JUDGMENT
[ENTITY].J.
1. While exercising power under [SECTION], the Central government can specify conditions subject to which the exemption will be available in respect of excisable goods. It reads as follows :
"The Central Government may from time to time, by notification in the Official Gazette, exempt subject to such conditions as may be specified in the notification any excisable goods from the whole or any part of duty leviable on such goods."
[SECTION] is not relevant for the purpose of the present case.
Under [SECTION], the Central Government issued on 1st April, 1977 the following notification."
"G.S.R. 183 (E). - In exercise of the powers conferred by [SECTION] of the [ACT], and in supersession of the notification of the Government of India, Ministry of Finance (Department of Revenue), No. 105/61 Central Exercise, dated the 20th April, 1961, the Central Government hereby exempts clinical samples cleared by a manufacturer of patent or proprietary medicine, being medicines falling under Item No. 14E of the First Schedule to the [ACT], from the whole of the duty of excise leviable thereon :
Provided that -
(i) such clearances in any month are limited to a quantity not exceeding four per cent by value of the total duty-paid clearances during the preceding month of all types of patent or proprietary medicines,
(ii) samples are intended for free supply to the hospitals, nursing homes or medical practitioners, and
(iii) the samples are packet in a form distinctly different from regular trade packing and each smallest packing is clearly and conspicuously marked `physician's samples, not to be sold':
Provided further that in respect of a patent or proprietary medicine aforesaid, the exemption under this notification will be available only for a period of three years from the date of first clearance of the said medicine from any factory of a manufacturer.
Explanation. - In this notification, "manufacturer" means -
(a) where it is a company within the meaning of the [ACT], a company -
(i) which does not hold any share in the capital of any foreign company, and
(ii) not part of the capital of which is held by a foreigner or a foreign company;
(b) where it is a firm -
(i) the firm has no interest in any foreign firm; and
(ii) no interest in the firm is held by a foreigner or a foreign company; and
(c) where it is an individual, such individual is not a foreigner."
The central excise authorities have refused to the petitioner the benefit of this exemption notification because, according to the central excise authorities the petitioner is not a "manufacturer" as defined in the Explanation. The petitioner has, therefore, filed this petition in which Mr. [ENTITY] has raised the contentions with which we now proceed to deal.
2. The first contention which Mr. [ENTITY] has raised is that the petitioner is a "manufacturer" within the meaning of the definition of that expression given in the Explanation. The Explanation makes it clear that all manufacturers have been classified under three heads : (i) companies, (ii) firms and (iii) individuals. We are not concerned in this case with the firms or individuals. We are concerned with the definition of a `company' given in that Explanation because the petitioner is a company. Benefit of the exemption notification has been denied to the petitioner because, at the relevant time, ciba Geigy Limited, a company incorporated in Switzerland, was holding in the capital of the petitioner-company. the petitioner-company has not been holding any share in the capital of any foreign company.
The question which Mr. [ENTITY] has raised for our consideration is whether two sub-clauses of clause (a) in the Explanation are conjunctive or disjunctive. In other words, can it be said that in order to be entitled to the benefit of the exemption notification, a company not only must not hold share in the capital of any foreign company but that no foreign company should hold share in the capital of the company registered under the [ACT]. Clause (a) in Explanation clearly contemplates companies, incorporated in India under the [ACT]. The petitioner company is one such company. Except those which fall under the exception, all companies which are incorporated under the [ACT], and which are pharmaceutical manufacturers are entitled to the benefit of the impugned exemption notification. The exception is carved out by two circumstances. If there is a company which holds a share in the capital of a foreign company and in the capital of which a foreign company or a foreigner holds a share, it is not a "manufacturer" for the purposes of the exemption notification. In other words the definition of "manufacturer" draws a clear distinction between companies incorporated in India which do not have any capital from a foreigner or a foreign company and which do not have any share in the capital of a foreign company. the expression "and" clearly suggests that both these conditions are required to be satisfied. It appears to us that it is the mutuality of foreign interest or foreign element which excludes a company from the class of manufacturers contemplated by the exemption notification. Therefore, if a pharmaceutical company incorporated in India holds a share in the capital of a foreign company but in the capital of which no foreigner or a foreign company holds a share, it is a "manufacturer" within the meaning of that expression as defined in clause (a) in the Explanation to the exemption notification. So also a company which is incorporated in India and in the capital of which a foreigner or a foreign company holds a share but which does not holds any share in the capital of any foreign company falls within the meaning of the expression "manufacture" as defined in clause (a) in the Explanation to the exemption notification. Therefore, if there is a company which is incorporated in India and to which both the circumstances specified in sub-clause (i) and (ii) of clause (a) in the Explanation to the exemption notification are to attracted, it cannot be excluded from the class of "manufacturers" within the meaning of the expression as defined in clause (a) in the Explanation to the exemption notification.
