E.S. Da Silva, J.
1. By this common judgment we propose to conveniently dispose of the above mentioned two writ petitions which are raising similar questions of facts and law. In both of them the petitioners are a Company registered under the Indian Companies Act, 1956 and having a small scale unit at Cortalim, Goa, for the manufacture of sanitary pads under Tariff Item No. 68 in the First Schedule to the Central Excise & Salt Act, 1944 (hereinafter referred to as the Act). The pads are used by ladies during the menstruation period to prevent the flow of blood and impurities. They are made of absorbent cotton covered with plastic shield and used hygienically to treat bleeding and prevent infection. Thus according to the petitioners the sanitary pads are covered by the definition of the words 'drugs'.
2. It is their case that for the first time the pads were brought under the net of the Central Excise by virtue of the Finance Bill, 1975. The rate of duty then applicable was of 1% ad valorem and thereafter the same underwent a change from time to time. The petitioners manufactured the sanitary pads and cleared the same on payment of duty at the appropriate rate, in the case of Writ Petition No. 275 of 1987 from 1-3-1975 onwards and in case of Writ Petition No. 12 of 1988 from 2-11-1985 onwards and continued to pay the same on the basis of the rates prevailing from time to time. Thus in the first case of Writ Petition No. 275 of 1987 the petitioners have paid excise duty totalling Rs. 85,29,035.27 for the years 1981-82 to 1986-87 while in respect of the second case in Writ Petition No. 12 of 1988 the total duty paid for the years 1985-86 and 1986-87 was Rs. 4,63,560.62. However, all this duty was paid in good faith without knowing the correct legal position because sanitary pads which were classified under Tariff Item No. 68 were fully exempted under the provisions of Notification No. 55/75--C.E. dated 1-3-1975 subsequently amended by Notification No. 104/82--C.E. dated 28-2-1982 and thereafter by a Notification No. 234/82--C.E., dated 1-11-1982 and as such did not attract any excise duty.
3. It is further their case that sanitary pads are drugs within the meaning of Item No. 19 under Notification No. 55/75--C.E., dated 1-3-1975, as well as of Item No. 21 under the replaced Notification No. 104/82--C.E., dated 28-2-1982, which are identical entries and read as under:
'All drugs, medicines, pharmaceuticals and drug intermediates not elsewhere specified.'
Similarly in the subsequent Notification No. 234/82--C.E., dated 1-11-1982, its corresponding Entry of Item No. 21 refers to 'all bulk drugs and medicines not elsewhere specified' which concept of 'bulk drugs' came to substitute the old concept of drug in the Original Notification No. 55/75--C.E., dated 1-3-1975. Explanation 1 to this Notification, however, gives a wider definition of 'bulk drugs' as meaning any chemical or biological or plant product conforming to pharmacopoeial standards, used in the diagnosis, treatment, mitigation or prevention of diseases in human beings or animals and used as such or as an ingredient in any formulation. Therefore, sanitary pads being drugs excise duty was not exigible at all and hence they were entitled to refund of the entire duty wrongly paid in the aforesaid amounts of Rs. 85,29,035.27 and Rs. 4,63,560.62 respectively.
4. The petitioners in the month of March, 1987, came to know of judgment of the Gujarat High Court delivered in Special Civil Application No. 758 of 1980 in the case of M/s. Sunali Textile Corporation v. Union of India, wherein it has been held that sanitary pads are drugs and as such exempted from paying excise duty under the provisions of the Notification No. 55/75--C.E., dated 1-3-1975 as is specified in Item No. 19. They were then advised that on the basis of a correct interpretation of law consequent upon the decision of the Gujarat High Court, sanitary pads were drugs and not liable to pay excise duty and that therefore the levy, assessment and collection of excise duty by the respondents was illegal and without authority of law. Accordingly refund claims in respect of duty wrongly paid to the respondents were submitted by the petitioners, vide their letters dated 18-4-1987, along with competent applications for refund. Vide their letters dated 24-6-1987 the respondent No. 1 denied the petitioners' claim as inadmissible and thereafter the respondent No. 2, on considering the written submissions filed before him by the petitioners, ultimately rejected the prayer for refund sought for by them vide their impugned orders dated 21-9-1987 (Exh.F in both the petitions).
5. Shri Andhiyarujina, the learned Counsel appearing for the petitioners sought to contend before us that sanitary pads manufactured by their industrial units fall very much within the definition of drugs in section 3(b) under the Drugs & Cosmetics Act, 1940 and in the absence of any provision in the Excise Act to the contrary it was to be accepted that the said pads were 'drugs' within the meaning of the Act. For this purpose he took us first through the definition of 'drug' and 'bulk drug' in section 2 of the Drugs (Price Control) Order, 1987 which is as under:
'2. Definitions : In the order, unless the context otherwise requires.
(a) 'Bulk drug' means any substance including pharmaceutical, chemical, biological of plant product of medicinal gas conforming to pharmacopoeial or other standards accepted under the Drugs and Cosmetics Act, 1940 (23 of 1940), which is used as such, or as an ingredient in any formulation.
(b) .......................................
(c) .......................................
(d) 'Drug' includes,
(i) A medicine for internal or external use of human beings or animals and all substances intended to be used for, or in the diagnosis, treatment, mitigation or prevention of disease in human beings or animals;
(ii) Such substances, intended to affect the structure or any function of the human or animal body or intended to be used for the destruction of vermin or insects which cause disease in human being or animals, as may be specified from time to time by the Government by notification in the official gazette; and
(iii) Bulk drugs and formulations.'
