Macleods Pharmaceuticals Ltd vs The Unior Of India And Others
2017 Latest Caselaw 7014 Bom

                                                  210-WP-2527-1999.DOC




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       IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                    CIVIL APPELLATE JURISDICTION


                    WRIT PETITION NO. 2527 OF 1999



 1. Macleods Pharmaceuticals Ltd.
 A Company Incorporated under the
 Companies Act, 1956 and having its office
 at Atlanta, 3rd Floor, Churchgate, Near
 Leela Hotel, Andheri-Kurla Road,
 Andheri (East), Mumbai 400 059.

 2. Govind Ruia,
 of Mumbai Inhabitant having his office at
 Atlanta, 3rd Floor, ChurchRoad, Near Leela
 Hotel, Andheri -Kurla Road, Andheri                  ...Petitioners
 (East), Mumbai - 400 059.

         Versus

 1. The Union of India

 2. The Commissioner of Central Excise
 Having its office at Nav Prabhat
 Chambers, Ranade Road, Dadar (West),
 Mumbai 400 014.

 3. The State of Maharashtra

 4. The Commissioner of State Excise
                                     ...Respondents
 having his office at Thane




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                                                    210-WP-2527-1999.DOC




 Mr. Hormaz Daruwalla, with Mr. Ravi Gandhi, i/b M/s. Kanga
        & Co. for the Petitioners.
 Mr. Jitendra B. Mishra, for Respondents Nos. 1 and 2.
 Mr. A.I. Patel, AGP for Respondents Nos. 3 & 4.

                               CORAM:   A.S. OKA &
                                        RIYAZ I. CHAGLA, JJ.

JUDGMENT RESERVED ON 10TH AUGUST 2017

JUDGMENT PRONOUNCED ON 12TH SEPTEMBER 2017

O R A L J U D G M E N T :- (Per Riyaz I. Chagla J.)

1. The issue which arises for determination in this Petition

is whether formulations containing less than 135 mgs. i.e. 65

mgs of Dextropropoxyphene can be classified as 'Narcotic

Drug' or 'Narcotic' within the meaning of Section 2(h) of the

Medicinal and Toilet Preparations (Excise Duties) Act, 1955

("for short M & TP Act") and liable to State Excise Duty.

The brief facts that arise in the present case are as

under :-

2. The first Petitioner is a company manufacturing

Pharmaceutical formulations viz. Ibruven Forte, Centrivon

and Spasmovan (in short subject formulations) under Chapter

210-WP-2527-1999.DOC

30 of the schedule to the Central Excise Tariff Act, 1985. The

second Petitioner is the Chief Executive of the first Petitioner.

The Petitioners are having a factory, inter alia, at Palghar,

Dist. Thane.

3. By a notification dated 12th June 1986, the first

Respondent inter alia, declared Dextropropoxyphene to be a

'Narcotic Drug' for the purpose of the M & TP Act and entry

No.86 was inserted, which read thus :-

"(+) - 4 - dimethylamino - 1 - 2 diphenyl - 3 - methyl - 2 - butanol propionate, (the international non-proprietary name of which is Detropropoxyphene), and its salts, preparations, admixures, extracts and other substances containing any of these drugs, except preparations for oral use containing not more than 125 miligrams of Dextropropoxyphene base per dosage unit or with a concentration of not more than 2.5 percent in undivided preparations, provided that such preparations do not contain, provided that such preparations do not contain any substance controlled under the Convention on psychotropic substances, 1971 adopted by the United Nations Conference at Vienna in February, 1971".

4. The Petitioners had been advised that the subject

formulations were liable to duty under Chapter 30 of the

210-WP-2527-1999.DOC

Central Excise Tariff Act, 1995 and not covered by the M & TP

Act 1955 since they contained 65 milligram of

Dextropropoxyphene i.e. less than 135 mgs per doze under

the Notification. The Petitioners had claimed the subject

formulations were liable to duty under Chapter heading 30.03

of Central Excise Tariff Act, 1985 and not under the M & T P

Act.

5. Respondent No.4 issued a show cause notice on 24th

October 1997 calling upon the Petitioners to submit

information in a form attached to the notice. The Petitioners

submitted the information called for by the show cause notice

on 15th December, 1997. The Respondents addressed a

communication dated 17th November 1998 and claimed that

the Petitioners were manufacturing the subject formulations

which were Narcotic substance without permission and had

committed a criminal offence. The Petitioners were called for

a personal hearing on 30th November 1998 but which could

not be attended by the Petitioners due to the non-availability

of the concerned person. The Petitioners informed

Respondent No.4 on 12th December 1998 that the subject

210-WP-2527-1999.DOC

formulations contained only 65 mgs of Dextropropoxyphene

and since the notification issued by the first Respondent

provided for formulations having more than 135 mgs of

Dextropropoxyphene to be classified as a narcotic substance,

the subject formulations would not be covered by the

definition of Narcotic under the M & TP Act.

