1. These proceedings, since transferred to the Tribunal pursuant to the provisions of Section 35P(2) of the Central Excises and Salt Act, 1944 (hereinafter referred to us the Act), arose as a result of rejection of claims for refund of duty paid, that had been filed by M/s. Smith and Nephew (India) Limited. The two refund claims, filed separately by the said company, dated 22-8-1973 and 23-8-1974 covering the period June 1971 to July 1973 and August 1973 to July 1974 respectively, were disallowed by one common order dated 5-12-1974 passed by Assistant Collector of Central Excise, Bombay-I Division. The appeal against the said order was also rejected by the Appellate Collector of Central Excise, by his order dated 3-12-1975.
2. In the meantime, on an order of amalgamation having been passed by High Courts of Bombay and Karnataka in or about September, 1975, the said company stood merged with J.L. Morison, Son & Jones (India) Limited whereby the assets and liabilities of Smith and Nephew (India) Limited stood transferred to, and vested in, the latter company, and it is this second company as successor-in-interest, that filed the revision petition to Government of India and the same has been transferred to the Tribunal to be treated as if it were an appeal. It is registered as such, and taken up for disposal, after hearing notice to the party.
3. The subject-matter of the refund claims, were two products of the appellant-company described as: Although it is not indicated on the record as to at what point of time, the manufacture of the products was undertaken, but the disputed period starts from the time when Tariff Item 60 was introduced in the Central Excise Tariff (hereinafter referred to as the C.E.T.), that is, with effect from 1971. It appears that the appellants themselves classified the subject goods as falling under newly introduced T.I. 60, which covered "Adhesive tapes all sorts, not elsewhere specified". Duty, as per Scheduled rates, was levied accordingly, which the party duly paid.
4. Contention was raised subsequently to the effect that these goods were in the nature of surgical dressings, and would not fall within the category of adhesive tapes, within the contemplation of T.I. 60.
Asserting that the duty had been paid erroneously and inadvertently, claims for refund, as stated above, were filed under the provisions of Rule 11 of the Central Excise Rules, 1944 (hereinafter referred to as the Rules), 5. These claims were rejected by the Assistant Collector, as already observed, on the view that every surgical dressing could not be treated as a medicinal preparation, and in order to qualify for such a treatment, it had to be shown that they were composed of some medical substance, and as such fell within the description of medical preparation, as envisaged by T. I. 14-E. Holding that in the instant case, no such evidence had been placed on record, and observing that Zinc Oxide plaster B.P.C. has no therapeutic properties and that adhesive tapes were used mainly as a supportive for holding dressings, he held that these could not, as such, fall within the ambit of T.I.14-E, and that that mere fact that these types of adhesive tapes were manufactured under Drug Manufacturing Licence and had been described in the British Pharmceutical Codex (BPC for short) as surgical dressings, would not be determinative of the fact to take them outside the scope of T. I. 60 which, in the Assistant Collector's view, was broad based, and embraced surgical tapes as well.
6. An appeal was carried against this rejection of the refund claims to the Appellate Collector, but the same was rejected. The view of the Assistant Collector was confirmed without recording any reasons on merits of the contentions convassed by the party, holding that since appellants had not come up in appeal, as provided by provisions of the Central excise law against the classification of the products, it was not open to them to rake up this controversy by means of refund claims.
7. The appellants assailed these findings by means of revision petition filed before the Central Government, now being treated as an appeal, pleading that the Appellate Collector's orders were vitiated for failure to afford them any personal hearing and that he had erred in rejecting the appeal on the ground that they had not come up in appeal against the classification, and that the order was not a speaking order, as no reasons on merits of the controversy had been recorded and that the observation of the Appellate Collector while dismissing the appeal that the classification having remained unchallenged, the party's refund claims were not entertainable, was wholly not sustainable inasmuch as Rule 11 fully entitled them to claim refund of amounts, paid as duty, which they considered to have been made by mistake or due to some error. They further contended that not only Rule 11 conferred on them the right to claim refund within a period of one year of duty paid in excess inadvertently, but it being a case of mistaken payments of duty which was not due, they were entitled to have a longer period of three years under general law of limitation and that the Appellate Collector erred in ignoring all these vital aspects.
