SALEEM AKHTAR, J: --This appeal with the leave of this Court, arises from the judgment of the Division Bench of the High Court of Sindh dismissing the Constitution Petition filed by the appellants challenging the show-cause notice dated 24-10-1987 calling upon the appellants to pay sales tax amounting to Rs.13,06,299.60 on Dybenal lozenges cleared by the appellant without payment of sales tax during the period 1-10-1982 to 21-7-1987 on _the ground that the same was drug.
2. The appellants are public limited company engaged in manufacturing and importing pharmaceutical products. Amongst various other pharmaceutical products they manufacture Dybenal lozenges which according to them is a medicine and contains 2:4 dichlorobezyl alcohol and amylemeta cresol as active ingredients. It was further stated that its manufacturing formula shows that it is a product without menthol and considered as drugs under PTC yielding 30.03 commonly used and prescribed by the doctors for the treatment of sore and afflicted throat and infection of the mouth. Dybenal lozenges is registered under section 7 of the Drugs Act, 1976, as medicams/drugs with the Ministry of Health, Government of Pakistan. In the year 1981 the Assistant Collector, Central Excise and Land Customs, issued a show-cause notice dated 7-12-1981 requiring the appellants to produce evidence in support of their contention. That Dybenal lozenges is not liable to sales tax. The appellant replied stating'that Dybenal lozenges being drug is exempted from sales tax. Thereafter nothing was heard from him. After 6 years the appellants were again served with another show-cause notice dated 24-10-1987 issued by the Deputy Collector II, Central Excise and Land Custons, Karachi, calling upon the appellants to show cause as to why sales tax amounting to Rs.13,06,288.80 from 1981 onwards should not be recovered from them under Rule 10 of the Central Excise Rules, 1944, and why,they should not be penalized under Rule 210 for violation of the rules. The appellants filed objections on 22-11-1987 reiterating the same facts claiming exemption from sales tax under IRO 666(1)/81 dated 20th June, 1981. The Deputy Collector fixed the case for hearing on 12-12-1987 and after hearing the order was reserved. However, another officer namely Shaukat Ali, Deputy Collector-1, who had not heard the matter at all passed the order dated 31st January, 1988, whereby appellants were ordered to pay Rs.13,06,299.60 as sales tax and a personal penalty of Rs.2,000 was imposed. Before this order was passed the Superintendent, Central Excise and Land Customs, City Circle, Karachi, issued a notice dated 3-12-1987 to. The appellants pointing out that under its Circular No.8 of 1981 dated 28-9-1981 the Central Board of Revenue had ruled that menthol and lozenges are not drugs in terms of PTC 30.03 and the appellants are, therefore, liable to pay sales tax. The appellants were required to maintain all Central Excise records and clear the goods upon payment of sales tax. The Superintendent raided the appellant's factory on 7-12-1987, seized the cartons of Dybenal lozenges and refused to clear unless sales tax was paid. The appellant challenged the order dated 3-12-1987 in the High Court which was admitted to regular hearing.
They had also challenged the same order in revision where they succeeded and the case was remanded by the Additional Secretary, Government of Pakistan, for de novo hearing and, thus, the orders passed earlier became infructuous. The Constitution petition was, therefore, withdrawn.
3. On remand, respondent No.3 issued notice and after hearing passed order in October, 1989, and relying on -CBR'a reply dated 25-1-1988 the contentions raised by the appellants were rejected.
Besides sales tax a penalty of Rs.10,000 was also imposed. The applicants filed an Appeal against the aforesaid order before the Collector (Appeals) which was dismissed holding that the Dybenal lozenges has been rightly classified under PTC 17.04 and was not exempted from payment of sales tax. The demand created by the department was, thus, upheld. The appellants then filed Constitution Petition No.D-111 of 1990 which was dismissed by the impugned judgment. The Division Bench of the High Court observed that registration of Dybenal lozenges by the Ministry of Health as medicament does not necessarily lead to an inference that the finding by the respondents is erroneous. It was further observed that the question whether Dybenal lozenges is covered by PTC Heading No.30.03 as a medical product or a confectionery falling under PTC Heading No.17.04 is a question of fact which has been determined by the respondents.
Leave was granted to consider the following questions:-
(1) The factum that there is a difference of opinion among the two Government Departments concerned, raises a question of law requiring examination by this Court;
(2) that there is a conflict of views even in the High Court of Sindh on the above question, inasmuch as a Division Bench in an earlier judgment dated 12-8-1990 passed in Constitution Petition No.D-814 of 1988 in the case of M/s. The Boots Company Pakistan Limited v. Central Board of Revenue, has taken the view that `Strepsils' which is also a specie of Lozenges, was a drug and was not subjected to sales tax whereas in the present case a contrary view has been taken without distinguishing the above earlier judgment; (3)that the respondents have wrongly pressed in service Rule 10 of the Central Excise Rules, 1944, as the relevant provision for the alleged claim for payment was section 28 of the Sales Tax Act.
