1964 (12) TMI 4 - HC - Customs

Court corrects classification of Hostacycline injections, rules in favor of plaintiff on refund

The court ruled in favor of the plaintiff, finding the classification of Hostacycline injections under item 28(A) of the Indian Customs Tariff to be ... Writ jurisdiction - Classification of goods Issues Involved:1. Classification of Hostacycline injections under the Indian Customs Tariff (I.C.T.).2. Alleged discrimination in the classification of similar products.3. Jurisdiction of the High Court to review decisions of the Customs Authorities.4. Exhaustion of remedies under the Sea Customs Act.5. Therapeutic value of ascorbic acid in Hostacycline injections.Detailed Analysis:1. Classification of Hostacycline Injections under the Indian Customs Tariff (I.C.T.)The plaintiff company imported Hostacycline (Tetracycline Hydrochloride) injections and paid a duty assessed under item 28(A) of the I.C.T., which levied a 50% ad valorem duty. The plaintiff contended that the correct classification should be under item 28(27) of the I.C.T., which levied a 20% ad valorem duty for antibiotics free from other therapeutic ingredients.The court found that the customs authorities classified Hostacycline injections under item 28(A) solely because of the high ascorbic acid content, which was argued to serve both as a buffering agent and a therapeutic substance. However, the court concluded that the ascorbic acid in Hostacycline injections did not have therapeutic value and was used solely as a buffering agent. Therefore, the classification under item 28(A) was deemed incorrect, and the correct classification should be under item 28(27).2. Alleged Discrimination in the Classification of Similar ProductsThe plaintiff argued that other brands of tetracycline hydrochloride, such as Achromycin and Tetrocyin, were classified under item 28(27) of the I.C.T. and subjected to a 20% duty, while Hostacycline injections were classified under item 28(A) and subjected to a 50% duty. This was seen as discriminatory.The court noted that there was indeed discrimination against the plaintiff's goods when the suit consignments were imported in 1958, as similar products were classified differently. The court found the defendant's plea inconsistent and unconvincing, thereby supporting the plaintiff's claim of discrimination.3. Jurisdiction of the High Court to Review Decisions of the Customs AuthoritiesThe defendant argued that the Sea Customs Act is a complete code providing for redress by the Tribunals referred to therein and that the High Court has no jurisdiction to review the decisions of the Customs Authorities.The court referred to various legal precedents, including Secretary of State for India v. Mask & Co., and concluded that while the Sea Customs Act provides a self-contained code of appeal and revision, the High Court retains the jurisdiction to review decisions for excess of jurisdiction or error of law apparent on the face of the record. The court held that the classification made by the customs authorities was manifestly erroneous and unreasonable, thus asserting its jurisdiction to review the classification.4. Exhaustion of Remedies under the Sea Customs ActThe defendant contended that the suit was premature as the plaintiff had not exhausted all remedies provided under the Sea Customs Act, specifically not filing a revision to the Central Government.The court found that since the appeals were rejected based on the instructions of the Central Board of Revenue, further revision would serve no useful purpose. Citing Venkateswaran v. Wadhwani, the court held that the rule requiring exhaustion of remedies is discretionary and does not bar the High Court's jurisdiction. Thus, the suit was not premature and was maintainable.5. Therapeutic Value of Ascorbic Acid in Hostacycline InjectionsThe primary issue was whether the ascorbic acid in Hostacycline injections had any therapeutic value. The court examined expert testimony and pharmaceutical literature, concluding that ascorbic acid was used solely as a buffering agent and had no therapeutic value in the context of Hostacycline injections.The court noted that the mere presence of an ingredient with potential therapeutic action does not imply it serves that role in a specific preparation. The evidence showed that ascorbic acid was added to ensure the stability and efficacy of the antibiotic, not for its therapeutic properties. Therefore, the classification of Hostacycline injections under item 28(A) was incorrect.Conclusion:The court ruled in favor of the plaintiff, finding that the classification of Hostacycline injections under item 28(A) of the I.C.T. was illegal and that the correct classification should be under item 28(27). The plaintiff was entitled to a refund of the excess duty paid, and the suit was maintainable. The court also asserted its jurisdiction to review the decisions of the Customs Authorities and found the classification by the customs authorities to be manifestly erroneous and discriminatory.