Home Bihar Finance Act, 1981 Hoechst Pharmaceuticals Ltd. & Ors. vs. State of Bihar & Ors. (1983)

Hoechst Pharmaceuticals Ltd. & Ors. vs. State of Bihar & Ors. (1983)

September 6, 2024

This article is written by Shilpi. This article contains a detailed analysis of the facts, the issues that were raised, arguments made by both parties, findings, and the decision of the Supreme Court in the case of Hoechst Pharmaceuticals Ltd. vs. State of Bihar (1983). The judgement discusses the power of a State Government to enact legislation providing for a levy of surcharge and the constitutional validity of the said legislation. This article also throws light on the legal concepts and provisions which were involved in this case along with other judgments which were referred to in this case.

Table of Contents

Introduction

The government of any country cannot ignore the collection of funds if it wishes to run the country efficiently, and taxation is the go-to method for governments to collect monetary resources and use it over time to focus on the development and growth of the country. The taxation system of India is organised in a manner that taxes are levied not by single but by dual governments – Central Governments and State Governments. The local authorities like local governments and the municipality also have the power to impose minor taxes.

Since the inflow and outflow of money is a continuous process, the government needs it around the year to discharge its obligation of managing the affairs of a state. Owing to this, it levies taxes in diverse forms on the income of companies and individuals.

The case of Hoechst Pharmaceuticals Ltd. and Others vs. State of Bihar and Others (1983) is a landmark case on the subject matter of taxation, powers of the Central and State Governments, and constitutional rights. This case primarily deals with the constitutional validity of certain provisions of the Bihar Finance Act, 1981 (hereinafter referred to as “the Act”). In this case, appellants were the manufacturers and distributors of drugs, contesting the relevance of enacting surcharge provisions under the Act with respect to determining the price control as set up by the Central Government.

This case plays a critical role in lending clarity to the pressing issues of legislative competence of both the Central and State Governments, and constitutional rights of the people engaged in the trade and commerce of drugs, medicines, formulations, and repugnancy between central and state laws.

Details of the case

The following are the fundamental details of the case:

Court: The Supreme Court of India
Appellants: Hoechst Pharmaceuticals Ltd. And Anr.
Respondents: State of Bihar & Others.
Case Number: Special Leave Petitions No. 10744-53
Neutral Citation: (1983) 4 SCC 45
Bench: A.P. Sen, E.S. Venkataramiah & R.B. Misra.
Date of decision: 06.05.1983
Relevant Act: The Indian Constitution, the Bihar Finance Act, 1981 & the Drugs (Price Control) Order, 1979
Relevant Section(s) of the Act: Article 14, 19(1)(g), 246 & 254 of the Indian Constitution; Section 5(1) & (3) of the Bihar Finance Act, 1981; Paragraph 21 of the Drugs (Price Control) Order, 1979

Facts of the case

The facts of the case of Hoechst Pharmaceuticals Ltd. & Ors. v. State of Bihar & Ors. (1983) are as follows:

The appellants in this case operated a drug manufacturing unit in Bihar. It was engaged in the business of selling medicines throughout the state. They established a wholesale unit in Patna, from where they used to distribute medicines to the retailers, which used to be eventually sold to the customers. A significant portion of their medicines were sold subject to the controlled prices as per the Drugs (Price Control) Order, 1979 (hereinafter referred to as “the Order”), which was issued under Section 3(1) of the Essential Commodities Act, 1955.

Section 5(1) of the Act provided for a levy of a surcharge on every dealer whose gross turnover during a year exceeds Rs. 5 lakhs. This levy of surcharge will be in addition to the tax payable by him, at such rate not exceeding 10% of the total amount of the tax. Section 5(3) of the Act prohibits the dealer from collecting the amount of surcharge payable by him from the purchasers.

The petition was filed on the ground that the Order empowered the manufacturers or producers to pass the liability of sales tax to the consumers, however, the Act prohibits such passing of the liability to the consumers. The Order was enacted by the Parliament under Entry 33 of the Concurrent List of the 7th Schedule of the Indian Constitution; however, the Act was enacted by the State legislature under Entry 54 of the State List of the 7th Schedule of the Indian Constitution.

