M/S Cadila Pharmaceuticals LTD. vs. State Th. Finance Deptt.And Ors.

Held

The Court held that the argument of double taxation is without merit. It reasoned that the tax levied under the CGST Act, 2017, and IGST Act, 2017, is a tax on the supply of goods and services, essentially replacing previous sales taxes. In contrast, the duty of excise under the State Excise Act is a specific tax applied to goods, typically at manufacture or import. The Court found that the CGST/IGST and the State excise duty are legally distinct and address separate stages of economic activity, thus allowing for simultaneous levy. The Court clarified that while goods like rectified spirit, alcohol, or denatured spirit supplied inter-State are exigible to IGST, this does not preclude the State from levying excise duty under its State Excise Act when such goods are imported for use in medicinal and toilet preparations. The Court dismissed petitions where the raw material was used for medicinal and toilet preparations, but allowed petitions where the raw material was used for manufacturing other goods, including liquor, holding that such petitioners are not liable to pay the impugned excise duty. The respondents were directed to determine the end-use of the raw material in each case and grant refunds where applicable.

Facts

Multiple writ petitions were filed by various pharmaceutical and chemical companies (petitioners) and an industrial association (petitioner) challenging the imposition of excise duty on the import of rectified spirit, alcohol, or denatured spirit by the State of Jammu and Kashmir. The petitioners argued that the levy amounted to double taxation, as these goods were already subject to CGST and IGST under the Goods and Services Tax regime. The impugned levy was part of the Excise Policy 2019-2020. The petitions were filed before August 5, 2019, and the court noted that the subsequent constitutional changes were not argued by the parties.

Key Issues

1. Whether the imposition of excise duty by the State on the import of rectified spirit, alcohol, or denatured spirit, when these goods are already subject to CGST and IGST, constitutes impermissible double taxation, contrary to Section 9 of the CGST Act, 2017, and Section 7 of the IGST Act, 2017? Petitioner's arguments: The petitioners contended that the Central Government, through the CGST Act, 2017, and IGST Act, 2017, levies tax on intra-State and inter-State supplies of goods and services, including rectified spirit, alcohol, or denatured spirit (except for specific uses). They argued that the State's imposition of excise duty on the import of these same goods amounts to double taxation, which is legally impermissible. They relied on the repeal of the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, and the substitution of Entry 84 of List I of the Constitution. Revenue/State's arguments: The State argued that the CGST/IGST and the State excise duty are legally distinct levies. The CGST/IGST is a tax on the supply of goods and services, while the excise duty is a specific tax applied to goods at the point of manufacture or import, and they address separate stages of economic activity. The State contended that the levies are not double taxation.