the whole'statute. [1528]
A specific provision to include Ayurvedic preparations containing
self-generated alcohol which are not capable of being consumed as ordinary alcoholic beverages was necessary. Thal having not been done
by the Explanation itself, it was not permissible to include it by the
Circular. The Explanation I could not have been in conflict with the
provisions of the Act and the Circular could not have been in conflict
with the Explaruition, the Schedule, the Rules and the Act. ll52E-F)
The Court set· aside the order of the High Court and restored that
of the Civil Jndge decreeing the suit. [152G]
Inland Revenue Commissioners v. Gittus, [1920) I KB 563;
Baidyanath Ayurved Bhawan Pvt. Ltd. v. The Excise Commissioner,
U.P., [1971] 2 SCR 590; Mohan/al Magan/al Bhavsar v. Union of
India, [1986] l SCC 122; Commissioner of Sales Tax v. The Modi Sugar
Mills Ltd., [1961] 2 SCR !89 and Cape Brandy Syndicate v. CommisG
sioners of Inland Revenue, [192i] I KB 64, referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1845
(N) of 1974.
From the Judgment and Decree dated 6/7 .3.1974 of the Bombay
H High Court in First Appeal No. 586 of .1969.
I
A. PHARMACEUTICALS v. STATE OF MAHARASHTRA[SAIKIA, J.] 133
S.K. Dholakia and H.S. Parihar for the Appellant.
A.K. Ganguli, A.M. Khanwilkar, A. Subba Rao, C.V. Subba
Rao and A.S. Bhasme for the Respondents.
The Judgment of the Court was delivered by
SAIKIA, J, This plaintiff's appeal by special leave is from the
Appellate Judgment and Decree of the High Court of Judicature at
Bombay reversing those of the trial court and dismissing plaintiff's
special suit.
The appellant is a Limited Company registered under the Companies Act having its registered office sit_uate at Ahmednagar within
the ·State of Maharashtra. The appellant carries on business, inter
alia, as manufacturers of Ayurvedic preparations including "Asavas",
"Aristhas". At all times material to this appeal, the appellant was
manufacturing and selling an Ayurvedic product called "Ashvagandhaarist" which is a medicinal preparation containing self-generated alcohol but not capable of being consumed as ordinary alcoholic
beverage,
Under the provisions of the Medicinal and Toilet Preparations
(Excise Duties) Act, 1955, hereinafter referred to as "the Act", which
came into force on 1st April, 1957, excise duties were levied on medicinal and toilet preparations specified in the Schedule to the Act,
hereinafter .referred to as "the Schedule". The Act, as originally stood
in 1955, inter alia, contained two items in the Schedule respeciively
specifying "medicinal and toilet preparations.containing alcohol which
are prepared by distillation or to which alcohol has been added and
which are capable of being consumed as ordinary "alcoholic beverage"
and "medicinal and toilet preparations not otherwise specified containing alcohol", being the commodities excisable under the provisions
of the Act. The said "Ashvagandhaarist'' was treated and accepted by
tile Excise Authorities as being exempt from the payment of any excise
duty upon the basis and the footing that the same was an Ayurvedic
preparation containing self-generated alcohol which was not capable
of being consumed as ordinary alcoholic beverage, and which fell
under item 2(i) of the S~hedule in respect of which the rate of excise
duty postulated in the Schedule was "Nil".
The Act was amended by the Amendment Act 19 of 1961. The
amendment, inter alia, introduced the concept of "patent and pro·
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134
SUPREME COURT REPORTS
[1989] Supp. 1 S.C.R.
prietary medicine" in the Schedule. The amendment Act, however, by
an Explanation, introduced in the Schedule the definition of the
"patent and proprietary medicine" contained in the Drugs Act, 1940.
Even after the introduction of the said amendment, the appellant's
aforesaid product continued to be treated as exempt from the liability
to pay any excise duty on the self-same ground, namely, that it was
covered under item 2(i) of the Schedule which item 2(i) was re-
-numbered as item 3(i) of the Schedule as amended by the Amendment
Act of 1961.
By Section 18 of the Finance Act, 1962, the Act was further
amended by substitution of an Explanation No. 1 to the Schedule of
the Act. By virtue of and under the said Explanation, a patent and
, proprietary medicine was defined as a medicinal preparation of the
description and the type specified in the Explanation. The Explanation
which was brought in by the Finance Act was given retrospective effect
from April 23, 1962.
