Aphali
Pharmaceuticals Ltd. Vs. State of Maharashtra & Ors [1989] INSC 283 (19 September 1989)
Saikia,
K.N. (J) Saikia, K.N. (J) Oza, G.L. (J)
CITATION:
1989 AIR 2227 1989 SCR Supl. (1) 129 1989 SCC (4) 378 JT 1989 (3) 720 1989
SCALE (2)617
ACT:
Medicinal
and Toilet Preparations (Excise Duties) Act 1955-Amendment Act 19 of
1961--Finance Act 1962--Section 18 thereof-Levy of excise duty on the product
"Ashvagandharist" manufactured by the appellant--Whether permissible
under the schedule to the Act as amended--Effect and Interpretation of
Explanation I added to the Schedule of the Act by Finance Act 1962--Circular
dated May 31, 1962 issued by the Government of Maharashtra----Whether in
conformity with the provisions of the Act and Explanation I of the Schedule.
Medicinal
and Toilet Preparation (Excise Duties) Rules 1956-Rules 64 to 66 whether
consistent with the schedule and the circular dated 31.5.1962.
HEAD NOTE:
The
appellant is a company having its registered office at Ahmednagar in Maharashtra. It carries on business as
manufacturers of Ayurvedic preparations including "Asvas" and "Aristhas".
At the material time the appellant was manufacturing and selling an Ayurvedic
product, "Ashvagandharist" which is a medicinal preparation
containing selfgenerated alcohol but not capable of being consumed as ordinary
alcoholic beverages.
Medicinal
and Toilet Preparations (Excise Duties) Act 1955 came into force on 1.4.1957.
The schedule to the said Act contained two items specifying "medicinal and
toilet preparations containing alcohol" which are prepared by distillation
or to which alcohol has been added and which are capable of being consumed as
ordinary "alcoholic beverage" and "medicinal and toilet
preparations not otherwise specified containing alcohol" as the
commodities excisable under the provisions of the Act. The said "Ashvagandharist"
was treated and accepted by the Excise Authorities as being exempt from the
payment of excise duty upon the basis and footing that the same was an Ayurvedic
preparation containing self-generated alcohol which was not capable of being
consumed as ordinary alcoholic beverage and which fell under item 2(i) of the
schedule in respect of which, the rate of excise duty prescribed in the
schedule was "Nil".
130
The Act was amended by Amendment Act 19 of 1961 whereby concept of "patent
and proprietary" medicine was introduced in the schedule. The Amendment
Act, by an Explanation introduced in the schedule the definition of
"patent and proprietary" medicine contained in the Drugs Act 1940.
Despite the said amendment in the schedule the appellants' product continued to
be treated as exempt from the liability to pay excise duty on the ground that
it was covered under item 2(i) of the schedule which item was re-numbered as
item 3(i) of the schedule. Thereafter by section 18 of the Finance Act 1962,
the Act was further amended by substitution of Explanation I to the schedule of
the Act. By the said explanation, a "patent and proprietary" medicine
was defined as a medicinal preparation of the description and the type
specified in the Explanation. The said Explanation was given retrospective
effect from April 23,
1962. In pursuance of
the said Explanation I brought by the Finance Act, Director of Prohibition and
Central Excise, Govt. of Maharashtra, Bombay issued a circular dated May 31,
1962, which inter alia directed that the medicinal preparations containing
self-generated alcohol but not capable of being consumed as alcoholic beverage
were to be treated as products falling under Item No. I and not Item 3 of the
schedule. As a result of that circular, the Respondents levied excise duty on
the appellants' product amounting to Rs.2, 18,282.16p. and realized the same
from the appellant. The appellant paid the amount "under protest".
With a
view to recover the aforesaid amount, which according to the appellant, was
illegally recovered by the Respondents, the appellant filed a suit, being
special suit No. 23 of 1965 in the Court of Civil Judge Sr. Division, Ahmednagar.
The
Civil Judge by his order dated 27.3.69 decreed the appellantplaintiff's suit
with interest at 6% per annum from the date of the suit till realisation.
The
Respondents appealed to the High Court against the Order of the Civil Judge and
the High Court allowed the appeal, reversed the Judgment and decree passed by
the Civil Judge and dismissed the appellant's suit. Hence this appeal by the
plaintiff-appellant by special leave.
Allowing
the appeal, this Court,
HELD:
From Explanation I of the Schedule of the Act as substituted by Act 5 of 1964
it is clear that patent or proprietary medicine 131 means any medicinal
preparation which is not specified in a monograph in a Pharmacopoeia, Formulary
or other publications notified in this behalf by the Central Government in the
Official Gazette. [144C] To be a patent medicine one would be required to have
a patent. A patented article means an article in respect of which a patent is
in force, [144D] A patent medicine will, therefore, mean medicine in respect of
which a patent is in force. [144E] Patent means a grant of some privilege
property, or authority, made by the Government or sovereign of a country to one
or more individuals. A proprietor is one who has the legal right or exclusive
title to anything. It is synonymous with owner. A person entitled to a trade
mark or a design under the Acts for the registration or patenting of trade mark
or design is called a proprietor of the trade mark or design. [144E-F] A
Schedule in an Act of Parliament is a mere question of drafting. It is the legislative
intent that is material. An Explanation to the Schedule amounts to an
Explanation in the Act itself. [147F] The Schedule may be used in construing
provisions in the body of the Act. It is as much an Act of the Legislature as
the Act itself and it must be read together with the Act for all purposes of
construction. Expressions in the Schedule cannot control or prevail against
express enactment and in case of any inconsistency between the schedule and the
enactment, the enactment is to prevail and if any part of the schedule cannot
be made to correspond it must yield to the Act. [147H; 148A-B] An explanation
is different in nature form a proviso, for a proviso excepts, excludes or
restricts while an explanation explains or clarifies. Such explanation or
clarification may be in respect of matters whose meaning is implicit and not
explicit in the main section itself. [149F] Bihta Marketing Union v. Bank of Bihar, AIR 1967 SC 389:
[1967]
1 SCR 848; State of Bombay v. United Motors, AIR 1953 SC 252: [1953] SCR 1069;
Collector of Customs v. G. Dass & Co., AIR 1966 SC 1577; Burmah Shell Oil
Ltd. v. Commercial Tax Officer, AIR 1961 SC 315: [1961] 1 SCR 902; Dattatraya Govind
Mahajan v. State of Maharashtra, AIR 1977 SC 915 (928): [1977] 2 SCR 790 and Hiralal
132 Ratanlal v. State of U. P., [1973] 1 SCC 216.
Ex praecedentibuset
consequentibus optima fit interpretatio. The best interpretation is made from
the context.
