1982 (9) TMI 230 - CGOVT - Central Excise

Issues Involved:
1. Classification of Methyl Aceto Acetate under the Customs Tariff Act, 1975.
2. Eligibility for exemption under Notification No. 55/75-CE.
3. Definition and scope of the term "drug intermediate."
4. Application of the theory of structural relationship.
5. Interpretation of taxing statutes in commercial terms.
6. End-use condition for exemption eligibility.

Detailed Analysis:

1. Classification of Methyl Aceto Acetate under the Customs Tariff Act, 1975:
The petitioners imported Methyl Aceto Acetate and it was classified under item 29.01/45(1) of the Customs Tariff Act, 1975, with countervailing duty corresponding to Item 68 of the Central Excise Tariff. The petitioners sought a refund of the countervailing duty, claiming that the imported goods should be exempted under Notification No. 55/75-CE as "drug intermediates."

2. Eligibility for exemption under Notification No. 55/75-CE:
The petitioners argued that Methyl Aceto Acetate should be exempted from countervailing duty under Notification No. 55/75-CE, which exempts "all drugs, medicines, pharmaceuticals, and drug intermediates not elsewhere specified" from Central Excise duty. The Assistant Collector and the Appellate Collector rejected this claim, stating that Methyl Aceto Acetate did not find exclusive use as a drug intermediate.

3. Definition and scope of the term "drug intermediate":
The petitioners contended that Methyl Aceto Acetate qualifies as a "drug intermediate," citing definitions from the Cost Accounting Records (Bulk Drugs) Rules, 1974, and the Condensed Chemical Dictionary by G.C. Hawley. The Government noted that the term "drug intermediate" is not defined in the notification and that its interpretation should be based on commercial understanding rather than strict scientific or technical definitions.

4. Application of the theory of structural relationship:
The petitioners challenged the Chief Chemist's opinion, which suggested that the structural relationship theory did not support Methyl Aceto Acetate as a drug intermediate. They argued that the theory is not valid for certain chemicals listed in Notification No. 64-Cus., dated 6-3-79, which are recognized as drug intermediates despite having no structural relationship with the final drug product.

5. Interpretation of taxing statutes in commercial terms:
The Government emphasized that in interpreting items in a taxing statute, the meaning attached to them by those dealing in them in their commercial sense should be considered. This approach was supported by various court pronouncements, including the case of M.M.T.C. v. Union of India, where the court held that commercial understanding should prevail over scientific or technical meanings.

6. End-use condition for exemption eligibility:
The Government observed that while the notification does not explicitly stipulate an end-use condition, it is implicitly built into the meaning and scope of the term "drug intermediate." A chemical can be regarded as a drug intermediate when it is actually used in the manufacture of drugs. The exemption should be extended to Methyl Aceto Acetate to the extent it is used by the petitioners for the manufacture of Analgin, provided the Assistant Collector is satisfied in this regard.

Conclusion:
The Government held that the ratio of their earlier decision in Order No. 642B/1981 would apply to Methyl Aceto Acetate for being treated as a drug intermediate for purposes of exemption Notification No. 55/77-CE. The benefit of this exemption should be extended to Methyl Aceto Acetate to the extent it is used by the petitioners for the manufacture of Analgin, subject to the Assistant Collector's satisfaction. All ten revision applications were disposed of accordingly.

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