2017 (11) TMI 733 - HC - Central Excise

Classification of goods - product Lobain - Respondent has held that articles contained less than 135 mg Dextropropoxyphene to be correctly taxable under the Medicinal and Toilet Preparations - Held that - the substances contained less than 135 mg of Dextropropoxyphene is not taxable under the M & TP Act. The impugned order has erroneously held that preparations containing Dextropropoxyphene in such minimal quantity although not being a narcotic drug or narcotic by itself but does not cease to be a preparation containing a narcotic drug or narcotic - from a plain reading of the Notification dated 14th November 1985 wherein the subject preparation viz. Dextropropoxyphene has been referred it is clear that only where the preparation contains in excess of 135 Mgs of Dextropropoxyphene would be considered to be a narcotic drug. It is thus clear from the said entry in the Notification that the formulation of Dextropropoxyphene containing less than 135 mgs viz. 65 mg. would stand exempted and not classified as narcotic drug or narcotic under the M & TP Act - In the present case admittedly the subject formulations contained less than 135 mgs i.e. 65 mg of Dextropropoxyphene and hence cannot be classified as a narcotic drug or narcotic in view of the said notification. This issue is squarely covered by the decision in the case of Macleods Pharmaceuticals Ltd Govind Ruia Versus The Union of India The Commissioner of Central Excise The State of Maharashtra The Commissioner of State Excise 2017 (9) TMI 877 - BOMBAY HIGH COURT where it was held that the subject formulations containing less than 135 mgs would by the Notification itself be not included as a narcotic drug or narcotic. Petition allowed - decided in favor of petitioner.

Summary

Issues:
Challenging order upholding taxation under Medicinal and Toilet Preparations (Excise Duties) Act, 1955 for product Lobain.

Analysis:
The Petitioners contested an order upholding taxation on their product Lobain under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955. The dispute arose when the Inspector State Excise issued a show cause notice in June 1997, leading to subsequent orders by the Superintendent of State Excise and the Commissioner of State Excise, directing the Petitioners to pay excise duty and obtain a license under the Act. The Petitioners challenged these decisions through a series of appeals and revision applications. The High Court intervened in June 1999, directing the Petitioners to pay duty to the State Government and not the Central Excise authorities for future production, tagging the case with related petitions.

The key legal issue revolved around whether formulations containing less than 135 mg of Dextropropoxyphene could be classified as a narcotic drug under the Act. The Petitioners argued that previous judgments favored their position, citing cases involving similar disputes. The Court examined the matter in light of previous decisions and found that formulations with less than 135 mg of Dextropropoxyphene should not be considered narcotic drugs under the Act. The Court referenced specific notifications and legal provisions to support its conclusion, emphasizing that the quantity of Dextropropoxyphene was a crucial factor in determining the classification.

The Court's detailed analysis highlighted that the subject formulations, containing 65 mg of Dextropropoxyphene, fell outside the scope of narcotic drugs as per the relevant notification. Relying on precedents and legal provisions, the Court concluded that the impugned order was erroneous and set it aside. The final judgment declared that the Petitioners' formulations were excluded from classification as narcotic drugs under the Act, quashing the previous orders and allowing the Petitioners to withdraw any deposited amounts with interest. The Court ruled in favor of the Petitioners, emphasizing compliance with the notification's provisions and rejecting the taxation imposed by the State authorities.

In conclusion, the High Court's judgment provided a comprehensive analysis of the legal issues surrounding the classification of formulations containing Dextropropoxyphene under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955. By referencing previous decisions, legal provisions, and notifications, the Court clarified that formulations with less than 135 mg of Dextropropoxyphene should not be treated as narcotic drugs, ultimately ruling in favor of the Petitioners and setting aside the contested orders.