The appellants challenged the constitutional validity of Section 5(1) & (3) of the Act before the court. The High Court of Patna passed an order and judgement on 30.04.1982 where the High Court upheld the constitutional validity of Sections 5(1) and 5(3) of the Act. Appeals by special leave from the abovementioned judgement were filed before the Supreme Court.

Issues raised

For adjudication of the dispute between the parties, the following issues came to be decided by the court:

Whether sub-sections (1) and (3) of Section 5 of the Act are in contravention with Paragraph 21 of the Drugs (Price Control) Order, 1979, issued under Section 3(1) of the Essential Commodities Act, 1955, rendering the sub-sections void?
Whether sub-sections (1) and (3) of Section 5 of the Act are in contravention of Articles 14 and 19(1)(g) of the Indian Constitution?
Whether there be an arena of conflict between a law passed by a State legislature and the Parliament for a subject covered beyond the Concurrent list of the Constitution, as provided by Article 254(1) of the Indian Constitution?

Arguments made by the parties

Appellants

The appellants made the following contentions before the Hon’ble Supreme Court:

The appellants argued that setting prices for essential commodities, especially drugs, and formulations, happens to be already regulated by the Central government. The Central government has already notified and issued several control orders in accordance with Section 3(1) of the Essential Commodities Act, 1955.
The control orders permit producers or manufacturers to escape the tax liability by passing it to consumers. As a result, the state legislature did not have the power to enact Section 5(3) of the Act. This sub-section prohibits the dealers from collecting the surcharge amount in areas regulated by laws enacted by the Parliament.
If Section 5(3) of the Act includes all kinds of sales in its ambit, even those that talk about essential commodities with prices that are set by the Central Government, there would exist a repugnancy between the laws made by the State Governments and that of the control order. Section 6 of the Essential Commodities Act states that if such a conflict exists, the central law shall always have the upper hand.
The appellants further stated that Section 5(1) of the Act is unconstitutional. This was because a surcharge liability had been levied on dealers who happened to have a turnover of more than Rs. 5 lakhs. The turnover was inclusive of transactions that happened in the course of inter-state trade or commerce, outside the borders of a particular state, or when the item was being imported into India or exported outside India.
The appellants contended that the transactions mentioned in the above point fall within the scope of Article 286 of the Indian Constitution and outside the scope of this Act. Hence, such transactions should not be used for the calculation of gross turnover as listed in Section 2(j) of the Act for the objective of levying a surcharge in accordance with Section 5 (1) of the Act.
The appellant further argued that the first line of Article 246(3) of the Indian Constitution mentions “subject to clauses 1 and 2” that allow the State Legislature to make laws for its areas with respect to the matters mentioned in List II of the Seventh Schedule, subject to the powers of the Union to make laws on the matters stated in List I or List III. Hence, Section 5(3) of the Act, which mentions that no dealer is allowed to collect the surcharge levied on him, must follow Section 6 of the Essential Commodities Act.
Section 6 of the Essential Commodities Act states that when an order is made under Section 3 of the Act, it shall have dominance over any inconsistent law apart from the Act. This argument is based on the doctrine of occupied field and the federal supremacy concept, which states that Union power has the domineering position when there is a conflict between matters of List II and List III.
Section 5(3) of the Act restricts the dealers from accumulating the surcharge that is levied on them. It is not consistent with paragraph 21 of the Order that permits manufacturers or producers to pass the tax liability of sales to the consumers. Following Section 6 of the Essential Commodities Act, if there is any repugnancy, the control order shall have the upper hand.
The laws laid down in Section 5(3) of the act are discriminatory in nature, as the Essential Commodities Act deals with controlled commodities and their sellers specifically by setting controlled prices. However, sellers of these commodities mentioned in the Act are treated on the same footing as those who have the flexibility to absorb the surcharge by increasing prices when the former fail to increase their selling prices past the controlled price.
Section 5(3) of the Act imposes a restriction that restricts the producers or manufacturers of drugs or medicines from passing on the liability of surcharge to the consumers. This is confiscatory in nature and creates a massive burden for them. Hence, it imposes an unreasonable restriction on the manufacturers or producers by hindering their freedom to carry on business as guaranteed under Article 19(1)(g) of the Indian Constitution.
Section 5(1) of the Act is unconstitutional as it examines the gross turnover of certain dealers for levying the surcharge as per Section 2(j) of the Act. As per Entry 54 of List II, the state legislature does not have the powers to implement a provision that allows for levying the surcharge on gross turnover taking in the transactions linked to inter-state trade, commerce, import, or export. The transactions of such nature fall outside the ambit of the Act and must not be considered while computing the gross turnover for levying of the surcharge.