The learned Counsel has also invited our attention to the definition of 'drug' from the Mitra's Legal & Commercial Dictionary at page 207(1975 Edn.) as well as to the Chandigarh Collectorate Trade Notice No. 32 of 1980 under Notification No. 55/75--C.E., dated 11-4-1980, according to which surgical cotton (absorbent cotton wool), gauzes, bandages and other non-medicated surgical dressings are 'drugs' within the meaning of the definition of the 'drugs' given in section 3(b)(1) of the Drugs and Cosmetics Act and submitted that they would be entitled to exemption under the said Notification. He also relied on the letter of Minister of Finance No. 102/26/79--C.X.3, dated 11--3-1980, wherein it has been again reiterated that surgical cotton (Absorbent Cotton Wool), gauzes, bandages and other non-medicated surgical dressings are 'drugs' within the meaning of the definition of the 'drugs' given in section 3(b)(1) of the Drugs and Cosmetics Act and contended that they would be entitled to exemption under Notification No. 55/75--C.E. vide Sl. No. 19 of the said Notification.
6. Reliance was also placed by the learned Counsel on the judgment of the Supreme Court in Chimanlal Jagjivandas Sheth v. State of Maharashtra, : AIR1963SC665 and on two judgments of the Gujarat High Court, being one in Rainbow Surgical Dressing Mfg. Co. v. Union of India and others, 21(2) G.L.R. 632 and the other in Sunali Textile Corporation v. Union of India and others, : 1986ECR26(Gujarat) . In the aforesaid Chimanlal's case the Supreme Court held that the definition of 'drugs' in section 3(b) is comprehensive enough to take in not only medicines but also substances intended to be used for or in the treatment of diseases of human beings or animals. The expression 'substances' must be something other than medicines which are used for treatment. The part of the definition which is material for the present case is 'substances intended to be used for or in the treatment'. The appropriate meaning of the expression 'substances' in the section is 'things'. By this reasoning the Court further held that it could not be disputed and indeed it was not disputed that absorbent cotton wool, roll bandages and gauzes are substances within the meaning of the said expression. The said articles being sterilised or otherwise treated to make them disinfectant were being used for surgical dressing being thus essential materials of treatment in surgical cases. Besides being aseptic these articles had to possess those qualities which are utilised in the treatment of diseases. In the Rainbow's case which has dealt with gauzes and surgical roll bandages as well as in Sunali's case which specifically covers the question as to whether surgical dressings, such as hospitals/maternity/sanitary pads, were drugs or not, the Gujarat High Court also ruled that since the definition of drugs in section 3(b) of the Drugs and Cosmetics Act is comprehensive enough to take in it not only medicines but also substances intended to be used for or in the treatment of diseases in human beings or animals there was no doubt that sanitary pads were 'drugs' for the purpose of the Drugs Act being thus entitled to exemption under Notification No. 55/75--C.E. and that the contention that surgical dressing are not used for curing any ailment of human body and are therefore not drugs was not sustainable.
7. Lastly the learned Counsel referred to various medical books mentioned in the compilation made available to us, namely, Drugs & Cosmetics Act, 1940, Modern Gynaecology with Obstetrics for Nurses, Nursing Techniques, Principles & Practice of Nursing and Current Obstetric & Gynecologic Diagnosis & Treatment to drive home his point that sanitary pads were being used by women not only during menstruation period but also for medical and gynecological purposes.
8. Shri Khandeparkar, the learned Counsel appearing for the respondents, while contesting this proposition and relying on the very averments of the petitioners, in para 2 of their petitions, to the effect that sanitary pads are used by ladies during the menstruation period to prevent the flow of blood or impurities vehemently contended that from the petitioners' own admission the articles in question are basically and primarily used by women to check the flow of bad blood so as to avoid messiness. Therefore a sanitary towel or pad was only a toilet item and could never be classified as a drug. The learned Counsel urged that, for the purpose of classification of any article under the tariff entries, the meaning given is the one which is understood in the common parlance and therefore no scientific or technical meaning is to be adopted. As such an end drug for the purpose of its classification is to be known or considered not for its ingredients but instead by its primary function. Thus, the learned Counsel further submitted, a definition in an enactment cannot be imported in another enactment for the same term unless the object and the purpose of both the enactments are same. In the instant case the object and the purpose of the Drugs Act and the Excise Act being different the definition of 'drug' in the Drugs Act cannot be imported to the Excise Act. In support of this proposition Shri Khandeparkar cited the case of Commissioner of Sales Tax v. Ciba of India Ltd. : 1986(23)ELT343(Bom) , which is dealing with cosmetics and toilet preparations of articles like baby powder, body talc, etc. and for the purpose of Sales Tax Classification the Court held that entries in Schedule to a Sales Tax Law must be generally interpreted in accordance with trade or common parlance of persons dealing in such items and one has to go to the ordinary meaning or the plain grammatical meaning of the two expressions. The learned Counsel contended that by applying that test we have to see that the primary use of sanitary pads by the ladies was for the purpose of cleanliness and to stop the monthly flow of menstrual blood with impurities. Obviously the pads by themselves do not treat any injury and it prevents only messing up. The ultimate use of such pads is not directly to prevent infections although it helps in avoiding the consequence of any infection. However, Shri Khandeparkar obviously seems to have overlooked that in para 10 of their affidavit-in-reply the respondents have clearly admitted that although since times immemorial women have used different pads to check the flow of blood to avoid its messiness and for cosmetic effect. However, with the progress and science, sanitary pads have been introduced so as to prevent infection through use of unhygienic home made pads of rags. It is true that the respondents further qualified their stand by averring that the pads are sanitary not because they prevent any infection but because they are sterilised so as to avoid being carriers of infection to a part of the body easily susceptible to infection. But at the same time in the aforesaid decision the Court observed, following the dictum of the Appellate Tribunal, that, in a given circumstance, the mere application of common parlance test would result in over simplification or produce erroneous results.