Injustum
est nisi tota lege inspecta, de una aliqua ejus particula proposita judicare Vel
respondere. It is unjust to decide or respond as to any particular part of a
law without examining the whole of the law. Interpretare et concordare leges ligibus,
est optimus interpretendi modus. To interpret and in such a way as to harmonize
laws with laws, is the best mode of interpretation. [151G-H] Jura eodem modo distituentur
quo constitutuntur. Laws are abrogated by the same means (authority) by which
they are made. [152A] Every word in a Statute is to be given a meaning. A
construction which would leave without effect any part of the language of a
statute will normally be rejected. Every clause of a statute is to be construed
with reference to the context and other clauses of the Act so as to make, as
far as possible, a consistent enactment of the whole statute.
[152B]
A specific provision to include Ayurvedic preparations containing
self-generated alcohol which are not capable of being consumed as ordinary
alcoholic beverages was necessary. That having not been done by the Explanation
itself, it was not permissible to include it by the Circular. The Explanation I
could not have been in conflict with the provisions of the Act and the Circular
could not have been in conflict with the Explanation, the Schedule, the Rules
and the Act. [152E-F] The Court set aside the order of the High Court and
restored that of the Civil Judge decreeing the suit. [152G] Inland Revenue
Commissioners v. Gittus, [1920] I KB 563;
Baidyanath
Ayurved Bhawan Pvt. Ltd. v. The Excise Commissioner, U.P., [1971] 2 SCR 590; Mohanlal
Maganlal Bhavsar v.
Union of India, [1986] 1 SCC 122; Commissioner of Sales Tax v. The Modi
Sugar Mills Ltd., [1961] 2 SCR 189 and Cape Brandy Syndicate v. Commissioners
of Inland Revenue, [1921] 1 KB 64, referred to.
CIVIL
APPELLATE JURISDICTION: Civil Appeal No. 1845 (N) of 1974.
From
the Judgment and Decree dated 6/7.3.1974 of the Bombay High Court in First
Appeal No. 586 of 1969.
133
S.K. Dholakia and H.S. Parihar for the Appellant.
A.K. Ganguli,
A.M. Khanwilkar, A. Subba Rao, C.V. Subba Rao and A.S. Bhasme for the
Respondents.
The
Judgment of the Court was delivered by SAIKIA, JThis plaintiff's appeal by
special leave is from the Appellate Judgment and Decree of the High Court of
Judicature at Bombay reversing those of the trial court
and dismissing plaintiff's special suit.
The
appellant is a Limited Company registered under the Companies Act having its
registered office situate at Ahmednagar within the State of Maharashtra. The appellant carries on business,
inter alia, as manufacturers of Ayurvedic preparations including "Asavas",
"Aristhas". At all times material to this appeal, the appellant was
manufacturing and selling an Ayurvedic product called "Ashvagandhaarist"
which is a medicinal preparation containing self-generated alcohol but not
capable of being consumed as ordinary alcoholic beverage.
Under
the provisions of the Medicinal and Toilet Preparations . (Excise Duties) Act,
1955, hereinafter referred to as "the Act", which came into force on 1st April, 1957, excise duties were levied on medicinal
and toilet preparations specified in the Schedule to the Act, hereinafter
referred to as "the Schedule". The Act, as originally stood in 1955,
inter alia, contained two items in the Schedule respectively specifying
"medicinal and toilet preparations containing alcohol which are prepared
by distillation or to which alcohol has been added and which are capable of
being consumed as ordinary "alcoholic beverage" and "medicinal
and toilet preparations not otherwise specified containing alcohol", being
the commodities excisable under the provisions of the Act. The said "Ashvagandhaarist"
was treated and accepted by the Excise Authorities as being exempt from the
payment of any excise duty upon the basis and the footing that the same was an Ayurvedic
preparation containing self-generated alcohol which was not capable of being
consumed as ordinary alcoholic beverage, and which fell under item 2(i) Of the
Schedule in respect of which the rate of excise duty postulated in the Schedule
was "Nil".
The
Act was amended by the Amendment Act 19 of 1961.
The
amendment, inter alia, introduced the concept of "patent and pro134 prietary
medicine" in the Schedule. The amendment Act, however, by an Explanation,
introduced in the Schedule the definition of the "patent and proprietary
medicine" contained in the Drugs Act, 1940. Even after the introduction of
the said amendment, the appellant's aforesaid product continued to be treated
as exempt from the liability to pay any excise duty on the self-same ground,
namely, that it was covered under item 2(i) of the Schedule which item 2(i) was
renumbered as item 3(i) of the Schedule as amended by the Amendment Act of
1961.
By
Section 18 of the Finance Act, 1962, the Act was further amended by
substitution of an Explanation No. 1 to the Schedule of the Act. By virtue of
and under the said Explanation, a patent and proprietary medicine was defined
as a medicinal preparation of the description and the type specified in the
Explanation. The Explanation which was brought in by the Finance Act was given
retrospective effect from April 23, 1962.
In
purported pursuance of the said Explanation and/or upon the basis thereof, a
circular dated May 31, 1962 was issued by the then Director of Prohibition and
Central Excise, Government of Maharashtra, Bombay which, inter alia, directed
that the medicinal preparations containing selfgenerated alcohol but not
capable of being consumed as alcoholic beverage were to be treated as products
falling under item 1 and not item 3 of the Schedule. consequent thereupon, the
respondents levied and recovered from the appellant diverse sums aggregating to
Rs.2, 18,282.16 being the alleged amount of the excise duty payable in respect
of the product "Ashvagandharist". The amounts were paid by the
appellant "under protest".
With a
view to enforcing their rights in respect thereof and/or recovering the said
amount illegally recovered by the respondents, on July 14, 1965, the appellant
filed a suit, being Special Suit No. 23 of 1965 in the Court of Civil Judge,
Senior Division, Ahmednagar.
On March 4, 1966, the respondent No. 4 filed its
written statement and similarly on the 4th April, 1966 the respondent Nos. 1 to 3 filed
written statements. In the written statements, filed on behalf of the
respondents it was, inter alia, contended that the said product of the
appellant was "the unrestricted ayurvedic preparations" manufactured
by the plaintiff (appellant) labelled and marked by the 135 plaintiff
(appellant) under their brand name and trade mark.
