A Project

ON
“Hoechst Pharmaceuticals
Ltd. v. State of Bihar”

Constitutional law-II

[Submitted as a partial fulfilment of the requirements for B.A.LL.B(Hons.)5

Year Integrated course]

Session:2020-21

Submitted On:[29/05/2021]

Submitted By: Submitted To:

Hardik Jain Ms. Deeksha Sharma

Roll. No :34 (Faculty Constitutional law-II)

Class: IV- A

University Five year Law College

University of Rajasthan
Jaipur
1
 Declaration of Originality

I, Hardik Jain here by declare that this project titled “Hoechst Pharmaceuticals Ltd. v.
State of Bihar ” is based on the original research work carried out by me under the
guidance and supervision of Ms. Deeksha Sharma.
The interpretations put forth are based on my reading and understanding of the original
texts. The books, articles and websites etc. Which have been relied upon by me have been
duly acknowledged at the respective places in the text.
For the present project which I am submitting to the university, no degree or diploma has
been conferred on me before, either in this or in any other university.

Date:- 29/05/2021 Hardik Jain

Roll no. 34

Semester –IV(A)
 ACKNOWLEDGMENT

I have written this project titled, Hoechst Pharmaceuticals Ltd. v. State of Bihar “under the
supervision of, Ms. Deeksha Sharma Faculty, University Five Year Law College,
University of Rajasthan, Jaipur. Her valuable suggestions herein have not only helped me
immensely in making this work but also in developing an analytical approach this work.
I found no words to express my sense of gratitude for Director Dr. Sanjula Thanvi constant
encouragement at every step.
I am extremely grateful to librarian and library staff of the college for the support and
cooperation extended by them from time to time.

Hardik Jain
 CERTIFICATE

Ms . Deeksha Sharma Date: 29/05/2021

Assistant Professor
University five year law college
University of Rajasthan, Jaipur

This is to certify that Hardik Jain student of semester IV, section A of University
Five Year Law College, University of Rajasthan has carried out project tittle
“Hoechst Pharmaceuticals Ltd. v. State of Bihar” under my supervision. It is an
investigation of a minor research project. The student has completed research work
in stipulated time and according to norms prescribed for the purpose.

Supervisor
Table of Content

Title............................................................................................................................1

Declaration of Originality.........................................................................................2

Acknowledgment.......................................................................................................3

Certificate...................................................................................................................4

Abstract……………………………………………………………………………..

Research Questions………………………………………………………………..

Research Methodology…........................................................................................6

CHAPTER 1…………………………………………………………………………9

1.1 Introduction……………………………………………………………………...9

CHAPTER -2………………………………………………………………………….10

2.1 FACT………………………………………………………………………………10

2.2 BACKGROUND…………………………………………………………………..10

CHAPTER 3……………………………………………………………………………12

3.1 GUIDING CASE…………………………………………………………………12

CHAPTER 4 ……………………………………………………………………………13

4.1 JUDGEMENT…………………………………………………………………….13

CHAPTER 5…………………………………………………………………………15

5.1CONCLUSION……………………………………………………………………15

5.2BIBLIOGRAPHY…...........................................................................................16
CHAPTER--1

1.1 INTRODUCTION

•Identification of Parties

Petitioner: Hoechst Pharmaceuticals Ltd. And Another Etc.

Respondent: State Of Bihar And Others
Date of Judgment : 6 may,1983
•Equivalent Citation – 1983 AIR 1019, 1983 SCR (3) 130
•Bench: Sen, A.P. (J)

List I1 Entry 54-Taxes on sale and purchase of goods

List l1 Entry 33 -Trade and Commerce and the production supply and
distribution of the products of any industry where the control of such industry is
declared by Parliament by law to be expedients in public interest.

Law passed by Parliament under entry 33 List Ill

Essential Commodities Act 1955 has been passed by Parliament under entry 33
List 11l providing for regulation production supply and distribution of essential
Commodities.

Under this aw the Central government passed an order by under section 3 of the
Act which stated that manufacturers or producers of goods could pass on the tax
Tiability (sales tax and excise duty) to the consumers. In other words the sales tax
could be recovered from purchasers of goods and products by the manufacturers
and producers.

The Central law was on the subject of Price Fixation of exsential commodities
under entry 33 List Ill Law passed by Bihar Legislature under Entry 54 List I.