In purported pursuance of the said Explanation and/or upon the
basis thereof, a circular dated May 31, 1962 was issued by the then
Director of Prohibition and Central Excise, Government of Maharashtra, Bombay which, inter alia, directed that the medicinal preparations
containing self-generated alcohol but not capable of being consumed
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as alcoholic beverage Were to be treated as products falling under item
1 and not item 3 of the Schedule. consequent thereupon, the respondents levied and recovered from the appellant diverse sums aggregating to Rs.2,18,282.16 being the alleged amount of the excise duty
payable in respect of the product "Ashvagandharist". The amounts
were paid by the appellant "under protest".
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With a view to enforcing their rights in respect thereof and/or
recovering the said amount illegally recovered by the respondents, on
July 14, 1965, the appellant filed a suit, being Special Suit No. 23 of
1965 in the Court of Civil Judge, Senior Division, Ahmednagar.
On March 4, 1966, the respondent No. 4 filed its written statement and similarly on the 4th April, 1966 the respondent Nos. 1 to 3
filed written statements. In'the written statements, filed on behalf of
the respondents it was, inter alia, contended that the said product of
the appellant was "the unrestricted ayurvedic preparations" manuH factured by the plaintiff (appellant) labelled and marked by the
A. PHARMACEUTICALS v. STATE OF MAHARASHTRA[SAiKIA, J.] 135
plaintiff (appellant) under their brand name and trade mark. This, A
therefore, fell within "the scope of patent or proprietary medicine .as
given in Explanation 1 below the Schedule annexed to the Act, as
inser.ted from April 23, 1962 by Finance Act (No. 2) 1962.
By his Judgment and Decree dated March 27, 1969, the learned B
Civil Judge was pleased to decree the appellant's suit for
Rs.2,22,582.07 together with future interest at 6 per cent per annum
from the date of the suit till realisation.
Aggrieved by the Judgment and Order dated March 27, · 1969 ,the
respondents (being the defendants therein) preferred ·an appeal to C
the High Court of Judicature at Bombay, whicli was registered as First
Appeal No. 586 of 1969. The said appeal was heard by the High Court
alongwith other appeals being First Appeals Nos. 136 of 1968 and 93
of 1970 as also suits being Suit Nos. 230 of 1965 and 319 of 1965.
The appeals and the suits were heard together having regard to the
common questions of law involved therein. By .its judgment and decree D
the High Court was pleased to allow the said first appeal of the respondents, reversing the judgment .and decree of the Trial Court and to
dismiss the appellant's special suit. Hence this appeal by special leave.
Mr. S.K. Dholakia, the learned counsel for the appellant E
submits, inter alia, that the findings of the High Court are repugnant to
the relevant provisions of the Act and/or the rules framed thereunder
and/or the scheme, intendments and purposes thereof. It is con.tended
that the appellant's product "Ashvagandhaarist" fell squarely within
item 3(i) of the Schedule and as such wholly exempt from the payment
of excise duty; that in view of the admitted position that until 1962 r
"Ashvagandhaarist" was exempt from the payment of excise duty as
being a commodity falling under item No. 2(i) of the Schedule, simply
by reason of t.he Explanation which was introduced in ·the Act by the
Finance Act of 1962, as the explanation could never be considered to
be or, in any event, in the scheme of the provision of the Act, was not a
substantive provision of the Act and the explanation was not intended G
to and it did not seek to. disturb the enumeration of the categories or
the respective fields assigned to the various items of the schedule in
existence prior thereto. It is submitted that item 3 of the amended
Schedule was a specific item and enumerated categories of Ayurvedic
medicinal preparations covered thereby arid that being so, all
commodities answering description set out therein· fell within the H
136
SUPREME COURT REPORTS
[ 1989) Supp. 1 S.C.R.