This,
therefore, fell within the scope of patent or proprietary medicine as given in
Explanation 1 below the Schedule annexed to the Act, as inserted from April 23, 1962 by Finance Act (No. 2) 1962.
By his
Judgment and Decree dated March 27, 1969,
the learned Civil Judge was pleased to decree the appellant's suit for Rs.2,22,582.07
together with future interest at 6 per cent per annum from the date of the suit
till realisation.
Aggrieved
by the Judgment and Order dated March 27, 1969, the respondents (being the
defendants therein) preferred an appeal to the High Court of Judicature at
Bombay, which was registered as First Appeal No. 586 of 1969. The said appeal
was heard by the High Court alongwith other appeals being First Appeals Nos.
136 of 1968 and 93 of 1970 as also suits being Suit Nos. 230 of 1965 and 319 of
1965.
The
appeals and the suits were heard together having regard to the common questions
of law involved therein. By its judgment and decree the High Court was pleased
to allow the said first appeal of the respondents, reversing the judgment and
decree of the Trial Court and to dismiss the appellant's special suit. Hence this
appeal by special leave.
Mr.
S.K. Dholakia, the learned counsel for the appellant submits, inter alia, that
the findings of the High Court are repugnant to the relevant provisions of the
Act and/or the rules framed thereunder and/or the scheme, intendments and
purposes thereof. It is contended that the appellant's product "Ashvagandhaarist"
fell squarely within item 3(i) of the Schedule and as such wholly exempt from
the payment of excise duty; that in view of the admitted position that until
1962 "Ashvagandhaarist" was exempt from the payment of excise duty as
being a commodity falling under item No. 2(i) of the Schedule, simply by reason
of the Explanation which was introduced in the Act by the Finance Act of 1962,
as the explanation could never be considered to be or, in any event, in the
scheme of the provision of the Act, was not a substantive provision of the Act
and the explanation was not intended to and it did not seek to disturb the
enumeration of the categories or the respective fields assigned to the various
items of the schedule in existence prior thereto. It is submitted that item 3
of the amended Schedule was a specific item and enumerated categories of Ayurvedic
medicinal preparations covered thereby and that being so, all commodities
answering description set out therein fell within the 136 ambit thereof and was
excluded from the purview of the other items contained in the said schedule and
that the express language of item 3(i), namely, of "Ayurvedic preparations
containing self-generated alcohol which were not capable of being consumed as
ordinary alcoholic beverages" were exempted and that the appellant's
product "Ashvagandhaarist" was admittedly and obviously an Ayurvedic
preparation containing self-generated alcohol which was not capable of being
consumed as ordinary alcoholic beverage and as such it could not be made
excisable on the ground that it fell within any other item of the schedule but
it constituted residuary clause of the schedule in so far as the medicinal and
toilet preparations containing alcohol were concerned. Counsel further submits
that the expression "not otherwise specified" occurring in item 3 of
the schedule did not restrict the scope of the enumerated categories under item
3 but was merely a marginal note showing that the said item 3 was residuary
item and comprised of three sub-groups of commodities specified therein; and
that item No. 1 was not a specified item. Mr. Dholakia further submits that the
interpretation that "ashvagandhaarist" fell within item No. 1
rendered the provisions of item No. 3 wholly nugatory inasmuch as if an Ayurvedic
preparation containing self-generated alcohol but incapable of being used as
ordinary alcoholic beverage, is treated as failing under item 1 there would be
no Ayurvedic medicine which would factually fail under item 3 of the schedule
and that the Explanation newly introduced by the Finance Act, 1962 could not
add to, amend or alter or vary the classification of the goods existing prior
thereto as covered by the various items of the said schedule; nor could it
otherwise nullify or add to, amend or alter or vary the substantive provisions
of the schedule and it could not be considered to be a substantive provision of
the Act nor could it be allowed to abrogate the substantive provisions of the
Act. In other words, the submission is that in view of the fact that the
product of the appellant was exempt from payment of duty because the duty
against item No. 3(i) in the amended Schedule of 1961 was mentioned to be 'nil'
the High Court ought to have held that the said legal and factual position
could not be transformed to the detriment of the appellant by shifting the said
commodity from the field covered by item 3(i) to that covered by item 1 of the
Act merely on the basis of the Explanation which was introduced by the Finance
Act of 1962. Counsel argues that this was more so because "ashvagandhaarist"
was not a name within the contemplation of the explanation but was merely a
descriptive appellation of the medicine manufactured and sold by the appellant
and it being a standard preparation according to the Ayurvedic system could be
manufactured by any one conversant with the said system, and it did 137 not
have a brand name in the hands of the appellant and the High Court's
interpretation that a mere description is a name is inconsistent with the
scheme of the definition of "patent and proprietary medicines" in the
Explanation. This was the reason, it is argued, why Asavas and Aristhas were
expressly made non-dutiable after 25.9.6,4. by subsequent amendment by the
Government.
Mr.
A.K. Ganguli, learned counsel appearing for the respondents, demurring, submits
that there can be no doubt that "Asavas" and "Aristhas"
fall under item 1 of the schedule to the Act as substituted by Finance Act 2 of
1962 and hence taxable at 10% ad valorem; and those being Ayurvedic
preparations are specified preparations and they could never fail under item 3
or any part thereof which deals with medicinal preparations not otherwise
specified containing alcohol. Item 1, Mr. Ganguli submits, specifically
describes that medicinal and toilet preparation which has alcoholic contents
and which alcohol comes to be present in those medicines by use of one of the
two methods described in that item. First of such methods contemplates alcohol
contents in the medicine which is prepared by distillation and the second
method is addition of alcohol to the medicine. The medicinal preparation which
is prepared by distillation and which contains alcohol and other medicinal
preparations to which alcohol is added fall in category I and such medicines
would cover medicinal preparations belonging either to Allopathic or Ayurvedic
system or I any other system of medicines. For every system of medicines,
counsel argues, item No. 1 is not general item but it is a specific item in the
sense it covers only those medicines which are prepared by distillation and
contain alcohol and others to which alcohol has been added. According to
counsel, such medicines belonging to any system whether indigenous or foreign
are covered by item 1 and would be taxable as per that item and the disputed
goods are undoubtedly medicinal preparations and they are also patent and
proprietary medicines in view of the Explanation 1 and these Ayurvedic
preparations are medicinal preparations being patent or proprietary medicines
containing alcohol which are not capable of being consumed as alcoholic
beverages and as such they squarely fall under item 1 of the Schedule, and the
main Act and the Explanation is a self-contained provision which eliminates the
reference either to Drugs Act or to the Rules made under the Act; and one has
to read only the provision of the Schedule as a whole including the
Explanation, and their meaning being simple and plain, they must be given their
full effect.