3. In the instant case, since the petitioner-company did not or does not hold any share in the capital of any foreign company, it is the "manufacturer" within the meaning of that expression as defined in the exemption notification even though a part of its capital was, at the relevant time, held by a foreign company. In this context, we may refer to the two decisions of the Supreme Court which lay down rules of statutory interpretation.
The first decision is in [PRECEDENT]. It was a case under the [ACT]. The principle which has been laid down is as follows :
"and" generally has a cumulative sense requiring the fulfilment of all the conditions that it joins together. It is the antithesis of "or" However, sometimes in order to carry out the intention of the Legislature, it may be necessary to read "or" for "and" and "and" for "or"
4. In the instant case, it is not necessary to read "and" disjunctively because the two negative conditions which are joined by the expression "and" appear to us to suggest the mutuality of foreign element in regard to a company incorporated in India.
5. The next decision to which our attention has been invited is in [PRECEDENT]. It was a case under the [ACT]. The question of interpreting a notification issued under that Act arose in that case. The principle which the Supreme court has laid down is that a notification be judged not by the object which the rule-making authority had in mind but by the words by which it has used in order to effectuate the legislative intent. The Supreme Court has further observed that it is well established that, in a taking statute, there is no room for any intendment. The entire matter is governed wholly by the language of the notification. Therefore, if the tax-prayer is within the plain terms of the exemption, it cannot be denied its benefit by calling in aid any supposed intention of the exempting authority. We have borne in mind this principle while interpreting the exemption notification with which we are concerned. 30-9-80
6. The next contention which Mr. [ENTITY] has raised is that though the exemption notification uses the expression "foreign company", it does not define that expression. It appears that the [ACT], the [ACT], and the exemption notification do not define that expression. However, taking into account the scheme of the Explanation appended to the exemption notification, in our opinion, a "foreign company" is a company so- called under the [ACT]. [SECTION] thereof provides :
"[SECTION], both inclusive, shall apply to all foreign companies, that is to say, companies falling under the following two classes, namely :-
(a) companies incorporated outside India which, after the commencement of this Act, establish a place of business within India and
(b) companies incorporated outside India which have, before the commencement of this Act, established a place of business within India and continue to have an established a place of business within India at the commencement of this Act."
[SECTION] is not applicable to the instant case. Within the meaning of [SECTION], a company can be said to be a `foreign company', if, inter alia, it has a place of business within India. Ciba Geigy Limited is a company incorporated in Switzerland. However, in order to be a foreign company' within the meaning of [SECTION] of the [ACT]. it must have a place of business in India. Mr. [ENTITY] has tried to argue that it has no place of business in India. We could not permit Mr. [ENTITY] to raise this question before us because the petitioner has not pleaded in the petition that Ciba Geigy Limited is not a `foreign company' within the meaning of [SECTION] of the [ACT], because it has no place of business in India. Whether it has a place of business in India or not is a question of fact and unless it is pleaded, the respondents cannot reply to it. Therefore, without going into question whether Ciba Geigy Limited has a place of business in India, for the purposes of this case, we are of the opinion that since it is incorporated in Switzerland, it is a `foreign company'. In other words, in absence of any pleading to the contrary, we assume against the petitioner that it has a place of business in India. The second contention which Mr. [ENTITY] has raised, therefore, fails and is rejected.
7. The third contention which Mr. [ENTITY] has raised is that the exemption notification goes beyond the scope of [SECTION] of the [ACT] read with [SECTION]. We have quoted [SECTION] hereinabove. The only contention which Mr. [ENTITY] has raised is that the expression "subject to such conditions as may be specified in the notification" connotes a reasonable condition and not any condition whatsoever. There is no doubt about the fact that any condition which the Central Government may specify in an exemption notification issued under [SECTION] must be reasonable and rational in order that it satisfies the constitutionality test under [SECTION]. We are required to examine this aspect not only in the context of [SECTION] but also in the context of [SECTION] and [SECTION] under which clause (a) in the Explanation appended to the exemption notification is being challenged. The argument which Mr. [ENTITY] has raised is that the Explanation treats unequals as equals and is, therefore, unreasonable. According to him, therefore, it is violative of the petitioner's fundamental right under [SECTION] under [SECTION]. It is difficult to uphold the contention based on [SECTION] because [SECTION] cannot be invoked by any one except a citizen of India is a settled law. We, therefore, proceed to examine the reasonableness or the rationality of clause (a) in the Explanation appended to the exemption notification in the text of [SECTION].
