APHALI PHARMACEUTICALS LTD. versus STATE OF MAHARASHTRA & ORS.

Citation: [1989] SUPP. 1 S.C.R. 129 · Decided: 19-09-1989 · Supreme Court of India · Bench: G.L. OZA · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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 1955-
Amendment Act 19 of 1961-Finance Act 1962-Section 18 thereof-
Levy 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 1956-
Rules 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 bever-
age" 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 con-
sumed 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 
A 
B 
c 
D 
E 
F 
G 
H 
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 
B 
c 
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 self-
generated alcohol but not capable of being consumed as alcoholic bever-
D 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 appellant-
F 
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 

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