HAMDARD LABORATORIES (WAQF), PAKISTAN, KARACHIV VS THE FEDERATION OF PAKISTAN
1991 P T D 674
[Karachi High Court]
Before Syed Haider Ali Pirzada and Allah Dino G. Memon, JJ
HAMDARD LABORATORIES (WAQF), PAKISTAN, KARACHI
versus
THE FEDERATION OF PAKISTAN through the Secretary, Ministry of Finance,
Islamabad and 4 others
Constitutional Petition No. D-1075 of 1990, decided on 10/01/1991.
Sales Tax Act (III of 1951)---
---S. 3(4)---Central Excise Rules, 1944, Rr. 9, 10, 52, 174, 210 & 226-- Constitution of Pakistan (19731, Art. 199---Sales tax---Levy of---Authorities found petitioners' product "LAHMINA" liable to be levied sales tax, holding that said product was a food supplement, a tonic liable to sale tax and that by clearing same from factory without payment of Sales Tax, petitioners had contravened provisions of the Rules and the Act---Case of petitioner on the other hand was that product 'LAHMINA' was not manufactured from fruits or vegetables, but was extracted from herbal solids, that same purely being medicinal was prescribed by Hakeems for prevention and treatment of human ailments as detailed in petition---Petitioners claimed that `LAHMINA' purely being a Unani medicine, was exempted from sales tax like allopathic medicines used for same purpose---Main grievance of petitioners was that department had. found `LAHMINA' as food supplement on the basis of report of Central Drugs Laboratory without disclosing its report to the petitioners---High Court with consent of parties remanded case with direction to the Department to show the petitioner the report of Central Drugs Laboratory on basis of which product was found as food supplement as well as the report of National Health Laboratory, to the petitioners and also provide petitioners opportunity to produce in rebuttal the material or report of National Council of Tib which petitioners wished to produce and thereafter to decide question whether the product `LAHMINA' was a food supplement or was a Unani medicine for treatment of various diseases as claimed by petitioners.
Munawar Ghani for Petitioners.
Naimur Rehman Standing Counsel for Respondents.
Date of hearing: 10th January, 1991.
JUDGMENT
SYED HAIDER ALI PIRZADA, J.---The petitioners through this petition have prayed for the following reliefs:--
"(i) That this Hon'ble Court be pleased to hold and declare that the impugned orders dated 28-5-1988, 4-4-1989, 18-3-1990 and 4-6-1990 passed by' respondents Nos.2 to 5 against the petitioners ordering the petitioners to pay Sales Tax of Rs.9,32,113 and Rs.5,29,020.22 on the Unani product `LAHMINA' are erroneous, illegal, arbitrary and of no legal effect.
(ii) To hold and declare that Unani medicine `LAHMINA' sold by the petitioners in bottle of 300 mg. for treatment of disease does not fall under item No.21-07 of Pakistan Customs Tariff and is exempt from Sales Tax.
(iii) Costs.
(iv) Such further/other/additional relief or reliefs which this Hon'ble Court may deem fit and proper in the circumstances of the case."
The facts leading to the filing of the above petition are that the petitioners are engaged in the manufacture and sale of drugs and Unani medicines for treatment of various diseases and among such products the petitioners produce `LAHMINA' which is sold in a bottle of 300 mg. The case of the petitioners as set out in the petition is that their product `LAHMINA' contains the ingredients namely Santalum Albus, Napela Hindostana, nardostachya jatamansi/Vabrian, Slavia Hameatodes, cinnamomum officientialis, zingiber zerumbet, myruts cary ophylous, corriandum sativumm Xanthoxylum Altum, Alpinia Galanga, bombax malabaricum, centraurea bchen, versicolor iris, cinnamomum malabthrum, cyperus pertenius, cinnamomum talala, parmelia perlata, mesua Ferra, Hyoseyamus Niger, root piper longum, I pomea jigitata, boerhavia Diffusa, Ficus Relgiosa, Vitax Venifera, Acacea Arbica and Rosa Danamcens. These are extracted from herbal solids.
In para. 3 of the petition, it is averred that for 300 mg. of `LAHMINA' the quantities of herbal solids are given. It is the further case of the petitioners that `LAHMINA' has different medicinal functions. It is good for the treatment of brain, heart, jaundice, asthama, cough, indigestion, peptic ulcer, liver, regulates the excretory system, kidney congestion and flagm, throat infection. It also regulates perspiration and it is seditene.
It is their further case that the product `LAHMINA' is not manufactured from fruits or vegetables but it is extracted from herbal solids. It's use is purely medicinal and is prescribed by Hakeems for the prevention and treatment of human ailments. Since `LAHMINA' is purely a Unani medicine, so it is exempted from sales tax as are allopathic medicines used for the same purpose. `LAHMINA' is a cure for many diseases as mentioned in earlier part of this Judgment. It is prescribed to a patient when he suffers from any of the above diseases and it is not used in normal course.