Respondent

The respondent made the following contentions before the Hon’ble Supreme Court:

The respondent stated that Section 5(5) of the Act is not inconsistent with paragraph 21 of the control order. He further stated that the matter of repugnancy under Article 254(1) came up only when both laws dealt with the same subject matter under List III of the Seventh Schedule which is Concurrent List and there happened to be a clash between both the laws. If it so happens that the aforementioned conditions are fulfilled, then the state law shall be void to the extent that it is repugnant with the law made by the Parliament.
The respondent emphasises that instead of directing attention towards the doctrine of the occupied field, the assessment should be made on the basis of the principle of ‘pith and substance.’ One resorts to this doctrine to determine the true nature and character of a law when its validity is challenged on the grounds of legislative competence. The ‘pith and substance’ test is used to resolve overlapping powers in different Lists of the Seventh Schedule of the Constitution.
The respondent further states that appellants are subject to paragraph 24 of the control order since they belong to the category of manufacturers or producers of drugs. Paragraph 24 discusses sales by manufacturers or producers to wholesalers or distributors instead of paragraph 21, which deals with the matter of retail sales. In accordance with paragraph 24, producers or manufacturers do not have the liberty to pass on the liability of sales tax, and the price they quote to distributors or wholesalers should be inclusive of sales tax.
The respondent added that the controlled price determined by the Central Government as per Section 3(1) of the Essential Commodities Act is the maximum they can charge, as it gives a free hand to producers or manufacturers to sell the item at a reduced price if they so wish. As a result, while the surcharge that has been imposed under Section 5(1) of the Act may decrease their profits, it does not in any matter create a conflict with the Central law.
The respondent further argues that the appellants have failed to furnish any evidence declaring that the surcharge that has been levied in accordance with Section 5(1) creates a huge burden on the profits accrued by them or that the government happens to take away their profits.

Laws involved in Hoechst Pharmaceuticals Ltd. & Ors. vs. State of Bihar & Ors. (1983)

Provisions under the Constitution

Article 14 of the Constitution

Article 14 of the Indian Constitution provides for equality before the law or equal protection of the laws within the territory of India. In this case, the appellants argued that the levy of surcharge is discriminatory against dealers dealing in essential commodities whose prices are controlled. They argue that the law makes a false equation of “unequals as equals”. The court while rejecting this argument observed that the surcharge would be levied uniformly on all dealers whose turnovers have exceeded a certain limit, irrespective of the commodity dealt with.

Article 19(1)(g) of the Constitution

Article 19(1)(g) of the Indian Constitution provides that all citizens have the right to practise their profession or to carry on any occupation, trade, or business. The appellants argued that the restriction on passing the burden of surcharge to the consumers imposes a burden on the dealers. This burden infringes on their right to carry on business. The court while rejecting the contention held that the authority of the legislature to levy a surcharge is not dependent on the means of the seller to pass the surcharge on the consumers.

Article 246 of the Constitution

Article 246 of the Indian Constitution provides for the following:

Clause (1): Regardless of clauses (2) & (3), only the Parliament has the power to make laws on matters provided under List I (Union list) of the Seventh Schedule.
Clause (2): Regardless of clause (3), both the Parliament and the State Legislatures have the power to frame laws on matters provided under List III (Concurrent list) of the Seventh Schedule.
Clause (3): Subject to clauses (1) & (2), only the State Legislatures have the power to make laws on matters provided under List II (State list) of the Seventh Schedule
Clause (4): The Parliament is empowered to make laws on any matter for an area that is not included in a State, even if those matters are listed under List II of the Seventh Schedule.

