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PETITIONER: STATE OF GOA & ORS.

       Vs.

RESPONDENT: LEUKOPLAST (INDIA) LTD.

DATE OF JUDGMENT:       27/02/1997

BENCH: SUHAS C. SEN, SUJATA V. MANOHAR

ACT:

HEADNOTE:

JUDGMENT:          (With Civil Appeals Nos. 2462-63 of 1988)                       J U D G M E N T SEN,J.      Leukoplast (India)  Limited, the  assessee-company  was granted a  licence by  the Drugs  Controller under the Drugs and Cosmetics  Act, 190. It was amended on September 7. 1987 Under this  licence, the  assessee was  entitled to  produce inter alia  Zinc Oxide Adhesive Plaster B.P.C. (Leukoplast), Surgical  Wound  Dressing  (Handyplast);  Balladona  Plaster B.P.C.; Capsicum  Plaster B.P.C.  and Cotton  Crape Bandages B.P.C. (Leukocrapes).      The aforesaid  goods or  products were  liable to local sales tax  as   well as  Central sales liable to local sales Tax as well as Central sales tax and prior to 1.11.1981, the rate of  6 per  cent and  under Section 8(2A) of the Central Sales Tax  Act, the  rate of  Tax was  4 per  cent.  By  the notification No.  14/41/81-Fin (R&C), dated 28.8.1981, drugs and medicines were exempted from the levy of local sales tax in excess of 3 per cent and thus, according to the assessee- company, as  a result  of this  exemption, the Central Sales Tax leviable  under Section  8(2-A) of the Central Sales Tax Act was also reduced to 3 per cent.      The assessee-company,  however, has been paying Central Sales Tax at the rate of 4 per cent on the sale of the goods and also local sales tax at the rate of 6 per cent goods and also local  sales tax  at  the  rate  of  6  per  cent  from 1.11.1981 to 1.4.1987.      By another  notification No.  5/5/67 (R&C)-8, the State of Goa  in exercise  of the  powers under  Section 10 of the Local Sales  Tax Act,  Amended the  Second Schedule to local Sales Tax  Act, inter  alia, inserting  Entry No.  77  which speak of "drugs and medicines, including all I.V. Drips". By the aid  notification, the  goods were totally exempted from levy of  the local sales tax and consequently. The Sales tax from 2.4.1987  on the   above  mentioned products  or  goods manufactured by the assessee-Company.      Further, the case of the assessee is that the sales tax payable from  1.11.81 to  1.4.87 was at the rate of per cent only and  as such  by two  letter both  dated 3.4.1987, they pointed out  to the  Sales Tax  Officer that  the  goods  in

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question  were  "drugs  and  medicines",  and  on  and  from 1.11.1981 to  1.4.1987 the  said goods  were liable to local and Central  sales tax  at the  rate of  3  per  cent.  They further prayed  for refund  of the  duty paid  in excess  of local and Central sales tax levied and collected as a result of the  Sales tax  assessment which had been completed. They also filed  revised sales  tax returns  for  the  assessment periods, 1.1.1985  to 31.12.1985 and 1.1.1986 to 31.12.1986. However, despite  these two  letters, no action was taken by the state  of Goa  a regards  the claim  for refund  of  the Central and  local  sales  tax  collected  in  excess.  They further  prayed   for  the   completion  of  the  assessment proceedings which  were still  pending  for  the  subsequent periods, that is, from 1.1.1983 to 31.12.1986.      They further  contended that after the admission of the writ petition,  the Assistant  Sales Tax  officer made order dated  December  24,  1987  for  the  period  commencing  on 1.1.1983 and ending on 31.12.1983. He rejected the claim for refund, applying the doctrine of unjust enrichment.      Thereupon, the  assessee-company filed  a writ petition challenging the decision of the Assistant Sales Tax Officer, the contention  of the  assessee  was  that  the  assessment orders should be set aside and it was entitled to the refund of the  tax paid  under mistake  of law and collected by the State without  the authority of law. On behalf of the State, however, it  was contended that the products were not "drugs and medicines" and as such no question of refund of tax paid did arise.  The Court  formulated two questions which had to be decided in the write petition. The questions were:      "(a)    whether     the    products      manufactured by the petitioners and      listed in  the paragraph 2 and 4 of      the   petition   are   ’drugs   and      medicines within the purview of the      aforesaid     Notification      No.      14/41/81-Fin (R & C) and NO. 5/5/87      (R&C)-8 and      (b)  Whether  the  petitioners  are      entitled to the refund sought"      After  a  long  discussion  about  the  nature  of  the products of  the assessee-company  and   after referring  to Pharmaceutical    Codex     incorporating    the     British Pharmaceutical  Codex,  the  meaning  given  to  "drugs  and medicines’ in  Drugs and Cosmetics Act and also to the under standing of  the phrase  "drugs and medicines" by the excise authorities, and  several affidavits  filed on behalf of the assessee, the  High Court  came to  the  decision  that  the products manufactured  by the  assessee-company  had  to  be treated as  "drugs and  medicines" and the writ petition was entitled to succeed.      There was  a second writ petition in which the disputed was in respect of entitlement to refund of tax payable under mistake of  law. Following  the decision  in the  first writ petition, the  second writ  petition  was  also  decided  in favour of the assessee-company with some modifications.      The State has come up in appeal. We have heard the case in  extenso.   The  dispute  basically  centres  around  the contention of  the assesse that its products like Zinc Oxide Adhesive  Plaster   B.P.C.  (Leukoplast),   Surgical   Wound Dressing (Handyplast);  Balladona Plaster  B.P.C.;  Capsicum Plaster   B.P.C.    and   Cotton   Crape   Bandages   B.P.C. (Leukocrapes) can  be treated  as "drugs and medicines". The assessee’s  contention   that  it   has  got  a  licence  to manufacture these products under the Drugs and Cosmetics Act and its  production is controlled at every stage by the Drug

