1988 (10) TMI 38 - SC - Central Excise

EXEMPTIONS DRUG INTERMEDIATES CHEMICAL HAVING OTHER USES THAN AS DRUG INTERMEDIATE EXEMPTION ALLOWABLE ONLY WHERE PRODUCT ACTUALLY USED AS DRUG INTERMEDIATE

Summary

Issues:
- Eligibility of Acetic Anhydride for exemption under specific notifications as a drug intermediate.
- Interpretation of the term "drug intermediate" under the Central Excises and Salt Act, 1944.
- Adjudication of refund claims for duty paid on Acetic Anhydride.
- Reversal of orders by the Collector of Central Excise (Appeals) and subsequent appeals before the Appellate Tribunal.
- Consistency of interpretation with previous judgments and government orders.
- Application of the principle of contemporaneous exposition in statutory interpretation.

Analysis:
1. The central issue in this case revolved around determining whether Acetic Anhydride manufactured and sold by the respondent to drug manufacturers qualified for exemption under specific notifications as a drug intermediate. The contention was that the product was used in the manufacture of drugs and, therefore, should be exempt from excise duty.

2. The respondent had filed refund claims for duty paid on Acetic Anhydride, asserting that it fell under the category of drug intermediate as per the relevant notifications. The dispute arose from the Assistant Collector's initial refund allowance, which was later challenged and overturned by the Collector of Central Excise (Appeals), leading to further appeals by the respondent before the Appellate Tribunal.

3. Previous judicial decisions, such as the Mysore Acetate & Chemical Co. Ltd. case and the government order concerning Hindustan Organic Chemicals Ltd., emphasized the importance of end-use in determining the eligibility for exemption as a drug intermediate. The principle was reiterated in the Shasum Chemicals case, highlighting the significance of contemporaneous exposition in statutory interpretation.

4. The Supreme Court, in its analysis, considered the broad description and substance of the term "drug intermediate" in the exemption notification. It was established that the Acetic Anhydride manufactured by the respondent was indeed used by drug manufacturers in the production of drugs, aligning with the intended purpose of the exemption.

5. Ultimately, the Court upheld the Tribunal's decision, concluding that the goods in question met the criteria for exemption as a drug intermediate based on their actual use in drug manufacturing. The appeals were dismissed, with no costs awarded, affirming the Tribunal's correct interpretation in light of the goods' intended purpose and application.

6. The judgment underscored the importance of interpreting statutory provisions in alignment with their purpose and contemporaneous understanding, emphasizing the need to consider the practical application and intended use of products in determining their eligibility for specific exemptions under the Central Excises and Salt Act, 1944.