Related to Article 246, the appellants argued that the state has passed a law on the powers of the union to regulate the prices of essential commodities. They argued that the authority of the state to levy surcharge is subordinate to the power of the union. The court decided that the authority of the state to levy taxes on sales is plenary and not subordinate to the powers of the union to regulate the prices of essential commodities.

Article 254 of the Constitution

Article 254 of the Indian Constitution provides for the following:

Article 254(1) of the Constitution provides that if a law enacted by a state legislature related to an entry of the concurrent list is repugnant to a law enacted by the Parliament on the same entry, the law enacted by the Parliament will prevail over the State law subject to clause (2) of Article 254. The law to the extent of the repugnancy will be declared void.
Article 254(2) of the Constitution provides that if there is an Act enacted by the state legislature that is in contravention of a previous law enacted by the Parliament related to an entry of the Concurrent list, the state legislature can obtain the assent of the President and then the state law will prevail in that state. That state law will override the provisions of the Union Act in its application to that state only.
The proviso to clause (2) empowers the Parliament to repeal or amend a repugnant state law, either directly, or by enacting a law repugnant to the state law with respect to the same subject matter. This proviso takes away the predominance power of the state legislature as provided by clause (2).

The appellant argued that there exists a repugnancy between the Act and the Order issued by the Central Government. They argued that the prohibition imposed by the Act on passing on the surcharge is in contravention of the Order’s allowance for passing on sales tax. The court held that there is no repugnancy between the Act and the Order because repugnancy arises only when both the laws are enacted under the same entry of the Concurrent list of the 7th schedule.

Section 5(1) & (3) of the Bihar Finance Act, 1981

Sub-section (1) of Section 5 of the Act provides for a levy of a surcharge on every dealer whose gross turnover during a year exceeds Rs. 5 lakhs. It further provides that this levy of surcharge will be in addition to the tax payable by him, at such rate not exceeding 10% of the total amount of the tax. Proviso to the sub-section provides that the aggregate of the payable tax and surcharge shall not exceed the rate fixed by Section 15 of the Central Sales Tax Act, 1956 in respect of the goods declared to be of special importance in inter-state trade or commerce, by Section 14 of the Act. Sub-section (3) of Section 5 of the Act prohibits the dealers to collect the surcharge payable by him under sub-section (1) of Section 5.

Paragraph 21 of the Drugs (Price Control) Order, 1979

Paragraph 21 of the Order provides for control of sale prices of formulations specified in the Third Schedule. It provides that no retailers must sell the formulation specified under the Third Schedule at a price exceeding as specified in the current price list or the price indicated on the label of the container or the pack, whichever is less. This price will include any local taxes. It further explains that ‘local tax’ will include sales tax and octroi (a tax levied by state or local government on categories of goods when they enter the area) actually paid by the retailer under any law in force. Paragraph 21 of the Order empowers the manufacturer or producer of a drug to pass the liability to pay sales tax to the consumer.

Relevant judgements referred to in the case

While deciding the dispute between the parties, the Hon’ble Supreme Court referred to several judgments and books. Judgments referred to in the case are discussed as follows:

In the Province Of Madras vs. Boddu Paidanna And Sons (1941), the Madras High Court observed that when the powers that are distributed under List I, II, and III of the Seventh Schedule to the Government of India Act, 1935, are differentiated or compared, it is difficult to pinpoint the powers of various legislatures with precision. This is so because these powers tend to overlap each other now and then, owing to which the judiciary uses a method to determine the pith and substance or the purpose behind drafting the law to identify the list where that particular law belongs. This case was referred to in the Hoechst Pharmaceuticals case to demonstrate the harmonisation of legislative entries that stand in conflict with each other.

In A.L.S.P.P. Subrahmanyan Chettiar vs. Muttuswami Goundan and Ors. (1940), the Madras High Court stated that the guidelines that were relied upon by the Privy Council to understand the length and breadth of Sections 91 and 92 of the British North America Act, 1867 must be similarly employed for interpreting Section 100 of the Government of India Act, 1935. The Chief Justice further elucidated that whenever a law is made that happens to cover subject matters under two or more lists, it is difficult to follow a strict interpretation as this might result in invalidating or striking down several laws when it appears that the law seems to be dealing with uncharted territories.

