Case: M/S. Indian Chemical &amp; Pharmaceutical Works Vs. State Of Andhra Pradesh &amp; Ors

The appellant manufactures drugs in Hyderabad and among the drugs manufactured by it is chloral hydrate. In September 1962, the State of Andhra Pradesh issued rules called the Andhra Pradesh (Telengana Area) Chloral Hydrate (Chloral) Rules, 1962 with respect to manufacture, possession, sale, import, export and transport of chloral hydrate (hereinafter referred to as the Rules). We shall refer to the Rules in detail later, but in brief they provide that the manufacture of chloral hydrate shall take place only in accordance with the conditions of a licence granted by the Excise Commissioner and only on payment of excise duty of Rs. 500 per annum. The Rules also provide for possession, import, export, sale and transport of chloral hydrate. In consequence of the issue of the Rules, the appellant was called upon to take out a licence and pay the necessary excise duty. The appellant refused to do so and in November 1962 filed a writ petition in the High Court challenging inter alia the validity of the Rules. It may be mentioned that the Rules were issued under the Andhra Pradesh (Telengana Area) Intoxicating Drugs Act, No. IV of 1333 Fasli (hereinafter referred to as the 1333-F Act) as amended by the Hyderabad Opium and Intoxicating Drugs (Amendment) Act, No. XXII of 1953.2. The main contention of the appellant in the High Court was that the 1333-F Act had been repealed in toto on the introduction of the Dangerous Drugs Act, No. 2 of 1930 by the Opium and Revenue Laws (Extension of Application) Act, No. 33 of 1950, and the Drugs Act, No. 23 of 1940 by the Part B States (Laws) Act, No. III of 1951, and therefore, there was no power in the Hyderabad Legislature to amend it by Act 22 of 1953. In consequence there was no law in force on the basis of which the Rules could be promulgated in 1962. Secondly, it was contended that even if the 1333-F Act, did not stand repealed as above, the Rules framed by the State of Andhra Pradesh in 1962 with respect to chloral hydrate were not within the powers conferred by the 1333-F Act as amended in 1953, as chloral hydrate was not a narcotic or narcotic drug and was not covered by item 51 of List II of the Seventh Schedule to the Constitution.3. The petition was opposed on behalf of the State, and it contended that there was no repeal of the 1333-F Act by the introduction of the Dangerous Drugs Act 1930 and the Drugs Act, 1940 and consequently the amendment of the 1333-F Act by the Hyderabad Act No. 22 of 1953 was good, and the 1333-F Act as amended was in force in 1962 when the Rules were framed. It was further contended that the Rules were intra vires the 1333-F Act as amended in 1953 as chloral hydrate was a narcotic and an intoxicating drug.4. The High Court repelled the contentions raised on behalf of the appellant and dismissed the writ petition. The appellant then applied for a certificate for leave to appeal to this Court, which was refused. It then obtained special leave from this Court; and that is how the matter has come before us.

Court's reasoning:
We are therefore of opinion that the introduction of the Dangerous Drugs Act in the Part B State of Hyderabad in 1950 did not result in complete effacement of the 1333-F Act. It remained alive even so far as opium, charas, bhang and ganja were concerned for the purpose of collection of duties of excise thereon. It also remained alive with respect to other substances which might be notified as intoxicating drugs under the 1333-F Act. If there was any such notification between 1924 and 1950 that notification would remain valid and the 1333-F Act would apply to it. If there was no such notification, the 1333-F Act would remain on the statute book as a conditional statute under which a notification in respect of any substance could be issued. The argument that the introduction of he Dangerous Drugs Act in 1950 completely repealed the 1333-F Act has no force and mustamended Act is also clearly in excise Act as well be clear from the definition of "intoxicating drugs revenue" in S. 2 (2) which means revenue from any duty, fee, tax, fine or confiscation imposed or ordered under the provisions of this Act. It was therefore open to the State Government to declare by notification any substance as an intoxicating drug within the meaning of the Act provided it was an intoxicating and narcotic substance. If such a declaration is made the substance will be liable to excise duty under the amended Act and the Rules framed thereunder and will be liable to such incidental control as may be necessary for the collection of duties. Further, drugs being in the Concurrent List, the provisions of the 1953 amendment Act will also be a law under item 19 of List III and will be in addition to the Drugs Act of 1940 by virtue of S. 2 thereof. Now it appears that chloral hydrate has been notified by the Government of Andhra Pradesh as an intoxicating drug within the meaning of the amended Act. It was thereafter that the rules were framed. The Rules provide for the manufacture of chloral hydrate under a licence and for payment of duties of excise of Rs. 500/- per year on such manufacture. They also provide for possession, sale, import, export and transport. If chloral hydrate is a narcotic drug or a narcotic within the meaning of entry 51 of List II of the Seventh Schedule and is an intoxicating drug and narcotic substance within the meaning of S. 2 (1) (iv) of the amended Act, it could be notified under the amended Act and on such notification it would be liable to excise duty and to such incidental control as may be necessary for the purpose of collection of excise duty. We are in the present case mainly concerned with the grant of licence and imposition of excise duty of Rs. 500/- per annum. If chloral hydrate is an intoxicating and narcotic substance, the rules could be framed with respect to its control and the appellant could be asked to take out a licence and pay excise duty or the manufacture thereof, even though chloral hydrate may be a drug which is controlled under the Drugs Act.The appellant also relies on the Medicinal and Toiler Preparations (Excise Duties) Act, No. 16 of 1955, in this Court. It is true that the appellant stated in its writ petition that it was holding a licence under the 1955-Act; but there was no clear averment in the petition that chloral hydrate was being manufactured as a medicinal preparation under the 1955-Act. The licence which has been produced shows that chloral hydrate is being manufactured under the Drugs Act and the rules framed thereunder. Further the judgment of the High Court shows that no argument was raised before it to the effect that chloral hydrate was a medicinal preparation under the 1955-Act. In the circumstances we are not prepared to allow the appellant to raise this point for the first time before us, even though there was some kind of denial on this point by the State Government in its affidavit to which we have already referred.