Bombay High Court
Union Of India vs Vicco Laboratories on 27 April, 1988
JUDGMENT S.K. Desai, J.
1. This is an Appeal preferred by the Union of India and the Assistant Collector of Central Excise against the judgment and decree passed on 6th May, 1982 by the Civil Judge, Senior Division, Thane, in Special Civil Suit No. 143 of 1978. The suit was filed by the Respondents to the Appeal who are a firm and a private limited company respectively. The respondents will be hereinafter referred to as "the Plaintiffs" for the sake of clarity.
2. The Plaintiffs' suit was one seeking certain declarations, one of which was in respect of an order dated 4th June, 1977, passed by the Union of India. An alternative declaration was also sought in respect of another order dated 14th June, 1976 passed by the Assistant Collector of Central Excise at Kalyan. In the suit the Plaintiffs also sought to recover the sum of Rs. 95,22,728.21 with interest on the principal amount of Rs. 79,16,897.43. This amount was claimed as illegally recovered from them as alleged excise duty in respect of two products manufactured by the Plaintiffs, viz., Vicco Vajradanti Tooth Paste and Vicco Turmeric Vanishing Cream. A perpetual injunction was also sought from implementing the said orders or from recovering excise duty on the said products on the basis thereof.
3. Plaintiff No. 1 were a registered partnership firm having their factory at MIDC area, Dombivali, District Thane. Plaintiff No. 2 was subsequently formed to take over the assets and liabilities of the said firm. The Plaintiffs manufacture and deal in proprietary Ayurvedic medicines and hold an Ayurvedic licence bearing No. A/237 issued under the provisions of the Indian Drugs and Cosmetics Act, 1940. The Plaintiffs claim that Vajradanti Tooth Paste and Turmeric Vanishing Cream manufactured by them are Ayurvedic medicinal preparations. The Plaintiffs claim to be manufacturing the same since about 1959 and 1965 respectively. We shall refer to these products as "V. Vajradanti" and "V. Turmeric" respectively for the sake of brevity. The Plaintiffs have also obtained a licence under the Drugs Act, which licence has been renewed from time to time. In support of their contention the Plaintiffs rely upon certificates dated 6-1-1976 and 17-8-1976 issued by the Commissioner, Food and Drug Administration of the State of Maharashtra. According to the Plaint, V. Vajradanti is a proprietary Ayurvedic medicinal preparation made from extracts of 18 natural herbs and barks which are indicated in the authoritative text books on Ayurveda as specified in the First Schedule to the Drugs Act. The list of these 18 herbs and barks is found annexed to the Plaint as Exhibit 'D'. Each of these ingredients, according to the Plaintiffs, has therapeutic value as indicated in Ayurvedic literature and is useful for treatment of dental diseases and V. Vajradanti is useful both as preventive as well as curative medicine. The Plaintiffs manufacture V. Vajradanti in two forms, viz., as a powder and as a tooth paste. According to the Plaintiffs, this product is useful for treatment of disorders of the gums, tooth decay, pyorrhea, swollen gums, bleeding gums and for diseases and ailments pertaining to teeth and gums. According to the Plaintiffs further, the product is sold by chemists and drug-gists. It has been pointed out in the Plaint that no licence is required for the sale of Ayurvedic medicinal preparations unlike allopathic medicinal preparations. In the Plaint the Plaintiffs have further indicated the standard medicinal agents or ingredients for the diseases and ailments of the mouth. The Plaintiffs, therefore, contend that V. Vajradanti would fall within excise Heading 33.06. In support of their contention it is urged that ordinary tooth pastes and creams are manufactured under a licence for manufacturing cosmetics issued under the Drugs Act, whereas V. Vajradanti is manufactured under an Ayurvedic drugs licence issued under the very same Act. The Plaintiffs also rely on the fact that sales-tax authorities in the State of Maharashtra have also accepted V. Vajradanti as a medicinal preparation and do not consider it to be a tooth paste. Copies of the orders of the sales-tax authorities in this behalf were annexed to the Plaint.
4. As far as the other preparation V. Turmeric is concerned, the same is also claimed to be an Ayurvedic preparation. It consists of extracts from turmeric blended with pure sandalwood oil in the base of vanishing cream. The latter is based on a very simple formula consisting of stearic acid, alkali and water made compatible with two Ayurvedic ingredients, viz., turmeric and sandalwood oil. According to the Plaint, these two ingredients are included in 'Charak Samhita' as well as in other Ayurveda pharmacopoeias. The Plaintiffs have claimed that turmeric has antiseptic value and can be used externally for several skin infections and for skin diseases. Similar value is also claimed for sandalwood-oil particularly for its soothing and ameliorative effects. According to the Plaint, doctors prescribe V. Turmeric to their patients for various skin diseases and for preventing skin diseases. According to the Plaint, it is sold by chemists and druggists as Ayurvedic medicine and consumers also purchase the same as Ayurvedic medicine and not as a cosmetic or toilet preparation. A vanishing cream base, according to the Plaint, has no curative or prophylactic value and its only utility is that it vanishes when it is applied on the skin. It has been pointed out that a number of allopathic medicinal preparations such as "Soframycin" as well as "Burnol" are also having the base of vanishing cream.
