TMI Blog1987 (2) TMI 324X X X X Extracts X X X X X X X X Extracts X X X X ..... on 1-1-1981 and ending on 31-12-1987 together with interest at the rate of 21% from the date of collection till the date of refund. 2. Petitioners manufacture under a licence dated July 13, 1967, issued by the Drugs Controller under the Drugs and Cosmetics Act, 1940, which was amended on September 7, 1987, several products, inter alia, Zinc Oxide Adhesive Plaster B.P.C. (Leukoplast); Surgical Wound Dressing (Handyplast); Belladona Plaster B.P.C.; Capsicum Plaster B.P.C. and Cotton Crepe Bandages B.P.C. (Leukocrepe). 3. The aforesaid goods or products were liable to Local Sales Tax as well as Central Sales Tax and prior to 1st November, 1981, the rate of the Local Sales Tax leviable on them being of 6% and under Section 8(2-A) of the Central Sales Tax Act, the rate of the Central Sales Tax of 4% 28-10-1981, drugs and medicines were exempted from the levy of Local Sales Tax in excess of 3% and thus, according to the petitioners, as a result of this exemption, the Central Sales Tax leviable under Section 8(2-A) of the Central Sales Tax Act was also reduced to 3%. 4. The petitioners however had been paying Central Sales Tax at the rate of 4% on the sales of the goods and also Loc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x paid in excess till the time of the institution of the present writ petition. However, after the admission of this writ petition, the Assistant Sales Tax Officer made orders dated December 24, 1987 for the period commencing on 1-1-1983 and ending on 31-12-1983. He rejected the claim for refund, applying the principle or the doctrine of unjust enrichment. 8. Petitioners case is that the aforesaid products or goods are drugs and medicines and therefore, fall under the purview of the exemption Notifications No. 14/41/81-Fin. (R C) and No. 5/5/87(R C)-8. The assessment orders under challenge are accordingly illegal and liable to be set aside and the petitioners are entitled to the refund of the taxes paid under a mistake of law and collected by the respondents without authority of law. Respondents however contend that the aforesaid products are not drugs and medicines , and as such, the question of the refund of the taxes paid does not at all arise. Hence, two are the questions that fall for our determination, namely, (a) whether the products manufactured by the petitioner and listed in the paragraphs 2 and 4 of the petition are drugs and medicines within the purview of the af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Counsel further urged that that had been the understanding of the Excise Authorities who had consistently classified the said products as Drugs and Medicines falling under Tariff Item No. 68, but exempted from payment of duty under Notification No. 55/75, dated 1-3-1975. Finally, the learned Counsel, placing reliance on Leukoplast (India) Ltd. v. Union of India and Others, 1983 E.L.T. 2106 (Bom.), contended that the Division Bench of this Court has held that Zinc Oxide Self Adhesive Plaster B.P.C. manufactured by the petitioners is a Drug and Medicine and has, as such, granted refund of tax collected. He also placed reliance in support of his contentions in the decision of the Supreme Court in Chimanlal Jagjivandas Sheth v. State of Maharashtra, A.I.R. 1963 S.C. 665. 10. We have already mentioned that the case of the respondents is that the products question manufactured by the petitioners are not drugs and medicines and that therefore, the petitioners are not entitled to the sought refund of duty. The learned Advocate General has indeed contended before us that first of all, the Division Bench has not held in Leukoplast (India) Ltd. v. Union of India and Others, 1983 E.L.T. 2106 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Drugs and Cosmetics Act is of no significance and does not advance the petitioners case. He further placed reliance in support of his submission that the popular understanding of the word and not its technical meaning is to be considered in Indo International Industries v. Commissioner of Sales Tax, Uttar Pradesh, 1981 (47) S.T.C. 359, as well as in the decision of the Single Judge of this Court in Prabhudas Kalyanji Adhia v. State, A.I.R. 1970 (Bom.) 134. He equally placed reliance in Nippon Yusen Kaisha v. Ramjiban Serowgee, A.I.R. 1938 P.C. 152 to support his contention that definitions given in one Statute cannot be used to interpret the same expression occurring in a different Act or Statute. The learned Advocate General, proceeding with his arguments, further contended that definitions given in the Pharmaceutical Codex are not binding as observed in Prabhudas Adhia s case (supra), and in any event, the definition given in Section 3(b) of the Drugs and Cosmetics Act is, as the word includes shows, inclusive in nature. The learned Advocate General lastly contended that as laid down by the Supreme Court in Union of India and Others v. Gujarar Woollen Felt Mills, A.I.R. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it may be also pointed out that this is not an absolute principle of law. Generally it is so, but in a given case, the definition given in a particular Statute, not being repugnant, may be used to construe and interpret the same expression occurring in another statute. The learned Advocate General is further right in his submission that inasmuch as the Excise Law is concerned, it is the understanding which a product has in trade or popularly that counts. 