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TMI Blog1984 (1) TMI 324X X X X Extracts X X X X X X X X Extracts X X X X ..... r, allowed redemption on payment of fine of Rs. eight lakhs twenty five thousand in lieu of confiscation. 3. Appeal No. 1075/83 arises out of and is directed against the order bearing No. S/10-11/83, dated 18-3-83 passed by the Additional Collector of Customs, Bombay by which he directed confiscation of a consignment of tetracycline Urea Complex under Section 111(d) of the Customs Act read with Section 3 of the Import and Export Control Act, 1947 but allowed redemption on payment of fine of Rs. two lakhs in lieu of confiscation. 4. Appeal No. 1076/83 arises out of and is directed against the order bearing No. S/10-29/84 C-dated 13-5-1983 passed by the Additional Collector of Customs, Bombay by which he ordered confiscation of Tetracycline Urea Complex under Section 111(d) of the Customs Act read with Section 3 of the Import and Export Control Order, 1947 but, however, allowed redemption on payment of fine of Rs. one lakh fifty thousand in lieu of confiscation. 5. Appeal No. 1150/83 arises out of and is directed against the order bearing No. S/10-23/83 C-dated 6-4-1983 passed by Additional Collector of Customs, Bombay by which he ordered confiscation of a consignment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tem falling under Appendix 9 of the A-M 83 policy. (2) The imported goods is not a drug nor an active ingredient nor a salt or ester of a drug and as such the import is permissible under OGL under Appendix 10(1) of A-M 83 policy. (3) Tetracycline Urea Complex is neither Tetracycline base nor Tetracycline Hydrochloride but it is a different commodity altogether commercially known as Tetracycline Urea Complex and as such it falls outside the canalised item. (4) The burden of establishing that the imported goods fall within Appendix 9 lies heavily on the Deptt. and that there was no material placed on record by the Department from which it could be said that the burden has been discharged. The learned Collector and the learned Additional Collector have totally lost sight of this aspect. (5) The orders of the Additional Collector and the Collector are vitiated by reason of taking into consideration extraneous matters such as, Circular Instructions issued by the Chief Controller of Imports Exports; the news item appearing in Chemical Weekly ; adverse effects of the imports on the production of IDPL and placing reliance on the ambiguous report of the Deputy Chief Chemist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged on both sides, it is necessary and useful to make a brief reference to the notices of show cause issued to the appellants; the findings of the learned Additional Collector and the learned Collector; their reasoning: the documents relied upon by the appellants; the relevant entries and few other paragraphs in the Import Policy of 1983 and 1984. 13. Two sets of show cause notices were issued. In the first set it was alleged, firstly that the import of Tetracycline Urea Complex contravened the Import Trade (Control) Order No. 17/55 on the ground that the imported goods required a valid import licence which had not been produced. Secondly, the item imported is Tetracycline which figures in the canalised list in Appendix 9 of 1983 A-M policy. Thirdly, Tetracycline Urea Complex is covered by Tetracycline of canalised list. Import under OGL cannot be allowed. The Import is unauthorised. Also there is a case of mis-declaration. In the second set of show cause notice it was alleged that the goods have been imported in contravention of Government of India, Import Trade Control Order No. 17/55, dated 7-12-55 for the reasons (i) to bring into India, of the said good requires a val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order Shri Shah s attention was also drawn to I.T.C. circular dated 3-1-83 from C.C.I. E. addressed to all the Customs, Licensing and Sponsoring authorities that Tetracycline Urea Complex is also included in Tetracycline in the canalised list, in Appendix 9. Shri Shah said that no public notice was issued in the context wheareas, the circular is dated 3-1-83, these goods have been shipped on 30-11-82. 16. It is thus seen that the Additional Collector did rely upon the statement of the Deputy Chief Chemist, the Report appearing in the Chemical Weekly dated 28-12-1982 and also report in the Times of India by Shri G.K. Pandey, besides he also took into consideration the effect of the import on I.D.P.L. and the circular dated 3-1-1983 issued by the C.C.I. E. Now, in the show cause notice issued to the appellants we do not find any reference being made to the Circular dated 3-1-83 issued by C.C.I. E., statement of the Dy. Chief Chemist and reports in the Chemical Weekly and the Times of India. 17. In Appeal No. 1075/83 the finding of the learned Additional Collector Shri V.S. Naik reads : In so far as the importation has been made without cover of a valid ITC licence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the goods cannot be imported under O.G.L. The goods are confiscated under Section 111(d) of the Customs Act, 1962. The learned Collector has spelled out his reasons in the order. The learned Collector, Shri K. Srinivasan has observed that the imported goods were tested in Customs Laboratory and reported to have characteristics of Tetracycline . He has further observed that as per information available in literature, Urea-Complex of Tetracycline is known to be formed at the last stage of purification after the complete synthesis of Tetracycline, is over. After referring to the contentions urged on behalf of the importers and referring to the items in the ITC Schedule, the learned Collector observed : It is an admitted fact that Tetracycline Urea-Complex does not figure in any of the pharmacopoeia. Tetracycline and Tetracycline HCL are drugs which figure in the standard pharmacopoeia. What is Tetracycline ? Tetracyclines are a group of antibiotics having an identical 4-ring combocy-clic structure as a basic skelton and differing from each other chemically only from substituent variation. It is an antimicrobial substance produced by the growth of certain strains of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, as it gives a positive test for Urea. II. Flow Sheet of Tetracycline Hydrochloride I.P. duly certified by the Controller, Food