ORDER
Krishna Kumar, Member (J)
1. Heard both sides.
2. The appellant are against the manufacture of varicus medicaments falling under chapter 30 of the Central Excise tariff Act, prior to 2.4.1998 as under:
Prior to 2.4.98, the appellants were manufacturing enteric coated acetyl salicylic acid acid tablets I.P. 50 mg and put up these tablets in aluminium foil blister packing. The product name was mentioned as “enteric coated acetyl salicylic acid” and also trade mark/symbol registered by the appellants under Trade and Merchandise Mark Act, 1958 was indicated on the packing. Accordingly, such acetyl salicylic acid which was bearing the brand name/trade mark/symbol was declared as falling under sub-heading 3003.10 as patent and proprietary medicament. From 2.4.98 onwards the appellants also cleared acetyl salicylic acid by mentioning the name of the product and also indicating the abbreviation of the product as “ASA”. Since in this type of packing there was no trade marks/symbol affixed, the applicants claimed this product as generic product classifiable under sub heading 3003.20 at nil rate of duty.
3. Thus the dispute relates to classification of the item in question, having bearing on the rate of duty, the ld. Counsel for the appellant has interalia made following submissions:
The letters “ASA,” in brackets indicated on the packing of Acetyl Salicylic Acid tablets I.P. 50 mg is abbreviation of ASA. Hence it is not hit by Note 2(ii) of Chapter 30.
A.1 Letters “ASA” indicated on the packing of acetyl salicylic acid tablets are abbreviation of acetyl salicylic acid. This is evident from the following books / literature:
a) Aspirin and other salicylates edited by John R. Vane, Chairman and Regina M. Botting pages at 142, 143, 144, 145 and 147 to 153 of the paper book ;
b) The World Book Encyclopedia, Volume I at page 173-174 of the paper book;
c) Dorland’s Illustrated Medical Dictionary at page 175-176 of the paper book;
d) Taber’s Cyclopedic Medical Dictionary pages 177-178 of the paper book.
A.2 Thus, when the product is indicated as acetylsalicylic acid tablets IP 50 mg. (ASA), the letters ASA would only refer to Acetyl Salicylic acid which is mentioned in the specified pharmacopoeia. Hence, it is not hit by note 2(ii) of Chapter 30.
Decision of the Supreme Court in Aphali Pharmaceuticals Ltd. v. State of Maharashtra, explained the meaning of patent or proprietary medicament.
B. 1 The Supreme Court in Aphali Pharmaceuticals Ltd. v. State of Maharashtra held that the word “patent” means a patent granted under Indian Patents & Designs Act, 1911 or the Patent Act, 1970. A patented medicine will therefore mean medicine in respect of which a patent is in force. Proprietary means of a proprietor i.e., holding proprietary rights. The issue involved in the aforesaid decision of the Supreme Court is as to whether the product “Ashvagandhaarist” would fall within the item No. 3(i) of the schedule to Medicinal and Toilet Preparations (Excise Duties) Act, 1945 as claimed by the appellants or under item 1 of the said schedule. Item 3 of the schedule inter alia covered ayurvedic preparations, containing self-generated alcohol which was not capable of being consumed as ordinary alcoholic beverages. Item 1 of the schedule to the aforesaid Act covered medicinal and toilet preparations being patent or proprietary medicines containing alcohol and which are not capable of being consumed as ordinary alcohol beverages. The explanation 1 to the schedule defined patent or proprietary medicament. In terms of this explanation, patent or proprietary medicines has the same meaning as in Clause (h) of Section 3 of the Drugs Act, 1940. Clause (h) of Section 3 of the Drugs Act, 1940 defined patent and proprietary medicament as under:
Patent or proprietary medicine means a drug which is a remedy or prescription prepared for internal or external use of human beings or animals, and which is not for the time being recognized by the Permanent Commission or Biological Standardization of the World Health Organization or in the latest edition of the British Pharmacopoeia or the British Pharmaceutical Codex or any other Pharmacopoeia authorized in this behalf by the Central Government after consultation with the Board.
B.2 The Hon’ble Supreme Court, while considering as to whether “Ashvagandhaarist” would fall under item 1 of the schedule to Medicinal & Toilet Preparations Act, considered as to what is the true scope of the expression “patent or proprietary medicine”. In para 24 of this decision the Hon’ble Supreme Court has held as under:
To be a patent medicine one would be required to have a patent. A patented article means an article in respect of which a patent is in force. “Patent” means a patent granted under the Indian Patents and Designs Act, 1911, and now the Patent Act, 1970. A patent medicine will, therefore, mean medicine in respect of which a patent is in force. “Proprietary” means of a proprietor, that is holding proprietary rights. “Patent” means a grant of some privilege, property, or authority, made by the Government or sovereign of a country to one or more individuals. A proprietor is one who has the legal right or exclusive title to anything. It is synonymous with owner. A person entitled to a trade mark or a design under the Acts for the registration or patenting of trade mark or design is called a proprietor of the trade mark or design.
