Ayurveda
Pharmacy & Anr Vs. State of Tamil Nadu [1989] INSC 90 (15 March 1989)
Pathak,
R.S. (Cj) Pathak, R.S. (Cj) Misra Rangnath
CITATION:
1989 AIR 1230 1989 SCR (2) 37 1989 SCC (2) 285 JT 1989 (1) 539 1989 SCALE
(1)624
ACT:
Tamil Nadu
General Sales Tax Act, 1959 Validity of Notification dated 4.3.1974 and Tamil Nadu
Act No. 23 of 1974 imposing a higher levy on two Ayurvedic medicin al
preparations--Arishtams and Asavas--While all other medic i- nal preparations
under different systems of medicines e n- joyed a lower levy.
HEAD NOTE:
Arishtams
and Asavas are Ayurvedic preparations which were originally subject to a
uniform levy applicable to a ll medicinal preparations belonging to the
different systems of medicine under the Tamil Nadu General Sales Tax Act, 195
9.
Firstly
by a notification dated 4.3.1974, and later, by t he Tamil Nadu Act, No. 23 of
1974, the State Government singled out Arishtams and Asavas for a higher rate
of levy of 3 0% while all other medicinal preparations were subjected to a levy
of 7%, with a view to curb the abuse of Arishtams a nd Asavas for their
alcoholic content by drink addicts and to eliminate the mushroom growth of Ayurvedic
pharmacies pr e- paring sub-standard Arishtams and Asavas for purposes other
than medicinal use. The appellants filed writ petitions contending that Arishtams
and Asavas manufactured by them are essentially Ayurvedic medicines, that the
object of controlling consumption of liquor is being served by sever al other
existing statutes, that there are over 130 Allopath ic medicines containing alcohol
which are potable, and that therefore, the levy of tax at 30% on Arishtams and Asavas
alone while other medicinal preparations are subjected to tax at 7% results in
an invidious discrimination against t he manufacturers of those Ayurvedic
preparations. The High
Court dismissed the
petitions.
Allowing
the appeals,
HELD:
The two preparations, Arishtams and Asavas, are medicinal preparations, and
even though they contain a hi gh alcohol content, so long as they continue to
be identified as medicinal preparations they must be treated, for t he purposes
of the Sales Tax Law, in like manner as medicin al preparations generally, including
those containing a lower percentage of alcohol. The appellants are entitled to
a refund of the excess paid as sales tax. [41H; 42A, C] 38 There is no reason
why Arishtams and Asavas should be treated differently from the general class
of Ayurved ic medicines. It is open to the Legislature, or the State Government
if it is authorised in that behalf by the Legi s- lature, to select different
rates of tax for different commodities. But where the commodities belong to the
same class or category, there must be a rational basis for di s- criminating
between one commodity and another for the purpose of imposing tax. It is
commonly known that consider a- tions of economic policy constitute a basis for
levying different rates of sales tax. For instance, the object may be to
encourage a certain trade or industry in the context of the State policy for economic
growth, and a lower rate would be considered justified in the case of such a
commodity. There may be several such considerations bearing directly on the
choice of the rate of sales tax, and so long as there is good reason for making
the distinction from other commodities no complaint can be made. What the
actual rate should be is not a matter for the courts to determine gene r- ally,
but where a distinction is made between commodities failing in the same
category a question arises at once before a Court whether there is
justification for the di s- crimination. In the present case, we are not
satisfied that the reason behind the rate of 30% on the turnover of Aris h-
tams and Asavas constitutes good ground for taking those two preparations out
from the general class of medicinal prep a- rations to which a lower rate has
been applied. [40F- H; 41A-C] Adhyaksha Mathur Babu's Sakti Oushadhalaya Dacca (
P) Ltd. and others v. Union of India, [1963] 3 SCR 957, relied on.
CIVIL
APPELLATE JURISDICTION: Civil Appeal No. 1868 of 1974.
From
the Judgment and order dated 2.9.1974 of the Madr as High Court in Writ
Petition No. 2729/1974.
F.S. Nanman,
C.S. Vaidyanathan and K.R. Nambiar for t he Appellants.
T.S. Krishnamoorthy
Iyer, A.V. Rangam and T.V. Ratn am for the Respondent.
S. Balakrishnan
(not present) for the Intervener.
