# SUPii:EME COURT REPORTS [1964) HYDERABAD CHEMICAL AND PHARMACEUTICAL WORKS LTD. ETC v. STATE OF ANDHRA PRADESH AND ORS

- **Citation:** [1964] 7 S.C.R. 376
- **Court:** Supreme Court of India
- **Decided:** 1961-02-17
- **Case number:** Writ Petitions Nos. 400, 431 to 433 and 495 of 1958
- **Bench:** P. B. Gajendragadkar, K. N. Wanchoo, J. c. SHAH, N. Rajagopala•Ayyangar, s. M. SIKRI
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/supii-eme-court-reports-1964-hyderabad-chemical-and-pharmaceutical-works-ltd-3131
- **Pages:** 7

## Headnote

Medicinal and Toilet Preparation (Excise Duties) Act No. 16
of 1955, s. 21-Whether repeals rule 36 frcrmed-under Hyde'rabad
Abkari Act-If Act No. 16 is a law "otherwise made by Parliament' within the meaning of Art. 277- Hyderabad Act and Rul.1>
36 repealed-Constitution of India, Art. 277, Entry 84, List I of
Vll Schedule-Hyderabad Medical Preparations and Spirituous
Rules 1345 F, r. 36 ..
The appellants are manufacturers of medicine in which they
have to use alcohol. According to r. 36 of the Medical Preparation and Spirituous Rules, 1345 F framed under the Hyderabad
Abkari Act, 1316 F the appellant used to pay certain fees to the
State Government for the supervision of the use of alcohol by
the appellants. After the coming into force of the Medical and
Toilet Preparations (Excise Duties) Act, 1955 and the Rules
framed thereunder the appellants contended that since R. 36 was
repealed by this Act they had not to pay that fee. On the refusal
of the State Government to accept their contention the appellants filed writ petitions before the High Court challenging the
power of the Government to levy the fee. But the High Court
held that R. 36 was not repealed and dismissed the writ petitions.
Thereupon the appellant filed the present appeals on certificates
granted by the High Cf>urt.
Before this Court it was contended on behalf of the appellant that s. 21 of the 1955 Act in terms repealed any corresponding State law and therefore R. 36 stood repealed. The respondent
contended that the proviso to that section saved all previous
rules which were not inconsistent with the Act and hence R. 36
should be deemed to be in force. It was further contended by
the respondent-State that R. 36 remained in force because it was
meant to carry out the general purpose of the Hyderabad Abkari
Act which was a general Act relating to alcohol and intoxicating
drugs.
Held: (i) By virtue of Entry 84 List I of the VII Schedule
to the Constitution no charge could be levied on the manufacture
of medicinal .preparations except by the Union of India and
since the 1955 Act is a law made otherwise by Parliament within
the meaning of Art. 277 the duties and other charges which used
to be levied by the State in connection with medicinal preparations could no longer be levied by it. Further the effect of s. 21
of the Act is that so far as the Hyderabad Act applied to the use
of alcohol in the manufacture of medicinal and toilet preparations, the Hyderabad Act must be deemed to have been repealed.
(ii) By reasons R. 143 of the 1956 Rules r. 36 must be held to
have been repealed after the coming into force of the 1955 Act
and the rules framed thereunder. The purpose of R. 36 is clearly
~overed by the 1955 Ac.t and the rules framed thereunder and
It cannot survive the said Act and Rules in view of s. 21 of the
Act and r. 143 and the proviso to s. 21 cannot be availed of by
the State.
-
7 S.C.R.
SUPREME COURT REPORTS
377
(iii) The field covered by R. 36 is completely covered by the
1964
Rules framed under the Act and therefore R. 36 can no longer be Hyderabad Ohemiwl
justified as good under the general law relating to alcohol and in- and Pharmaceulical
toxicating drugs as contended by the State.
Works Ltd. etc.

## Text

1964
MarcA20
376
SUPii:EME COURT REPORTS
[1964)
HYDERABAD CHEMICAL AND PHARMACEUTICAL
WORKS LTD. ETC.
v.
STATE OF ANDHRA PRADESH AND ORS.