A ambit thereof and was excluded from the purview of the other items
contained in the said schedule and that the express language of item
3(i), namely, of "Ayurvedic preparations containing self-generated
alcohol which were not capable of being consumed as ordinary
alcoholic beverages" were exempted and that the appellant's product
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"'Ashvagandhaarist" was admittedly and obviously an Ayurvedic preparation· containing self-generated alcohol which was not capable of
being consumed as ordinary alcoholic beverage and as such it could not
be made excisable on the ground that it fell within any other item of
the schedule but it constituted residuary clause of the schedule in so
far as the medicinal and toilet preparations containing alcohol were
concerned. Counsel further submits that the expression "not otherwise
specified" occurring in item 3 of the schedule did not restrict the scope
of the enumerated categories under item 3 but was merely a marginal
note showing that the said item 3 was residuary item and comprised of
three sub-groups of commodities speficied therein; and that item No. l
was not a specified item. Mr. Dholakia further submits that the
interpretation that "ashvagandhaarist" fell within item No. I rendered
O the provisions of item No. 3 wholly nugatory inasmuch as if an
Ayurvedic preparation containing self-generated alcohol but incapable
of being used as ordinary alcohoHc .beverage, is treated as falling
under item 1 there would be no Ayurvedic medicine which would
factually fall under item 3 of the schedule and that the Explanation
newly introduced by the Finance Act, 1962 could not add to, amend or
alter or vary the classification of the goods existing prior thereto
as covered by the various items of the said schedule; nor could it
otherwise nullify or add to, amend or alter or vary the substantive
·provisions of the schedule and it could not be considered to be a
substantive provision of the Act nor could it be allowed to abrogate
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the substantive provisions of the Act. In other words, the submission
is that in view of the fact that the product of the appellant was exempt
from payment of duty because the duty against item No . .3(i) in the
amended Schedule of 1961 was mentioned to be 'nil' the High Court
ought to have held that the said legal and factual position could not
be transformed to the detriment of the appellant by shifting the said
commodity from the field covered by item 3(i) to that covered by
item 1 of the Act merely on the basis of the Explanation which was
introduced by the Finance Act of 1962. Counsel argues that this was
more ·,so because "ashvagandhaarist" was not a name within the contemplation of the explanation but. was merely a descriptive appellation
of the medicine manufactured and sold by the appellant and it being
a standard preparation according to the Ayurvedic system could be
manufactured by any one conversant with the said system, and it did
A. PHARMACEUTICALS v. STATE OF MAHARASHTRA[SAIKIA, J .1 137
not have a brand name in the hands of the appellant and the High
Court's inttirpretation that a mere d,escription is a name is inconsistent
with the scheme of the definition of "pate!)! and proprietary
medicines" in the Explanation. This was the reason, it is argued, why
Asavas and Aristhas were expressiy made non-dutiable a.fter 25.9.6'1
by subsequent amendment by the Government.
Mr. A.K. Ganguli, learned counsel appearing for the respondents, demurring, submits that there can be no doubt that "Asavas"
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and "Aristhas" fall under ·item l of the schedule to the Act as substituted by Finance Act 2 of 1962 and nence taxable at 10% ad valorem;
and those being Ayurvedic preparations are specified preparations and c
they could never fall under item 3 or any part thereof which deals with
medicinal preparations not otherwise specified containing alcohol.
Item 1, Mr. Ganguli submits, specifically.describes that medicinal and
toilet- preparation which has alcoholic contents .and which alcohol
comes to be present in those medicines by use of one of the two
methods described in that item. First of such methods contemplates D
alcohol contents in the medicine which is prepared by distillation
and the second method is addition of alcohol to the medicine. The
medicinal preparation which is prepared by distillation and which
contains alcohol and other medicinal preparations to which alcohol
is added fall in eategory l and such medicines would cover medicinal
preparations belonging either to Allopathic or Ayurvedic system or
any other system of medicines. For every system of medicines, counsel
argues, item No. l is not general item but it is a specific item in the
sense it covers only those medicines which are.prepared by distillation
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and contain alcohol a~ others tci which alcohol has been added.
According to counsel, such medicines belonging'!o any system whether
indigenous or foreign are covered by item 1 and would be taxable as
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per that item and the disputed goods are undoubtedly medicinal preparations and they are also patent and proprietary medicines in view
of the Explanation 1 and these Ayurvedic preparations are medicinal
preparations being patent or proprietary medicines containing alcohol
which are not capable of being consumed as alcoholic beverages and as
such they squarely fall under item 1 of the Schedule, and the main Act G
and the Explanation is a self-contained provision which eliminates the
reference either to Drugs Act or to the Rules made under the Act; and
one has to read only the provision of the Schedule as a whole including
the Explanation, and their meaning being simple and plain, they must
be given their full effect.
