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PETITIONER: STATE OF GUJARAT

       Vs.

RESPONDENT: SUHRID GEIGY LTD. AND ORS.

DATE OF JUDGMENT:       10/12/1996

BENCH: S.P. BHARUCHA, S.C. SEN

ACT:

HEADNOTE:

JUDGMENT:                             WITH            CIVIL APPEAL NOS. 3536-40/82 & 7431/83                       J U D G M E N T      BHARUCHA, J.      These appeals  arise out of judgments and orders of the High Court  of Gujarat. the principal judgment was delivered in the  case of  Suhrid Geigy  Ltd., Ahmedabad  vs. Union of India &  Ors. (1980 E.L.T. 538), which is under challenge in Civil Appeal  No.1780/80, and  was  followed  in  the  other matters. We shall deal with the principal judgment first. The  appellants   manufacture.  inter  alia,  the  following medicinal preparations:      Sr. No.   Product      1.      Xylocaine  1% plain vial      2.       "         2% plain vial      3.       "         1% Adrenaline                         vial      4.       "         2% Adrenaline                         vial      5.       "         2% Adrenaline                         cartrtridge      6.       "         5% heavy ampoule      7.       "         4% topical vial      8.       "         5% ointment tube      9.       "         2% jelly tube      10.      "         2% viscous vial      11.  Butazolidin   3ml. ampoule      12.  Irgapyrin     3ml. ampoule      13.  Irgapyrin     5ml. ampoule      The  first   ten  medicinal   preparations  are   local anesthetics. The other three are anti-inflammatory and anti- rheumatic  medicinal   preparations  and   contain  a  small percentage of  Xylocaine. The  appellants were  issued  with demand notices  to pay  excise duty  under the provisions of the medicinal  and Toilet  Preparations (Excise Duties) Act, 1955, upon the said medicinal preparations. The demands were challenged in a writ petition before the Gujarat High Court, which was allowed by the principal judgment under  appeal.      Reference must  first be made to some provisions of the said Act.  Section 2  is its  definition section. Clause (c)

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thereof defines  "dutiable goods" to mean "the medicinal and toilet preparations  specified in  the Schedule". Clause (g) defines "medicinal  preparation" to include "all drugs which are a  remedy  or  prescription  prepared  for  internal  or external use  of human  beings or animals and all substances intended to  be used  for or in the treatment, mitigation or prevention of  disease in  human  beings  or  animals".  The definition of  "narcotic drug"  and "narcotic" in clause (h) reads thus"      "(h) "narcotic  drug" or "narcotic"      means  a  substance  (other    than      alcohal) which  when  swallowed  or      inhaled by,  or  injected  into,  a      human  being   induces  drowsiness,      sleep,          stupefaction     or      insensibility   in the  human being      and  includes   all  akjakiuds   of      opium.      Section 3(1) is the charging section and it states that there shall  be  levied  duties  of  excise,  at  the  rates specified  in   the  Schedule,   on   all   dutiable   goods manufactured in  India. Entry  1 of  the Schedule deals with medicinal  preparations   and  sub-entry  (1)  thereof  with allopathic medicinal  preparations. Item (iii) thereunder at the relevant time prescribed the duty leviable on "medicinal preparations not  containing alcohol but containing narcotic drug or narcotic".      The  aforementioned   notices  were   issued   to   the appellants  upon  the  basis  that  anaesthetics,  including Xylocaine, were covered by the definition of a narcotic drug or narcotic  in section  2(h); hence, medicinal preparations containing Xylocaine  were assessable to duty under the said Act.      The High  Court took  the view  that the use in Section 2(h) of  the word  "or" between the words "stupefaction" and "insensibility"  did  not  suggest  alternatives.  The  four stages of  drowsiness, sleep, stupefaction and insensibility mentioned in  Section 2(h)  were stages of progression which followed one after another and, in that sense, the word "or" meant  "and".   A  narcotic   drug  or  a  narcotic  should, therefore, produce  all the four effects one after the other with the  passage  of  time.  When  a  narcotic  drug  or  a narcotic, which  was  a  component  part  of  the  medicinal preparation sought  to  be  taxed,  ceased  to  produce  the symptoms set  down in  the definition  of Section  2(h),  it ceased to  be a narcotic drug or a narcotic. For this, among other reasons, the High Court rejected the Revenue’s case.      We do  not agree with the High Court that, by reason of the definition  in  Section  2(h),  a  narcotic  drug  or  a narcotic is  a substance  which must  produce drowsiness and sleep and  stupefaction and insensibility, in that order, in a human being, and that the word "or" between "stupefaction" and "insensibility"  therein must  be read as "and". We take the view  that, on  its plain  meaning, a  narcotic drug  or narcotic as  defined in preparation, as defined by Section 2 (g). It  cannot, therefore,  be said  to  be  a  "substance" within the  meaning of  Section 2(h),  by  reason  of  whose inclusion  in   another  medicinal  preparation,  the  other medicinal preparation  becomes dutiable.  As we  see it,  to render a  medicinal preparation  dutiable, it  must  include some substance,  other than  a medicinal  preparation,  that possesses the  properties of  producing  drowsiness,  sleep, stupefaction or  insensibility. That  substance needs  to be identified. If that substance is in a medicinal preparation, whether by  itself or  by reason  of being  an ingredient of

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another medicinal  preparation that  is incorporated  in the medicinal  preparation,   the   medicinal   preparation   is dutiable. In  the present  case, it  is not  enough for  the Revenue  to  state  that  the  said  medicinal  preparations contain Xylocaine and Xylocaine has the properties mentioned in Section 2(h). What must be set out is: what is it that is contained in  Xylocaine which contains these properties and, by reason  thereof, makes  the said  medicinal  preparations dutiable.      It is,  therefore, that  we would  agree with  the High Court that the demands upon the appellants must be quashed.      Having regard  to this  conclusion, we  dot not find it necessary to  consider either the argument that the State of Gujarat, by  itself, cannot  not maintain the appeal or that the demands upon the appellants contravene the provisions of Article 14 of the Constitution.      In the  other appeals,  anaesthetics are ingredients of the medicinal preparations sought to be made dutiable. As in the case  of Xylocaine,  what it  is within the anaesthetics that  produces   drowsiness  or  sleep  or  stupefaction  or insensibility was  not identified.  For the  reasons  afore- stated, these appeals must also be dismissed. The appeals are dismissed, No order as to costs.