5. The suit was required to be filed obviously because the aforesaid contentions were not accepted by excise authorities and between November, 1975 and July, 1976 correspondence ensued between the parties. The Plaintiff also claim that the excise authorities have illegally recovered from them the sum of Rs. 17,95,472/- as alleged excise duty under tariff item 14FF in respect of V. Vajradanti for the period from March, 1974 and similarly Rs. 61,21,424.62 in respect of V. Turmeric. As a matter of fact, the Plaintiffs had filed Writ Petitions, but Rules were discharged therein and the Plaintiffs were directed to pursue a fresh remedy under the Excise Act by preferring Appeals. Ultimately the remedy by way of a suit was required to be pursued since the Plaintiffs failed to get relief from the excise authorities.
6. Broadly speaking, the contention of the Plaintiffs is that V. Vajradanti is an Ayurvedic medicinal preparation which is not excisable under the Central Excises and Salt Act, 1944, nor covered by tariff item 14FF. A similar contention is raised in respect of V. Turmeric and it is contended that it is not excisable under tariff item 14F. It is unnecessary to set out fully the technical defences raised by the Defendants in their written Statement, inasmuch as those aspects have not been pressed before us since they were concluded as far as the High Court was concerned by High Court decisions against these contentions of the Defendants. However, it was expressly stated to us by Counsel for the Appellants that the Defendants must not be taken to have given up these contentions and have reserved their rights to raise the same if the matter is carried further. It is contended by the Defendants that V. Vajradanti is only a tooth paste having properties similar to those of other tooth pastes and that similarly V. Turmeric is a beauty or facial cream similar to the other creams used for cosmetic purposes. According to the Defendants, some of the other pastes and cosmetic creams may have similar properties and merely because some therapeutic agents known to Ayurveda are used in the manufacture of V. Vajradanti and V. Turmeric would not be enough to constitute the two preparations as exclusively Ayurvedic medicines. Indeed, according to the Defendants, they cannot be regarded as medicinal preparations at all so that the further question of considering whether they are Ayurvedic medicines or exclusively Ayurvedic medicines will not, therefore, arise. According to the Defendants, if the products answer the tariff descriptions of tooth paste and vanishing cream, then the tariff items 14FF and 14F would be attracted and the two products will be liable to excise duties under these two heads. The Defendants have further contended that the licence under which the products are manufactured or the classification thereof under the Drugs Act or the Sales Tax Act constitute facts which are totally irrelevant for the purposes of classification under the Excise Act. The Defendants have also placed reliance on the manner in which these products are advertised as well as the places from which they are sold. They have denied that these are prescribed by doctors or sold as medicinal products by druggists or chemists. In other words, the contention of the Defendants is that the two products have been properly classified, that excise duty has been properly levied on the same and thus, there is no question of quashing any order or declaring any order to be bad for the reasons alleged or otherwise, or of refunding any amount on the footing that this is payment made under any mistake or payment illegally recovered by the Defendants from the Plaintiffs.
7. On the pleadings, the trial Judge framed as many as eighteen issues and answered them as under :
Issues. Answers. -------- ---------- "1. Do Plaintiffs prove that their products Yes. Vicco Vajradanti and Vicco Vanishing Cream are Ayurvedic Medicinal preparations ?
2. Do Defendants prove that Vicco Vajradanti No. fall under item 14FF of First Schedule to Central Excises and Salt Act, 1944 ?
3. Do Defendants prove that Vicco Turmeric No. Vanishing Cream fall under item 14F(1) of the said schedule ?
4. Do Plaintiffs prove that the Defendants Yes. illegally recovered Rs. 17, 95,472.80 paise from them as excise duty in Vicco Vajradanti from March, 1974 onwards as averred in para 10 of their plaint ?
5. Do Plaintiffs prove that the Defendants Yes. illegally recovered Rs. 61,21,424.63 paise as excise duty on Vicco Turmeric Vanishing Cream from October, 1975 onwards ?
6. Do Plaintiffs prove that orders dated Yes. 14-6-1976 and 4-6-1977 passed by the Defendants in respect of their two products are without jurisdiction, illegal, null and void as alleged in para 13 of their plaint ?
7. Do Plaintiffs prove that the Defendants Yes. made invidious discrimination against the Plaintiff in respect of the two products in question ?
8. Do Plaintiffs prove that order dated Yes. 4-6-1977 passed by Defendant No. 2 is in breach of principles of natural justice and fairplay as alleged in para. 13(D) of their plaint ?
9. Do Plaintiffs prove that the orders Yes. dated 4-6-1977 and 14-6-1976 have resulted in recovery and threat to recovery of excise duty without authority of law ?
10. Do Plaintiffs prove that the order dated Yes. 14-6-1976 is in contravention of Section 4 of the Central Excises and Salt Act, 1944 ?
11. Do Plaintiffs prove that they discovered Yes. in September, 1975, that they paid excise duty of the said two products for three years and two months under a mistake ?
12. Whether this Court has no jurisdiction to try this suit as alleged in this paras 1 and 5 of the written statement ? Court has jurisdiction to entertain and try the suit.
13. Whether the suit is bad for misjoinder No. of parties ?
14. Whether the suit is premature as No. alleged in para. 3 of the written statement ?
15. Whether the suit is barred by limitation No. for reasons alleged in para 4 of the written statement ?
16. Are Plaintiffs entitled to the Yes. declaration sought ?
17 Are Plaintiffs entitled to perpetual Yes. injunction as prayed for ?
17A. Whether Plaintiffs are entitled to Yes. claim refund as sought in the plaint or of any other amount ?
