2008 (5) TMI 653 - SC - Indian Laws

Ehether the exemption Notification would apply in respect of drugs which were manufactured upto 31st October 1999 or manufactured and sold upto the said date/

Summary

Issues Involved:
1. Interpretation of the exemption notification under the Drugs (Price Control) Order, 1995.
2. Applicability of the exemption notification post the expiry date.
3. Legality of the demand for recovery of alleged overcharged amounts.

Detailed Analysis:

Interpretation of the Exemption Notification under the Drugs (Price Control) Order, 1995:
The case revolves around the interpretation of the exemption notification dated 29th August 1995, issued under paragraph 25 of the Drugs (Price Control) Order, 1995. The notification exempted the first respondent, a pharmaceutical company, from price control measures for the bulk drug Pentazocine and its formulations until 31st October 1999. The key issue was whether this exemption applied only to drugs manufactured up to the specified date or also to those sold after the expiry date. The Supreme Court held that the exemption notification should be interpreted pragmatically, considering the entire process of manufacturing and marketing the drug. It concluded that the exemption applied to drugs manufactured by the company up to 31st October 1999, even if sold thereafter.

Applicability of the Exemption Notification Post the Expiry Date:
The appellant argued that the exemption ceased to apply after 31st October 1999, and any drugs sold post this date should adhere to the price control measures. The Supreme Court rejected this view, stating that the exemption notification was clear and unambiguous. It emphasized that the exemption was related to the drug's manufacture, not its sale. The Court recognized the practical realities of the pharmaceutical industry, noting the time lag between manufacturing and actual sale. It ruled that the exemption applied to drugs manufactured up to the expiry date, irrespective of their sale date.

Legality of the Demand for Recovery of Alleged Overcharged Amounts:
Following the expiry of the exemption, the first respondent was issued a notice demanding recovery of Rs. 2,59,76,070/- for alleged overcharging, along with interest. The first respondent contended that no overcharging occurred and that all required information was provided to the authorities. The Supreme Court found the demand for recovery unjustified, as the exemption notification covered drugs manufactured up to the specified date, regardless of their sale date. The Court dismissed the appeal, affirming the High Court's decision that the exemption applied to drugs manufactured by 31st October 1999, even if sold later.

Conclusion:
The Supreme Court dismissed the appeal, upholding the High Court's interpretation of the exemption notification. It ruled that the exemption applied to drugs manufactured up to 31st October 1999, irrespective of their sale date. The Court emphasized the need for a pragmatic and purposive interpretation of exemption notifications, considering the practical aspects of manufacturing and marketing drugs. The demand for recovery of alleged overcharged amounts was deemed unjustified, and the appeal was dismissed with costs.