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TMI Blog1995 (10) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... ts. 2. We have heard Shri A. Hidayatullah, Advocate and Shri V.S. Nankani, Advocate for the appellants. The department s case was represented by Smt. Vijay Zutshi, Director (Publication) and Shri Sharad Bhansali, SDR. We have also considered the written submissions filed by the Advocate for the appellants subsequent to the hearing. No submission was filed by the Departmental Representative. 3. The arguments put forth by Shri Hidayatullah are as follows : The appellants manufacture the goods in accordance with the licence issued under the Drugs and Cosmetics Act, 1940 for manufacture of patent or proprietary Ayurvedic medicine. This licence is issued by the competent authority after consulting an expert in the Ayurvedic System of Medicine as provided in Rules 154 and 154A of the Drugs and Cosmetics Rules, 1945. The licence is granted after due enquiry by the competent authority who has the required knowledge and expertise for that purpose. The licence is subject to annual renewal subject to fulfilment of conditions which embrace the premises of manufacturers place, conditions relating to maintaining records, sampling of the goods as well as materials, labelling of the drugs e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dgment in the case of Dabur India v. Collector of Central Excise [1994 (71) E.L.T. 1069]. There is no decision of the Hon ble Supreme Court or any High Court contrary to the decisions in Leukoplast India Ltd., Ramesh Chemical and Panama Chemical. The Calcutta High Court in Calcutta Clinical Research Science Ltd.. v. Union of India (1971 Taxation Law Report 1073), therefore, has applied reference of drugs as under Drugs Act and held that manufacture of drugs is only complete after labelling. Whereas a consistent view has been taken by four High Courts and the Tribunal has expressed conflicting views, the judgments of the High Court are binding, as held by the Tribunal in 1985 (21) E.L.T. 904, 1987 (27) E.L.T. 93, 1987 (28) E.L.T. 438, 1994 (70) E.L.T. 754 and 1994 (72) E.L.T. 735. The ratio of the Supreme Court s judgment in M.G. Abrol v. Shantilal Company, [AIR 1966 SC 197] supports the view expressed by the High Courts. In that judgment, the Court held that when the Iron and Steel Controller, the licensing authority had certified that the consignment of iron and steel scrap was not useable in India and licensed its export, the Customs could not confiscate it on the ground that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an those medicaments which should qualify the patent or proprietary medicaments in Heading 3003.10. He argued that the decision in Amrutanjan case is not good law as it is contrary to the judgments in the High Courts cited earlier. Further, it is for the competent authority under the Drugs Act to look into and interpret the scope of ayurvedic medicaments. He attempted to point out some further flaws in that decision. The view that use of synthetic ingredients would render the item non-ayurvedic was now contrary to the judgment of the Madhya Pradesh High Court in Panama Chemical Works in which the Court held the product `swad which contained 75% liquid glucose which is an allopathic and ayurvedic medicine. He said that a plea of new argument in view of a subsequent discovery cannot affect the binding precedent as held by the Supreme Court in Ambica Prasad v. State of UP (AIR 1980 SC 1762). Since the Bhoruka Industries Pvt. Ltd. decision followed Amrutanjan that would also not be binding. He sought to distinguish (AIR 1968 SC 1450) cited by the Departmental Representative. He relied upon the maxim Generalia Specialibus Non Derogant citing AIR 1961 SC 1170 and AIR 1978 SC 16. 6. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce issued under the Drugs and Cosmetics Act. But, he says that this does not stop the department from going into the composition of the product for purposes of classification. We are not able to agree with the proposition that once an article is being manufactured in accordance with the licence issued under the Drugs Act, the department cannot go into the classification of the product. The definition of drug in the Drugs Act is much wider than the definition of medicaments classifiable under Heading 3003 of the Tariff. The Central Excise Tariff includes, as we have seen in para 7, a number of goods which would not be classifiable under Heading 3003. Some of the goods defined as drugs under the Drugs Act and manufactured in accordance with the licence under that Act would be classifiable under Heading 30.02 (Vaccines) 30.04 (Certain kinds of bandages) 29.36 or 29.37. These are only a few examples. The function of the department relating to classification of goods for the purposes of assessment to Central excise duty therefore, necessarily entails study, independently and what the authorities under the Drugs Act may have correlated as to the nature of the product. Due consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which are established to be exclusively ayurvedic, unani etc. which should be excluded from the scope of the heading. The advocate s argument proceeds on the assumption that the medicament is exclusively ayurvedic. If it were, the goods would not fall under sub-heading 10 of the Heading. We have to see whether these are in fact exclusively ayurvedic. 