- (1.)THE petitioner in this case is engaged in the manufacture and sale of medicinal preparations containing alcohol having the chemical formulae C2h50h. For the manufacture of these medicinal preparations the petitioner Company contends that it has to consume heavy quantities of alcohol in the form of rectified spirit which is used in different stages. In the primary stage the crushed medicinal herbs and other drugs are put in the liquid alcohol to extract active principles present in the said medicinal herbs. According to the petitioner, this is an intermediate stage or semi-manufactured stages and the products so obtained are not 'medicinal preparations' as defined in sub-section (g) of section 2 of the Medicinal and Toilet Preparations (Excise Duties)Act, 1955 being Act XVI of 1955. The petitioner further states that after their extractions they are added to and mixed up in solution with chemicals to make final medicinal preparations which are sold in the market under different proprietory names. The peuioner company has been holding L-2 licence granted by the Covernmert of Bengal (now West Bengal) and later they were in possession of another additional licence L-l for manufacture of medicinal preparations containing alcohol of 'in bond' granted by the same government. The petitioner further states that on the strength of these two licences the petitioner purchased rectified spirit from different distilleries and warehouses, the Government of West Bengal collected excise duties on "medicinal preparations containing alcohol manufactured in the petitioner's factory with the said alcohol. The petitioner further submits that these are defined in subsection 7 of section 2 of the Bengal excise Act, 1909 (Act V of 1909) as "excisable articles" and "medicinal preparations containing alcohols". The petitioner contends that the levy and realisation of duties on these medicinal preparations by the Government of west Bengal were illegal and without any jurisdiction. According to the petitioner, the State Government has no such power in view of Entry 84 of the list I of the Sevneth Schedule in the constitution of India. The petitioner states that Entry No. 51 of the List II of the Seventh Schedule to the Constitution of India excluded the jurisdiction of the State Government to levy and collect excise duties on Medicinal preparations containing alcohol. The effect, according to the petitioner, of the enactment of the Medicinal and toilet Preparations (Excise Duties)Act, 1955 (Act No. XVI of 1955) by the Parliament read with Rule 143 framed under the Act was that all state enactments and rules framed there under were repealed and the State Governments were completely prohibited from levying and collecting excise duties on medicinal Preparations containing alcohol. Inspite of the same according to the petitioner, the Government of West bengal continued to levy and collect excise duties on the plea that the Semimanufactured or intermediate products which are not covered by the said Act are liable to excise duties in accordance with the provisions of the Bengal Excise act, 1909. As a result of section 64 of the Finance Act, 1964 (Act V of 1964)the excise duties on Medicinal Preparations containing alcohol were enhanced to 10% ad valorem from the rates fixed by Section 3 of the Act XVI of 1955 and for the purpose of assessment levy and collection, by the said section of Act V of 1964, the section 4 of the salt and Excise Act 1944 (Act I of 1964) was made applicable. The petitioner states that the L-l and L-2 licences which had been granted by the government of West Bengal were re-validated by the Act XVI of 1955. According to the petitioner, by virtue of sub-section (b) of Section 2 of the act XVI of 1955 read with Article 268 of the Constitution of India, the State government while assessing levying and collecting excise duties in accordance with the said Act should always collect them in accordance with these provisions. According to the petitioner, by virtue of section 4 of the Act I of 1944, namely the Salt and Excise Act, 1944, the articles of like kind and quality must be dutiable and must have selling value in the market or capable of being sold in the market and the semi-manufactured goods in the process of manufacture have neither any market value nor are they capable of being sold in the market. The petitioner further states that when the Semi-manufactured goods or intermediate products are added in solutions to make the final products, the excise duties are again assessed, levied and collected on the final product at the rate of ten percent, ad valorem, as a result, according to the petitioner, the petitioner is subjected to the double taxation on the very same products.
(2.)THE petitioner further states that on or about 26th July 1968 when the petitioner surrendered L-2 licence and commenced manufacturing with duty paid alcohols under L-l licence, the excise duty was assessed, levied and collected by the Government of West bengal at the time of their sales from the warehouses. According to the petitioner, when the final medicinal products are made the duty so paid is deducted from the total ad-valorem duty payable on such products and section B of chapter IV of the Rules framed under act XVI of 1955 does not provide for any such procedure. Further more, the bengal Excise Act, 1909, according to the petitioner, does not provide for levy and collection of excise duties on behalf of another Government and in view of the provisions of Article 265 of the constitution of India mere legal authority was not sufficient but there must be procedure laid down for the levy and collection of taxes. According to the petitioner the Bengal Excise Act, 1909 does not provide for levy or collection of excise duties, on behalf of another government.
(3.)THE main grievance of the petitioner in this application is that a sum of Rs. 70,360. 30 has been illegally realised from the petitioner on intermediate products in violation of the act XVI of 1955. The petitioner claims refund of the same. The next grievance of the petitioner is that for the purpose of propaganda and publicity of the medicinal Preparations containing alcohol the same are distributed by salesman free of cost. These do not have any market value nor are these capable of being sold in the market. Further more, there are wastages, breakages of the products which have also no market value. But the petitioner have been forced to pay duties on Physicians' free sample and up to 28th March, 1969, this comes to about Rs. 16,150. 80 p. The petitioner contends that such realisation of the duties by the respondents was illegal and improper, and the petitioner is entitled to refund of the same. The third grievance of the petitioner is on the ground that as 'establishment charges' an amount of Rs. 23,441. 56 p. was realised by the Government. The l-l licence is for the Bonded Laboratory. In the said licence the petitioner company used to bring in the rectified spirit inside the Bonded Laboratory situated in the factory premises. The government of West Bengal was realising from the petitioner the salary anil wages, house rent etc. of the staff who had been posted at the Bonded Laboratory inside the factory premises. These were realised by the Government us 'establishment Charges', but according to the petitioner, the rules framed under the Act XVI of 1955 do not provide for any such realisation. On this point the petitioner contends that the action of the government is illegal and it has unlawfully realised as 'establishment Charges' Rs. 23,441. 56 p. and the petitioner claims direction for the refund of the same. According to the petitioner, the Commissioner of Excise, government of West Bengal and the employees under him, in order to retaliate for the demand of the petitioner for the refund of the illegal collection, mentioned hereinbefore, began a thorough examination of the stocks maintained by the petitioner company, and being unable to find discripencies anywhere stopped supply of rectified spirit which was essential for the manufacture of the medicinal preparations containing alcohol and this was done in contravention of Rule 18 framed under Act XVI of 1955. On the 10th March, 197o, the petitioner-company served a lawyer's notice and on the 13th March, 1970 by a letter dated 13th March, 1970, the respondent No. 2 asked the petitioner to show cause, threatening cancellation of licence and imposing penal duties and it was directed that the petitioner should pay the duties of rs. 48,797-86. The petitioner thereupon moved this Court under Article 226 of the Constitution. On 25th March, 1970, and obtained a rule nisi. In this application the petitioner claims writ in the nature of mandamus against the respondents asking them to refund all the amounts on account of the illegal assessments, levy, and collection of excise duties on goods which are not provided for in the Act XVI of 1955 and collection of other charges made in violation of the provisions of the constitution of India. This Court issued a rule nisi and directed that upon the petitioner furnishing the security for the amount claimed by the letter dated 13th of March, 1970 the respondents would be restrained from interfering in any manner with the manufacture and sale of the products of the petitioner-company, mentioned in the petition.