JOHNSON AND JOHNSON PAK (PVT.) LTD VS PAKISTAN, 2008 PTD-KARACHI-HIGH-COURT-SINDH 345 (2004)

(a) Drugs Act (XXXI of 1976)---

----S. 3(g)-Word "suture"---Meaning.

"Suture" in terms of ordinary dictionary meaning is defined as stitch that joins the edges of a wound. It is used for sewing up wounds through a surgical process and might therefore .fall under the broad definition of drugs under the Drugs Act, 1976 meant for restoration of organic functions as medicines to be consumed for treatment of preventing disease.

(b) Customs Act (IV of 1969)---

----First Sched. PCT Heading 30.03 & 30.05---Drugs Act (XXXI of 1976), S.3(g)---`Suture'---Determination of classification---PCT Heading 30.05 having specifically referred to suture material, thus, same could not be treated as medicaments under PCT Heading 30.03---Once item in question was shown to be falling in one category, then same could not be treated to fall in another category on analogy of a different statute---Principles.

Glaxo Laboratories Pakistan v. Federation of Pakistan PLD 1992 SC 455 ref.

(c) Administration of justice---

----Courts have not always approved departure from consistent past practice---Such principle would be applied only when both interpretations of relevant rule were possible and that department had been consistently following a particular one---Administrative department could not ignore a legal provision and choose to follow a consistently wrong practice.

Radhaka Corporation v. Collector of Customs 1989 SCMR 353 rel.

(d) Notification---

----Notification could not be given retrospective effect, unless expressly provided so therein.

S.I.H. Zaidi for Petitioner.

Muhammad Akram Zuberi for Respondent.

Sajjad Ali Shah for standing counsel.

Date of hearing: 24th August, 2004.

JUDGMENT

SABIHUDDIN AHMED, J---It may not be necessary to refer to the detailed history of proceedings initiated by the respondent against the petitioner as the only question before us relates to the liability of the petitioner to pay sale tax on silk and catgut sutures (with needle attachments or of standard length) in respect of the goods cleared from the date proceedings were initiated against him in 1987 upto 26-4-1988, when the aforesaid goods were notified to be exempted from sales tax.

2. The petitioner's case in a nutshell appears to be that they were claiming exemption from sales tax under P.C.T. Heading 30.03 (medicaments) in terms of S.R.O. No.666 (I/81), dated 25-6-1981. However pursuant to a letter from the respondent No.2, dated 26-1-1987 to the effect that absorbent cotton wool, bandages and gauze etc. (surgical dressings) fell under Headings 30.04 and 30.05 and were liable to sales tax. Proceedings against them were initiated through show-cause notice, dated 16-6-1987 and 27-8-1987 requiring them to pay sales tax on different kinds of sutures manufactured by them. They contended that suture was covered by Heading 30.03 (medicaments) and that with needles by 90.17 (surgical instruments), but their plea was rejected by all respondents. However, admittedly through S.R.O. No.308(I)/88), dated 25-4-1988 the Notification, dated 25-6-1981 was amended and the sutures falling under Heading 30.05 were also exempted from payment of sales tax.

3. I.H. Zaidi learned counsel for the petitioner has assailed before us the final order passed by the respondent No.1 denying the benefit of exemption from sales tax claimed by the petitioner upon the following grounds : --

(i) That the sutures manufacture by the petitioner were registered as drugs under the Drugs Act and incorporated in national formulary published under the aforesaid Act. Therefore, they were required to be treated, as medicaments under Heading 30.3 of P.C.T. entitled to exemption from sales tax.

(ii) That in any event the consistent departmental practice prior to 1987 was to treat as exempt from sales tax had almost acquired the force of law and could not be departed from through a simple letter of the C.B.R. issued in another context.

(iii) That the Notification, dated 26-4-1988 was only classificatory of the correct legal position and issued with the intention of removing a confusion and was therefore, required to be given retrospective effect.