18. What decree or order ? As per order below."
8. Ultimately, after considering the evidence and the documentary material, the learned Civil Judge, Senior Division, accepted the Plaintiffs' case in toto and declared the order of the 2nd Defendant passed on 4th July, 1977 illegal and void. Necessary injunction was also granted. Somewhat curiously a permanent injunction was granted against the Defendants restraining them from recovering any excise duty from the Plaintiffs in respect of the two products. Such injunction could only be granted as long as the two excise entries remained as they were without any change. It is the admitted position that there has been a complete alteration of the phraseology employed and the scheme of the headings with effect from 28th February, 1986 and obviously, therefore, the injunction must necessarily cease to operate from the date of the Change. Since the changed phraseology was not in issue and no evidence was led in connection with the same, the Court cannot and ought not to express any opinion as to the position under the changed phraseology. It must be left to the excise authorities and to the Plaintiffs to support their respective contentions under the said phraseology. Returning to the present litigation, the learned Civil Judge, having accepted the Plaintiffs' contentions, passed a money decree in respect of both products but restricted to the amounts recovered by way of excise levy for the period of three years prior to the filing of the suit. Somewhat oddly the money decree which was proper on the findings given as against the 1st Defendants, viz., the Union of India, was also passed against the Assistant Collector of Central Excise who was the 2nd Defendant. That is an obvious error which has to be corrected, irrespective of the fate of the other contentions in the Appeal. In respect of excise claims during the pendency of the Suit, it would appear that the Plaintiffs were required to furnish a bank guarantee and by the judgment the guarantee was directed to stand cancelled.
9. Broadly speaking, in order to consider the Appellants' grievances against the judgment apart from the fairly minor corrections indicated which have to be made and which have not been objected to, it will have to be stipulated that the decision to be given in this matter, whether at the trial stage or at the appellate stage, must necessarily be based upon the record. The Court cannot speculate de hors the record. The Court cannot consider possibilities, even strong probabilities. Indeed, at one time, we felt that on one aspect of the matter which will hereinafter be indicated a remand may be in order, but neither side sought a remand and the final hearing of the Appeal proceeded and was completed on the basis of certain stipulations orally made at the Bar and recorded in our earlier Order. It will be appropriate, therefore, to briefly deal with the evidence led by the parties which was fairly extensive but which has been neatly summarised by the trial Judge in his judgment.
10. The first witness led on behalf of the Plaintiffs was the partner of Plaintiff No. 1 and the principal shareholder of the limited Company one G. K. Pendharkar (P.W. 1) who has given necessary particulars regarding the composition of the two products. He has indicated that V. Vajradanti is made from the extracts of 18 natural herbs and barks which have a therapeutic value according to Ayurvedic literature. All these 18 ingredients have been named by him. He has explained how an extract of these herbs is prepared and has stated that in every 100 grams of paste there will be 20 grams of such extract (20%). He has also explained the process of manufacturing the paste and it would appear that out of balance 80 per cent 58 per cent is calcium carbonate and a binder is thereafter added to the mixture. It has been contended by Pendharkar that these extracts of Ayurvedic ingredients are not used in any other tooth paste available in the market. Two experts have been examined on behalf of the Plaintiffs and they are Dr. V. S. Upasak (P.W. 4) and Dr. D. S. Antarkar (P.W. 11). Both of them have enumerated the 18 ingredients in V. Vajradanti paste and their therapeutic properties. According to Dr. Antarkar, even the ingredients like calcium carbonate (chalk) and the binder which is gum of tragacant have therapeutic value according to Ayurvedic text books. As regards the other product V. Turmeric, witness Pendharkar has similarly indicated the process of manufacture thereof in his deposition. This process is that it is made from the extracts of turmeric blended with pure sandalwood oil with a base of vanishing cream. Pendharkar has mentioned how the therapeutic properties of turmeric and sandalwood oil have been described in Ayurvedic text book 'Charak Samhita'. He has given the percentage of these two ingredients in the final product and according to him, the paste contains 18 per cent turmeric extract and 1.2 per cent sandalwood oil. The vanishing cream base is stearic acid. The plaintiffs' witness Dr. Upasak who holds both ayurvedic and allopathic qualifications has supported Pendharkar in the contention that both turmeric and sandalwood oil have therapeutic values according to Ayurvedic text books. According to Dr. Upasak, the concept of vanishing cream is also known to Ayurveda though, according to his knowledge, this would not be stearic acid but consist of different ingredients. It may be mentioned that apart from Dr. Upasak and Dr. Antarkar, the Plaintiffs have examined one other doctor, viz., Dr. K. H. Joshi (P.W. 9) and according to Dr. Joshi, vanishing cream paste is not used for preparing Ayurvedic medicine. However, on a perusal of the qualifications and experience of the three doctors, it is very clear that Dr. Antarkar (P.W. 11) is a genuine well-qualified expert and his evidence will have to be accepted unless it has been demonstrated as unreliable by cross-examination or otherwise demonstrated to be palpably absurd.
