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TMI Blog1989 (9) TMI 212X X X X Extracts X X X X X X X X Extracts X X X X ..... alcohol but not capable of being consumed as ordinary alcoholic beverages. 3. Under the provisions of the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, hereinafter referred to as "the Act", which came into force on 1st April, 1957, excise duties were levied on medicinal and toilet preparations specified in the Schedule to the Act, hereinafter referred to as "the Schedule". The Act, as originally stood in 1955, inter alia, contained two items in the Schedule respectively specifying "medicinal and toilet preparations" containing alcohol which are prepared by distillation or to which alcohol has been added and which are capable of being consumed as ordinary "alcoholic beverage" and "medicinal and toilet preparations not otherwise specified containing alcohol", being the commodities excisable under the provisions of the Act. The said "Ashvagandhaarist" was treated and accepted by the Excise authorities as being exempt from the payment of any excise duty upon the basis and the footing that the same was an Ayurvedic preparation containing self-generated alcohol which was not capable of being consumed as ordinary alcoholic beverage, and which fell under Item 2(i) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, filed on behalf of the respondents it was, inter alia, contended that the said product of the appellant was "the unrestricted ayurvedic preparations" manufactured by the plaintiff (appellant) labelled and marked by the plaintiff (appellant) under their brand name and trade mark. This, therefore, fell within the scope of patent or proprietary medicine as given in Explanation 1 below the Schedule annexed to the Act, as inserted from April 23, 1962 by Finance Act (No. 2) 1962. 9. By his judgment and decree dated March 27, 1969, the learned Civil Judge was pleased to decree the appellant's suit for Rs. 2,22,582.07 together with future interest at 6 per cent per annum from the date of the suit till realisation. 10. Aggrieved by the judgment and order dated March 27, 1969, the respondents (being the defendants therein) preferred an appeal to the High Court of Judicature at Bombay, which was registered as First Appeal No. 586 of 1969. The said appeal was heard by the High Court along with other appeals being First Appeal Nos. 136 of 1968 and 93 of 1970 as also suits being Suit Nos. 230 of 1965 and 319 of 1965. The appeals and the suits were heard together having regard to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erwise specified" occurring in Item 3 of the Schedule did not restrict the scope of the enumerated categories under Item 3 but was merely a marginal note showing that the said Item 3 was residuary item and comprised of three sub-groups of commodities specified therein; and that Item No. 1 was not a specified item. Mr. Dholakia further submits that the interpretation that "Ashvagandhaarist" fell within Item No. 1 rendered the provisions of Item No. 3 wholly nugatory inasmuch as if an Ayurvedic preparation containing self-generated alcohol but incapable of being used as ordinary alcoholic beverage, is treated as falling under Item 1 there would be no Ayurvedic medicine which would factually fall under Item 3 of the Schedule and that the Explanation newly introduced by the Finance Act, 1962 could not add, to amend or alter or vary the classification of the goods existing prior thereto as covered by the various items of the said Schedule; nor could it otherwise nullify or add to, amend or alter or vary the substantive provisions of the Schedule and it could not be considered to be a substantive provision of the Act nor could it be allowed to abrogate the substantive provision of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ging either to Allopathic or Ayurvedic system or any other system of medicines. For every system of medicines, counsel argues, Item No. 1 is not general item but it is a specific item in the sense it covers only those medicines which are prepared by distillation and contain alcohol and others to which alcohol has been added. According to Counsel, such medicines belonging to any system whether indigenous or foreign are covered by Item 1 and would be taxable as per that item and the disputed goods are undoubtedly medicinal preparations and they are also patent and proprietary medicines in view of the Explanation 1 and these Ayurvedic preparations are medicinal preparations being patent or proprietary medicines containing alcohol which are not capable of being consumed as alcoholic beverages and as such they squarely fall under Item 1 of the Schedule, and the main Act and the Explanation is self-contained provision which eliminates the reference either to Drugs Act or to the Rules made under the Act; and one has to read only the provision of the Schedule as a whole including the Explanation, and their meaning being simple and plain, they must be given their full effect. 13. To a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vides that "there shall be levied duties of excise, at the rates specified in the Schedule, on all dutiable goods manufactured in India". The original Schedule to the Act in 1955 read : THE SCHEDULE (See Section 3) Item No. Description of dutiable goods Rate of duty 1. Medicinal and toilet preparations, containing alcohol, which are prepared by distillation or to which alcohol has been added, and which are capable of being consumed as ordinary alcoholic beverages. Rupees seventeen and annas eight per gallon of the strength of London proof spirit. 