TMI Blog1992 (7) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... dent No. 4, Superintendent, Central Excise, issued a show cause notice dated 8-1-1991 to the petitioner Company that why the product 'SWAD' be not classified as confectionery instead of Ayurvedic medicine. Thereafter a corrigendum was also issued by the Superintendent, Central Excise. Then the Assistant Collector, Central Excise, Indore issued a notice of show cause to the petitioner Company as to why the product be not classified as a confectionery. The petitioner Company requested the Authorities to extend the time for submission of reply in view of the pendency of a similar petition on similar grounds before this Court. But the Assistant Collector refused to stay the proceedings. Hence a writ petition was filed by the petitioner seeking the issuance of a writ restraining the Assistant Collector, Central Excise and the Superintendent, Central Excise, Indore from taking any further action on the show cause notices Annexures P-6, P-7 and P-8 being illegal and without jurisdiction. 3. As the main petition which was pending before this Court is M.P. No. 1287 of 1989, the facts leading to this petition may be briefly stated. The petitioner M/s. Panama Chemical Works manufactures an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15. Thereafter the Inspector of the Central Excise, Range 5, took the sugar syrup and the SWAD tablet for test on 26-12-1988 and 6-2-1989, respectively vide Annexures P-16 and P-17. Other documents were also sought by the Inspector, whereupon all the necessary documents sought were supplied. As such, all through there has been no mis-statement or suppression of any material facts in relation to the process and manufacture of SWAD by the petitioner. 5. The Collector, Central Excise, respondent No. 2, issued a show cause notice under Section 11A of the Central Excise Act to the petitioner firm to show cause why the SWAD tablet be not classified under sub-heading 1704.90 relating to sugar confectionery instead of sub-heading 3003.30 relating to pharmaceutical products and why an amount of over one crore be not recovered under Rule 9(2) of the Central Excise Rules, 1944 read with Section 11A of the Central Excises and Salt Act, 1944 and why penalty under Rules 9(2), 52A(5) and 173B(2) of Central Excise Rules be not imposed for contravention of the said Rules. The notice is Annexure P-19, which is challenged in this petition on various grounds. 6. Firstly it has been contended by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of this in the ingredients either in their said drug licence or on the wrapper of the product. The second ground is that the weight of the tablet has been declared as 250 milligrams containing total 104 mg of Kala Namak, Sendha Namak, Nimbu Ka Sar, Kali Mirch, Jira, Ajwain, Sounth, Pipla Mul and Lendi Pipal, whereas in fact each tablet of SWAD weighs 3350 mg containing the same quantity i.e. 104 mg of the said 9 Ayurvedic ingredients. The Book mentioned in the Drug licence has not been followed. As such by mis-statement and suppression of fact the petitioners have managed to classify their product SWAD as an Ayurvedic Patent or Proprietary Medicine 'with intent to evade Central Excise duty, but in fact it is not an Ayurvedic product for the following reason : (i) Liquid glucose is an Allopathic ingredient and it has not been mentioned as ingredient in any Ayurvedic, Sidha or Unani Tibb system of medicine specified in the first Schedule of the Drugs and Cosmetics Act, 1940. (ii) The weight of each tablet is 3.35 grams instead of 250 mgs., whereas the total weight of the Ayurvedic ingredients is only 104 mg. Thus, the overall percentage of the ingredients has come down from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d before hearing the petitioner. Therefore, the objection of the respondents about the tenability of the petition cannot be looked into for this reason also. In reply to the rejoinder the respondents submitted that the show cause notice is legal because the Collector is the proper officer to modify the classification list and it could be so modified in view of the fresh facts being brought on record. Although the modification in classification has to be prospective, the differential duty for past period arising out of the wrong classification can be demanded under Section 11A. 13. Thereafter the petitioners, vide rejoinder dated 13-3-1990, submitted that on complaint of Collector Customs and Central Excise, the Drug Controller had issued a show cause to the petitioner firm under Section 18(a)(1) of the Drugs and Cosmetics Act, 1940 (hereinafter called the Cosmetics Act) read with the Rules framed thereunder asking the petitioner as to why permission to manufacture the drug be not withdrawn and why all the manufacturing licenses be not suspended or cancelled. The copy of these notices are Annexure P-20A and Annexure P-21. 