6. The Inspector of State Excise department, Vashi on

29th December 1998 visited the factory of the Petitioners and

seized the stock of the subject formulations on the ground

that the Petitioners had evaded State Excise Duty and that

the Superintendent of State Excise Department issued an

alleged order dated 16th December 1998 which was not

served upon the Petitioners. The Petitioners informed the

Superintendent of Central Excise by their communications

dated 5th January 1999, 3rd February 1999 and 11th

February 1999 that the State Excise Authorities are

demanding duty on the subject formulation under the M & TP

Act and that no Central Excise Duty is payable under the

Central Excise Tariff Act, 1985. The Petitioners having not

210-WP-2527-1999.DOC

received any communication from the Central Excise

Authorities filed this Petition.

7. The Petition came up for admission on 4th May 1999

when the Division Bench of this Court passed an order

wherein the Petitioners were directed to pay duty at the rate

of 20% to the State Government under the M & TP Act and

the Petitioners were directed not to deposit any duty with the

Central Excise Authorities under the Central Excise Act till the

hearing of the Petition. In the event that the Petitioners were

to succeed in the Petition, the State Government shall remit

the amount payable by way of duty to the authorities under

the Central Excise Act out of the amount deposited by the

Petitioners by virtue of the said order. In so far as the duty

already paid @ 15% / 16% to the Union of India under the

Central Excise Act the Petitioners were to furnish particulars

of the duty paid in the past under the Central Excise Act and

the State Government was to find out the differential amount

payable by the Petitioners, in the event it was held that the M

& TP Act is applicable. This was to be intimated to the

Petitioners and Petitioners were to deposit the said amount

210-WP-2527-1999.DOC

within four weeks of the receipt of the intimation by the State

Government. By a further order dated 13th February 2006

passed in a Civil Application taken out by the Petitioner, order

dated 2nd February 2005, by which the Petition was

dismissed for default was recalled and Rule was issued.

8. An Affidavit has been filed by one Pratapsinh Damodar

Golekar, Deputy Commissioner of State Excise (Medicinal

and Toilet Preparations), Maharashtra State, Mumbai dated

3rd May 1999 in Reply to the Petition. In the said Affidavit the

deponent has relied upon an order of the Government of

India dated 13th April 1999, which rejected a revocation

application by one DWD Pharmaceuticals Ltd. and placed

reliance upon a judgment of the Supreme Court in M/s.

Baidyanath Ayurved Bhavan Ltd., Vs. Excise

Commissioner, UP and Ors1 where it was held that mere

presence of alcohol in a medicine is sufficient to make the

medicine dutiable under the M & T P Act. The formulations

containing less than 135 mg. Dextropropoxyphene was held

to be dutiable under the M & TP Act by the said Government

1 AIR 1971 SC 378.

210-WP-2527-1999.DOC

order. An Affidavit has also been filed in reply to the Petition

by the Commissioner of Central Excise, Vasai-II, Division

Thane II dated 7th November 2003, wherein it is stated that

the Central Board of Excise and Customs vide their

communication dated 3rd April 2000 had informed the

Respondents that the commodity viz. Dextropropoxyphene

was correctly dutiable under the M & TP Act. It was stated

that the Petitioners ought to have claimed refund of the duty

paid under the Central Excise Act and having not claimed the

refund, the Petitioners claim had become time barred and

they were not entitled to make any claim.

9. Mr. Daruwalla, the learned counsel appearing for the

Petitioners has submitted that the above issue is no more res

integra. This issue has been answered by the Division Bench

of this Court in USV Limited Vs. State of Maharashtra 2

paragraph 13, of which reads thus:-

13. Plain reading of the Notification dated 12th June 1986 would disclose that any medicinal preparations containing Dextropropoxyphene base per dosage unit not more tha 135 mg are

2 2007 (3) Bom. C.R. 316.

210-WP-2527-1999.DOC

excluded from being classified as narcotic drug or narcotic within the meaning of the said expression under Section 2(h) of the said Act. Once the product of the petitioners discloses Dextroropoxyphene-HCL which in terms contains Dextroropoxyphene base to the extent of 70 mg, which fact has not been disputed by the respondents at any stage of the proceedings, even in the affidavit in reply filed by them, obviously such a product would stand exempted in terms of the said notification and would not be classifiable as narcotic drug or narcotic under the said Act.

