2001 (12) TMI 97 - AT - Central Excise

Summary

Issues Involved:
1. Applicability of concessional rate of duty on bulk drugs under Notification No. 6/94-C.E. during the period from 6-1-95 to 9-2-95.
2. Effect of the repeal of the Drugs (Prices Control) Order, 1987 on the concessional rate of duty.
3. Interpretation of legislative incorporation and reference in the context of fiscal statutes.

Detailed Analysis:

1. Applicability of Concessional Rate of Duty:

The primary issue was whether manufacturers of bulk drugs, falling under Chapters 28 and 29 of the Central Excise Tariff Act, 1985, could avail the benefit of a concessional rate of duty under Notification No. 6/94-C.E. for the period from 6-1-95 to 9-2-95. The notification granted partial exemption from duty to certain goods, including bulk drugs, with the term "bulk drugs" defined as per the Drugs (Prices Control) Order, 1987. The notification was amended on 9-2-95, omitting the relevant entries and explanation.

2. Effect of Repeal of the Drugs (Prices Control) Order, 1987:

The Department argued that the repeal of the Drugs (Prices Control) Order, 1987, effective from 6-1-95, meant that the definition of "bulk drugs" was no longer available, and thus, the concessional rate could not be claimed during the period in question. The jurisdictional Commissioner confirmed the demand for differential duty and imposed penalties and interest on the assessee.

3. Interpretation of Legislative Incorporation and Reference:

The Tribunal examined conflicting views from previous decisions: the South Regional Bench, Bangalore, favored the assessee, while the Delhi Bench supported the Revenue. The appellant argued that the repeal of the Drugs (Prices Control) Order, 1987, did not affect the continued operation of Notification 6/94, as the provisions were incorporated by reference. The appellant relied on Supreme Court decisions, including *Ram Sarup v. Munshi & Ors.* and *Mahindra and Mahindra Ltd. v. Union of India*, which established that the repeal of an Act does not affect the construction or effect of another Act incorporating its provisions.

The Department countered that the burden of proving entitlement to exemption lay with the assessee and that a strict interpretation of fiscal statutes was required. They cited Tribunal decisions and Supreme Court rulings, including *Collector of Customs, Madras v. Nathella Sampathu Chetty*, to argue that the reference to the definition in the Drugs (Prices Control) Order, 1987, was not an incorporation, and thus, the exemption could not be claimed post-repeal.

Tribunal's Conclusion:

The Tribunal concluded that the intention behind the notifications was to incorporate the definition of "bulk drugs" from the Drugs (Prices Control) Order, 1987. The Supreme Court's principles on legislative incorporation applied, meaning the repeal of the 1987 Order did not affect the notification's provisions until they were amended on 9-2-95. The Tribunal found no merit in the Revenue's contention that the absence of the 1987 Order's definition negated the exemption.

The Tribunal also noted the importance of bulk drugs in national health programs and inferred that the Government did not intend to deny exemptions during the short period in question. The benefit of the concessional rate of duty under Notification No. 6/94-C.E. was thus available to manufacturers from 6-1-95 to 9-2-95.

The question referred was answered in favor of the assessee.