1984 (9) TMI 174 - AT - Customs

Summary

Issues:
- Claim of exemption under Notification No. 55/75-C.E. for import of xylidine and diethylamine
- Interpretation of "drug intermediate" for exemption eligibility
- Rejection of exemption claim by custom house and Appellate Collector
- Applicability of predominant use test
- Actual use as the basis for exemption
- Reversal of judgment by Appellate Collector
- Definition of "drug intermediate"
- Classification of xylidine and diethylamine as drug intermediates
- Verification of actual use by custom house

Analysis:

The case involves the appellants, M/s. Gujarat Pharmaceutical & Chemical Works, importing xylidine and diethylamine for use in manufacturing anesthetics, claiming exemption under Notification No. 55/75-C.E. However, the custom house rejected their exemption claim, stating that the goods had versatile uses, including the manufacture of dye stuff, and their principal use was not as a drug intermediate.

The learned Counsel for the appellants argued that the Appellate Collector erred in his decision, contending that no substance used as a drug intermediate had its principal use solely as such, citing a previous Tribunal ruling. They also highlighted that the excise authorities had certified the actual use of xylidine and diethylamine in the manufacture of specific drugs, lidocaine, and lignocaine hydrochloride.

On the issue of predominant use, the Tribunal rejected the notion that a substance must have a preponderant use as a drug intermediate to qualify for exemption, emphasizing that actual use should be the determining factor. The Tribunal also dismissed the concept of exclusive use in the drug industry, emphasizing that actual use is the most reliable measure.

The Tribunal criticized the lack of precision in the term "drug intermediate," acknowledging that a substance could serve as an intermediate in some cases and a finished product in others, particularly in chemical science. They disagreed with defining a drug intermediate as the penultimate product before the finished goods, deeming it without merit.

Ultimately, the Tribunal classified xylidine and diethylamine as drug intermediates when used in manufacturing anesthetics, granting the exemption under Notification No. 55/75-C.E. The Tribunal directed the custom house to verify the actual use of the imported substances as drug intermediates to ensure compliance.

In conclusion, the judgment emphasized the importance of actual use over predominant or exclusive use in determining eligibility for exemption as a drug intermediate, providing clarity on the classification of substances and the verification process by the custom house.