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SUPREME COURT REPORTS
[1989] Supp. 1 S.C.R.
To appreciate the rival contentions we can appropriately refer to
~ the provisions and the Schedule of the Act arid the legislative changes
thereof. The Act was meant to provide for the levy and collection of
duty of.excise on medicinal and toilet preparations containing alcohol,
opium, Indian hemp or other narcotic drug or narcotic. The statement
of objects and reasons as notified in Gazette oflndia of 16.9.1954, Part
8
II; S. 2, Ext., page 596 said that by virtue of entry 40 in List II in
.the. Seventh Schedule to the Government of India Act, 1935, medicinal
and toilet preparations containing alcohol, etc., were subjected to
Provincial excise duties. In order to secure uniformity the entry
, relating to excise duty on medicinal,,and toilet preparations containing
·alcohol, etc. were transferred under the Constitution from the State
list to, the Union List. The Act was intended to implement this proC vision in the Constitution and proposed uniform rates of excise duty
and a uniform procedure· for the collection thereof. The Act came in
force on 1.4.57.
The Act in Section 2(a) defined "alcohol" to mean "ethyl
D alcohol of any strength and purity having the chem_ical composition
C2H,0H"; and it defined "medicinal preparation" in Section 2(g) to
include "all drugs which are a remedy or prescription prepared for
internal or external use of human i:Jeings or animals and all substances
intended to be used for or in the ireatment, mitigation or prevention of
disease in human beings or animals". It did not define "drug". The
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Drugs Act, 1940, as it was substituted by the Drugs (Amendment)
Act, 1955 ( 16.4.55) had defined "drug" in Section 2(b) to include
"(i) ·all medicines for internal or external use of human beings or
animals and all substances intended to be used for or in the diagnosis,
treatment, mitigation· or prevention of disease in human beings or
animals other than medicines and substances exclusively used or
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prepared for use in accordance with the Ayurvedic or Unani systems of
medicine; and (ii) such substances (other than food) intended to affect
the structure or any function of the human body or intended to be used
for the destruction of vermins or insects which cause disease in human
beings or animals, as may .be specified from time to time by the Central
Government by notification in the Official Gazette."
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(Emphasis supplied)
Section 3(i) of the Act provides that "there shall be levied duties
, of excise, at the rates specified in the Schedule, on all dutiable goods
manufactured in India."
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The original Schedule to the Act in 1955 read:
A. PHARMACEUTICALSv. STATEOFMAHARASHTRA(SAIKIA,J.] 139
THE SCHEDULE
A
(See section 3)
Item Description of dutiable
Rate of
No. goods.
duty.
B
1.
Medicinal and toilet preparations,
Rupees seventeen
containing alcohol, which are prepared
and annas eight
by distillation or to which alcohol
per gallon of the
has been added, and which are capable
strength of London
of being consumed as ordinary alcoholic
proof spirit.
c
beverages.
2.
Medicinal and toilet preparations not
otherwise specified containing alcohol
(i) Ayurvedic preparations containing
Nil
self-generated alcohol, which are
D
not capable of being consumed as
ordinary alcoholic beverages.
{ii) Ayurvedic preparations containing
Rupees three per
self-generated alcohol, which are
gallon.
capable of being consumed as
ordinary alcoholic beverages.
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(iii) All others.
Rupees five per
gallon ofthe
strength of
London proof
spirit
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3.
Medical and toilet preparations,
Nil
not containing alcohol, but containing
opium, Indian hemp, or other
n)iicotic drug or narcOtic.
It would thus be c)ear tl)at medicinal and toilet preparations were G
classified into those which were capable of being eonsumed as ordinary
alcoholic beverages and those which were not capable of being consumed as ordinary alcoholic beverages. Again, medicinal and toilet
preparations containing alcohol prepared by distillation or adding
alcohol is differentiated from medicinal and toilet preparations 'not .
D.therwise specified containing alcohol'. Further, under this 'not H
140
SUPREME COURT REPORTS
[1989] Supp. 1 S.C.R.