[P. B. GAJENDRAGADKAR, C.J., K. N. WANCHOO, J. c. SHAH,
N. RAJAGOPALA•AYYANGAR AND s. M. SIKRI, JJ.]
Medicinal and Toilet Preparation (Excise Duties) Act No. 16
of 1955, s. 21-Whether repeals rule 36 frcrmed-under Hyde'rabad
Abkari Act-If Act No. 16 is a law "otherwise made by Parliament' within the meaning of Art. 277- Hyderabad Act and Rul.1>
36 repealed-Constitution of India, Art. 277, Entry 84, List I of
Vll Schedule-Hyderabad Medical Preparations and Spirituous
Rules 1345 F, r. 36 ..
The appellants are manufacturers of medicine in which they
have to use alcohol. According to r. 36 of the Medical Preparation and Spirituous Rules, 1345 F framed under the Hyderabad
Abkari Act, 1316 F the appellant used to pay certain fees to the
State Government for the supervision of the use of alcohol by
the appellants. After the coming into force of the Medical and
Toilet Preparations (Excise Duties) Act, 1955 and the Rules
framed thereunder the appellants contended that since R. 36 was
repealed by this Act they had not to pay that fee. On the refusal
of the State Government to accept their contention the appellants filed writ petitions before the High Court challenging the
power of the Government to levy the fee. But the High Court
held that R. 36 was not repealed and dismissed the writ petitions.
Thereupon the appellant filed the present appeals on certificates
granted by the High Cf>urt.
Before this Court it was contended on behalf of the appellant that s. 21 of the 1955 Act in terms repealed any corresponding State law and therefore R. 36 stood repealed. The respondent
contended that the proviso to that section saved all previous
rules which were not inconsistent with the Act and hence R. 36
should be deemed to be in force. It was further contended by
the respondent-State that R. 36 remained in force because it was
meant to carry out the general purpose of the Hyderabad Abkari
Act which was a general Act relating to alcohol and intoxicating
drugs.
Held: (i) By virtue of Entry 84 List I of the VII Schedule
to the Constitution no charge could be levied on the manufacture
of medicinal .preparations except by the Union of India and
since the 1955 Act is a law made otherwise by Parliament within
the meaning of Art. 277 the duties and other charges which used
to be levied by the State in connection with medicinal preparations could no longer be levied by it. Further the effect of s. 21
of the Act is that so far as the Hyderabad Act applied to the use
of alcohol in the manufacture of medicinal and toilet preparations, the Hyderabad Act must be deemed to have been repealed.
(ii) By reasons R. 143 of the 1956 Rules r. 36 must be held to
have been repealed after the coming into force of the 1955 Act
and the rules framed thereunder. The purpose of R. 36 is clearly
~overed by the 1955 Ac.t and the rules framed thereunder and
It cannot survive the said Act and Rules in view of s. 21 of the
Act and r. 143 and the proviso to s. 21 cannot be availed of by
the State.
-
7 S.C.R.
SUPREME COURT REPORTS
377
(iii) The field covered by R. 36 is completely covered by the
1964
Rules framed under the Act and therefore R. 36 can no longer be Hyderabad Ohemiwl
justified as good under the general law relating to alcohol and in- and Pharmaceulical
toxicating drugs as contended by the State.
Works Ltd. etc.
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 399403 /1962. Appeal from the judgment and order dated February 17, 1961 of the Andhra Pradesh High Court in Writ Petitions Nos. 400, 431 to 433 and 495 of 1958.
K. Srinivasamurthy and Naunit Lal, for the appellants
(in all the appeals).
K. R. Chaudhuri and B. R. G. K. Achar, for the respon-
·dents (in all the appeals).
March 20, 1964. The Judgment of the Court was delivered by
v.
Stat< of Andhra
Prod"h and Ors.
WANCHOO, J.-These are five connected appeals on certiWanchoo, J.
