Holding

Homeodent, being a homeopathic toothpaste that contains alcohol via mother‑tincture, is a toilet preparation liable to excise duty under the Medicinal & Toilet Preparations (Excise Duties) Act, 1955, and the demand of duty stands.

Summary

M/s Dabur India Ltd. manufactured a homeopathic toothpaste called Homeodent for M/s Sharda Boiron Laboratories between 1985 and 1988 and paid excise duty under the Central Excises & Salt Act, 1944. The State Excise authorities later claimed that Homeodent contained alcohol (through mother‑tincture) and therefore attracted duty under the Medicinal & Toilet Preparations (Excise Duties) Act, 1955, issuing a demand notice without a hearing. Dabur challenged the demand through revisions, appeals and writ petitions, arguing that the product was already classified under the 1944 Act, that the notice violated natural justice, and that the High Court erred in dismissing its writs on the ground of an alternative remedy. The Supreme Court held that Homeodent, being a toilet preparation containing alcohol, is liable to duty under the 1955 Act and that the demand stands; it also directed that any refund claim be considered without applying the limitation in Section 1IB of the 1944 Act. The petitions were disposed of with the demand upheld and interim orders vacated.

Issues considered

Whether Homeodent toothpaste is liable to excise duty under the Medicinal & Toilet Preparations (Excise Duties) Act, 1955.
Whether the presence of alcohol in the mother‑tincture makes the product dutiable under the 1955 Act.
Whether Homeodent is a medicinal preparation or a toilet preparation for the purpose of the statutes.
Whether the State Excise authorities could levy duty despite prior classification under the Central Excises & Salt Act, 1944.
Whether the demand notice issued without notice and hearing violated principles of natural justice.
Whether the High Court was correct in dismissing the writ petitions on the ground of an alternative statutory remedy.
Whether the limitation period under Section 1IB of the 1944 Act applies to a refund claim.

Legislation cited

1956 Ruless. Rule 11, s. Rule 12
Central Excises and Salt Act, 1944s. 1IB, s. 3
Constitution of Indias. Article 226, s. Article 263
Medicinal & Toilet Preparations (Excise Duties) Act, 1955s. 3(1), s. 4, s. 7

Subjects

excise dutyMedicinal & Toilet Preparations ActCentral Excise Actalcohol contenthomeopathic toothpastenatural justicerefund of dutyArticle 263Article 226overlapping statutes

Judgment

DABUR INDIA LTD. AND ANR.
A
v.
STATE OF UTTAR PRADESH AND ORS.

JULY 12, 1990

B [SABYASACHI MUKHARJI, CJ., K.N. SAIKIA AND
K. RAMASWAMY, JJ.]

Central Excises and Salt Act, 1944: Sections 3, 1IB-Homeodent
tooth paste-Whether homeopathic medicine or toilet preparation-
Whether liable to excise duty.
c Constitution of India, 1950: Article 263-Dispute under two
different central legislations-Under one-State authorities to realise
and impose taxes-Under the (>/her Central Government-Refund to be
paid or adjusted-Should be subject matter of settlement by the pro-
posed Council.
D
Medicinal & Toilet Preparations (Excise Duties) Act, 1955: Sec-
tions 3( 1) and 4--'Homeodent' tooth paste-Liability to excise duty.

M ts Dabur India Limited, petitioner in one set of petitions, is a
public limited company engaged in the manufacture of Ayurvedic as
E well as Allopathic medicaments, along with cosmetics. It used to
manufacture for and on behalf of M ts Sharda Botren Laboratorie-The
petitioner in the second set of petitio~a Homeopathic tooth paste
called 'Homeodent' out of the raw-materials supplied by M/s Sharda,

F
on job basis. It accordingly manufactured Homeodent during 1985 to
1988, duly paying duties of excise on Homeodent under the Central
Excises & Salt Act, 1944.
t
The Superintendent of State· Excise visited the factory of M ts
Dabur on 18th January, 1988 and enquired about the excisability of
Homeodent under the Medicinal & Toilet Preparations (Excise Duties)
Act, 1955. He was told that Homeodent had been classified under the
G 1944 Act in view of the orders passed by the Central Excise authorities.
However, when it was revealed that the Homeodent tooth paste was
toilet preparation containing alcohol, within the meaning of section
2(k), read with Item 4 of the Schedule, referred to in section 3 of the
1955 Act, the District Excise Officer caused a common notice dated
17.3.1988 to be served on MfS Dabur requiring it to pay duty aggregat-
H ing to Rs.68,13,334.20 under the provisions of the 1955 Act on such

294
DABUR INDIA v. STATE OF U.P. 295

goods manufactured and cleared between January 1985 and January
A
-\,..1988. This order was passed without issuing any notice to show cause,
and without affording any opportunity of hearing, to the petitioner.

The Petitioner sent a representation requesting for compliance
with the principles of natural justice and also disputing the amount
claimed as duty. On 18th March, 1988 the Superintendent of State B
~ Excise modified the earlier order and confirmed the demand of duty
amounting to Rs.46.67 lakhs, on provisional basis. On that day the
Y petitioner deposited a sum of Rs. J1.66 lakhs and further executed a
bank guarantee for the· balance. Simultaneously, the petitioner
appealed against the order dated 18th March, 1988. The Excise Com-
'missioner dismissed the appeal. No appeal was filed by M/s Sharda
c
• against the demand notice of excise duty under the 1955 Act .

- ~ The petitioner moved the High Court. On 13th May, 1988 the
High Court directed the petitioner to file a revision petition with the
Central Government. Both the petitioners then approached the Central
Government in revision. On 22nd September, 1988 the Additional Sec- D
retary to the Government of India in exercise of his revisional powers
allowed the revision filed by M /s Dabur and declared the orders of the
District Excise Officer and the Excise Commissioner as null and void
having been passed in viol.ition of the principles of natural justice. The
revision filed by M /s Sharda was not entertained by the Central
~- <;overnment. on the ground that a right of appeal was vested in Mfs E
St.arda, which was not availed of. The High Court dismissed Mfs
Sharda'& petition challenging the order of the Central Government
. _ declining to entertain its review. Against the order of the High Court
• M /s Sharda have filed the special leave petition in this Court.

On the basis of the revision order, the petitioners called upon the F
').._, District Excise Officer to refund the amount of Rs.46.67 lakhs reco-
vered from it by way of cash payment and encashment of bank
guarantee. The State Excise authorities however failed to grant the
refund, and instead issued a fresh show-cause notice to the petitioners
jointly on 2nd November, 1988.
G
In December 1988, Mfs Dabur moved the High Court under Arti-
cle 226 of the Constituti<>n for quashing and setting aside the show-
----. cause notice dated 2.11.1988 and for refund of duty amounting to
Rs.46.67.

The High Court dismissed the writ petition. The High Court was H
296 SUPREME COURT REPORTS (1990] 3 S.C.R.

of the opinion that the question whether Homeodent tooth paste was
A sans alcohol could not be adjudicated upon under the extraordinary
writ jurisdiction. The High_ Court however came to the conclusion
that both the 1944 and 1955 Acts operated in different fields and there
was no overlapping between the two. The High Court further observed
that where the parties fully acquiesced with the matter and subjected
B themselves to the statutory procedure, no action should be allowed to be
taken under Article 226 of the Constitution unless the case was patently
without jurisdiction. In this connection, it was emphasised by the High
Court that once the parties chose the statutory procedure they must go
to the logical end.