Hence, the Judicial Committee has devised a rule, namely ‘pith and substance’. In other words, it refers to identifying the purpose of the law to determine which list happens to fall under. Whenever a conflict arises between two or more lists, immediate attempts must be made to smoothen out the rough edges by employing this principle. If all the attempts at reconciliation fail, then the non-obstante clause provided under Article 246(1) must be used. This case was referred to in the Hoechst Pharmaceuticals case also to demonstrate harmonious interpretation of legislative powers.

In Ralla Ram vs. The Province Of East Punjab (1948), the Bombay High Court stated that under all circumstances, when there seems to be a conflict between laws, it is mandatory to ascertain the pith and substance or the purpose of the law, as they help the courts in deciding how to move ahead when they happen to come across two conflicting enactments. The court further stated that when the disputed tax does not seem to be a tax levied on income, it is possible to reconcile the apparent conflict between the provisions of both Acts.

In the case S. Kodar vs. The State of Kerala (1974), the State Government had imposed additional sales tax by virtue of the Tamil Nadu General Sales Tax Act, 1959. The appellants had challenged this tax imposition and had contended that the State Government had levied this tax on the income instead of the sales. Nevertheless, the Hon’ble Supreme Court upheld the validity of the Act and stated that the additional tax had been levied on the sale of goods only instead of the income. The judgement in the Hoechst Pharmaceuticals case places great reliance upon the S. Kodar case to hold that such surcharges are a valid exercise of the taxing power of a state and do not, per se, constitute discrimination against dealers in certain specified commodities.

In Panipat Co-Operative Sugar Mills vs. The Union Of India (1972), the Apex Court observed that Section 3 (3C) of the Essential Commodities Act serves to ascertain the price for sugar that seems to be fair and that this price shall be applicable upon the supply that is sold to the government. Moreover, the court stated that the price that is set should not be on the basis of costs incurred per unit instead of industry-wide variables. The court further expressed that when the fair price is being determined, it should be congruent to the interests of the people responsible for growing sugarcanes, consumers, and manufacturers. Lastly, the court emphasised that while determining the prices, the government does not have the liberty to do it in an arbitrary manner or do it on the basis of immaterial consideration and the price so fixed should guarantee a fair return on the investment that happens in that industry.

The Shree Meenakshi Mills Ltd vs. Union Of India (1974) revolved around the issue of an unprecedented rise in the price of cotton around the 1970s and how the government decided to undertake the control and regulation of cotton yarn prices as the yarn production decreased year after year. The year 1973 witnessed a major spike in the price of cotton and the government issued two notifications to regulate three things – production of cotton yarn, distribution of cotton yarn, and prices of cotton yarn.

The judgement in the Hoechst Pharmaceuticals case does not go into the details of the case of Panipat Co-Operative Sugar Mills. It is used along with the Shree Meenakshi Mills case to establish that when the government controls the prices of essential commodities, it keeps consumer interest and equitable distribution in mind. Hence, the fact that a surcharge may have the effect of increasing the cost of something does not per se make it unconstitutional, so long as the general purpose of the act is a matter within the province of the legislature.

The notifications were issued by the government with the intent to steady the market. Two notifications were issued gradually, where the Textile Commissioner set prices for the yarn counts of 59s and 60s differently in the first notification. Under the second notification, he stated that the yarn cannot be sold to everyone but specific entities only.

However, the notifications were challenged contending that they were not in line with the powers bestowed under the Essential Supplies (Temporary Powers) Act, 1946 and that the move to regulate the price was arbitrary in nature as it did not include production cost or reasonable profit in its ambit and impinged upon the fundamental rights guaranteed under Articles 19(1)(f) and (g) along with Article 31 of the Constitution of India.

Lastly, it was contended that the last notification monopolised the market for cotton yarn. The Apex Court ruled that the attempts taken by the government did not fall outside the scope of the law and that they were reasonable restrictions to safeguard the interests of the public. Moreover, these actions were an hour of need considering the pricing crisis that was affecting the fair distribution of the cotton yarn. In the Anakapalle Co-Operative Agricultural and Industrial Society Ltd. vs. Union Of India (Uoi) And Ors. (1977), the Supreme Court adopted a similar stance to the preceding case.

