HAMDARD LABORATORIES (WAQF) VS FEDERATION OF PAKISTAN through Secretary, Ministry of Finance, Islamabad, 2016 PTD-KARACHI-HIGH-COURT-SINDH 2532 (2016)

Sales Tax Act (III of 1951)---

----S. 3(4)---Central Excise Rules, 1944, Rr. 10, 210 & 226---Sindh Pure Food Ordinance (VII of 1960), S. 2(9)---Sindh Pure Food Rules, 1965, Item No. 50---Honey food having medicinal qualities---Department issued show cause notice to the petitioner for payment of sales tax for selling honey packed in tubes to medical stores---Petitioner denied said demand contending that honey being natural product/medicine was not subject to levy of any sales tax and excise duty---Validity---Use of any food item for medicinal purposes would not make the same a medicine---Honey although possessed medicinal qualities which had miraculous effect on human body, but the same could not be considered to be medicine---Any product or substance had to be seen and examined in its entirety rather than discussing proprieties of the same in small sphere---Honey had to be seen in broader spectrum and not in limited manner, since honey had medicinal effect on some diseases hence the same was to be considered as medicine---Under S. 2(9), Explanation of Sindh Pure Food Ordinance, 1960, an article would not cease to be a food by reason only that the same was also capable of being used as medicine---For proving something as medicine or drug, the product had to pass through various tests as provided under the drug laws and the same had to be registered under the same law---Under Sindh Pure Food Rules, 1965, honey had been categorized as item No. 50 as a sweeting agent, which meant that honey had been recognized as food item---Primary use of honey was food and not medicine---Petitioner himself had never considered honey as drug; as honey neither had found mention in his list of Unani medicine nor had the same been registered as drug before the drug authorities---Material relied upon by the petitioner had also regarded honey as food having antibacterial and other medicinal properties---Honey, being food, was, therefore, not exempt from levy of sales tax and central excise duty---Constitutional petition was dismissed in circumstances.

Sultan Ahmad Bari v. Collector of Central Excise and Land Customs Karachi and others 1983 CLC 1538 ref.

Monawwar Ghani for Petitioner.

Muhammad Aslam Butt, D.A.G. for Respondent No.1.

Shakeel Ahmed for Respondents Nos.2 and 3.

Dates of hearing: 22nd, 29th January and 3rd February, 2016.

JUDGMENT

IRFAN SAADAT KHAN, J.---This Constitutional Petition has been filed with the following prayers:-

(i)To hold and declare that the impugned order dated 6.2.1986 passed by the Respondent No.2 against the Petitioner thereby ordering the Petitioner to pay Sales Tax at Rs. 10,43,845.12 on natural Honey is bad, illegal, arbitrary, without jurisdiction and of no legal effect.

(ii)To hold and declare that natural honey marketed by the petitioner packed in tube for medicinal purposes does not fall under item No.04.06 of Pakistan Customs Tariff, as such the impugned order dated 20.4.1986 of the Respondent No.3 requiring the Petitioner to take out L-4 licence for the manufacture of natural Honey and to furnish the details of production and clearance of goods from 1.9.1985 and onwards is bad, illegal, without jurisdiction and of no legal effect.

(iii)Costs,

(iv)Such further/other/additional relief or reliefs which this Honourable Court may deem fit and proper in the circumstances of the case.

2.Briefly stated, the facts of the case are that the petitioner is engaged in the manufacture and sale of drugs, unani medicines and other items. The petitioner received a show cause notice dated 25.1.1986 from The Deputy Collector-II, Collectorate of Central Excise and Land Customs Karachi, Government of Pakistan (Respondent No. 2) mentioning therein that on the market survey the department had received the information that the petitioner had sold and was selling honey packed in tubes on medical stores/general stores, etc. In the said show cause notice it was further mentioned that since natural honey did not enjoy exemption under SRO 666(I)/81 dated 25.6.1981 hence as per the figures collected by the staff of the department the petitioner had cleared 637716 tubes of honey without the payment of the sales tax amounting to Rs.10,43,845.12 on the value of goods amounting to Rs.83,50,716/- at the rate of 12-1/2% ad-valorem and did not have a proper Central Excise Licence and were not maintaining proper Central Excise Record. In the said show cause notice the petitioner was also directed to pay the sales tax and were also asked as to why the above mentioned amount may not be recovered under Rule 10 of Central Excise Rules, 1944 (hereinafter referred as the Rules), read with section 3(4) of the Sales Tax Act, 1951 and also asked to explain as to why penal action should not be taken against them as provided under Rules 210 and 226 of the Rules. The petitioner was directed to give the reply within ten days.

3.The petitioner then wrote a letter dated 27.1.1986 to the Respondent No.2 whereby it was contended that the petitioner was not engaged in the manufacturing of honey rather only packs it in tubes and sold out the same in the market hence the provisions of either Sales Tax or the Excise Duty were not applicable on them. It was further claimed by the petitioner that honey is a medicine used for the treatment of various ailments and since the petitioner simply packed the honey in small tubes the said activity could not be considered as a manufacturing activity and honey, being a natural product and a medicine, is not liable for any sales tax or excise duty.