8. On merits, they reiterated the contention that their products did not at all fall under T.I. 60 'inasmuch as the said products were medicated plasters, manufactured to pharmacopeial or similar specifications and that the Assistant Collector's view that zinc oxide had no therapeutic property was also wrong. Extensive reliance was placed on medical literature in support of their plea that zinc oxide had positive curative properties, with pertinent reference to the BPC 1973; The Merck Index, 7th Edition, page 1116; Remington's Practice of Pharmacy, 1961, page 697; Drill's Pharmacology in Medicine, 3rd Edition; p. 797; and The Pharmacological Basic of Therapeutics by Goodman and Gillman; 4th Edition, p. 1050. They thus emphatically asserted that zinc oxide had definite therapeutic value, and that the zinc oxide adhesive plasters or bandages could not fall within general heading of 'Adhesive tapes' which term, according to them, applied to adhesive tapes meant for industrial or other non-medical use. They thus contended that the true nature and character at various stages of manufacture, distribution or sale of their products made them quite distinct from the ordinary adhesive tapes, falling under T-1. 60, 9. Reference was also made to the Budget Speech of the then Finance Minister delivered at the time of introduction of T.I. 60 of the CET, by clarifying, inter alia, that this was meant to cover "non-medical adhesive tapes". It was thus pleaded that this was unmistakable indication of intention of the Legislature not to levy excise duty, on medical or medicated tapes, by reference to the newly added tariff item 10. Shri D.B. Engineer appeared on the date fixed for hearing to argue the matter. He at the outset, stated that the questions falling for determination, were as to whether these two products traded by the appellants as (i) Paragon Zinc Oxide Adhesive Plasters B.P.C., and (ii) Elastoplast Electric Adhesive Bandages B.P.C. were tapes in the ordinary sense, and secondly even if the width of these plaster strips, could be taken to be a factor to vest them with the character of a tape, could these be considered adhesive tapes, in the sense, as contemplated by T.I. 60. He pin-pointed the nature as well as function of these products, by citing a number of technical references on the subject, as well British Pharmaceutical Codex. Certain extracts were also supplied of the literature, highlighting the meaning attached to these plaster adhesive tapes and on being asked as to whether the said citations pertain to the period to which the controversy relates, he confirmed this fact. He clarified that the period in dispute was June 1971 to July 1974, as subject-matter of the two refund claims, and that the references which he was quoting, and copies of the relevant extracts thereof, which he was filing, were mostly from the editions of the year 1973.
11. He, first of all, supplied copy of the monograms from the Merck Index (8th edn.) and then from the B.P.C. 1973 to support his contention that these products known as zinc oxide adhesive plaster or bandages were made to specifications as laid down by these authorities and were subjected to highest degree of quality control, and were marketed with clear indication that they conformed to these standards, laid by the B.P.C. Reading from the relevant portions thereof, he stated that they consisted of a suitable cloth spread evenly as self-adhesive plaster mass containing zinc oxide, and laid emphasis on the fact that these were not covered by an ordinary adhesive substance, but highly medicated one, consisting of zinc oxide. He further read from B.P.C. 1973 to highlight the fact that zinc oxide itself contained medical properties, and relying on the same, contended that the view taken by the lower authorities that zinc oxide was not possessed of any therapeutic properties, was patently wrong.
