State
of Gujarat Vs. Suhrid Geigy Ltd. & Ors
[1996] INSC 1589 (10
December 1996)
S.P.
Bharucha, S.C. Sen Bharucha, J.
ACT:
HEAD NOTE:
WITH CIVIL
APPEAL NOS. 3536-40/82 & 7431/83
These
appeals arise out of judgments and orders of the High Court of Gujarat. the
principal judgment was delivered in the case of Suhrid Geigy Ltd., Ahmedabad
vs. Union of India & Ors. (1980 E.L.T. 538), which is under challenge in
Civil Appeal No.1780/80, and was followed in the other matters. We shall deal
with the principal judgment first.
The
appellants manufacture. inter alia, the following medicinal preparations:
Sr. No.
Product
1. Xylocaine
1% plain vial
2.
" 2% plain vial
3.
" 1% Adrenaline vial
4.
" 2% Adrenaline vial
5.
" 2% Adrenaline cartrtridge
6.
" 5% heavy ampoule
7.
" 4% topical vial
8.
" 5% ointment tube
9.
" 2% jelly tube
10.
" 2% viscous vial
11. Butazolidin
3ml. ampoule
12. Irgapyrin
3ml. ampoule
13. Irgapyrin
5ml. ampoule
The
first ten medicinal preparations are local anesthetics. The other three are
anti-inflammatory and anti- rheumatic medicinal preparations and contain a
small percentage of Xylocaine. The appellants were issued with demand notices
to pay excise duty under the provisions of the medicinal and Toilet
Preparations (Excise Duties) Act, 1955, upon the said medicinal preparations.
The demands were challenged in a writ petition before the Gujarat High Court,
which was allowed by the principal judgment under appeal.
Reference
must first be made to some provisions of the said Act. Section 2 is its
definition section. Clause (c) thereof defines "dutiable goods" to
mean "the medicinal and toilet preparations specified in the
Schedule". Clause (g) defines "medicinal preparation" 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". The definition of "narcotic drug" and "narcotic"
in clause (h) reads thus" "(h) "narcotic drug" or
"narcotic" means a substance (other than alcohal) which when
swallowed or inhaled by, or injected into, a human being induces drowsiness,
sleep, stupefaction or insensibility in the human being and includes all akjakiuds
of opium.
Section
3(1) is the charging section and it states that there shall be levied duties of
excise, at the rates specified in the Schedule, on all dutiable goods
manufactured in India. Entry 1 of the Schedule deals with
medicinal preparations and sub-entry (1) thereof with allopathic medicinal
preparations. Item (iii) thereunder at the relevant time prescribed the duty leviable
on "medicinal preparations not containing alcohol but containing narcotic
drug or narcotic".
The
aforementioned notices were issued to the appellants upon the basis that anaesthetics,
including Xylocaine, were covered by the definition of a narcotic drug or
narcotic in section 2(h); hence, medicinal preparations containing Xylocaine
were assessable to duty under the said Act.
The
High Court took the view that the use in Section 2(h) of the word
"or" between the words "stupefaction" and
"insensibility" did not suggest alternatives. The four stages of
drowsiness, sleep, stupefaction and insensibility mentioned in Section 2(h) were
stages of progression which followed one after another and, in that sense, the
word "or" meant "and". A narcotic drug or a narcotic
should, therefore, produce all the four effects one after the other with the
passage of time. When a narcotic drug or a narcotic, which was a component part
of the medicinal preparation sought to be taxed, ceased to produce the symptoms
set down in the definition of Section 2(h), it ceased to be a narcotic drug or
a narcotic. For this, among other reasons, the High Court rejected the
Revenue's case.
We do
not agree with the High Court that, by reason of the definition in Section
2(h), a narcotic drug or a narcotic is a substance which must produce
drowsiness and sleep and stupefaction and insensibility, in that order, in a human
being, and that the word "or" between "stupefaction" and
"insensibility" therein must be read as "and". We take the
view that, on its plain meaning, a narcotic drug or narcotic as defined in
preparation, as defined by Section 2 (g). It cannot, therefore, be said to be a
"substance" within the meaning of Section 2(h), by reason of whose
inclusion in another medicinal preparation, the other medicinal preparation
becomes dutiable. As we see it, to render a medicinal preparation dutiable, it
must include some substance, other than a medicinal preparation, that possesses
the properties of producing drowsiness, sleep, stupefaction or insensibility.
That substance needs to be identified. If that substance is in a medicinal
preparation, whether by itself or by reason of being an ingredient of another
medicinal preparation that is incorporated in the medicinal preparation, the
medicinal preparation is dutiable. In the present case, it is not enough for
the Revenue to state that the said medicinal preparations contain Xylocaine and
Xylocaine has the properties mentioned in Section 2(h). What must be set out
is: what is it that is contained in Xylocaine which contains these properties
and, by reason thereof, makes the said medicinal preparations dutiable.
It is,
therefore, that we would agree with the High Court that the demands upon the
appellants must be quashed.
Having
regard to this conclusion, we dot not find it necessary to consider either the
argument that the State of Gujarat, by
itself, cannot not maintain the appeal or that the demands upon the appellants
contravene the provisions of Article 14 of the Constitution.
In the
other appeals, anaesthetics are ingredients of the medicinal preparations
sought to be made dutiable. As in the case of Xylocaine, what it is within the anaesthetics
that produces drowsiness or sleep or stupefaction or insensibility was not
identified. For the reasons afore- stated, these appeals must also be
dismissed.
The
appeals are dismissed, No order as to costs.
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