9. Another decision relied by the learned Counsel is Union of India and others v. Gujarat Woollen Felt Mills : 1977(1)ELT24(SC) , which is a case concerning wollen fabrics and non-woven felts, manufactured from wollen fabrics in which a question arose as to the interpretation of items in schedule of the Excise Act. In this case the Court held that the well known rule in interpreting items in statutes, like the Central Excise and Salt Act, 1944, is that resort should be had not to the scientific or the technical meaning of such terms but to their popular meaning or the meaning attached to them by those dealing in the trade, that is to say, to their commercial sense. But here also the Court observed that an inquiry regarding the meaning of the term 'woollen fabrics' as commercially understood would be relevant only when there is doubt as to the sense in which the term has been used in the corresponding entry. In the instant case we have seen that Explanation 1 to the Notification No. 234/82--C.E., dated 1-11-1982, gives us the exact definition of 'bulk drugs' which has replaced the original concept of drugs and hence the aforesaid ruling seems to be not applicable or relevant to our case.
10. In the case of M/s. Sarin Chemical Laboratory v. Commissioner of Sales Tax, U.P. : [1971]1SCR731 , which is dealing with the question as to whether tooth powder was a toilet item and liable to be taxed under section 3(A) of the U.P. Sales Tax Act read with Entry 6, the Court observed that the names of articles, the sales and purchases of which are liable to be taxed given in a statute, unless defined in the statute, must be construed not in a technical sense but as understood in common parlance. As such since in common parlance tooth powder is considered as a toilet and that meaning accords with the dictionary meaning as well the Court ruled that tooth powder was a toilet. Obviously on facts our cases are different and therefore the ratio of this decision does not appear also to be attracted in the instant cases.
11. In another case of Stamac Products, Calcutta v. Collector of Central Excise, Calcutta , involving the question as to whether 'Marylon Medicated Shampoo' which purportedly possessed some medicinal properties, as claimed by the petitioners, was classifiable under Item No. 14F(ii)(c) of the Central Excise Tariff and not as a patent or proprietary medicine under the Central Excise Tariff Item 14E, the Court opined that, although its ingredients may possess some remedial properties, still the same was used as a shampoo for the protection of hair. Thus both in common parlance and as per the showings of the petitioners the product was used as a shampoo and was also known as shampoo. As such it was classifiable under Item 14F(ii)(c) which is a specific entry for the product shampoo and could not be classified as a patent or proprietary medicine under Item 14E of the Central Excise Tariff. The Court then observed that the correct principle of the interpretation of the items or entries occuring in the Central Excise Tariff would be to construe them not in the manner in which it is understood in technical sense or in scientific laboratories, but in the sense in which the people dealing in or commercially conversant with the items would attribute to them. Therefore, the meaning suggested by technical and scientific tests can never be preferred to the meaning gathered from the common parlance of the people in trade and commerce conversant with the subject. However, this decision apart from having been given on facts being thus distinguishable is certainly not attracted to the case in question wherein the product of sanitary pads has been purportedly assigned an effective and actual medicative used not only to check the flow of impure blood during the menstruation of women but also in connection with gynecological purposes in surgery.
12. Shri Khandeparkar further submitted that even when interpreting the common parlance what was really important was the primary function of the product and this feature should have been accorded as the deciding factor while classifying the item and merely because the product could be utilised for other incidental functions or uses this fact was not expected to change the classification. In the case of M/s. Annapurna Carbon Industries Co. v. State of Andhra Pradesh : [1976]3SCR561 , in which the controversy was as to whether Arc Carbons known as 'Cinema Arc Carbons' were covered by Entry No. 4 and their sales were liable to Sales Tax under the A.P. General Sales Tax Act, the Court observed that the deciding factor is the predominant or ordinary purpose or use. It is not enough to show that the article can be put to other uses also and it is its general or predominant user which determines the category in which an article will fall. However, in our view this authority is not going to help the case of the respondents or take it any further. In fact, the question of primary or predominant purpose or use of the item does not even seem to arise at all in the present case. On the contrary the decision appears to substantially favour the petitioners' contention that the sanitary towels are drugs because its primary and predominant use is meant for women not only for the purpose of preventing the flow of blood and impurities during menstruation but also for surgical purposes as dressing in gynecological interventions thus acting as a sterilised pad or prophylactic nature used to help in maintaining proper asepsis in or around the region of the vagina. It is certainly not the petitioners' case in this respect that the pads are used as bandages or dressing for healing wounds or injuries and its specific purpose has been abundantly sought to be made out on the aspect of preventing the occurrence of infections on the sensitive region of the woman's vagina. Sanitary pads are thus essentially items used for the purpose of prophylactic which in other words means preventive treatment or precautionary medicine.
13. The learned Counsel cited also the case of M/s. Atul Glass Industries (Pvt.) Ltd. v. Collector of Central Excise : 1986(25)ELT473(SC) , to further strengthen his point that when a particular expression is not defined in a statute, common parlance and dominant use is to be considered for the purpose of classification. It was then urged that taxation is based on the common man's understanding of an item with regard to its classification. This was a case wherein the point to be decided was as to whether 'glass mirrors' could be classified as 'other glass and glassware' set forth in Tariff Item No. 23A(4) under the Schedule I of the Central Excise and Salt Act, 1944 or whether they fall under the residuary Tariff Item No. 68. In para 3 of the judgment, the Court described in fairly broad detail the process through which a glass sheet passes and the mechanism which the same undergoes for its total transformation so as to emerge as a glass mirror. It was specifically stressed that the evolved product was completely different from the original glass sheet and what was once a glass piece in its basic character has no longer remained so. It has been reduced to a mere medium. That was clear if regard was had to the fundamental functions and qualities of a glass mirror. The power to reflect an image is a power derived not from the glass piece but principally from the silvering and other processes applied to the glass medium. However the Court also observed that it is a matter of common experience that the identity of an article is associated with its primary function. When a consumer buys an article he buys it because it performs a specific function for him. There is a mental association in the mind of the consumer between the article and the need it supplies in his life. It is the functional character of the article which identifies it in his mind. In the case of a glass mirror, the consumer recalls primarily the reflective function of the article more than anything else. It is a mirror, an article which reflects images. It is referred to as a glass mirror only because the word glass is descriptive of the mirror in that glass has been used as a medium for manufacturing the mirror. The basic or fundamental character of the article lies in its being a mirror. It is therefore this test of functional character which exactly differentiates this case from ours and clearly supports the petitioners' proposition. Hence the authority cited is again not to be applied once sanitary pads are used not only at the time of woman's menstruation, but also for medical or gynecological purposes.