8. Mr. [ENTITY] has argued that the exception which clause (a) in the Explanation to the exemption notification carves out does not disclose any intelligible differential which has rational nexus with the object sought to be achieved. In order to answer this contention, it is necessary first to find out whether there is a differentia. A close reading of clause (a) in the Explanation appended to the exemption notification clearly brings out two classes of companies engaged in the manufacture of pharmaceuticals. There may be some which are incorporated in India and which do not hold any share in the capital of a foreign company and no part of whose capital is held by a foreigner or a foreign company. Such companies will be "manufacturers" within the meaning of that expression given in the exemption notification. There may be other companies which may be holding a share in the capital of a foreign company and in the capital of which a foreigner or a foreign company may be holding a share. Distinction has been made by the exemption notification between these two classes of companies even though all of them are incorporated in India under the [ACT] or its predecessor Act. Therefore, there is no doubt about the fact that there is a differentia which clearly demarcates one set of companies from another set. We may call them for the purpose of this decision "wholly indigenous company" and "companies having foreign element" in them. We are required to find out whether the denial of exemption to the latter class of companies has any rational nexus with the object sought to be achieved. What is the object which the exemption notification seeks to achieve? It has been pleaded by the petitioners that the object is to encourage the marketability of new patent or proprietary medicines.
9. Mr. [ENTITY] who appears on behalf of the respondents has asked us not to discern any other object from the exemption notification because the petitioner has not pleaded it. We are unable to accede to this argument raised by Mr. [ENTITY]. In our opinion, it is open to a Court of law either to discern from the pleadings the object of a notification or to discern it from the notification itself even if such object as is discernible from the notification has not been pleaded. In order to discern the real object which the exemption notification seeks to serve, it is necessary to have a fresh look at the notification itself which we have reproduced in the foregoing parts of this judgment. It exempts only clinical samples of a patent or proprietary medicine which a manufacturer manufactures and which otherwise is liable to payment of excise duty. In other words, exemption has been granted to the manufacturer from payment of excise duty in respect of nothing else except clinical samples of its patent or proprietary medicine. This exemption is also subject to certain conditions. The first condition is that the value of such tax- free clinical samples shall not exceed in value four per cent of the total duty-paid clearness made during the proceeding month of all types of patent or proprietary medicines. This condition makes it clear that on a very infinitesimally small part of the patent or proprietary medicines which a manufacturer manufacturers is exempt from payment of excised duty if it is supplied in the shape of clinical samples. Second condition subject to which exemption is available is that such clinical samples are intended for free supply to hospitals, nursing homes and medical practitioners. In our opinion, reference to hospitals, nursing homes and medical practitioners exhausts the entire medical world. There is none else in the medical world who is left out of the aforesaid three categories. The next condition to which the availability of exemption is subjected is that such clinical samples shall bear a different trade packing and that each smallest packing is clearly and conspicuously marked "physician's samples, not to be sold". This condition clearly demarcates clinical samples from the commercially marketable products belonging to that class. The last condition to which the availability of exemption is subjected is that such exemption shall be available only for a period of three years.
10. Taking into account the conspectus of the scheme which the exemption notification discloses, can we say that it is intended to encourage only trade and commerce in patent or proprietary medicines? In our opinion, encouragement of trade or business in patent or proprietary medicine is the secondary object of the exemption notification. Its primary object is to enable a manufacturer to supply such clinical samples free of charge to medical practitioners so that they, having become known to them, are made available to the patients. In order to know that new patent or proprietary medicines are manufactured in the country, a medical practitioner will hardly take pains to purchase them with the object of finding out whether they can be prescribed to his patients. It is only when the manufacturer supplies such clinical samples free of charge to a medical practitioner that the medical practitioner tries to find out the utility of such patent or proprietary medicines and prescribes them to this patients who are in need of them. Therefore, the primary object which underlines the exemption notification is to make available to the patients new patent or proprietary medicines by making them known to the medical practitioners which objective can be achieved by enabling the manufacturer to supply a certain quantity of their patent or proprietary medicines in the form of free clinical samples to the medical practitioners. Therefore, whereas the primary object of the exemption notification is to serve the patients and the ailing humanity, its secondary object is to encourage trade and business therein.
11. Now, if the primary object of the exemption notification is to render service to the patients by enabling a manufacturer to make his patent or proprietary medicines known to the medical world, can we say that such object will be better served by dividing in two classes the manufacturers of patent or proprietary medicines - the wholly indigenous companies and the companies having foreign element in them? On this hypothesis, we are unable to see any rational nexus which this classification may have with the primary object of serving the patients in the society. A patient may need as much a new patent or proprietary medicine manufactured by a wholly indigenous company as he may need a patent or proprietary medicine manufactured by a company which has foreign element in it. So far as the object of serving the patients is concerned, it is difficult to think that this classification has any rational nexus with it. In our opinion, therefore, the impugned part of the exemption notification does not have any rational nexus with the object which the exemption notification seeks to serve and therefore, though it makes a differentia between two sets of companies, that differentia is not intelligible. [SECTION] in the context of the present case cannot mean anything different. In our opinion, therefore, clause (a) in Explanation appended to the exemption notification does not satisfy the rationality test laid down under [SECTION]. It is, therefore, [SECTION] of the [ACT] read with [SECTION].