4. Mr.Mansoor Ahmed Khan, the learned counsel for the appellant, has contended that the Dybenal lozenges has been registered as a drug under the Drugs Act and also falls within the definition of medicam as contemplated by PTC No.30.03 and as under SRO 666(81)/81 medicams are exempted from payment of sales tax, the appellants cannot be charged with sales tax. On the other hand Mr.Shahoodul Haque, the learned ASC for the respondents, has vehemently contended that the question that Dybenal lozenges is not medicine or drug cannot be decided by the High Court and since the finding is against the appellants they are not entitled to any exemption. According to the learned counsel for the respondents, Dybenal lozenges fall under PTC 17-04 and are taxable. The appellant's main claim is that Dybenal lozenges is an item covered by .PTC No.30.03 as medicam.
In support of his contention reliance was placed on registration granted under the Drugs Act by the Ministry of Health, the fact that Dybenal lozenges has been included in the national formulary as medicams, and that it contains 2:4 dichlorobezhyl alcohol and amylemeta cresol as active ingredients. The photocopy of the application for registration of the product Dybenal lozenges showing composition, clinical, pharmaceutical and other relevant data of the drug based on PWF Formula and name were produced. The ingredients were shown as follows:- "Dybenal Lozenges. Each lozenge contains: 2.4 Dichlorobenzyl Alcohol .....1.2.Mg Amylemta Cresol 0.5 ing These facts do not seem to have been controverted or refuted by the respondents Nos.2 and 3. Respondent No.3 rejected the appellant's claim in the following manner:-- "As regards the presence of Dybenal Lozenges in the National Formulary as a medicament and other allied arguments, the case was referred to the Central Board of Revenue, Islamabad for a classification ruling. The Central Board of Revenue, Islamabad, has ruled that Dybenal Lozenges ;are classifiable under PCT 17.04 and are thus liable to sales tax." '
In appeal after noting the arguments the Collector observed as follows:-- "As regards their contention that their product involved in the case under appeal is a medicament and duly registered under Drugs Act, hence should not be classified as sales taxable goods is not tenable. Sales Tax Act and the Drugs Act are two different and independent Special Acts of the Legislature. There is no provision in any of the two Acts barring the application of one on the other for the liability of the goods under any of them. More registration under the Drugs Act cannot exclude the application of the Sales Tax Act:'
It is, thus, clear that so far ingredients and composition of Dybenal lozenges and its registration as drug is not disputed. The department has mainly relied on the ruling of the Central Board of Revenue which classifies Dybenal lozenges under PCT 17.04. This Circular No.8 of 1987 dated 21st September, 1981, reads as follows:- "In regard to the liability to sales tax of the menthol (sweet drops/lozenges), a question has been raised as to be considered by the Board and it is decided that menthol sweet drops/lozenges are not `drug' in terms of heading 30.03 of the rirst Schedule to the Customs Act, 1969, and are, therefore, liable to sales tax. "
This Circular has been the basis of decision by the department authorities while deciding the appellant's case. It speaks of menthol sweets/lo2enges which have not been treated as drugs in terms of PTC 30.03 of the First Schedule to the Customs Act, 1969, and, therefore, they have been classified to fall under PTC 17,04. The approach of the department was completely restricted and mind does not seem to have been applied to the facts of the appellants particularly when the ingredients of Dybenal are different which has been registered as a medicine by the concerned Health Department of the Government under the Drugs Act. It is true that the determination of the classification by a ,particular department for its own purpose may not be applicable to the other department. But if the other department does not classify or define any merchandise or commodity or its ingredients, a concerned department with technical knowledge and expertise on the subject accepts it as a particular object, without applying an artificial meaning, then such classification shall be relevant for determining the nature -of such merchandise/goods.
5. The-SRO has granted exemption from levy of sates tax, the goods produced or manufactured in Pakistan falling under heading numbers of the First Schedule to the Customs Act, 1969, specified in Column 2 of the table attached to it. The appellants rely on item No-22 which covers goods falling under heading No.30.03 including "Unani and Ayurvedic medicines and drugs except liquid glucose and rock phosphate." The identity of the goods falling under heading No.30.03 is mentioned in the Pakistan Customs Tariff. Chapter 30 deals with pharmaceutical products and 30.03 is described as medicaments (including vetenary medicaments): In the note to Chapter 30 it has been provided that for the purpose of heading No.30.03 medicaments means goods (other than food or beverages such as dietic, diabetic or fortified foods, tonic beverages, SPA water) not falling within Heading No.30.02 or 30.04 which are either:- "(a)Products comprising two or more constituents which have been mixed or compounded together for therapeutic or pro-phylactic use; or (b)unmixed products suitable for such uses put up in measured doses or in forms or in packings of a kind sold by retail for therapeutic or prophylactic purposes."
