JUDGMENT
S.H. Sheth, J.
1. The petitioner is a company which is engaged in the business of manufacturing pharmaceuticals and medicinal preparations. It has been, inter alia manufacturing oral drugs, injections and tablets. the respondent served, upon the petitioner two notices calling upon them to pay excise duty on the manufacture of thirteen medicinal preparations. The demands were made under Rule 9 of the Medicinal and Toilet Preparation (Excise duty) Rules 1956. 13 medicinal preparations have been listed at page 3 of the petition. They are as follows :
Sr. No Product 1. Xylocaine 1% plain vial 2. ” 2% palin vial 3. ” 1% Adrenalin vial 4. ” 2% Adernaline vial 5. ” 2% Adrenaline cartidges 6. ” 5% heavy amples 7. ” 4% topical vials 8. ” 5% ointment tubes 9. ” 2% Viscous vila 10. Butazolidin 3 m. ampules 11. Irgapyrin 3 m. ampules. 13. Irgrapyria 5 ml. ampules.
Items 1 to 10 are injections and items 11 to 13 are or a drugs.
2. The petitioner challenges in this petition the validity of the impugned demands made by the Central Excise authorities, on more than one ground. The principal contention which Mr. Nanavaty who appears on behalf of the petitioner has raised is that by virtue of a notification issued by the Central Government, items 1 to 100 have been exempted from payment of excise duty under Item 14E in the first Schedule to the Central Excises and Salt Act, 1944. He has further argued that within the meaning of Sc. 3 read with Item I (iii) in the Schedule to the medicinal and Toilet Preparation (Excise Duties) Act, 1955, there 13 medicinal preparations are not liable to be taxed. In Support of his argument, he has indeed invited our attention to Seventh Schedule to the Constitution-in particular to Entry 51 in the State List and Entry 54 in the Union List. Reference to these two entries in the Seventh Schedule to the Constitution was purely elucidatory. Nothing turns upon them. Item 14E in the First Schedule to the Central Excise and Salt Act, 1944 provides as follows :
“14E Patent or Proprietary Medicines not containing Alcohol, opium, Indian hemp or other narcotic drugs or other narcotics other than those medicines which are exclusively ayurvedic, unani, sidha or homeopathic.”
There are two Explanations appended to that Item. Explanation I reads as follows :
“Patent or proprietary medicines” means any drug or medicinal preparation in whatever form, for use in the internal or external treatment of or, for the prevention of ailmentsin, human beings or animals which bears either on itself or on its container or both, a name which is not specified in a monograph in a Pharmacopoeia, Formularly or other publications notified in this behalf by the Central Government in the Official Gazette, or which is a brand name, that is, a name or a registered trade mark under the Trade and Merchandise Marks Act, 1958 (43 or 1958) of any other mark such as a symbol, monogram, label, signature of 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.”
Explanation II brings into play the provisions of Section 2 on the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, to which we have referred above. Item 14E makes it abundantly clear that it is applicable to those patent or proprietary medicines which, inter alia do not contain marcoble drugs or other narcotics so far as allopathic medicines are concerned. Rule 8(1) of the Central Excise Rules, 1944, provides as follows :
“The Central Government may from time to time by notification in the Official Gazette, exempt subject to such conditions as may be specified in the notification any excisable goods from the whole or any part of duty leviable on such goods.”
The notification issued on 7th April 1962, by the Central Government Rule 8(1) of the said Rules provides as follows :
“In exercise of the powers conferred by Rule 8(1) of the Central Excise Rules, 1944, the Central Government hereby exempts anesthetics from the payment of excise duty leviable thereon.”
3. The first leg of the argument raised by Mr. Nanavaty is that the Central Government itself has regarded anasesthetics as falling under Item 14E and have, therefore, exempted them from the payment of excise duty leviable thereon under Item 14E in the First Schedule read with Section 3 of the Central Excises and Salt Act, 1944. The inference which Mr. Nanavaty, therefore, wants us to draw is that the first ten items which are anasesthetics do not contain `narcotic drugs’ or `other narcotics’. According to him, if they were otherwise not covered by Entry 14E, the Central Government could not have granted an exemption to them. The petitioner in its petition has stated that Item 1 to 10 are broad-spectrum anti-inflammatory and anti-rheumatic range of medicines containing a very small percentage of xylocaine as a local anesthetic to avoid any pain arising out of the administration of drug. These averments made on behalf of the petitioner have not been controverted therefore, undisputed fact that whereas item 1 to 10 are local anesthetics, item 11 to 13 are anti-inflammatory and anti- rheumatic range of medicines. It has further been stated by the petitioner that the medicinal preparations listed at serial Nos. 1 to 10 are used for benumbing a local area of human body on which a surgical operation is going to be performed. In view of the exemption notification to which we have referred, there is no doubt about the fact that medicinal preparations at serial Nos. 1 to 10 are exempt from payment of excise duty under Item 14E of the First Schedule to the Central Excises and Salt Act, 1944.
