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1979 Supreme(Bom) 48
IN THE HIGH COURT OF BOMBAY
B.N. Deshmukh, C.J. D.P. Madon, J.
State of Maharashtra others.... Appellants.
Versus
Glaxo Laboratories (India) Pvt. Ltd. another.... Respondents.
Appeal No. 127 of 1975 in Suit No. 238 of 1966 (Original Side), decided on 22/23-2-1979.
Advocates appeared :
S.A. Desai with L.C. Chougule, for appellants.
K.S. Cooper with M.O. Chinoy, for first respondents.
S.B. Sukthankar, for second respondents.
Headnote:
The plaintiffs, a pharmaceutical company, manufactured and sold a medicinal preparation called Codopyrin. Prior to September 25, 1961, Codopyrin was a proprietary medicine, subject to a 10% ad valorem excise duty under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 (the Act). In April 1961, the plaintiffs revised the formula for Codopyrin to conform with the British Pharmacopoeia, believing that this would exempt it from excise duty under Item No. 5 of the Act. The Collector of Bombay, however, ruled that Codopyrin was still liable for duty because the labels did not bear the words "Compound Codeine Tablets B.P. 1958". The plaintiffs challenged this decision in court, arguing that the orders were illegal and that Codopyrin was not liable for duty. The trial court ruled in favor of the plaintiffs, and the defendants appealed.
Fact of the Case:
The plaintiffs, a pharmaceutical company, manufactured and sold a medicinal preparation called Codopyrin. Prior to September 25, 1961, Codopyrin was a proprietary medicine, subject to a 10% ad valorem excise duty under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 (the Act). In April 1961, the plaintiffs revised the formula for Codopyrin to conform with the British Pharmacopoeia, believing that this would exempt it from excise duty under Item No. 5 of the Act. The Collector of Bombay, however, ruled that Codopyrin was still liable for duty because the labels did not bear the words "Compound Codeine Tablets B.P. 1958". The plaintiffs challenged this decision in court, arguing that the orders were illegal and that Codopyrin was not liable for duty. The trial court ruled in favor of the plaintiffs, and the defendants appealed.
Finding of the Court:
The court found that the plaintiffs' suit was maintainable, that the impugned orders were passed in non-compliance with the Act, and that Codopyrin was not a patent or proprietary medicine liable to excise duty. The court held that the plaintiffs were entitled to recover the amount of duty paid under protest, along with interest and costs.
Issues: 1. Whether the plaintiffs' suit was maintainable under section 20 of the Act. 2. Whether the impugned orders were passed in good faith and in compliance with the Act. 3. Whether Codopyrin was a patent or proprietary medicine liable to excise duty under the Act.
Ratio Decidendi: 1. Section 20 of the Act barred suits against the collecting Government or officers for orders passed in good faith or acts done or ordered to be done under the Act. However, the court held that the impugned orders were not passed in good faith or in compliance with the Act, as they were based on a statutory provision that did not apply to the relevant period and on a violation of the Drugs Rules, which was not a matter for the taxing authorities under the Act. 2. The court held that Codopyrin was not a patent or proprietary medicine liable to excise duty under the Act, as it was manufactured from a standard formula found in the British Pharmacopoeia and did not bear a brand name or other mark indicating a connection with a particular person.
Final Decision: The court dismissed the appeal and upheld the trial court's decision in favor of the plaintiffs. The plaintiffs were entitled to recover the amount of duty paid under protest, along with interest and costs.
D.P. MADON, J.:---Glaxo Laboratories (India) Pvt. Ltd., who are the first respondents before us, filed a suit on the Original Side of this High Court against the State of Maharashtra, the Collector of Bombay, the Director of Prohibition and Excise, Maharashtra, at the time when the orders complained of by the first respondents were passed, as also the Director of Prohibition and Excise, Maharashtra, at the time of the filing of the suit, and the Union of India for a declaration that the orders dated March 3, 1962, April 10, 1962 and September 20, 1962 passed by the Collector of Bombay and the order dated February 2, 1965 passed by the Director of Prohibition and Excise, Maharashtra, and the notice of demand dated July 1, 1965 issued by the Collector for the recovery of a sum of Rs. 1,64,415.34 p. from the first respondents by way of excise duty under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, were illegal, invalid and ultra vires and for a decree in the said sum of Rs. 1,64,415.34 p. with interest thereon at the rate of 9 per cent per annum from the date of the suit till payment and for the costs of the suit. The suit was decreed with costs by Mr. Justice Rege in the terms prayed for by the first respondents save that he granted them interest on the said sum of Rs. 1,64,415.34 p. at the rate of 6 percent annum from the date of the judgment till payment. The union of India has not filed any appeal against the said judgment and decree, but the other defendants to the said suit have filed the present appeal and have made the original plaintiffs and the union of India as the respondents thereto.
2. It will be convenient to refer to the first respondents-Glaxo Laboratories (India) Pvt. Ltd., who were the original plaintiffs, as "the plaintiffs". The plaintiffs inter alia manufacture and deal in pharmaceuticals. Amongst the medicinal preparations manufactured and sold by the plaintiffs is one known as Codopyrin. Prior to September 25, 1961 Codopyrin was a proprietary medicine, that is to say, it was a medical preparation manufactured from a formula peculiar to the plaintiff themselves. There is no dispute that Codopyrin manufactured with this formula was excisable to ten per cent ad valerm duty under Item No. 4 of the schedule to the Medicinal and Toilet Preparations (Excise Duty) Act, 1955 (Act 16 of 1955), (hereinafter referred to as "the Act"). In about April 1961 the plaintiffs desired to revise the formula for Codopyrin so as to make it conform to the formula of compound codeine tablets as specified in the 1958 Edition of the British Pharmacopoeia. As the plaintiffs held a licence under the Drugs Act, 1940, and the Drugs Rules, 1945, made under the said Act to manufacture pharmaceuticals specified in the said licence, they intimated the said fact to the Director, Drugs Control Administration of the State of Maharashtra (hereinafter referred to as "the Drugs Control Director"). According to the plaintiffs, the medicinal preparation, Codopyrin manufactured from the new formula adopted by them was not liable to any excise duty under the Act by reason of the provisions of Item No. 5 in the schedule to the Act. They, therefore, by their letter dated, October 13, 1961 wrote to the Director, Prohibition and Excise Department, Maharashtra to confirm that the new stock starting with batch No. 3215 with strip packs of 300 tablets would not be liable to any excise duty under the Act. By their letter dated October 20, 1961 the plaintiffs intimated to the said Director that all their packs of Codopyrin were being made from the revised formula with effect from batch No. 3215, and once again the plaintiffs requested the Director to confirm that these stock were not liable to payment of excise duty under the Act. The Director forwarded the said letter of the plaintiffs for disposal to the Collector of Bombay who is the licensing authority under the Act. After two reminders were sent to him, the Collector of Bombay