The petitioners received a show-cause notice dated 28-6-1986 from respondent No.4, wherein it was alleged that the said product `LAHMINA' was a food supplement, a tonic, liable to sales tax and that by clearing the same from the factory without payment of sales tax, the petitioners contravened the provisions of Rules 9, 52, 226, 174 of Central Excise Rules, 1944 read with section 3(4) of Sales Tax Act, 1951. The petitioners-were, therefore, required to show cause why sales tax of Rs.9,32,118 for the period should not be recovered under Rule 10 of the Central Excise Rules, 1944, read with section 3(4) of Sales Tax Act, 1951 and why penal action should not be taken against the Petitioners under Rules 210 and 226 of Central Excise Rules, 1944 for violation of the Rules cited above. The Petitioners denied the allegations contained therein and submitted a detailed reply to the said show-cause notice on 10-7-1986 vide their Advocate's letter making it clear that `LAHMINA', being exempt from sales tax as `Unani medicine' under Item No. 22 of Notification No. S.R.O. 666(1)/81 dated 25-6 1981, was not attracted to the mischief of levy of sales tax.
The respondent No.5, by impugned order dated 28-5-1988, held that the product `LAHMINA' is a food supplement falling under item 21.07 of the P.C.T. and, therefore, it is not exempted from payment of sales tax. The petitioners filed Appeal No. 1(105) CE (App.) S.Z/88/1183 against the impugned order before the respondent No. 3 which was dismissed on 4th April, 1989. The petitioners went in revision before the respondent No. 2 which was also dismissed on 18-3-1990. During the pendency of the revision petition, the respondent No.5, sent show-cause notice dated l6i-10-1989 to the petitioners wherein it was alleged that product `LAHMIHA' does not fall under S.R.O. 566(1)/89 dated 3-6-1989 and is chargeable to sales tax under P.C.T. heading 21.07. Further, it was alleged that the Petitioners violated Rules 9, 52, 52-A, 226 of Central Excise Rules, 1944 read with section 3(4) of Sales Tax Act, 1951 and the amount of sales tax involved amounting to Rs.5,29,020.22 was recoverable under Rule 10 of Central Excise Rules, 1944 read with section 3(4) of the Sales Tax Act. The Petitioners sent a reply through their counsel on 13-11-1989 and requested to defer the proceedings until the disposal of the revision application but the respondent No.5 vide impugned order, dated 4th June, 1990 ignored the plea of the petitioners and illegally held that the product `LAHMINA' is a food supplement or a prepared food falling under item No. 21.07 of the P.C.T. and the product is not exempt from payment of sales tax within the frame work of exemption Notifications Nos. S.R.O. 666(1)/81 and 566(1)/89, dated 3rd June, 1989 and in consequence thereof, the petitioners were held liable to pay Rs.5,29,020.22 as sales tax. They have, therefore, impugned the orders, dated 28th August, 1988, 4th April, 1989, 18th March, 1990 and 4th June, 1990 passed by respondents Nos. 2 to 5 against the petitioners ordering the petitioners to pay sales tax of Rs.9,32,113 and Rs.5,29,020.22 in the above petition.
Mr. Munawar Ghani, learned counsel appearing for the petitioners has raised the following contentions:--
(1) The impugned orders violate the principles of natural justice as the report or material was not disclosed to the petitioners.
(2) The product was to be referred to an organization like the National Council for Tib.
Mr. M. Naimur Rehman has submitted that he has no objection if the case is remitted to respondent No. 4 for a fresh hearing; he has no objection if the respondent No. 4 furnishes the report or other materials on the basis of which the product was declared as food supplement.
At the outset, it may be pointed out that `LAHMINA' being a medicinal product is registered under the Trade Marks Act, 1940 in Class 5 under Trade Mark No. 84922 as "medicinal and pharmaceutical preparations and medicinal tonics". Clause `K' of section 2 of the Unani, Ayurvedic and Homeopathic Practitioners Act, 1965 has defined the words "Unani and Ayurvedic system of medicine" as the "Unani Tib and Ayurvedic (including the Siddah) system of medicine", whether supplemented or not by such modern advances as the Board may, from time to time determine. Section of the (sic) provides composition of the National Council of Tib.
The main grievance of the petitioners before us is that the respondents have held that the product 'LAHMINA' is a food supplement on the basis of report of Central Drugs Laboratory without disclosing the report to the petitioners.
Mr. Munawar Ghani, submits that is a fit case for remand, Mr. M. Naimur Rehman has fairly conceded and has submitted that the respondents will be at liberty to refer the product to National Health Laboratory. Mr. Munawar Ghani submits that the product may be sent to National Council of Tib. It is not necessary to give any direction to the respondents. The respondents are at liberty to obtain report from the National Health Laboratory as well as from National Council of Tib.
We would, therefore, remand the above case to the respondent No.4, with the direction to show the report of Drugs Laboratory on the basis of which the product was held as food supplement as well as the report of National Health Laboratory, Islamabad, to the petitioners and also provide the petitioners opportunity to produce in rebuttal the material or report of the National Council of Tib which they wish to produce, and thereafter, to decide the question whether the product `LAHMINA' is a food supplement or `LAHMINA' is a Unani medicine for treatment of various diseases. The petitioners shall be entitled to file appeals and other proceedings competent under the Act before the forums provided for in case they are aggrieved by the above fresh order.
By consent of the parties, the impugned orders are set aside. The petition stands disposed of in the above terms with no order as to costs.
H.B.T./H-280/K Order accordingly.