14. In support of his further contention that a similar definition cannot be imported from another enactment unless the object and purpose of both the enactments are the same, Shri Khandeparkar relied on the case of Gwalior Rayons Silk Mfg. (Wvg.) Co. Ltd. v. Custodian of Vested Forests, Palghat and another : [1990]2SCR401 , which has propounded the view that the judicial interpretation given to the words defined in a statute does not afford a guide to construction of the same words in another statute unless these statutes are pari materia legislations. This was a case concerning two enactments, being one Kerala Private Forest (Vesting and Assignment) Act (1971) and the other the Kerala Law Reforms Act, 1964 and the question which arose was regarding the meaning of the words 'private forest'. The land involved were all forests as defined in Madras Preservation of Private Forests Act, 1949. The Court then held that transplanting the meaning accorded to 'private forest' from Kerala Law Reforms Act to Kerala Vesting Act was not proper. In its observations the Court emphasised that not only the aim and the object of the two legislations were not similar in the first place but also that the definition of 'private forest' in the K.L.R. Act was not just the same as the definition of 'private forest' in the Vesting Act and indeed there was a vast difference in between the two. Therefore we can easily see that this is not a ruling which is going to drive the respondents' case to the point since in that ruling the terms was well defined being thus very much distinguishable on facts. It is true that in the case of Subhash Chandarnishat v. Union of India and another, 1979 E.L.T. 212, which was also cited by the respondents' Counsel the view taken by the Court was that it is an undisputed principle of construction that an entry in a legislative enactment has to be construed in the widest possible manner and the same principles of construction cannot be applied to the construction of entries in an excise tariff which have to be interpreted in their own context. But these observations came also in a totally different context and were mainly referred to the interpretation of legislative items or entries so as to assess its exact meaning and connotation rather than to mere words or expressions used in the said statutes. This was a case in respect of Vasmol Emulsified Hair Oil and Pomade and the question was as to whether these products manufactured by the petitioners were to be classified as cosmetics and toilet preparations. The Court held on facts that since the advertisements and literature submitted by the petitioners clearly showed that emphasis has been given by the petitioners to hair darkening qualities of the Vasmol products and not to the other qualities similar to those of an ordinary hair dressing, therefore, they will not be covered by the expression 'Cosmetics and Toilet Preparations' falling under Item 14F of the Central Excise Tariff and that the contention that the petitioner had declared the Vasmol Products as hair lotions before the Sales Tax authorities will not change the position as the petitioner had throughout contended before the Central Excise authorities that the aforesaid Vasmol Products were not hair lotions or hair pomades covered by Item 14F of the Central Excise Tariff. With this regard very pertinent are the observations made by the Court to the effect that the concerned authority did not apply his mind to the relevant pieces of evidence showing as to how these products were understood in trade or commercial parlance and that instead of giving due weight to this material in the form of affidavits and considering their effect the authority has chosen to place undue reliance on the chemical composition of the said products and to some extent on the advertisements which have been also misconstrued by him. It was not a case where on the material before him two views were possible or reasonably opened to him and he had chosen to adopt one of them. The evidence available before him clearly showed that the aforesaid products could not be fairly regarded as 'hair dressing' or 'hair pomade' at all. The Court then posed a question somewhat similar to the question posed by the Exchequer Court of Canada in The King v. Planters Nut and Chocolate Co. Ltd., 1951 CLR 122, and which is thus :
'Supposing a householder who did not to darken his hair were to ask his son to go to the provision store and get a bottle of hair Pomade or hair dressing, would he expect his son to come back with Vasmol Emulsified Hair Oil or Vasmol Pomade. The answer to that question, in my opinion, would be clearly in the negative on the evidence on record.'
Therefore, it is obvious that on facts this case is no doubt clearly distinguishable from the petitioners' case and as such also not attracted.
15. Again in the case of Shree Baidyanath Ayurved Bhawan Ltd. Patna and another v. Collector of Central Excise, Patna and another, 1985 (22) E.L.T. 844 (Tri), which has dealt with the question as to whether Dant Manjans (Lal, Black or White), was to be classified or not as Ayurvedic medicine or drug, are as a toilet requisite under Item 68 of the Central Excise Tariff being thus not entitled to exemption under Notification No. 55/75--C.E., it was held that Drugs and Cosmetics Act, 1940 or Central Excise Tariff is a distinct and separate Act enacted by Parliament and no provision of it has been incorporated or referred to in the Central Excise and Salt Act, 1944 or Central Excise Tariff which is also a separate enactment. Hence, definitions given in the former cannot be made use of for the purpose of defining the same terms in the latter enactment. It appears, however, that this whole judgment went on the wrong assumption, otherwise enunciated in para 72 wherein it was observed that a 'medicine'/ drug' as known in common parlance is a substance or preparation used in the treatment of diseases and must have a curative power so as to make it effective for treatment of ailments. Therefore and apart from the fact that it concerns only with the meaning of Ayurvedic medicine the above mentioned ruling does not touch the real controversy in the cases under question wherein the petitioners are not contending that sanitary pads are used for treatment of diseases or having any curative or healing effect but instead are specific and sterilised outfits meant to prevent infection and to be used by ladies not only during menstruation period but also for gynecological purposes including as surgical dressing.
