Sales tax exemption on medicinal preparations ended when Central excise legislation displaced the State excise power.

The State's sales tax power under Entry 54 of List II was held to remain separate from the Union's excise power under Entry 84 of List I, so the existence of central excise competence did not by itself invalidate sales tax on medicinal and toilet preparations containing alcohol. The sales tax exemption for goods on which excise duty is or may be levied initially applied, because such preparations were liable to excise duty under the relevant State scheme. After the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 displaced the corresponding State excise operation, those goods no longer qualified for the exemption and were liable to sales tax.

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Issues: (i) Whether the State could levy sales tax on medicinal and toilet preparations containing alcohol notwithstanding the Central power to levy excise duty on such preparations. (ii) Whether medicinal and toilet preparations containing alcohol remained covered by the sales tax exemption for goods on which excise duty is or may be levied after the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 came into force.

Issue (i): Whether the State could levy sales tax on medicinal and toilet preparations containing alcohol notwithstanding the Central power to levy excise duty on such preparations.

Analysis: The power to levy sales tax rested on Entry 54 of List II, while the Central power to levy excise duty on medicinal and toilet preparations containing alcohol arose under Entry 84 of List I. The constitutional allocation of excise power to the Union did not extinguish the State's separate power of taxation by sales tax. The existence or extinction of excise power was therefore not ative of the validity of sales tax as such.

Conclusion: The State had legislative competence to levy sales tax on the sales in question.

Issue (ii): Whether medicinal and toilet preparations containing alcohol remained covered by the sales tax exemption for goods on which excise duty is or may be levied after the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 came into force.

Analysis: Entry 32 of Schedule II of the Sales Tax Act exempted goods on which duty is or may be levied under the relevant excise enactments. Under the Excise Act, read with the adapted definitions, medicinal and toilet preparations containing alcohol were liable to excise duty and thus initially fell within the exemption. But the 1955 Central Act, enacted under the Union excise entry, repealed the corresponding State law and displaced the continued operation of the State excise power under Article 372. The Court treated the repeal as severable and effective to the extent of medicinal preparations, so that such goods no longer remained goods on which State excise duty could be levied.

Conclusion: After the 1955 Act, medicinal and toilet preparations containing alcohol ceased to fall within the exemption and were properly included in sales tax assessment.

Final Conclusion: The petition failed on merits because the exemption was unavailable after the 1955 Central legislation, and the sales tax assessment on the medicinal preparations was sustained.

Ratio Decidendi: Where a sales tax exemption depends on the continuing power to levy excise duty under a State law, that exemption ends to the extent the State excise power is displaced by valid Central legislation and the corresponding State law ceases to operate.

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