It was inter alia urged before this Court on behalf of the petitioner
c that it was not seeking to circumvent the alternative remedy provided
under the Act but in view of the conflicting claims of the Central and
State Excise authorities seeking to classify Homeodent tooth paste
~-
under the respective Acts of 1944 and 1955, the petitioner was left with
no other alternative but to challenge the actions by way of writ petition
D under Article 226 of the Constitution. It was further contended that
Homeodent did not contain alcohol but contained ingredient "mother
tincture" containing alcohol, which had a tendency to evaporate during
the process of manufacture of Homeodent; that no test result as
required under the 1955 Act was obtained to establish whether Borneo-
dent contained alcohol or not; and that on 31st August, 1987 the
Assistant Collector of Central Excise had already passed an order clas- "-...-
E
sifying Homeodent under the Act of 1944 which order had been upheld
by the Collector of Central Excise (Appeals). The main point that the
petitioner sought to emphasis was that the High Court ought to have
appreciated that Homeodent tooth paste having been subjected to duty
under the provisions of the 1944 Act, the question of levying and reco-
t
F vering duty under the 1955 Act did not and could not arise.
~
Dismissing the petitions, this Court,

HELD: (I) Homeodent is a homeopathic preparatioo but it is also
a tooth paste. Therefore, it is a toilet preparation. Whether or not such
G Homeodent would not be dutiable under the Medicinal & Toilet Pre-
parations (Excise Duties) Act, 1955 would depend upon whether it con-
tained alcohol or not. [315E]
~
(2) It is undisputed that mother-tincture was one of the com-
ponents that was used in the preparation of Homeodent and it has been
H found that alcohol was there and mother tincture was added in the
DABUR INDIA v. STATE OF U.P. 297

medicinal preparation as its component. [315G]
A
M/s Baidyanath Aryuved Bhawan (Pvt.) Ltd. Jhansi v. The
Excise Commissioner U.P., [1971] 1SCR590, referred to.

(3) The authorities charged with the duties of enforcing a particu-
lar Act are enjoined with the task of determining the question whether B
alcohol is contained therein or not. [3JOD]

(4) It has been determined by the authorities enjoinr.d to enforce
the 1955 Act that Homeodent was a medicinal and toilet preparation
and liable to excise duty, and such finding has not been assailed on any
cogent ground in any proper manner. If that is the position, then it
must be upheld that Homeodent was dutiable. [317D]
c
• ,~ Union of India v. Bombay Tyre International Ltd., [1984] 1 SCR
347; Mohan/al Magan Lal Bhavsar v. Union of India, [1956] 1 SCC 122
and N.B. Sanjana, Assistant Collector of Central Excise, Bombay v.
The Elphinston Spinning and Weaving Mills Co. Ltd., [1971] 3 SCR D
506, referred to.

(5) Provisions for rebate of duty on alcohol contained in section 4
of the 1955 Act show that multipoint tax on medicinal preparations
containing alcohol was within the contemplation, otherwise there was
no purpose in incorporating section 4 into the Act. [316B] E

(6) Justice requires that provisions for claiming refund of this
duty should be made more clear. However, in the view of the facts and
the circumstances that have happened, it is directed that if the petitio-
ners are entitled to any refund of the duty already paid to the Central
Government in view of the duty imposition now upheld against them in F
favour of the State Government such refund application should he
entertained and considered in accordance with law. l316E-FJ

(7) In a case of this nature, where there is some doubt as to
whether duty was payable to the Central Government under the 1944
Act or whether the item was dutiable under the 1955 Act, it would he G
just and proper and in consonance with justice infiscal administration
that the Central Government should consider in the light of the facts
found, if an application is made under section JIB of the 1944 Act, and
circumstances of this case, the limitation period under section JIB of
the 1944 Act should not apply. This direction must be confined in the
facts and the r;r<umstances of this case only. [316G-H; 317A] H
298 SUPREME COURT REPORTS [1990] 3 S.C.R.

Citadel Fine Pharmaceuticals Pvt. Ltd. v. D.R.O., [1973] Mad.
A
Law Journal 99; Union of India v. Bombay Tyre International Ltd., ...( •
[1984] 1 SCR 347 and Assistant Collector of Central Excise v. Madras
Rubber Factory Ltd., [1986] supp. SCC 751, referred to.

(8) Government should consider feasibility of a machinery under
B a Council to be formed nuder Article 263 of the Constitution to adjudi·
cate and adjust the dues of the respective Governments. [3180] ~

(9) This Court would not like to hear from a litigant in this y"
country that the Government is coercing citizens of this country to
make payment which the litigant is contending not leviable. Govern-
ment, of course, is entitled to enforce payment and for that purpose to
c take all legal steps but the Government, Central or State, cannot be
permitted to play dirty games with the citizens to coerce them in making
payments which ·the citizens were not legally obliged to make. lf any ~
money is due to the Government, the Government should take steps but
not take extra legal steps or manoeuvre. Therefore, the right of renewal
D of the petitioner of licence must be judged and attended to in accor-
dance with law and the occasion not utilised to coerce the petitioners to
a course of action not warranted by law and procedure. [318A-C]

ORIGINAL JURISDICTION: Writ Petition (Civil) No. 426 of
1989 etc. etc.
E
(Under Article 32 of the Constitution of India).

P. Chidambaram, K.K. Venugopal, Dushyant Dave, R. Karan·
jawala, Ms. Meenakshi Arora, Mrs. Manik ·Karanjawala (N.P.), C.S.
Vaidyanathan and S.R. Setia for the Petitioners.
F
Yogeshwar Prasad, R.S. Rana and Ashok Srivastava for the ~
Respondents.

The Judgment of the Court was delivered by

G SABYASACHI MUKHARJI, CJ. The challenge in these writ
petitions and special leave petitions is basically to the order dated 18th
January, 1989, passed by the District Excise Officer, Gaziabad, seek·
ing to recover duties of excise on Homeodent under the Medicinal & k
Toilet Preparations (Excise Duties) Act, 1955 (hereinafter called 'the
1955 Act'), even though the product was classifiable under the Central
H Excises & Salt Act, 1944 (hereinafter called 'the 1944 Act') and was, in
DABUR INDIA v. STATE OF U.P. [MUKHARJI, CJ.] 299

fact, assessed to duty under the said, Act between 1985 and 1988.
Necessarily, the question arises as to whether, in the facts and cir- A
cumstances of the case, the 1944 Act would apply or the 1955 Act
would apply. The factual dispute is whether in the facts, as enumera-
ted hereinafter, alcohol was present in Homeodent and further
whether Homeodent was Homeopathic medicine or toilet preparation
and further whether the same was dutiable under the 1944 Act. We B
., must recapitulate the basic facts in the several matte~ involved herein.

Mis. Dabur India Limited which is the petitioner in special leave
petition No. 1610/89 arising out of judgment and order dated 20th
December, 1988 in civil miscellaneous writ petition No. Nil of 1988
connected with civil miscellaneous writ petition No. Nil of 1988 of the
High Court of Allahabad, and also the petitioner in writ petition No. c
426/89, is a public limited company engaged in manufacture of
Ayurvedic medicaments and Allopathic medicaments along with cos-
metics. It had agreed to manufacture for and on behalf of M/s. Sharda
Boiron Laboratories Ltd. {hereinafter called 'the company')-being
the petitioner in special leave petition Nos. 135-36/89, used to D
manufacture and/or produce a Homeopathic tooth paste called
'Homeodent' out of the raw-materials supplied by the company on job
work basis. The petitioner states that it accordingly manufactured
Homeodent during 1985 to 1988, duly paying duties of excise on
Homeodent under the. 1944 Act at appropriate leviable rates and
recovered the same from the company. According to the petitioner, E
Homeodent did not contain alcohol but contained ingredients
"mother tinctures" containing alcohol. It is stated that alcohol, due to
various reasons, has a tendency to evaporate during the process of
manufacture ofHomeodent.