4.The matter then proceeded before the Respondent No.2 who rejected the claim of the petitioner vide judgment dated 6.2.1986 and held that honey is a sweet liquid obtained from Honey Bees from the nectar secreted by the plants. It was further observed that though the honey has a great importance as a diet but is not a medicine in his view hence was not exempt, as per the relevant provisions of the law and thus was liable for sales tax. While passing the said judgment the Respondent No.2 did not impose the penalty on the ground that since this was a matter of classification and interpretation hence the petitioner was not liable for imposition of any penalty. However, the petitioner was warned to be careful in future. It is against this judgment that the present petition was filed which was admitted on 12.6.1986 for regular hearing with the observation that Grounds Nos.(C), (D), (E), (F), (I), and (J) of the memo. of petition require consideration.

5.Mr. Monawwar Ghani Advocate has appeared on behalf of the petitioner and submitted that the petitioner is not a manufacturer of natural honey and honey is a medicine and is not liable for any sales tax. According to him honey is a natural product which could not be manufactured and it contains Vitamins B1, B6, C, K, E, etc. which are quite useful for human body and the honey is used for curing many diseases. Hence the Respondent No.2 in his view was not justified in charging the Sales Tax upon it. In support of his contentions the learned counsel has placed reliance on a number of Clinical Studies, Bulletins of Islamic Medicine, Reports from Doctors, Islamic Scholars, etc. Learned counsel has also relied upon the cases of Sultan Ahmad Bari v. Collector of Central Excise and Land Customs Karachi and others (1983 CLC 1538) and Messrs Sterling Products (Pakistan) Ltd. v. Deputy Collector, Central Excise and Land Customs, Karachi and another (PLD 1979 Karachi 643).

6.According to the learned counsel for the petitioner honey possesses such qualities which other products do not have hence honey is a medicine since it has the property to heal wounds and has an anti-inflammatory effects too. Moreover, according to him honey is never worn out or expires. He, therefore, submitted that in view of material produced/relied upon by him honey may be considered a medicine and the sales tax imposed by the Respondent No.2 may be declared to be illegal and uncalled for.

7.Mr. Shakeel Ahmed Advocate has appeared on behalf of Respondents Nos.2 and 3 and has vehemently refuted the arguments advanced by the learned counsel for the petitioner. He has submitted that honey is a food which contains medicinal qualities. He invited our attention to Ayat Nos.68 and 69 of Surah Nahal and also referred to the Tafseer of Molana Abul Aala Maudadi to prove his case that honey is a food having medicinal qualities. He stated that no doubt honey possess medicinal qualities and properties but it could not be considered to be medicine simplicitor as it is a food having medicinal values. The learned counsel has produced before us a list of the medicines produced and manufactured by the petitioner and stated that even the petitioner has not placed the honey under the category of medicines produced by it but under the heading of other products meaning thereby that the petitioner themselves do not consider honey to be a medicine/drug. The learned counsel further submitted that if the petitioner considers honey to be a medicine/drug then why it has not been got registered as drug before the Drug Authorities. He further submitted that if the analogy of learned counsel for the petitioner is accepted then Fig, Milk, Kalongi (Black Seed), Vinegar, Onion and other items which have medicinal properties may also be considered to be the medicines. The learned counsel submitted that as per Pakistan Customs Tariff honey has been categorized as a taxable item. He further submitted that honey is a food supplement and is even used for cosmetic purposes. In the end, the learned counsel submitted that since honey is a food item having medicinal value, it could not be termed to be a medicine alone, therefore, this petition is liable to be dismissed.

8.Mr. Muhammad Aslam Butt, Deputy Attorney General for Pakistan, has appeared on behalf of Respondent No.1 and has adopted the arguments of Mr. Shakeel Ahmed the learned counsel for the Respondents Nos.2 and 3.

9.Mr. Monawwar Ghani, learned counsel for the petitioner, in his rebuttal submitted that the example of Fig, Onion, Vinegar, Olives, etc. given by the learned counsel for the Respondents is misplaced since these items are obtained by human efforts whereas honey is a natural product. He finally submitted that this petition may be allowed as prayed.

10.We have heard the learned counsel for the parties at considerable length and have perused the record, the decisions relied upon by the learned counsel for the petitioner so also the material relied upon by the learned counsel.

11.The only controversy involved in the instant petition is that whether the honey sold by the petitioner in the market could be considered as a medicine on which neither sales tax nor central excise duty could be levied or is a food having medicinal value and thus not exempt from these levies.

