COLFAX LABORATIORIES INDIA LTD Vs. STATE OF GOA

JUDGEMENT

(1.) THE petitioner no. 1 is a company incorporated under the companies act, 1956, having its registered office at rua de ourem, panaji, goa and the petitioner no. 2 is the managing director of the said company. The petitioners had applied for licence to manufacture cosmetics, namely shaving cream, body talcum, hair cream and after shave lotion under the trademark "old spice" on 14th february, 1968 under the drugs and cosmetics act, 1940 and they were granted a licence on 15th april, 1968. They were also granted licence under the medicinal and toilet preparations (excise duties) act, 1955 (hereinafter referred to as the said act, for short) by the commissioner of excise on 1st april, 1969. From the inception till the year 1984, the petitioners paid excise duty on "old spice" after shave lotion on the basis that it was "toilet preparation". However, purportedly based on the judgment of the supreme court in the case of chimanlal jagjivandas sheth vs. State of maharashtra (air 1963 sc 665) the company had applied for re-classification of the product as "medicinal preparation", on 14th january, 1985, to the commissioner of excise, government of goa, and this application was allowed by holding that the product "after shave lotion" was required to be classified as "medicinal preparation" and not as "toilet preparation" under the act. This order was made effective from the date of issuance and consequently vide order dated 12th june, 1985, the excise commissioner classified the production "after shave lotion" as falling within the ambit of item no. 1 (i) (b) of the schedule to the act. The petitioners then applied for refund of excise duty paid after the order dated 23rd march, 1985 and the excise commissioner ordered refund of excise duty by his orders dated 26th august, 1985 and 27th november, 1985.

(2.) ON 14th january, 1989, m/s. Pjm pharmaceuticals pvt. Ltd. Filed an application before the drugs controller, government of goa, for manufacture of the following cosmetic products under loan licence with the petitioner-company :-

(3.) THE demand notice dated 13th march, 1991, was challenged by the petitioners by filing writ petition no. 109 of 1991 which was disposed of by this court on 22nd august, 1991. The excise commissioner was directed to treat the said demand notice dated 13th march, 1991 as show cause notice and he was authorised to supplement the said notice by any additional grounds/materials, if so desired. The petitioners also challenged the demand notice dated 15th may, 1991, which was also disposed of in the same terms as in writ petition no. 109 of 1991, on 23rd september, 1991. Accordingly, supplemental memorandum dated 6th september, 1991 and 30th september, 1991 were issued by the commissioner under which the after shave lotions were proposed to be, classified as "toilet preparations". The petitioners filed their reply and were heard. By order dated 7th november, 1991, the commissioner of excise held that the demands were substantially barred by limitation and that the correct classification of after shave lotions were required to be determined by the standing committee under the said rules. This order was challenged by the respondents by filing appeals under rule 127 of the rules before the chief secretary, government of goa, whereas the petitioners challenged the said order as well as the filing of the appeals by the respondents in writ petition no. 84 of 1992 which was disposed of by a di vision bench of this court on 21 st/ 22nd december, 1994. This court held that the excise commissioner and not the standing committee was empowered to classify and levy the duty prescribed under the act. The excise commissioner was, therefore, directed to decide all the issues according to law after giving adequate opportunity of hearing to the petitioners. The excise commissioner passed his order on 12th august, 1998, holding that the product "after shave lotions" were "toilet preparations" and directed the petitioners to pay the excise duty as per the demand notices dated 13th march, 1991 and 15th may, 1991 within 15 days of the said order. This order was challenged by the petitioners in writ petition no. 337 of 1998 and it was decided on 1st april 1999. This court held that demand notices dated 13th march, 1991 and 15th may, 1991 though purported to have been issued under rule 12, were to be construed as having been issued in exercise of the powers under rule 11 of the said rules and consequently, the excise commissioner shall be entitled to recover the short paid duty on account of erroneous classification and/ or calculation. It was further held that the classification as made by the excise commissioner as "toilet preparations" instead of "medicinal preparations" did not call for any interference. On the issue of quantification of duty as done by the excise commissioner this court held that the phrase "ad valorem" appearing in the column of "rate of duty", in the schedule appended to the medicinal and toilet preparations (excise duty act, 1955) referred to the value of excisable goods and, therefore, it would have to be worked out by applying the formula as laid down in section 4 (4) (d) (ii) of the central excise act, 1944 and thus, the excise duty would be deducted from the wholesale price and the figure arrived at would be the value of the excisable goods. If the duty leviable is "ad valorem", 100% then it would be in the following formula : wholesale price 100% duty value of at which goods - ad valorem"= the are actually sold excisable goods meaning, thereby 50% of the wholesale price and 10% of the value arrived at by application of the aforesaid formula.