The
Judgment of the Court was delivered by 39 PATHAK, CJ. The appellants in these
two appeals a re manufacturers of Ayurvedic drugs and medicines, 'including Arishtams
and Asavas. Arishtams and Asavas contain alcohol, and it is said that the
presence of alcohol is essential f or the effective and easy absorption of the
medicine by t he human system and also because it acts as a preservative. All
the Ayurvedic preparations as well as Allopathic, Siddha and Unani medicines
were originally subject to a multi-point levy of 31/2 % under the Tamil Nadu
General Sales Tax Ac t, 1959. By a notification dated 4 March, 1974, the State of Tamil Nadu included a large number of items in
the Fir st Schedule to the aforesaid Act in order to make them subject to a
single-point levy. While all other patent or propri e- tary medicinal preparations
belonging to the different systems of medicines were taxed at the rate of 7%
only, Arishtams prepared under the Ayurvedic system were ma de subject to a
levy of 30%. It seems that representations we re made to the State Government
against the high rate of tax on Arishtams, and therefore a separate entry was
introduced by Tamil Nadu Act No. 23 of 1974 in the First Schedule as item 135
dealing specifically with Arishtams and Asavas. They were shown as attracting a
rate of 30% while all other medicinal preparations were shown under item No. 95
and subjected to tax at 7%.
The
appellants filed writ petitions in the High Court of Madras challenging the
levy of 30% on Arishtams and Asava s, but on 2 September, 1974 the High Court dismissed the writ petitions.
From
the counter affidavit filed by the Government of Tamil Nadu in the writ
petition, out of which one of t he present appeals arises, it appears that the
higher levy of sales tax on Arishtams and Asavas was introduced by t he State
Legislature to curb the abuse of medicinal prepar a- tions for their alcoholic
content by drink addicts and to eliminate the mushroom growth of Ayurvedic
Pharmacies pr e- paring sub-standard Arishtams and Asavas for purposes other
than medicinal use. The appellants contend that Arishta ms and Asavas
manufactured by them are essentially Ayurved ic medicines, and that in any
event the object of controlling the consumption of liquor is amply served by
several other existing statutes, including the Medicinal and Toilet Prep a-
rations (Excise Duty) Act, 1955, Drugs and Cosmetic Act, 1940, as amended in
the year 1964, and Spirituous Prepar a- tions (Inter State Trade and Commerce)
Control Act, 1955.
It is
said that there are over 130 Allopathic medicines containing alcohol which are
potable as against only three Ayurvedic medicines, and that therefore the levy
of tax at 30% of Arishtams and Asavas alone while 40 other medicinal
preparations are subjected to tax at 7% (now increased to 8%) results in an
invidious discrimination against the manufacturers of those Ayurvedic
preparations thus violating Art. 14 of the Constitution. It is contend ed that
the impugned rate of tax also offend Article 19(1)( g) of the Constitution. The
appellants in Civil Appeal No. 18 68 of 1974 have also taken the point that the
high rate of tax on Arishtams and Asavas has been imposed by the State of Tamil Nadu with the object of discouraging the
import of these Ayurvedic medicines from the neighbouring State of Kerala, and consequently the measure is violative
of Art.
301 as
well.
While
dismissing the writ petitions the High Court observed that the imposition of
the rate of 30% on the sale of Arishtams and Asavas must be regarded
principally as a measure for raising revenue, and it repelled the argume nt
that the rate of tax was discriminatory or that Art.
19(1)(g)
was infringed. It rejected the plea of the appellants that Art. 301 was
contravened and refused to acce pt that there was any ulterior object in
imposing a high rate of tax on those two commodities.
Now
there is no doubt that Arishtams and Asavas a re Ayurvedic medicinal preparations.
The question is whether these two medicines attract different considerations from
those applied to other medicinal preparations. Reference is made by the State
to their high content of alcohol, and that, it is said, attracts a class of
customers who purchase them for their alcoholic content rather than their
medicinal value. On that basis, it is urged, there is justification for a
higher rate of tax.
We
think that the appeals are entitled to succeed. Item 95 mentions the rate of 7%
(now 8%) as the tax to be levied at the point of first sale in the State. Item
135 provides a rate of 30% in respect of Arishtams and Asavas at the point of
first sale. We see no reason why Arishtams and Asav as should be treated
differently from the general class of Ayurvedic medicines covered by Item 95.
