1. This case involves the scope and ambit of tariff item 14-E of the First Schedule to Central Excises and Salt Act, 1944 and rules framed thereunder. The petitioner is a manufacturer of pharmaceutical products at Nanganallur, Madras. Some of the pharmaceutical products manufactured by it are liable to excise duty and others are not excisable. For the manufacture of such of those pharmaceutical products which are excisable, the petitioner has taken out a licence under the said Act. The items that attract the excise duty are governed by the tariff item 14-E of the First Schedule to the Central Excise Act. As required by the licence, the petitioner furnished the lables attached to the products manufactured in its factory, both excisable and non-excisable, along with a proforma in triplicate on 11.02.1967. It also undertook to supply to the Department in advance the labels of new preparations excisable or non-excisable, manufactured for sale in future. On receipt of the said labels, the pharmaceutical products manufactured by the petitioner were classified as excisable and non-excisable.
2. As per the said classification, the following three preparations have been held to be non-excisable as they are Indian Pharmacopoeia products 1. Sulphaguanidire Tablets, 2. Sulphaguandire Tablets, and 3. Calcium Gluconate Tablets, as per the revised classification which was made on 5-09-67. The petitioner has been manufacturing these three preparations and has been clearing them with the approval of the Central Excise authorities without payment of duty as they have been classifield already as non-excisable.
3. However, by a notice dated 2-02-1971, for the first time, the petitioner was asked to show cause as to why the duty was not paid on the clearance of the said three preparations from 19-9-1966 to 9-4-197 and as to why a penalty should not be levied under Rule.173Q of the Central Excise Rules. In answer to the said show cause notice, the petitioner represented that the said three preparations are not proprietary or patent medicines as two of them were preparations under the Indian Pharmacopoeia and one of them was a preparation under the U.S. Pharmacopoeia and therefore, they will not come under tariff item 14-E and that the authorities themselves classified these items as non-excisable on that basis and had permitted the clearance without payment of duty. The petitioner also contended that the recovery of excise duty under Rule 9 (2) is not sustainable, that, the proper provision to be applied is Rule 10, and that the recovery cannot, however, be made under Rule 10 as it is beyond the period of one year prescribed in the said rule.
4. The objections of the petitioner were, however, overruled by Superintendent Of Central Excise, Guindy, who directed the recovery of excise duty in a sum of Rs. 11,319.90 as proposed in the show cause notice, on 15.02.1971. Against the said order, the petitioner file an appeal to the Collector of Central Excise, but without success. Thereafter, the petitioner moved the Central Government in revision but that revision also failed. Thereafter it has approached this court seeking a writ of certiorari to quash the order of the revisional authority confirming the order passed by the original authority demanding a sum of Rs. 11,319.90 from the petitioner as excise duty payable in respect of the said three pharmaceutical items manufactured by the petitioner.
5. The petitioner's attack against the original order is three fold (1)-The three preparations manufactured by it will not come under tariff item 14-E of the First Schedule to the Central Excises and Salt Act and therefore it is not liable to pay any excise duty in relation to these items, (2) that even assuming that the goods are excisable, it can be brought to change only by initiating proceedings under Rule 10 and not by invoking Rule.9 (2) which is quite inapplicable to the facts of the case and. (3) that the proceedings under Rule 10 is clearly barred by time and therefore, no recovery of excise duty could be made so far as the clearance of those three items made by the petitioner between 19.09.1966 and 9-04-1970 as the one year period prescribed in Rule 10 had expired.
6. As regards the first contention which raises the scope and ambit of tariff item 14-E we have to scan through the said item along with its explanation. Item 14-E is extracted below :-
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The main part of tariff item 14-E refers to patent and proprietary medicines other than those which are exclusively Ayurvedic, Unani, Sidha or homoeopathic. This shows that the item is mainly concerned with patent and proprietary medicines. Explanation 1 to that item gives the definition of 'patent and proprietary medicines'. It defines a patent and proprietary medicines as a drug or medicinal preparation which bears either on itself or on its container or both a name which is not specified in a monograph, in a pharama copoeia, formulary or other publications, notified in this behalf by the Central Excise, in the Official Gazette or which is a brand item i.e. a name or a registered trade mark under the Trade and Merchandise Marks Act or any other mark such as a symbol, monogram, label, signature or invented words or any writing which is used in relation to that medicine for the purpose of indicating or so as to indicate a connection in the course for trade between the medicine and some person having the right either as proprietor or otherwise, to use the name or mark.
