9911796707
TMI Blog1988 (4) TMI 303X X X X Extracts X X X X X X X X Extracts X X X X ..... er dated 14th June, 1976 passed by the Assistant Collector of Central Excise at Kalyan. In the suit the Plaintiffs also sought to recover the sum of Rs. 95,22,728.21 with interest on the principal amount of Rs. 79,16,897.43. This amount was claimed as illegally recovered from them as alleged excise duty in respect of two products manufactured by the Plaintiffs, viz.,Vicco Vajradanti Tooth Paste and Vicco Turmeric Vanishing Cream. A perpetual injunction was also sought from implementing the said orders or from recovering excise duty on the said products on the basis thereof. 3. Plaintiff No. 1 were a registered partnership firm having their factory at MIDC area, Dombivali, District Thane. Plaintiff No. 2 was subsequently formed to take over the assets and liabilities of the said firm. The Plaintiffs manufacture and deal in proprietary Ayurvedic medicines and hold an Ayurvedic licence bearing No. A/237 issued under the provisions of the Indian Drugs and Cosmetics Act, 1940. The Plaintiffs claim that Vajradanti Tooth Paste and Turmeric Vanishing Cream manufactured by them are Ayurvedic medicinal preparations. The Plaintiffs claim to be manufacturing the same since about 1959 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned, the same is also claimed to be an Ayurvedic preparation. It consists of extracts from turmeric blended with pure sandalwood oil in the base of vanishing cream. The latter is based on a very simple formula consisting of stearic acid, alkali and water made compatible with two Ayurvedic ingredients, viz., turmeric and sandalwood oil. According to the Plaint, these two ingredients are included in 'Charak Samhita' as well as in other Ayurveda pharmacopoeias. The Plaintiffs have claimed that turmeric has antiseptic value and can be used externally for several skin infections and for skin diseases. Similar value is also claimed for sandalwood-oil particularly for its soothing and ameliorative effects. According to the Plaint, doctors prescribe V. Turmeric to their patients for various skin diseases and for preventing skin diseases. According to the Plaint, it is sold by chemists and druggists as Ayurvedic medicine and consumers also purchase the same as Ayurvedic medicine and not as a cosmetic or toilet preparation. A vanishing cream base, according to the Plaint, has no curative or prophylactic value and its only utility is that it vanishes when it is applied on the skin. It has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dic medicines. Indeed, according to the Defendants, they cannot be regarded as medicinal preparations at all so that the further question of considering whether they are Ayurvedic medicines or exclusively Ayurvedic medicines will not, therefore, arise. According to the Defendants, if the products answer the tariff descriptions of tooth paste and vanishing cream, then the tariff items 14FF and 14F would be attracted and the two products will be liable to excise duties under these two heads. The Defendants have further contended that the licence under which the products are manufactured or the classification thereof under the Drugs Act or the Sales Tax Act constitute facts which are totally irrelevant for the purposes of classification under the Excise Act. The Defendants have also placed reliance on the manner in which these products are advertised as well as the places from which they are sold. They have denied that these are prescribed by doctors or sold as medicinal products by druggists or chemists. In other words, the contention of the Defendants is that the two products have been properly classified, that excise duty has been properly levied on the same and thus, there is no q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f parties? No. 14. Whether the suit is premature as alleged in para. 3 of the written statement? No. 15. Whether the suit is barred by limitation for reasons alleged in para.4 of the written statement? No. 16. Are Plaintiffs entitled to the declaration sought? Yes. 17 Are Plaintiffs entitled to perpetual injunction as prayed for? Yes. 17A. Whether Plaintiffs are entitled to claim refund as sought in the plaint or of any other amount? Yes. 18. What decree or order? As per order below." Ultimately, after considering the evidence and the documentary material, the learned Civil Judge, Senior Division, accepted the Plaintiffs' case in toto and declared the order of the 2nd Defendant passed on 4th July, 1977 illegal and void. Necessary injunction was also granted. Somewhat curiously a permanent injunction was granted against the Defendants restraining them from recovering any excise duty from the Plaintiffs in respect of the two products. Such injunction could only be granted as long as the two excise entries remained as they were without any change. It is the admitted position that there has been a complete alteration of the phraseology employed and the scheme of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 1 and the principal shareholder of the limited Company one G.K. Pendharkar (P.W. 1) who has given necessary particulars regarding the composition of the two products. He has indicated that V. Vajradanti is made from the extracts of 18 natural herbs and barks which have a therapeutic value according to Ayurvedic literature. All these 18 ingredients have been named by him. He has explained how an extract of these herbs is prepared and has stated that in every 100 grams of paste there will be 20 grams of such extract (20%). He has also explained the process of manufacturing the paste and it would appear that out of balance 80 per cent 58 per cent is calcium carbonate and a binder is thereafter added to the mixture. It has been contended by Pendharkar that these extracts of Ayurvedic ingredients are not used in any other tooth paste available in the market. Two experts have been examined on behalf of the Plaintiffs and they are Dr. V.S. Upasak (P.W. 4) and Dr. D.S. Antarkar (P.W. 11). Both of them have enumerated the 18 ingredients in V.Vajradanti paste and their therapeutic properties. According to Dr. Antarkar, even the ingredients like calcium carbonate (chalk) and the binder whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which are utilized for preparing V. Vajradanti, Dr. Antarkar has given their various therapeutic properties according to Ayurveda. He has categorically stated that the product made from those extracts and Sorbitol would be regarded by him as Ayurvedic medicine. He has similarly deposed to the therapeutic properties of turmeric and sandalwood oil. According to him, the product made out of these two ingredients with a base of vanishing cream would have to be considered as Ayurvedic medicine. According to him, both these products have medicinal value both preventive and curative. He was asked as to the basis of his conclusion that both these products are Ayurvedic medicinal products and according to Dr. Antarkar, since Ayurvedic medicinal ingredients have been used in the said two products, he would classify them as Ayurvedic preparations. He was asked whether there is any other Ayurvedic product which has base of a vanishing cream. This was in cross-examination and according to him, there was another Ayurvedic product which had the base of vanishing cream. This is found in paragraph 7 of the cross-examination. Similarly according to him, there was another ointment produced by Zandu P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te. He categorically claimed to have kept statistics about the effects of V. Vajradanti tooth paste on his patients. This would necessarily imply that he could have made available to Court, if required, the necessary particulars about the patients to whom the product had been prescribed, the details of the treatment and the ultimate result. It is important to note that thereafter in subsequent cross-examination the Government Pleader did not ask him to produce these details. Going through the entire evidence of Dr. Wagh, we are impressed by the frank and forthright manner in which he has given evidence and it would appear to us that none of the three witnesses, viz., Dr. Wagh, Dr. Joshi or Dr. Antarkar can be regarded as biased or partisan witnesses who had come to Court only to give evidence to favour the Plaintiffs' claim. 12. The Plaintiffs have also led the evidence of some users and shop-keepers. One of the users is Ravjibhai (P.W. 7). He has deposed to his use of the two products. He claims to have used tooth paste to stop bleeding from teeth and gums and the other product for treatment of black rings around the eyes. He stated that in his opinion these two products wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chemist that the dentist did recommend V. Vajradanti for tooth diseases and the chemists had supplied the product in the paste form to customers on Doctors' prescriptions. We have left out one doctor who is an Ayurvedic practitioner, viz., Dr. Upasak. He has categorically stated that he has tried the tooth paste (V. Vajradanti) for curing or preventing inflammation of gums, bleeding of gums and decay of the teeth. He has mentioned the therapeutic agents contained in V. Vajradanti and maintained that he regarded the tooth paste as Ayurvedic Medicine. He has also deposed to user of the other product. This has been prescribed for patients having itching, burning, laceration of skin, abrasion of skin, wounds and other disorders. He also claimed to have maintained records of cases in which he had prescribed the two products and patients reporting having obtained relief. No further questions were put to him regarding this aspect. He was asked about a product or a medicine named 'Sarpina' since an Ayurvedic therapeutic agent called 'Sarpagandh' was utilised in its manufacture. He maintained that it was an Ayurvedic product. He very fairly admitted that sandalwood oil and turmeric are used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... store on the basis of Doctors' prescriptions. He was ultimately faced with the bills issued by his shop and forced to concede that what he had earlier deposed to was incorrect. That this witness had only come to help the Defendants and was unreliable is demonstrated by his claim that he had sold a popular skin cream on a Doctor's proscription. However, he was forced to concede that he could not produce the prescription or a copy of the bill indicating the aforesaid fact. It is very clear that the witness was not at all reliable and had mainly come to Court only to oblige the Defendants. The third witness examined by the Defendants was Smt. Charulata (D.W. 3) serving at the Central Excise Laboratory at Dharavi Road. After having gone through the evidence and report which was not made by her, we find that this evidence was only of a routine analysis and has little relevance to the matter under consideration. In her cross-examination the lady was forced to concede that she did not know what Ayurveda is nor did she have any knowledge of Ayurvedic medicines. She was very candid and admitted that she had no degree or qualification in Ayurveda and could not say what medicines were recogni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ti has medicinal value, the producers may try to enlarge the market by carrying on propaganda recommending its user as a regular tooth paste or dentifrice. This is the view already taken by this High Court in several decisions and which view we adhere to. 15. It is time now to consider whether the conclusions reached by the trial Court are justified on the basis of the record. 16. This is an Appeal from a judgment in a Suit and hence the conclusion at the end of the trial either in the trial Court or in the Appeal Court necessarily will have to be based on the record, viz., oral testimony as well as documents. It will not be permissible to travel beyond the record and to decide the questions arising or determine the lis as between the parties on material outside the record. However, the record will have to be understood and considered with reference to the pleadings and the issues framed. The pleadings and the issues would determine the parameters of the enquiry and the record has to be scrutinised, considered and proper conclusions derived therefrom on the basis of these circumscribing limits. 