12.Honey is a natural sweet substance produced by Apis mellifera bees from the nectar of plants or from secretions of living parts of plants or excretions of plant-sucking insects on the living parts of plants which the bees collect, transform, deposit and store in honeycombs. There are many kinds of honey available in the market. In the Cave paintings near Valencia in Spain, even before the birth of the Christ, paintings show people gathering honey. In Quran and Bible discussion about honey is available. It is a popular item which is used in many forms and with each passing day more and more benefits and usefulness of honey is being revealed through researches. Though it is claimed that honey never spoils but as per the different food authorities of the world, e.g. Scottish Food Authorities and American Food Authorities, preservatives have to be added to the honey to maintain its shelf life. As per the Islamic websites, it was among the favorite foods of our Prophet Mohammad (Peace Be Upon Him).

13.There are no two opinions on the issue that honey has significant positive effects on the human body and is used for the treatment of certain diseases but merely using any item to cure any disease would make it a medicine or not is the main question and, in our view, the answer to this question is in negative. Use of any food item for medicinal purposes would not make the same a medicine.

14.We do not agree with the contention raised by the learned counsel for the petitioner that since honey is a natural product and could neither be manufactured nor prepared etc. by humans it may be considered as a medicine. If this analogy of the learned counsel is accepted then milk, which is also a natural product, would also be considered as a medicine since it is a known fact that milk is quite useful and has a positive effect on a human body.

15.We were able to lay our hands on a decision given by the Grand Chamber of Germany dated 6 September 2011, reported as Karl Heinz Bablok and others v. Freistaat Bayern, wherein the Grand Chamber of Germany, through an exhaustive order, held that "honey must be regarded as a food for human consumption". As stated earlier there are no two opinion's on the issue that honey possesses such type of medicinal qualities which has miraculous effect on the human body but, in our view, could not be considered to be a medicine. Even in the material produced before us by the learned counsel for the petitioner it has been regarded as a food, which has antibacterial and other medicinal properties. These reports mainly consist of research made on the honey as per which its medicinal proprieties have been discussed. In the reports it has categorically been mentioned that "the Holy Quran mentioned honey and attributed some therapeutic values to it". In all these reports therapeutic value of the honey has been discussed and as stated earlier there are no two opinions that honey possesses therapeutic value but again the question would be whether it is a medicine or a food containing medicinal qualities? If for instance in a latest research it is found that 'X' disease is curable by water if it is given to the patient, no doubt water would become a medicine for that patient but could water as a whole be considered to be a medicine? Any product or substance has to be seen and examined in its entirety rather than discussing its proprieties in another small sphere. In our view same analogy would apply to honey also and while considering honey it has to be seen in a broader spectrum and not in a limited manner that since it has a medicinal effect on some diseases hence it is to be considered as a medicine. As per the research made by us we have not come across a single country of the world where honey has been considered and regarded as a medicine rather, as stated above, as per the American and Scottish Food laws honey is regarded as food on which food laws are applicable rather than the drug laws.

16.The decision relied upon by the learned counsel for the petitioner in the case of Sultan Ahmad Bari (supra) is distinguishable from the facts, since in the said case the Court discussed about the primary use of the product and not the secondary use, whereas in the instant case the primary use of the honey, in our view, is that of a food and not a medicine. The other decision in the case of M/s. Sterling Products (supra) is also found to be distinguishable as in this case it was held that a product simply on the basis of its being used for any other purpose than drug would not fall outside the category of a drug, whereas in the instant case the petitioner themselves have never considered honey as a drug and honey does not find mention in their list of Unani medicines and have also not registered the same as a drug before the drug authorities.

17.We were able to lay our hands on Pure Food Ordinance, 1960, wherein the term "food" has been defined under section 2(9) as under:

2(9) "food" means any article used as food or drink for human consumption other than drugs, and includes:

(i)any substance which is intended for use in the composition or preparation of food;

(ii)any flavoring matter or condiment;

(iii)any colouring matter intended for use in food;

(iv)chewing gum and other products of the like nature; and

(v)water in any form, including ice, intended for human consumption or for use in the composition or preparation of food.

Explanation. An article shall not cease to be food by reason only that it is also capable of being used as a medicine.

From the above section it is clear that in order to avoid any confusion the law makers have added an explanation in the said section that an article shall not cease to be food by reason only that it is also capable of being used as a medicine. In the case of honey also it could not be said that it has ceased to be a food only on the ground that it has some medicinal value, as for proving something a medicine or a drug the said product has to pass, through various tests as provided under drug laws and it has to be registered under the said law, which in the present case admittedly has not been done. In the Pure Food Rules 1965 also honey has been categorized as item No.50 as a sweetening agent, meaning thereby that as per the food laws of our country honey has been recognized as a food item as per the relevant food laws.

18.We, therefore, in view of what has been discussed above, have come to the conclusion that honey is a food which possesses medicinal value but is not a medicine and hence not exempt from levy of the sales tax and the central excise duty. We, therefore, find no merit in the instant petition and dismiss the same accordingly.

SL/H-2/SindhPetition dismissed.