10. The said judgment of this Court has considered the

notification dated 12th June 1986 and its applicability and as

set out above held that the subject formulation of

Dextropropoxyphene being less than 135 mg viz. 70 mg

would stand exempted in terms of the said notification and

not classified as a narcotic drug or narcotic under the said

Act. The said judgment has also considered the Supreme

Court judgment relied upon in the Central Government order

dated 13th April 1999, in paragraph 15, which reads thus:

The decision of the Apex Court in (M/s Baidyanath Ayurved Bhawan Pvt. Ltd., Jhansi Vs. The Excise Commissioner, UP and Ors.), reported in AIR 1971 S.C. 378 was on totally different issue where the quantity of Dextroropoxyphene or any similar such product was not in issue. The issue in that

210-WP-2527-1999.DOC

case was, whether the medicinal preparations contain alcohol or not. The quantity of alcohol was not subject matter to adjudicate. In the matter in hand, the quantity of Dextro- ropoxyphene is most relevant factor to decide, whether the product can be called as narcotic drug or narcotic under the said Act and as already seen above, the product of the Petitioners cannot be considered as containing narcotic drug or narcotic.

11. Mr. Daruwalla has accordingly submitted that the very

same issue having already been answered by the Division

Bench of this Court in favour of the Petitioner the demand of

duty payable under the M & TP Act in the present case is

thoroughly untenable. It was held in the said judgment that

the State Government shall reimburse the Central

Government regarding the liability of the Petitioners for

Central Central Excise duty during the period for which the

Petitioners have paid duty @ 20%. Mr. Daruwalla has

submitted that in the present case the Petitioners had

stopped manufacturing of the subject formulations upon the

interim order dated 4th May 1999 having been passed.

However, the above judgment would squarely apply in the

present case and the Petitioners having suffered loss on

account of the wrongful seizure of the subject formulations by

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the Respondents Nos. 3 and 4, and costs should be awarded

to them.

12. Mr. Patel, AGP appearing for Respondents Nos. 3 & 4

and Mr. Jitendra Mishra, learned Advocate appearing for

Respondents Nos. 1 & 2 have supported the action taken by

the Respondents.

13. Having heard the arguments, we are of the view that

this Petition is squarely covered by the judgment of this Court

in USV Ltd. (Supra). The term "Narcotic Drug" or "Narcotic"

with which we are concerned with in the present case has

been defined under Section 2(h) of the M & T P Act to mean a

substance which is coca leaf, or coca derivative, or opium, or

derivative of opium, or Indian hemp and shall include any

other substance, capable of causing or producing in human

beings dependence, tolerance and withdrawal syndromes

and which the Central Government may, by notification in the

Official Gazette, declare to be a Narcotic Drug or Narcotic.

Under the notification dated 12th June 1986, issued by the

Central Government in terms of the said provisions of the M

210-WP-2527-1999.DOC

& T P Act, substances have been declared as Narcotic Drug

or Narcotic. The plain reading of item No. 86 in the

notification extracted above which is the relevant item in the

present case a Narcotic Drug or Narcotic would include only

formulations containing more than 135 mgs of

Dextropropoxyphene per dosage unit. In the present case

admittedly the subject formulations contain less than 135 mgs

i.e. 65 mgs of Dextropropoxyphene and hence cannot be

classified as a Narcotic drug or Narcotic in view of the said

Notification.

14. We accordingly hold and declare that the subject

formulations of the Petitioners containing less than 135 mgs

i.e. 65 mgs of Dextropropoxyphene are excluded from being

classified as a Narcotic Drug under the Section 2(h) of the M

& T P Act. We find that the view taken by the Respondents

viz. that the Petitioners are liable to the State Excise Duty

under the M & T P Act is thoroughly untenable and we quash

the impugned demand notices.

210-WP-2527-1999.DOC

15. We direct the Respondents to pay the Petitioners costs

of Rs. 50,000/- for the loss caused to the Petitioners on

account of the wrongful seizure of the subject formulations.

The Petitioners are permitted to withdraw the amount

deposited with the Registry pursuant to the interim order

dated 4th May 1999 together with interest, if any, accrued

thereon.

16. Rule is made absolute in the above terms.

       (RIYAZ I. CHAGLA J.)                ( A.S. OKA, J.)