Case: Glaxo Smithkline Pharmaceuticals Ltd. and Ors Vs. Union of India (UOI) and Ors

3. A lot of correspondence took place between the Appellant before us and the Union of India which ultimately culminated in a show cause notice dated 10th June, 1997. The said show cause notice referred to an earlier letter written by the Appellant, finding that there was a differential in the price charged for the goods manufactured during the exemption period stated thereunder. A sum of Rs. 1.90 crores was payable in the following terms:2. Government had exempted Betamethasone disodium Phosphate based formulations of your company for only the period 28.2.92 to 31.12.94 vide notification SO No. 166 dated 28.2.92. Accordingly, you were required to follow the prices fixed by the Government for the formulation pack immediately on expiry of the exemption period i.e. from 1.1.95. Your contention that an application for fresh cost study had been made in October 1994 itself, merely did not give the right to the company to charge own prices, a Government fixed price was prevailing as on that date. A case of violation of the provisions of the para 9(3) of the DPCO 87 has accordingly been established and it has been decided to invoke the provisions of para 13 of the DPCO 95, for recovery of overcharged amount as assessed below:4. This was replied to by the Appellant, after which an order was passed on 9th April, 1999, by which the said show cause notice was confirmed, and a sum of Rs. 2.04 crores including interest was demanded. Since the Appellants were aggrieved by the said demand, they filed a Writ Petition No. 1266 of 1999 before the High Court at Bombay, which culminated in the impugned judgment dated 16th February, 2004, dismissing the aforesaid writ petition.

Court's reasoning:
8. Having heard learned Counsel for the parties, the point with which we are concerned is in a very narrow compass. If paragraph 28, which is set out hereinabove; is perused, it is clear that the exemption relates to drug manufacturing units or classes of such units. The very exemption order which has also been set out by us (supra) again refers only to bulk drugs and formulations based thereupon which are "manufactured" by the company. Further, a reading of the guidelines of 1989 also makes it clear that the exemption only relates to manufacture and has no reference to sale whatsoever9. It will be noticed that the reference is to the date of commencement of commercial production of a bulk drug which has reference to manufacture alone. However, Shri Mukherjee, referred us to Sub-clause (viii) of the aforesaid guidelines in order to argue that after the expiry of the period of exemption, the manufacturer has to submit an application for fixation of the price of a bulk drug under the provisions of the DPCO10. Sub-clause (viii) cannot be read in isolation but must be read as a part of the entire scheme of the guidelines. All that Sub-clause (viii) says is that after the period of exemption, which is after the period which has reference to manufacture and not sale of goods, such goods as are manufactured after the exemption will be subject to the drill of Sub-clause (viii). Read in this light, we do not find any difficulty in rejecting Shri Mukherjees arguments based on this sub-clause11. We are of the view that the matter is no longer res-Integra. In Ranbaxys case, cited by Shri Ganesh, the relevant exemption provision under the DPCO of 1995, referred to in paragraph 19 of the judgment, is almost a verbatim reproduction of the earlier exemption provision i.e. paragraph No. 28 of the DPCO of 1987, with which we are directly concerned13. It can be seen that the issue that arose in the Glaxosmithkline case was completely different from the issue that arose in Ranbaxys case and the present case. Ranbaxys case and the present case are directly concerned only with an exemption notification, and not a notification for fixation of price. Also, what is relevant for an exemption notification is the manufacture of drugs, whereas what is relevant for a price fixation notification relates to sale and not manufacture. Obviously, therefore, the Glaxosmithkline decision would have no relevance to the facts of the present casehis argument also need not deter us, for the simple reason that there will only be one price that is fixed for all goods that are manufactured by the Appellant up to 31st December, 1994, and that price will be a price unilaterally determined by the Appellant and will not be fixed under the DPCO.