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1977 Supreme(Mad) 328
High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE RAMANUJAM
Indo French Pharmaceutical Company, Madras - Appellant
Versus
Union of India - Respondent
Case No : W.P.No. 2967 of 1973
Decided On : 20 July 1977
The definition of 'patent and proprietary medicines' under Explanation 1 to tariff item 14-E of the First Schedule to the Central Excise Act and Rules requires a medicinal preparation to bear a mark, symbol, or other indication that the manufacturer has a proprietary interest in it, apart from the manufacturer's name.
Headnote:
CENTRAL EXCISE - TARIFF ITEM 14-E - SCOPE AND AMBIT - PATENT AND PROPRIETARY MEDICINES - DEFINITION - EXPLANATION 1 - INTERPRETATION - MEDICINAL PREPARATIONS BEARING MANUFACTURER'S NAME - WHETHER PATENT OR PROPRIETARY MEDICINES - USE OF SYMBOL 'INDIA FRENCH' - WHETHER INDICATES PROPRIETARY INTEREST - APPLICABILITY OF RULE 9(2) AND LIMITATION UNDER RULE 10 - CONSIDERATION.
Fact of the Case:
The petitioner, a manufacturer of pharmaceutical products, challenged the demand for excise duty on three pharmaceutical preparations classified as non-excisable by the Central Excise authorities. The petitioner contended that the preparations were not patent or proprietary medicines under tariff item 14-E of the First Schedule to the Central Excise Act and Rules, and that even if they were excisable, the recovery of duty could only be made under Rule 10, which was barred by limitation.
Finding of the Court:
The court held that the three pharmaceutical preparations were not excisable under tariff item 14-E as they did not fall within the definition of 'patent and proprietary medicines' under Explanation 1 to the item. The court interpreted Explanation 1 to mean that a medicinal preparation would be considered patent or proprietary only if it bore a mark, symbol, or other indication that the manufacturer had a proprietary interest in it, apart from the manufacturer's name. The court found that the petitioner's use of the symbol 'India French' on all its products, including the three preparations in question, did not indicate a proprietary interest in those preparations.
Issues: 1. Whether the three pharmaceutical preparations manufactured by the petitioner were excisable under tariff item 14-E of the First Schedule to the Central Excise Act and Rules. 2. Whether the recovery of excise duty could be made under Rule 9(2) or Rule 10, and whether the proceedings under Rule 10 were barred by limitation.
Ratio Decidendi: The court held that the three pharmaceutical preparations were not excisable under tariff item 14-E because they did not fall within the definition of 'patent and proprietary medicines' under Explanation 1 to the item. The court interpreted Explanation 1 to mean that a medicinal preparation would be considered patent or proprietary only if it bore a mark, symbol, or other indication that the manufacturer had a proprietary interest in it, apart from the manufacturer's name. The court found that the petitioner's use of the symbol 'India French' on all its products, including the three preparations in question, did not indicate a proprietary interest in those preparations.
Final Decision: The court allowed the writ petition and quashed the impugned demand made on the petitioner for excise duty on the three pharmaceutical preparations.
RAMANUJAM, J
This case involves the scope and ambit of tariff item 14-E of the First Schedule to Central Excises and Salt Act, 1944 and rules framed thereunder. The petitioner is a manufacturer of pharmaceutical products at Nanganallur, Madras. Some of the pharmaceutical products manufactured by it are liable to excise duty and others are not excisable. For the manufacture of such of those pharmaceutical products which are excisable, the petitioner has taken out a licence under the said Act. The items that attract the excise duty are governed by the tariff item 14-E of the First Schedule to the Central Excise Act. As required by the licence, the petitioner furnished the lables attached to the products manufactured in its factory, both excisable and non-excisable, along with a proforma in triplicate on 11-12-1967. It also undertook to supply to the Department in advance the labels of new preparations excisable or non-excisable, manufactured for sale in future. On receipt of the said labels, the pharmaceutical products manufactured by the petitioner were classified as excisable and non-excisable.
2.As per the said classification, the following three preparations have been held to be non-excisable as they are Indian Pharmacopoeia products. 1. Sulphaguanidire Tablets, 2. Sulphaguandire Tablets, and 3. Calcium Gluconate Tablets, as per the revised classification which was made on 5-9-1967. The petitioner has been manufacturing these three preparations and has been clearing them with the approval of the Central Excise authorities without payment of duty as they have been classified already as non-excisable.
3.However, by a notice dated 2-2-1971, for the first time, the petitioner was asked to show cause as to why the duty was not paid on the clearance of the said three preparations from 19-9-1966 to 9-4-1970 and as to why a penalty should not be levied under R. 173Q of the Central Excise Rules. In answer to the said show cause notice, the petitioner represented that the said three preparations are not proprietary or patent medicines as two of them were preparations under the Indian Pharmacopoeia and one of them was a preparation under the U.S. Pharmacopoeia and therefore, they will not come under tariff Item 14-E and that the authorities themselves classified these items as non-excisable on that basis and had permitted the clearance without payment of duty. The petitioner also contended that the recovery of excise duty under R. 9(2) is not sustainable, that, the proper provision to be applied is R. 10, and that the recovery cannot, however, be made under R. 10 as it is beyond the period of one year prescribed in the said rule.
4.The objections of the petitioner were, however, overruled by Superintendent of Central Excise, Guindy, who directed the recovery of excise duty in a sum of Rs. 11, 319.90 as proposed in the show cause notice, on 15-2-1971. Against the said order, the petitioner filed an appeal to the Collector of Central Excise, but without success. Thereafter, the petitioner moved the Central Government in revision but that revision also failed. Thereafter it has approached this court seeking awrit of certiorarito quash the order of the revisional authority confirming the order passed by the original authority demanding a sum of Rs. 11, 319.90 from the petitioner as excise duty payable in respect of the said three pharmaceutical items manufactured by the petitioner.
5.The petitioner's attack against the original order is three fold (1)-The three preparations manufactured by it will not come under tariff item 14-E of the First Schedule to the Central Excises and Salt Act and therefore it is not liable to pay any excise duty in relation to these items, (2) that even assuming that the goods are excisable, it can be brought to change only by initiating proceedings under Rule 10 and not by invoking R. 9(2) which is quite inapplicable to the facts of the case and, (3) that the proceedings under Rule 10 is clearly barred by
