This article delves into the case of Hoechst Pharmaceuticals Ltd Vs. State Of Bihar and Others, decided on 6 May 1983. The case revolves around the legislative competence under Article 246 and taxation implications on pharmaceutical sales.
Hoechst Pharmaceuticals Ltd, a company distributing pharmaceuticals and life-saving medications in India, faced the issue of taxation and price control while selling medicines in the state of Bihar. The Central Government’s Drugs (Price Control) Order, 1979, and the Bihar Finance Act of 1981 posed challenges in their operations. The case sought to determine the competence of the impugned legislation under Article 246 and the conflict between the two laws.
The petitioner was a business that produced and distributed a range of pharmaceuticals and life-saving medications throughout India, including the state of Bihar. In order to sell their manufactured goods to wholesale distributors/stockists in the districts of Bihar, who in turn sold them to retailers through whom the medications and drugs reached consumers, the petitioner established a branch or sales outlet there that was registered as a dealer. The Drugs (Price Control) Order, 1979, issued by the Central Government under subsection (1) of section 3 of the Essential Commodities Act, nearly 94% of the medicines and drugs sold by company/distributors were at the controlled price absolute of local levy, and they were conspicuously forbidden from selling these medicines and drugs for more than the controlled price so fixed by the Central Government from occasionally allowing the manufacturer or producer to pass along a portion of the profit. In addition to the tax that was due, Section 5(1) of the Bihar Finance Act of 1981 mandated the imposition of a surcharge on dealers whose gross annual sales exceeded Rs. 5 lakhs. Under Section 5(3) of the Act, it was also forbidden for these dealers to collect the remaining balance of the payable surcharge.
Whether the subject-matter of the impugned legislation was competently enacted under Art. 246
It is equally well settled that the varied entries within the three Lists aren’t ‘powers’ of legislation, but ‘fields’ of legislation. Article 246 and other articles of the Constitution grant the power to legislate. Taxation is taken into account to be a definite matter for purposes of legislative competence. This incompatibility is further highlighted by the absence of any tax-related entries in List III, the Concurrent Legislative List, despite the State having the sole authority to create laws relating to the levy and imposition of taxes on the sale or purchase of goods related to Entry 54 of List II of the Seventh Schedule. In light of this, it can be concluded that the two laws, Section 5(3) of the Act and Paragraph 21 of the Control Order issued by the Central Government under Section 3(1) of the Essential Commodities Act, each have a separate and distinct purpose and are both enforceable. There is no question that the two laws conflict, hence repugnancy is not a factor in this situation.
Conclusion: The judgment in the Hoechst Pharmaceuticals case upheld the legislative competence of the impugned laws and clarified the non-conflicting nature of Section 5(3) of Essential Commodities Act and Paragraph 21 of Drugs (Price Control) Order, 1979. The case highlighted the importance of understanding legislative fields and tax implications to resolve legal complexities effectively.