ficates granted by the High Court of Andhra Pradesh. They
involve a common question of law and will be dealt with together. The brief facts necessary to understand the question
of Jaw raised in these appeals are these. The appellants manufacture medicines in which they have to use alcohol. Before
Parliament passed the Medicinal and Toilet Preparations (Ex-
·cise Duties) Act. No. 16 of 1955, (hereinafter referred to as the
Act), the appellants were working under licences granted ·
under the Hyderabad Abkari Act, No. l of 1316-F. Under that
Act certain rules called the Medical Preparations and Spirituous. Rules, 1345-F were framed and r .. 36 thereof provided that
"the expenses of the establishment for the supervision of the
work shall be borne by the ·pharmaceutical laboratory
(licensee) as per the decision of the Commissioner Excise". It
appears that for the manufacture of medicines, the appellants
used to be supplied with alcohol. Further the State qovemment posted on the bonded manufacturies of the appellants
certain supervisory excise staff, and r. 36 was obviously framed
to re-imburse the Government for expenses incurred in that
behalf. After the Act came into force from April l, 1957, the
appellants who were manufacturing medicinal preparations
were governed by it and the Rules framed thereunder and took
licences under the Act. The appellants then contended that as
the Act had repealed all previous provisions with respect to
medicinal preparations, they were no longer bound to pay the
charges prescribed under r. 36 of 1345-F Rules. Their contention was that this rule along with such provisions of the
Hyderabad Abkari Act, which concerned medicinal preparations were repealed by the Act and the Rules framed thereunder. The State Government could therefore no longer ask
~hem to pay the costs of the establishment posted at their
378
SUPREME COURT REPORTS
[I964J
1964
bonded manufacturies for supervision . The appellants thereHyi,uabad cn.mical upon filed writ petitions in the High Court challenging the
and Pharma<eutical levy of these charges.
Work< Lid. do.
•·
The petitions were opposed on behalf of the State and its
j,":;;,:{ :::f'Or~. contention was that.even though the Act and the Rules framed thereunder had come into force from April I, 1957, r. 36
Wanchoo, J.
of the 1345-F Rules continued and was not repealed by the
Act and the Rules framed thereunder, and the State was entitled to the expenses of the supervisory staff and could realise
it from the appellants.
The High Court held that r. 36 could not be said to have
been repealed by the Act and the Rules framed thereunder and
was still good law. In this connection the High Court pcinted
out that the Hyderabad Abkari Act was not concerned only
with medicinal preparations but was a general Act dealing
with excise including alcohol, and that alcohol in the ultimate
analysis was liquor; therefore the State Government which
supplied alcohol to the appellants for the purpose of making
medicinal and toilet preparations for which no duty was paid
was entitled to see that the alcohol was not used for purposes
other than that for which it was supplied to the appellants.
Accordingly the High Court held that r. 36 of the 1345-F Rules
was designed to achieve this object, under the general law of
excise contained in the Hyderabad Abkari Act, and was therefore good. In consequence, the writ petitions were dismissed.
The appellants then applied for certificates to appeal to this
Court, which were granted; and that is how the matter has
come up before us
The only question that falls for consideration therefore is
whether after the coming into force of the Act and the Rules,
' r. 36 of the 1345-F Rules can still be said to survive. There is
no doubt that the Hyderabad Abkari Act was a general Act
-
and before the Constitution came into force, r. 36 of the 1345-F
Rules would be good law. Under the Constitution, however,
medicinal and toile't preparations came under entry 84, List I
of the Seventh Schedule to the Constitution, which provides
for duties of excise on tobacco and other goods manufactured
or produced in India, except-
(a) alcohclic liquors for human consumption;
(b) opium, Indian hemp and other narcotic drugs and
narcotics,
but including medicinal and toilet preparations containing
a.lcohol or any substance containing opium, Indian hemp and
other narcotic drugs and narcotics. No charge could thereafter
be levied 6n the manufacture of medicinal preparations except
by the Union in the shape of duties under item 84 of List I.
• The State Government however insisted on the payment
ol the charges.
7 S.C.R
SUPREME COURT REPORTS
379
But under Art. 277 of the Constitution "any taxes, duties,
1964
cesses or fees, which, immediately before the commencement Hyderabad Chem.ical
of this Constitution were being lawfully levied by the Govern-•"tP~""
1
ment of any State ...... may, notwithstanding .that ~hose taxes,
or :_
1
• e1c.
duties cesses or fees are mentioned m the Umon List, contrnue
State of Andhra
to be ievied and to be applied to the same purposes until pl'Ovi- Prad"'h and°''·
sion to the contrary is made by Parliament by law". In view
Wanckoo,J.
of this provision, all duties and charges levied by the State
before the coming into force of the Constitution on the ma~ufacture of. medicinal preparations could continue to be levied
until law was made by Parliament otherwise. It is not in dispute that the Act came into force from April l, 1957 and is a
law made otherwise by Parliament within the meaning of Art.
