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Union Of India And Others v. Leukoplast Private Limited And Others
Factual and Procedural Background
The Union of India appealed against a judgment of the Bombay High Court that had classified the respondent-company’s product “Handyplast”—an elastic adhesive wound-dressing pad medicated with 0.125% Nitrofurozone—outside the scope of Tariff Item 14-E (“patent or proprietary medicines”) of the First Schedule to the Central Excise Act, 1944. Both parties accepted the physical description of the product. The High Court decision followed protracted departmental proceedings and delays; during this time the respondent continued to pay duty under an alternative tariff item (T-1.68) until the Central Excise Tariff Act, 1985 replaced the schedule. The Supreme Court (per B.P. Jeevan Reddy, J.) heard the appeal under Article 136 of the Constitution.
Legal Issues Presented
- Whether “Handyplast,” containing 0.125% Nitrofurozone, constitutes a “patent or proprietary medicine” within the meaning of Tariff Item 14-E of the Central Excise Act.
Arguments of the Parties
Respondent's Arguments
- The product merely protects cuts or wounds from contamination, enabling natural healing; it has no curative properties.
- A medicament should not be inferred where Nitrofurozone is present only in negligible quantity.
Revenue's (Appellant's) Arguments
- Because Nitrofurozone is added after sterilisation, the dressing is intended to treat or cure wounds and therefore qualifies as a medicinal preparation.
- The respondent's own advertisements refer to the product as a medicine, supporting its classification under Item 14-E.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The Supreme Court examined the two grounds on which the High Court had ruled for the respondent:
- Quantity of Nitrofurozone: The High Court relied on a passage from “The Pharmaceutical Codex” that prescribes a 1% concentration for gauze dressings. The Supreme Court found this reference inapplicable to the respondent’s pad-type dressing and therefore rejected the High Court’s reasoning.
- Purpose of Nitrofurozone: The High Court concluded the drug was added solely to sterilise the pad. The Supreme Court held that the pad was already sterile before the drug was introduced; thus Nitrofurozone was not for sterilisation but potentially for therapeutic effect, undermining the High Court’s second ground.
Despite disagreeing with the High Court’s analysis, the Supreme Court declined to interfere. It noted:
- The litigation history suggested that the extended-period proviso to Section 11-A (regarding recovery of duties not levied) was likely inapplicable.
- The monetary difference in duty was minimal, and the respondent had consistently paid duty under another heading.
- Given the inordinate administrative delays and the modest revenue impact, the Court considered it inappropriate to exercise its discretionary jurisdiction under Article 136.
Holding and Implications
APPEAL DISMISSED. The Supreme Court affirmed the High Court’s ultimate relief to the respondent but on equitable and discretionary grounds rather than on the merits identified by the High Court. No costs were awarded. The decision resolves the dispute only between the parties and sets no new precedent on the interpretative scope of Tariff Item 14-E, as the Court’s reasoning was explicitly fact-specific and premised on procedural and equitable considerations.
B.P Jeevan Reddy, J.— The question in this appeal preferred by the Union of India against the decision of the Bombay High Court is whether the respondent's product “Handyplast” is a ‘patent or proprietary medicine’ within the meaning of Tariff Item 14-E of the First Schedule to the Central Excise Act as it obtained at the relevant time. Tariff Item 14-E reads as follows:
Item No. 14-E — patent or proprietary medicines
Tariff Item No. Description of Goods Rate of Duty 14-E 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 homoeopathic. 12.5 per cent ad valorem
Explanation I.— ‘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 monograph, 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 trade mark 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 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.— (omitted as unnecessary.)”
2. The respondent is a company engaged in the manufacture of strips of surgical dressings containing a pad medicated with Nitrofurozone (0.125%) sold under the trade name “Handyplast”. A sample of the said product is placed before the Court as Exh. B. The following is the general description of such products, as set out by the High Court:
“Such elastic adhesive wound dressing consists of a fabric pad, comprising a piece of lint wrapped in muslin bandage, fixed to a rectangular piece of extension plaster so as to leave a margin of adhesive surface surrounding the pad. The elasticity of the plaster is unidirectional across the narrow width of the pad. The pad and adhesive margin are covered with a protector, which is removed before application. The pad is medicated with an antiseptic and dyed yellow, if necessary, with a non-toxic dye; the antiseptic and dye may be omitted if the dressing is supplied sterile.”
3. Both parties agree that the product in question accords with the above description. The question is whether it is a ‘patent or proprietary medicine’ within the meaning of Tariff Item 14-E. The Explanation defines the expression “patent or proprietary medicines” to mean inter alia “medicinal preparation, in whatever form, for use in the external treatment of or for the prevention of ailments in human beings which bears either on itself or on its container or both, a name which is not specified in a monograph in a Pharmacopoeia”. The respondent's case is that the said product is used merely for protecting a cut or a wound from getting infected by dust and other substances, thus enabling the body system to cure itself. According to the respondent it's product does not cure nor does it have any curative properties. On the other hand the case of Revenue is that had the product been supplied in a mere sterile form, the respondent's case could have been accepted but in this case the respondent adds a medicine namely Nitrofurozone after rendering the dressing sterile. The Revenue's case is that the Nitrofurozone is meant for curing/treating the cut or wound, as the case may be. In support of its case the Revenue relies upon the very advertisements issued by the respondent saying that it is a medicinal preparation.
4. The High Court has held in favour of the respondent mainly on two grounds, viz., (i) for the said product to become a medicinal preparation, the Nitrofurozone must be at least one per cent; since it is only 0.125 per cent in the case of Handyplast it cannot be called a medicine or medicinal preparation; and (ii) the said negligible amount of Nitrofurozone is applied “for an antiseptic purpose, that is to say, to make the said pad sterile”. In support of the first proposition the High Court has relied upon a statement under the heading “Non-adherent Wound-contact Dressings: framycetin sulplhate gauze (tulle) dressing” from a textbook The Pharmaceutical Codex — incorporating the British Pharmaceutical Codex, Eleventh Edn., 1979 prepared and published by the Department of Pharmaceutical Sciences, The Pharmaceutical Society of Great Britain. We have perused the same and find that the said requirement is in the case of a gauze and not in the case of dressing or pad like the respondent's product. There is no other statement in the said Codex, which says that in the case of a dressing pad like the one concerned herein, Nitrofurozone or other drug should be in a particular quantity. The said reason given by the High Court is, therefore, unsustainable.
5. Coming to the other ground given by the High Court we find ourselves equally unable to agree. The Nitrofurozone is not applied to render the pad sterile; the pad is already rendered sterile and thereafter Nitrofurozone in the said small quantity is added. Before us Shri Hidayatullah, learned counsel for the respondent, sought to contend that the said small quantity of Nitrofurozone is applied to preserve the sterility; but this is not the ground assigned by the High Court, nor is any textbook cited by learned counsel to support his contention conclusively.
6. Even though we are not satisfied with the reasoning of the High Court, we are of the opinion that no interference is called for in the particular facts and circumstances of the case. The relevant facts relating to the dispute concerned herein have been stated in the opening paragraphs of the judgment of the High Court, which establish that the proviso to Section 11-A may not be attracted to this case. The High Court has traced the course of this litigation and the inordinate delays in deciding the matter. The respondent has been paying duty all the while under T-1.68 till the Central Excise Tariff Act, 1985 came into force. The difference of duty is very small. Having regard to all the above facts, we do not think this is a fit case for interfering under Article 136 of the Constitution.
7. The appeal is accordingly dismissed subject to the findings recorded hereinbefore. No orders as to cost.
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