17. The Plaintiffs have come to the Court on the basis of allegations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appellants before us). The thrust of the argument was advanced against the conclusion that these could be regarded as medicines. If this argument was negatived and the Court was inclined to conclude that they are medicines then there is not much difficulty in holding that these are patent or proprietary medicines. 21. It is now well settled that it is for the person on whom a levy of tax or duty falls to decide as to under which head of the Excise Manual his product is leviable and therefore if a product can be considered to be one falling within the two heads (without staraining the language), then the Court will accept the case of the person who is liable to pay excise duty since it will be presumed that he knows which head is less onerous so far as he is concerned. Since the rates vary from year to year, occasionally it may not be possible to hold that the particular head must be preferred because it is less onerous. Apart from this aspect, there is in this matter overwhelming evidence to enable the Court to conclude definitely that these are products which are regarded as medicines, further that they are patent or proprietary medicines and finally that they are Ayurvedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvedic or with medicine or with Ayurvedic medicine? It was urged before us that if the evidence of P.W. 1 Pendharkar and P.W. 11 Dr. Antarkar is properly examined and considered there will be little difficulty since their claim that the product must be considered exclusively Ayurvedic medicine, is not even disputed by cross-examination - leave alone rebutted by loading evidence. However, if you do not specifically plead and contend that your products are exclusively Ayurvedic medicine, can you then contend that your claim spelt out by the oral testimony was not sought to be dispelled either by properly directed cross-examination or contrary testimony offered in rebuttal? This would be expecting too much from the Defendants. The idea of proper pleadings is to put the Defendants on guard as to what you are intending to establish. 24. The argument that in taxation matters the onus is on the Revenue will be in applicable to the present case. If an item can fall within two Entries, it may be for the person affected by the levy to decide as to under which head it should be classified and there, perhaps, it may be correctly observed that the Court or Tribunal deciding the matter mus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a fullfledged enquiry which did not take place in the lower Court because of the defective pleading of the plaintiffs. This is not a harsh view but a proper view of the matter. To hold otherwise would amount to a denial of justice to the Defendants. We had at one time thought of and even suggested to the parties, whether the matter should go down and a finding on this specific issue sought from the trial Court after the remand. At that stage, certainly, it would have been open to the Defendants to lead evidence in rebuttal and they could also have sought, subjects to directions which could have been given either by us or by the trial Court on remand, recall of witnesses already examined particularly P.W. 11. On behalf of the Plaintiffs, that is, the Respondents before us, their Senior Counsel stated categorically that he was not seeking any remand and asked the Court to decide the issues on such evidence as was available. His contention or submission has been recorded by us fully in a separate Order. After this position was taken on behalf of the Respondents, the Counsel appearing on behalf of the Appellants also stated categorically and in no uncertain terms that the Appellants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s would be entitled upto the date of the Decree passed by the trial Court. The reliefs to be granted for the subsequent period upto 31st March, 1986 will also have to be suitably modified in accordance with the conclusion reached by us earlier. It will also have to be made clear that the injunction would have to be directed to stand vacated when the entries were substantially altered and this has been admittedly done in March, 1986. 28. In the result it has to be held that although the Plaintiffs have established that on this record the two products are Ayurvedic medicines their plea (in the arguments) that they are wholly or exclusively Ayurvedic medicines cannot be accepted in this suit for the reasons indicated. On that part of the Plaintiffs' claim, that is a claim of total exclusion from payment of excise duty the Appeal cannot be dismissed and will have to be upheld. To uphold the Plaintiffs' claims fully would be to permit them to take advantage of their own wrong, in this case the defective pleading. It is not possible to speculate as to what questions the Defendants would have put to Dr. Antarkar or other witnesses to cross-examination on this aspect of the matter or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso be without prejudice to the department's right to apply for review if any review is maintainable. 31. Accordingly, without prejudice to the claim of the Plaintiffs that the correct amount is much higher which claim can be entertained after the Civil Application is disposed of and the order passed on 17th April, 1988 held to be a nullity or illegality in other proceedings, we direct that there will be a decree in the amount of Rs.1,12,98,552.43ps. (Rupees one crore twelve lacs ninety eight thousand five hundred fifty two and paise fourty three) in favour of the Respondents/Plaintiffs but only against the 1st Appellants (Union of India). Whether the figure will be required to be revised upward will depend upon what we decide in the Civil Application. The 1st Appellants will pay interest on the said amount at 12% per annum from 1st June, 1988. As the amount is substantial and since we have awarded interest, we direct the 1st Appellants to deposit the amount in this Court on or before 31st July, 1988. As and when the deposit is made the liability to pay interest would cease. In case the deposit is made the original Plaintiffs will have liberty to apply for permission to withd ..... X X X X Extracts X X X X X X X X Extracts X X X X
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