Is a Product Whose Sale is Prohibited by Law, Excisable?
FOR excisability, two conditions are mandatory, movability and marketability. Now if the sale of a particular product is prohibited by law, can the product be excisable?
The Supreme Court answered this question in a detailed judgement delivered on 14.01.2011.
The product in question is “physician sample of medicines” and as per the Drugs Act, sale of physician sample is prohibited.
The Supreme Court looked at the purpose and object of the two Acts and noted that,
The main object or real purpose of the Drugs Act, 1940 and Rules made thereunder, is to regulate the manufacture of drugs in order to maintain the standard or quality of drugs for sale and distribution as a drug. Therefore, any requirement or condition imposed by the Drugs Act and Rules made thereunder, is in furtherance of its above stated object of regulating and maintaining the quality of Drugs.
And
The primary object of the Central Excise Act is to raise revenue by imposing duty on goods that are manufactured. In other words, the scope of the Act extends to the event of manufacture of goods, for the levy of excise duty.
The Supreme Court held that;
These two Statutes and the Rules made thereunder, operate in entirely two different fields having different objects, purposes and schemes. The conditions or restrictions contemplated by one statute should not be lightly and mechanically imported and applied to fiscal statue for non levy of excise duty, thereby causing a loss of revenue.
Therefore, the prohibition on the sale of Physician Samples intended for distribution to medical practitioners as free samples by Rule 65 (18) of the Drugs Rules shall have no bearing or effect upon the levy of excise duty under the Act, since excise is a duty on manufacture, duty is payable whether or not goods are sold. Excise duty is payable even in case of free supply, since sale is not a necessary condition for charging duty under the Act.
The Supreme Court referred to a large number of its own decisions on ‘excisability' and ‘manufacture'. These are land mark decisions which a student of excise cannot afford to miss. When you find the time, do read the following judgements.
1. CCE vs. Acer India Ltd
2. Province of Madras vs. Boddu Paidanna and Sons –
3. Indian Cable Co. Ltd. vs. CCE -
4. Union of India vs. Delhi Cloth and General Mills -
5. Union Carbide India Ltd. v. Union of India -
6. Bhor Industries Ltd. vs. Collector of Central Excise, Bombay -
7. Hindustan Polymers v. CCE -
8. A.P. State Electricity Board vs. CCE, Hyderabad -
9. Triveni Engineering & Industries Ltd. v. CCE -
10. Union of India v. Sonic Electrochem (P) Ltd., -
11. ITC Ltd. v. Collector of Central Excise, Patna -
12. Cadila Laboratories (P) Ltd v. CCE, Vadodara -
13. Hindustan Zinc Ltd. v. CCE -
14. Dharampal Satyapal v. CCE -
15. Moti Laminates (P) Ltd. v. CCE -
16. Union of India v. Delhi Cloth & General Mills Co. Ltd. -
17. Gujarat Narmada Valley Fertilizer Co. Ltd. vs. Collector of Excise and Customs -
18. Moriroku UT India (P) Ltd. vs. State of Uttar Pradesh and Ors -
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