1978 (3) TMI 113 - HC - Central Excise

Issues Involved:
1. Whether the intermediate products (Tincture Zingiberis Fort, Tincture Belladona, Tincture Nux Vomica, Spirit Chloroform, and Extract Rauwolfia Serpentina) are "medicinal preparations" under Section 2(g) of the Medicinal and Toilet Preparations (Excise Duties) Act, 1955.
2. Whether duty is payable on "physicians' samples".

Detailed Analysis:

Issue 1: Definition of "Medicinal Preparations"
The appellant argued that the intermediate products used in the manufacture of their medicinal preparations are not "medicinal preparations" as defined in Section 2(g) of the Medicinal and Toilet Preparations (Excise Duties) Act, 1955. Section 2(g) defines "medicinal preparation" as including all drugs which are a remedy or prescription prepared for internal or external use in humans or animals and substances intended for treatment, mitigation, or prevention of disease.

The appellant contended that these intermediate products are merely ingredients and not final medicinal preparations. However, the court referred to authoritative texts such as the British Pharmaceutical Codes (1949), Martindale's "The Extra Pharmacopoeia," and "Pharmacology, Materia Medica and Therapeutics" by Birendra Nath Ghosh, which classified these products as medicinal preparations used for treatment, mitigation, or prevention of diseases.

The court concluded that these intermediate products are indeed medicinal preparations under Section 2(g) of the Act, and the imposition of excise duty on these products was justified. The appellant's objections were overruled.

Issue 2: Duty on "Physicians' Samples"
The appellant claimed that "physicians' samples," which are distributed free of cost for propaganda and publicity, should not be subject to excise duty as they have no market value. The appellant argued that since these samples are not sold, there is no manufacturing cost or profit to consider for duty purposes.

The court examined the relevant sections of the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, and the Central Excises and Salt Act, 1944. It noted that the schedule to the Act generally imposes duty on an ad valorem basis. According to Section 4 of the Central Excises and Salt Act, 1944, the value for duty purposes is the wholesale cash price, excluding trade discounts and duty payable at the time of removal from the factory.

The court found no provision in the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, exempting "physicians' samples" from excise duty. However, it acknowledged that the Central Excise Tariff under Item 14-E sub-clause (6) provides an exemption for clinical samples of non-alcoholic medicines, but this does not apply to products containing alcohol.

The court concluded that excise duty could be levied on "physicians' samples," but the manufacturing profit should be excluded from the wholesale price for duty calculation purposes. This is because the profit is not realized when the samples are distributed free.

Judgment:
The appeal was allowed in part. The court directed the issuance of a writ of Mandamus, commanding the respondents to impose excise duty on "physicians' samples" by excluding the manufacturing profit from the wholesale price. The respondents were also directed to consider all claims for refunds, including those due on "physicians' samples," within three months from the date of the judgment.

No order was made as to costs.

Separate Judgment:
S.K. Dutta, J. concurred with the judgment delivered by Sankar Prasad Mitra, C.J.

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