Full Judgment Text
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PETITIONER:
ASTRA PHARMACEUTICALS (P) LTD.
Vs.
RESPONDENT:
C.C.E.
DATE OF JUDGMENT16/12/1994
BENCH:
SAHAI, R.M. (J)
BENCH:
SAHAI, R.M. (J)
PARIPOORNAN, K.S.(J)
CITATION:
1995 SCC (2) 84 JT 1995 (1) 276
1995 SCALE (1)17
ACT:
HEADNOTE:
JUDGMENT:
The Judgment of the Court was delivered by
R.M. SAHAI, J.- This appeal under Section 35-L of the
Central Excises and Salt Act, 1944 (’Act’ for short) raises
two important questions of law, one relating to construction
of Item 14-E of the Central Excise Tariff levying duty on
patent and proprietary medicines and other the scope of
proviso to Section 11-A of the Act.
2.For purposes of duty, patent and proprietary medicines
were classified in relevant period in two broad categories -
one, which were dutiable under
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Tariff Item 14-E and other which fell under the Residuary
Item 68. The latter were wholly exempt from duty under
Notification No. 55/75 dated 1-3-1975. The appellant
manufactured pharmacopoeial and non-pharmacopoeial
medicines. One of the items manufactured by the appellant
was 20% Dextrose injection. It is a trade name in the
Indian Pharmacopoeia. It being one of the medicines
specified in Pharmacopoeia it was wholly exempt from duty.
An item which fell under Tariff Item 68 and was wholly
exempt from duty was further exempted from operation of Rule
174 and no Central Excise licence to manufacture it was
required to be taken out. The appellant, therefore, did not
obtain any licence and cleared the Dextrose manufactured by
it without paying any duty since the date of manufacture in
December 1978 till 23rd January, 1982 when notice was served
on it for showing cause as to why Dextrose manufactured by
it may not be subjected to duty under Tariff Item 14-E as
even though it was pharmacopoeial product, yet the label
used on the packing and the container bore a monogram which
indicated a connection between the medicine and the
appellant.
3.To determine if the appellant was liable to pay duty on
Dextrose injection manufactured by it, it will have to be
examined if it fell under Tariff Item 14-E extracted below:
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Tariff Description of Goods Rate of duty
Item No. Basic Special Excise
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14-E Patent or Proprietary Medicines 12 1/2% 10% of the
not containing alcohol, opium, adv. basic duty
Indian hemp or other narcotic chargeable
drugs or other narcotics other
than those medicines which are
exclusively Ayurvedic, Unani,
Sidha or Homeopathic.
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Explanation 1.- "Patent or proprietary medicines" means any
drug or medicinal preparation, in whatever form, for use in
the internal or external treatment of, or for the prevention
of ailments in human beings or animals, which bears either
on itself or on its container or both, a name which is not
specified in a monogram in a Pharmacopoeia Formulary or
other publications notified in this behalf by the Central
Government in the Official Gazette, or which is a brand
name, that is a name or a registered trademark under the
Trade and Merchandise Marks Act, 1958 (43 of 1958) 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 of trade between the
medicine and some person, having the right either as
proprietor or otherwise to use the name or mark with or
without any indication of the identity of that person.
Explanation H.- ’Alcohol’, ’Opium’, "Indian Hemp", "Narcotic
Drugs" and ’Narcotics’ have the meanings respectively
assigned to them
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in Section 2 of the Medicinal and Toilet Preparations
(Excise Duties) Act, 1955 (16 of 1955).
The entry is in two parts, one the main and other
explanatory. The main part negatively excludes those
medicines which contain any of the ingredients mentioned in
it or are Ayurvedic, Unani, Sidha or Homeopathic medicines.
The range of patent and proprietary medicines thus having
been determined by the main part the explanation spells out
the exact scope of the entry by first widening its ambit by
including any drug or medicinal preparation in whatever form
and used for any ailment in human beings or animals, then
carves out an exception in favour of any pharmacopoeial
medicine or medicines which have been mentioned in a
publication issued by the Central Government, but excludes
again from it those medicines which even though mentioned in
pharmacopoeia are identified by a monogram or a symbol,
signature or invented words so as to establish a
relationship between the producer and the medicine. To put
it simply, all those patent and proprietary medicines which
are mentioned in Pharmacopoeia are excluded from the entry
unless the manufacturer or producer by use of any
distinctive mark establishes connection with the medicine.
In other words, all those medicines which either bear a name
which is not specified in the pharmacopoeia or which is a
brand name and that brand name is used by any symbol,
monogram or signature so as to establish a relationship
between the medicine and the person manufacturing or selling
it then such patent or proprietary medicine would be covered
in it. The purpose appears to be that if a manufacturer
manufactures medicines which were mentioned in pharmacopoeia
then it was not liable to pay any duty. But if it produced
a medicine which carries its own name which was not
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mentioned in the pharmacopoeia, then it was liable to pay
duty under this item. That is, a patent or proprietary
medicine to attract levy under this tariff item must either
be a medicine which was not specified in a pharmacopoeia or
other publication and carried on it or its container name of
the produce by symbol or invented name etc. A medicine of
which the producer is the proprietor and it is known by its
name would be covered in this clause. The other class of
patent or proprietary medicines to which this tariff item
applies are those medicines which have a brand name or a
registered trademark under the Trade and Merchandise Marks
Act and carry such mark, symbol or monogram as to establish
relation between medicine and producer or manufacturer, That
is, the writing or monogram on the medicine must establish
that it was the producer or the manufacturer who was
proprietor of the medicine.