11. It will not be out of place now to refer to the evidence of Dr. Antarkar. He holds an Ayurvedic degree from the University of Bombay. He is also an Ayurvedacharya from the All India Ayurved Vidyapith, Delhi. He has been attached to the Podar Hospital which is Ayurvedic Hospital at Worli, Bombay, for the last 29 years. The said hospital is, according to the evidence, a teaching hospital and Dr. Antarkar is an under-graduate as well as a post-graduate teacher. Dr. Antarkar has also written 30 research papers on different Ayurvedic problems. It is quite clear that Dr. Antarkar is a recognised practitioner and expert of Ayurvedic medicine. As far as the 18 ingredients are concerned, the extracts of which are utilized for preparing V. Vajradanti, Dr. Antarkar has given their various therapeutic properties according to Ayurveda. He has categorically stated that the product made from those extracts and Sorbitol would be regarded by him as Ayurvedic medicine. He has similarly deposed to the therapeutic properties of turmeric and sandalwood oil. According to him, the product made out of these two ingredients with a base of vanishing cream would have to be considered as Ayurvedic medicine. According to him, both these products have medicinal value both preventive and curative. He was asked as to the basis of his conclusion that both these products are Ayurvedic medicinal products and according to Dr. Antarkar, since Ayurvedic medicinal ingredients have been used in the said two products, he would classify them as Ayurvedic preparations. He was asked whether there is any other Ayurvedic product which has base of a vanishing cream. This was in cross-examination and according to him, there was another Ayurvedic product which had the base of vanishing cream. This is found in paragraph 7 of the cross-examination. Similarly according to him, there was another ointment produced by Zandu Pharmacy which also had the base of vanishing cream. Dr. Antarkar was candid enough to confess that he had not personally prescribed either of these two products - as medicines for treatment or prevention of dental diseases or skin diseases. He was asked whether he was aware that a tooth paste contained products like polishing agent, astringent, detergent, deodorant and binding agent and he could not say whether these were present in V. Vajradanti or other tooth pastes. He also candidly admitted that he had not made any comparative study of V. Vajradanti tooth paste and other tooth pastes. We find a fairly lengthy cross-examination of this witness about tooth and gum diseases, but broadly speaking, Dr. Antarkar has not been shaken. Indeed, he has maintained the value of turmeric as a therapeutic medicinal ingredient as per Ayurveda only and not recognised by any other modern medical science. This witness thus specifically denied that the two products are merely tooth paste and cosmetic product respectively.
12. As far as prescribing of the two products as medicines is concerned, Dr. Joshi (P.W. 9) who is a general medical practitioner having Ayurvedic qualifications has specifically stated that he had prescribed V. Turmeric Vanishing Cream as a medicine for skin infection, skin diseases, boils, minor skin injuries, inflammation of skin and insect bite. He was candid enough to admit that some people may have used V. Turmeric merely as a beauty aid. In his cross-examination he was not asked a single question about his claim that he had prescribed V. Turmeric as a medicine and hence this part of his testimony has gone unchallenged. Since he was an Ayurvedic medical practitioner, it has to be assumed that he must have prescribed this product as an Ayurvedic medicine. As far as V. Vajradanti is concerned, the Plaintiffs had led evidence of Dr. Wagh (P.W. 8), a Dental Surgeon practising in Bombay since 1971, who has categorically stated that V. Vajradanti both in tooth paste and in powder form had been prescribed by him to his patients who complained of bleeding gums, loose teeth and gum diseases. He found the products very useful. According to him, he would consider them as Ayurvedic medicines. In his cross-examination he denied that tooth paste was not an Indian method for cleaning teeth. He candidly admitted that he did not know any other Ayurvedic tooth paste. He categorically claimed to have kept statistics about the effects of V. Vajradanti tooth paste on his patients. This would necessarily imply that he could have made available to Court, if required, the necessary particulars about the patients to whom the product had been prescribed, the details of the treatment and the ultimate result. It is important to note that thereafter in subsequent cross-examination the Government Pleader did not ask him to produce these details. Going through the entire evidence of Dr. Wagh, we are impressed by the frank and forthright manner in which he has given evidence and it would appear to us that none of the three witnesses, viz., Dr. Wagh, Dr. Joshi or Dr. Antarkar can be regarded as biased or partisan witnesses who had come to Court only to give evidence to favour the Plaintiffs' claim.
13. The Plaintiffs have also led the evidence of some users and shopkeepers. One of the users is Ravjibhai (P.W. 7). He has deposed to his use of the two products. He claims to have used tooth paste to stop bleeding from teeth and gums and the other product for treatment of black rings around the eyes. He stated that in his opinion these two products were Ayurvedic medicines. In his cross-examination he contended that he was using V. Turmeric also for preventing recurrence of boils on this face.