16. It was further urged by Shri Khandeparkar that the reliance placed by the petitioners on Chimanlal's case : AIR1963SC665 , is unfounded and irrelevant so much so the same is based entirely on the provisions of the Drugs and Cosmetics Act (hereinafter called the Drugs Act) while in the instant cases we are trying to find a proper definition to the term 'drug' within the meaning and purview of the Excise Act. Therefore, it is not permissible in this context to import to this enactment any definition related to this term which may be found under any other provision of the Drugs Act. The learned Counsel submitted that on facts also the decision was inapplicable since this was not a judgment in rem and instead it was dealing with a case of substandard goods (gauze, bandages, etc.) which were incidental but somehow connected with medical activities, namely, with the treatment of diseases. Attempt was made by the learned Counsel to impress upon us that whatever entries are available in the Excise Act they are mainly for the purpose of classification of items in order to achieve its ultimate aim of levying tax. They are certainly not so arranged as to extend any benefit to the assessees and in this context it is not appropriate that whatever definition of drugs are adopted in the aforesaid judgment related to the Drugs Act should be used to define the concept of 'drug' under the provisions of the Excise Act. In the instant cases the petitioners are seeking to obtain benefits under the exemption Notifications and hence the burden of proving that the item falls within its clauses lies on the petitioners rather than on the Department.
17. In this respect we were told by the learned Counsel that it was necessary in given circumstances to look at the petitions and to the grounds in respect whereof the tax benefits were sought to be obtained by the petitioners. The learned Counsel contended that it seems clear that the sole ground for the refund claimed are the judgments of the Gujarat High Court and that no other grounds were even placed before the assessing authority. With regard to these judgments, namely, the judgment in Sunali'[s case, the learned Counsel again contended that the decision based by the Gujarat High Court is a judgment on admission which does not lay down any law while in Rainbow's case the subject matter of the decision was particularly gauze and surgical roll bandages which are articles quite different from sanitary pads. The learned Counsel further contended that all the judgments relied upon by the petitioners and also the Trade Notice No. 32 of 1980 are entirely based on the Drugs Act and thus the aforesaid judgments could not have any binding effect in the instant cases and at the most it might bear some persuasive value only.
18. We are however afraid that it is not possible for us to accept this proposition of Shri Khandeparkar. We say so because inspite of our inquiries the learned Counsel was unable to point out to us what were the distinguishing features of these judgments so as to even doubt about its persuasive impact on the petitioners' case. The argument advanced by the learned Counsel with regard to the fact that all the aforesaid judgments and the Trade Notice as well were passed considering the provisions of the Drugs Act alone would be relevant only if there was any definition of 'drug' in the Excise Act itself, being a fact that the resort to common parlance does not necessarily exclude that the meaning of an expression may also accord with its definition contained in the Drugs Act. On the other hand, it is a settled law that the instructions contained in the Trade Notices regarding classification of a product are always binding on the Department and that the Department should be estopped from contending to the contrary. If any authorities are required for this purpose, the decisions in the cases of Guest Keen Williams Ltd. v. Union of India and others, 1980 E.L.T. 6 and Star Chemicals (Bombay) Ltd. v. Union of India and others, 1980 E.L.T. 133, are very much available to the point.
19. Further, the contention of Shri Khandeparkar that the petitioners' cases do not squarely fall within the four corners of the Supreme Court judgment in Chimanlal's case does not appear also to be well founded. The circumstance of the judgment having been delivered under the provisions of the Drugs Act, which is aimed at ensuring the maintenance of the required standards of quality in the manufacture of drugs and medicines, does not rule out that substances or things of the same type and nature of the ones referred to in the decision and which admittedly include absorbent cotton wool, roll bandages and gauze, should also be brought under the definition of 'drugs' within the meaning attributed to this word in the Act. The very fact that the ruling held it appropriate to classify such substances or things as 'drugs' for the purpose of making its manufacturers liable to criminal prosecution on account of its spurious and standard quality unmistakably suggests that this was the common and general understanding of these substances by the public at large about its very nature and utility.
20. Again the criticism of the learned Counsel in respect of Sunali's case to the effect that this decision was passed on admission is also misconceived inasmuch as it is clear from the aforesaid ruling that if any admission was relied by the Court this was only in Rainbow's judgment, being a fact that Sunali's judgment is expressly based not only on the conclusions arrived at by the Gujarat High Court in the earlier case of Rainbow, but also on the decision of the Supreme Court in Chimanlal's case as well as on the letter of the Ministry of Finance (Trade Notice) while ultimately ruling that for the above reasons the test of common parlance was not to be attracted in this case.
21. Similarly the submission that an important aspect which this judgment has not considered was that while interpreting the meaning of term in the Excise Act or in the Notification thereunder the same was not understood as per its common parlance and also that the same judgment proceeded mainly on the basis of the definition of drugs in the Drugs Act, the reason why, the decision is contrary to the normal rules of interpretation of a statute being also distinguishable on facts has been already met with while considering identical challenges raised by the respondents against the petitioners' claims both in respect of doctrine of common parlance in the trade as well as on the theory of primary function of a product and its dominant use or purpose as a deciding factor in the classification of an Item in the entries of the excise tariff. In the instant case since, according to the petitioners and the evidence available, sanitary pads are utilised by women not only to check the flow of blood and impurities during the period of menstruation but also for gynecological purposes in surgery, this should be construed also as its primary use or dominant function at the time of a correct classification of the product under the relevant tariff entries in the Act.
22. Therefore, as a result of the cumulative effect of the above mentioned exemption Notifications, the binding nature of the instructions contained in the Trade Notices issued by the Department in respect of the definition of the term 'drug' and scope of its applicability, the ruling of the Supreme Court in Chimanlal's case as well as the judgments of the Gujarat High Court in Rainbow and Sunali's case, the persuasive impact of the expert's opinion on the ultimate utility of sanitary pads which does not seem to be at all inconsistent with the broad connotation given to its meaning as per the common parlance and lastly the very admission of the respondents in their affidavit-in-reply that the product is used also to prevent infections we are of the view that sanitary pads are to be classified as 'drugs' within the definition in section 3(b) of the Drugs Act and the meaning of Item 19 under Notification No. 55/75--C.E., dated 1-3-1975, subsequently replaced by Notification No. 104 of 1982 and 234 of 1982 dated 28-2-1982 and 1-11-1982 respectively.