138 To
appreciate the rival contentions we can appropriately refer to the provisions
and the Schedule of the Act and the legislative changes thereof. The Act was
meant to provide for the levy and collection of duty of excise on medicinal and
toilet preparations containing alcohol, opium, Indian hemp or other narcotic
drug or narcotic. The statement of objects and reasons as notified in Gazette
of India of 16.9.1954, Part II, S. 2, Ext., page 596 said that by virtue of
entry 40 in List II in the Seventh Schedule to the Government of India Act,
1935, medicinal and toilet preparations containing alcohol, etc., were
subjected to Provincial excise duties. In order to secure uniformity the entry
relating to excise duty on medicinal and toilet preparations containing
alcohol, etc. were transferred under the Constitution from the State list to
the Union List. The Act was intended to implement this provision in the
Constitution and proposed uniform rates of excise duty and a uniform procedure
for the collection thereof. The Act came in force on 1.4.57.
The
Act in Section 2(a) defined "alcohol" to mean "ethyl alcohol of
any strength and purity having the chemical composition C2H5OH"; and it
defined "medicinal preparation" in Section 2(g) to include "all
drugs which are a remedy or prescription prepared for internal or external use
of human beings or animals and all substances intended to be used for or in the
treatment, mitigation or prevention of disease in human beings or
animals". It did not define "drug". The Drugs Act, 1940, as it
was substituted by the Drugs (Amendment) Act, 1955 (16.4.55) had defined
"drug" in Section 2(b) to include "(i) all medicines for
internal or external use of human beings or animals and all substances intended
to be used for or in the diagnosis, treatment, mitigation or prevention of
disease in human beings or animals other than medicines and substances exclusively
used or prepared for use in accordance with the Ayurvedic or Unani systems of
medicine; and (ii) such substances (other than food) intended to affect the
structure or any function of the human body or intended to be used for the
destruction of vermins or insects which cause disease in human beings or
animals, as may be specified from time to time by the Central Government by
notification in the Official Gazette." (Emphasis supplied) Section 3(i) of
the Act provides that "there shall be levied duties of excise, at the
rates specified in the Schedule, on all dutiable goods manufactured in India." The original Schedule to the
Act in 1955 read:
139
THE SCHEDULE (See section 3) Item Description of dutiable Rate of No. goods. duty.
1.
Medicinal and toilet preparations, Rupees sevencontaining alcohol, which are
prepared and annas eigwhich are prepared by distilation or ht per gallon to
which alcohol has been added, and of strength which are capable of being
consumed as of London ordinary alcoholic beverages. proof spirit.
2.
Medicinal and toilet preparations not otherwise specified containing alcohol (i)
Ayurvedic preparations containing Nil self-generated alcohol, which are not
capable of being consumed as ordinary alcoholic beverages.
(ii) Ayurvedic
preparations containing Rupees three self-generated alcohol, which are per
gallon.
capable
of being consumed as ordinary alcoholic beverages.
(iii)
All others. Rupees five per gallon of the strength of London proof spirit
3.
Medical and toilet preparations, Nil not containing alcohol, but containing
opium, Indian hemp, or other narcotic drug or narcotic.
It
would thus be clear that medicinal and toilet preparations were classified into
those which were capable of being consumed as ordinary alcoholic beverages and
those which were not capable of being consumed as ordinary alcoholic beverages.
Again, medicinal and toilet preparations containing alcohol prepared by
distillation or adding alcohol is differentiated from medicinal and toilet
preparations 'not otherwise specified containing alcohol'. Further, under this
'not 140 otherwise specified' category Ayurvedic preparations have been
classified into three groups, namely, Ayurvedic preparations containing
self-generated alcohol not capable of being consumed as ordinary alcoholic
beverages, those capable of being consumed as ordinary alcoholic beverages; and
others. These three divisions were not drugs as defined in Drugs Act then. The
first category of Ayurvedic preparations had not been subjected to duty while
the other two categories had been.
Admittedly,
under the above Schedule the product of the appellant 'ashvagandhaarist' was
not dutiable which meant that it was included in item 2(i). It would also be
clear that 'Ayurvedic preparations containing self-generated alcohol which were
capable of being consumed as ordinary alcoholic beverages' were dutiable at the
rate of Rupees 3 per gallon and the third category of others was also dutiable
at the rate of Rupees 5 per gallon on the strength of London proof spirit. Alcohol
and self-generated alcohol were treated differently.
The
Schedule was amended by the Amending Act No. 19 of 1961 and the amended
Schedule stood as follows:
Item
No. Description of dutiable goods Rate of duty
1.
Medicinal preparations, being patent Ten per cent or proprietary medicines, containad
valoreming alcohol and which are not capable of being consumed as ordinary
alcoholic beverages.
2.
Medicinal preparations, containing Rupees three alcohol, which are and eight
prepared by distillation or to which five naye alcohol has been added, paise
per and which are capable of being litre of consumed as ordinary alcoholic the strengbeverages.
th of London proof spirit.
3.
Medicinal preparations not otherwise specified containing alcohol(i) Ayurvedic preparations
containing Nil self'generated alcohol which are not capable of being consumed
as ordinary alcoholic beverages.
141
(ii) Ayurvedic preparations, containThirty eight ing self-generated alcohol,
which naye paise per are capable of being consumed as litre.
ordinary
alcoholic beverages.
(iii)
All others. Rupee one and ten naye paise per litre of the strength of London
proof spirit.
Explanation
I: "Patent or proprietary medicines" has the same meaning as in
clause (h) of Section 3 of the Drugs Act, 1940 (23 of 1940).
The
statement of objects and reasons of the Amendment Bill, as published in Gazette
of India, 8.3.1961, Pt. II, S. 2, Ext., page 106, said:
"Consequent
on the decision to adopt metric units from the 1st April, 1961, in the sale of alcohol and
collection of duty thereon, it is proposed to provide for the levy and
collection of excise duty on medicinal and toilet preparations in terms of
metric units.
