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TMI Blog1991 (2) TMI 236X X X X Extracts X X X X X X X X Extracts X X X X ..... red in this show cause notice is 14-10-1983 to 10-1-1984. 3. The appellants have filed Appeal No. 3696/87-C aggrieved by the Order of the Collector of Central Excise (Appeals), Bombay passed in Order-in-Appeal No. M-277/BII-178/87, dated 10-6-1987 by which he has confirmed the Order-in-Original passed by the Assistant Collector by his Order, dated 13-10-1984. The question that arises for consideration in these appeals is the eligibility of exemption Notification No. 104/82-C.E., dated 28-2-1982 as amended by Notification No. 197/82, dated 22-6-1982 in respect of product 'Potassium Mercuric Iodide Concentrated Solution' (hereinafter referred to as 'product') manufactured and cleared by the appellants without payment of duty. 4. (i) The facts of the case in Appeal No. 3696/87-C are that the appellants filed a classification list with the Department on 3-6-1981 declaring that the 'product' is exempted from payment of duty. The Department is said to have approved the said classification list on 23-3-1982 and exempted the said product from payment of excise duty. Thereafter a sample was drawn on 28-4-1982 and the result was communicated to the appellants on 11-8-1982 which read as "Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .94 for the period from 22-6-1982 to 30-9-1983 which had been cleared without payment of duty. It was alleged that the appellants had mis-declared the said product as drug and suppressed the correct information leading to wrong classification. (iv) The appellants submitted their reply on 28-5-1984 by which they have explained that the product is covered by the said Notification and exempted from payment of duty. They have relied on the certificate issued by the Joint Commissioner, Food and Drugs Administration, Maharashtra State, Bombay. They have relied on the approval of classification which was granted to them. They have also contended that the RT-12 had also been fully finalised for the relevant period. Under the circumstances, they have submitted that there cannot be any suppression of facts as alleged by the Department and contended that the demand was barred under Section 11A of the Act. They further contended that the product is bulk drug which is used for the treatment of skin, dis-infection, ringworm, lupus and also as an adjunct in the treatment of syphilis eligible for exemption under the said Notification. They have relied on the British Pharmaceutical Codex (B.P.C.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) of Section 11A of the Act with the same allegation as in the earlier Show Cause Notice in respect of appeal No. E/3696/87-C. The appellants have submitted the same reply. The adjudication was done by the Collector of Central Excise, Bombay-II and passed the order in original, dated 19-1-1987 rejecting the contentions of the appellants and held inter alia as herein :- "The company has referred to the extracts of British Pharmacopoeia as well as Martindale Extra Pharmacopoeia wherein it is claimed that the product is mentioned as a 'bulk drug'. The relevant extracts are reproduced in the preceding paragraphs. About this contention it is to be noted that a product can be considered to be a "drug" only when the same is manufactured in accordance with the specifications laid down in the relevant Pharmacopoeia. The concentration of Mercuric Iodide solution to be used as a drug mentioned in the Pharmacopoeia ranges from 0.02 to 0.05%. When used in the ointments, the prescribed level is 1 or 2%. In the British Pharmacopoeia 'Neko' soap is mentioned as a "proprietary preparation" containing Red Mercuric Iodide 1%. It thus follows that Red Mercuric Iodide itself cannot be considered as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 or 2% have been used in the treatment of ringworm and lupus, stronger ointments are irritant. Red Mercuric Iodide in solution with Potassium Iodide has been given by mouth, in doses of 2 to 4 mg as an adjunct in the treatment of syphilis." 7. They have also relied on the information on the product appearing at page 465 of the "National Formulary" (10th Edition) published by the American Pharmaceutical Association which is noted below :- "Potassium Mercuric Iodide, dried at 120° for 4 hours, yields not less than 98 per cent and not more than 102 per cent of K2Hg14. Description - Potassium Mercuric Iodide occurs as odorless, yellow crystals, deliquescent in air. It is neutral or alkaline to litmus. Solubility - Potassium Mercuric Iodide is very soluble in water. It is soluble in alcohol, in ether, and in acetone. Identification - A: Dissolve about 20 mg. of Potassium Mercuric Iodide in 1 ml. of water and add 1 ml. of chloroform and 0.5 ml. of ferric chloride T.S. : the chloroform shows the characteristic colour of iodine. B : Dissolve about 100 mg. of Potassium Mercuric Iodide in 2 ml. of