M/S. Astra Pharmaceuticals (P) Ltd. Vs.
Collector of Central Excise, Chandigarh [1994] INSC 688 (16 December 1994)
(R.M. SAHAI & K.S. PARIPOORNAN, JJ.)
ACT:
HEADNOTE:
1.
This
appeal under Section 35L of the Central Excises & Salt Act, 1944 ('Act' for
short) raises two important questions of law, one relating to construction of
item no. 14E of the Central Excise Tariff levying duty on Patent and
Proprietary medicines and other the scope of proviso to Section 11A of the Act.
2.
For
purposes of duty patent and pro- 278 prietary medicines were classified in
relevant period in two broad categories one, which were dutiable under tariff
item 14E and other which fell under the residuary item 68. The latter were
wholly exempt from duty under Notification No.55/75 dated 1.3.75. The appellant
manufactured pharmacopoeial and non-pharma-copoeial medicines. One of the items
manufactured by the appellant was 20% Dextrose injection. 1 is a trade name in
the Indian pharmacopoeia.
It being one of the medicines specified in
pharmacopoeia it was wholly exempt from duty. An item which fell under tariff
item 68 and was wholly exempt from duty was further exempted from operation of
rule 174 and no central excise licence to manufacture it was required to be
taken out. The appellant, therefore, did not obtain any licence and cleared the
Dextrose manufactured by it without paying any duty since the date of
manufacture in December 1978 till 23rd January 1982 when notice was served on
it for showing cause as to why Dextrose manufactured by it may not be subjected
to duty under tariff item 14E as even though it was pharmacopoeial product, yet
the label used on the packing and the container bore a monogram which indicated
a connection between the medicine and the appellant.
3.
To
determine if the appellant was liable to pay duty on Dextrose injection
manufactured by it, it will have to be examined if it fell under tariff item
14E extracted below:
Tariff Description of Goods Rate of duty Item
No. Basic Special Excise 14E Patent or Proprietary 12-1/2% 10%of Medicines not
contain- Adv. the basic ing alcohol, opium, duty Indian Hemp or other
chargeable.
narcotic drugs or other narcotics other than
those medicines which are exclusively ayur- vedic, unani, sidha or
homoeopathic.
Explanation: 1 `Patent or Proprietary
medicines' means any drug or medicinal preparation, in whatever form, for use
in the internal or external treatment of, or for the prevention of ailments in
human beings or animals, 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 Marks 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 in relation to that medicine for the purpose of
indicating or so as to indicate a connection in the course of trade between the
medicine and some person, having the right either as proprietor or otherwise to
use the name or mark with 279 or without any indication of the identity of that
person.
Explanation : 11 `Alcohol', 'Opium', 'Indian
Hamp', 'Narcotic Drugs' and 'Narcotics' have the meanings respectively assigned
to them in Section 2 of the Medicinal and- Tolet preparations (Excise Duties)
Act, 1955 (16 of 1955).
4.
The
entry is in two parts, one the main and other explanatory. The main part
negatively excludes those medicines which contain any of the ingredients
mentioned in it or are ayurvedic, unani, sidha or homoeopathic medicines.
The range of patent and proprietary medicines
thus having been determined by the main part the explanation spells out the
exact scope of the entry by first widening its ambit by including any drug or
medicinal preparation in whatever form and used for any ailment in human beings
or animals then carves out an exception in favour of any pharmacopocial
medicine or medicines which have been mentioned in a publication issued by the
Central Government, but excludes again from it those medicines which even
though mentioned in pharmacopoeia are identified by a monograph or a symbol,
signature or invented words so as to establish a relationship between the
producer and the medicine. To put it simply, all those patent and proprietary
medicines which are mentioned in pharmacopoeia are excluded from the entry
unless the manufacturer or producer by use of any distinctive mark establishes
connection with the medicine.
5.
In
other words, all those medicines which either bear a name which is not
specified in the Pharmacopoeia or which is a brand name and that brand name is
used by any symbol, monogram or signature so as to establish a relationship
between the medicine and the person manufacturing or selling it then such
patent or proprietary medicine would be covered in it. The purpose appears to
be that if a manufacturer manufactures medicines which were mentioned in
Pharmacopoeia then it was not liable to pay any duty. But if it produced a
medicine which carries its own name which was not mentioned in the
Pharmacopoeia, then it was liable to pay duty under this item. 'Mat is, a
patent or proprietary medicine to attract levy under this tariff item must
either be a medicine which was not specified in a Pharmacopoeia or other
publication and carried on it or its container name of the produce by symbol or
invented name etc. A medicine of which the producer is the proprietor and it is
known by its name would be covered in this clause. The other class of patent or
proprietary medicines to which this tariff item applies are those medicines
which have a brand name or a registered trade mark under the Trade and
Merchandise Marks Act and carry such marks or symbol, monogram as to establish
relation between medicine and producer or manufacturer.
That is, the writing or monogram on the
medicine must establish that it was the producer or the manufacturer who was
proprietor of the medicine.