............................................
Under
existing item 2(ii) of the Schedule to the Act, Ayurvedic preparations
containing self-generated alcohol which are capable of being consumed as
ordinary alcoholic beverages are subjected to duty at the rate of Rs.3 per
gallon. However, by virtue of the provision contained in section 19(2)(xix) of
the Act, read with Rule 8 of the Medicinal and Toilet Preparations (Excise
Duties) Rules 1956, the rate of duty with respect to such preparations has been
reduced to Rs. 1.75 per gallon with effect from the 10th September, 1960, and
it is this reduced rate that is, proposed to be expressed in terms of metric
units in the Bill." It would thus be clear that the main purpose was the
levy and collection of excise duty on medicinal and toilet preparations in
terms of metric unit. while there was reference to them existing item 2(ii) of
the Schedule of the Act, namely, Ayurvedic preparations containing 142
self-generated alcohol which were capable of being consumed as ordinary
alcoholic beverages the duty whereof was reduced to Rs. 1.75 per gallon from Rs.3
per gallon, there was no mention that item No. 2(i) of the Schedule, namely, Ayurvedic
preparations containing self-generated alcohol which were not capable of being
consumed as ordinary alcoholic beverages was subjected to tax. The statement of
object and reasons was silent about item No. 2(i).
In the
amended Schedule we find that item 1 for the first time mentioned medicinal
preparations being patent or proprietary medicines, containing alcohol and
which are not capable of being consumed as ordinary alcoholic beverages and the
earlier item No. 1 has been re-numbered as item No.
2 and
the earlier item No. 2(i), (ii) and (iii) remained as they were as 3(i), 3(ii)
and 3(iii). As regards levy of duty item 2(i) of the old Schedule was kept duty
free in item 3(i) of the Schedule. Thus, there has been no fresh charging of
duty on what was 2(i) and is now 3(i) under which category the appellant's
product 'ashvagandhaarist' was exempted from duty before the amendment of the
Schedule. There is, therefore, no doubt that item 1 & 2(i) remained
mutually exclusive or in other words, they would not be overlapping.
Item 1
in the amended Schedule deals with medicinal preparations being patent or
proprietary medicines and not medicinal preparations 'not otherwise specified.'
The Explanation I says that patent or proprietary medicines has the same
meaning as in clause (h) of Section 3 of the Drugs Act, 1940. The High Court
has found that re-numbered definition 3(h) was earlier 3(d) and read as
follows:
"3(d)
'Patent or proprietary medicine' means a drug which is a remedy or prescription
prepared for internal or external use of human beings or animals, and which is
not for the time being recognised by the Permanent Commission on Biological Standardisation
of the World Health Organisation or in the latest edition of the British
Pharmacopoeia or the British Pharmaceutical Codex or any other Pharmacopoeia authorised
in this behalf by the Central Government after consultation with the
Board." Thus, patent or proprietary medicines meant a drug which was
defined in the Drugs Act and not in the Act. The High Court rightly held that Ayurvedic
medicine was not a drug at all.
The
definition of drug expressly excluded them. So the definition of patent or
proprietary medicine 143 was exclusive of Ayurvedic medicinal preparations,
those being excluded from the definition of drug. The definition of patent and
proprietary medicines till then did not apply to Ayurvedic preparations. This
position continued indeed till the amendment of Drugs Act by the Drugs and
Cosmetics (Amendment) Act, 1964. Several amendments were effected by that
Amendment Act of 1964. Section 33A and Chapter IV A were inserted. Section 33A
said that Chapter IV was not to apply to Ayurvedic (including Siddha) or Unani
drugs. "Save as otherwise provided in this Act, nothing contained in this
Chapter shall apply to Ayurvedic (including Siddha) or Unani drugs". Chapter
IVA made.provisions relating to Ayurvedic (including Siddha) and Unani drugs.
This shows that prior to this amendment of 1964 Ayurvedic preparations were
expressly not drugs under the Drugs Act.
The
Drugs and Cosmetics Act in the amendment First Schedule after the amendment Act
of 1964 included Ayurvedic (including Siddha) and Unani system drugs prepared
under Section 3(a) which contains the definition: "Ayurvedic (including Siddha)
or Unani drugs includes all medicines intended for internal or external use of
human beings or animals and all substances intended to be used for or in the
diagnosis, treatment, mitigation or prevention of disease in human beings and
animals, mentioned and process and manufacture exclusively in accordance with
the formula prescribed in the authoritative book on Ayurvedic (Siddha) Unani
system of medicines specified in the first schedule." This definition was
also inserted by Drugs and Cosmetics (Amendment) Act, 1964 (13 of 1964) Section
2(a)(i) with effect from 15.9.1964.
The
same exclusion remained in the related Central Acts.
For
example, the Drugs Control Act, 1950 (Act 26 of 1950) replaced the Drugs
Control Ordinance, 1949 (6 of 1949) which was promulgated on 3.10. 1949 in
order to ensure that certain essential imported drugs and medicines were sold
in the reasonable price in the Chief Commissioner's provinces.
Similar
ordinances were issued by all the provinces. The necessity for continuing price
control of these essential drugs continued. That was an Act to provide for the
control of sale, supply and distribution of drugs. Drug meant any drug as
defined in clause (b) of Section 3 of Drugs Act, 1940, in respect of which a
declaration had been made under Section 3 which defined drug. It may be noted
that Pharmacopoeia authorised for the purpose of Section 3(h) of the Drugs Act,
1940, were: The Indian Pharmacopoeia, the Pharmacopoeia of the United States,
the National formulary of the United States, the International Pharmacopoeia
and the State Pharmacopoeia 144 of the Union of Soviet Socialist Republics,
vide S.O. 701 Gazette of India, 1961, Pt. II, S. 3(ii), p. 725. There was thus
no Ayurvedic Pharmacopoeia prescribed for the purpose of that Act.
Pharmacopoeia is a book containing the list of drugs with directions for use.
The fact that no Ayurvedic Pharmacopoeia had been notified at the relevant time
was because Ayurvedic preparations were not drugs for the purpose of Drugs Act
and, for that matter, of Medicinal and Toilet Preparations (Excise Duties) Act,
at the relevant time. It could be for this reason that in the original Schedule
the expression medicinal and toilet preparations 'not otherwise specified' was
used and Ayurvedic preparations of different categories were put under item 2.