12. The Drugs and Cosmetics Act makes a clear distinction between ayurvedic medicaments and patent or proprietary ayurvedic medicaments. The former defined in Section 3(a) have to be exclusively manufactured in accordance with the formula described in the authoritative books on ayurveda specified in the First Schedule. The latter, defined in Section 3(h) covers formulations containing ingredients mentioned in the formula described in the authoritative books of ayurveda and excludes a formulation excluded in these authoritative books. Thus while both kinds of medicines must have ingredients mentioned in the formula described in the authoritative books. Patent or proprietary medicines however may not - indeed must not have a formulation included in these books. Such a medicine is thus a formulation evolved outside the authoritative boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... miss the appeal. Sd/- (Gowri Shankar) Dated : 28-7-1995 Member (T) 16. [Order per : S.K. Bhatnagar, Vice President]. - With due respects to Hon ble Member (Technical) my views and orders are as follows : 17. The basic question before us is the determination of correct classification of pharmaceutical products Vicks medicated cough drops and Vicks vaporet throat drops under the Central Excise Tariff. 18. The Assistant Collectors (and other officers of the Central Excise De partment) who have been vested with the authority to determine such issues for Central Excise purposes are therefore, naturally required to proceed in accordance with the Principles of Interpretation, the Section Notes, Chapter Notes and the relevant headings and sub-headings of the Central Excise Schedule. 19. In the process of applying these provisions if the Central Excise Authorities are required to keep the provisions of certain other enactments in view, normally, it is so stated explicitly in the Act, Schedule or the Notification(s) (as for example Sections 3 4 of the Act and the example can be multiplied). 20. There is however, nothing in the Act or the Tariff to show that the Centra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Patent and proprietary medicament and `Drugs does not refer to Drugs and Cosmetics Act, 1940 (although it refers to the Trade and Merchandise Marks Act, 1958). In fact, there is every reason to believe that the Legislature has intentionally adopted a different definition for `Medicament , `Drug and `Patent and proprietary medicament etc. It is interesting to note in this connection that phrase `pharmaceutical products is peculiar to Central Excise Schedule and does not find mention in the Drugs and Cosmetics Act and even the word `drugs used in Note 2(ii) has been used in the Central Excise Schedule only to show that it falls within the ambit of the Medicaments and that too in a sense different from the one used in the Drugs and Cosmetics Act where it has a specific connotation for the purpose of that Act as it excludes Ayurvedic, Siddha or Unani Drugs and includes not only medicines but other substances and devices; this is however, not the case in Central Excise Tariff. For example, substances, devices and goods other than medicaments would be classifiable as pharmaceutical products (and not as drugs) for central excise purposes. 25. I have drawn attention deliberatel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rts or the Tribunal had occasion to refer to the provisions of Drugs and Cosmetics Act, that by itself is not sufficient to hold that in all cases, in all circumstances all the provisions of the Drugs and Cosmetics Act shall always apply to Central Excise cases and/or the Central Excise Authorities are bound by the provisions of that Act or the orders (whether in the nature of licence, otherwise) issued by Drug Controller or other officers under the Drugs and Cosmetics Act. I, therefore, entirely agree with my learned colleague that the Central Excise officers, can independently determine the meanings of the words and phrases used in the Central Excise Tariff for the purposes of Central Excise Act, infer the intention of the legislature from the language used therein or the context or the purpose thereof; and act accordingly. 