14. The petitioner No. 1 obtained the report of two Exper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt opinion liquid glucose is not an active ingredient and therefore need not be mentioned in the label. Even in respect of Allopathic drugs under Rule 96 only the contents of active ingredients are to be mentioned on the label. The Director of Allopathic Services, under the Act or the Rules can not be held to be an Expert of Ayurvedic medicines. The provisions of the various authorities stated by the petitioners and the respondents were also stated in the reply. 17. During the course of the arguments both the learned counsel for the parties have argued in accordance with their pleadings as above, because the pleadings in view of the rejoinders and replies to the rejoinders actually had become argumentative. Therefore, nothing specific was added during the oral arguments, except the synopsis filed before us. In view of the aforesaid contention of both the parties the first and crucial point which arises for determination is whether the tablet SWAD can be classified as an Ayurvedic medicine or a confectionery. For answering this question various other aspects and the provisions of the Act and the authorities cited by the parties have to be taken into consideration. However, before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a rule of law. In the same case it is also held that if an inferior Court or Tribunal of first instance acts wholly without jurisdiction or patently in excess of jurisdiction or manifestly conducts proceedings before it in a manner contrary to rules of natural justice and accepted rules of procedure and which offends superior Court's sense of fair play, the Superior Court may exercise its powers to issue prerogative writ of certiorari to correct the error of the Court or Tribunal of first instance, even if an appeal to another inferior Court or Tribunal was available. This authority was referred to in Titaghur Paper Mills case (supra) and the Titaghur Paper Mill's case has been followed in Dunlop's case (supra) and the same principle has been reiterated in Dr. Smt. Kuntesh Gupta's case (supra). Now, according to the petitioners the Central Excise Authorities have issued the notices challenged in the two petitions without any jurisdiction and without any basis, therefore, they can approach this Court directly. 21. Another point pertaining to the limitation has also been raised and the jurisdiction of the Collector, Central Excise, under Section 11A of the Central Excise Act has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ayurvedic medicine on the basis of the Drug License No. 25D/24/83. The formula was approved by the Drug Controller on 18-7-1986. The classification list was thereafter filed by the petitioner on 25-8-1986. It was provisionally approved on 15-10-1985 and final approval was given on 9-1-1988. As per formula a mixture of sugar is prepared in manufacturing process. Therefore, the respondent No. 4 gave a notice on 26-11-1987 to the petitioner stating that sugar syrup prepared during the course of manufacture is classifiable under sub-heading 1702.30. A reply was given by the petitioner to this notice on 11-2-1987 that Sugar Syrup is not excisable. Thereafter the respondent, vide letter dated 11-1-1988 asked for the details of production and value of sugar Syrup, vide Annexure P-12. The petitioners, vide Annexure P-13 gave the quantity of the sugar consumed from August 1986 to November, 1987 and the Inspector Central Excise, Range 5, took samples of sugar syrup and SWAD tablet for test on 26-12-1988 and 6-2-1989. The purchase invoices of raw material was also furnished, vide Ex. P-18. As such the petitioners have never refused to disclose any fact from the Authorities and acting upon app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... redients, namely Pudina and Eucalyptus oil are Ayurvedic in nature and these have medicinal properties. The certificate given by Dr. Rao is not based on first hand information and besides, being a Professor of Surgery of E.N.T., he cannot be considered as a specialist in the field of medicine. The certificate, which could be taken note of is the one issued by the competent authority, which, in the instant case could only be the DGHS. Therefore, the case of the appellant that the product is a medicine is not established and, therefore, the Tribunal held the product as confectionery, in the aforesaid judgment the certificate of the so called Expert Dr. Rao was considered and it was found that the information was based on the opinion of Dr. M.A. Virinchi, but it was not clear before the Tribunal as to who this Dr. Virinchi is and what information is supplied to Dr. Rao. As such the certificate is not based on the first hand information. It is also not shown whether the certificate is based on the clinical trials. The manufacturer also was not in a position to give any further details. Therefore, after considering all the facts and circumstances of the case and the contents of the prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es v. Union of India - 1980 (6) E.L.T 598 (M.P.) = 1980 M.P.L.J. 479, has sought the aid of Section 3(b) of the Drugs and Cosmetics Act to consider the classification under the Central Excise Tariff. To ascertain whether a particular product is a medical preparation or not on the basis of the definition of 'drug' in Section 3(b) of the Cosmetics Act it was held that the glucose repacked by the petitioner could not be taxed under Item No. 14E of the Tariff. 