2. Medicinal and toilet preparations not otherwise specified containing alcohol - Ayurvedic preparations containing self-generated (i) alcohol, which are not capable of being consumed as ordinary alcoholic beverages. Nil Ayurvedic preparations containing self-generated (ii) alcohol, which are capable of being consumed as ordinary alcoholic beverages. Rupees three per gallon. All others.(iii) Rupees five per gallon of the strength of London proof spirit. 3. Medicinal and toilet preparations, not containing alcohol, but containing opium, Indian hemp, or other narcotic drug or narco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urvedic preparations, containing self-generated (ii) alcohol, which are capable of being consumed as ordinary alcoholic beverages. Thirty eight naye paise per litre. All others.(iii) Rupees one and ten naye paise per litre of the strength of London proof spirit. Explanation I. - "Patent or proprietary medicines" has the same meaning as in clause (h) of Section 3 of the Drugs Act, 1940 (23 of 1940). The statement of objects and reasons of the Amendment Bill, as published in Gazette of India, 8-3-1961, Pt. II, S.2, Ext., page 106, said : "Consequent on the decision to adopt metric units from the 1st April, 1961, in the sale of alcohol and collection of duty thereon, it is proposed to provide for the levy and collection of excise duty on medicinal and toilet preparations in terms of metric units............... Under existing Item 2(ii) of the Schedule to the Act, Ayurvedic preparations containing self-generated alcohol which are capable of being consumed as ordinary alcoholic beverages are subjected to duty at the rate of Rs. 3 per gallon. However, by virtue of the provision contained in Section 19(2)(xix) of the Act, read with Rule 8 of the Medicinal and Toilet Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is not for the time being recognised by the Permanent Commission on Biological Standardisation of the World Health Organisation or in the latest edition of the British Pharmacopoeia or the British Pharmaceutical Codex or any other Pharmacopoeia authorised in this behalf by the Central Government after consultation with the Board." Thus, patent or proprietary medicines meant a drug which was defined in the Drugs Act and not in the Act. The High Court rightly held that Ayurvedic medicines was not a drug at all. The definition of drug expressly excluded them. So the definition of patent or proprietary medicine was exclusive of Ayurvedic medicinal preparations, those being excluded from the definition of drug. The definition of patent and proprietary medicines till then did not apply to Ayurvedic preparations. This position continued indeed till the amendment of Drugs Act by the Drugs and Cosmetics (Amendment) Act, 1964. Several amendments were effected by that Amendment Act of 1964. Section 33A and Chapter IV-A were inserted. Section 33A said that Chapter IV was not to apply to Ayurvedic (including Siddha) or Unani drugs. "Save as otherwise provided in this Act, nothing contai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. The fact that no Ayurvedic Pharmacopoeia had been notified at the relevant time was because Ayurvedic preparations were not drugs for the purpose of Drugs Act and, for that matter, of Medicinal and Toilet Preparations (Excise Duties) Act, at the relevant time. It could be for this reason that in the original Schedule the expression medicinal and toilet preparations `not otherwise specified' was used and Ayurvedic preparations of different categories were put under Item 2. In the Schedule as amended by the 1962 Act, this expression continued in Item 3. The same definition of `drug' also continued in the Drugs Act. 23. From the Explanation I of the Schedule of the Act as substituted by Act 5 of 1964 also it is clear that patent or proprietary medicine means any medicinal preparation 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. 24. To be a patent medicine one would be required to have a patent. A patented article means an article in respect of which a patent is in force. "Patent" means a patent granted under the Indian Patents and Designs Act, 1911, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is used in relation to that medicinal preparation for the purpose of indicating or so as to indicate a connection in the course of trade between the preparation and some person having the right either as proprietor or otherwise to use the name or mark with or without any indication of the identify of that person." This amendment of the Explanation came into force in June, 1962 with retrospective effect from 23rd April, 1962. 26. The Director of Prohibition and Excise, for Maharashtra State, Bombay, thereafter issued the circular dated 31-5-1962 (Ext. 44). It said that the patent or proprietary medicines as defined in Clause (d) of Section 3 of the Drugs Act of 1940 (23 of 1940) and falling under Items No. 1 and No. 4 of the Act as substituted by the Amendment Act, 1961 were, prior to 23rd April, 1962, subject to levy of duty at 10 per cent ad valorem by virtue of the Explanation 1 below the Schedule to the Act which has now been deleted from 23rd April, 1962. According to new definition of `Patent and Proprietary Medicines' as given in the new Explanation as amended by Finance (No. 2) Act, 1962 medicinal preparations containing alcohol, opium, Indian hemp or other narcotic drug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he group of Asavas and Aristhas known as `restricted' and `unrestricted'. Restricted means preparations which could be used as alcoholic beverages. In this case the period from 26-7-1962 to 29-2-1964 is alone material inasmuch as by the Finance Act of 1964 with reference to Item No. 1, the Ayurvedic and Unani medicines containing self-generated alcohol and which were not capable of being consumed as ordinary alcoholic beverages were exempted from the levy of excise duty. In other words, the position prior to Finance Act of 1962 was continued and thereafter the medicinal preparations, namely, Asavas and Aristhas ceased to be taxed from 1964. 