12. Shri Engineer further urged that a reading of the technical literature on the point, as produced by him, establishes beyond doubt that zinc oxide plaster/bandages had functions other than mere fastening or holding in position, adding that even immobilising a part or holding it in position to protect it from further damage, was in itself part of a treatment. He cited a Supreme Court authority in support of his contention that the term 'drug' was not confined or restricted to cover only medicines but extended also to substances intended to be used for or in the treatment of diseases of human beings or animals. This authority titled Chimanlal Sheth v. State of Maharashtra reported in 1963 Maharashtra Law Journal 276 (photostat copy placed on file) has highlighted the fact that it was a mistake to create artificial distinction between medicines and substances which are not medicines strictly so-called and laid down that the expression 'substances' must be some thing other than medicines but which are used for treatment and held that articles, like absorbent cotton wool, roller bandages and gauzes, were substances which were used f r or in treatment, and besides being treated with antiseptic material so as to make them disinfectant for surgical dressings; they possess other qualities which are utilised in the treatment of diseases inasmuch as they have to conform to certain prescribed standards and consequently the term 'drug' as understood by Drugs Act would be not only medicines used for treatment but other substances which were "aids for treatment".
13. The learned Counsel argued, on the basis of this authority, that the subject goods were even more specialised than gauze or absorbent cotton wool, etc. which were the subject-matter of the case before the Hon'ble Supreme Court, and that on parity of reasoning, these adhesive plasters/bandages were entitled to be treated as having properties to work as "aids in treatment", and that this factor alone would take them out of the category of general adhesive tapes covered by T.I. 63.
14. He also quoted from certain judgments in support of his contention that unless a particular commodity comes or can be brought under the specified categories covered by a tariff item, a general entry of wide connotation could not be held to be covering them and merely because the general description of a given tariff item tallies with the name or description of an article, it would not mean that said tariff item can apply to every commodity going by that name or description. (Reference is made in this connection to 1980 E.L.T. 468 (Mad.): M/s. Parry Confectionary Ltd., Madras v. Government of India and Ors. and 1979 E.L.T. J-608 : Shri Vallabh Glass Works Ltd. Vallabh Vidyanagar and Another v. Union of India and Ors.) 15. Shri Engineer urged, therefore, that in the light of the test laid down by the Supreme Court, and further by Delhi High Court in case Alkali and Chemical Corporation of India Ltd. v. Union of India and Ors. (1981 E.L.T. 22) to the effect that excisable goods must be classified according to their general substantial use, and that in face of the fact as shown by reference to the BPC, B.P. (British Pharmacopeia) and Merck Index, etc. that zinc oxide has properties, protective as well as antisceptic, and is used in skin diseases, and is also for dressing in moist eczema and on wounds etc.; the plaster and bandage prepared with application thereof, made them to perform certain functions for treatment of diseases, and thus acquire the character of medicine or drugs, and that these have certainly to be treated as medicated tapes.
16. He further relied on the licence issued to the party under the provisions of the Drugs Control Order, by placing a copy thereof on record, giving annexure of the categories of drugs to be covered by the said licence. 'Surgical dressings' which, according to him, will cover the subject goods, are listed at S. No. 17 of the said Annexure. Also placed on record was a copy of the declaration, filed for the purpose of the licence for manufacture of drugs, affirming that all these products conform to standards as laid down by the BPC or USP, the subject goods being mentioned at S. No. 2 and 4 of the said declaration. The learned Counsel pleaded that this description was sufficient to take these goods out of the category of ordinary adhesive tapes. He further placed reliance on the Budget Speech of the then Finance Minister, while introducing T.I. 60 in the Schedule to the Tariff, in the year 1971, and read extracts therefrom, as stating that the newly proposed tariff item 60 was intended to cover tapes which were 'non-medical' and argued that this coming from the mouth of the mover of the Bill was a positive proof of the fact that this T.I. 60 was not meant to apply to medicated tapes, like the present ones.
17. He, however, very fairly, while summing up his arguments, said that although his contention was that the classification as made under T.I.60 by means of the impugned order was not sustainable but he accepted the position that the Tribunal can determine proper classification, as can be gathered from the facts and pleadings coming on record, and that if the Bench felt that his arguments veered round the fact that these goods answer the description of medicated tapes, then these could be held to be covered by T.I. 14-E. He had, in fact, produced a letter dated 6-1-1981 (copy placed on file) issued by the same Collectorate, namely under signature of Shri M.C. Thakur, Assistant Collector of Central Excise, Division 'R', Bombay saying that these products conform to the Tariff description of T.I. 14-E and the Explanation given therein and thus merited classification under 14-E as P or P medicines.