23. The next submission of Shri Khandeparkar is regarding the point of Limitation. According to the learned Counsel the authorities under the Act are tied by the limits of time provided by the statute and therefore bound by the periods of limitation referred to in section 11(b) of the Act. Hence there is no question of any extension of the period prescribed thereunder while disposing of the petitioners' application for refund of the duty alleged to have been unduly paid. Reliance was placed in this regard on the case of Collector of C.E., Chandigarh v. Doaba Co-operative Sugar Mills, : 1988(37)ELT478(SC) , wherein the Supreme Court held that when the duty has been levied without the authority of law or without reference to any statutory authority or to the specific provisions of the Act and the Rules framed thereunder have no application, the decision will be guided by the general law and the date of limitation would be the starting point when the mistake or the error comes to light. But, in making claims for refund before the departmental authority, an assessee is bound within the four corners of the statute and the period of limitation prescribed in the Central Excise Act and the Rules framed thereunder must be adhered to. The authorities functioning under the Act are bound by the provisions of the Act. If the proceedings are taken under the Act by the Department, the provisions of limitation prescribed in the Act will prevail. Thus the maximum period available to the petitioners to claim refund, if any, in terms of the residuary provisions of Article 137 of the Limitation Act, would be three years prior to the date of the delivery of the judgment by the Gujarat High Court in Sunali's case which, as per the petitioners say, is the date when the error of law under which they have purportedly done the payment of duty came to be known to them.
24. Shri Andhiyarujina, however, whilst strongly refuting these submissions of the respondents' learned Counsel, has contended that in terms of section 11(b) of the Act read with Rule 11 the petitioners claim for refund was made vide application dated 18-4-1987 i.e. within a month after they received a copy of the judgment delivered by the Gujarat High Court in Sunali's case at which time only the mistake of law became apparent to them.
25. In case of State of Madhya Pradesh v. Bhailal Bhai & others : [1964]6SCR261 , cited by the learned Counsel, the Court upheld the contention of the petitioners' Counsel that the provisions of the Limitation Act do not apply to the granting of relief under Article 226 and as such even assuming that the remedy of recovery by action in a Civil Court stood barred that would be no reason to refuse relief under Article 226 of the Constitution. But at the same time the Court cautioned that since the maximum period fixed by the legislature as the time within which the relief by suit in a Civil Court must be brought may ordinarily be taken to be a reasonable standard by which delay in seeking remedy under Article 226 can be measured. The Court may consider the delay unreasonable even if it is less than the period of limitation prescribed for a civil action for the remedy but where the delay is more than this period, it will always be proper for the Court to hold that it is unreasonable.
26. In the case of D. Cawasji and Co. and others v. State of Mysore and another, 1978 E.L.T. 154, it was observed that when the question of refund of tax paid under the mistake of law arises there is no limitation to operate prior to the period of three years from the date the mistake was realised. The Court observed in this regard that the period of limitation prescribed for recovery of money paid under a mistake of law is three years from the date when the mistake is known, be it 100 years after the date of payment and this is a reasonable standard by which delay in seeking remedy under Article 226 can be measured. The Court further observed that for filing a writ petition to recover the money paid under the mistake of law, in cases where the particular law has been declared invalid, the starting point of limitation of three years will be the date on which such judgment was rendered.
27. Similarly in the case of Associated Bearing Company Ltd. v. Union of India and another, 1980 E.L.T. 415, while dealing with the question of refund of excise duty illegally collected and the scope of Rule 11, a Division Bench of this Court held that once the recovery of excise duty by the Department was found to be illegal the provisions of Rule 11 would not be attracted and a claim for such refund could be entertained within three years from the date when the mistake of law was discovered.
28. The learned Counsel urged that collection of excise duty without authority of law was by itself a nullity and hence there was no question of limitation period arising in that case. In the case of Arphi Incorporated, Bombay v. The Union of India & others, 1988 (14) E.C.R. 80, a Single Judge of this Court ruled that bar of Limitation was not to apply to refund claims for taxes paid in ignorance without the authority of Law. He further submitted that duty paid under mistake of law is duty recovered without authority of Law. The limitation does not start till mistake is discovered and Rule 11 cannot stand on the way of refund if duty collected is illegal.
29. There is no doubt considerable substance in these submissions of the learned Counsel for the petitioners. In the case of BTX Chemicals Pvt. Ltd. v. Collector of C. Ex. : 1989(41)ELT377(Bom) , another Single Judge of this Court again held, by relying on the decision in Kay Foam Ltd. v. Union of India : 1988(34)ELT449(Bom) , that it is now well settled that the duty recovered without any authority of law cannot be retained by the authority and the provision for filing application within period of six months from payment of duty has no application to such a case. It is open for the tax payer to demand back duty which was recovered without authority of law at any stage. In this view of the matter, we are inclined to accept that the bar of limitation cannot be a hurdle on the way of the petitioners' claim for refund in the present writ petitions. The respondents having been paid the duty under a mistake of law they are therefore liable to refund the same under the provisions of section 72 of the Indian Contract Act. Section 17(c) of the Limitation Act provides that where in the case of any suit or application for which a period of limitation is prescribed by this Act, the suit or application is for relief from the consequences of a mistake, the period of limitation shall not begin to run until the applicant has discovered the mistake or could, with reasonable diligence, have discovered it.
30. This position was further reiterated in a subsequent decision of the Full Bench of this Court in the decision of New India Industries Ltd. v. Union of India, 1990 (46) E.L.T. 23 (Bom.): 1990 (1) Bom.C.R. 515 , which has ruled that duty recovered without authority of law is duty paid under mistake of law within the meaning of section 72 of the Indian Contract Act. We therefore hold that in view of the facts and circumstances of this case and since admittedly the petitioners preferred their claims for refund hardly within a month or so from the time they became aware of the judgment of the Gujarat High Court their claims are well within the prescribed period of limitation, if any, and that no such ground is any more available to the respondents.