8. This appeal is concerned with the latter
clause i.e., the medicine carrying brand name. the Explanation includes in its
ambit all those medicines which carry a brand name which is registered under
the Trade and Merchandise Act and the manufacturer describes that medicine by
any symbol, monogram or label so as to establish a relationship between the
manufacturer and the medicine then the medi- 280 cine manufactured by him could
be included in the Explanation appended to Item 14E. The appellants manufacture
20% Dextrose injections. It is not disputed that 20% Dextrose injections are
mentioned in Pharmacopoeia but the appellant has been denied exemption as on
the cover it carries the name 'AP ASTRA'. According to the Department, since
the medicine is described by a monogram and it established a relation between
the manufacturer and the medicine, therefore, it was included in Explanation 1
to Item 14E. The Tribunal found that letters 'AP' do not constitute a monogram
because the two letters arc not interwoven but they being placed side by side
in an artistic manner on the top it made the medicine manufactured by the appellant
as a patent or proprietary medicine attracting central excise duty under tariff
item 14E.
6.
As
has been explained earlier the first part of the Explanation widens the ambit
of the entry by extending it to any drug or medicinal preparation for use in internal
or external administration for prevention of ailments in human beings or
animals. But then it narrows it by restricting the applicability of the tariff
item to only such medicines which bear either on itself or on its container or
both a name which is not specified in a monograph in a Pharmacopoeia. This
obviously is not applicable to the appellant as the injections manufactured by
the appellant are specified in a Pharmacopoeia. The other class of medicines to
which this Explanation applies are those which have a brand name that is a name
or a registered trade mark under a Trade & Merchandise Marks Act. The
medicine manufactured by the appellants is not registered under the Trade and
Merchandise Marks Act. Therefore, it would attract levy only if its container
or packing carried any distinctive marks so as to establish the relation
between the medicine and the manufacturer. But the identification of a medicine
should not be equated with the produce mark.
Identification is compulsory under the Drug
Rules.
Technically, it is known as 'house mark. In
Narayan's Book on Trade Marks and Passing-Off, the distinction between 'house
mark' and 'product mark' (brand name) is brought out thus, "677A. House
mark and product mark (or brand name).
In the pharmaceutical business a distinction
is made between a house mark and a product mark. The former is used on all the
products of the manufacturer. It is usually a device in the form of an emblem,
word or both. For each product a separate mark known as a product mark or a
brand name is used which is invariably a word or a combination of a word and
letter or numeral by which the product is identified and asked for. In respect
of all products both the product mark and house mark will appear side by side
on all the labels, canons etc. Goods are ordered only by the product mark or
brand name. The house mark serves as an emblem of the manufacturer projecting
the image of the manufacturer generally." The 'AP' or 'Astra' on the
container or packing was used to project the image of manufacturer generally.
It did not establish any relationship between the mark and the medicine. For
instance, if the appellant instead of using Dextrose injections would have described
it as Astra injec- tions or Astra Dextrose injections then it could be said
that a relationship between the monograph and the medicine was established. In
the case of appellant it was 281 only a monograph to identify the manufacturer.
7.
In
M/s Indo French Pharmaceutical Co., Madras v. Union of India and others 1978
E.L.T. (J 478) a learned Single Judge of the Madras High Court while construing
tariff item 14E observed, " a close reading of the Explanation however in
my view indicates that the marks, symbols, monogram, label, signature or other
words which are used in the medicinal preparation or its container should be
such as to indicate that the medicine is a special preparation made by the
manufacturer. The connection between the medicine and the manufacturer
contemplated under the Explanation should be such as to indicate that the
manufacturer has a proprietary interest in the medicine. " This was
approved by a Division Bench of the same High Court in Union of India v.
Indo-French Pharmaceutical Company 1983 E.L.T. 725 (Mad.). Reliance was placed
on Ramsey Pharma Private Ltd. v. Superintendent, Central Excise, Allahabad
& Ors. 1983 E.L.T. 78 (All.) for the Revenue and it was claimed that this
decision was followed by the Tribunal and since it was based on correct
interpretation of Explanation 1 the appellant was not entitled to any relief It
would be seen that in the decision rendered by the Allahabad High Court it is
not clear if the container bore the name of the medicine as well. What has been
extracted in the judgment is that the medicine has been manufactured by M/s
Ramsey Pharma Pvt. Ltd. As stated earlier if the container of the appellant
would have stated that these were Astra Dextrose injections then it could be
said that a relationship between the medicine and the manufacturer was
established. The ratio laid down by the Madras High Court is approved as
correctly enunciating the scope of Explanation 1. Since the appeal is being
allowed on merits the question whether the Revenue was justified in reopening
the case under proviso to Section 11 A of the Act is rendered academic and is
not necessary to be decided.
8.
In
the result this appeal succeeds and is allowed. The order passed by the
Tribunal is set aside and the question of law raised by the appellant is
decided by saying that Dextrose injections manufactured by the appellant in the
relevant years were not patent and proprietary medicines dutiable under tariff
item 14E of the Schedule. There shall be no order as to costs.
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