7. According to the learned counsel for the petitioner, the three medicinal preparations will not become patent or proprietary medicines under the definition given in the Explanation. According to the learned counsel for the respondent, however, Explanation 1 gives an extended definition of 'patent or proprietary medicine', that this extended definition will take in even medicines which are not patent or proprietary medicines and that if the medicine bears either on itself or on its container a name or a symbol, monogram, label, signature or invented words or any writing to indicate a connection between the medicine and the manufacturer, it will become a patent or proprietary medicine. A close reading of the Explanation, however, in my view indicates that the marks, symbols, monogram, label, signature or other words which are used in the medicinal preparation or its container should be such as to indicate that the medicine is a special preparation made by the manufacturer. The connection between the medicine and the manufacturer, contemplated under the Explanation, should be such as to indicate that the manufacturer has a proprietary interest in the medicine. It is well known that in all medicinal preparations, the manufacturer's name-: is and has necessarily to be indicated. Every container of a medicinal preparation will necessarily indicate the manufacturer's name and this cannot be taken to indicate a connection between the medicine and its manufacture. If that is so, every medicinal preparation will automatically become patent or proprietary medicine as defined in the Explanation in addition to the manufacturer's name some other symbol mark, monogram or label has been used by the manufacturer to indicate that his is a special preparation and not exclusively based on any pharmacopoeia then it can be said that they indicate that the manufacturer has got a proprietary interest in the medicine. The antithesis between the expression 'a name which is not specified in a monogaph in a pharmacopoeia, formula or other publications' and the expression 'a brand name occurring in the Explanation' have to be considered significant. That indicates that if a manufacturer uses a word, symbol, label, monogram etc. apart from a monograph, in a pharmacopoeia, formulary or other publication, then that can be treated as indicating that the manufacturer has a proprietary interest in the medicine manufactured by him.
8. In this case, the mark which the petitioner is said to have used in all the articles manufactured by it, including the three pharmaceutical preparations referred to above, is a mark with a flame inside which occurs the words 'India French.' These words have been taken by the authorities as indicating the petitioner's proprietary interest in the three medicines on the ground that Explanation 1 by virtue of the user of such symbol can be taken to confer a proprietary right on the petitioner in the medicines. It cannot be disputed that the petitioner has been using this symbol, a flame inside which the words 'India French' occur, in respect of all the articles manufactured by it. It is seen that even in the letter-head, the petitioner has been using this mark. Therefore, it is not a distinctive mark given by the petitioner to the three medicines referred to above but it is a mark which is generally given to all labels. In its letter dated 11.12.1967, the petitioner has categorically stated that this mark is being used in respect of all the articles manufactured by it. I cannot, therefore, construe the said mark as a brand mark given by the petitioner for the medicines manufactured by it. In my view, therefore, the three pharmaceutical preparations manufactured by the petitioner, which were earlier permitted to be cleared without payment of duty by the Central Excise authorities themselves are not excisable under tariff item 14-E of the First Schedule to the Central Excise Act and Rules. I have therefore, to accept the contention of the petitioner and hold that it is not liable to pay excise duty in respect of the three items of pharmaceutical preparations, which has been manufactured by it and cleared between 19.09.1966 and 9.04.1970.
9. In view of this finding, it is not necessary to go into the other contentions raised by the petitioner on the question of applicability of Rule.9 (2) and the question of limitation provided in Rule.10.
10. The writ petition is, therefore, allowed and the impugned demand made on the petitioner is quashed. There will be no order as to costs.