A
otherwise specified' category Ayurvedic preparations have been classified into three groups, namely, Ayurvedic preparations containing
self-generated alcohol not capable of being consumed as ordinary
alcoholic beverages, those capable of being consumed as ordinary
alcoholic beverages; and others. These three divisions were not drugs
as defined in Drugs Act then. The first category of Ayurvedic preparaB
lions had not been subjected to duty while the other two categories
had been.
c
D
E
p
Admittedly, under the above Schedule the product of the appellant 'ashvagandhaarist' was not dutiable which meant that it was included in item 2(i). It would also be clear that 'Ayurvedic preparations
containing self-generated alcohol which were capable of being consumed as ordinary alcoholic beverages' were dutiable at the rate of
Rupees 3 per gallon and the third category of others was also dutiable
at the rate of Rupees 5 per gallon on the strength of London proof
spirit. Alcohol and self-generated alcohol were treated differently.
The Schedule was amended by the Amending Act No. 19 of 1961
and the amended Schedule stood as follows:
Item No. Description of dutiable goods
!.
2.
Medicinal preparations, being patent
or proprietary medicines, containing alcohol and which are not
capable of being consumed as
ordinary alcoholic beverages.
Medicinal preparations, containing
alcohol, which are prepared by
distillation or to which alcohol
has been added, and which are
capable of being consumed as ordinary alcoholic beverages.
Rate of duty
Ten percent
ad valorem.
Rupees three and
eighty five naye
paise per litre
of the strength
of London proof
spirit.
G 3.
Medicinal preparations not otherwise
specified containing alcoholH
(i) Ayurvedic preparations containing
self-generated alcohol which are
not capable of being consumed as
ordinary alcoholic beverages.
Nil
A. PHARMACEUTICALS v. STATEOFMAHARASHTRA[SAIKIA, J.] 141
(ii) Ayurvedic preparations, containing self-generated alcohol, which
are capable of being consumed as
ordinary alcoholic beverages.
(iii) Ail others.
Thirty eight
naye paise per
litre.
Rupee one and
ten naye paise
per litre of
the strength
of London proof
spirit.
A
B
Explanation I: "Patent or proprietary medicines" has the same
meaning as in clause (h) of Section 3 of the Drugs
C
Act, 1940 (23 of 1940).
The statement of objects and reasons of the Amendment Bill, as
published in Gazette of India, 8.3.1961, Pt. JI, S. 2, Ext., page 106,
said:
"Consequent on the decision to adopt metric units from the
1st April, 1961, in the sale of alcohol and collection of duty
thereon, it is proposed to provide for the levy and collection of excise duty on medicinal and toilet preparations in
terms of metric units.
D
E
Under·existing item 2(ii) of the Schedule to the Act,
Ayurvedic preparations containing self-generated alcohol
which are .capable of being consumed as ordinary alcoholic
beverages are subjected to duty at the rate of Rs.3 per galF
Ion. However, by virtue of the provision contained in section 19(2)(xix) of the Act, read with Rule 8 of the Medicinal and Toilet Preparations (Excise Duties) Rules 1956,
the rate of duty with respect to such preparations has been
reduced to Rs.1.75 per gallon with effect from the 10th
September, 1960, and it is this reduced rate that is, proG
posed to be expressed in terms of metric units in the Bill."
It would thus be clear that the main purpose was the levy and
collection of excise duty on medicinal and toilet preparations in terms
of metric unit. while there was reference to them existing item 2(ii) of
the Schedule of the Act, namely, Ayurvedic preparations containing
H
142
SUPREME COURT REPORTS
[1989) Supp. 1 S.C.R.
A
self-generated alcohol which were capable of being consumed as ordinary alcoholic beverages the duty whereof was reduced to Rs. I. 75 per
gallon from Rs.3 per gallon, there was no mention that item No. 2(i) of
the Schedule, namely, Ayurvedic preparations containing self-generated alcohol which were not capable of being consumed as ordinary
alcoholic beverages was subjected to tax. The statement of object and
a reasons was silent about item No. 2(i).
