HOECHST PHARMACEUTICALS LTD. AND ANOTHER ETC. versus STATE OF BIHAR AND OTHERS

Citation: [1983] 3 S.C.R. 130 · Decided: 06-05-1983 · Supreme Court of India · Bench: A.P. SEN · Disposal: Dismissed

Cited by 29 judgment(s) · cites 8 · see the full citation network in Lexace

Judgment (excerpt)

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130 
HOECHST PHARMACEUTICALS LTD. 
AND ANOTHER ETC. 
v. 
STATE OF BIHAR AND OTHERS 
May 6, 1983 
(A.P. SEN, E.S. VENKATARAM!AH AND 
R.B. MISRA, JJ.] 
Bihar Finance Act,.1981-Sub-ss. (/)and (3) of s. 5-Levy of surcharge 
on sales tax and prohibition from passing on liability thereof to purchasers-
Whether l'oid in terms of opening words of Art. 246(3) for being in conflict with 
Paragraph 21 of Drugs (Price Control) Order, 1979 issued under s. 3(1) of 
Essential Commodities Act ?-Whether violative of Arts. 14 and 19(1) (g) ?-
Whether it is an essential characteristic of Sales Tax that the seller must have 
right to pass it on to ~nsumer ?-Whether classification of dealers on the basis 
of'gross turnover' as defined ins. 2( j) invalid? 
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Constitution of India-Art. 246-State Legislature's Power to 111ake law 
with respect to matters enumerated in List II-Whether subject to Parliament's 
power to make law in re~pect of matters enumerated in List 111 ?-Doctrine of 
'pith and substance' a~d the principle of' Federal Sufremacy". 
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Constitution of India-Art. 254(i)-Can repugna11cy between a Stale lair 
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and a law made by Parliament arise outside the Concurrent field? 
Constitution of India-Arts. 200 and 201-Governor's decision lo refer a 
Bill to President-Whelher subject to Court's scrutiny?-• Assent of Presfden_t'--
Whether justiciable'? 
Sub-section (I) of s. S of the Bihar Finance Act, 1981 provides for the 
levy of a surCharge in addition to the tax payable, On every dealei whose gross 
turnover during a year exceeds Rs. 5 lakhs and, sub-,s. (3) thereof prohibits 
such a dealer from collecting amount of surcharge payabie by him from the 
purchn.sers. In exercise of the pow~r· conferred by this _seCtion, the State 
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Government fixed the rate of surcharge at 10 per cent of the total amount of 
tax payable by a dealer. 
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Two of the appellants in this batch of appeals were companies engaged in 
the manufacture and sale of the medicines throughout India whose branches! 
sales depots in Bihar were registered as dealers. 
Their products were sold 
through wholesale distributors/stockists appointed in _almost all tl)e districts of 
the State and their gross turnover within the State during the relevant period 
ran into crores ofrupees.-Most of.the medicines and drugs sold by them were 
~overed ~ tte Drn~s (frice Control) Crder, 1979 iss¥•11 up~er 1ub·B. (I) Q( 
.A 
HOECHST V. BIHAR 
131 
s. 3 of the Essential Commodities Act in terms of which they were expressly 
prohibited from selling those medicines and drugs in excess of the controlled 
price· fixed- by the Central Government from time to time but were allowed to 
pass on the liability to the consumer. -During the assessment years 1980..81 
and 1981-82 they had to pay the surcharge under s. 5(1) of the Bihar Finance 
Act, 1981at10 per cent of the tax payable by them. 
The appellants challenged the Constitutional validity of sub-s. (3) of 
s. 5 but the same was repelled by the High _Court relying on the decision in 
S. Kodar v. State of Kera/a, [1979] I S.C.R. 121. 
It was contended on behalf of the appellants: (i) that sub-s. (3) ofs. 5 
of the Act which is a State Jaw relatable to Entry 54 of List JI of the Sev<nth 
Schedule to the Constitution and which provides that no de'11er shaU be 
en titled to collect the surcharge levied on him is void in ternis of the opening 
words of Art. 246(3) of the Constitution' as it is in direct conflict with para-
graph 21 of the Drugs (Price Control) order, 1979, issued under sub-s. (I) of 
s. 3 of the Essential Commodities Act, 1955 which is a Union Law relatable to 
Entry 33 of List III and which enables the ntanufacturer or producer of drugs 
to pass on the liability to pay sales tax to the consumer; (ii} that the words 
•·a -law n1ade by Parliament which Parliament is competent to enact'' contained 
in Art. 254(1) must be construed to mean not only a law made by Parliament 
with respect to one of the matters enumerated in the Concurrent List but also 
to include a law made by Parliament with respect to any 'of the matters 
enumerated in the Union List and therefore sub-s. (3) of s. 5 of the Act being 
repugnant to Paragraph 21 of the Control Order is void under Art. 254; 
(iii) that it both sub-s. (1) and sub-s. (3) of s. 5 were relatable to Entry 54 of 
List II, there was no need for the Governor to have referred the Bihar Finance 
Bill 1981 to the President for his assent and that the President's assent i:s 
j

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