· It is further the case of the .petitioner company that during the F
period from 1979 to 1988 it also manufactured certain other medicinal
~--
·-" products containing alcohol which were classifiable under the 1955
Act. The petitioner company held at all material times licence as
required under the 1955 Act to manufacture these products. The State
Excise authorities enforcing the provisions of the Act had permanently
posted an Inspector as also a peon in the factory of the petitioner G
where these dutiable products were manufactured. The bonded
manufactory in which these products were manufactured was under
lock and key of the said officers, according to the petitioner. The
activities of the petitioner, the petitioner asserts, were clearly within
the knowledge of the State excise authorities for over a considerably
long period. During the period from 1985-1988, the company supplied H
300 SUPREME COURT REPORTS (1990] 3 S.C.R.

to the petitioner amongst other ingredients, "mother tinctures" under
A BM-9 forms, stating clearly that such mother tinctures were intended
to be used in manufacture of Homeodent in the factory of the
petitioner. 'f4ese BM-9 forms, according to the petitioner, were filed
with the State excise authorities regularly. Therefore, the petitioner
asserts that the State excise authorities were aware of the manufacture
B of Homeodent by the petitioner and the activity of the company in
getting the same manufactured in the factory of the petitioner out of
mother tinctures. However, the State excise authorities did not object
to the same nor did they call upon either the petitioner or the company
to pay duty under the 1955 Act.

On 1st January, 1985, the petitioner states, the petitioner filed
c classification list classifying Homeodent under the Act of 1944, declar-
ing therein the ingredients of Homeodent. On 17th January, 1985, the
classification list filed by the petitioner on 1.1.1985 was approved
finally and Homeodent was held to be classifiable under the Act of
1944. On 31st August, 1987 the Assistant Collector of Central Excise
D passed an order which was an appealable one classifying Homeodent
under the Act of 1944. The petitioner asserts that this order had subse-
quently been upheld by the Collector of Central Excise (Appeals),
New Delhi, on an appeal filed by the company. However, on 18th
January, 1989 the Superintendent of State Excise, Bulandshahr Visited
the factory of the petitioner and after inspecting the same, enquired
E about Homeodent. It is the case of the petitioner that it had explained
that Homeodent was classified under the Act of 1944 in view of the
orders passed by the Central Excise authorities. However, it is stated
that the Superintendent of State Excise, Bulandshahr called upon the
petitioner to furnish details in respect of Homeodent including its
ingredients and total value of clearances etc. On 20th January, 1988
F the petitioner addressed a detailed letter to the Superintendent of
State Excise, Bulandshahr, explaining its stand, and that duty had
been paid thereon. State Excise authorities, thereafter, did not take
any action against the petitioner nor did they take out samples of
Homeodent tooth paste to get appropriate results as required under
the Act of 1955 and the rules framed thereunder. However, on 17th
G March, 1988 the Superintendent of State Excise, Bulandshahr passed a
demand order directing the petitioner to deposit a sum of
Rs.68, 13,334.20 being the alleged duty payable on 'Homeodent'
manufactured and cleared between January, 1985 and January, 1988.
This order was passed without issuing any notice to show cause and,
according to the petitioner, without affording the petitioner any
H opportunity of hearing. The petitioner on the same day sent a rep-
DABUR INDIA v. STATE OF U.P. IMUKHARJI, CJ.] 301

resentation requesting for compliance with the principles of natural
A
justice and disputing the claim for duty. On .18th March, 1988 the
Superintendent of State Excise, Bulandshahr, modified his earlier
order and confirmed the demand of duty amounting to Rs.46~67 lakhs
on provisional basis. Once again the petitioner was neither served with
a show cause notice nor was afforded an opportunity of personal hear-
ing, according to the petitioner. While passing either of the orders, no B
test result, it is asserted, was obtained to establish whether Homeo-
dent contained alcohol or not. However, on 18th March, 1988 the
petitioner deposited a sum of Rs.11.66 lakhs. The petitioners also
executed a bank guarantee in favour of the District Magistrate,
Ghaziabad, for a sum of Rs.35 lakhs.

On 6th April, 1988 the petitioners filed an appeal before the c
Excise Commissioner, U .P. against the illegal orders of the District
• ~Excise Officer. The petitioners also appeared for personal hearing
before the Excise Commissioner through their advocate on 23rd April,
1988. On 5th May, 1988 the Excise Commissioner, U.P., passed an
order dismissing the appeal of the petitioners. However, petitioner D
No. 1 states that copy of the order was not served upon it. The
petitioner No. 1 further asserts that without serving a copy of the order
on it and withouf intimating whether the order had been passed or not,
the District Excise Officer approached M/s. Grindlays Bank for
encashment of the bank guarantee of Rs.35 lakhs and coerced, accord-
~ ing to the petitioners, the bankers to encash the same forthwith. E
Thereafter, the petitioner moved the High Court of Allahabad against
the illegal actions of the respondents. The High Court directed the
~ authorities to serve a copy of the order and restrained the respondents
r from encashing the bank guarantee. It is stated that while the High
Court of Allahabad was considering the writ petition of the petitioner
and had granted stay as aforesaid, the respondent District Excise F
~ officer encashed the bank guarantee of Rs.35 lakhs without even cal-
ling upon the petitioner first to pay the amount. On 13th May, 1988 the
High Court of Allahab~d directed the petitioner to file a revision
petition with the Central Government. A revision petition was filed
along with stay application on 28th May, 1988. Thereafter, the Central
Government granted stay against recovery of the balance amount of G
Rs.21.46 Iakhs. On 22nd September, 1988 the Additional Secretary to
the Government of India in exercise of his revisional powers allowed
•. -1.. the revision of the petitioners and declared the orders of the District
Excise Officer dated 17th and 18th March, 1988 as upheld in appeal by
the Excise Commissioner as null and void having been passed in viola-
tion of principles of natural justice. Thereupon it, the petitioners state, H
I

A
302 SUPREME COURT REPORTS (1990] 3 S.C.R.

called upon the District Excise Officer and the District Magistrate to
,
1

refund the amount of Rs.46.67 lakhs recovered from it by way of cash
payment and encashinent of bank guarantee in view of the revision
order. The case of the petitioner is that the State Excise authorities
failed to grant the petitioner refund as prayed for despite the order of
the revisional authorities. On 2nd November, 1988 the District Excise
B Officer issued a show-cause notice requiring the petitioner to show
cause as to why an amount of Rs.68.13 lakhs be not recovered from it
in respect of Homeodent manufactured and cleared during January,
1985 to January, 1988. In December, 1988 the petitioner moved the
High Court of Allahabad under Article 226 of the Constitution of
India, inter alia, praying for a writ of mandamus for quashing and
setting aside the showccause notice dated 2.11.1988 and for refund of
c duty amounting to Rs.46.67 lakhs. On 20th December, 1988 the High
Court of Allahabad dismissed the writ petition filed by the petitioner.
It is stated that on 10th January, 1989 this Court upon special leave
/.
petitions Nos. 135-36/89 filed by the company was pleased to issue - --<:
notice and directed stay of operation of the notice of demand. There-
D after, on 20th January, 1988 the District Excise Officer directed the
petitioner to appear for personal hearing in response to the show cause
notice. The petitioner appeared before the District Excise Officer
without prejudice and submitted a detailed reply to the show cause
notice and also contended during personal hearing that the notice was
required to be withdrawn. In its reply the petitioner categorically
E stated that the reply was being submitted without prejudice to
petitioner's right to move this Court by way of a special leave petition.
Thereafter, the petitioner moved this Court on 2 lst January, 1989. It
is, therefore, necessary to refer to the judgment and order dated 20th
December, 1988 in civil writ petition No. Nil/88 connected with civil
miscellaneous writ petition No. Nil/88 in the High Court of Allahabad.
F
It appears that M/s. Dabur India Limited had filed the said writ
petition in the High Court challenging the show-cause notice dated
2nd November, 1988 by the District Excise Officer. Ghaziabad.
Another writ petition being writ petition No. 1160/88 which is the
subject matter of special leave petition Nos. 135-36/89 was filed by
G M/s. Sharda (the company) for quashing the order 0f the Central
Government dated 3.6.1988 which was annexure-1 to the writ petition.
These two were disposed of by the said judgment. The question that
was mainly involved therein was that the contention of the petitioner
that the Homeodent did not contain alcohol, though one of the ingre-
dients of such preparation was mother tincture containing alcohol and
H the same was assessable under Item 14FF of the 1944 Act. The Asstt.
DABUR INDIA v. STATE OF U.P. [MUKHARJI, CT.] 303