4. The next question which arises for our consideration is whether all the 13 medicinal preparations are liable to pay excise duty under Section 3 of the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, read with Item I in the Schedule to that Act. Sub-section (1) of Section 3 of this Act provides as follows :
“There shall be levied duties of excise, at the rates specified in the Schedule, on all dutiable goods manufactured in India.”
We now turn to the Schedule. The general heading of Item 1 is “Allopathic Medicinal Preparations”. Sub-item (iii) is material for the purpose of the present case. It provides as follows :
`Medicinal preparations not containing alcohol but containing narcotic drug or narcotic.’
We are required to find out whether 13 medicinal preparations which the petitioner has been manufacturing contain a `narcotic drug’ or `narcotics’. The argument which Mr. Nanavaty has raised is that they do not contain a `narcotic drug’ or `narcotics’. In support of his argument, he has relied upon the exemption notification issued by the Central Government under Rule 8 (1) of the Central Excise Rules, 1944, to show that within the meaning of Item 14E in the First Schedule to the Central Excises and Salt Act, 1944, the Central Government itself regarding the first ten medicinal preparations as not containing a narcotic drug or a narcotic. According to him, if they had contained a narcotic drug or narcotic, they would not have fallen within the fold of Item 14E and the question of exempting them from payment of excise duty under Item 14E would not have arisen. The argument which Mr. Nanavaty has raised has indeed some substance. But what the Central Government thought of medicinal preparations 1 to 10 in the context of Item 14E in the First Schedule to the Central Excises and Salt Act, 1944, cannot finally conclude the question of applicability or otherwise of Item 1 (iii) in the Schedule of the Medicinal and Toilet Preparations (Excise Duties) Act, 1955. Even then, the argument raised by Mr. Nanavaty cannot be said to be irrelevant. While construing Entry (iii) in the Schedule to the Medicinal and Toilet. Preparations (Excise Duties) Act, 1955, we have got to bear in mind the behavior of the Central Government in granting exemption to first ten medicinal preparations for payment of excise duty under Item 14E of the Central Excises and Salt Act, 144.
5. We now turn to Item 1 (iii) itself. It renders liable to payment of excise duty the medicinal preparations which contain `narcotic drug’ or`narcotic’ but do not contain alcohol. It is nobody’s case that any of these 13 preparations contain alcohol. Therefore, it is not necessary for us to dwell on that aspect at all.
6. `Narcotic drug’ or `narcotic’ has been defined by the Act. At the relevant time in respect of which impugned demands have made, `narcotic drug’ or `Narcotic’ was defined as follows by Section 2 (h) :
??? `narcotic drug’ or `narcotic’ means a substance (other than alcohol) ??? allowed or inhaled by, or injected into, a human being ?? drowsiness, sleep, stupefaction or insensibility in the human being (and includes all alkaloids of opium).”
It is in light of this definition that we have to examine whether each one of these 13 medicinal preparations fall within the fold of Item 1 (iii). A close took at the definition shows the effect of a narcotic drug in four stages. The first effect which it produces when it is swallowed or inhaled by or injected into a human body, or drowsiness. Drowsiness matures into sleep which, with the passage of time results into stupefaction and finally culminates into insensibility. Indeed `or’ has been used in the definition while chronicling these four stages. But if does not suggest four alternatives. The four stages are stages of progression which follow one after another. In that sense, `or’ means `and. Now, there is no doubt and there cannot be any doubt about the fact that all these four stages affect the central nervous system. The final and culminating effect is that an individual who has swallowed or inhaled a narcotic drug or narcotic or into whose body it has been injected loses his senses and becomes unaware of what is happening to and around him. In other words, the administration of a narcotic drug or a narcotic produces cerebral sensorium of central nervous system. It is common knowledge that unless the central nervous system is affected in one way or the other, drowsiness, then sleep, then stupefaction and lastly insensibility are unlikely to follow. When a general anesthetic is administered to a person, it produces one after another all these symptoms because it affects the central nervous system.
