1984 (2) TMI 326 - AT - Customs

Summary

Issues:
1. Interpretation of the term "drug intermediate" for the purpose of customs duty exemption.
2. Determining the eligibility of methyl dichloro acetate as a drug intermediate.
3. Examination of the predominant use requirement for claiming customs duty exemption.
4. Consideration of scientific and technological advancements in defining drug intermediates.

Analysis:
1. The appeal involved the interpretation of the term "drug intermediate" for customs duty exemption. The importers, M/s. Trichem Laboratories, imported methyl dichloro acetate claiming it as a drug intermediate used in the manufacture of chloramphenicol. The dispute arose as the claim was rejected by the Assistant Collector and the Appellate Collector, who distinguished between raw materials and intermediates in the manufacturing process.

2. The eligibility of methyl dichloro acetate as a drug intermediate was contested. The Appellate Collector acknowledged its use in the synthesis of chloramphenicol but held that such use did not categorize it as a drug intermediate. The standard reference books indicated its general purpose as an organic intermediate in various chemical syntheses, challenging the importers to demonstrate its predominant use in drug manufacturing.

3. The requirement of predominant use for claiming customs duty exemption was a crucial aspect of the case. The Department argued against considering methyl dichloro acetate as a drug intermediate, citing previous Tribunal orders emphasizing the need for actual use demonstration. The Tribunal highlighted the impracticality of demanding predominant use, stating that substances with multiple applications could not be restricted to a single purpose.

4. The judgment delved into the impact of scientific and technological advancements on defining drug intermediates. The Tribunal disagreed with the narrow interpretation of a drug intermediate as the penultimate product in the manufacturing process. Instead, it emphasized that substances enjoying notification concessions should be used as intermediates in drug manufacturing, irrespective of the stage in the process. The decision acknowledged the evolving nature of science and technology, emphasizing the need to adapt definitions to changing industrial practices.

5. Ultimately, the Tribunal allowed the appeal, directing relief to be granted promptly. It authorized customs inquiries to verify the substance's use as a drug intermediate, considering the factory's licensing for drug manufacturing by the State government. The decision reflected a broader perspective on defining drug intermediates in light of advancing science and technology, ensuring a pragmatic approach to customs duty exemptions in the pharmaceutical industry.