In the Schedule as amended by the 1962 Act, this expression continued in item
3, The same definition of 'drug' also continued in the Drugs Act.
From
the Explanation I of the Schedule of the Act as substituted by Act 5 of 1964
also it is clear that patent or proprietary medicine means any medicinal
preparation which is not specified in a monograph in a Pharmacopoeia, Formulary
or other publications notified in this behalf by the Central Government in the
Official Gazette.
To be
a patent medicine one would be required to have a patent. A patented article
means an article in respect of which a patent is in force. "Patent"
means a patent granted under the Indian Patent and Designs Act, 1911, and now
the Patent Act, 1970. A patent medicine will, therefore, mean medicine in
respect of which a patent is in force. "Proprietary" means of a proprietor,
that is, holding proprietary rights. Patent means a grant of some privilege,
property, or authority, made by the Government or sovereign of a country to one
or more individuals. A proprietor is one who has the legal right or exclusive
title to anything. It is synonymous with owner. A person entitled to a trade
mark or a design under the acts for the registration or patenting of trade mark
or design is called a proprietor of the trade mark or design. Under the Trade
and Merchandise Marks Act, 1958, "trade mark" means:
"(i)
in relation to Chapter X (other than section 81), a registered trade mark or a
mark used in relation to goods for the purpose of indicating or so as to
indicate a connection in the course of trade between the goods and some person
having the right as proprietor to use the mark; and (ii) in relation to the
other provisions of this Act, a mark used or proposed to be used in relation to
goods for the 145 purpose of indicating or so as to indicate a connection in
the course of trade between the goods and some person having the right, either
as proprietor or as registered user, to use the mark whether with or without
any indication of the identity of that person, and includes a certification
trade mark registered as such under the provisions of Chap. VIII." As
defined in s. 2(a), registered proprietor in relation to a trade-mark means a
person for a time being entered in the register as proprietor of the
trade-mark. A registered trade-mark means a trade-mark which is actually on the
register.
By s.
18 of the Finance (No. 2) Act, 1962, the Schedule to the Act was further
amended substituting the Explanation 1 by the following:
"Explanation
1: "Patent or proprietary medicines" means any medicinal preparation
which bears either on itself or on its container or both a name which is not
specified in a monograph in a Pharmacopoeia, Formulary or other Publications
notified in this behalf by the Central Government in the Official Gazette, or
which is a brand name, that is a name or a registered trade mark under the
Trade and Merchandise Mark Act, 1958 (43 of 1958), or any other mark such as a
symbol, monogram, label, signature or invented words or any writing which is
used m relation to that medicinal preparation for the purpose of indicating or
so as to indicate a connection in the course of trade between as preparation
and some person having the right either as proprietor or otherwise to use the
name or mark with or without any indication of the identity of that
person." This amendment of the Explanation came into force in June, 1962
with retrospective effect from 23rd April, 1962.
The
Director of Prohibition and Excise, for Maharashtra State, Bombay, thereafter
issued the circular dated 31.5.
1962
(Ext. 44). It said that the patent or proprietary medicines as defined in
clause (d) of s. 3 of the Drugs Act of 1940 (23 of 1940) and falling under
items No. 1 and No. 4 of the Act as substituted by the Amendment Act, 1961
were, prior to 23rd April, 1962, subject to levy of duty at 10 per cent ad 146 valorem
by virtue of the Explanation I below the Schedule to the Act which has now been
deleted from 23rd April, 1962.
According
to new definition of 'Patent and Proprietary Medicines' as given in the new
Explanation as amended by Finance (No. 2) Act, 1962 medicinal preparations
containing alcohol, opium, Indian hemp or other narcotic drugs or narcotic
falling under item 3(i), 3(iii) and 3(v) of the said Schedule, were with effect
from 23rd April, 1962 liable to duty not under the said items but under item
No. 1 or item No. 4 of the said Schedule at 10 per cent ad valorem, if such
preparations are "patent or proprietary medicines" as defined in the
Explanation. Excise duty on all 'patent or proprietary medicinal preparations'
(Alopathic, Ayurvedic, Unani and Homoeopathic preparations) containing alcohol,
opium, Indian hemp or other narcotic drug or narcotic, which fall within the
purview of the new definition of 'patent or proprietary medicines' given in the
Explanation, should therefore, be recovered at the rate of 10 per cent ad valorem
from the holders of the licences granted under the said Act and the rules there
under in accordance with the instructions contained in their Circular No. DQ
64-31/61 dated 22nd July, 1961. A note received from the Government of India,
explaining the scope of the new definition of 'patent or proprietary medicines'
was also enclosed along with the circular.
It is
in evidence in the instant case that two bottles containing Asavas were
produced in the Court as Exhibit 42/1 and Exhibit 42/2. Both the bottles
contained the same kind of Asavas. The ingredients of the two were the same and
the preparation of the two was also the same. When the Asavas were sold during
the period beginning from June, 1962 to February, 1964, no excise duty was
levied because on the label there was no trade mark of patent and proprietary
right printed. If the Asavas were sold in the bottle having a label with no
trade mark as at Exhibit 42/1, no duty was recovered from the plaintiff. These Asavas
were supplied to Employees' State Insurance as per their tender without the
trade mark on the label to see that the plaintiffcompany were not taxed the
excise duty which would have been charged had they put the patent mark on the
label. But in order to fight for blemish of cheating, the plaintiff thought it
necessary to have the trade mark on such bottles without any difference. As
soon as the goods were sought to be sold in the above manner the excise duty
was levied and was sought to be recovered from the plaintiff's fund. No excise
duty was recovered after February, 1964 even though Asavas were sold with their
trade mark. It is also in evidence that there were two sub-groups in the group
of Asavas and Aristhas known as 'restricted' and 'unrestricted'. Restricted
means preparations which 147 could be used as alcoholic beverages. In this case
the period from 26.7.62 to 29.2.64 is alone material inasmuch as by the Finance
Act of 1964 with reference to item No. 1, the Ayurvedic and Unani medicines
containing self-generated alcohol and which were not capable of being consumed
as ordinary alcoholic beverages were exempted from the levy of excise duty. In
other words, the position prior to Finance Act of 1962 was continued and
thereafter the medicinal preparations, namely, Asavas and Aristhas ceased to be
taxed from 1964.
