2000 (12) TMI 276 - SC - VAT and Sales Tax

Supreme Court Upholds Tax on Medicinal Preparations with High Alcohol Content

The Supreme Court upheld the constitutional validity of Item 67 of the Schedule to the Assam Finance (Sales Tax) Act, 1956, which classified medicinal ... Whether this type of classification which differentiates medicinal preparations based on the content of alcohol in such preparations is a valid classification or not? Held that:- So far as the Assam Act is concerned, unlike the Tamil Nadu General Sales Tax Act, 1959, it identified the medicinal preparations containing more than 12% alcohol as a separate class vis-a-vis such preparations either not containing alcohol or containing less than 12% alcohol. This difference distinguishes the basis of the judgment of this Court in Ayurveda Pharmacy’s case (1989 (3) TMI 187 - SUPREME COURT OF INDIA) inasmuch as the Assam Act does not identify the medicinal preparations containing more than 12% alcohol as being the same as other medicinal preparations not containing alcohol. On the contrary, as could be seen these types of spirituous medicinal preparations which contained 12% alcohol have been separately classified for the levy of tax under Item 67 of the Schedule to the Act. We are of the considered view that the classification founded in the impugned Act in regard to the medicinal preparations based on the strength of alcohol contents in the same, cannot be said to be arbitrary and violative of Article 14 as held by the High Court in its impugned judgment. For the reasons stated above, these appeals succeed, the impugned judgments of the High Court are set aside and the writ petitions filed by the respondents before the High Court stand dismissed. Issues:Challenge to assessment order under Assam Finance (Sales Tax) Act, 1956; Constitutional validity of Item 67 of the Schedule to the Act under Article 14 of the Constitution.Analysis:The case involved a challenge to the assessment order of a medicinal preparation under the Assam Finance (Sales Tax) Act, 1956. The High Court declared Item 67 of the Schedule to the Act as violative of Article 14 of the Constitution. The respondents argued that the preparation should not be classified as 'spirituous medicinal preparation' due to the absence of spirit and the lack of a method to determine alcohol content. However, the High Court upheld the constitutional challenge based on a previous Supreme Court judgment.The Supreme Court analyzed the relevant provisions of the Act and the applicability of the previous Supreme Court judgment. It noted that while most Ayurvedic, Homeopathic, and Unani medicines were exempt from tax, a specific classification existed for medicinal preparations containing more than 12% alcohol under Item 67. The Court found this classification to be valid, as it differentiated such preparations from others based on alcohol content, constituting a separate class justifying taxation.Contrasting the present case with the previous judgment, the Court highlighted the distinct classification in the Assam Act for spirituous medicinal preparations. Unlike the previous case where Ayurvedic preparations were treated similarly regardless of alcohol content, the Assam Act specifically identified and taxed preparations with over 12% alcohol. This differentiation was deemed non-arbitrary and in line with legislative discretion, upholding the validity of the classification under Article 14.In conclusion, the Supreme Court allowed the appeals, setting aside the High Court judgments and dismissing the writ petitions filed by the respondents. The Court affirmed the validity of the classification based on alcohol content in medicinal preparations under the Assam Act, emphasizing the legislative authority to determine taxable objects and classes.