B.3 Thus patent and proprietary medicament means that the medicament for which patent is in force. In respect of this medicine there is a proprietor holding proprietary rights. Applying the ratio of this decision, it is submitted that the product Acetyl Salicylic Acid (ASA) cannot be treated as patent or proprietary medicament since there was neither a patent in force nor proprietary or legal right or exclusive title to the appellants to the use of letters “ASA” as mentioned in the product in question. Therefore, the product in question cannot be treated as patent or proprietary medicament.
B.4 The letters “ASA”, as is evident from the various literatures mentioned above, are used to denote Acetyl Salicylic Acid and hence no one can claim an exclusive title or legal right to the use of the said letters. The fact that the various literatures/books have referred to the letters “ASA” to denote Acetyl Salicylic Acid would clearly show that every body can use the same. Hence the impugned order of the Commissioner holding that appellants had right to use the letters “ASA” is factually and legally incorrect.
B.5 The aforesaid dictionaries and other technical books using the letters “ASA” to denote Acetyl Salicylic Acid would clearly show that it is not an invented word to which the appellants have exclusive right to use. Hence use of letters “ASA” denote Acetyl Salicylic Acid apart from mentioning the product an Acetyl Salicylic Acid cannot be treated as use of brand name or trade name to indicate the connection in the course of trade between the medicine and the appellants.
Ordinary connotation of the term “patent or proprietary medicament” should be kept in mind while interpreting the statutory definition contained in Note 2 of Chapter 30.
B6.1 The principle of interpretation to be applied in situations like the present one has been considered by the Supreme Court in Hariprasad Shivshankar Shukla v. A.D. Divelkar AIR 1957 SC 121.
B6.2 In that case, the Hon’ble Supreme Court was concerned with the interpretation of definition of “retrenchment” contained in Section 2(oo) of Industrial Dispute Act. The Supreme Court held that in ordinary acceptation, retrenchment connotes that the business itself is being continued, but a portion of the staff or labour are discharged as surplus. In view of the above ordinary acceptation, the Supreme Court held that the termination of service of all workmen as a result of the closure of business cannot be properly described as retrenchment. The Supreme Court held that the statutory artificial definition of the term ‘retrenchment” did not go beyond ordinary acceptation of that term.
B6.3 Further, the Supreme Court laid down the dictum that even though the artificial definition may include a meaning different from or in excess of the ordinary acceptation of the word which is subject of definition, “but in absence of compelling words to show that such a meaning different from an ordinary meaning is intended, it would be wrong to take the definition as itself destroying the essential meaning or ordinary acceptation of the word defined.”
B6.4 In Commissioner of Gift Tax v. Dr. Kamdin , the High Court had to interpret definition of “gift” contained in the Gift Tax Act. The Bombay High Court after relying on the above decision of the Supreme Court, held that in ordinary acceptation, “gift” is always irrevocable. Therefore any transfer which is not irrevocable cannot be properly termed as “gift” within the meaning of word “gift” as defined in Gift Tax Act.
B6.5 In Hotel and Catering Training Board v. Automobile Property Ltd. 1968 (3) All ER 99 at page 402, the Court of Appeals speaking through’ Lord Denning held as under:
…It is true that the “industry” is defined; but the defination is not to be read in isolation. It must be read in the context of the phrase as it defines, realising that the function of definition is to give precision and certainty to the word or phrase which would otherwise be vague and uncertain – but not to contradict it or supplant it altogether.
B6 6 In ILM Cadija Umma v. S. Don Manis Appu AIR 1939 PC 63 at page 65, the Privy Council speaking through Sir George Rankin held thus:
…A phrase having been introduced and then defined the definition prima facie must entirely determine the application of the phrase; but the definition must itself be interpreted before it is applied, and interpreted, in case of doubt in a sense appropriate to the phrase defined and to the general purpose of the enactment….
C. 1 The Note 2 to Chapter 30 reads as under:
2(i) …
(ii) Patent or proprietary medicament means any drug or medicinal preparation,…which bears…a name which is not specified in a monograph, in a pharmacopoeia, formerly or other publications, namely:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
or which is a brand name, that is registered trade mark under Trade and Merchandise Marks Act, 1958 (43 of 1958) or any other mark such as a symbol, monogram, label or invented words or any writing which is used in relation to that medicine for the purpose of indicating or so as to indicate a connection in the course of trade between the medicine and some person, having the right either as proprietor or otherwise to use the name or mark with or without any indication of the identity of that person .