It
would be noted that the Explanation itself did not specifically mention
"Allopathic, Ayurvedic, Unani and Homoeopathic preparations" as was
done in the Director's Circular. On a comparison of the earlier Explanation and
the substituted Explanation one would notice that earlier "patent and
proprietary medicines" meant a drug. In the substituted Explanation it
means any medicinal preparation.
However,
it can not be lost sight of that the words "medicinal preparation" as
continued to be defined in s. 2(g) of the Act "includes all drugs which
are a remedy or prescription prepared for internal or external use of human
beings or animals and all substances intended to be used for or in treatment,
mitigation or prevention of diseases in human beings or animals." We have
already noticed that the Drugs Act continued to exclude Ayurvedic preparations
till its amendment in 1964. It has been stated that even after amendment of the
Schedule after 1961 amendment the appellant's product was exempted from duty,
till the Director's Circular disturbed the position.
This
brings us to the question of interpretation of the Act and the Schedule with
the Explanation. in view of the submission that the Explanation could not have
rendered item 3(i) of the Schedule redundant. Was there any change of intention
of the Legislature in this regard? A Schedule in an Act of Parliament is a mere
question of drafting. It is the legislative intent that is material. An
Explanation to the Schedule amounts to an Explanation in the Act itself. As we
read in Halsbury's Laws of England, Third Edition, Vol. 36, para 551: "To
simplify the presentation of statutes, it is the practice for their subject
matter to be divided, where appropriate, between sections and schedules, the
former setting out matters of principle, and introducing the latter, and the
latter containing all matters of detail.
This
is purely a matter of arrangement, and a schedule is as much a part of the
statute, and as much an enactment, as is the section by which it is
introduced." The schedule may be used in construing provisions in the 148
body of the Act. It is as much an act of Legislature as the Act itself and it
must be read together with the Act for all purposes of construction.
Expressions in the Schedule cannot control or prevail against the express
enactment and in case of any inconsistency between the schedule and the
enactment the enactment is to prevail and if any part of the schedule cannot be
made to correspond it must yield to the Act. Lord Sterndale, in Inland Revenue
Commissioners v. Gittus, [1920] 1 K.B. 563 said:
"It
seems to me there are two principles of rules of interpretation which ought to
be applied to the combination of Act and Schedule. If the Act says that the
Schedule is to be used for a certain purpose and the heading of the part of the
Schedule in question shows that it is prima facie at any rate devoted to that
purpose, then you must read the Act and the Schedule as though the Schedule
were operating for the purpose, and if you can satisfy the language of the section
without extending it beyond that purpose you ought to do it. But if in spite of
that you find in the language of the Schedule words and terms that go clearly
outside that purpose, then you must give effect to them and you must not
consider them as limited by the heading of that part of the Schedule or by the
purpose mentioned in the Act for which the Schedule is prima facie to be used.
You cannot refuse to give effect to clear words simply because prima facie they
seem to be limited by the heading of the Schedule and the definition of the
purpose of the Schedule contained in the Act." The above observation was
not disapproved in appeal (1921) 2 A.C. 81. However, the basic principle is
that in case of a conflict between the body of the Act and the Schedule, the
former prevails. In the instant case we do not find any such conflict.
An
Explanation, as was found in Bihta Marketing Union v. Bank of Bihar, AIR 1967
SC 389: (1967) 1 SCR 848, may only explain and may not expand or add to the
scope of the original section. In State of Bombay v. United Motors, AIR 1953 SC 252: (1953) SCR 1069,it was found that an
Explanation could introduce, a finction or settle a matter of controversy.
Explanation may not be made to operate as "exception" or
"proviso". The construction of an Explanation, as was held in
Collector of Customs v. G. Dass & Co., AIR 1966 SC 1577, must depend upon
its terms and no theory of its purpose can be entertained 149 unless it is to
be inferred from the language used. It was said in Burmah Shell Oil Ltd. v.
Commercial Tax Officer, AIR 1961 SC 3 15: (1961) 1 SCR 902, that the
explanation was meant to explain the Article and must be interpreted according
to its own tenor and it was an error to explain the Explanation with the aid of
the Article to which it was annexed. We have to remember what was held in Dattatraya
Govind Mahajan v. State of Maharashtra, AIR 1977 SC 915 (928): (1977) 2 SCR
790, that mere description of a certain provision, such as
"Explanation" is not decisive of its true meaning. It is true that
the orthodox function of an explanation is to explain the meaning and effect of
the main provision to which it is an explanation and to clear up any doubt or
ambiguity in it, but ultimately it is the intention of the legislature which is
paramount and mere use of a label cannot control or deflect such intention.
State of Bombay v. United Motors, (supra) laid down that the interpretation
must obviously depend upon the words used therein, but this must be borne in
mind that when the provision is capable of two interpretations, that should be
adopted which fits the description. An explanation is different in nature from
a proviso for a proviso excepts, excludes or restricts while an explanation
explains or clarifies. Such explanation or clarification may be in respect of
matters whose meaning is implicit and not explicit in the main section itself.
In Hiralal Ratanlal v. State of U.P., [1973] 1 SCC 216 (225), it was ruled that
if on a true reading of an Explanation it appears that it has widened the scope
of the main section, effect be given to legislative intent notwithstanding the
fact that the Legislature named that provision as an Explanation. In all these
matters courts have to find out the true intention of the Legislature. In D.G. Mahajan
v. State of Maharashtra, (supra) xx this Court said that legislature has
different ways of expressing itself and in the last analysis the words used
alone are repository of legislative intent and that if necessary an Explanation
must be construed according to its plain language and 'not on any a priori
consideration'.
Applying
the above principles we do not find any difference between the Schedule and the
Explanation I; the latter has not amended the Schedule by either deleting item
3(i) or by adding or including Ayurvedic preparations in item 1. No change of
legislative intent is indicated.
In the
Medicinal and Toilet Preparations (Excise Duties) Rules, 1956 Section C
Medicinal and Toilet preparations, Allopathic preparations, Homoeopathic
preparations and Ayurvedic preparations are dealt with separately. So far as Ayurvedic
preparations are concerned, 150 Rule 64 dealing with types of preparations
said: "Asavas and Aristhas are the principal types of Ayurvedic
preparations in which alcoholic content is self-generated and not added as
such." Rule 65 on Pharmacopoeia for Ayurvedic preparations said:
"Until a standard Ayurvedic pharmacopoeia has been evolved by the Central
Government, the pharmacopoeias that are in vogue in the various States shall be
recognised as standard Ayurvedic pharmacopoeias." Rule 66 classified the
preparations containing self-generated alcohol for purposes of levy of duty. It
said: "No duty shall be levied on Ayurvedic preparations containing
self-generated alcohol in which the alcohol content does not exceed 2 per cent.