In the amended Schedule we find that item 1 for the first time
mentioned medicinal preparations being patent or proprietary
medicines, containing alcohol and which are not capable of being con~
sumed as ordinary alcoholic beverages and the earlier item No. 1 has
been re-numbered as item No. 2 and the earlier item No. 2(i), (ii) and
C (iii) remained as they were as 3(i), 3(ii) and 3(iii). As regards levy of
duty item 2(i) of the old Schedule was kept duty free in item 3(i) of the
Schedule. Thus, there has been no fresh charging of duty on what was
2(i) and is now 3(i) under which category the appellant's produ~t 'ashvagandhaarist' was exempted from duty before the' amendment of the
I) Schedule. There is, therefore, no .doubt that item 1 & 2(i) remained
mutually exclusive or in other words, they would not be overlapping.
Item 1 in the amended Schedule deals with medicinal preparations
being patent or proprietary medicines and not medicinal preparations
'not otherwise specified.'
E
The Explanation I says that patent or proprietary medicines has
the same meaning as in clause (h) of Section 3 of the Drugs Act, 1940.
The High Court has found that re-numbered definition 3(h) was earlier
3( d) and read as follows:
"3(d) 'Patent or proprietary medicine' means a drug which.
f
is a remedy or prescription prepared for internal or external use of human beings or animals, and which is not for
the time being recognised by the Permanent Commission
on Biological Standardisation of the Wrold Health Organisation or in the latest edition of the British Pharmacopoeia
or the British Pharmaceutical Codex or any other PharG
macopoeia authorised in this behalf by the Central Government after consultation with the Board."
Thus, patent or proprietary medicines meant a drug which was defined
in the Drugs Act and not in the Act. The High Court rightly held that
Ayurvedic medicine was not a drug11t_all. The definition of drug expreH ssly excluded them. So the definition of patent or proprietary medicine
A. PHARMACEUTICALS v. STAIE OFMAHARASHTRA[SAIKIA. J.] 143
was exclusive of Ayurvedic medicinal preparations, those being
excluded from the definition of drug. The definition ·of patent and
proprietary medicines till then did not apply to Ayurvedic preparations. This position continued indeed till the amendment of Drugs Act
by the Drugs and Cosmetics (Amendment) Act, 1964. Several amend"
ments were effected by that Amendment Act of 1964. Section 33A and
Chapter TV A were inserted. Section 33A said that Chapter IV was not
to apply to Ayurvedic (including Siddha) or Unani drugs. "Save as
otherwise provided in this Act, nothing contained.in this Chapter shall
apply to Ayurvedic (including Siddha) or Unani drugs". Chapter IVA
made provisions relating to Ayurvedic (including Siddha) and Unani
drugs: This shows that prior to this amendment of 1964 Ayurvedic
preparations were expressly not drugs under the Drugs Act.
The Drugs and Cosmetics Act in the amendment First Schedule
after the amendment Act of 1964 included Ayurvedic (including
Siddha) and Unani system drugs prepared under Section 3(a) which
contains the definition: "Ayurvedic (including Siddha) or Unani drugs
includes all medicines intended for internal or external use of human
beings or animals and all substances intended to be used for or in the
diagnosis, treatment, mitigation or prevention of disease in human
beings and animals, mentioned and process and manufacture exclusively in accordance with the formula prescribed in the authoritative
book on Ayurvedic (Siddha) Unani system of medicines specified in
the first schedule." This definition was also inserted by Drugs and
Cosmetics (Amendment) Act, 1964 (13 of 1964) Section 2(a)(i) with
effect from 15. 9. 1964.
The same exclusion, remained in the related Central Acts. For
example, the Drugs Control Act, 1950 (Act 26 of 1950) replaced the
Drugs Control Ordinance, 1949 (6 of 1949) which was promulgated on
3.10.1949 in order to ensure that certain essential imported drugs and
medicines were sold in the reasonable price in the Chief Commissioner's provinces. Similar ordinances were issued by all the provinces.
The necessity for continuing price control of these essential drugs continued. That was an Act to provide for the control of sale, supply and
distribution of drugs. Drug meant any drug as defined in clause (b) of
Section 3 of Drugs Ad, 1940, in respect of which a declaration had
been made under Section 3 which defined drug. It may be noted that
Pharmacopoeia authorised for the purpose of Section 3(h) of the
Drugs Act, 1940, were: The Indian Pharmacopoeia, the Pharmacopoeia of the United States, the National formulary of the United
States, the Intl'rnational Pharmacopoeia and the State Pharmacopoeia
A
B
c
D
E
F
G
H
144
SUPREME COURT REPORTS
[1989] Supp. 1 S.C.R.