Collector of Central Excise, Ghaziabad, had taken the view that the
A
-"- . Homeodent was classifiable under sub-heading No. 3306-02 of the
,. Chapter 33 of the Central Excise Tariff Act, 1985 and on that duty @
15% ad valorem was leviable. This duty computed at the said rate by
the Central Excise authorities was paid, according to the petitioner, on
the goods manufactured from 1.1.1986. On 18th January, 1988 the
District Excise Officer made a surprise inspection of the units of the B
petitioner and when it was revealed that the Homeodent tooth paste
manufactured by M/s. Dabur was toilet preparation containing alcohol
'--..,. within the meaning of Section 2(k), read with Item 4 of the Schedule,
referred to in section 3 of the 1955 Act, and was therefore assessable to
duty @ 100% ad valorem. The District Excise Officer, Ghaziabad,
therefore had caused a common notice dated 17.3.1988 to be served on
the petitioner requiring it to pay duty aggregating to Rs.68, 13,334.20 c
under the provisions of the 1955 Act on such goods manufactured from
1st January, 1985 till the date of notice. As mentioned hereinbefore,
• ~ ·against this notice some representation was made by the petitioner to
the District Excise Officer and thereupon the petitioner was directed
to deposit provisionally the excise duty to the tune of Rs.46,55,451.45 D
under the 1955 Act and the same was deposited by the petitioner. Such
demand wad challenged by M/s. Dabur in appeal before the Excise
Commissioner. The Excise Commissioner affirmed the order of the
District Excise Officer and dismissed the appeal. No appeal was filed
by M/s. Sharda against the demand notice of excise duty under the
1955 Act. However, both the petitioners approached the Central E
Govt. in revision under Rule US of the 1956 Rules. The revision of
M/s. Dabur was disposed of by the Central Govt. and the result was
communicated by the Additional Secretary to the Govt. of India by the
order dated 22.9.1988. The contention of M/s. Dabur that the demand
was raised on it without any opportunity of being heard and in viola-
tion of principles of natural justice, was accepted and a direction was F
given that the case be adjudicated upon de nove after giving a show
cause notice and proper opportunity of being heard to the party. The
revision filed by M/s. Sharda was also not entertained by the Central
Government on the ground that a right of appeal was vested in M/s.
Sharda which could have been exercised upto 17 .6.1988, which was not
done. G

However, pursuant to the order of the Central Government, the
District Excise Officer issued the impugned show-cause notice dated
2. 11. 1988 to the petitioners jointly, validity of which was challenged by
them in the writ petition and the other writ petition bas been filed by
M/s. Sharda only to challenge the order of the Central Govt. refusing H
304 SUPREME COURT REPORTS (1990] 3 S.C.R.

to entertain its revision. The learned Judges in the judgment under
A
appeal noted that the petitioner did not advance any argument on the
merits of the question; whether Homeodent tooth paste is assessable
to duty under the 1944 Act or under the 1955 Act and rightly so
because that involved a factual scrutiny which could hardly be gone
into by the High Court. The High Court was of the opinion that the
B question, whether Homeodent tooth paste is sans alcohol, cannot be
adjudicated upon under the extra-ordinary writ jurisdiction. On behalf
of the petitioners before the High Co1111 two contentions were raised.
Firstly that the Central Govt. having set aside the order of District
Excise Officer, Ghaziabad, whereunder excise duty to the tune of
Rs.46,66,451.45 was paid, there was no justification for the respon-
dents to retain that amount thereafter and a writ of mandamus be
c issued against the respondents directing them to refund this amount;
and secondly, that under Rule 11 of the 1956 Rules when duties are
short levied, a written demand by the proper officer being made within
six months from the date on which the duty was paid, the short fall
could be recovered. The submission was that no duty can be recovered
D for the period anterior to six months to be reckoned from the date of
payment of duty. It was, therefore, urged that the show cause notice
was invalid, inasmuch as the District Excise Officer, Ghaziabad, had
exceeded the jurisdiction in having recovered the duty beyond
limitation.

E The High Court addressed itself to the question whether Article
226 of the Constitution of India was a proper remedy. We are not
really concerned with this question. The High Court, however, came
to the conclusion that both the 1944 & 1955 Acts operate in different
fields and there is no overlapping between the two. If the Homeodent
tooth paste is found to be assessable to duty under the 1955 Act then it
F will not amount to review of the order of the Central Excise
authorities. It was emphasised before the High Court that adjudication
by the Central Excise authorities does not stop the State Excise
authorities from considering the case under the provisions of the i955
Act. Both the Acts are mutually exclusive and the authorities there-
under are fully empowered to consider the assessability separately,
G according to the High Court. The High Court came to the conclusion
that where the parties fully acquiesced with the matter and subjected
themselves to the statutory procedure, no action should be allowed to
be taken under Article 226 of the Constitution unless the case is .>I.~·
patently without jurisdiction. The orders having been made under the
statutory provisions, the Court should be loath to interfere under
H Article 226 of the Constitution of India. It wa& emphasised by th< High
DABUR INDIA v. STATE OF U.P. [MUKHARJI, O.J 305

Court that once the parties choose the·statutory procedure they must
A
go to the logical end. The Central Govt. had directed the State Excise
.authorities to adjudicate the case de novo and, therefore, the District
Excise Officer, Gbaziabad, had no option but to issue show-cause
notice. So the show-cause notice dated 22nd November, 1988 was
jointly given to the petitioner pursuant to the direction of the Central
Government much after the orders had been, passed initially or in B
appeal. Therefore, the common show-cause notice to the parties can-
not, according to the High Court, be characterised as a sparking point
and from the backdrop of the case stated above, it is amply clear that
the Excise authorities had not assumed jurisdiction to proceed against
the petitioner for the first time by way of a show-cause notice dated
2nd November, 1988 rather it had been issued at much subsequent
stage pursuant to the direction of the Central Government. The High c
Court came to the conclusion that the show-cause notice having been
- ·~.. issued in accordance with the directions of the Central Govt. in the
revisional jurisdiction which the petitioner itself subjected to, cannot
be ·assailed under Article 226 of the Constitution. So this show-cause
notice dated 2nd November, 1988 cannot be equated with the show- o
cause notice given at the initial stage to assume jurisdiction in the
matter. The High Court also came to the conclusion that no writ can be
issued in favour of the parties who remain sitting on the fence and took
a chance of the proceedings taken up under the statutory provisions
going in their favour. The High Court held the petitioner who had
resorted to statutory remedie• on its own could not be permitted to · I!'
take recourse under Article 226 of the Constitution of India, in .the
event of their having become successful under the former.

Coming to writ petition No. 1160/88 wherein the order of the
Central Government refusing to entertain the revision had been chal-
lenged. The Central Government had refused to entertain the revision F
}.. on the sole ground that the right of appeal that vested in M/s. Sharda
could not be exercised thereby. The High Court, however, came to the
conclusion that the case of M/s. Dabur was that it is manufacturing
Homeodent tooth paste on job basis under the loan licence of M/s.
Sharda as per the specifications and control and the raw-material of
the latter but factually both the petitioners are different entities under G
the law and therefore each petitioner had to pursue its own remedy.
Therefore, on an analysis of the material, the High Court found that
there was nothing to interfere with the order of the Central
Government.