Section 5 of Bihar Finance Act 1981 prohibited the dealers to recover surcharge
(sales tax) from the purchasers .This law interdicted that no dealer liable to pay
a surcharge in addition to tax payable by him shall be entitled to collect the
amount of surcharge from the purchaser.

Section S provided for the imposition of a surcharge at 10 percent of the amount

of tax payable by a dealer whose gross turnover during a year exceeded rupees
5 lakhs, in addition to tax payable by him

Facts
 Messrs Hoechst Pharmaceuticals and Glaxo Laboratories challenged the Bihar
Act on the ground that under the Central law they were allowed to pass on the tax
liability to consumers but the Bihar Act denied them.

CHAPTER—2

2.1 SUMMARY OF FACT

Messrs Hoechst Pharmaceuticals and Glaxo Laboratories challenged the Bihar
Act on the ground that under the Central law they were allowed to pass on the
tax liability to consumers but the Bihar Act denied them.

2.2 Background
F.N. Balsara, stated that he should be given assent to use his right to keep Whisky,
Brandy, Wine, Beer, with medicine U.D. Colon etc. He further stated to use them
and import-export them within the Custom Limits. Also, that government must not
obstruct him from such usage under Prohibition Act as it was his personal right and
to pass the similar orders under the Specific Relief Act.
Balsara, showed himself the citizen of India and presented a petition in the Bombay
High Court. He requested for passing an order to forbid the State and Prohibition
Commissioner from enforcing the provision of Bombay Prohibition Act, 1949
against him. He also requested to pass an order to that effect.
2.3 ISSUES (High Court)
Central law and State law operated in different and distinet fields. Under entry 54
List I1
Under Entry 54 the State while levying a tax on sale or purchase of goods is
competent to prohibit the dealers liable to pay a surcharge from recovering the
same from the purchaser.

Apparent Conflict
There was an apparent conflict between Central law which allowed
manufacturers or producers of drugs to pass on the liability to pay sales tax to the
purchaser and the State law which prohibits such manufacturers or producers to
recover surcharge (sales tax) from purchasers

Argument of Petitioners
Since Parliament has chosen to occupy the field of price fixation under entry 33
List 111 the State legislature is not competent to pass a law under entry 54 List II
prohibiting the passing of liability of tax to the purchasers, Hence the State law
was repugnant to Central law and void under 254 (1)
2.4 Judgment
The Supreme Court held
"The true principle in judging the constitutional validity of section 5 of the Act
is to determine whether in pith and substance it is a law relatable to Entry 54 of
List Il and not whether there is repugancy between section5 of the Act and Price
Control order made by the Central govenment under Essential Commodities Act
under entry 33 of List II
"The question of repugnancy under Article 254 (1) between a law made by
Parliament and a law made by the State legislature can arise only in case both
the legislations occupy the same field with respect to one of the matters
enmerated in the Concurvent List. and there is a direct conflict between the two
laws. It is when both these requirements are fulfiled that the State law will to the
extent of repugnancy, become void."
"Article 254(1) has no application cases of repugnancy due to overlapping found
between List I on the one hand and Lists I and l on the other. If such
overlapping exists in any particular case the State law will be ultra vires because
of the non-obstante clause in Article 246(1) read with the opening words "subject to"
in Article 246(3). In such a case the State law will fail not because of repugnance to
the Union law but due to want of legislative competence"
"The underlying principle is that the question of repugnancy arises only when
both the legislatures are competent to legislate in the same field that is with
respect to one of the matters enumerated in the Concurrent List. Article 254(1)
cannot apply unless both the Union and State Law relate to a subject specified in
the Concurrent List and they occupy the same field.

Decision

There cannot be any intrusion by a law made by Parliament under entry 33 List III
into a forbidden field viz the State's exclusive power to make a law with
respect to levy and imposition of a tax on sale or purchase of goods relatable to
Entry 54 List II. It follows that the two laws viz the price control order passed by the
Central government under Essential Commodities Act passed under entry 33
List IlI and Section 5 of the Bihar Finance Act operate on two separate and
distinct fields and both are capable of being obeyed. There is no question of any
clash between the two laws and the question of repugnancy does not come into play.
5.2 BIBLIOGRAPHY
https://dullbonline.wordpress.com/2017/06/28/hoechst-pharmaceuticals-ltd-v-
state-of-bihar-air-1983-sc-1019
https://indiankanoon.org/doc/703764/