12. The question whether the technical or the commercial meaning is to be considered while interpreting the entries in the Schedule of the Sales Tax Act fell for the determination of the Division Bench of this Court in Uday Minerals case (above). The Division Bench, relying on the observations made by the Supreme Court in Commissioner of Sales Tax, Madhya Pradesh v. Jaswant Singh Charan Singh, A. I. R. 1967 S.C. 1454 and in Ramavatar Budhaiprasad etc. v. Assistant Sates Tax Officer, Akola and Another, A.I.R. 1961 S.C. 1325, held that it is clear that while construing entries in the Schedule to determine whether they are taxable or not regard must be had to the items/entries as ordinarily understood by the traders and the consum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary medicine unless it is displayed in the prescribed manner; any drug which by means of any statement, design or device accompanying it or by any other means purports or claims to cure or mitigate any such disease, any cosmetic containing any ingredient which may render it unsafe or harmful for use, in contravention of any of the provisions of the Chapter unless such manufacture is done under a licence issued for such purpose under the said Chapter. Then, Section 27 imposes penalties for the manufacture, sale, stock, exhibit for sale and distribution of drugs in contravention with the provisions of the Act and make it, inter alia, punishable with imprisonment. This being so, the learned Counsel contended, in view of the mandate incorporated in the Drugs and Cosmetics Act, it is not open to a manufacturer to manufacture or sell or exhibit to sell or distribute any drug unless he manufactures it under a licence issued by the Drugs Controller under the Said Act, and further, in compliance with the provisions of Chapter IV. This, by implication, shows that the purchaser of the manufactured drugs is, in his turn, bound by the provisions of Chapter IV. He cannot thus lawfully purchase a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facture for sale, or sell, or stock, or exhibit for sale. or distribute any drug or cosmetic except under a licence issued for such purpose under the said Chapter. Clauses (a) and (b) prohibit the manufacture for sale, the sale, the stocking, the exhibition for sale and distribution of any drug or cosmetic which is not of standard quality, which is misbranded or adulterated or which has been imported or manufactured in contravention of any of the provisions of the Act or the rules made thereunder. Section 27 provides for penalties to the contraventions of the provisions of the Act and specifically lays down that whomsoever, himself or by any other person on his behalf, manufactures for sale, sells, stocks or exhibits for sale or distributes, inter alia, without a valid licence as required under clause (c) of Section 18 shall be punishable with imprisonment for a term which shall not be less than one year but which may extend to 10 years and shall also be liable to fine. In other words, the Drugs and Cosmetics Act makes it abundantly clear that only those drugs which are manufactured under a valid licence issued under the said Act and in compliance with its provisions can be lawfull ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that surgical dressings known as Handyplast, manufactured by the petitioners, are not a drug or a medicine. He contended that once the Division Bench has held that Handyplast is not commercially understood as a drug or medicine and since the petitioners had clubbed together several products, including Handyplast, in this petition, it necessarily follows that the said products are similar handyplast, and therefore, what was held by the Division Bench as regards Handyplast applies to them. Then, with a view to elaborate the above submission, the learned Advocate General took us minutely through the judgment delivered in the said case and contended ; that, through the Court has stated in paragraph 4 that the question which was falling to its determination was whether the said product Handyplast is a drug or medicinal preparation falling under Item 14E of the First Schedule of the Tariff for purposes of duty, the fact remains that while addressing to that question, the Court made general observations which show that the Division Bench held the view that, as a general proposition, Handyplast is not understood in the trade or in the commerce or popularly as a drug or medicine. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the question whether Handyplast was a drug or medicinal preparation without specifically stating again that this determination was for the sole purpose of determining whether the said product was falling under Item 14E of the First Schedule of the Tariff. After a detailed discussion, the Division Bench, finally held the view that Handyplast does not constitute a drug or medicinal preparation falling within the purview of Item 14E of the First Schedule which deals with patent or proprietary medicines, i.e., drugs or medicinal preparations. The above discussion and analysis of the judgment in Leukoplast s case [1985 (20) E.L.T. 70] suffices to clearly show that the submissions of the learned Advocate General above referred to have no merit and what was held in the said case was for the limited purposes of determining whether Handyplast was or not a product falling under Item 14E of the First Schedule of the Tariff for the purposes of duty. The Division Bench has not, at all, addressed itself to the larger question as to whether or not Handyplast is a drug or medicine which benefits of exemption under the Notifications No. 14/41/81-Fin (R C) and No. 5/5/87 (R C)-8. 18. Having de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter considering the decision in Rapidur (India) Ltd Patil, J. in Associated Bearing Co. Ltd. and Garware s cases and after discussing in detail the law regarding the precedents and that the interpretation given by a High Court of a decision of the Supreme Court is binding in a coordinate bench of the same High Court as held in Panjumal Hassomal Advani v. Harpal Singh Abnashi Singh Sawhney and Others, A.I.R. 1975 Bom. 120, held that the view taken by Kolse Patil J., was erroneous and concluded in a very expressive manner by saying that the total effect is therefore, as far as this Court is concerned or at any rate as far as the Division Bench is concerned, that the doctrine of unjust enrichment is buried 10 fathoms deep". 