In Prag Ice and Oil Mills & Anr. etc. etc. vs. Union of India (1978), the Apex Court observed that even if someone manages to find mistakes with a law, that does not establish its invalidity. While the law may appear oppressive or unjust by its nature, it may very well remain outside the scope of judicial interference. The issues faced by the government are such that if the need arises, the government has the liberty to make rough accommodations no matter how illogical they appear on the surface.

However, it is important to note that one should refrain from criticising the government’s actions in haste. If the government happens to make minor errors, it does not always fall in the ambit of judicial review. When the Parliament makes a choice not to allow the government to fix the prices as it deems fit, it would be unjust on the part of the Apex Court to scrutinise the decision taken by the government. Moreover, the price control of any item can be deemed unconstitutional only when it appears that it carries an element of arbitrariness, discrimination, and irrelevance to the policy.

Judgement in Hoechst Pharmaceuticals Ltd. & Ors. vs. State of Bihar & Ors. (1983)

While dealing with the competence of the State Government to enact Section 5(1) of the Act, the court held that a surcharge partakes of the nature of sales tax; hence, it is within the competence of the state legislature to enact Section 5(1) of the Act in order to levy a surcharge on certain class of dealers in addition to the tax payable by them.

The court further held that the State Government has the competence to levy tax on the sale or purchase of goods under Entry 54 of the State List under the 7th Schedule (taxes on the sale or purchase of goods other than newspapers, subject to the provisions of Entry 92A of List I), it was equally empowered to select the class of dealers on whom the payment of charge will fall. Therefore, the state legislature can, without any doubt, enact Section 5(3) of the Act prohibiting the dealers from recovering the charge payable by them under sub-section (1) from the purchasers.

The court held that the capacity of the state legislature to make laws related to Entry 54 of List II of the 7th Schedule is separate from the power of the Parliament to frame laws related to Entry 33 of List III of the 7th Schedule (trade and commerce in, and the production, supply, and distribution of certain provided goods). Therefore, the authority of a state legislature to frame laws related to taxation is independent of the power of the Parliament to frame laws related to the same.

While dealing with the issue of inconsistencies between the provisions of Section 5(3) of the Act and Paragraph 21 of the Order, the court held that Section 5(3) of the Act is not in contravention with Paragraph 21 of the Order as both these clauses operate in different fields. The court held that the Act is enacted under Entry 54 of List II which is a tax entry, and the Order has been enacted under Entry 33 of List III. Hence, in order to be a ‘repugnancy’ between the two, the law must be made with respect to the subjects enumerated under the Concurrent list. Both these laws operate in distinct fields and hence are capable of being obeyed. Therefore, the question of any repugnancy does not come into play.

The court observed that the intention of issuing a control order under Section 3(1) of the Essential Commodities Act is to secure the equitable distribution and availability of essential commodities to consumers at fair prices. The mere contention that such an order can lead to incurring loss by those engaged in the fields of industry, trade, and commerce will not make the regulatory law unreasonable. The exception to this rule is that the basis on which the price was fixed was in excess of power, or there is a statutory obligation to ensure a fair return to the industry.

While deciding the submission that Section 5(1) & (3) of the Act is in contravention of Article 14 of the Indian Constitution, the Supreme Court held that there is no ground whatsoever to support this contention of the party. Nothing proves that sub-section (5) of Section 5 of the Act is arbitrary or irrational, or it treats ‘unequals as equals’ or it imposes a disproportionate burden on a certain class of dealers. The levy of charge as provided under Section 5(1) of the Act falls uniformly on a certain class of dealers spending upon their capacity to bear an additional burden.

The court while dealing with the issue of Section 5(1) & (3) of the Act in contravention of Article 19(1)(g) of the Constitution, held that this contention of the party cannot prevail. The court held that merely because a dealer falling within Section 5(1) is prevented from collecting the surcharge from the consumer, neither does it affect the power of the state legislature to enact Section 5(3) of the Act nor does it become a tax on his income.

The court observed that the power to decide how much tax to be imposed vests with the lawmaker. It is not the function of a court to consider the justness of a tax or enter the realm of legislative policy. The provision of equality as enshrined under Article 14 does not take the power of the state to classify a class of people who must bear the heavier burden of tax. The legislature is exclusively empowered to determine the economic wisdom of tax.