14. Apart from this customer, the Plaintiffs also examined one Kisandas Chhabra (P.W. 10) who claims to have used V. Vajradanti for relieving his dental troubles. In addition to the doctors and the customers, the Plaintiffs also examined two shopkeepers. The first of them was P.W. 2 Ramniklal who is running a medical store at Dombivali. He claims to sell all kinds of medicines, allopathic, homoeopathic and ayurvedic. Both the products involved in the suit claim are sold by him and he claims to have recommended the two products to his customers as Ayurvedic medicines. He has categorically stated that he kept both the products in the ayurvedic medicinal section and not in the, cosmetic section. Indeed, he went on to say that other products such as Ponds cream and Lakme cream were kept by him in the cosmetic section. The name of the shop owned by him is Ashok Medical Centre which was managed by this gentleman for the last ten years. The witness also holds a diploma in Pharmacy. He was asked whether dentists had ever prescribed either of the two products and he stated that one dentist by name Dr. Angaonkar had given prescription for V. Vajradanti tooth paste. The witness gave his opinion that V. Vajradanti was the best tooth paste in the Market. He was asked about another tooth paste called 'Promise' and he claimed that it was not an Ayurvedic tooth paste. He was asked about the process of manufacture of tooth pastes and candidly admitted that he was not aware of the same. He maintained that the words "Ayurvedic preparation" were printed on boxes of V. Turmeric Cream. He admitted that some people did use V. Vajradanti tooth paste as any other tooth paste. A similar witness was one Premji (P.W. 3) who is a partner of a chemist's shop at Dadar, Bombay. He also claimed to sell allopathic and ayurvedic medicines. He claims to have sold the two products for fifteen years and five years respectively and contended that according to his reckoning they were Ayurvedic medicines. He also maintained quite categorically that the two products were sometimes sold against Doctor's prescription. No cross-examination was addressed on the last point and, therefore, it will have to be accepted on the evidence given of the dentist and the chemist that the dentist did recommend V. Vajradanti for tooth diseases and the chemists had supplied the product in the paste form to customers on Doctors' prescriptions. We have left out one doctor who is an Ayurvedic practitioner, viz., Dr. Upasak. He has categorically stated that he has tried the tooth paste (V. Vajradanti) for curing or preventing inflammation of gums, bleeding of gums and decay of the teeth. He has mentioned the therapeutic agents contained in V. Vajradanti and maintained that he regarded the tooth paste as Ayurvedic Medicine. He has also deposed to user of the other product. This has been prescribed for patients having itching, burning, laceration of skin, abrasion of skin, wounds and other disorders. He also claimed to have maintained records of cases in which he had prescribed the two products and patients reporting having obtained relief. No further questions were put to him regarding this aspect. He was asked about a product or a medicine named 'Sarpina' since an Ayurvedic therapeutic agent called 'Sarpagandh' was utilised in its manufacture. He maintained that it was an Ayurvedic product. He very fairly admitted that sandalwood oil and turmeric are used in the preparation of V. Turmeric. According to him, the two products were cooling and soothing.
15. One will have to concede that even ignoring the interested testimony of a partner of Plaintiff No. 1, the Plaintiffs have led fairly good evidence for consideration of the claim of the Plaintiffs that these products were medicines and Ayurvedic medicines. They have examined general practitioners of Ayurvedic medicines as well as an expert. They have examined a dentist. They have examined two chemists and one user. As contrasted with this evidence, the evidence led on behalf of the Defendants must be regarded as thoroughly unsatisfactory. One Laxmidas Thakkar (D.W. 1) was the first witness who claimed that he sold the first product as a tooth paste. He was faced with the bills issued by his firm and these bills showed that he had sold the product as a medicine or as Vicco paste. In his cross-examination it was shown that he was unaware of the composition of the two products as contrasted with the two chemists and the medical store owner examined by the Plaintiffs. The evidence of this witness Thakkar is generally unsatisfactory. A similar witness one Ramesh Kadam (D.W. 2) was also examined. According to him, he sold both the products and other tooth-pastes and creams and no customer had asked for these products as medicines. This, however, appears to us to be totally irrelevant since the two other chemists had specifically mentioned supplying these products against Doctors' prescriptions and after such statements were made, no questions were asked on this statement in their cross-examination. Similarly, the dentist and the Ayurvedic practitioner have specifically contended that they have kept records of the patients who had been prescribed the two products as medicines and the results obtained. No further inquiries were thereafter made by the cross examiner. Hence, on the evidence led the Court may be constrained to accept the case of the Plaintiffs that the products are being prescribed by doctors as medicinal products and sold by chemists as medicinal products though they may also be sold to other customers who do not require them for their medicinal value but use them as a cosmetic or as tooth paste. Even as far as witness Ramesh Kadam is concerned, he has been given the lie by Exhibits 128 and 129 which show that these products have been sold by his store on the basis of Doctors' prescriptions. He was ultimately faced with the bills issued by his shop and forced to concede that what he had earlier deposed to was incorrect. That this witness had only come to help the Defendants and was unreliable is demonstrated by his claim that he had sold a popular skin cream on a Doctor's proscription. However, he was forced to concede that he could not produce the prescription or a copy of the bill indicating the aforesaid fact. It is very clear that the witness was not at all reliable and had mainly come to Court only to oblige the Defendants. The third witness examined by the Defendants was Smt. Charulata (D.W. 3) serving at the Central Excise Laboratory at Dharavi Road. After having gone through the evidence and report which was not made by her, we find that this evidence was only of a routine analysis and has little relevance to the matter under consideration. In her cross-examination the lady was forced to concede that she did not know what Ayurveda is nor did she have any knowledge of Ayurvedic medicines. She was very candid and admitted that she had no degree or qualification in Ayurveda and could not say what medicines were recognised as Ayurvedic medicines. She also admitted that there was no method in chemistry known to her for analysing or identifying herbs or barks present in a product or determining the percentage thereof. She was not aware whether the Food and Drugs Administration Department established under the Drugs and Cosmetics Act had appointed an Ayurvedic expert as an analyser. One wonders why such a witness was at all examined in the Suit. Even as regards the chemical analysis done, the evidence given by her is thoroughly unsatisfactory and totally superficial. Since she was an unnecessary and a useless witness we refrain from making further comments upon the manner in which she had performed her duties and given evidence in Court. We would have also commented upon, if necessary, the reports given by the chemical examiner. It seems to be the practice of the Department that tests are carried out by one person, reports are prepared by another and signed by a third one. However, ultimately the witness was forced to concede that certain medicinal creams contain a vanishing cream base as also that some medicines may also contain calcium carbonate. She also conceded that medicines may contain a small amount of flavouring agent. As stated earlier, it becomes unnecessary to deal further with the evidence of this witness. As contrasted with the direct and satisfactory testimony led by the Plaintiffs in respect of the two products, the testimony led by the Defendants is thoroughly unsatisfactory both in respect of the first two witnesses as well us in respect of the third witness. Thus the record reveals good, direct and satisfactory testimony and evidence led on behalf of the Plaintiffs and almost useless evidence led on behalf of the Defendants. However, this is not a simple property matter or a suit on a negotiable instrument so that one can find in favour of the Plaintiffs merely because of the better quality of evidence led on their behalf. We have also to consider whether the Plaintiffs are entitled to recover back the amounts. Before coming to the concluding stages, it may be set down that what is indicated by the Plaintiffs in the advertisements given for the two products would appear to be not decisive of the matter one way or the other. The Plaintiffs may try, to capture or increase their market by indicating their product as a beauty cream. Similarly although V. Vajradanti has medicinal value, the producers may try to enlarge the market by carrying on propaganda recommending its user as a regular tooth paste or dentifrice. This is the view already taken by this High Court in several decisions and which view we adhere to.