19. Though it is not disputed that this clear view was taken by this Court in a long line of decisions which has culminated in the decisions in Rapidur (India) Ltd., Dipsi Chemicals and Associated Bearing Co. Ltd., Bombay [1988 (33) E.L.T. 285 (Bom.)], the learned Advocate General, placing reliance in the decision of the Supreme Court in State of Madbya Pradesh v. Vyankatlal and Another, A.I.R. 1985 S.C. 901, contended that the judgment of their Lordships of Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Mr. Hidayatullah submitted that it is obvious that the petitioners would not have paid duty in excess if they had been aware of the exemption. Hence, the allegation made that they became aware of the exemption only when the concerned authorities stopped levying tax is to be accepted. In this connection, reliance was placed in two decisions of this Court namely, in Indian Plastics Ltd. v. Union of India and Others, 1981 E.L.T. 509 (Bom.) and in Industrial Cables (India) Ltd. v. Union of India and Others, 1985 (19) E.L.T. 341 (Bom.). In Indian Plastics Ltd., a similar question indeed arose and the learned Single Judge who dealt with the case observed :- It is inconceivable that the petitioner, a business concern, would act in such an irrational manner as not to claim this large amount running into several lakhs of rupees, in the petition as initially filed, instead of restricting its claim only to the later period of 12th May, 1974 to 11th May, 1975. No prudent and reasonable person, much less a business concern, would want only make an over payment running into lakhs of rupees and thereafter deliberately refrain from taking the earliest possible steps to recover money collect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e above provision of law refers to exemption from tax generally or subject to tax generally at a rate which is lower than 4%. Since the Notification No. 14/41/81-Fin.(R C) did not reduce the rate of duty levied but had only reduced the tax payable, it is obvious, he urged, that the petitioners are not at all benefiting from the exemptions given in the said notification. He further contended that the burden to establish the exemption lies on the petitioners and in this connection, placed reliance on the decision of the Supreme Court in Controller of Estate Duty, Kerala v. Venugopala Varma Rajah, A.I.R. 1977 S.C. 121. 23. Mr. Hidayatullah however took strong objection to the above submissions of the learned Advocate General. He contended that, first of all, it is not open to the concerned authorities to supplement and plug the loopholes in the orders by way of returns, and much less to raise for the same purpose new questions in the course of the arguments. In this connection, the learned Counsel placed reliance on the decisions of the Supreme Court in The Commissioner of Police, Bombay v. Gordhandas Bhanji, 1952 B.L.R. 383 and in Mohinder Singh Gill and Another v. The Chief Electi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubsequently given by the officer making the order of what he meant, or of what was in his mind, or what he intended to do. Public orders made by public authorities are meant to have public effect and are intended to affect the actings and conduct of those to whom they are addressed and must be construed objectively with reference to the language used in the order itself. (emphasis supplied). Similarly, in Mohinder Singh Gill and Another v. The Chief Election Commissioner, New Delhi and Others, A.I.R. 1978 S.C. 851, their Lordships of the Supreme Court observed that when a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of affidavit or otherwise. Otherwise, an order bad in the beginning may, by the time it comes to Court on account of a challenge, get validated by additional grounds later brought out. The same view was naturally taken by a Division Bench of this Court in Bush (India) Ltd. v. Union of India and Others, 1980 E.L.T. 258 (Bom.). The Division Bench observed that it is not open to the Excise authority to urge in its affidavit-in-reply a ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above provision of Section 2-A will be that the benefit of the said section cannot be given to the petitioners. The learned Advocate General indeed submitted that the rate of duty was not reduced and what was reduced was the amount of tax payable. This argument is undoubtedly enticing and subtle but we are unable to accept it, since we are in one with Mr. Hidayatullah in that the provision of sub-section (2-A) of Section 8 of the Central Sales Tax Act is couched in a language wide enough to permit a liberal interpretation thereof and to give the citizens the intended benefits of the exemption. As rightly submitted by Mr. Hidayatullah, the Legislature made a choice of particular words while enacting sub-section (2-A) of Section 8. Nowhere a reference was made to the tax levied or to the rate levied and on the contrary, what is stated is that the tax payable under the Central Sales Tax Act will be nil or as the case may be, shall be calculated at a lower rate, if there is a general tax exemption or if the payment of tax is generally subject to a rate which is lower than 4%. Now, by virtue of the aforesaid Notification No. 14/41/81-Fin. (R C), the tax payable was reduced from 6 paise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnotes the idea of meaning. In the context of Section 3(b) of the Drugs and Cosmetics Act, we are inclined to think that the word includes occurring in the said Section should not be read as a word of extension with reference to its context, but on the contrary, it is equal to means . 27. Petitioners seek, inter alia, a mandamus directing the respondents to refund the excess of Central and Local Sales Tax paid together with interest at the rate of 21 % from the date of the collection of the amount to the date of the refund. Although we held that the petitioners are entitled to the refund of the excess tax paid, we are unable to grant the relief of interest as prayed by them. We direct that the refund of the duty collected without authority of law should be made within 3 months from today without any interest thereon. However, if the refund is not made within that time, the said amount will accrue interest at the rate of 6% per annum from the expiry of the said three months. 28. The result is that with the modification as regards the interest mentioned in the preceding paragraph, the rule is made absolute in terms of prayers (a) and (b). There will be no order as to costs, in ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