sodium hydroxide T.S. and add a few drops of formaldehyde T.S. : a black precipit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l soap which on hydrolysis renders the mercury salt soluble. This soap is designed for disinfecting rather than for detergent purposes. The Neko soap is recommended for disinfecting the hands after examination of cases of communicable diseases. The soap is also invaluable in the post-mortem or dissecting room. The said soap is also useful for freeing the hair from parasites, for checking dandruff and allaying the irritation of prickly heat. They have relied on the letter dated 13-12-1968 of the Directorate of Drugs Control Administration which clarified that if Mercuric Iodide is included as an ingredient in the manufacture of Neko soap then the said soap would be considered as a medicated soap and controlled under the Drugs and Cosmetics Rules. Therefore, they have contended that the soap being a medicated soap and the product having all the medicinal qualities has to be considered as a bulk drug within the definition of "Bulk Drug" appearing in the said Notification. They have assailed the Collector (Appeals) 's finding in which, he has observed that the Neko soap in which the said product is used is supposed to contain only 1% concentration while the product offered for assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing explanation shall be inserted, namely- "Explanation. - In Serial Number 21, 'bulk drugs' mean any chemical or biological or plant product, conforming to pharmacopoeial standards, used for diagnosis, treatment, mitigation or prevention of diseases in human beings or animals, and used as such or as in ingredient in any formulation". The explanation of 'bulk drug' given in the above notification includes chemicals conforming to pharmacopoeial standards used as such or as an ingredient in any formulation. Notification No. 104/82-C.E., dated 28-2-1982 is reproduced below - "In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue and Insurance) No. 55/75-C.E., dated the 1st March, 1975, the Central Government hereby exempts goods of the description specified in the Schedule annexed hereto, and falling under Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), from the whole of duty of the excise leviable thereon. The Schedule 1 to 20 - XXX All drugs, medicines, pharmaceuticals and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 1% as an ingredient to the manufacture of the soap will not in any way be excluded from the explanation of the bulk drug from the Notification, as held by the Collector (Appeals) in the impugned order. All bulk drugs will be of very high concentration. Merely, because the bulk drugs are in high concentration and while formulating the drug, a small quantity is used, it will not in any way lose the property of a drug as held by the Collector (Appeals). The learned Counsel had relied on the case of Citric India Limited, Nasik v. Collector of Central Excise, Pune as reported in 1985 (22) E.L.T. 447 to emphasise this point. The reading of paras 3 and 4 as noted below will also help by clarifying the Collector's finding :- "3. The Collector held the term 'pharmaceutical' to refer to drugs manufactured according to a pharmacopoeial standard which are used for diagnosis, treatment, mitigation or prevention of diseases. In view of this, he would not consider citric acid a pharmaceutical as it was only a basic chemical and was not used directly as a drug or drug-intermediate. Its use was only as a vehicle and as an ingredient of a compound just like other chemicals and substances like alc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lk drug. It may be a chemical but it does conform to pharmacopoeial standards and it has been used as an ingredient in the formulation of medicated soap which is undisputedly manufactured as per the drug licence for utilisation in the treatment and prevention of skin diseases. The literature clearly supports the contentions of the appellants and they are entitled to exemption from the payment of duty under the said Notification. 14. The demands are also time-barred and there is no suppression or mis-representation in this matter since the appellants have been manufacturing this item for a long time and they have been filing the classification lists which have been approved from time to time. The RT-12 have all been filed which have been finalised and therefore the Department cannot be said to be not aware of the manufacture and clearances of this product. The Department should have made investigations at the time of the filing of the classification and before its approval. The fact that the appellants had submitted the copy of the drug licence and all other correspondence in this matter is not disputed by the Department. Therefore, it cannot be contended that the appellants have s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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