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Control  authorities  does  not  conclude  the  matter.  The Question  is  how  these  terms  are  understood  by  people generally? For  example, can  a bandage be treated as a drug or a medicine? Will the position be different if the bandage is medicated?  These question cannot be decided by reference to any  definition of the Drugs and Cosmetics Act or product control licence  issued by  the Drug Controller. There is no definition given  in the  local sales  Tax  Act  or  in  the Central Sales Tax Act of these terms. It has to be found out how these products are understood and treated in the market. In  the   ordinary  commercial  sense,  are  these  articles considered  as  drugs  or  medicines?  These  are  basically questions of fact.      In fact,  the difficulty  of defining  what is drug and medicine was  discussed in  the case  of Customs  and Excise Commissioner v. Beecham Food Ltd. (1972) 1 W.L.R. 241 (H.L.) where the  question  was  where  Ribena  blackcurrant  juice B.P.C. could  be treated as drug or medicine. The plantiff’s case  was   theat  this   product  consisted   of  syrup  of blackcurrant   made   in   accordance   with   the   British Pharmaceutical Codex  and containing  some natural vitamin C and  a   syrup  made   in  accordance   with   the   British Pharmacopoeia  and   synthesised  vitamin   C.  It   has   a prophylactic function  when taken  by those who need vitamin C. It was sold and advertised on the basis of that function. The plantiffs  sought a  declaration that Ribena was a "drug or medicine"  and was  entitled to  the benefit of exemption from Purchase  Tax Act,  1936. It  was held  by the House of Lords that  Ribena  could  not  be  treated  as  a  drug  or medicine. It coming to this decision certain in mind.      Lord Reid  pointed out  that in  the Purchase  Tax Act, "Medicine" had not been defined. so it had to be under stood as a ordinary word of English language. Lord Reid observed:      "At  with  so  many  English  nouns      there is  no  clear  limit  to  the      denotation of  the  word  medicine.      All  the   circumstances  must   be      considered and  there may  be cases      where it  is extremely difficult to      decide  whether  or  not  the  term      medicine  is  properly  applicable.      But here  I think that, however one      approaches the  matter, it would be      a misuse of Language to call Ribena      a medicine  and I  would  therefore      allow the appeal"      Lord Morris  who delivered  a dissenting judgment tried to define the term "medicine" in the following manner:      "What then is medicine? the learned      judge (1969)  1 W.L.R.  1518,  1827      pointed to  a dictionary definition      of medicine  (when used  in a sense      other than  a substance  (when used      in a  sense other than a substance)      as: "The  science and art concerned      with  the  cure,  alleviation,  and      prevention of disease, and with the      restoration  and   preservation  of      health." In  line with  the learned      judge I  think that a fair approach      is  to   regard  a  medicine  as  a      medicament which is used to cure or      to alleviate  or to prevent disease      or to restore health or to preserve      health."

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    Lord Wilberforce,  who agreed  with Lord  Reid, pointed out that  the fact  that t drug was present in something did not convert  that preparation as a whole into a drug. Merely because Vitamin  C. was present in Ribena, it did not become a drug.      In our  view, whether  the products manufactured by the assessee can  be treated  as "drugs  or medicine"  cannot be answered straightway. The medicinal content of the products, if any,  has to be ascertained. Its curative function has to be found  out. Can the product be called a medicament at all ? Is  it used  to cure or alleviate or to prevent disease or to restore  health or to preserve health? Are these products treated as  drugs of medicines in common parlance? These are basically questions  of fact.  These was  no reason  for the assessee-company to  bypass the statutory remedy and come to the Court with a writ petition. These questions basically of fact should  be  agitated  before  the  statutory  appellate authority.      In the case of Titaghur Paper Mill Co. Ltd. and another v. State  of Orissa and another, (1983( 142 ITR 663, a Bench of three Judges of this Court pointed out the inadvisability of entertaining  a writ  petition  questioning  a  sale  tax assessment. This Court held:-      "Under the scheme of the Act, there      is  a   hierarchy  of   authorities      before which  the  petitioners  can      get adequate  redress  against  the      wrongful acts  complained  or.  The      petitioners  have   the  right   to      prefer   an   appeal   before   the      prescribed authority  under  sub-s.      (1) of  s. 23  of the  Act. If  the      petitioners are  dissatisfied  with      the decision  in the  appeal.  They      can prefer  a further appeal to the      Tribunal under  sub-s. (3) of s. 23      of the Act, and then ask for a case      to be stated upon a question of law      for the  opinion of  the High Court      under s.  24 of  the Act.  The  Act      provides for  a complete  machinery      to   challenge    an    order    of      assessment, and the impugned orders      of   assessment    can   only    be      challenged by  the mode  prescribed      by the  Act and  not by  a petition      under    Art.     226    of     the      Constitution."      We are  of the  view that  the assessee should not have been  allowed   to  bypass   the  statutory  remedies  where questions of  fact could  have been  properly  agitated  and ascertained.      The appeal,  therefore, is  allowed. The impugned order of the High Court is set aside.      The assessee-company  will  be  at  liberty  to  prefer appeal against  the assessment  order in accordance with law within a  period of  six weeks  from date. If such appeal is preferred within the said period of six weeks, the appellate authority will  entertain the  appeal  without  raising  any question of limitation. all the question of fact and law are left to be decided by the appellate authority.      There will be no order as to costs. CIVIL APPEALS NOS. 2462-63 OF 1988      In view  of our  decision in  Civil Appeal  NO. 2461 of 1988, the  above Appeals  are also allowed. There will be no

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order as to costs.