A of the Union of SoyjeJ Socialist Republics, vide .S.O. 701 Gazette of
India, 1961, Pt. II, S. 3(ii), p. 725. There was thus no Ayurvedic
Pharmacopoeia prescribed for the purpose of that Act. Pharmacopoeia is a book containing the list of drugs with directions for use.
The fact that no Ayurvedic Pharmacopoeia had been notified at the
relevant time was because Ayurvedic preparations were not drugs for
B the purpose of Drugs Act and, for that matter, of Medicinal and Toilet
Preparations (Excise Duties) Act, at the relevant time. It could be for
this reason that in the original Schedule the expression medicinal and
toilet preparations 'not otherwise specified' was used and Ayurvedic
preparations of different categories were put under item 2. In the
Schedule as amended by the 1962 Act, this expression continued in
C item 3, The same definition of 'drug' also continued in the Drugs Act.
From the Explanation I of the Schedule of the Act as substituted
by Act 5 of 1964 also it is clear that patent or proprietary medicine
means any medicinal preparation which is not specified in a monograph in a Pharmacopoeia, Formulary or other publications notified in
D this behalf by the Central Government in the Official Gazette.
To be a patent medicine one would be required to have a patent.
A patented article means an article in respect of which a patent is in
force. "Patent" means a patent granted under the Indian Patent and
Designs Act, 1911, and now the Patent Act, 1970. A patent medicine
E will, therefore, mean medicine in respect of which a patent is in force.
"Proprietary" means of a proprietor, that is, holding proprietary
rights. Patent means a grant of some privilege, property, or authority,
made by the Government. or sovereign of a country to one or more
individua!S. A proprietor is one who has the legal right or exclusive
title to anything. It is synonymous with owner. A person entitled to a
F
trade mark or a- design under the acts for the registration or patenting
of trade mark or design is called a proprietor of the trade mark or
design. Under the Trade and Merchandise Marks Act, 1958, "trade
I
G
H
mark" means:
"(i) in relation to Chapter X (other than section 81), a
registrered trade mark or a mark used in relation to goods
for the purpose of indicating or so as to indicate a connection in the course of trade between the goods and some
person having the right as proprietor to use the mark; and
(ii) in relation to the other provisions of this Act, a mark
used or rroposed to be used in relation to goods for the
A. PHARMACEUTICALSv. STATEOFMAHARASHTRA(SAIKIA,J.] 145
purpose of indicating or so as to indicate ·a connection in
the course of trade between the goods and some person
having the right, either as proprietor or as registered user,
to use the mark whether with or without any indication of
the identity of that person, and includes a certification
trade mark registered as such under the provisions of
Chap. VIII."
As defined ins. 2(a), registered proprietor in relation to a trade-mark
means a person for a time being entered in the register as proprietor of
the trade-mark. A registered trade-mark means a trade-mark which is
actually on the register.
By s. 18 of the Finance (No. 2) Act, 1962, the Schedule to the
Act was further amended substituting the Explanation 1 by the
following:
"Explanation 1: "Patent or proprietary medicines" means
any medicinal preparation which bears· either on itself or on
its container or both a name which is noi specified in a
monograph in a Pharmacopoeia, Formulary or other Publications notified in this behalf by the Centrl Government in
the Official Gazette, or which is a brand name, that is a
name or a registered trade mark under the Trade and
Merchandise Mark Act, 1958 ( 43 of 1958), or any other
mark such as a symbol, monogram, label, signature or
invented words or any writing which is used .in relation to
that medicinal preparation for the purpose of indicating or
so as to indicate a connection in the course of trady between as preparation and some person having the right
either as proprietor or otherwise to use the name or mark
with or without any indication of the identity of that
person.''
This amendment of the Explanation came into force in June, 1962 with
retrospective effect from 23rd April, 1962.
The Director of Prohibition and Excise, for Maharashtra State,
Bombay, thereafter issued the circular tla.ted 31.5.1962 (Ext. 44).