STATE OF GUJARAT versus SUHRID GEIGY LTD. AND ORS.

Citation: [1996] SUPP. 9 S.C.R. 796 · Decided: 10-12-1996 · Supreme Court of India · Bench: S.P. BHARUCHA · Disposal: Dismissed

Judgment (excerpt)

A 
STATE OF GUJARAT 
v. 
SUHRID GEIGY LTD. AND ORS. 
DECEMBER 10, 1996 
B 
[S.P. BHARUCHA AND S.C. SEN, JJ.] 
Medicinal and Toilet Preparations (Excise Duties) Act 1995: 
Sec. 2(g), 2(h) and Item (iii) sub-entry (1) of Enfly 1 of the 
C 
Schedul~Assessee--Manufacturer of Medicinal preparations-Xylocaine, a 
local anaesthetic, and Other anti- inflanunato1y and anti-rheumatic n1edicinal 
preparations containing Xylocain~Notice to pay excise duty-On challenge, 
High Court quashed the demand to pay excise duty-On appeal, Held: the 
substance in the Xylocaine that produces drowsiness or sleep or stupefaction 
or insensibility not identified-Not liable to pay excise duty-High Court 
D justified in quashing the demand to pay excise duty. 
The Respondent-assessees were engaged in the manufacture of 
Xylocaine, a local anaesthetic, and other anti-flammatory and anti-
rheumatic medicinal preparations containing a small percentage of 
E Xylocaine. Demand notices under the provisions of the Medicinal and Toilet 
Preparations (Excise Duties) Act, 1955 were issued to the assessees to pay · 
excise duty upon the said medicinal preparations. On challenge, the High 
Court quashed the demand to pay Excise Duty. Hence the present appeals. 
The contention of the Revenue was that the said medicinal prepara-
F lions contain Xylocaine, which has the property of producing drowsiness, 
sleep, stupefaction and insensibility, and, therefore, the said medicinal 
preparations were dutiable. 
Dismissing the appeals, this Court 
G 
HELD : 1.1. The High Court was justified in quashing the demands 
upon the assessees to pay excise duty on the said medicinal preparations. 
[801-D] 
1.2. Under item(iii) of sub entry (i) of Entry 1 of the Schedule to the 
Medicinal and Toilet Preparations (Excise Duties) Act, 1955, to be dutiable 
H therennder a medicinal preparations should contain a narcotic drug or a 
796 
STATE v. SUHRID GEIGY LTD .. 
797 
narcotic. In other words , the medicinal preparation must contain ll sub· A 
stance that, when swallowed or inhalelj by or injected··into a human being, 
produces in him either drowsiness or sleep or stupefaction or insensibility. 
[800-F] 
1.3. To render a medicinal preparation dutiable, it must include some 
substance, other than a medicinal preparation, that possesses the proper· B 
ties of producing drowsiness, sleep, stupefaction or insensibility. That sub· 
stance needs to be identified. If that substance is in a medicinal 
preparation, whether by itself or by reason of being an ingredient ofanother 
medicinal preparation that is incorporated in the medicinal preparation, 
the medicinal preparation is dutiable. (801-B] 
1.4. Xylocaine is itself a medicinal 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 prepara· 
tion, the other medicinal preparation becomes dutiable. [801-A] 
c 
1.5. It is ~ot enough for the Revenue to state that the medicinal D 
preparations manufactured by the assessees contain Xylocaine und 
Xylocaine has the properties mentioned in section 2(h). It must set out what 
is it that is contained in Xylocaine which contains the properties of produc· 
ing drowsiness, sleep, stupefaction or insensibility and, by reason thereof, 
makes the said medicinal preparations dutiable. (801-C] 
E 
2. In the connected appeals, other anaesthetics are ingredients of 
the medicinal preparations sought to be made dutiable. As in the case 
of Xylocaiue, what it is within the anaesthetics that produces drowsiness 
or sleep or stupefaction or insensibility was not identified by the 
Revenne. Hence, these medicinal preparations also conld not be snb· F 
jected to duty. (801-F] 
3. The High Court, however, erred in holding that by reason of the 
definition in Sec. 2(h), a narcotic drug or a narcotic is a substance which 
must produce drowsiness and sleep and stupefaction and insensibility, in G 
that order, in a human being, and that the word "or" between "stupefaction' 
and "insensibility" therein must be read as 'and". On its plain meaning, a 
narcotic drug or narcotic as defined in section 2(h) is a substance, other 
than alcohol, which, when swallowed or inhaled by, or injected into a human 
being, produces in him either drowsiness or sleep or stupefaction or insen· 
sibility. A substance that has the effect ofinducing drowsiness but not going H 
798 
SUPREME COURT REPORTS [1996) 

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