28. It would be noted that the Explanation itself did not specifically mention "Allopathic, Ayurvedic, Unani and Homoeopathic preparations" as was done in the Director's Circular. On a comparison of the earlier Explanation and the substituted Explanation one would notice that earlier "patent and proprietary medicines" meant a drug. In the substituted Explanation it means any medicinal preparation. However, it cannot be lost sight of that the words "medicinal preparation" as continued to be defined in Section 2(g) of the Act "includes all d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at purpose, then you must read the Act and the Schedule as though the Schedule were operating for the purpose, and if you can satisfy the language of the section without extending it beyond that purpose you ought to do it. But if in spite of that you find in the language of the Schedule words and terms that go clearly outside that purpose, then you must give effect to them and you must not consider them as limited by the heading of that part of the Schedule or by the purpose mentioned in the Act for which the Schedule is prima facie to be used. You cannot refuse to give effect to clear words simply because prima facie they seem to be limited by the heading of the Schedule and the definition of the purpose of the Schedule contained in the Act." The above observation was not disapproved in appeal (1921) 2 A.C. 81. However, the basic principle is that in case of a conflict between the body of the Act and the Schedule, the former prevails. In the instant case we do not find any such conflict. 31. An Explanation, as was found in Bihta Marketing Union v. Bank of Bihar, AIR 1967 SC 389 : (1967) 1 SCR 848, may only explain and may not expand or add to the scope of the original secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different ways of expressing itself and in the last analysis the words used alone are repository of legislative intent and that if necessary an Explanation must be construed according to its plain language and `not on any a priori consideration'. 32. Applying the above principles we do not find any difference between the Schedule and the Explanation I; the latter has not amended the Schedule by either deleting Item 3(i) or by adding or including Ayurvedic preparations in Item 1. No change of legislative intent is indicated. 33. In the Medicinal and Toilet Preparations (Excise Duties) Rules, 1956 Section C, Medicinal and Toilet preparations, Allopathic preparations, Homoeopathic preparations and Ayurvedic preparations are dealt with separately. So far as Ayurvedic preparations are concerned, Rule 64 dealing with types of preparations said : "Asavas and Aristhas are the principal types of Ayurvedic preparations in which alcoholic content is self-generated and not added as such. "Rule 65 on Pharmacopoeia for Ayurvedic preparations said : "Until a standard Ayurvedic pharmacopoeia has been evolved by the Central Government, the pharmacopoeias that are in vogue in the variou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st not be capable of being consumed as an ordinary alcoholic beverage. The fact that ointments and liniments were medicinal preparations containing alcohol in semi-liquid form did not make any difference. However it was not in dispute that the articles were medicinal preparations for the purposes of the Act and that they were patent and proprietary medicines. In the instant case the question is whether Ayurvedic preparations, in view of the definition of medicinal preparations in the Act, could be regarded as drugs and could be dutiable under Item 3 and not Item No. 1. In Commissioner of Salex Tax v. The Modi Sugar Mills Ltd., (1961) 2 SCR 189 it was held that a taxing statute must be interpreted in the light of what is clearly expressed therein and nothing can be implied nor can provisions be imported into them so as to supply an assumed deficiency. In Baidyanath Ayurved Bhawan (supra) this Court quoted the observation of Rowlatt, J. in Cape Brandy Syndicate v. Commissioners of Inland Revenue, (1921) 1 K.B. 64 that "in a taxing Act one has to look at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tained definition of `patent and proprietary medicines' for the purpose of the main Act and severed the connection between the provisions of the Drugs Act as was contemplated in earlier Explanation I, and consequently one need not look to the Drugs Act at all for its interpretation and the Schedule was thence to be interpreted as it existed along with that self-containing definition in Explanation I. In doing so, the position that "Patent and Proprietary medicines" means "any medicinal preparation" which very "Medicinal preparation" includes all drugs which are a remedy or prescription etc. as defined in Section 2(g) of the Act. So a reference to the Drugs Act was still necessary. No doubt this is an inclusive definition. To enlarge its denotation a specific provision to include Ayurvedic preparations containing self-generated alcohol which are not capable of being consumed as ordinary alcoholic beverages was necessary. That having not been done by the Explanation itself, it was not permissible to include it by the Circular. The Explanation I could not have been in conflict with the provisions of the Act and the Circular could not have been in conflict with the Explanation, the Sch ..... X X X X Extracts X X X X X X X X Extracts X X X X
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