Therefore, the questions that fall for determination are firstly, H
306 SUPREME COURT REPORTS (1990] 3 S.C.R.

A whether the High Court was justified in dismissing the writ petition of
the petitioner on the ground of alternative remedy particularly when
the writ petition challenged the actions of the respondents in seeking
to levy and recover duties of excise under the 1955 Act as being with-
out jurisdiction and/or without authority of law. The next question
that arises is whether the High Court was justified in dismissing the
B writ petition challenging particularly in two sets as has already been
subjected to duty of excise under the 1944 Act. The next' question that
falls for consideration is whether the High Court was justified in dis-
missing the writ petition of the petitioner which had prayed for refund
of duties of excise amounting to Rs.46.67 lakhs illegally recovered
from the petitioner on Homeodent tooth paste under the 1955 Act in
pursuance of the order which was declared null and void in revision by
c the Central Government. It is also necessary to consider whether the
High Court was justified in dismissing the writ petition of the
petitioner particularly when it challenged levy and recovery of duty
under 12 of the 1956 Rules framed under the 1955 Act when the said
rules have already been declared to be invalid and without jurisdiction
D by a Division Bench of the Madras High Court in the case of Citadel
Fine Pharmaceuticals Pvt. Ltd. v. D.R.O., (1973) Madras Law Journal
p. 99.

The next main question requiring consideration is whether the
respondents were acting within their jurisdiction while levying duty of
E excise on Homeodent under the 1955 Act when in the manufacture of
H0meodent alcohol had not been used as a raw material but mother
tinctures containing alcohol had been used and particularly when at the
final stage of manufacture Homeodent did not contain any trace of alcohol.

The question that has really to be delermined in this case is,
F whether firstly Homeodent was classifiable under the 1944 Act or 1955
Act and who will determine that; and secondly, which Act will prevail
in the facts and circumstances of the case.

In this connection, it may be mentioned that M/s. Sharda had
applied for a licence and was granted a loan licence to manufacture
G tooth paste as per the provisions of Drugs & Cosmetics Act, 1944 and
the Rules framed thereunder. The said licence was granted under rule
139B and was in Form 3 lA for manufacture of cosmetics. Sub-
sequently, Homeodent was envisaged by the Drug authorities as a
homeopathic medicament and licence had been granted accordingly. It
is the case of the petitioner that tooth pastes were manufactured by the
H petitioner company for and on behalf of the loan licensee from the
~ DABUR INDIA v. STATE OF U.P. [MUKHARJI, CJ.] 307

following chemicals and ingredients:
it ~~ A
"Potassium Chlorate BPC 73 Sodium Benxoate IP Sodium
Flouride BP Plantago Offionle Mt HP 1 Cochloric
Armorocie MT NP 1 Cochloric Officincie MT HP 1
Phytolecca Decandra NT Methyl Parehudron Benxoate IP
Prophyle Paraphydroxy Benxoate IP Calcium Carbonate B
IP Sodium Alginete USP NF 1980 Titenium Oxide BP Pre-
cipitate Silico USP NF Liquid Sodium Socicylate 15 381:
1972

Sodium Leuryle Sulphate (High Purity) Saccharine IP"

It is further to be noted that the final product i.e. the tooth paste
c
is a homeopathic semi-solid compound in which mother tincture was
- '>- · completely absent or present in fractionally negligible quantity,
depending upon the manufacturing conditions, vaccum and the tem-
perature. It is the case of the petitioner that at the time the tooth paste
is manufactured, packed and is ready for delivery, the alcohol would D
diminish completely and would not be left at all. Nor can it be so
traced upon any chemical testing. In this connection, the petitioner
sought to crave leave to several documents and some test examination
reports. According to the Laboratory test which the petitioner pro-
duced, the alcohol content was absent in the nine samples sent by the
loan licensee. It was further stated that the Govt. of India had issued E
instructions vide letter dated 19th December, 1957 requiring for
determination of alcohol content of any product the samples must be
sent to specified laboratories. Despite the said position, it is the case of
the petitioner that the Excise authorities acting under the 1955 Act,
had never withdrawn any sample of tooth paste manufactured by the
petitioner within their knowledge between 1985 and 1988 a sufficiently F
long period during which their inspector-in-charge was physically pre-
sent in the factory of M/s. Sharda and had not only access but
knowledge of the activities including the manufacture of the sai.d tooth
paste. The Superintendent of Excise, Bulandshahr, visited the factory
of the petitioner-company on 18th January, 1988 and after inspecting
the same enquired about the exciseability of Homeodent tooth paste. G
The petitioner's offkers explained that Homeodent was classified
under the 1944 Act and the duty had been paid accordingly. Subse-
quently, the Superintendent (Excise) called upon the petitioner to
furnish details about the quantity and value of Homeodent manufac-
tured and cleared between 1985 and 1988. In pursuance thereof, the
petitioner replied vide his letter dated 20th January, 1988 and in H
308 SUPREME COURT REPORTS [1990] 3 S.C.R.

details explained the reasons by Homeodent was not liable to duty
A
under the 1955 Act. In pursuance of the reply of the petitioner no ...{ ~
action was taken and the petitioner assumed that the matter had been
closed. The petitioner has given detailed episodes of harassment.

The main point that the petitioner seeks to emphasis in this case
B is that the High Court ought to have appreciated that the petitioner's
product Homeodent tooth paste having been subjected to duty under
the provisions of the 1944 Act, the question of levying and recovering
duty under the 1955 Act did not and cannot arise. Theretore, the impugned
actions of the. respondents were required to be set aside by issuing
appropriate writ of mandamus. The High Court was, therefore, in
error, according to the petitioner, in dismissing the writ petition with-
e out appreciating this contention. The High Court ought to· have
appreciated that the petitioner was not seeking to circumvent the
alternative remedy provided under the Act but in view of the conflict-
ing claims of the Central and State Excise authorities seeking to clas-
sify Homeodent tooth paste under the respective Acts of 1944 and
D 1955, the petitioner was left with no other alternative but to challenge
the actions by way of writ petition under Article 226 of the Constitu-
tion. It is contended that the High Court ought to have appreciated the
actions of the State authorities were ex facie and without authority in
law in so far as they sought to levy and recover duty on Homeodent
tooth paste under the 1955 Act. Therefore, the petitioner was justified
E in challenging such actions by way of a writ petition before the High
Court. It was further urged that the High Court had committed an
error on the ground of alternative remedy before the High Court as
also the demand raised against it could not be justified under Rule 12
beyond a period of six months as prescribed under Rule 11 particularly
in view of the fact that Rule 12 as had been declared to be invalid and
F without jurisdiction as per the judgment of the Madras High Court. It
is further contended that the High Court committed an error in dismis-
sing the writ petition of the petitioner challenging the demand of duty
made by the State Excise authorities amounting to Rs.68 lakhs particu-
larly in view of the fact that as per S .4 of the 1944 Act which is made
the basis of valuation even under the Act of 1955 as per the Explana-
G lion II to the Schedule as interpreted by this Court in the cases of
Union of India & Ors. v. Bombay Tyre International Ltd. etc., (1984] 1
SC~ 347 and Asstt. Collector of Central Excise & Ors. v. Madras
Rubber Factory Ltd etc., [1986] Suppl. SCC 751 the duty liability could
not exceed the sum of Rs.26 lakhs. It was further emphasised that the
High Court committed error in not directing the State Excise authori-
H ties to refund the amount of Rs.46.67 lakhs which was recovered from
DABUR INDIA v. STATE OF U.P. [MUKHARJI, CJ.} 309

the petitioner under Orders dated 17/18 .3 .1988 which were declared to
A
~ ).- be null and void having been passed without giving any opportunity of
hearing.