31. Of course, to the extent, there is a certain amount of commonality and the scope of similar phrases and words is required to be determined and clarified and it is so considered by the Central Excise Authorities themselves or the Courts or the Tribunal that it could be so done with the help of other laws, they can certainly look to not only the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dson Hindustan Limited (and a supplement agreement with Proctor and Gamble India Ltd.) in India and therefore, must be governed by the terms and conditions of the licence. 36. The appellants have not produced any material or other evidence to show that they have been licenced to produce these medicines according to the Ayurvedic principles and practice and yet sell them under the same Brand Name or Trade Mark by which they are known as Allopathic Medicines the world over. 37. The appellants have admittedly manufactured them by methods not known to Ayurveda. Therefore, even it could be shown that some of the ingredients were known to Ayurveda that would by itself not be sufficient to prove that these were Ayurvedic medicines. The Legal Notice published by the Govt. of India, Ministry of Health and Family Planning, Deptt. of Health as a part of Ayurvedic Formulary of India Part-I, First Edition is important. The Clause 5 6 of this legal notice are reproduced herewith : 5. Use of substitute drugs (Pratinidhi Dravyas) wherever the original drugs are not available, is permissible in the Ayurvedic classic and practice. It must however be ensured that only the substitutes as ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The importance attached to method of preparation and use in Ayurvedic (and Homeopathic) systems is also a known fact. It will perhaps be more evident if we draw an analogy from the difference between Allopathic and Homeopathic systems. Thus, for example, the Homeopathic system fallows the principle of Similia Similibus Curentur i.e., similars are cured by similars and the drugs used in homeopathy are first given to healthy human volunteers and only after these provings they are included in Homoeopathy Materia Medica, and its medicines are prepared from `mother tincture by following the method of ionisation or dilution. Thus, greater the dilution, the greater its potency and the system believes in administering minimum possible quantity of medicine. It is well known that Allopathic medicines are not prepared on these principles or by these methods; with the results that `Borax in allopathy is very different from `Borax in homeopathy; even though the chemical is the same. The examples can be multiplied. In other words, even a substance known by the same name in both the systems could have different effects and be used in different ways. Even if the constituents of a medicine are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produced by the appellants themselves shows that it was Patent and proprietary in character and even going by the Drugs and Cosmetics Act upon which the Ld. Counsel has so heavily relied it is evident that there is a clear distinction between ayurvedic drug or medicine, a patent or proprietary ayurvedic drug or medicine and other drugs or patent or proprietary medicines. The proviso of Sections 3(a), 3(b) and 3(h) are clear and important. Section 3(a) lays emphasis on the manufacture exclusively in accordance with the formulae described in the authoritative books of ayurvedic system of medicine; Section 3(h) on formulations containing only such ingredients as specified in the First Schedule and Rule 161 of the Drugs and Cosmetics Rules relating to the Ayurvedic drugs emphasises the method of preparation thereof as detailed in the standard text and Adikarna, as are prescribed in the authoritative books specified in the First Schedule of the Act. 47. It is significant that the word `exclusively has been subject matter of interpretation by the Hon ble Supreme Court in the case of Ishwar Singh Bindra and Ors. v. The State of U.P. In the case Bench consisting of Hon. Mr. M. Hida ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inciples of western system of medicine. It has been patented and marketed as Allopathic medicine and is known throughout the world as such. 51. The fact that one of the ingredients is extract of a herb `ARKE known to Ayurved (used in addition to those used in the American or the British product of the same Trade Mark, is not and could not be a determining factor in accordance with the aforesaid Supreme Court s judgment itself. 