31. It was lastly contended by Shri Andhiyarujina that the respondents should not be also allowed to raise the ground of unjust enrichment in order to oppose the refund claims sought to be enforced by the petitioners against them. In this respect it was urged by the learned Counsel that in their affidavit-in-reply the respondents have averred that in any event the petitioners are not entitled to refund because they have collected the duty from their clients and thus they have not paid from their pockets as they have been reimbursed by the consumers. In other words it is the respondents' plea that the petitioners have already collected the duty from their customers and if they succeed in these petitions they will unjust and unduly pocket it in their favour. It is however seen that apart from this statement made by the respondents in the affidavit there is nothing, either in the order dated 24-6-1987 from the respondent No. 1 in the order dated 21-9-1987 from the respondent No. 2, to suggest that such ground was ever invoked by them to deny to the petitioners the refund claimed under the relevant exemption Notifications.
32. In the above mentioned case of BTX Chemicals Pvt. Ltd. v. Collector of C. Ex., : 1989(41)ELT377(Bom) , it has been observed by this Court that duty paid under mistake of law is recoverable under section 72 of the Contract Act and that having regard to the fact that the petitioners had paid the duty on account of their ignorance of the exemption notifications it would be reasonable to infer that they have passed on the burden of levy upon their customers. But the learned Single Judge abstained to give any finding on the issue regarding the entitlement of refund in view of the fact that the objection with respect to unjust enrichment had been at that time referred to the Full Bench in Writ Petition No. 1336 of 1987. In an earlier case of Associated Bearing Company Ltd. v. Union of India and another, 1980 E.L.T. 415, a Division Bench of this Court had already ruled that there is no provision in the Central Excise Law under which a manufacturer could be denied the refund of duty illegally collected from him even though he recovered it from the customers and had no intention to refund it to them. However, in the aforesaid case of New India Industries Ltd. v. Union of India, W.P. No. 1336 of 1987; 1990(46) E.L.T. 23, the Full Bench of this Court not only reiterated the previous stand taken by the various courts throughout that duty recovered without authority of law was duty paid under mistake of law and as such the Government was liable to refund such duty under section 72 of the Indian Contract Act which is based on equitable principles but also held that duty paid under mistake of law was liable to be refunded even if such duty had already been recovered by the manufacturer from the customers. The Court however propounded that a suitable procedure for refund welfare fund could be created to avoid unjust enrichment by observing that the conduct of the petitioner who seeks refund in a writ petition is certainly relevant. However, regardless of the conduct of the petitioners themselves and of the fact whether they had already reimbursed themselves, the Writ Court was not bound to order refund whenever tax or duty had been collected from the petitioners without the authority of law. The Court has a large measure of discretion to select the appropriate relief. It would equally be abhorrent to principles of justice to hold that the State which has unjustly enrich itself by collecting tax without authority of law ought to be permitted to retain money unjustly gained by merely alleging that the petitioner had passed on the burden of tax to others. The Court also further observed that there is no real contradiction between the two concepts, viz. 1) the State is bound to refund amounts collected without authority of law and 2) the jurisdiction under Article 226 is discretionary and equitable in nature. Thus when tax has been collected without authority of law, the State is bound to refund the same. Ordinarily, the tax illegally collected ought to be returned to the person from whom it had been collected. The concept of unjust enrichment is, however, not altogether irrelevant in the matter of granting refund of tax which has been collected without authority of law. The legal obligation of the manufacturer to pay the said duty is irrespective of the fact whether or not he is able to ultimately shift the tax burden to his wholesale buyers or others. The liability of the manufacturer to pay excise duty may subsist even after the goods have passed out of his hands. But excise duty being an indirect tax, the manufacturer may add the duty to his wholesale cash price and pass on the tax burden to others. When the persons who had borne the ultimate burden from a small class, it would not be difficult to identify them and to pass appropriate order of refund in their favour. But when tax had illegally been imposed on a product of mass consumption and the persons to whom the tax burden has been shifted are too numerous to be identified or giving direct repayment orders, the Writ Court may mould the consequential relief in some other appropriate manner. According to the facts and circumstances of each case, the Writ Court would decide whether it is the State or the assessee or any third agency who ought to be entrusted with the duty of extending the benefit of tax refund to those who had ultimately borne the burden.
33. The view taken by the Full Bench has been, otherwise, consistently followed by a series of decisions of this Court. In the case of Industrial Plastic Corporation Pvt. Ltd. v. Union of India, : 1992(57)ELT390(Bom) , a Division Bench of this Court observed that the Court ought not to presume that the burden of tax has been passed to the consumers and upon that assumption reject the consequential prayer for refund. It is for the Department to raise such a plea on affidavit and Court should decide the question according to the facts and circumstances of the case. The Court is required to satisfy itself that the tax burden has been shifted to the consumers and the order of refund would result in securing unjust enrichment. The Court particularly took note that in that case the affidavit on behalf of the Department there was no averment that the burden was in fact shifted to the consumers save and except claiming that the excise duty is invariably passed on to the customers. The Court then cautioned that it was not the averment which was sufficient to examine the claim of unjust enrichment by Writ Court in absence of any date produced by the Department and therefore it was not possible to examine the claim of unjust enrichment, even assuming that such plea was permissible. The same Division Bench in another case of Rotogravures v. Union of India, : 1992ECR173(Bombay) , reaffirmed the earlier stand and held that the doctrine of unjust enrichment was not invokable to deny refund when affidavit was not filed by the Department to establish that the burden of duty had been passed to the customers. It is pertinent to note that consistent with the previous decision the Court expressly mentioned the need of filing of the affidavit to establish that the petitioners did actually pass the burden of duty to the customers. This cannot certainly be done by the Department by mere filing of an affidavit wherein a vague averment was made that the duty paid by the assessee was passed on by the manufacturer to the public to be recovered from the customers. As it was stressed in the earlier decision of the Division Bench in the case of Industrial Plastic Corporation it is not the averment which is sufficient to examine the claim of unjust enrichment by Writ Court in absence of any date produced by Department . The Court is required to satisfy itself that the tax burden has been actually shifted to the consumers and the order of refund would result in securing unjust enrichment.