The Sahibabad factory of M/s. Dabur India Ltd. was set up in the
year 1979. From the very beginning the petitioner had undertaken the
job of manufacturing various products covered under the 1955 Act. B

~
The petitioner ha\! obtained the necessary licence and fell under the
purview of the 1955 Act. Sec.tion 6 of the 1955 Act stipulates that the
Central Govt. mav, by notification in the Official Gazette, provide
that from such date as may be specified in the notification'., no person
shall engage in the production or manufacture of any dutiable goods or
of any specified component parts or ingredients of such goods or of
specified containers of such goods or of labels of such containers c
except under the authority and in accordance with the terms and con-
- ">-·. ditions of a licence granted under this Act. Dutiable goods have been
defined in the Act vide Clause (c) of s. 2 i.e. meaning thereby the
medicinal and toilet preparations specified in the Schedule as being
subject to the duties of excise levied under the Act. D

It is stated that the State Excise authorities had posted an officer
in the factory of the petitioners at Sahibabad for physical control on a
part-time basis. In. the year 1985, an officer in the rank of an Inspector
was posted at the said factory on full time basis for physical supervision
·--"" and control. Hence, all the activities of the petitioner were within the E
knowledge of the respondent Excise authorities. The version of the
petitioner is that on an inquiry from M/s. Sharda Bairon Laboratories
Ltd. for manufacturing of Homeodent tooth paste on job work basis
out of the raw-material and packing materials to be supplied by the
said loan licensee, M/s. Sharda, petitioner No. 1 undertook the job.
The petitioner-company had filed a list classifying the said Homeodent F
' tooth paste under Tariff item 14FF of the 1944 Act as the said tooth
}.
paste did not contain any alcohol directly. The classification list was
filed in the prescribed Form and with all the particulars. It was further
checked up by the Inspector Range Inspector and it was subsequently
approved by the Assistant Collector, Central Excise, according to the
petitioner. G
On 31st August, 1987 there is indeed an order of the Asst!
~ Collector of Central Excise, Division II, Ghaziabad, stating that the
tooth paste in question was classifiable under the 1944 Act and not
under the 1955 Act. It has to be understood that under the 1955 Act
the duties go to the State Govt. while under the 1944 Act the duties go H
310 SUPREME COURT REPORTS l 1990] 3 s.c.~.

to the Central Govt., though both these Acts are central legislations.
A The authorities charged with the duties under the 1944 Act are Central
Govt. employees and Central Govt. authorities are different and dis-
tinct from the authorities of the State Govt. under the 1955 Act. The
basic question that has to be decided is whether in such a situation who
or which authority will decide if the product in question would be
B leviable to duty under the 1944 Act and go to the coffers of the Central
Government or whether it will be leviable under the 1955 Act and the
realisations go to the State Govt.

In the facts and circumstances of this case, that will depend on
the question whether alcohol was used as any of the ingredients in
production of the product or manufacture thereof. That there was
c production and/or manufacture and as such excise was leviable, there
is no dispute. The question is, whether in the process any ingredient
was used containing alcohol in respect of a product which is medicinal
in nature and as such would be dutiable under the 1955 Act. (Homeo-
dent is a homeopathic preparation but it is also a tooth paste. There-
D fore, it is a toilet preparation. Whether or not such Homeodent would
be dutiable under the 1955 Act, would depend upon whether it con-
tained 'alcohol' or not. The authorities charged with the duties of
enforcing a particular Act are enjoined with the task of determining
the question whether alcohol is contained therein or not. It is the case
of the petitioner that they had paid duties of excise on Homeodent
E tooth paste manufactured by it on behalf of loan licensees under the
1944 Act. The total amount of duty claimed to have been paid for the
said period amounted to Rs.6,26,570.47. The petitioners rely heavily
on the test certificates issued by the Homeopathic Pharmacopia
Laboratories of the Ministry of Health & Family Welfare, Govt. of
India, which state that they had failed to detect any alcohol in the 9
F batches of the tooth paste given to them for testing. The petitioner
asserts that tooth paste is a homeopathic semi-solid compound in
which mother tincture is completely absent or is present in negligible
quantity with any alcohol that may be present in pheropest completely
and that there are no traces of the same in the final product upon
chemical testing. In January, 1988 there was an inquiry about the
G exciseability of Homeodent tooth paste by the Superintendent of
Central Excise, under the 1955 Act. The gravamen of the charge is
the order issued by the Distt. Excise Officer, Ghaziabad, on 17th
March, 1988 which was issued without notice to the petitioner and
without giving it any opportunity. The Distt. Excise Officer, however,
on demand from the petitioner had modified the earlier order of 17th
H March, 1988 and had issued on 18th March, 1988 a demand notice for
DABUR INDIA v. STATE OF U.P. [MUKHARJI, CJ.] 311

Rs.46,66,451.45. It is the grievance of the petitioner that as it was
A
carrying on the manufacture under the 1955 Act, it had applied for
licence and the respondent authorities without assigning any reason,
refused to renew the licence of the petitioner company. The implica-
tion of such absence of renewal is that the petitioner was being called
to pay an illegal demand. It, therefore, was forced to close down'its
manufacturing operations. The petitioner avers that in the meeting B
which took place between the Excise Commissioner and the Managing
Director of the petitioner-company on 14th March, 1988 the petitioner
was orally informed that the licence would be renewed upon payment
of dues under the orders dated 17th and 18th March, 1988, as
aforesaid. The petitioner further states that it was told by the Excise
Commissioner to deposit 1/3rd of the amount forthwith and execute a
bank guarantee for the remaining amount. According to the peti- c
tioner, it had deposited the sum of Rs.11,66,000 and consequently the
L-1 licence was renewed for a period from 25.3.1988 to 31.3.1988.
Then on !st April, 1988 the petitioner was once again forced to close
down its manufacturing activity in the absence of further renewal of
licence for the period from 1.4.1988 to 7.4.1988. D

It is stated that the petitioner-company had filed an appeal
before the Commissioner under rule 127 of the 1956 Rules and upon
compliance with the conditions of the State authorities, the licence was
renewed from 7.4.1988 on ad hoc basis for a period of 3 months upto
30th June, 1988. The case of the petitioner is that the hearing of the E
appeal before the Excise Commissioner was over on 23.4.1988.
However, no order thereupon was passed. On 7th March, 1988 M/s.
Grindlays Bank, who are the bankers of the petitioner, issued a bank
guarantee inquiring whether any orders had been passed by the Excise
Commissioner and whether the sum covered under the bank guarantee
had become due. The petitioner was informed by the bankers that the F
District Excise Officers and other officers present in the bank had
served an order requiring the Bank to clear the bank guarantees. The
petitioner states that at that time it had no information as to the order
of the Excise Commissioner hut later on it came to learn that the Excise
Commissioner had passed an order on 5th May, 1988 but the same was
not communicated to it; and the bank guarantees were enforced with- G
out giving the petitioner any opportunity of filing any revision petition.
The petitioner thereafter moved a writ petition before the Allahabad
High Court which directed that the said bank guarantee should not be
encashed until 13th May, 1988. According to the petitioner, the
bankers under coercion were compelled to encash the bank guarantee
on 9th Mav. 1988 and issue a draft for an amount of Rs.35 lakhs. The H
312 SUPREME COURT REPORTS [1990] 3 S.C.R.

writ pellllon of the petitioner came up for hearing before the
Allahabad High Court and it was directed to file a revision petition
within two weeks from 13.5.1988 and the same should be considered
on merits. The High Court had stayed the recovery of an amount of
Rs.21,46, 134.20 till the disposal of the stay application.