16. It is time now to consider whether the conclusions reached by the trial Court are justified on the basis of the record.
17. This is an Appeal from a judgment in a Suit and hence the conclusion at the end of the trial either in the trial Court or in the Appeal Court necessarily will have to be based on the record, viz., oral testimony as well as documents. It will not be permissible to travel beyond the record and to decide the questions arising or determine the lis as between the parties on material outside the record. However, the record will have to be understood and considered with reference to the pleadings and the issues framed. The pleadings and the issues would determine the parameters of the enquiry and the record has to be scrutinised, considered and proper conclusions derived therefrom on the basis of these circumscribing limits.
18. The Plaintiffs have come to the Court on the basis of allegations of mistake, viz. that under a mistaken belief of liability they have paid excise duty under Entries 14F and 14FF in respect of their two products, viz. V. Vajradanti and V. Turmeric. Thus, the first question to be decided is, whether the two products would fall within those two entries or would fairly fall within Entry 14E ? The Plaintiffs have contended during the course of trial and in the appeal that the products are medicines or rather patent or proprietary medicine falling within Entry 14E. This has been vehemently and strenuously opposed on behalf of the Defendants, who are the appellants before US.
19. Whether the two products are medicine or merely tooth paste and vanishing cream or rather a cosmetic cream has to be decided on this record. On the record as is available to us, it is more than amply proved by overwhelming evidence that the products would be excisable under Entry 14E and at the rates prescribed from time to time in respect of the said Entry. The consumers and Doctors, and the later category will include the general practitioners, dentists and Ayurvedic experts, consider that the two products are medicines and further that they are Ayurvedic medicines. In this respect even the first two witnesses who were examined on behalf of the Defendants were ultimately forced, much against their inclination, to concede that these products were prescribed by Doctors and sold by them under Doctors' prescriptions. The third witness examined on behalf of the Defendants has not carried the matter any further and her evidence is almost totally useless as far as these proceedings are concerned. In addition to this, we have the classifications made by various Governmental Authorities including the Sales-Tax Commissioner accepting the status of the two products as Ayurvedic medicines. Last but not the least we have unshaken testimony of P.W. 11 Dr. Antarkar, admittedly an expert on Ayurvedic medicine.
20. There is overwhelming evidence, therefore, on the record which is almost one sided to establish that the two products under consideration must be regarded as Ayurvedic medicines although they may also be used as tooth paste and are used as cosmetic cream.
21. The allied question whether they are patent or proprietary medicine presents very little difficulty and indeed, this aspect has not been seriously opposed on behalf of the Defendants (Appellants before us). The trust of the argument was advanced against the conclusion that these could be regarded as medicines. If this argument was negatived and the Court was inclined to conclude that they are medicines then there is not much difficulty in holding that these are patent or proprietary medicines.
22. It is now well settled that it is for the person on whom a levy of tax or duty falls to decide as to under which head of the Excise Manual his product is leviable and therefore if a product can be considered to be one falling within the two heads (without staraining the language), then the Court will accept the case of the person who is liable to pay excise duty since it will be presumed that he knows which head is less onerous so far as he is concerned. Since the rates vary from year to year, occasionally it may not be possible to hold that the particular head must be preferred because it is less onerous. Apart from this aspect, there is in this matter overwhelming evidence to enable the Court to conclude definitely that these are products which are regarded as medicines, further that they are patent or proprietary medicines and finally that they are Ayurvedic medicines and would, therefore, be covered by Heading 14E. Thus far the record presents no difficulty at all.
23. However, a point which does create considerable difficulty is the question, whether on the footing that these two products would be covered by Heading 14E, whether they are wholly exempt as exclusively Ayurvedic medicines. This averment is not found in the Plaint - and hence not specifically traversed and, therefore, no issue is specifically framed in this behalf. In the opinion of this Court it may not be sufficient only to aver and prove that these two products are medicinal products using Ayurvedic ingredients or even that the therapeutic ingredients used in the products are hundred per cent ingredients or in other words ingredients known to Ayurveda. Nowhere has the trial Court given an opinion as to what is understood by the phrase "exclusive Ayurvedic medicine". One can visualise several considerations which may become material for being considered as exclusively Ayurvedic medicines :
(a) that the therapeutic products used in the medicine excluding the inert liquid or cream were ones recognised by Standard Ayurvedic Text Books and indicated to produce the medicinal effects sought for or claimed;
(b) this may be considered to be a further refinement of (a), viz., that the therapeutic products must be one found in their natural state and not synthetically made or artificial ones though the medicinal or therapeutic effect may be identical in both cases;
(c) that the inert substance also, viz. the non-therapeutic ingredients also are ones in their natural state and not artificial ones.