For the above-mentioned reasons, the Supreme Court dismissed the special leave petitions.

Analysis of the case

The judgement revolves around the constitutional validity of an Act enacted by a State Legislature as per List II of the Seventh Schedule of the Indian Constitution. By upholding the validity of Section 5(1) & (3) of the Act, the court reaffirmed the power of the State Legislature to enact a law dealing with the levy of surcharges. The court has held the autonomy of a State Legislature to legislate effectively related to the matters falling under its jurisdiction.

By bifurcating Entry 54 of List II and Entry 33 of List III of the Seventh Schedule, the court created a scenario that will prevent any overlap of conflict between the state and the union legislation. The decision of the court that there is no repugnancy between the two legislation aided in removing any legal ambiguity. It will further help in the proper implementation of both the Act and the Order.

The decision that Section 5(1) & (3) of the Act is not in contravention with Articles 14 and 19(1)(g) ensures that the Act is constitutionally valid. It proved that the impugned provisions are not arbitrary and do not disproportionately burden any specific group of dealers. The observation of the court that it is the power of the legislature to determine any tax burden further appreciates the idea of separation of powers.

The decision of the court ensures that the Act and the Order are harmoniously construed while keeping in view their ambit and applications. It allows the state as well as the Central legislature to operate independently within their jurisdiction as determined by the Seventh Schedule of the Constitution. The decision of the court outlines the concept that judicial review should not encroach upon the economic wisdom of the legislature.

Conclusion

The judgement pronounced by the Apex Court has validated the legislative competence of the impugned laws and stated that Section 5(3) of the Essential Commodities Act does not encroach upon Paragraph 21 of the Drugs (Price Control) Order, 1979. This case has made a significant stride towards emphasising the importance of developing a keen understanding of diverse legislative fields and the implication of taxes at the state and central levels to settle legal complexities without too much hassle.

Frequently Asked Questions (FAQs)

What is the implication of the judgement in the case of Hoechst Pharmaceuticals Ltd. vs. State of Bihar (1983)?

This judgement has reaffirmed the autonomy of the state legislature to enact laws related to the subject matters falling under its jurisdiction. The judgement thrives to eliminate any conflict or overlap between the laws enacted by the State and the Union. It has also appreciated the idea of separation of power by not interfering with the economic wisdom of a legislature to frame any law dealing with taxation.

What is the object of Article 254 of the Indian Constitution?

Article 254 of the Indian Constitution deals with a scenario when there is a conflict between laws enacted by the Union and the State on the same subject matter as enumerated under List III (Concurrent List) of the Seventh Schedule of the Constitution. It provides for the resolution of that conflict between the State and the Union. In case of any conflict, the Central law will prevail over the state law

What is the effect of repugnancy under Article 254 of the Indian Constitution?

In case of a repugnancy between the state law and the union law, the State law will become void to the extent of such repugnancy.

Whether the Parliament is empowered to override a state law that has been granted assent by the President as per Article 254(2)?

Yes, as per the proviso of Article 254(2), the Parliament can enact any law with respect to the same subject matter and can override the state law that has been granted assent by the President as per Article 254(2).

How does Article 254 navigate between the legislative powers of the State and the Union?

Article 254 aids in maintaining a balance between the legislative powers of the State and the Union. It provides that generally, the law enacted by the Union overrides the law enacted by the State on the same subject matter. However, Article 254(2) provides for an exception.

What is the object of Article 246 of the Indian Constitution?

Article 246 of the Indian Constitution provides for the distribution of legislative powers between the state legislature and the Parliament. It refers to the Seventh Schedule of the Constitution which outlines the respective arenas of the State and the Union to legislate.

What does Article 246(4) of the Indian Constitution provide for?

Article 246(4) of the Indian Constitution empowers the Parliament to make laws related to the subject matters as enshrined under the State List related to the territories which do not fall under the authority of any state.

Hoechst Pharmaceuticals Ltd. & Ors. vs. State of Bihar & Ors. (1983)

Introduction

Details of the case

Facts of the case

Issues raised