4. This appeal is concerned with the latter clause, i.e.,
the medicine carrying brand name. The Explanation includes
in its ambit all those medicines which carry a brand name
which is registered under the Trade and Merchandise Act and
the manufacturer describes that medicine by any symbol,
monogram or label so as to establish a relationship between
the manufacturer and the medicine then the medicine
manufactured by him could be included in the explanation
appended to Item 14-E. The appellants
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manufacture 20% Dextrose injections. It is not disputed
that 20% Dextrose injections are mentioned in pharmacopoeia
but the appellant has been denied exemption as on the cover
it carries the name "AP - ASTRA". According to the
Department, since the medicine is described by a monogram
and it established a relation between the manufacturer and
the medicine, therefore, it was included in Explanation 1 to
Item 14-E. The Tribunal found that letters ’AP’ do not
constitute a monogram because the two letters are not
interwoven but they being placed side by side in an artistic
manner on the top it made the medicine manufactured by the
appellant as a patent or proprietary medicine attracting
Central Excise duty under Tariff Item 14-E.
5.As has been explained earlier the first part of the
Explanation widens the ambit of the entry by extending it to
any drug or medicinal preparation for use in internal or
external administration for prevention of ailments in human
beings or animals. But then it narrows it by restricting
the applicability of the tariff item to only such medicines
which bear either on itself or on its container or both a
name which is not specified in a monogram in a
pharmacopoeia. This obviously is not applicable to the
appellant as the injections manufactured by the appellant
are specified in a pharmacopoeia. The other class of
medicines to which this Explanation applies are those which
have a brand name that is a name or a registered trademark
under a Trade and Merchandise Marks Act. The medicine
manufactured by the appellants is not registered under the
Trade and Merchandise Marks Act. Therefore, it would
attract levy only if its container or packing carried any
distinctive marks so as to establish the relation between
the medicine and the manufacturer. But the identification
of a medicine should not be equated with the produce mark.
Identification is compulsory under the Drug Rules.
Technically, it is known as "house mark". In Narayan’s book
on Trade Marks and Passing-Off, the distinction between
"house mark" and "product mark" (brand name) is brought out
thus:
"677-A.’House mark and product mark (or brand
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name).- In the pharmaceutical business a
distinction is made between a house mark and a
product mark. The former is used on all the
products of the manufacturer. It is usually a
device in the form of an emblem, word or both.
For each product a separate mark known as a
product mark or a brand name is used which is
invariably a word or a combination of a word
and letter or numeral by which the product is
identified and asked for. In respect of all
products both the product mark and house mark
will appear side by side on all the labels,
cartons etc. Goods are ordered only by the
product mark or brand name. The house mark
serves as an emblem of the manufacturer
projecting the image of the manufacturer
generally."
The ’AP’ or ’ASTRA on the container or packing was used to
project the image of manufacturer generally. It did not
establish any relationship between the mark and the
medicine. For instance, if the appellant instead of using
Dextrose injections would have described it as Astra
injections or Astra Dextrose injections then it could be
said that a relationship between the
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monogram and the medicine was established. In the case of
appellant it was only a monogram to identify the
manufacturer.
6. In Indo-French Pharmaceutical Co. v. Union of India1 a
learned Single Judge of the Madras High Court while
construing Tariff Item 14-E observed:
"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.
" This was approved by a Division Bench of the same High
Court in Union of India v. Indo-French Pharmaceutical Co.2
Reliance was, placed on Ramsey Pharma Pvt. Ltd. v.
Superintendent, Central Excise3 for the Revenue and it was
claimed that this decision was followed by the Tribunal and
since it was based on correct interpretation of Explanation
1 the appellant was not entitled to any relief. It would be
seen that in the decision rendered by the Allahabad High
Court it is not clear if the container bore the name of the
medicine as well. What has been extracted in the judgment
is that the medicine has been manufactured by Ramsey Pharma
Pvt. Ltd. As stated earlier if the container of the
appellant would have stated that these were Astra Dextrose
injections then it could be said that a relationship between
the medicine and the manufacturer was established. The
ratio laid down by the Madras High Court is approved as
correctly enunciating the scope of Explanation 1. Since the
appeal is being allowed on merits the question whether the
Revenue was justified in reopening the case under proviso to
Section 11-A of the Act is rendered academic and is not
necessary to be decided.
7. In the result this appeal succeeds and is allowed. The
order passed by the Tribunal is set aside and the question
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of law raised by the appellant is decided by saying that
Dextrose injections manufactured by the appellant in the
relevant years were not patent and proprietary medicines
dutiable under Tariff Item 14-E of the Schedule. There
shall be no order as to costs.
1 1978 ELT J478 (Mad)
2 1983 ELT 725 (Mad)
3 1983 ELT78 (All)
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