(d) that the process of manufacture is to be found indicated in the ancient Ayurvedic Text Books. Here, we must clarify that what we are thinking of is the basic process though, there can certainly be refinement pertaining to the process to keep the technology abreast of modern trends. For example, paste was made in ancient times by mixing and using mortar and pestle. In ancient times this was done by hand. Today, grinding, mixing, sifting and making paste may be done by mechanical means or some process facilitated by the use of modern implements or electric power.
24. Further, subsidiary questions that may fall for consideration : Is exclusively Ayurvedic medicine the same as wholly Ayurvedic medicine ? Does the adjective exclusively go with Ayurvedic or with medicine or with Ayurvedic medicine ? It was urged before us that if the evidence of P.W. 1 Pendharkar and P.W. 11 Dr. Antarkar is properly examined and considered there will be little difficulty since their claim that the product must be considered exclusively Ayurvedic medicine, is not even disputed by cross-examination - leave alone rebutted by loading evidence. However, if you do not specifically plead and contend that your products are exclusively Ayurvedic medicine, can you then contend that your claim spelt out by the oral testimony was not sought to be dispelled either by properly directed cross-examination or contrary testimony offered in rebuttal ? This would be expecting too much from the Defendants. The idea of proper pleadings is to put the Defendants on guard as to what you are intending to establish.
25. The argument that in taxation matters the onus is on the Revenue will be in applicable to the present case. If an item can fall within two Entries, it may be for the person affected by the levy to decide as to under which head it should be classified and there, perhaps, it may be correctly observed that the Court or Tribunal deciding the matter must lean in favour of the subject and against the Revenue. That principle has been properly applied by us in order to determine that the two products V. Vajradanti and V. Turmeric, would be covered by Entry 14E and not Entries 14F and 14FF respectively. The argument or the submission does not hold good when the manufacturer thereafter claims exemption under the exclusion clause or under some notification which claim the Revenue does not accept. He must, in the first instance, specifically claim exemption placing reliance on the express phraseology of the exclusion clause or of the notification and then establish the claim, if rebutted or traversed, by sufficient evidence. Therefore, if legal proceedings are adopted, there must be a specific pleading or claim and a specific issue framed if that claim is not accepted or denied. The question of scrutining the evidence and of upholding or rejecting the claim would arise only if there is such clear and specific pleading. Claims of this nature cannot be decided on the basis of evidence which may have come on the record without necessary pleading. In this connection, it was, in our opinion, obligatory on the part of the Plaintiffs, to have drawn the attention of the Opponents from whom they claim refund and against whom they sought injunction as also of the Court to the precise nature of their claim. Without so doing, it is not permissible, in our opinion, to allow the Plaintiffs the benefit of the exclusion clause. This cannot be said to be a technical or a hypertechnical view. The technical requirements imposed by the Code of Civil Procedure have a definite purpose and that is not to take the other side by surprise. A party cannot get relief unless it specifically makes submissions in support of the claim and thereafter, after the necessary issue is framed, leads evidence in support of the claim. If that evidence stands unrebutted then that party must succeed. However, a party who has merely led evidence which may not have been properly rebutted cannot get the claim passed on such evidence unless that claim was first made in its pleading. It is not necessary for the Defendants to traverse all claims indicated in the evidence unless they are subject-matter of a definite claim made in the pleadings. In our opinion, it would be unsafe to arrive at any definite conclusion on this aspect of the matter in the absence of a fullfledged enquiry which did not take place in the lower Court because of the defective pleading of the plaintiffs. This is not a harsh view but a proper view of the matter. To hold otherwise would amount to a denial of justice to the Defendants. We had at one time thought of and even suggested to the parties, whether the matter should go down and a finding on this specific issue sought from the trial Court after the remand. At that stage, certainly, it would have been open to the Defendants to lead evidence in rebuttal and they could also have sought, subjects to directions which could have been given either by us or by the trial Court on remand, recall of witnesses already examined particularly P.W. 11. On behalf of the Plaintiffs, that is, the Respondents before us, their Senior Counsel stated categorically that he was not seeking any remand and asked the Court to decide the issues on such evidence as was available. His contention or submission has been recorded by us fully in a separate Order. After this position was taken on behalf of the Respondents, the Counsel appearing on behalf of the Appellants also stated categorically and in no uncertain terms that the Appellants were also not seeking a remand and stood by whatever evidence had been recorded.
26. It would appear that on the major portion of the Plaintiffs claim the record is almost wholly in favour of the Plaintiffs and the Appellants, therefore, must fail. On one part of the Plaintiffs' claim, however, that is the claim of total exclusion under the exclusion clause, the Appeal cannot be dismissed and will have to be partially allowed, in view of the absence of proper pleading. We cannot speculate as to what questions could have been put to Dr. Antarkar or the other witnesses or what further evidence the Defendants might have led to dispute the Plaintiffs' contention, which was specifically and clearly indicated only in the argument and not in its pleading, that they were manufacturers of exclusively Ayurvedic medicines. Thus, although upholding the claim that the Plaintiffs are manufacturers of patent or proprietary Ayurvedic medicines, which claim is supported by the record as it stands, we must repel their claim for relief based on the contention that they are manufacturers of exclusively Ayurvedic medicines and hence entitled to total exclusion even under Entry 14E.