34. Having regard to this settled position in law it is Shri Andhiyarujina's strong plea that if there is no averment or positive facts on record supported by figures and statistics to substantiate the claim of undue enrichment the issue cannot be determined by a Writ Court and the Writ Court should also not use its discretion to go into the question of unjust enrichment in the absence of sufficient material or data.
35. In our view these submissions are correct and deserve acceptance. The question of undue enrichment is to be decided on the facts and circumstances of each case. However, the burden of proving such undue enrichment lies always on the party which makes such plea, that is to says the concerned Department. There is no occasion for any shifting of this burden cast upon the Excise Authorities before whom the petitioners raised their claims for refund. We have to see that in the instant cases at no lower stage, either at the level of the Superintendent or of Assistant Collector, both these authorities had applied their minds to the question that such plea should not be raised in a mere affidavit-of-reply totally unsupported by any data and/or admissible evidence. On the other hand, there is also no presumption in law that the manufacturers have passed on the consumers any duty eventually paid or have recovered from them the amounts disbursed to the Government towards tax.
36. In their affidavit-in-rejoinder the petitioners have expressly averred that in view of the law laid down by the judgments of this Court in BTX Chemicals and Rotogravures the doctrine of unjust enrichment is not available to the respondents if proper facts are not brought out either in the orders of the Excise Department or in the affidavit-in-reply. They have further stated that although the goods manufactured by their S.S.I. Units were fully exempted from payment of excise duty on account of the exemptions granted to the Units under the Notifications No. 55 of 1975 as amended, No. 234 of 1982 as amended and No. 175 of 1986 as amended, however, duty was paid at their own cost. It is true that the respondents failed to state that although such duty was paid by them at their own cost on the manufactured goods, the same was not subsequently recovered from the consumers, but the fact remains that as a result of non existence of any presumption to the contrary there was no need for the petitioners to expressly make such statement on oath even after the respondents having pleaded in their affidavit-in-reply that the petitioners had not paid duty from their pockets as they have been reimbursed by the consumers. It was for the respondents to show and prove with facts and figures the actual recovery of the duty paid from their clients.
37. Shri Khandeparkar's contention that the plea raised by the respondents on the question of unjust enrichment was not made to justify the impugned order but only in answer to the claims made by the petitioners and that this specific plea having been taken on oath the failure of the petitioners to deny the facts averred by the respondents by itself amount to ample proof of the very occurrence of unjust enrichment in this case and as such no further proof is required in not at all convincing nor legally permissible. The submission is therefore to be recorded only to be rejected because it goes against the settled principle of law regarding the shifting of the burden of proof and the absence of any legal presumption against the petitioners about the recovery of the duty paid from the consumers. Therefore, the argument sought to be made by the respondents' learned Counsel that in view of their positive statement in the affidavit-in-reply about the actual collection of duty paid from the customers the fact that the petitioners missed the occasion to specifically contradict such statement by filing any affidavit from their auditor or accountant to say that no duty was actually collected or reimbursed from their clients, legal consequences drawn from Order 19 of C.P.C. should follow and the ratio of the decision in the case of Subhash Chandarnishat v. Union of India and another, 1979 E.L.T. 212 about the validity of evidence by affidavits becomes also applicable, is again, according to our opinion, of no consequence and devoid of any merit. In our judgment we are firm and definite that a mere or vague affidavit containing unsubstantiated pleas need not be materially displaced or specifically contradicted and that no unfavourable presumption operates against the petitioners in the facts and circumstances of the case with regard to their eventual recovery of duty actually paid to the Government from their customers or the public in general. Hence the question of unjust enrichment seems to be not attracted in the instant cases and as such there is no scope for the petitioners to refute any vague or general averments which the respondents might have made in their affidavit-in-reply with regard to their purported plea of unjust enrichment.
38. Shri Khandeparkar has produced before us the outer printed packaging material meant to be used as wrappings for the sanitary pads made saleable to the public consumers which purportedly display the words 'retail price including all taxes'. The learned Counsel submits that in view of this label no further proof is required to show that while marketing their product the petitioners have passed on to the consumers the tax paid by adding it to its price. However, it is again difficult to accept this display of labels in the coverings of the sanitary pads packs, admittedly manufactured by the petitioners from the year 1990 onwards, as an indicative of any effective discharge on the part of the respondents of the burden of proof cast upon them to establish their plea of actual recovery by the petitioners of the duty paid from their customers. In the absence of any positive material made available by the respondents along with their plea it is not permissible for the Writ Court to even entertain such challenge opposed by the respondents to the petitioners' claim for refund of the duty unduly collected by the Department without any authority of law. This also answers the issue raised by Shri Khandeparkar by placing reliance on the ratio of the Supreme Court ruling in the case of M/s. Amar Nath Om Prakash and others v. State of Punjab and others, : [1985]2SCR72 , also cited by the learned Counsel, wherein the Court held on the question of refund of excessive or illegal taxation indulged by the Government under the provisions of the Punjab Agricultural Produce Markets Act, 1961, that if burden of excess market fee levied under the Act was passed by dealers on the next purchaser i.e. consumer-public, the dealers are not entitled to claim refund of the excess amount. We therefore hold that in the facts and circumstances of the case the respondents' plea of unjust enrichment fails and is thus bound to be rejected.
39. The petitioners' learned Counsel has fairly conceded that in the case of Writ Petition No. 275 of 1987 in view of the prevalent position in law from March, 1986 onwards, consequent upon the new amendment they are partly giving up their claim for Rs. 12,89,968.00 corresponding to the period from March, 1986 to March, 1987 and as such the real claim, out of the total amount of Rs. 85,20,035.37 initially pleaded becomes reduced to Rs. 72,39,000/- only. We take note of this submission and grant leave to the petitioners to amend their prayer accordingly.
40. In the result with the above submissions, we allow the petitioners' claims and subject to the modified prayer in Writ Petition No. 275 of 1987 make the rule absolute in both the petitions with no order as to costs.