B On 22nd September, 1988 the Additional Secretary to the Govt.
of India allowed the revision petition of the petitioner and oet aside the
orders of t\le District Excise Officer, dated 17-18th March, 1988.
Thereupon the petitioner called upon the District Excise Officer, Lo
refund the amount of Rs.46,47 ,000 but the respondents failed to
refund and neglected it. The respondents had issued a show-cause
notice calling upon the petitioner as to why an amount of Rs.68.13
c lakhs be not recovered. on Homeodent tooth paste manufactured and
cleared between 1985 and 1988. The High Court had dismissed the writ
petition which is the subject-matter of another special leave petition.
Respondent No. 3 i.e. the District Excise Officer. Ghaziabad. vide his
order dated 19. 1. 1989 had confirmed the show-cause notice issued by
D him on 2nd November, 1988 and also confirmed the demand for
Rs.68,50,745.20. The said order dated 19th January, 1989 is the
subject-matter of challenge in writ petition No. 426/89.

Therefore, the basic question now is, whether the authorities
under the 1955 Act were entitled and authorised to levy duties under
E the Act. In the orders dated 18-19th January, 1989 passed by the
District Excise Officer which is in vernacular and a translation of
which is given in Annexure XIV to the writ petition, states that in
reference to a confidential letter dated 13th January, 1988 of the
Deputy Excise Commissioner, Meerut Division, during the surprise
inspection of the premises of M/s. Dabur India Ltd. and M/s. Sharda,
f Ghaziabad on 18th January, 1988 by Sri Lal Ji Rai, the then Distt.
Excise Officer & Excise Superintendent, Bulandshahr, it was found
that M/s. Dabur India Ltd. had been manufacturing a toilet prepara-
tion i.e. Homeodent tooth paste containing, according to the said
order, alcohol for M/s. Sharda Boiron. The question is, did they do so.
How does one find it out? As stated in the order, there is no dispute
G but if 11 was, then calculating the duty u/s 3 of the 1955 Act a sum of
Rs.68, 13,334.28 would be found due. The Officer found that there was
a conspiracy and without knowledge of the officer-in-charge in a
clandestine manner this production was carried on. This is an answer,
according to the impugned order, u/s 7 of the 1955 Act. Section 7 deals
with the offences and penalties under the Act and provides that if any
H person contravenes any of the provisions of a notification issued u/s 6
DABUR INDIA v. STATE OF U.P. {MUKHARJI, CJ.] 313

or evades the payment of any duty of excise or fails to supply any
A
--). information which he is required to supply, he shall for every such
offence be punishable to the punishment mentioned in the section.
The officer has further found that as against an outstanding sum of
Rs.68,13,334.28, Rs.11,67,000 had been deposited. After narrating
the incident and the presence of the counsel and lawyers the officer
was of the opinion that nothing has been brought to his notice which B
, required revision of the previous order. So, therefore, a break up was
, given and out of Rs.68,50,745.20, the actual duty payable
Rs.46,67 ,000 has already been realised and, therefore, the balance
duty is Rs.21,83,745.28 and they have failed to realise the same.

In view of this Court's order dated 10th January, 1989, whereby
this Court had directed that the proceedings might go on but the de-
c
mands will not be enforced, inasmuch as orders dated 18-19th January,
~ 1989 reiterate the order of 17th March, 1988 it is necessary to refer to
the order dated 17th February, 1988 passed by the District Excise
Officer, Ghaziabad. Therein it stated that both the units were jointly ·
and severally inspected on surprise visits i.e. the units bonded D
laboratories, and on the basis of the information collected it was
revealed that Dabur India Ltd. was manufacturing a suitable toilet
preparation containing alcohol named Homeodent without obtaining
necessary licence. According to the said order the product had been
manufactured outside the bonded premises approved under the L-1
.-.C# licence and the duty payable on this product had not been paid. The
order further states that on the basis of the information and the stock a·
sum of Rs.68, 13,334.20 was payable and a challan to that effect was
issued. In the first letter dated 13th March, 1988, Dabur India Ltd.
wrote to the Distt. Excise Officer, that the classification of Homeo-
dent tooth paste made by the Excise Officer as toilet preparation was
erroneous, as this preparation, according to Dabur India Ltd., should F
;. . be classified under Item 2 of the Schedule to the 1955 Act as a Homeo-
dent preparation and not under Item 4. Item 3 to the Schedule of 1955
Act contains the following: "Homeopathic preparations containing
alcohol". Item No. 4 is "Toilet preparations containing alcohol or
narcotic drugs or narcotic". So the question raised here is whether the
tooth paste is primarily a toilet preparation or a homeopathic prepara- G
tion. Such a question really, in our opinion, must be justiciable by the
authorities enjoined to enforce the provisions. On the basis that the
-"< product was a homeopathic item, a sum of Rs.6245.29 was paid. The
petitioner further stated as follows:

"Assuming and not admitting that your classification is H
314 SUPREME COURT REPORTS [1990] 3 S.C.R.

correct, even then your calculation of duty of the product is
A eroneous on the following points:

a. The total wholesale value of the goods manufactured as
on 18.1.88 is Rs.65,93,91~.63.

B b. A trade discount @) 20% has to be deducted from this
wholesale price Rs.13,26,373.27.
1
~
The balance amount comes to Rs.52,67,542.36. The excis1>
duty element in this amount comes to Rs.26,33,771.18.

The assessable velue comes to Rs.26.33,771.18. The calcula-
c tion chart showing these calculations is attached as Anne-
xure 'B'.

3. Kindly note that for central Excise purpose the excise- ~
able value declared to the CE Dept!. on the total goods
.D manufactured upto 18.1.88 is only Rs.46,66,451.45 and the
wholesale price of these goods is Rs.66,31,866.35 only.
This too is evident from Annexure 'B'.

We would, therefore, request you to kindly amend your
demand notice accordingly.
E -..
Please note that the foregoing is without any prejudice
whatsoever to any arguments that may be raised by us at
the time of hearing with the Commissioner UP, Excise,
Allahabad or during any legal proceedings arising out of
your aforementioned demand notice or ad judicatory order
F of the Commissioner. We also reserve the right to adduce
further grounds in our defence and support at any /all
future occasions in this connections." -k
On 18th March, 1988 there was further amendment by the Dist!.
Excise Officer, Ghaziabad, he stated as follows:
G
"With reference to this office's notice No. 185/1-2 dated
18.3.88 both the units are jointly and severally informed
that in the application letters dated 17.3.88 received sepa-
rately from both the units, the total wholsale price of the ><
total Homeodent tooth paste manufactured has been
H declared as Rs.65,739,15.6~. It has also been informed that
DABUR INDIA v. STATE OF U.P. [MUKHARJI, O.J 315

for the purpose of Central Excise Duty, the total assessable
A
value of the total quantity of Homeodent tooth paste
manufactured uptil 19.1.88 is Rs.46,66,451.45 and that the
total wholesale price on this quantity has been declared as
Rs.66,31,866.35 to the Central Excise Deptt.