He confirmed that subject articles were being treated as patented and proprietary goods, and thus item 14-E could apply though he wanted it to be placed on record that the view conveyed by means of the letter dated 6-1-1981 was also being contested by the appellants on the contention that the goods fell under T.I. 68.
18. The learned Counsel concluded by saying that the appellants would, in any case, be entitled to some refund even if the products were held to be falling under T.I. 14-E, because of the duty difference in the rates between T.I. 60 and that of 14-E. He further contended that although it was his stand that the payment having been made under mistake as to the applicability of the correct Tariff item, and as such general law of limitation would apply giving appellants a period of three years, but in view of the Tribunal decision in case of Miles India Ltd. reported in 1983 ELT 1026 (CEGAT) he realised that he could not urge this contention before us, and so far as the Tribunal was concerned, the consequential refund may be allowed for the period of one year, preceding the dates of filing of the respective claims, adding that at the relevant time, Rule 11 allowed one year for making such claims.
19. Smt. V. Zutshi, SDR addressing reply arguments on behalf of the respondent, contended that T.I. 60 was so worded, as to cover tapes of 'all sorts', and thus any article, which goes by the name and description of a tape, would be covered by this entry. She pointed out that the Finance Minister's speech in this regard would not conclude the issue because in the very authority, on which the learned counsel placed reliance in this regard, it was clearly indicated that reference to the speech of the mover of the Bill has to be made only in cases of doubt; stressing that in this case, there was no scope for any doubt.
She further referred to some departmental clarifications (as reproduced at page 792 of the Central Excise Tariff of India (1983-84), 10th edn.
by R.K. Jain) issued under Central Board of Excises and Customs Tariff Advice No. 51/78 dated 15-9-1978 that adhesive plaster was classifiable under T.I. 60 of the CET, and not under T.I. 14-E. She further argued that much will depend upon the process of manufacture, which was a very important consideration, and what had to be kept in focus was as to whether these were manufactured in one continuous process or whether adhesive tapes came first, at intermediary stage, and thereafter there was application of zinc oxide and other similar solutions, asserting that in that event, the tapes would be liable to excise duty at both the stages : first as adhesive tapes at intermediary stage, and then under T.I. 14-E at the final stage. She, however, added that, according to Department's stand, zinc oxide was not possessed of any therapeutic properties and that the basic character of these tapes was to function as adhesives and as such they would be covered by T.I. 60, notwithstanding whatever property they might possess. She further contended that the licence under the Drugs Control Order was for a different purpose; namely, regulation of prices, etc. and could have no bearing on the question as to the medicinal properties or otherwise of these tapes and that Chimanlal Sheth's ruling, relied upon by the learned counsel, also did not have any bearing on this question because that also had reference to the definition of drugs, as given under the Drugs Act. She conceded, however, that if the drugs emerged as patent or proprietary medicines, and were marketed as such, then T.I. 14-E could be applicable, but reiterated that T.I. 60 would also apply. When asked by the Bench as to how two tariff entries could apply to one product, she did not have much comments to offer except for saying that one could be at the intermediary stage and the other at the stage of final product. She also controverted the stand that if the products were held to be not classifiable under T.I. 60, then period of 3 years would be available for claiming refund.
20. Shri D.B. Engineer made a short rejoinder by pointing out that there was no question of any intermediary stage, and that he could vouchsafe for the fact that these were prepared in one continuing process, and that even the monograms indicated that it was not a case where first they ware manufactured as mere adhesive tapes, and thereafter zinc oxide solution was being applied, and as far as his knowledge .went, he could say at the bar that one single solution was applied containing adhesive properties as well as zinc oxide and other ingredients. He further pointed out that what was before the authorities were the goods as finished products, and that it would not be appropriate to introduce any element of intermediary stage now.
