2017 (9) TMI 877 - HC - Central Excise

Classification of goods - whether formulations containing less than 135 mgs. i.e. 65 mgs of Dextropropoxyphene can be classified as 'Narcotic Drug' or 'Narcotic' within the meaning of Section 2(h) of the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 and liable to State Excise Duty? - Held that - The term Narcotic Drug or Narcotic with which we are concerned with in the present case has been defined under Section 2(h) of the M T P Act to mean a substance which is coca leaf, or coca derivative, or opium, or derivative of opium, or Indian hemp and shall include any other substance, capable of causing or producing in human beings dependence, tolerance and withdrawal syndromes and which the Central Government may, by notification in the Official Gazette, declare to be a Narcotic Drug or Narcotic - The plain reading of item No. 86 in the notification states that a Narcotic Drug or Narcotic would include only formulations containing more than 135 mgs of Dextropropoxyphene per dosage unit.n declared as Narcotic Drug or Narcotic - In the present case admittedly the subject formulations contain less than 135 mgs i.e. 65 mgs of Dextropropoxyphene and hence cannot be classified as a Narcotic drug or Narcotic in view of the said Notification. The subject formulations of the Petitioners containing less than 135 mgs i.e. 65 mgs of Dextropropoxyphene are excluded from being classified as a Narcotic Drug under the Section 2(h) of the M T P Act. We find that the view taken by the Respondents viz. that the Petitioners are liable to the State Excise Duty under the M T P Act is thoroughly untenable - the impugned demand notices quashed. Petition allowed - decided in favor of petitioner.

Summary

Issues:
Classification of formulations containing less than 135 mgs of Dextropropoxyphene as 'Narcotic Drug' or 'Narcotic' under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 and liability to State Excise Duty.

Analysis:
The petition raised the issue of whether formulations containing less than 135 mgs of Dextropropoxyphene could be classified as 'Narcotic Drug' or 'Narcotic' under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, and thus be liable to State Excise Duty. The petitioners, a pharmaceutical company, manufactured formulations containing 65 mgs of Dextropropoxyphene, which they argued fell under Chapter 30 of the Central Excise Tariff Act, 1985, and not the M & TP Act. The dispute arose when the State Excise Department seized the formulations, alleging evasion of State Excise Duty. The petitioners contended that their formulations were not covered by the definition of Narcotic under the M & TP Act due to containing less than 135 mgs of Dextropropoxyphene.

The court referred to a previous judgment in USV Limited Vs. State of Maharashtra, where it was held that formulations with Dextropropoxyphene base per dosage unit not exceeding 135 mg were excluded from classification as a narcotic drug. The court emphasized the importance of the quantity of Dextropropoxyphene in determining the classification. It distinguished a Supreme Court judgment related to alcohol content in medicines, stating that in this case, the quantity of Dextropropoxyphene was the critical factor for classification. The court reiterated that formulations with less than 135 mgs of Dextropropoxyphene were not to be considered as containing a narcotic drug or narcotic under the M & TP Act.

Consequently, the court held that the subject formulations containing 65 mgs of Dextropropoxyphene were excluded from classification as a Narcotic Drug under the M & TP Act. The demand for State Excise Duty was deemed untenable, and the impugned demand notices were quashed. The court directed the respondents to pay the petitioners costs for the loss incurred due to the wrongful seizure of the formulations. The petitioners were allowed to withdraw the amount deposited with the Registry, along with any accrued interest, as per the interim order.

In conclusion, the judgment clarified the classification of formulations with Dextropropoxyphene content below 135 mgs, emphasizing the specific quantity threshold for determining the Narcotic classification under the M & TP Act. The court's decision favored the petitioners, highlighting the importance of accurate interpretation and application of the relevant legal provisions in excise duty matters.