Based on your declaration and clarification given in your B
above application and on the basis of statistics and declara-
tions that exciseable value on a provisional basis for the
total quantities of the cosmetics homeodent tooth paste
containing alcohol, which has been sold uptil 18.1.88 and
which in stock on 18.1.88 has accepted as Rs.46,66,451.45
instead of Rs.6,81,334.20. This does not mean that this value
has been finally accepted. c
One to the fore mentioned, the amount of Rs.68, 13,331.20
is amended to Rs.46,66,451.45 in the office's notice No.
185/1-2 dated 18.1.88. On this partial amendment, both the
units are jointly and severally ordered to provisionally D
deposit Rs.46,66,451.45 instead of Rs.68, 13,324.20 as duty
in the State Treasury, Ghaziabad immediately on receipt of
this notice, under the appropriate account head and to pro-
duce a copy of the receipted Treasury Challan as proof of
deposit in this office."
E
In view of the facts alleged and found by the District Excise
Officer, Ghaziabad, as mentioned hereinbefore, it appears to us that
the Homeodent was a medicinal and toilet preparations and liable to
excise duty. This Court in Mis Baidyanath Ayurved Bhawan (Pvt.)
Ltd., Jhansi v. The Excise Commissioner, U.P. & Ors., [1971) 1 SCR
590 has held that in order to attract duty under the 1955 Act, all that is F
required is that a medicinal preparation should contain alcohol.
Alcohol may be part of the preparation either because it is directly
added to the solution or it came to be included in it because one of the
components of that preparation contained alcohol. It is undisputed
that mother-tincture was one of the components that was used in the
preparation of Homeodent and it has been found that alcohol was G
there and mother tincture was added in the medicinal preparation as
its component. That was not the case before any authorities in this case
but being present it was found in liquid form which incidentally again
was disputed because test reports were not accepted by the petitioner
but according to the respondent authorities, indicated the presence of
alcohol. Section 3(1) of the 1955 Act was attracted. This Court in the H
316 SUPREME COURT REPORTS [1990] 3 S.C.R.

aforesaid decision further reiterated that even if the imposition of
A
excise duty under section 3(1) of the said Act on preparations in which ..( ~~
alcohol was indirectly introduced attracts multipoint taxation that by
itself would not render the duty illegal. The provisions for rebate of
duty on alcohol contained in Section 4 of the said Act show that
multipoint tax on medicinal preparations containing alcohol was
B within the contemplation of the legislature otherwise there was no

~
purpose in incorporating section 4 into the Act. In this connection,
section 4 of the 1955 Act may be referred to which is as follows: .

"4. Rebate of duty on alcohol, etc., supplied for manufac-
lute of dutiable goods-Where alcohol, narcotic drug or
narcotic had been supplied to a manufacturer of any duti-
c able goods for use as an ingredient of such goods by, or
under the authority of, the collecting Government and a
duty of excise on the goods so supplied had already been
recovered by such Government under any law for the time
~ -
being in force, the collecting Government shall, on an
D application being made to it in this behalf, grant in respect
of the duty of excise, leviable under this Act, a rebate to
such manufacturer of the excess, if any, of the duty so
recovered over the duty leviable under this Act."

In this case, however, the case of the petitioner is that duty has
E been recovered under the 1944 Act; if any refund has to be made, it
must be made in accordance with law. There is a question of limitation
for claiming refund of this duty. The provisions are not clear. In such a
situation, it appears to us that the justice requires that provisions -(_

should be made more clear and in the view of the facts and the
circumstances that have happened, we would direct that if the petitio-
F ners are entitled to any refund of the duty already paid to the Central
Government iri view of the duty imposition now upheld against them
in favour of the State Government such refund application should be
entertained and considered in accordance with law. We are conscious
in giving this direction, we are not strictly following the letter and the
provisions of the Act. But in a case of this nature, where there is some
G doubt as to whether duty was payable to the Central Government
under the 1944 Act or whether the item was dutiable under the 1955
Act, it would be just and proper and in consonance with justice in
fiscal administration that the Central Government should consider in Y.- -'"
the light of the facts found, if an application is made under section llB
of the 1944 Act and pass appropriate order. Such application should be
H made within four months from the date of the judgment. In the facts
DABUR INDIA v. STATE OF U.P. [MUKHARJI, CT.] 317

and the circumstances of this case, the limitation period under section
A
llB of the 1944 Act should not apply. This direction, in our opinion,
must be confined in the facts and the circumstances of this case only.

Our attention was drawn to the observations of this Court in
Union of India & Ors. etc. etc. v. Bombay Tyre International Ltd. etc.
etc., (supra) in respect of the valuation. But the point not having been B
taken at any stage before the authorities, it is not proper for us at this
stage to go into this question. We will proceed in view of the facts and
the circumstances of this case and to do justice between the parties on
the basis that the duty has been correctly imposed. We have looked
into the order of the District Excise Officer, Ghaziabad and we find
that all relevant facts have been considered and no facts were brought
before us contrary to the findings nor any contentions of substance c
raised which can induce us to hold to the contrary.

Reference may also be made to the observations of this Court in
Mohan/a/ Magan/al Bhavsar & Ors. v. Union of India & Ors., [1986] 1
sec 122 for the test to determine whether an item of medicinal pre- D
paration falls under Item 1 of the Schedule to the 1955 Act. It has been
determined by the authorities enjoined to enforce that Act and such
finding has not been assailed on any cogent or reliable ground in any
proper manner. If that is the position, then that order must be upheld
but it mu§t be upheld that Homeodent was dutiable and as such the
impugned order was correctly passed by the District Excise Officer. E
Our attention was drawn to the observations of this Court in
N. B. Sanjana, Assistant Collector of Central Excise, Bombay & Ors. v.
The Elphinstone Spinning and Weaving Mills Co. Ltd., [1971] 3 SCR
506. But in view of the facts on which the parties rested their case
before the authorities, it is not necessary at this stage to go into this F
controversy.

In the aforesaid view of the matter, we are of the opinion that the
impugned order dated 18th January, 1989 passed by the District Excise
Officer, Ghaziabad, must be given effect to and thereafter the
petitioner's application for refund, if any, made before the authorities G
under section 4 of the 1944 Act within the time indicated as before
should be disposed of in the manner indicated above, if made.

Before we part with this case, two aspects have to be adverted
to-one was regarding the allegation of the petitioner that in order to
compel the petitioners to pay the duties which the petitioners con- H
318 SUPREME COURT REPORTS [ 1990] 3 S.C.R.

tended that they were not liable to pay, the licence was not being
A
renewed for a period and the petitioners were constantly kept under ~ '"'·
threat of closing down of their business in order to coerce them to
make the payment. This is unfortunate. We would not like to hear from
a litigant in this country that the Government is coercing citizens of
this Country to make payment of duties which the litigant is contend-
B ing ·not to be leviable. Government, of course, is entitled to enforce
payment and for that purpose to take all legal steps but the Govern-
ment, Central or State, cannot be permitted to play dirty games with
the citizens of this country to coerce them in making payments which '"t"'
the citizens were not legally obliged to make. If any money is due to
the Government, the Government should take steps but not take extra
legal steps or manoeuvre. Therefore, we direct that the right of
c renewal of the petitioner of licence must be judged and attended to in
accordance with law and the occasion not utilised to coerce the
petitioners to a course of action not warranted by law and procedure. .~ _
Secondly, in a situation of this nature, we are of the opinion that the
Government should consider feasibility of setting up of a machinery
D under a Council to be formed under Article 263 of the Constitution to
adjudicate and adjust the dues of the respective Governments. In
these peculiar facts, it appears that the dispute is under two different
central legislations and under one the State authorities will realise and
impose the taxes on finding on certain basis and under the other the
same transaction may be open to imposition by Central Government
E authorities on a particular view of the matter. In such a situation, how ·-..._
and wherein the refund should be made of any duty paid in respect of
part of a transaction to one of the authorities, the State or the Centre,
to be adjusted should be the subject matter of a settlement by the ,
Council to be set up under Artcle 263 of the Constitution. This is a
matter on which we draw the attention of the concerned authorities for
F examination because section 3 of the 1955 Act and section 3 of the
1944 Act may overlap similar transaction in certain cases.

Writ petitions are disposed of with the aforesaid directions.
Special leave granted in SLP (Civil) No. 1610 of 1989 (Mis. Dabur
India v. State of U.P. & Ors.,) and SLP (Civil) Nos. 135-36 of 1989
G (Sharde Bairon Laboratories v. State of U.P. & Ors.). Appeals are
disposed of in the light of the directions given hereinbefore. Save as
aforesaid all interim orders are vacated.

In the facts a" d the circumstances of the case, the parties will pay
and bear their own costs.

R.S.S. Petitions disposed of.