21. After applying our very careful thought to the matter, we find weight in the arguments advanced by the learned counsel for the appellants, that from the nature of the goods and the function which they were to perform, it will be inappropriate to treat them as ordinary adhesive tapes. We find it established from technical literature on the subject that zinc oxide is possessed of properties which are both curative as well as preventive and protective. We further find that BPC clearly indicates that zinc oxide as adhesive plaster is used to secure dressing and to immobilise small areas (p.
634, 1973 Edn.). The British Pharmacopoeia, 1973 also indicates protective functions of zinc oxide. It is a case where the proposition laid down by the Supreme Court in Chimanlal Sheth case (Supra), expression would squarely apply to the effect that any article which performs the function of "aid-in-treatment", even though, not actual treatment, has to be considered as a medicine. It is to be noted that that case pertained to absorbent cotton wool, roller bandages and guazes, etc. On that analogy, the case of the goods covered by this appeal would be all the more stronger, because they are made to perform specified functions of protecting and keeping secure affected parts, and immobilising the affected areas, and to that extent are definitely to be treated as having curative, thus medicinal value.
22. We also find that the licence which is granted to the party for manufacture of drugs, has reference to these products as "surgical dressings" in the list of said drugs, which means that the official understanding of these products is that of medical or medicinal value.
We further find from the declaration, as referred to above, that these products are made to specifications laid down by the BPC or USP, and to that extent, the definition and description given in the BPC would be both relevant, as well as material.
23. We thus find it to be a case where the contention that these goods were not covered by T.I. 60, as simple adhesive tapes, carries force and which inference is fortified by the Budget speech, made by the then Finance Minister, while introducing this item. In this connection, we do not find it possible to subscribe to the contention of the learned SDR, that on the facts of this case, the said speech would not be, a relevant consideration on the view that it applied only in cases of doubt, because we do find it to be a case which is not free from doubt, inasmuch as reference has been made by the learned SDR herself to a number of Tariff Advices issued by the Board. Such clarifications would be necessitated only, if some doubts had been arising or felt in the matter of interpretation of T.I. 60. We also feel that this question, that such tapes of medicated plasters or bandages may be considered to be covered by this newly proposed item was even visualised at that time but it was thought appropriate to set at rest such doubts in the Budget speech itself, and that we find it to be a very relevant factor, which should more or less clinch the issue.
24. We further find that the argument to bring in, the intermediary stage of the product, is also misconceived because apart from the fact that the entire controversy rests on the goods as produced at final stage, and as final products, at no time, question of intermediary stage was in focus. Otherwise also, a reference to the BPC 1973, to whose specifications these products are manufactured, makes it clear that these are prepared in one continuous process as the self-adhesive plaster itself is prepared in a mass form containing zinc oxide, and then spread on the cloth or fabric. It is thus not a case as stipulated by the learned SDR that first adhesive tapes simpliciter are prepared, and then solution of zinc oxide etc. applied, so as to involve two different stages of manufacture. Although we would not feel bound by the departmental view, taken from time to time, but we do find that in this case, there have been shifts in stand and the latest view of the department itself is to cover them under T.I. 14-E as medicated tapes, as conveyed by Collectorate's letter dated 6-1-1981.
25. We are thus of our considered view that on the basis of the material placed on record by the learned counsel for the appellants and the arguments advanced by him, and the admission that they are marketed as patent and proprietary medicines, the subject goods are classifiable under T.I. 14-E of the CET.26. As a result, the classification determined by the lower authorities is set aside, and the goods are held to be classifiable under T.I.14-E. As submitted by the learned counsel, this re-classification would entitle the appellants to proportionate refund. We, however, do not find it feasible to accept the contention convassed by the learned counsel that the case of being of mistaken payments, provisions of general law of limitation giving them three , years would apply. The Tribunal has already taken a considered view in the matter in case reported as Miles India Ltd. (supra). In that view of the matter, which view the learned counsel rightly did not further seek to contest before this forum, the matter is thus governed by Rule 11, which prescribed period of one year at the relevant time, for making refund claims, and only that would be available in this case. The appeal is allowed to that extent, with the direction that consequential refund ensuing upon re-classification as now determined, be allowed to the appellants within a period of three months, from the date of communication of this order.