1981 (9) TMI 285 - CGOVT - Central Excise

Summary

Issues:
- Determination of whether certain products are considered drug-intermediates for the purpose of exemption under Notification No. 62/78 of the Central Excise Tariff.

Analysis:
1. The central issue in this case was to decide whether the products manufactured by the Petitioners, namely Aniline, Para Nitro Chloro Benzene (PNCB), and Acetanilide, qualified as drug-intermediates eligible for exemption under Notification No. 62/78. The Appellate Collector initially ruled that these products did not meet the criteria to be classified as drug-intermediates. For Aniline, it was determined that its primary use was outside the drug industry, thus not qualifying for the exemption. Regarding PNCB, the Appellate Collector noted the conversion process it undergoes before becoming a drug and classified it as a chemical rather than a drug-intermediate. Similarly, Acetanilide was deemed ineligible due to its various uses beyond drug-intermediates as per the Condensed Chemical Dictionary.

2. The Petitioners argued that the goods in question were indeed used as drug-intermediates, supported by certificates from reputable institutions like the Central Drug Research Institute and the National Chemical Laboratory. They contended that the purpose of the notification was to reduce duty on life-saving drugs, a goal that would be defeated if the Appellate Collector's reasoning was upheld. The Petitioners disagreed with the criteria set by the Appellate Collector, emphasizing that an item should be considered a drug-intermediate as long as it was used in drug manufacturing, regardless of predominant use or position in the manufacturing process. They also referenced a Trade Notice and certificates from drug control authorities to support their claim.

3. Upon reviewing all submissions, the Government found merit in the Petitioners' arguments, noting that the lower authorities' interpretation of 'drug intermediate' was not aligned with the notification's plain language. The Government acknowledged the evidence provided by the Petitioners, including certificates from reputable laboratories, confirming the products' use as drug-intermediates. It was observed that the notification did not specify the stage of use of the item as a penultimate stage before drug formation. Therefore, the Government concluded that the Petitioners should receive the exemption for the products to the extent they were actually used in drug manufacturing. The requirement of end-use was implied and necessary, ensuring that the exemption applied only when the product was utilized as a drug-intermediate, to be verified by the relevant authorities.

This judgment highlights the importance of a thorough analysis of the specific characteristics and uses of products to determine their eligibility for exemptions under relevant notifications, emphasizing the need for evidence and adherence to established procedures in claiming such benefits.