The Central Government is yet to respond to a notice from the double bench of Madhya Pradesh High Court on a writ petition challenging the MRP based excise duty notification as a constitutional violation, it is learnt.

The court, which admitted the petition of the Madhya Pradesh Small Scale Drug Manufacturers Association on February 11, 2005, had directed the respondents in the case – the secretary, Union finance ministry and commissioner, commissionerate of the department of customs & central excise, Indore, to respond within four-week's time.

Sources told Pharmabiz that the court had taken up the case at least three times during the past few months. On one occasion, the petitioner’s counsel failed to appear before the court and on another occasion hearing was adjourned due to failure of the government to file its affidavits. The court, which is now adjourned for summer holidays, is likely to again take up the case within a few weeks.

The petitioner mainly argued that as per the Entry No.84 of the Indian Constitution, the government is not empowered to levy excise duty on sales value, and the excise duty can be levied only on the manufacturing expenses. (Entry No.84 of the Indian constitution gives powers to the legislature to levy excise duty from manufacturers).

The petitioners argued that the sales value of drugs, unlike other manufacturing industries, includes marketing and distribution expenses that constitute a lion's share of the expenses. Hence, the present excise duty notification to levy Excise Duty based on MRP is a gross violation of the constitutional rights given to Indian citizens and the government should be directed to refrain from implementing it. The double bench (division bench) of MP High Court comprising of Chief Justice Ravindran and Justice Kemkar admitted the writ filed by the secretary of the MP Small Scale Drug Manufacturers Association.

Sources said the small scale manufacturers in Madhya Pradesh are gravely affected by the MRP based excise and many of the units are on the verge of closure. At least 20 to 25 units, out of 75 to 80 formulators in the state, have purchased land in the excise free zones of Uttaranchal and Himachal Pradesh for migration. At least 80 per cent of the units in the state will have to close down within one to one and a half years due to unviable business conditions.

Further, the Schedule M deadline has fuelled the closure process, as less than 20 per cent of the units have GMP facilities. Rest of the units is either in the process of moving to excise free zones or gearing up to close down the units, said the source.