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PETITIONER: ASTRA PHARMACEUTICALS (P) LTD.

       Vs.

RESPONDENT: C.C.E.

DATE OF JUDGMENT16/12/1994

BENCH: SAHAI, R.M. (J) BENCH: SAHAI, R.M. (J) PARIPOORNAN, K.S.(J)

CITATION:  1995 SCC  (2)  84        JT 1995 (1)   276  1995 SCALE  (1)17

ACT:

HEADNOTE:

JUDGMENT: The Judgment of the Court was delivered by R.M.  SAHAI,  J.-  This appeal under  Section  35-L  of  the Central Excises and Salt Act, 1944 (’Act’ for short)  raises two important questions of law, one relating to construction of  Item 14-E of the Central Excise Tariff levying  duty  on patent  and  proprietary medicines and other  the  scope  of proviso to Section 11-A of the Act. 2.For  purposes  of duty, patent and  proprietary  medicines were classified in relevant period in two broad categories - one, which were dutiable under 86 Tariff  Item 14-E and other which fell under  the  Residuary Item  68.   The latter were wholly exempt  from  duty  under Notification  No.  55/75  dated  1-3-1975.   The   appellant manufactured    pharmacopoeial    and     non-pharmacopoeial medicines.   One of the items manufactured by the  appellant was  20%  Dextrose  injection.  It is a trade  name  in  the Indian  Pharmacopoeia.   It  being  one  of  the   medicines specified  in Pharmacopoeia it was wholly exempt from  duty. An  item  which  fell under Tariff Item 68  and  was  wholly exempt from duty was further exempted from operation of Rule 174  and  no Central Excise licence to  manufacture  it  was required to be taken out.  The appellant, therefore, did not obtain any licence and cleared the Dextrose manufactured  by it without paying any duty since the date of manufacture  in December 1978 till 23rd January, 1982 when notice was served on  it for showing cause as to why Dextrose manufactured  by it  may not be subjected to duty under Tariff Item  14-E  as even  though  it was pharmacopoeial product, yet  the  label used on the packing and the container bore a monogram  which indicated   a  connection  between  the  medicine  and   the appellant. 3.To  determine if the appellant was liable to pay  duty  on Dextrose  injection manufactured by it, it will have  to  be examined if it fell under Tariff Item 14-E extracted below:

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----------------------------------------------------------- Tariff   Description of Goods              Rate of duty Item No.                               Basic Special Excise ----------------------------------------------------------- 14-E    Patent or Proprietary Medicines 12  1/2% 10% of the         not containing alcohol, opium,  adv.     basic duty         Indian hemp or other narcotic            chargeable         drugs or other narcotics other         than those medicines which are         exclusively Ayurvedic, Unani,         Sidha or Homeopathic. ---------------------------------------------------------- Explanation 1.- "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  ailments in human beings or animals, which bears  either on  itself or on its container or both, a name which is  not specified  in  a monogram in a  Pharmacopoeia  Formulary  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 trademark  under  the Trade  and Merchandise Marks Act, 1958 (43 of 1958)  or  any other  mark such as a symbol, monogram, label, signature  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. Explanation H.- ’Alcohol’, ’Opium’, "Indian Hemp", "Narcotic Drugs"  and  ’Narcotics’  have  the  meanings   respectively assigned to them 87 in  Section  2  of the  Medicinal  and  Toilet  Preparations (Excise Duties) Act, 1955 (16 of 1955). The  entry  is  in  two  parts,  one  the  main  and   other explanatory.   The  main  part  negatively  excludes   those medicines which contain any of the ingredients mentioned  in it or are Ayurvedic, Unani, Sidha or Homeopathic  medicines. The  range of patent and proprietary medicines  thus  having been determined by the main part the explanation spells  out the exact scope of the entry by first widening its ambit  by including any drug or medicinal preparation in whatever form and  used for any ailment in human beings or  animals,  then carves  out  an exception in favour  of  any  pharmacopoeial medicine  or  medicines  which  have  been  mentioned  in  a publication  issued by the Central Government, but  excludes again from it those medicines which even though mentioned in pharmacopoeia  are  identified by a monogram  or  a  symbol, signature   or   invented  words  so  as  to   establish   a relationship between the producer and the medicine.  To  put it simply, all those patent and proprietary medicines  which are  mentioned in Pharmacopoeia are excluded from the  entry unless   the  manufacturer  or  producer  by  use   of   any distinctive  mark establishes connection with the  medicine. In other words, all those medicines which either bear a name which  is not specified in the pharmacopoeia or which  is  a brand  name  and  that brand name is  used  by  any  symbol, monogram  or  signature so as to  establish  a  relationship between the medicine and the person manufacturing or selling it then such patent or proprietary medicine would be covered in  it.   The purpose appears to be that if  a  manufacturer manufactures medicines which were mentioned in pharmacopoeia then it was not liable to pay any duty.  But if it  produced a  medicine  which  carries  its  own  name  which  was  not

