1988 (4) TMI 266 - AT - Central Excise

Summary

Issues:
- Appeal against orders of Collector of Central Excise & Customs
- Refund claim for CV duty on imported Diosgenin
- Interpretation of Notification No. 55/75-C.E.
- Applicability of exemption for drug intermediates
- Condition imposed by Collector (Appeals) on refund claim
- Use of Diosgenin in the manufacture of drugs
- Challenge to the nature of Diosgenin as a drug intermediate

Analysis:
The appellants filed appeals against the orders of the Collector of Central Excise & Customs regarding the refund claim for Countervailing (CV) duty on the importation of Diosgenin, seeking the benefit of Notification No. 55/75-C.E. The Assistant Collector rejected the refund claim, stating that Diosgenin was a natural primary chemical and not a drug intermediate. However, the Collector (Appeals) allowed the appeal, emphasizing that the specific use of the chemical in drug manufacture qualifies for the notification's benefit, despite imposing a condition on the quantity used in drug production.

The appellants argued that Diosgenin was solely used for manufacturing pregnenolone and progesterone, essential in hormone steroids, with no other practical application. They referred to the Merck Index to support their claim and highlighted that subsequent notifications exempted Diosgenin from Central Excise Duty, indicating its exclusive use in drug manufacturing. Citing legal precedents, they contended that even as a starting material, Diosgenin qualifies as a drug intermediate under the notification, emphasizing the case law supporting their position.

The Department's representative insisted that a product must be used at the penultimate stage of drug manufacture to be considered a drug intermediate, challenging the appellants' interpretation. Referring to a Supreme Court judgment, the Department argued against granting the exemption under Notification No. 55/75 for CV duty purposes, despite the appellants' reliance on relevant legal decisions and the settled position on raw material usage in drug production.

The Tribunal noted that Customs authorities did not dispute the appellants' claim regarding Diosgenin's exclusive use in steroid drug manufacturing, focusing on whether it qualifies as an intermediate chemical. Relying on Tribunal and High Court decisions, the Tribunal ruled in favor of the appellants, affirming Diosgenin's eligibility as a drug intermediate under the notification, irrespective of its stage in the manufacturing process.

Regarding the condition imposed by the Collector (Appeals) on proving the actual use of Diosgenin in drug manufacturing, the Tribunal found no evidence suggesting an alternative use for Diosgenin, as supported by the Merck Index listing and the nature of the product. Considering the lack of contrary evidence and legal precedent, the Tribunal allowed the appeals, emphasizing Diosgenin's clear intended use in drug production, thereby granting the benefit of the notification without additional conditions.