7. We have already stated that indisputably item 1 to 10 which the petitioner has been manufacturing are local anaesthicn. The remaining three are anti-inflammatory and anti-rheumatic medicines. What is the difference between a local anesthetics and a general anesthetic? Encyclopedia Britannica, Vol 1, 1972 Edition at page 919 deals with anesthesia, This is what has been stated in that behalf : `General anesthesia involves loss of conscio business, usually for the purpose of relieving the pain of surgical operation. Local anesthesia involves loss of sensation in one area of the body by block of conduction in nerves… General anesthesia is manifested superifically by loss of consciousness but consists of depression of various central nervous system centers sub-serving sensation, muscle activity, respiration, circulation, other autonomic and visceral functions and mental activity.” At page 920A, this is what has been stated : `A local anesthesia or conduction block has enjoyed a sustain J populatiry for relief of surgical pain of minor operations…. The local anaeshtetics produce anesthesia by preventing the depolarization of the nerve-fibre membrane, thus bindering the conduction of nerve impulses. Infiltration of an area or the body with a local anesthetic prevents perception or sensory simuli by nerve endings in the area and blocks conduction of impulses over nerve fibres passing through the area.’ This distinction between a general anesthetic and a local anesthetic makes it clear that the latter does not affect the central nervous system. It only benumbs a local area. In order to be a `narcotic drug’ or a `narcotic’, it is necessary that it must affect the central nervous system and produce drowsiness, sleep, stupefaction and insensibility.
8. In Steadman’s Medical Dictionary, 1968-Reprint, Anesthesia has been defined as loss of sensation in a part; or in the body generally, induced by the administration of a drug. The Pharmacological Basis of Therapeutics, by Goodman & Gilman, Fifth Edition, 1975 (Section III) states that a local anesthetic is suitable for injection to produce neverbook. These reference leave no doubt in our minds that 13 medicinal preparation which the petitioner has been manufacturing do not contain `narcotic drug’ or `narcotic’ because they are incapable, as the evidence goes of producing in rising stages drowiness, sleepiness, stupefaction or insensibility. General anesthetics which affect the central nervous system and produce these symptoms can be more appropriately said to contain a `narcotic drug’ or `narcotic’ within the meaning of the definition of the expression given in section 2(h) at the relevant time of the Medicinal and Toilet Preparations (Excise Duties) Act, 1955.
9. It has been argued by Mr. Patel on behalf of the respondents that the first ten medicinal preparations manufactured by the petitioners are xylocaine in different forms. According to him, xylocaine is a narcotic drug. He has in that behalf invited out attention to the same book- the Pharmacological Basis of Therapeutics by Goodman & Gilman, Fifth Edition, 1975- it has been stated that Lidocaine which is also called xylocaine produces sleepiness at the unique after-effect. According to hi, therefore, it contains a `narcotic drug’. The argument advanced by Mr. Patel suffers from certain fallacies and cannot be accepted. The first fallacy, in our opinion, arises from the misconception of the definition of `narcotic drug’ or `narcotic’ given in Section 2(h) of the Medicinal and Toilet Preparations (Excise Duties) Act, 1955. Merely because while describing the four stages of the effects the expression “or” has been used, it does not mean that if a drug produces one of the four effects, it answers the description of a `narcotic drug’ or a `narcotic’ given in the definition. In our opinion a `narcotic drug’ or a `narcotic’ should produce all the four effects one after another with the passage of time. The second fallacy is that sleepiness is not the direct effect of xylocaine. It is an after-effect. A unique after-effect, in our opinion, is one which characterizes a particularly by producing that effect after all has been said and done. An after-effect is not a direct proximate, ordinary or a normal effect. An afore-effect in this context is, in our opinion a side effect which is produced after the utility of the drug for the purpose for which it has been administered is exhausted. Therefore, it is difficult to say that the first ten medicinal preparations which are known by the name of xylocaine (indeed in different forms) contain a `narcotic drugs’ or `narcotics’.