28. The Bombay High Court in the case of Leukoplast (India) Ltd. v. State of Goa -1988 (36) E.L.T. 369A, has held that although it is well settled that generally, while interpreting the fiscal Statutes, the scientific meaning of a product is not relevant but one has to consider its popular understanding or its understanding in the commerce or in the trade. But it is obvious that this trade understanding should be the understanding of those who are actually dealing with that particular product or goods. The Drugs and Cosmetics Act is a comprehensive piece of legislation which deals with drugs and provides not only for the standards of quality, misbranded and adulterated drugs but also for the safeguards for the manufacture, sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ranted to them. The classification list was filed before the Central Excise Authorities which was provisionally approved and later on finally approved. Now, the objection of the Central Excise Authorities is that firstly the liquid glucose, which is used in the medicine, is not an Ayurvedic ingredient and nowhere mentioned in the Ayurvedic book of medicines and the contents of the so-called curative medicines is only 3 percent whereas the percentage of glucose 97 percent. It has further been stated that there is deviation in the weight proportion of the active ingredients of the product and the liquid glucose has taken the product out of the purview of medicine. There is absence of dosage in the wrapper. However, it is manifest that the classification submitted by the petitioner was approved by the Competent Authority on the strength of the license issued by the Drug Controller of M.P. who has given the license after his due satisfaction that the product is an Ayurvedic product. 31. In the instant case a further development has taken place wherein the Central Excise Authorities had made a complaint to the Drug Controller that the license has been wrongly issued on the grounds whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntains liquid glucose without label declaration. However, the Drug Controller agreed with the contention of the petitioner that the liquid glucose is a preservative in Ayurvedic as well in Allopathic drugs. A letter of the Director Indigenous System of Medicines Dr. Sharma, dated 23-12-1989 was also produced, which says that liquid glucose is commonly used as preservative and binding agent and its presence has no effect on the active ingredient and the further opinion of the Expert that despite the presence of liquid glucose the character of the drug shall remain Ayurvedic, has also been considered by the Drug Controller. Finding the aforesaid opinion and the argument sound and comparing the various ingredients in Hall's and Vicks tablets and their preparation as compared to SWAD which are licenced as Ayurvedic medicines by the State of Maharashtra and Andhra Pradesh, the Controller of Foods and Drugs Administration, Bhopal discharged the notice against the petitioner and held that the product is an Ayurvedic product. As such the fact that the Drug Controller, agreeing with the opinion of the two Experts, has reiterated its earlier finding while issuing the licence of manufacture t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the opinion of the Director is erroneous and should not be acted upon. We fail to understand as to how the opinion of the Experts and that of the Drug Controller can be held to be erroneous in absence of any contrary opinion of Experts being on record. Much emphasis has been laid that according to the definition of Ayurvedic preparation there is a clear interdict on the use of any ingredient than the one shown in the text and that is why the word 'only' has been used in the definition. It is manifest that the word 'only' has been used in respect of the ingredients of the product and the preservative items in a particular product cannot be treated as active ingredients. Consequently we hold that the product of the petitioner is an Ayurvedic preparation and has rightly been classified by the Assistant Collector under Item 3003.30 of the Central Excise Tariff. 36. As regards the tenability of the petition it has been strenuously argued that the petition is premature. But as discussed above the law on the point is practically settled that the Court should not interfere in a matter at the stage on show cause notice as a general rule. But can always interfere when the notice is wit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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