52. Thus, even going by Drugs and Cosmetics Act it could not be considered as an Ayurvedic drug. 53. It must be noted that the Supreme Court s judgment in the Amrutanjan s case has not reviewed or overruled its judgment in the Ishwar Singh s case and has to be read along with it. In fact Amrutanjan s case only clarifies and pronounces only on those aspects which came up before it for its consideration; And the observations; and findings of the Supreme Court in the Ishwar Singh s case are still good law; Hence, we are bound to take them into consideration as well. 54. Again, for arguments sake accepting (but not admitting) that these were Ayurvedic medicines still as my Ld. Colleague has pointed out that they could at best be considered only as Patent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gample India Ltd. They filed classification list claiming the products as Ayurvedic medicaments falling under Chapter sub-heading 3003.30 which attracted nil rate of duty. Vicks Cough Drops and Vicks Vaporet Throat Drops are manufactured out of Pudinah Arka, Nilgiri Tel with Sugar base. The appellants claim that it has therapeutic and prophylactic use, as the said throat drops clear the nasal congestion and soothes the sore throat. The show cause notice alleges that in the manufacture of Ayurvedic medicaments crude drugs or the decoction or the extracts prepared by treating the medicinal vegetable substances such as roots, leaves and barks or drugs in water alcohol or milk are used. It is alleged that the ingredients used in Vicks throat drops and cough drops are only pure/synthetically prepared ingredients. It is also urged that Vicks is a registered trade mark. Therefore, the show cause notice calls upon them to explain as to why their product should not be classified under sub-heading 3003.10 of Central Excise Tariff Act as Patent and Proprietary Medicaments other than those medicaments which are exclusively Ayurvedic, Unani, Siddha, Homoeopathic or Biochemic drugs attr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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." 60. As can be seen from the definition of patent and proprietary as laid down in Note 2(ii) the product in question clearly falls within the said definition. The goods in question bears on its container a specific name viz. Vicks , which is not specified in a monograph, or in a Pharmacopoeia, or Formulary or other publications as noted in (a) to (j) of Note 2(ii). The product is used in America. It carries a trade name, symbol, monogram, which is used in relation to the medicine and which indicates a connection in the course of trade between the medicine and the propreitor. Therefore, the Chapter notes clearly bring within its ambit the impugned goods for classification as patent and proprietary medicine . 61. As regards the plea taken by the Learned Senior Advocate that the licence issued by the Drug Controller is conclusive of the fact that the product is an exclusive Ayurvedic medicine, does not have much force. The rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the methods thereof shall be maintained. PART XVII [LABELLING, PACKING AND LIMIT OF ALCOHOL IN] AYURVEDIC (INCLUDING SIDDHA) OR UNANI DRUGS 161. [Labelling, packing and limit of alnohol]. (1) There shall be conspicuously displayed on the label of the container or package of an Ayurvedic (including Siddha) or Unani drug, the true list of all the ingredients used in the manufacture of the preparation together with the quantity of each of the ingredients incorporated therein and a reference to the method of preparation thereof as detailed in the standard text and Adikarana, as are prescribed in the authoritative books specified in the First Schedule of the books specified in the First Act : Provided that if the list of ingredients contained in the medicine is large and cannot be accommodated on the label, the same may be printed separately and enclosed with the packing and reference be made to this effect on the label. (2) The container of a medicine for internal use made up ready for the treatment of human ailments shall, if it is made up from a substance specified in Schedule E(1), be labelled conspicuously with the words Caution: to be taken under medical supervis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... content of alcohol (Ethylalcohol v/s) Maximum size of packing (i) Mritsanjivani 16 per cent 30 ml. (ii) Mahadrakshava 16 per cent 120 ml. Nothing in these rules shall be deemed to require the (4) labelling of any transparent cover or of any wrapper-case or other covering used solely for the purpose of packing transport or delivery." 63. As can be seen from the above rules it is clear that the raw material to be used in preparation of Ayurvedic Drugs shall be identified and tested for their genuineness and records of such tests as are carried out for the purpose and methods thereof shall be maintained by the manufacturers. When these rules were pointed out to the Learned Senior Advocate and a query was posed to him to explain as to whether the appellants have maintained such test results and registers, the Learned Senior Advocate replied in the negative. It is his contention that the Excise Authorities [do] not have power to challenge the grant of licence by the Drug Authorities under the said legislation. We are not agreeable with this contention. The exemption from charging duty has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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