The definition of the word `medicament' has not been given and, therefore, its ordinary dictionary meaning shall be taken into consideration which. Means medicines and drugs. In the absence of any specific definition of the word `medicament or drug' in the Schedule or in the Sales Tax Act or the Rules, one has to determine its meaning by looking to other relevant provisions which provide for ascertaining the meaning of medicines or drugs. In this background the definition given by the Drugs Act will be relevant. The learned counsel for the appellant has relied on the fact that the Dybenal lozenges has been registered as a drug. It falls within the definition of `Drug' and that it is also published, in the National Formulary. These facts have not been denied or controverted and, thus, it seems clear that Dybenal lozenges has been accepted as the drug by the Ministry of Health which is meant for treatment or prevention of disease of the mouth and throat.
6. The department, has mainly relied upon the Customs General Order 8 of 1981 by which the Central Board of. Revenue decided that `menthol sweet drops are not drug' in terms of heading 30.03 of the First Schedule to the Customs Act, 1969, and are, therefore, liable to sales tax. This Circular deals with menthol sweets drops/lozenges and unless Dybenal lozenges are menthol sweets the circular cannot apply. According to the appellants menthol is not used in manufacturing Dybenal lozenges. The ingredients of menthol sweets were mostly confectionary and other menthol and other ingredients were about 1%. On the other hand, Dybenal lozenges contains 2:4 dichlorobenzyle alcohol and amylemeta cresol as active ingredients which completely distinguishes them from sweets drops. The High Court while considering this aspect of the case refused to enter into it as it was a question of fact and was to be determined by the respondent.
The inference drawn from undisputed facts is a mixed question of law and facts. In the present case the department entirely relied upon the ruling of the Board which was in respect of menthol sweets/drops/lozenges which are completely different in their ingredients from Dybenal lozenges its effect and the manner and purpose for which it~is used and prescribed by the doctors.
7. The fact that other government. Department has registered Dybenal as a medicine after duly testing its efficacy lends support to the claim of the appellants and in the absence of any definition of the words `drug' or `medicine' contrary to their dictionary meaning under the Sales Tax Act or the Customs Tariff this fact. Should heavily weigh in favour of the appellants.
8. Mr. . Mansoor Ahmed Khan has referred to the judgment in C.P, NO.D-814 of 1988, M/s The Boots Company Pakistan Limited v. Central Board of Revenue, where strepsils was held to be a drug falling under Heading No.30.03 entitled to exemption from sales tax. The ingredients of strepsils and purpose for which it is used is similar to Dybenal lozenges. No attempt has been made to distinguish the facts of the judgment pronounced in this petition. Where any judgment has been pronounced similar to the case under consideration if it is not being followed it is proper to give reasons for dissenting from it otherwise there would be conflicting judgements which is not favoured.
The learned counsel for the appellant has referred to Aslam Food Industries and others v. Pakistan and others 1985 SCM R 1753. In this case the appellant was importing liquid glucose and drugs and in the past it was classified under heading PCT .17.02. When the department subsequently treated it differently it was challenged. This Court observed as follows:- "It is again to be noted that. Chapter 17 PCT deals with confectionary item, the governing notes exclude altogether pharmaceutical products and what we find in 17.02 as chemically pure glucose is.a confectionary product and not a pharmaceutical product."
Therefore, any good which is a pharmaceutical product, drug or medicine it will not fall under Chapter 17 and cannot be classified under PCT heading No.17.02. As has been observed above considering the ingredients of Dybenal lozenges it has duly been accepted and registered as a drug by the Ministry of Health, Government of Pakistan under the Drugs Act. Drug as defined in section 3(g) of the Drugs Act is wide and covers any matter, material or stuff manufactured and sold for treatment, mitigation, prevention or diagnosis of disease in human beings or animals not prepared according to ayurvedic Unani, homeopathic or biochemistry system of treatment except as prescribed. Any substance mentioned as a preparation in Pakistan National formulary, or Pakistan Pharmacopoeia for treatment, mitigation, prevention or diagnosis of disease is a drug.
Dybenal lozenges fall within this definition which is a 'relevant consideration for deciding the present controversy. It is not manufactured purely with sugar and menthol and is not covered by PCT 17.02. It should therefore fall under PCT heading 30.03.
We allow the appeal and set aside the impugned judgment and declare that the impugned order of respondent No.3 is illegal and without lawful authority and further that Dybenal lozenges is not liable to sales tax.