GRIFFON LABORATORIES PRIVATE LTD Vs. STATE OF MAHARASHTRA

JUDGEMENT

(1.) This petition raises the question of the interpretation of Section 4(1) of the Central Excises and Salt Act, 1944, hereinafter referred to as "the Central Act". Only few facts are necessary to be mentioned. The petitioners are a limited company engaged in the manufacture of medicines and pharmaceutical formulations. Two of these products contain alcohol and they are hereinafter referred to as "the said products". All the products, including the said products, manufactured by the petitioners are sold through another private limited company called Franco Indian Pharmaceuticals Private Limited, hereinafter referred to as "Franco Limited". This latter company has been treated, as least for the purpose of the proceedings culminating in this writ petition, as a related person within the meaning of Section 4(4)(c) of the Central Act. Approximately 4 per cent. of the annual production of the medicinal preparations of the petitioners are distributed free of charge as samples to medical practitioners.

(2.) Though excise duty is normally leviable under the Central Act, in view of the fact that some of the products of the petitioners contain alcohol, they are also assessable to excise duty under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, hereinafter referred to as "the Act of 1955". The Act of 1955 is administered by the State of Maharashtra, which is the first respondent in this petition. The second respondent is the Commissioner of Prohibition and Excise while the third respondent is the Collector of Bombay (Prohibition and Excise). Though the Act of 1955 is administered by the State of Maharashtra, the basis for calculation of the excise duty is the one which is provided by Section 4 of the Central Act.

(3.) As already mentioned, Franco Limited is the sole distributor through whom the petitioners shell their products to the wholesalers. Again as already mentioned, the said Franco Limited is to be treated as a related person for the purpose of the levy of excise duty, the basis of which is provided in Section 4 of the Central Act. It has been mentioned in the petition, and it has not been denied by the respondents in a belated affidavit dated 10th of April, 1988 filed on their behalf, that the price at which Franco Limited sells the products of the petitioners to the wholesalers is the basis on which excise duty is levied by the respondents. However, the petitioners are distribution certain percentage of their production as free samples to the physicians. The question arose as to whether the samples so distributed are liable to excise duty and if so at what rate. The petitioners, at least at this stage, are proceeding on the basis that they are liable to excise duty. However, they insist that the prices of their products which are distributed as free samples to the physicians should not be higher than the prices at which Franco Limited is selling such products to the wholesale dealers. In other words, the basis for the levy of excise duty by the respondents on the products distributed by the petitioners as free samples to the medical practitioners cannot be higher than the one at which excise duty is levied on the sales made by Franco Limited.