10. Mr. Patel has then invited our attention to Pharmacology and Pharacotherpeutics by Satoskar and Bhandarkar. Third Revised Edition,1973, in which reference has been made to Lignocaine which is also another name for Xylocaine. It has been stated in that context that it is recommended, inter alia, for nerve bicks and may cause drovsioness but produces no action on the blood vessels. According to Mr. Patel, since xylocaine produces drowsiness, it answers the description of a “narcotic drug” or a “narcotic” as given in the definition of that expression in the said Act. It is ? to read closely what the another have said in that behalf. They do not ? that it causes drowsiness. They say it may cause drowsiness. Therefore ? upon the biochemical reaction which a particular human body produces to the administration of xylocaine, it may or may not produce drowsiness. It is necessary to remember that never blocks do not made a man insensible because they do notified the central nervous system. For this reason and also in light of the definition of the expression ‘narcotic drug’ or ‘narcotic’ which we have interpreted, we are unable to uphold the argument raised by Mr. Patel that merely because the first ten medicinal proportions manufactured by the petitioners are likely to produce drowsiness or sleepiness as unique after-effect, they contain a “narcotic drug” or “narcotic” within the meaning of that expression given in the definition. We are not concerned in this case with the scientific character of a “narcotic drug” or “narcotic”because the Act has its own dictionary. We are, therefore, required to find out whether these medical preparations contain a “narcotic drug” or “narcotic” within the meaning of hat definition and not on consideration of any scientific data, moverial or information.
11. It has next been argued by Mr. Patel that within the meaning of Item I (iii) in the Schedule to the said Act, if there is a medicinal preparation which contains a “narcotic drug” or a “narcotic,” it is enough to subject such a preparation to the payment of excise duty irrespective of whether the combination of that “narcotic drug” or “narcotic” with other ingredients in a particular medical preparation produces drowsiness, sleepiness, stupefaction or insensibility. According to him,the very prescience of a “narcotic drug” or a “narcotic” in a medicinal, preparation attracts the applicability, of Them (iii) in the Schedule to the said Act. In that context, he has further argued that a”narcotic drug” or a “netsuke” which is a comment part of a medicinal preparation, where administered singly, should be capable of producing drowsiness, sleepiness, stupefaction and insensibility. However,according to him, it does not mean that it need necessarily produce those effects when it forms a component, along with others, of a medicinal preparation. The distinction which Mr. Patel has tried to draw is indeed very ingenious. It is quite probable that a “narcotic drug” or a “narcotic” may produce, when administered singly,drowsiness, sleepiness, stupefaction or insensibility. It may not produce such symptoms when it acts on human body as a component of a particular medicinal preparation which has been manufactured out of several other things.
12. If we were required to examine the concept of a’ narcotic- drug” or ‘narcotic” in the light of scientific data available in that behalf, we would have indeed given greater weight to the argument which Mr. Patel has advanced. In the instant case, we are not required to do so because we are required to examine the characteristics of a ‘narcotic drug’ or a ‘narcotic’ as specified in section 2(b) of the said Act at the relevant time. It is wrong to say, therefore, that though a ‘narcotic drug’ or a ‘narcotic’ is one which should produce drowsiness, sleepiness, stupefaction, or insensibility,it need not necessarily produce such symptoms when it forms a component part of a medicinal preparation which is made up of several other things. When a’ narcotic drug’ or ‘narcotic’ which is a component part of a medicinal preparation ceases to produce the symptoms laid down in the donation of that expression given in Section 2(h) of the Act, it ceases to be a narcotic drug or narcotic. What other characteristics are retained, we are not concerned with.
13.Whether the medicinal preparations which the petitioner has been manufacturing contain a “narcotic drug” or “narcotic” (as understood and argued by Mr. Patel) was a question which we put to him. We do not have on record the scientific analysis of the components which enter into the manufacture of 13 medicinal preparations in question. Mr. Patel fell back upon the books to which we have made reference and which say that xylocaine may produce drowsiness, and has a unique after-effect of producing drowsiness. Therefore, Mr. Patel started his argument from the wrong end and said that since they produce this symptom, they contain a “narcotic drug” or a “narcotic”. This argument raised by Mr. Patel suffers from a serious fallacy. We cannot start from a wrong end and determine the character of a medicinal preparation only from its effects in a human organism. Suffice it to say that a heavy meal produces drowsiness and some times sleepiness. It can not, therefore, be said to contain a “narcotic” or a “narcotic drug “. We are, of the opinion that within the meaning of Section 3 read with Items 1 (iii) and Sec. 2(h) as it was at the relevant time, 13 medicinal preparations which the petitioner has been manufacturing are not liable to pay excise duty under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, because they do not contain a “narcotic drugs” or a “narcotic” . The first contention raised by Mr. Nanavaty is, therefore, upheld.