277, and therefore duties and other charges levied by the State
in connection with medicinal preparations could no longer be
levied by it. Further the Act specifically provides in s. 21 that
"if, immediately before the commencement of this Act, there
is in force in any State any law corresponding to this Act, that
law is hereby repealed". It is true that the Hyderabad Abkari
Act was a general law which was concerned with liquor and
intoxicating drugs generally; it thus applied to alcohol also
(treating it as liquor) used for manufacturing medicinal preparations. The effect of s. 21 therefore is that so far as the
Hyderabad Abkari Act applied to the use of alcohol, treating
it to be liquor, in the manufacture of medicinal and toilet preparations, the Hyderabad Abkari Act must be deemed to have
been repealed to that extent only by s. 21.
Reliance is placed on behalf of the State on the proviso
to s. 21, which lays down that "all rules made, ...... under any
law hereby repealed shall, so far as they are not inconsistent
with this Act. have the same force and effect as if they had
been respectively made ...... under tbis Act and by the authority empowered hereby is in that behalf." It is therefore contended that by virtue of the proviso to s. 21, r. 36 of the 1345-F
Rules must be deemed to continue. We are of opinion that
there is no force in this contention. Rules were framed under
the Act in 1956 and came into force along with the Act. Rule
143 of these Rules provides that all rules made under any law
•corresponding 'to the Act in force in any State are hereby
repealed except as respects things done or omitted to be done
before such repeal. Consequently all rules framed for the purpose of the manufa.cture of medicinal preparations came to an
end in view of r. 143 of 1956 Rules. Therefore r. 36 of 1345-F
Rules, which appears in the Medicinal Preparations and Spiritui?US ~ules mus~ ~e held to be no longer good law so far as it
appl~es to med1cmal preparations. That is one reason why we
consider. tha.t r. 36 must be held to have been repealed after
the com mg mto. force of the Act and the Rules framed thereunder. The proviso to s. 21 on which reliance has been placed
380
SUPREME COURT REPORTS
(1964]
1964
cannot change the position in view of the new Rules framed
Hyderabad Ohemka! in 1956 with respect to medicinal preparations. As soon as th.e
aftll PhaN11aewtical new Rules came mto force the old rules must fall and there- 1s
Worka Ltd. etc.
a specific provision in the new Rules (namely r. 143) which
Stare 0j·Andhra says that all rules made under any la.w corresponding to the
Prnduh and Ors. Act are hereby repealed.
=
'
J
We may refer in this connection to the construction of
ffa1&C"OO,
•
r. 36 of the Rules of 1345F. It provides that the expenses of
the establishment for the supervision of the work shall be
borne by the pharmaceutical laboratory. The establishment
which has to be paid for under r. 36 therefore is for the supervision of the work done by the pharmaceutical laboratories.
Now the work done by a pharmaceutical laboratory is to
manufacture medicinal preparations. Rule 36 therefore provides that expenses of the establishment for the supervision of
the work of medicinal preparations manufactured by pharmaceutical laboratories have to be paid by the laboratory concerned. The supervisory staff which has to be paid for under
r. 36 therefore is meant for the supervision of the manufacture·
of medicinal preparations and it is for that purpose only that
expenses have to be borne by the laboratory concerned. The
purpose of the rule therefore is clearly covered by the Act and
the Rules framed thereunder and it cannot survive the Act
and the Rules in view of s. 21 of the Act and r. 143 of the
1956-Rules, and the proviso to s. 21 cannot be availed of by
the State.
\
This brings us to the alternative argument on behalf of
the State, namely, that· in any case the rule still remains good
because it is meant to carry out the general purpose of the
Hyderabad Abkari Act, namely to see that unauthorised sale
of alcohol is not made for human consumption by the laboratory to which it is supplied for purposes of manufacture of
medicinal preparations. Therefore it is said that'the rule is
good inasmuch as it is concerned with the enforcement of the
general law relating to alcohol and intoxicating drugs contained in the Hyderabad Abkari Act. We are of opinion that there
is no force in this contention either. In the first place, as we
have already indicated. the main object of the supervisory stall"
mentioned in r. 36 is lo supervise the manufacture of medicinal preparations. In that connection the supervisoTy staff will
certainly see that the alcohol supplied is used for the purpose
for" which it is supplied and is not used in any other manner.
