CIPLA LTD Vs. UNION OF INDIA

JUDGEMENT

(1.) PETITIONER No. 1 is a joint stock company incorporated on August 17,1935 under the provisions of the Companies Act. The company runs its factory at Bombay and manufactures medicines known as `patent and proprietary medicines' falling under Tariff Item No. 14e of the first Schedule of Central Excise Act and the goods are liable to pay excise duty at prescribed rate. The excise duty on patent and proprietary/medicinal preparations was imposed with effect from March 1,1961. The medicines manufactured by the company are not advertised but it is customary that free supply of medicinal preparations and drugs is made to hospitals, nursing homes and medical practitioners to enable them to get familiarise with such preparations. The samples handed over to the hospitals and medical practitioners are free and the company does not recover any charges for the value thereof.

(2.) THE Government of India, Ministry of Finance (Department of Revenue) published exemption notification dated April 1,1977 in exercise of sub-rule (1) of Rule 8 of Central Excise Rules, 1944 exempting clinical samples issued by any manufacturer of patent or proprietary medicines falling under Tariff Item No. 14e of the First Schedule of the Central Excise Act from the whole of the duty of excise leviable thereon. The notification provides that the manufacturer is entitled to the benefit of exemption notification provided :-

(3.) THE dispute in this petition filed under Article 226 of the Constitution centres around to the applicability of the explanation to the petitioner company. It is required that to be stated that the validity of the explanation was challenged before Gujarat High Court and by judgment reported in 1980 (6) E. L. T. 759 (Guj.) (Suhrid Geigy Ltd. v. Union of India and Another), the Division bench of the Gujarat High Court held that clause (a) to the explanation is ultra vires under article 14 and Rule 8 of Central Excise Rules and it has no nexus with the object which the notification seeks to serve. The appeal preferred by the department before the Supreme Court is pending final disposal. Shri Korde, learned counsel appearing on behalf of the petitioners, submitted that in the present case, even accepting the validity of the explanation, the department is in error assuming that the benefit of exemption notification is not available to the company in view of the explanation. The company had entered into correspondence with the Assistant Collector of Central Excise, bombay claiming benefit of exemption notification and the department declines to accept the claim. Ultimately, while approving the classification list filed by the company, the Assistant collector of Central Excise by order dated March 17,1982 held that the company is not entitled to exemption under the notification dated April 1,1977. The company therefore preferred the present petition to challenge the order of the Assistant Collector and denial of benefit of exemption notification.