C.2 The name which is not specified in the pharmacopoeia also should satisfy the requirement of later portion of the aforesaid definition namely it should be for the purpose of indicating or so as to indicate the connection in the course of trade between the medicines and some persons having the right either as a proprietor or otherwise to use the name or mark with or without any indication of identity of that person.
C.3 Letter ASA as could be seen from the Medical dictionary, Encyclopedia, etc. are the abbreviation of Acetyl Salicylic Acid and no one has the proprietary right to use ASA. Therefore, the letters ASA cannot be treated as a name in which the appellants have the right as a proprietor or otherwise in order to treat the product in question as patent or proprietary medicament. Hence, indication of the abbreviation of Acetyl Salicylic Acid cannot be covered by the definition of patent or proprietary medicament.
The demand of Rs. 84,76.762/- raised in the show cause notice dated 30.4.2001 for the period from April 1998 to December 1999 is entirely barred by limitation since there was no suppression of facts.
D.1 The appellants had along with their letter dated 2.4.98, filing the classification declaration for the generic Acetyl Salicylic Acid tablets, filed the packing materials of the Acetyl Salicylic Acid tablets claimed as generic product. Packing material for Acetyl Salicylic Acid tablets earlier claimed as patent or proprietary medicament under Subheading 3003.10 were filed with the department. Hence, the packing material for Acetyl Salicylic Acid tablets claimed as generic product as well as patent and proprietary medicament were furnished to the department. Therefore the entire fact about the particulars printed on the packing material of Acetyl Salicylic Acid were known to the department. Hence, the allegation of suppression of facts, is without any basis and unsustainable in law.
D.2 The entire case of the department is based on the matter printed on the packing material used for packing the Acetyl Salicylic Acid tablets. When these packing materials were already with the department, it cannot be alleged that the appellants have suppressed the fact. It can only be contended that the department was also of the view that the letters “ASA” mentioned within brackets was not a trade mark or a name indicating the connection between the appellants and Acetyl Salicylic Acid tablets and therefore the Acetyl Salicylic Acid tablets without the trade mark was treated by the department as generic product. The show cause notice is clearly based on a change of opinion on the part of the department. However, such change of opinion is not covered by proviso to Section 11A.
D.3 It is clear from the letter dated 2.4.98 that the Acetyl Salicylic Acid tablets claimed as generic product from 2.4.98 was earlier classified as patent and proprietary medicament under 3003.10 because of the brand name or trade mark affixed on the pack.
D.4 In any event of the matter, this letter could have alerted the department to sec the packing of the product for the purpose of examining the claim made by the appellants that Acetyl Salicylic Acid tablets declared in the declaration dated 2.4.98 as generic product. Failure to examine the packing material and the product at the relevant time cannot be a ground to allege that the appellants have mislead, mis-represented or suppressed the fact. Hence, the extended period of limitation invoked in the impugned order is not available to the department. Hence the impugned order is incorrect.
E. 1 The fact that promotional materials used by the appellants had described the product as a “ASA tablet or ASA-50 are not relevant for the purpose of determining as to whether the product in question is the proprietary medicament in terms of Note 2 to Chapter 30 since the requirement of this note is that the product either on itself or on its packing should contain a name not mentioned in specified pharmacopoeia.
E.2 In any event of the matter, these promotional material mentioned the product “Acetyl Salicylic Acid tablets” for the purpose of indicating them as “ASA” tablets in abbreviation form. Hence, no adverse inference can be drawn based on the promotional material referred to in the show cause notice. Hence, the allegation of suppression of fact is incorrect and unsustainable in law.
E.3 The findings of the Commissioner at para 44 (iii) to (v) are incorrect in view of the Grounds of Appeal at para E. 11 to #. 13.
E.4 In any event of the matter the quantum of duty demanded is incorrect since the assessable value has not been arrived at after deducting the excise duty demanded.
F. For the reasons submitted above, penalty is not imposable either on the appellants or on Mr. G.C. Madhom, Excise Manager, of the appellant company.
4. The ld. DR. has reiterated the impugned order.
5. It is seen from the order of the Commissioner that most of the submissions as mentioned above have not been considered by the Commissioner. Many of the cases of High Court and apex court have not been considered by the Commissioner either they were not cited before or cited before him, but no findings have been recorded thereon. Therefore, we would consider it reasonable to remand the matter to the Commissioner for denovo adjudication and to pass a fresh speaking order in the matter after giving reasonable opportunity of hearing to the appellant.
(The Order was pronounced in open Court on 5.9.2006)
