1984 (4) TMI 289 - AT - Central Excise

Summary

Issues: Classification of sodium lauryl sulphate as a drug or a surface-active agent under Central Excise Tariff.

The judgment revolves around the classification of sodium lauryl sulphate (SLS) manufactured by M/s. Anand Synthochem Pvt. Ltd. The appellant argued that SLS, made to Indian Pharmacopoeia standard and used as an ingredient in drug formulations, should be classified as a drug under Item 68 CET, seeking exemption under Notification 55/75-C.E. However, Central Excise assessed it under Item 15AA as a surface-active agent due to its surface-active properties. The appellant contended that despite its surface activity, since it is solely used in drug manufacturing and holds a license for drug manufacture, it should be classified as a drug. The Counsel highlighted the absence of a broad clause like "all sorts" in Item 15AA, emphasizing that substances marketed as drugs should be assessed solely as drugs, with any ambiguity benefiting the assessee. Reference was made to a previous Tribunal decision and the absence of SLS use as a drug in certain chemical dictionaries.

The department's Counsel countered by pointing out references in chemical dictionaries listing SLS for non-drug uses, such as a wetting agent in the textile industry. The argument was made that the use of SLS should not dictate its classification, relying on the composition and character of the substance for assessment. The Counsel cited the Dunlop Judgment to support this stance, emphasizing that substances like sugar and alcohol, used in drug manufacture, are not classified as drugs. The definition of "drug" from Hawley's dictionary was presented to establish the criteria for a substance to be classified as a drug.

The appellant's Counsel responded by stressing that SLS has varied specifications for different uses and the production of non-pharmacopoeial grades does not undermine its classification as a drug. It was argued that the absence of direct use by physicians does not negate its status as a drug, as doctors typically prescribe patented formulations containing specific ingredients. The absence of a specific item for drugs in the Central Excise Tariff was noted, along with the limitation of Notification 55/75-C.E. in classifying substances under Item 68 if a more suitable heading exists. The unique surface-active properties of SLS were highlighted, indicating its application in patented preparations for effective therapeutic component penetration, supporting its classification as a surface-active agent under Item 15AA.

The Tribunal rejected the appeal, concluding that SLS fits well under Item 15AA designed for surface-active preparations, despite the arguments presented by M/s. Anand Synthochem Pvt. Ltd. The judgment emphasized the necessity to classify the substance under the most suitable heading based on its characteristics, ultimately determining that Item 15AA was the appropriate classification for SLS, thus dismissing the appeal.