4. We intend to take up all these contentions seriatim. However, before we do so it may be appropriate to reproduce P.C.T. Headings 30.03 to 30.05 and 90.17 as they existed at the relevant time and have been placed on record by the petitioner:--

In support of the first contention Mr. Zaidi drew our attention to the modified national 5. formulary published vide Notification, dated 12th June, 1981, wherein surgical sutures needles and silk needles as well Ethion-surgical sutures and the ligatures of all types manufactured by the petitioner have been listed under item 001678. Learned counsel then proceeded to rely upon the pronouncement of the Honourable Supreme Court in Glaxo Laboratories Pakistan v. Federation of Pakistan (PLD 1992 SC 455) where dybenal lozenges were treated as medicaments for the purposes of P.C.T. Heading 30.03 held exempted from sales tax on account of their being registered under Drugs Act. The above judgment indeed prima facie appear to support the contention of the learned counsel

6. Upon the careful consideration of the same, however, we found that it was clearly distinguishable and was of no help to the petitioner. In Glaxo case there was no provision in the P.C.T. relating to dybenal or other types of lozenges and the question before the Court was whether they were liable to be classified under Heading 30.03 (medicaments) or 17.04 (confessionary items). Recognizing that determination of a classification by a particular department for its own purpose may not be applicable to another department, their Lordships proceeded to notice that even the expression "medicament" had not been defined in the P.C.T. Schedule. Considering the ordinary dictionary meaning of the expression as "medicines and drugs" their Lordships held that in such context the terms accorded to the goods in question by an expert body under the Drugs Act might have, relevance. It was in this context that dybenal lozenges .which was recognized to be meant for treatment or prevention of disease of mouth and throat by the Ministry of Health was classified as a medicament rather than a mere confessionary item.

7. The context of the present case however, is altogether different. In the first place suture in terms of ordinary dictionary meaning is defined as a stitch that joins the edges of a wounds. It is used for sewing up wounds through a surgical process and might therefore fall under the broad definition of drugs under the Drugs Act meant for restoration of organic functions as medicines to be consumed for treatment of prevention disease.

8. In any event Heading 30.05 explicitly refers to suture material has been separately classified them medicaments under Heading 30.03 of the P.C.T. Schedule. This classification by necessary intendment excludes its possibility of being treated as medicaments under Heading 30.03. Indeed it may classify as a drug for the purpose of the Drugs Act which defines such expression to include any material for the restoration or correction of organic functions in human beings. Nevertheless, the objects of the Drugs Act are substantially different from those of taxing statutes and once it is shown that the item in question falls in one category upon no principle of construction it could be treated to fall in another merely on the analogy of a different statute. The contention of the learned counsel in our view has no force.

9. Mr. Zaidi's reliance on the consistent practice prevailing prior to 1987 appears to be equally untenable. Indeed we are conscious of the fact that the Courts have not always approved departure from consistent past practice as can be gathered from the observations of the Honourable Supreme Court in Radhaka Corporation v. Collector of. Customs (1989 SCMR 353). Nevertheless, such principle has been applied only when both interpretations of the relevant rule were possible and the department has been consistently following one. What needs to be considered in this case is that the past practice was deviated from not because of a letter issued by the respondent No. 2 but because of the fact that a specific provisions of the P.C.T. Schedule was overlooked and this fact was identified in the aforesaid letter. Indeed there is no principle of law which requires an administrative department to ignore a legal provision and chose to follow a consistently wrong practice.

10. The fact that the goods manufactured by the petitioner were subsequently exempted from payment of sales tax through the Notification, dated 26-4-1988 fortified the view that they were not so exempted prior to the aforesaid date. Mr. Zaidi however, attempted to argue that such a notification merely clarified the existing legal position and ought to be given retrospective effect. We regret we are entirely unable to accept this view. Had this been the intention, the notification could have expressly said so. For the above reason, we found no infirmity in the impugned order of the respondent No.1, dated 2-4-1992 and therefore, dismissed this petition. Nevertheless, we may add that in the aforesaid order a direction was given for determination of the petitioner's liability after taking into consideration the effect of and the petitioner's entitlement to if any of the exemptions available under S.R.O. 7(I)/83, dated 5th January, 1983. We are informed that no such determination has taken place and the parawise comments filed on behalf of the respondents do not furnish a satisfactory explanation. We would consequently order that the directions of the respondent No.1 to this effect in the .impugned order may also be implemented without unnecessary delay.

These are our reasons for dismissing this petition vide short order announced on 24-8-2004.

S.A.K./J-9/KPetition dismissed.