Rule 3(5 is only concerned with seeing that the manufacture of
med icin:d preparations is made properly and is done under the
supervision of the establishment attached to each laboratory;
and it is only incidentally that in that connection the establishment is also to see that the alcohol supplied is not used other-
, wise than for the purpose of manufacture. That however wilt
not make the rule good under the Hyderabad Abkari Act,
which deals with alcohol and intoxicating drugs generally.
7 S.C.R.
SUPREME COURT REPORTS
381
What we have said above is borne out if we look at the
l'JG4
1956-Rulcs. Rule 20 provides that in case of manufacture in Ilydum,-;;d(,,,, ,,,;,.,.
bond (and we are concerned in the present appeals with such and, Phm·macu,1;,-01
manufacture) alcohol on which duty has not been paid sh~.ll
fl 0"h Ltd.'"·
be used under excise supervision. Rule 42 provides that "it siat• 0{_:1,,,u,ia
shall be open to the Excise Commissicner to determine the size l'm-1<-.,7, """ o.·,.
of the supervisory staff in consultation with the licencee." 1t is
rraw!oo J.
clear therefore that under the 1956 Rules s'Upervisory staff is
'
attached to bonded manufacturies which manufacture medicinal preparations. This is al<o the purpose of r. 36. Further
r. 141 provides that "the licencee of a bonded manufactory
or warehouse shall, where so required by the Excise Commissioner, provide the officer and the staff posted to the mannfactory or bonded warehouse with suitable lodging conveniently situated to the factory or bonded warehouse premises at a
rent not exceeding 10 per cent of the pay of each officer so
accommodated. If for any reason the licencee is not able to
provide such accommodation he shall provide suitable accommodation to the satisfaction of the Excise Commissioner near
the manufactory or bonded warehouse recovering only 10 per
cent of the pay of the occupant." Then r. 45 provides that "the
officer-in-charge shall exercise such supervision as is required
to ensure that alcohol issued fCJr a. certain preparation is added
to the materials which go to make that preparation and that
no portion of such alcohol is diverted to other purpose." It is
clear therefore from these rules that the supervisory staff is
attached to a bonded manufactory for the purpose of supervision to see that the manufacture is carried on properly and also
to see that alcohol issued for the purpose of manufacture is
not diverted to any other use. We cannot therefore accept the
argument that simply because the supervisory staff has got to
see that alcohol supplied, assumi~g it to be liquor. is not misused, r. 36 is still good law because, its purpose is to see that
the general la.w relating to alcohol and intoxicating drug~ contained in the Hyderabad Abkari Act is carried out As the
I 956-Rules show it is the duty of the supervisory staff attach~d
to a bonded manufactory to see that the manufacture is properly made and that alcohc!l supplied is not diverted to any
use except tha.t of the manufacture of the preparation. This
being the purpose of the 1956-Rules, the levy under r. 36 of
1345-F cannot be justified on the ground that under that rule
che supervisory staff has to see that the general law relating to
alcohol and intoxicating drugs is not violated. There is no
doubt that the field covered by r. 36 of the 1345-F Rules is _.--
completely covered by the Rules framed under the Act and
therefore r. 36 can no longer be justified as good under the
general law rela.ting to alcohol and intoxicating drugs. We may
add that the Act or the 1956 Rules make no provision for any
such charge as is provided in r. 36 of 1345-F Rules, the intention being that the duty under the Act will cover all expenses
382
SUPREME COURT REPORTS
[1964]
1964
for enforcing it. The fact that members of the supervisory stall
ryd<ra;;;;;ichtmiool are the servants of the respondent makes no difference because
1n<i Pharduti<.al they function under the Act and the rules framed thereunder
Work~ Lt ·etc. and not under the Hydera.bad Act. We are therefore of opinion
Swte oJAwlhra that reading s. 21 of the Act and r. 143 of the Rules framed
Pradesh and Ora. thereunder, r. 36 of 1345-F Rules must be held to have been
W
h
J
repealed and thaJ. it is not saved by the proviSo to s. 21. We
anc oo, .
therefore allow t e appeals, set aside the orders of the High
Court, anc\ direct the issue of writs as prayed for. The appellants will get their costs from the responden~ne set of
hearing costs.
Appeals allowed.