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mentioned  in the pharmacopoeia, then it was liable  to  pay duty  under  this item.  That is, a  patent  or  proprietary medicine to attract levy under this tariff item must  either be a medicine which was not specified in a pharmacopoeia  or other publication and carried on it or its container name of the  produce by symbol or invented name etc.  A medicine  of which the producer is the proprietor and it is known by  its name  would be covered in this clause.  The other  class  of patent  or proprietary medicines to which this  tariff  item applies  are  those medicines which have a brand name  or  a registered  trademark under the Trade and Merchandise  Marks Act and carry such mark, symbol or monogram as to  establish relation between medicine and producer or manufacturer, That is,  the writing or monogram on the medicine must  establish that  it  was  the  producer or  the  manufacturer  who  was proprietor of the medicine. 4.   This appeal is concerned with the latter clause,  i.e., the medicine carrying brand name.  The Explanation  includes in  its ambit all those medicines which carry a  brand  name which is registered under the Trade and Merchandise Act  and the  manufacturer  describes that medicine  by  any  symbol, monogram or label so as to establish a relationship  between the   manufacturer  and  the  medicine  then  the   medicine manufactured  by  him could be included in  the  explanation appended to Item 14-E.  The appellants 88 manufacture  20%  Dextrose injections.  It is  not  disputed that 20% Dextrose injections are mentioned in  pharmacopoeia but the appellant has been denied exemption as on the  cover it  carries  the  name  "AP  -  ASTRA".   According  to  the Department,  since the medicine is described by  a  monogram and  it established a relation between the manufacturer  and the medicine, therefore, it was included in Explanation 1 to Item  14-E.   The Tribunal found that letters  ’AP’  do  not constitute  a  monogram  because the  two  letters  are  not interwoven but they being placed side by side in an artistic manner  on the top it made the medicine manufactured by  the appellant  as  a patent or proprietary  medicine  attracting Central Excise duty under Tariff Item 14-E. 5.As  has  been  explained earlier the  first  part  of  the Explanation widens the ambit of the entry by extending it to any  drug  or medicinal preparation for use in  internal  or external administration for prevention of ailments in  human beings  or animals.  But then it narrows it  by  restricting the applicability of the tariff item to only such  medicines which  bear either on itself or on its container or  both  a name   which   is  not  specified  in  a   monogram   in   a pharmacopoeia.   This  obviously is not  applicable  to  the appellant  as the injections manufactured by  the  appellant are  specified  in  a pharmacopoeia.   The  other  class  of medicines to which this Explanation applies are those  which have  a brand name that is a name or a registered  trademark under  a  Trade  and Merchandise Marks  Act.   The  medicine manufactured  by the appellants is not registered under  the Trade  and  Merchandise  Marks  Act.   Therefore,  it  would attract  levy only if its container or packing  carried  any distinctive  marks so as to establish the  relation  between the  medicine and the manufacturer.  But the  identification of  a medicine should not be equated with the produce  mark. Identification   is   compulsory  under  the   Drug   Rules. Technically, it is known as "house mark".  In Narayan’s book on  Trade  Marks and Passing-Off,  the  distinction  between "house mark" and "product mark" (brand name) is brought  out thus:               "677-A.’House mark and product mark (or  brand

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             name).-  In  the  pharmaceutical  business   a               distinction is made between a house mark and a               product  mark.  The former is used on all  the               products of the manufacturer.  It is usually a               device in the form of an emblem, word or both.               For  each product a separate mark known  as  a               product mark or a brand name is used which  is               invariably  a word or a combination of a  word               and letter or numeral by which the product  is               identified  and asked for.  In respect of  all               products both the product mark and house  mark               will  appear side by side on all  the  labels,               cartons  etc.  Goods are ordered only  by  the               product  mark or brand name.  The  house  mark               serves  as  an  emblem  of  the   manufacturer               projecting  the  image  of  the   manufacturer               generally." The  ’AP’ or ’ASTRA on the container or packing was used  to project  the  image of manufacturer generally.  It  did  not establish   any  relationship  between  the  mark  and   the medicine.   For instance, if the appellant instead of  using Dextrose  injections  would  have  described  it  as   Astra injections  or  Astra Dextrose injections then it  could  be said that a relationship between the 89 monogram  and the medicine was established.  In the case  of appellant   it   was  only  a  monogram  to   identify   the manufacturer. 6.   In Indo-French Pharmaceutical Co. v. Union of India1  a learned  Single  Judge  of  the  Madras  High  Court   while construing Tariff Item 14-E observed:               "A close reading of the Explanation,  however,               in my view indicates that the marks,  symbols,               monogram,  label,  signature  or  other  words               which are used in the medicinal preparation or               its  container should be such as  to  indicate               that  the medicine is a  special  preparation,               made  by  the  manufacturer.   The  connection               between  the  medicine and  the  manufacturer,               contemplated under the Explanation, should  be               such as to indicate that the manufacturer  has               a proprietary interest in the medicine. "  This was approved by a Division  Bench of the  same  High Court  in Union of India v. Indo-French Pharmaceutical  Co.2 Reliance  was,  placed  on  Ramsey  Pharma  Pvt.   Ltd.   v. Superintendent,  Central Excise3 for the Revenue and it  was claimed that this decision was followed by the Tribunal  and since it was based on correct interpretation of  Explanation 1 the appellant was not entitled to any relief.  It would be seen  that  in the decision rendered by the  Allahabad  High Court it is not clear if the container bore the name of  the medicine  as well.  What has been extracted in the  judgment is that the medicine has been manufactured by Ramsey  Pharma Pvt.   Ltd.   As  stated earlier if  the  container  of  the appellant  would have stated that these were Astra  Dextrose injections then it could be said that a relationship between the  medicine  and the manufacturer  was  established.   The ratio  laid  down by the Madras High Court  is  approved  as correctly enunciating the scope of Explanation 1. Since  the appeal  is being allowed on merits the question whether  the Revenue was justified in reopening the case under proviso to Section  11-A  of the Act is rendered academic  and  is  not necessary to be decided. 7.   In the result this appeal succeeds and is allowed.  The order  passed by the Tribunal is set aside and the  question

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of  law  raised by the appellant is decided by  saying  that Dextrose  injections  manufactured by the appellant  in  the relevant  years  were not patent and  proprietary  medicines dutiable  under  Tariff Item 14-E of  the  Schedule.   There shall be no order as to costs. 1    1978 ELT J478 (Mad) 2    1983 ELT 725 (Mad) 3    1983 ELT78 (All) 91 91