2008 (8) TMI 629 - AT - Central Excise

Exemption to Drugs/medicines as per Sl. No. 47 of N/N. 4/2006-C.E. - Manufacture of Bulk Drugs - Nevirapine and Stavudine - Exemption denied on the ground that since the item comes under Sl. No. 47(B), the appellants should have followed certain conditions - HELD THAT - The items manufactured by the assessee specifically fall under Sl. No. 117/118 of List 3 of Notification No. 21/2002-Cus., dated 1-3-2002. Although, the appellants cleared the items to be drugs, there is specific entry in the above stated Sl. No. of List 3 of Notification No. 21/2002-Cus., dated 1-3-2002. In view of this entry, the assessees are eligible for the benefit of the Notification. The items are bulk drugs and they are required to be granted the benefit of Notification. The issue is also covered in the case of M/s. Burroughs Wellcome (I) Ltd. v. CCE 2007 (6) TMI 354 - CESTAT, MUMBAI and Cipla Ltd. v. CC 2007 (8) TMI 131 - CESTAT, CHENNAI - it is found that the clearance made by them availing the Notification had been intimated to the Department in form ER-1 filed by the appellants from time to time. The appellants had cleared the items to Cipla Ltd. by availing nil rate of duty in terms of the Notification No. 4/2006-C.E. Cipla had used Stavudine and Nevirapine in the manufacture of medicines and had accounted for the quantity of both the items received by it from the appellants at nil rate of duty, in the records maintained by them, and used the same in the manufacture of formulations/medicines specified in Sl. No. 47A of the Notification No. 4/2006-C.E. It is further seen that Nevirapine is specifically mentioned in List-3 of the Notification No. 21/2002-Cus., hence, it is a drug covered under Sl. No. 47(A) of Notification No. 4/2006-C.E. It is also seen that all drugs or medicines including their salts and esters and diagnostic test kits which are specified in List-3 of List-4 of the Notification No. 21/2002-Cus., are exempted, when they are manufactured in India. Thus, both the items find a specific entry in Sl. No. 117 and 118 respectively of List-3 of Notification No. 21/2002-Cus., Therefore, the term drug has to be considered to include bulk drug and formulation as per Drugs (Prices Control) Order, 1995 and hence, both the items being bulk drugs are entitled for the benefit of the Notification. The impugned orders are not correct and legal and hence, they are set aside by allowing these appeals - appeal allowed.

Summary

Issues:
Interpretation of Notification No. 4/2006-C.E., dated 1-3-2006 regarding eligibility for benefits under Category (A) to Sl. No. 47 for manufacturers of drugs.

Detailed Analysis:

1. Issue of Eligibility under Notification: The appellants, manufacturers of drugs, claimed eligibility under Category (A) to Sl. No. 47 of Notification No. 4/2006-C.E., dated 1-3-2006. The Department contended that the items manufactured by the appellants were covered under Sl. No. 47(B) as bulk drugs, requiring specific conditions to be followed. The appellants argued that the items, Nevirapine and Stavudine, were cleared to another company for formulation manufacturing, thus not resulting in revenue loss. The Tribunal considered the specific entries of the items in List 3 of Notification No. 21/2002-Cus., dated 1-3-2002, and held that the appellants were eligible for the benefit of the Notification as the items were bulk drugs falling under the specified category.

2. Interpretation of Legal Precedents: The appellants relied on legal precedents, including the case of M/s. Burroughs Wellcome (I) Ltd. v. CCE and Cipla Ltd. v. CC, Chennai, to support their argument that bulk drugs should be considered as drugs for the purpose of the Notification. The Tribunal noted that the items cleared by the appellants were accounted for at nil rate of duty by the recipient company, which used them for manufacturing formulations/medicines specified in the Notification. The Tribunal emphasized that the term "drug" should include bulk drugs and formulations as per relevant regulations, thereby entitling the appellants to the benefit of the Notification.

3. Comparison with Similar Cases: The Tribunal compared the present case with the case of M/s. Burroughs Wellcome (I) Ltd., where the issue revolved around the entitlement of bulk drugs for exemption under a specific Notification. The Tribunal found similarities in the facts and legal provisions, leading to the conclusion that the benefit of the Notification should be extended to the appellants based on the specific entries of the items in the relevant Notification.

4. Final Decision: After considering the arguments from both sides and analyzing the legal provisions and precedents, the Tribunal set aside the impugned orders, ruling in favor of the appellants. The Tribunal concluded that the appellants, being manufacturers of bulk drugs falling under the specified category, were entitled to the benefits under Notification No. 4/2006-C.E., dated 1-3-2006. The decision was based on the specific entries of the items in the Notification and the interpretation of relevant legal provisions and precedents.

This detailed analysis of the judgment highlights the key issues, legal interpretations, comparisons with similar cases, and the final decision reached by the Tribunal in favor of the appellants.