1984 (9) TMI 290 - HC - Customs

Summary

Issues Involved:

1. Classification of Polyvinyl Pyrrolidone (P.V.P.) under the Indian Tariff Act, 1934.
2. Whether P.V.P. is a synthetic resin or a drug.
3. Relevance of end-use in tariff classification.
4. Interpretation of tariff entries and the definition of "drug."

Issue-wise Detailed Analysis:

1. Classification of Polyvinyl Pyrrolidone (P.V.P.) under the Indian Tariff Act, 1934:

The petitioners, manufacturers of pharmaceutical products, imported P.V.P. (marketed as 'Plasdone' or 'Povidone') and classified it under Tariff Item No. 87 of the Indian Tariff Act, 1934, which had a duty rate of 60%. The Customs authorities reclassified it under Tariff Item 82(3), applicable to artificial or synthetic resins, with a higher duty rate of 100% plus countervailing duty at 36%. The petitioners paid the duty under protest and sought a refund, which was denied by the Assistant Collector of Customs and subsequently by the Appellate Collector of Customs and in a revision application. The petitioners then filed the present petition, arguing that P.V.P. should be classified under Tariff Item 28 as a drug or alternatively under the residuary Item 87.

2. Whether P.V.P. is a synthetic resin or a drug:

The court examined various technical definitions and literature. P.V.P. is described as a synthetic polymer in several authoritative sources, including the Merck Index, United States Pharmacopoeia, and British Pharmaceutical Codex. The court noted that while all resins are polymers, not all polymers are resins, and P.V.P. is water-soluble, unlike typical resins. However, technical literature, including the McGraw-Hill Encyclopaedia of Science and Technology and the book "Water-Soluble Resins," classifies P.V.P. as a synthetic resin. The court concluded that P.V.P. is a synthetic polymer and falls under the broad definition of synthetic resins.

3. Relevance of end-use in tariff classification:

The petitioners argued that synthetic resins are typically used in industries like textiles or paints, not pharmaceuticals, and that pharmaceutical-grade P.V.P. is not known in the trade as a synthetic resin. The court found no evidence supporting this claim. Citing the Supreme Court's decision in Dunlop India Ltd. v. Union of India, the court held that the end-use of a product is irrelevant for tariff classification unless explicitly mentioned in the tariff entry. The nature of the product at the time of importation is what matters, not its ultimate use.

4. Interpretation of tariff entries and the definition of "drug":

The petitioners contended that P.V.P. should be classified as a drug under Tariff Item 28, relying on the definition of "drug" under the Drugs and Cosmetics Act, 1940. The court noted that while the Act's definition includes substances used as components of a drug, this extensive definition is specific to the Act's purpose and cannot be applied to interpret Tariff Item 28. The court emphasized that a drug in common parlance is a substance with physiological action on the living body. P.V.P., being physiologically inert and used as a binder in tablets, does not qualify as a drug. The court referred to authoritative definitions and previous judgments, concluding that P.V.P. cannot be classified as a drug under Item 28.

Conclusion:

The court held that P.V.P. is a synthetic resin under Tariff Item 82(3) and not a drug under Item 28. The petitioners' claim for classification under the residuary Item 87 was also rejected. The petition was dismissed, and the rule was discharged with costs.