LEUKOPLAST INDIA PRIVATE LTD Vs. UNION OF INDIA

JUDGEMENT

(1.) The petitioners challenge, in this Writ Petition, the Orders dates 25th October, 1980 and 19th August, 1981 passed by the Central Board of Excise and Customs, as well as the show cause notices issued by the same Board on 25th February, 1981 and 20th March, 1981.

(2.) The first petitioner is a Company registered under the Companies Act of 1956 and the second petitioner is shareholder of the same Company. The first petitioner manufacturers strips of Surgical Dressings containing a pad medicated with Nitrofurozone (0.125%) called Handyplast. On 12th October, 1962, a Tariff Advice was issued by the Central Board of Excise and Customs clarifying that products similar to Handyplast were not classied under Item 14E. Petitioners started the manufacture of Handyplast and on account of the said Advice, no duty was levied on the said product. However, on 16th March, 1974, a show cause notice was issued to them by the Assistant Collector of Excise and Customs, whereby he proposed to classify Handyplast under Item 14E on analogy of Belladona plaster and required the petitioners to pay the differential duty under Rule 10A from 1967 onwards. The petitioners replied to the said show cause notice on 29th April, 1974 and ultimately, by his Order dated 16th September, 1974, the Assistant Collector withdrew the above-mentioned show cause notice. As a result, no duty was levied on the clearances of Handyplast up to 1st March, 1975 when the residuary Item No. 68 was added to the Excise Tariff. On 6th September, 1975, the Central Board of Excise and Customs issued a show cause notice under Section 35A of the Central Excises and Salt Act, 1944 (hereinafter referred to as 'the Act') proposing to review the aforesaid Order dated 16th September, 1974 passed by the Assistant Collector of Excise and Customs on the grounds that medicated dressing were to be classified under Item 14E as they had therapeutic properties. The petitioners replied to the said show cause notice on 6th November, 1975 contending that Handyplast are products similar to those commercially known as surgical dressings as per British Pharmaceutical Code, 1973 and they are not a drug or medicinal preparation. They further contended that the essential characteristics of Handyplast as a surgical dressing are not altered by the small percentage of nitrofurozone and that, in any case, the said product has no therapeutic properties. No action had been taken by the Central Board of Excise and Customs, for about five years, after the filing of the said reply, and during the said five years, all clearances of Handyplast were made classifying it according to the binding and operative order. According to the operative Order of the Assistant Collector duty was paid under Item 68, and the assessment were finalised on such basis. Ultimately, on 25th October, 1980, the Central Board of Excise and Customs made an order classifying Handyplast under Item 14E relying on a Tariff Advice dated 17-4-69 passed on technical reconsideration and on an alleged admission by the petitioners that Handyplast is a medicinal preparation having therapeutic properties. As a result of this Order, on 10th December, 1980, a classification list was filed by the petitioners classifying Handyplast under Item 14E and duty was paid on it under protest. Later on, on 25th February, 1981, the concerned authority issued a show cause-cum-demand notice under Section 11A claiming the duty of Rs. 6,51,737.90 allegedly short levied. The petitioners, being aggrieved, filed a Revision Application against the said show cause notice under Section 36 of the Act on 24th March, 1981. Again, on 20th April, 1981, another show cause notice was issued by the concerned authority demanding another amount of Rs. 26,399.75 allegedly short levied. Petitioners replied to the said show cause notices on 26th March, 1981 and 20th April, 1981 submitting that the same notices were premature, since the issue was still to be decided by the Government of India and in any case, the show cause notice dated 25th February, 1981 was time barred. Thereafter, on 25th July, 1981, the petitioners addressed a letter to the first respondent seeking stay of the Order dated 25th October, 1980 and pointing out that the Review proceeding had been time-barred under Section 35A(3)(b). However, no hearing was given to the petitioners on the stay application, but on 19th August, 1981, an ex-parte Order was made for the first clearances on furnishing full Bank Guarantees. The Order was passed by the Senior Technical Officer. Similarly, on 9th August, 1981, further ex-parte Order of stay of past clearances of furnishing full Bank Guarantee was passed by a subordinate officer. On account of all these facts, the petitioners filed the present Writ Petition in this Court challenging the aforesaid Orders and show cause notices.

(3.) The respondents filed their return, their case being, in short, that after all whatever is the technical meaning of the product Handyplast, the fact remains that the petitioners themselves had advertised that the said product is a medicated one and therefore, it was not open to them to challenge now that the same product is not falling under Item 14E of the Tariff.