27. Thus, although on the record it can be held that these two products are Ayurvedic medicines properly falling within Entry 14E, it cannot be held in the Suit that they are entitled to total exemption from payment of excise duty under the exclusion notification under Entry 14E and the claim of their being manufacturers of exclusive Ayurvedic medicines cannot be upheld in the circumstances and for the reasons earlier indicated. It may be that in some other matter or for some other year or for the period subsequent to 1st March, 1986, the point may be specifically agitated and could thereafter be decided.
28. The net result of the aforesaid discussion would seem to be that the liability of the Plaintiffs to pay excise duty for their products under Entry 14E for the period under consideration will have to be worked out and the Plaintiffs would be entitled to refund not only of the total amount of the excise duty paid under the heads 14F and 14FF but would only be entitled to the difference between the excise duty payable under these two heads and that payable in respect of these two products under Entry 14E. This difference will then constitute the money decree to which the Plaintiffs would be entitled upto the date of the Decree passed by the trial Court. The reliefs to be granted for the subsequent period upto 31st March, 1986 will also have to be suitably modified in accordance with the conclusion reached by us earlier. It will also have to be made clear that the injunction would have to be directed to stand vacated when the entries were substantially altered and this has been admittedly done in March, 1986.
29. In the result it has to be held that although the Plaintiffs have established that on this record the two products are Ayurvedic medicines their plea (in the arguments) that they are wholly or exclusively Ayurvedic medicines cannot be accepted in this suit for the reasons indicated. On that part of the Plaintiffs' claim, that is a claim of total exclusion from payment of excise duty the Appeal cannot be dismissed and will have to be upheld. To uphold the Plaintiffs' claims fully would be to permit them to take advantage of their own wrong, in this case the defective pleading. It is not possible to speculate as to what questions the Defendants would have put to Dr. Antarkar or other witnesses to cross-examination on this aspect of the matter or what other evidence the Defendants might have led to dispute the Plaintiffs' alleged claim of Ayurvedic medicines had that claim been specifically made in the Plaint. In the result, we will, therefore, have to uphold the Appeal in part on the footing that these two products are not wholly or exclusively Ayurvedic medicines though we may uphold the finding of the trial Court that they have to be regarded as Ayurvedic medicines. The result will be that although upholding their claim to some relief as manufacturers of patent or proprietary Ayurvedic medicines i.e. governed by Heading 14E the claim as to additional reliefs on the condition or footing what they are manufacturers of Ayurvedic medicines and hence entitled to total exclusion from payment of excise duty must by rejected.
30. Statements of figures worked out by both the sides have been given to us. According to the Excise Authorities an amount of Rs. 1,12,98,552.43 ps. (Rupees One crore twelve lacs ninety eight thousand five hundred and fifty two and paise fourty three) only is payable to the original Plaintiffs. This would be for the Excise Duty paid up to 28-2-1986. This figure disputed by the original Plaintiffs and since the Excise Department for its working has relied on an order passed on 17th April, 1988, the original Plaintiffs, have taken out a Civil Application which has been numbered as Civil Application No. 1980 of 1988 impugning the same. According to the original Plaintiffs if the order is disregarded (as it must be) then on the footing indicated by this Court an amount of about Rs. 2,89,85,522.21ps. (Rupees two crores eighty nine lacs eighty five thousand five hundred twenty two and paise twenty one) will be payable by them and not the much smaller amount indicated by the Excise Department.
31. Since there, is a formal order (of 17th April) it may not be open in execution or on remand to the Civil Judge, Senior Division, to proceed to compute the figure ignoring the said order. Hence, the Civil Application will have to be considered before further directions can be given for payment over and above the agreed amount. We, however, propose to modify the decree passed by the Civil Judge, Senior Division and pass a decree for the admitted working which will be without prejudice to the rights of the Plaintiffs to claim more after disposal of the Civil Application. Our Order will also be without prejudice to the department's right to apply for review if any review is maintainable.
32. Accordingly, without prejudice to the claim of the Plaintiffs that the correct amount is much higher which claim can be entertained after the Civil Application is disposed of and the order passed on 17th April, 1988 held to be a nullity or illegality in other proceedings, we direct that there will be a decree in the amount of Rs. 1,12,98,552.43ps. (Rupees one crore twelve lacs ninety eight thousand five hundred fifty two and paise fourty three) in favour of the Respondents/Plaintiffs but only against the 1st Appellants (Union of India). Whether the figure will be required to be revised upward will depend upon what we decide in the Civil Application. The 1st Appellants will pay interest on the said amount at 12% per annum from 1st June, 1988. As the amount is substantial and since we have awarded interest, we direct the 1st Appellants to deposit the amount in this Court on or before 31st July, 1988. As and when the deposit is made the liability to pay interest would cease. In case the deposit is made the original Plaintiffs will have liberty to apply for permission to withdraw the same and apply the same in satisfaction of the Decree.
33. This disposes of the Appeal subject to the result of the Civil Application.
34. As far as the costs of the Suit and of the Appeal are concerned, we the parties should bear their own costs of the Appeal but the original 1st Defendants will pay to the original Plaintiffs half the costs of the suit.