2023 (8) TMI 536 - SCH - Central Excise

Exemption from payment of excise duty given to intravenous fluids - whether benefit allowed when product used only for the purpose of replenishment and not for any other purpose? - benefit of Notification dated 01.03.2000 (Notification No. 6/2000) and the subsequent Notification dated 01.03.2001 (Notification No. 3/2001). HELD THAT - It can only be said that intravenous fluids or solutions are made of chemicals, such as, sugar, electrolytes or amino acids, and are necessary for the circulatory system to assimilate them and for the purpose of maintaining the electrolyte balance in the circulatory system of the body, whether of a human or an animal. The object and purpose of the grant of such an exemption is to ensure that these products are available at a reduced price and that therefore, they can be easily accessible to be used for human beings or animals readily as it is in the nature of a life-saving product - sufficient material was produced by the Assessees in response to the show cause notice as well as at the time of being heard before the order of the Commissioner was passed in order to demonstrate the nature of the subject product. No doubt, the order in original is a lengthy one and takes into consideration the material which was produced by the respondents/Assessees as well as the material that was produced by the Revenue. However, there appears to be a mis-impression in the mind of the Authority while considering whether, the Assessees herein were entitled to the benefit of exemption or not. The simple test that ought to have been followed was to note the composition of the product in question and not as to whether it was being used for treatment of any particular disease. A reading of the license issued to the Assessees, makes it apparent that the composition of the product predominantly consists of Glucose (sugar) and electrolyte (minerals) which are essentially for the purpose of replenishment, not necessarily only used at the time of treatment for any particular disease but also as a preventive measure. Mere addition of Boric Acid and Chlorocresol, that too in minimal proportion, would not alter the character of the product. The product retains its essential purpose of replenishment; and not partake the character of a medicine used only for the treatment of any particular disease. The CESTAT was justified in holding that the respondents/Assessees were entitled to the benefit of exemption as per the Notifications dated 01.03.2000 and 01.03.2001 - Appeal dismissed.

Summary

Issues involved:
The issues involved in this case include the interpretation of exemption notifications related to intravenous fluids, specifically focusing on whether the products in question were eligible for exemption based on their composition and usage.

Exemption under Notification dated 01.03.2000 and 01.03.2001:
The Customs Excise & Service Tax Appellate Tribunal (CESTAT) observed that the exemption granted by the Notifications dated 01.03.2000 and 01.03.2001 for intravenous fluids used for sugar, electrolyte, or fluid replenishment should not receive a restricted interpretation. The Tribunal noted that the benefit of exemption was given in the Chennai circle, and there was no indication of a revision thereafter. The Deputy Drug Controller's letter confirmed that the products in question were essential for electrolyte replenishment, making the respondents eligible for the claimed exemption. The Revenue appealed against this order.

Contention of the Appellant:
The appellant argued that the Notification dated 01.03.2001 aimed to specify the intravenous fluids eligible for exemption based on usage for sugar, electrolyte, or fluid replenishment only. They contended that the products in question containing Boric Acid and Chlorocresol were for treating veterinary diseases, not solely for fluid replenishment. The appellant highlighted that certain judgments supported their position, emphasizing the need for a detailed examination of the product composition.

Contention of the Respondent:
The respondent argued that the products, Calcium Borogluconate and Calcium Magnesium Borogluconate, were primarily composed of sugar and electrolytes essential for fluid replenishment. They referenced the product composition specified in the license granted by the Food and Drugs Control Administration, Gujarat State, indicating the products' suitability for fluid replenishment. The addition of boric acid and chlorocresol was explained as a means to enhance product shelf life, not to change its essential purpose.

Judgment and Analysis:
The Supreme Court analyzed the composition and purpose of the products in question, emphasizing that intravenous fluids are vital for maintaining electrolyte balance in the body. The Court noted that the grant of exemption aimed to ensure accessibility of life-saving products at reduced prices. It was observed that the products predominantly consisted of glucose and electrolytes for replenishment, usable as preventive measures or during disease treatment. The Court concluded that the products retained their essential purpose of replenishment, not solely for disease treatment, thus upholding CESTAT's decision to grant exemption benefits to the respondents. The appeals were dismissed, affirming the respondents' entitlement to exemption under the relevant Notifications.

Conclusion:
The Supreme Court upheld the CESTAT's decision, ruling in favor of the respondents' eligibility for exemption under the Notifications dated 01.03.2000 and 01.03.2001. The Court found no merit in the appeals, leading to their dismissal, and disposed of any pending applications.