14. The next contention which Mr. Nanavaty has raised turns upon Art. 14 of the Constitution. The facts which he has stated in that behalf are as follows. The Medicinal and Toilet Preparations (Excise Duties) Act, 1955, is a Central Act which is applicable to the whole of India. In States other than Gujarat, excise duties are not levied on local anesthetics and such other medicinal preparations. Only in the State of Gujarat they are levied. The averments made to that effect in the petition have not been controverted by the respondents. According to Mr. Nanavaty, therefore, to collect it from one another introduces undue discrimination between the two. The argument raised by Mr. Nanavaty is well-founded and must be upheld. It is not open to the central excise authorities to levy throughout the country on a particular medicinal preparation excise duty under the said Act and to collect it from some of its manufacturers and not to collect it from others.
15. In reply, Mr. Patel who appears on behalf of the State of Gujarat has argued that since the proceeds of the excise duties collected under the said Act to the State Exchequer, a comparison between what is done in two cannot be made. The argument raised by Mr. Patel is misconceived. It is immaterial to which Exchequer the proceeds of the tax goes. The fact remains that the said Act imposes an all India levy which must be uniformly collected from all the concerned manufacturers in the country. Therefore, the action of the central excise authorities in levying and collecting the excise duty on 13 medicinal preparations which the petitioner has been manufacturing is hit by Art. 14 of the Constitution.
16. The next argument which has been raised by Mr. Nanavaty turns upon the promissory estoppel. The facts which he has stated in order to attract, the applicability of the doctrine is that by issuing the notification under sub-rule (1) of rule 8 of the Central Excise Rules, 1944, under which the Central Government has exempted from the payment of excise duty local anesthetics otherwise, dutiable under Item 14E in the First Schedule to the Central Excise and Salt Act, 1944, the Central Government has assured the petitioner and all other persons in similar situations that local anesthetics do not contain a “narcotic drug” or a “narcotic”. According to Mr. Nanavaty, it is not upon that assurance that the petitioner acted and did not charge his consumers the excise duty on the first 10 medicinal preparations which it has been manufacturing . Now if the Central Government turns round and says that the first 10 medicinal preparations which have been manufactured by the petitioner contain a “narcotic drug” or a “narcotic,” the Central Government will be going back upon the assurance which it gave by issuing the said notification. We are not impressed by this argument at all. What the Central Government did in relation to Item 14E in the First Schedule to the Central Excises and Salt Act, 1944, cannot amount to a promise in respect of dutiability or otherwise of an article under Item 1(iii) in the Schedule to the Medicinal and Toilet Preparations (Excise Duties) Act, 1955. Secondly, the promise upon which Mr. Nanavaty relies was not a promise made to the petitioner. In our opinion, therefore, the doctrine of promissory estoppel does not come into play in the present case. The argument raised in that behalf is, therefore, rejected.
17. The last argument raised by Mr. Nanavaty is that Rule 12 of the Medicinal and Toilet Preparations (Excise Duties) Rules, 1956, which confers upon the Government the residuary powers to recover duty is arbitrary and capricious and, therefore, is hit by Art. 14. of the Constitution because it provides for no time limit within which such a demand can be made. The impugned notices of demand were issued by the respondents to the petitioner under rule 9 (2) of the said Rules and not under Rule 12. The findings recorded by us on the first two contentions raised by Mr. nanavaty do not been brought into play against the petitioner, is purely academic and it is, therefore, not necessary to decide it. Nothing has been done under rule 12 which hits the petitioner. The last contention raised by Mr. Nanavaty, therefore, fails and is rejected.
18. In view of the findings recorded by us on the first two contentions raised by Mr. Nanavaty, the petition succeeds . The two impugned notices of demand are quashed. A writ of mandamus shall issue to the respondents directing them to desist and forbear from enforcing the impugned notices against the petitioner and collecting excise duty demanded thereunder. Rule is made absolute with costs.