12. has been invited by Mr. [ENTITY] to the decision of Supreme Court in [PRECEDENT], in which the principle which has been laid down in the context of [SECTION] is that while it forbids class legislation, it does not forbid reasonable classification for the purpose of legislation. In order to pass the test of permissible classification, two conditions must be fulfilled, viz. (a) the classification must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group and (b) the differentia must have a rational relation to the object sought to be achieved by the statute in question.
13. The next contention which has been raised by Mr. [ENTITY] is that he exemption notification is vague inasmuch as it does not specify the extent of the share which an Indian-incorporated company may hold in the capital of a foreign company or the extent of the share which a foreigner or a foreign company may hold in the capital of an Indian- incorporated company. Mr. [ENTITY] has in that context posed before us this question : how can an Indian incorporated company which holds one per cent share in the capital of a foreign company and one per cent of whose capital is held by a foreigner or a foreign company be treated equally with an Indian-incorporated company which holds 60 per cent of share in the capital of a foreign company or 60 per cent of whose capital is held by a foreigner or foreign company. the question which Mr. [ENTITY] has raised more pertains to be legislative filed than to the judicial field. As clause (a) in the Explanation to the exemption notification stands, it excludes from the class of manufacturers companies which may be holding even a very small share in the capital of a foreign company or even a very small share of whose capital may be held by a foreigner or a foreign company. It is the foreign element associated with the Indian-incorporated company which distinguishes it form other companies and not the extent of such foreign element. It is difficult for us to come to the conclusion that merely because the impugned exemption notification does not specify the extent of foreign element in an India - incorporated company that it should be struck down on the ground of vagueness.
14. In [PRECEDENT], the Supreme Court has observed that the rule that an Act a competent Legislature may be "Struck system. A Courts on the ground of vagueness is alien to Indian constitutional system. A law may be declared invalid by the superior Courts of law if the Legislature has no power to enact the law or that law violates any of the fundamental rights guaranteed in [SECTION] of the [ACT]al provisions but it cannot be declared invalid merely on the ground of vagueness. The Courts in India have no authority to declare a statue invalid because it violated "the due process of law"- the rule which American Courts have enunciated and incorporated in the American [ACT]. In the light of this decision of the Supreme Court, we are unable to uphold the contention raised by Mr. [ENTITY] as to the vague character of the exemption notification.
15. Lastly Mr. [ENTITY] has argued that clause (a) in the Explanation appended to the exemption notification is such that where as a wholly foreign company which is producing patent or proprietary medicines in India shall be entitled to the exemption under the exemption notification the Indian - incorporated companies with foreign element in them shall not be entitled to the benefit. Mr. [ENTITY] has read clause (a) in the Explanation to the exemption notification in wholly unwarranted manner. Clause (a) defines a 'manufacturer' Those who satisfy the terms of clause (a) in the Explanation to the exemption notification are so far as companies are concerned within the meaning of the exemption notification and all the other companies are not `manufacturers'. Therefore a, company which is wholly foreign does not fall within the ambit of the expression 'manufacturer' specified in clause (a) in the Explanation to the exemption notification - We are, therefore, unable to uphold the last last contention raised by Mr. [ENTITY] before us.
16. Mr. [ENTITY] has referred to three more decisions. In our opinion, they are not apposite or applicable to the facts of the present case. We only note them in this judgment. The first decision is in the [PRECEDENT]. The second is in [PRECEDENT]. The last is in the [PRECEDENT].
In our opinion, clause (a) in the Explanation to the exemption notification is severable from the rest of the notification. Striking it down will not render the rest of the notification unworkable. The rest of the notification can stand by itself. To strike down clause (a) in the Explanation to the exemption notification will mean extending the benefit of the exemption notification to all companies which are engaged in the manufacture of patent or proprietary medicines.
17. In the result we allow the petition and declare that clause (a) in the Explanation to the exemption notification - G.S.R. 163 (E) issued under [ACT] on 1st 1977- is ultra vires [SECTION] of the [ACT] and [SECTION] of the [ACT] A writ of mandamus shall issue direction to desist and forbcar from implementing it. Rule is made absolute accordingly with costs.
18. Mr. [ENTITY] who appears on behalf of the respondent makes an oral application under [SECTION] of the [ACT] for a certificate of fitness in order to enable the respondents to appeal to the Supreme Court against this decision. Since we have struck down a part of the exemption notification, we think it raises a substantial question of law of all India importance , We therefore , grant the respondents the certificate of fitness under [SECTION] of the [ACT]. The implementation of the writ issued by us shall be stayed for a fortnight pending interim orders from the Supreme Court in that behalf.