Where
the percentage of proof spirit is in excess of 2 per cent, duty will be leviable
under item 2(ii) or 2(i) of the Schedule to Act the according as the
preparations are capable of being consumed as ordinary alcoholic beverage or
not." Thus Ayurvedic preparations containing self-generated alcohol which
are not capable of being used as alcoholic beverages fall under original 2(i)
and now 3(i).
The
above Rules, which have not been shown to have been amended clearly say that
where the percentage of proof spirit is in excess of 2% the preparation would
be dutiable under item 2 which became item No. 3 in the amended Schedule. This
Rule is consistent with the Schedule but is wholly inconsistent with the
Director's circular.
Mr. Ganguli
relies on (1971) 2 SCR 590: (1971) 1 SCC 4 Baidyanath Ayurved Bhawan Pvt. Ltd.
v. The Excise Commissioner of U.P., The question there was whether medicinal
preparation containing tincture, spirit etc. was dutiable.
The
tincture and spirit in their turn contained alcohol. It was contended that
alcohol was not directly added but was component of the tincture or spirit. It
was, however conceded that the preparations were medicinal preparations and
that tincture was a component of that preparation and alcohol was a component
of tincture. Therefore, this Court held that it was difficult to see how it
could be urged that the preparation did not contain alcohol. All that the plain
language of the provision required was that the preparation should contain
alcohol. The question whether Ayurvedic preparation was a drug to be included
in the definition of medicinal preparation was not involved. Whether
self-generated alcohol was to be treated differently was also not there.
In Mohanlal
Maganlal Bhavsar v. Union of India. [1986] 1 SCC 122 it was held that before a medicinal
preparation can fall under Item 151 1 of the Schedule three conditions are
required to be satisfied: (A) the preparation must be a patent or proprietary
medicine; (2) it must contain alcohol; and (3) it must not be capable of being
consumed as an ordinary alcoholic beverage. The fact that ointments and
liniments were medicinal preparations containing alcohol in semi-liquid form
did not make any difference. However it was not in dispute that the articles
were medicinal preparations for the purposes of the Act and that they were
patent and proprietary medicines. In the instant case the question is whether Ayurvedic
preparations, in view of the definition of medicinal preparations in the Act,
could be regarded as drugs and could be dutiable under Item 3 and not Item 1. In
Commissioner of Sales Tax v. The Modi Sugar Mills Ltd., [1961] 2 SCR 189 it was
held that a taxing statute must be interpreted in the light of what is clearly
expressed therein and nothing can be implied nor can provisions be imported
into them so as to supply an assumed deficiency. In Baidyanath Ayurved Bhawan
(supra) this Court quoted the observation of Rowlatt, J. in Cape Brandy
Syndicate v. Commissioners of Inland Revenue, [1921] 1 K.B. 64 that "in a
taxing Act one has to look at what is clearly said. There is no room for any
intendment. There is no equity about a tax. There is no presumption as to tax.
Nothing
is to be read in, nothing is to be implied. One can only look fairly at the
language used." The question in the instant case, however, is whether the
appellant's product being an Ayurvedic preparation could be a drug for being
included in the definition of medicinal preparation for the purpose of the Act.
This question was not raised in the above cases.
As Mr.
Dholakia points out, the Circular would render item 3(i) of the Schedule wholly
redundant. It has been the consistent policy of legislature to exempt item 3(i)
hitherto 2(i), from duty. The legislature has not in any way changed it. The
Explanation has not in any way altered the classification in the Schedule. The
substituted Explanation no doubt stressed on patents and trade marks. But it
has not expressly envisaged in item I, patented trade marked Ayurvedic preparations
contrary to the classification in the Schedule. Ex praecedentibus et consequentibus
optima fit interpretatio. The best interpretation is made from the context. Injustum
est nisi tota lege inspecta, de una aliqua ejus particula proposita judicare Vel
respondere. It is unjust to decide or respond as to any particular part of a
law without examining the whole of the law. Interpretare et concordare leges legibus,
est optimus interpretendi modus.
To
interpret and in such a way as to harmonize laws with laws, is the best mode of
interpretation. In the instant case the Director's Circular is not in harmony
with item 3(i) or with the classifi152 cation of Ayurvedic preparations in
separate item 3. It would not be in conformity with definition of medicinal
preparation' in s. 2(g) of the Act. Jura eodern modo dislituentur quo constitutuntur.
Laws are abrogated by the same means (authority) by which they are made. The
Director's Circular is not shown to have been a piece of delegated legislation.
The Explanation on its tenor does not amend the Schedule. No part of a Statute
is to be taken as superfluous or redundant. Every word in a Statute is to be
given a meaning. A construction which would leave without effect any part of
the language of a statute will normally be rejected.
Every
clause of a statute is to be construed with reference to the context and other
clauses of the Act so as to make, as far as possible, a consistent enactment of
the whole Statute.
The
High Court accepted the submission that it provided a selfcontained definition
of 'patent and proprietary medicines' for the purpose of the main Act and
severed the connection between the provisions of the Drugs Act as was
contemplated in earlier Explanation I, and consequently one need not look to
the Drugs Act at all for its interpretation and the Schedule was thence to be
interpreted as it existed along with that self-containing definition in
Explanation I.
In
doing so, the position that "Patent and Proprietary medicines" means
"any medicinal preparation" which very "Medicinal
preparation" includes all drugs which are a remedy or prescription etc. as
defined in s. 2(g) of the Act. So a reference to the Drugs Act was still
necessary. No doubt this is an inclusive definition. To enlarge its denotation a
specific provision to include Ayurvedic preparations containing selfgenerated
alcohol which are not capable of being consumed as ordinary alcoholic beverages
was necessary. That having not been done by the Explanation itself, it was not
permissible to include it by the Circular. The Explanation I could not have
been in conflict with the provisions of the Act and the Circular could not have
been in conflict with the Explanation, the Schedule, the Rules and the Act.
In the
result, we set aside the judgment and decree of the High Court and restore
those of the Civil Judge decreeing the suit. We leave the parties to bear their
own costs.
Y. Lal
Appeal allowed.
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