It is open to t he Legislature, or the State Government if it is authorised in
that behalf by the Legislature, to select different rates of tax for different
commodities. But where the commodities belong' to the same class or category,
there must be a rational basis for discriminating between one commodity and
another for the purpose of imposing tax. It is common ly known that
considerations of economic policy constitute a basis for levying different
rates of sales tax. For instance, the object may be to encourage a certain
trade or industry in the context of the State policy for economic growth, and a
lower rate would be considered 41 justified in the case of such a commodity.
There may be several such considerations bearing directly on the choice of the
rate of sales tax, and so long as there is good reason for making the
distinction from other commodities no complaint can be made. What the actual
rate should be is not a matter for the courts to determine generally, but where
a distinction is made between commodities fairing in the same category a
question arises at once before a Court whether there is justification for the
discrimination. In t he present case, we are not satisfied that the reason behind
the rate of 30% on the turnover of Arishtams and Asav as constitutes good
ground for taking those two preparatio ns out from the general class of
medicinal preparations to which a lower rate has been applied. In Adhyaksha
Math ur Babu's Sakti Oushadhalaya Dacca (P) Ltd. and others v. Union of India,
[1963] 3 SCR 957 this Court considered whether t he Ayurvedic medicinal
preparations known as Mirtasanjiban i, Mritasanjibani Sudha and Mritasanjibanj Sura,
prepared in accordance with an acknowledged Ayurvedic formula, could be brought
to tax under the relevant State Excise Act wh en medicinal preparations were
liable to excise duty under t he Medicinal and Toilet Preparations (Excise
Duty) Act, whi ch was a Central Act. The Court held that the three prepar a- tions
were medicinal preparations, and observed that t he mere circumstance that they
contained a high percentage of alcohol and could be used as ordinary alcoholic beverag
es could not justify their being treated differently from other medicinal
preparations. The Court said:
"So
if these preparations are medicinal preparations but a re also capable of being
used as ordinary alcoholic beverage s, they will fail under the (Central) Act
and will be liable to duty under item No. 1 of the Schedule at the rate of R s.
17.50nP per gallon of the strength of London Proof spirit.
On a
consideration of the material that has been placed before us, therefore, the
only conclusion to which we can come is that these preparations are medicinal
preparations according to the standard Ayurvedic text books referred to
already, though they are also capable of being used as ordinary alcoholic
beverages. They cannot however be taxed under the various Excise Acts in force
in the concern ed States in view of their being medicinal preparations which
are governed by the Act." We are of opinion that similar considerations
should apply to the appeals before us. The two preparations, Arishta ms and Asavas,
are medicinal preparations, and even though they contain a high alcohol 42
content, so long as they continue to be identified as medicinal preparations
they must be treated, for the purposes of the Sales Tax Law, in like manner as medicinal
preparations generally, including those containing a lower percentage of
alcohol. On this ground alone the appellants were entitled to succeed.
In the
circumstances, we do not consider it necessary to enter upon the question
whether there is substance in t he complaint of the appellants that there is a
violation of Art. 301 of the Constitution.
In the
result, the appeals must be allowed and t he appellants held entitled to a
refund of the excess paid as sales tax on account of the turnover being treated
under Item 135 rather than under Item 95. Learned counsel for t he appellants
states that the appellants will inform all the ir customers, from whom the higher
rate has been charged, that the customers are entitled to a refund of the
excess paid by them and that an application will be invited for such refund and
that if any part of the excess remains unrefunded to t he customers the
appellants undertake that such balance will be paid over to the Arya Vaidya Rama
Varier Educational Found a- tion of Ayurveda.
The
appeals are allowed, the judgment and order of t he High Court on each writ petition
are set aside and the Sales Tax Authorities are directed to reassess the
turnover of t he Arishtams and Asavas at the rate mentioned in Item No. 95 and
to refund to the appellants the amount of tax paid in excess. The appellants,
in their turn, on obtaining such refund will within one month thereof, serve
notice on t he customers from whom such excess has been recovered to obta in a
refund from the appellants of such corresponding excess.
In the
event of any balance of the excess remaining un refunded by the appellant to
the customers upon the expiry of three months from such notice, the balance
will be paid over by the appellants to the Arya Vaidya Rama Varier Education al
Foundation of Ayurveda. There is no order as to costs.
H.L.C.
Appeals allowed.
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