Central excise prevails over State levy for Ayurvedic medicinal preparations classified under the 1955 Act.

Parliamentary legislation under Entry 84 of List I displaced earlier State excise laws, so State Governments could not continue to levy excise duty on the Ayurvedic preparations once the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 came into force. The Court also treated the preparations as medicinal preparations within Section 2(g), relying on their preparation from recognised Ayurvedic texts, supporting affidavits from practitioners, and their therapeutic use, even though they could also be consumed as alcoholic beverages. They were therefore taxable only under the Central Act and not under the State Excise Acts.

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Issues: (i) Whether the State Governments could continue to levy excise duty under the State Excise Acts on the three Ayurvedic preparations after the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 came into force; (ii) Whether the three preparations were medicinal preparations within Section 2(g) of the Act and therefore taxable only under that Act.

Issue (i): Whether the State Governments could continue to levy excise duty under the State Excise Acts on the three Ayurvedic preparations after the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 came into force.

Analysis: Article 277 preserved pre-Constitution State levies only until Parliament made provision to the contrary. Once Parliament enacted a law under Entry 84 of List I governing excise on medicinal and toilet preparations, the earlier State taxing laws, so far as they applied to such preparations, ceased to operate by reason of the parliamentary enactment. The Court held that the State excise laws were corresponding laws in this field and were repealed to that extent by Section 21 of the Act.

Conclusion: The State Governments could not continue to tax the preparations under the State Excise Acts.

Issue (ii): Whether the three preparations were medicinal preparations within Section 2(g) of the Act and therefore taxable only under that Act.

Analysis: The definition of medicinal preparation was inclusive and covered remedies prepared for internal or external use and substances intended for treatment, mitigation or prevention of disease. On the material placed, the preparations were made according to recognised Ayurvedic texts, were supported by affidavits of qualified Ayurvedic practitioners, and were used as tonics and in the treatment of ailments such as typhoid, cholera and collapse. The decision of the Standing Committee was not treated as conclusive. The Court accepted that the preparations were medicinal preparations, though they were also capable of being consumed as ordinary alcoholic beverages.

Conclusion: The preparations were medicinal preparations under Section 2(g) and were liable to duty only under Item 1 of the Schedule to the Act, not under the State Excise Acts.

Final Conclusion: The petitions succeeded, and the challenged State excise levies on the three preparations could not stand because the preparations fell within the Central excise regime created by Parliament.

Ratio Decidendi: Where Parliament has legislated under the Union taxing entry for medicinal and toilet preparations, State excise power saved by Article 277 ends, and preparations found to be medicinal preparations within the Central Act cannot be taxed under State excise laws even if they are also capable of use as alcoholic beverages.

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