Drug Administration, Madhya Pradesh. The relevant portion relied upon by the appellants reads : Process : PART I: Conversion of Tetracycline Urea Complex to Tetracycline base : 5 kg. Tetracycline-Urea complex dissolved in 100 litres alkaline alcohol with warming and stirring. The clear solution is filtered and the undissolved residue discarded. The filtrate is fed to the neutralization vessel where it is allowed to cool and then neutralised with enough dilute sulphuric acid to effect the precipitation of free tetracycline base, the PH being not allowed to drop below about 3-4 units. The reaction mixture is allowed to stand overnight for completion of precipitation and then centrifuged. The filtrate is discarded, the cake is washed with enough water till free of sulphate. The crude tetracycline cake is dried and used without further purification in the next step. PART II: The crude tetracycline from the first stage is stirred in about 35 litres alcohol; collosive (3:1) mixture and the dissolution is effected by the addition of an organic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess. 1. Strains of tetracycline which are soil microorganisms are cultured i.e. fermented in broth by constant agitation of the broth. Besides, sucrose (i.e. cane sugar) other sources of energy such as starch, dextrin, maltose, destrose, lactose, mannitol and glycerol are used. This process of fermentation is carried on for a few days-one to four days. During this process the fermentation is continuously agitated and aerated. 2. The above process results in formation of the following Isomers - Tetracycline 5-Hydrotetracycline 7-CoIoro Tetracycline 4-Epitetracycline 7-Chloro-l-epi-tetracycline Anhydro - tetracycline Iso-1-Chloro tetracycline 3. To separate Tetracycline from the remaining isomers and other impurities in the said formation, Urea (liquid i.e. Urea+Water) is added to the formation. The result is that Tetracycline and Urea combine and form a solid substance while the other six isomers and other impurities remain dissolved in the liquid i.e. water. The said solid substance comprising Tetracycline and Urea is commercially called Tetracycline Urea Complex. From this Tetracycline Urea Complex, the Urea is first removed by proper process which lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Appendix 9 and is a raw material to manufacturing Tetracycline Hydrochloride. 22. Item No. 1 in Appendix 10 of A-M 83 policy (Identical in policy A-M 84), reads Item Categories of eligible importers 1. Raw Materials, components and consumables (non-iron and steel items) other than those included in the Appendices 3,4,5,8,9, and 15. Actual Users (Industrial) In the Import Policy A-M 83 in Paragraph 3 of Appex. 9, 17 drugs have been mentioned and in 1984 A.M policy, 16 drugs have been mentioned. We will only refer to such of the items on which the parties placed reliance : Description as per A-M 83 policy Description as per A-M 84 Item 6 Doxycycline base, its hydrate/hyclate/hydroc-hloride/calcium complex and intermediates thereof. Item 7 Doxycycline base, its hydrate/hyclate hydro-chloride/calcium complex and intermediates thereof. Item 16 Tetracycline base/Hcl para 218 (4) of chapter 21 of 83 Policy Item 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 1 of Appendix 10 of the Import Policy, A-M 1983 ? 24. We have in detail referred to the findings of the learned Additional Collector as well as the findings of the learned Collector and reasons assigned by them. We have also in detail referred to and considered the document and evidence relied on by the appellants and also set out the relevant items in I.T.C. Schedules, and other relevant paragraphs and further formulated the contentions urged on both sides. Shortly stated, the Additional Collector considered the imported goods, as a Tetracycline itself though, of course, he recorded a finding that the imported goods, has the essential characteristics of Tetracycline. The learned Collector, however, found that the Tetracycline is an active ingredient in the substance Tetracycline Urea Complex. 25. The first question that arises for consideration is what is it that has been canalised under Appendix 9? The answer to this question depends on our interpretation of para 218(4) and relevant entries in Appendix 9 of the Policy A-M 83. The learned Advocates for the appellant contended that only drugs, their esters, salts and active ingredients have been canalised under the Pol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether the goods imported is a drug appearing in appendix 9, its salts, esters or active ingredients. According to the appellants, they are the manufacturers of Tetracycline Hydrochloride and that Tetracycline Urea Complex is a raw material for the manufacture of Tetracycline Hydrochloride. The appellants in appeal Nos. 739 and 1076 have contended that the imported goods is a chemical compound. They also gave the chemical name and composition. The appellants in other appeal did not state that the imported goods is a chemical compounds. In their Memorandum of Appeal they have stated that they are engaged in the manufacture of bulk drugs and one of the bulk drugs manufactured and marketed by them is Tetracycline Hydrochloride. This bulk drug is manufactured with the aid of an intermediate called Pentahydroxy Methyl-N, N-Dimethyl, Amino Naphtacendion Carboxamide Carbamide Compound which is commercially known as Tetracycline Urea Complex and that it is a raw material. Tetracycline Urea Complex does not find place in any Pharmacopoeiae or in any chemical dictionary. During the course of the arguments the learned Advocates contended that Urea Complex is a chemical. No material is p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ea Complex is formed either by adding Urea solution to the solid Tetracycline or adding Urea to Tetracycline solution. He also drew our attention to paragraph 3 of the manufacturing process wherein it is stated that the solid substance comprising Tetracycline and Urea is commercially called Tetracycline Urea Complex. From this Tetracycline Urea Complex, the Urea is first removed by proper process which leaves Tetracycline and such Tetracycline is further processed with Ammonium Chloride and Hydrochloric Acid so as to obtain the drug Tetracycline Hydrochloride. 28. Shri Hidayatullah the learned Advocate for the appellants in Appeal 739 and 1076 vehemently urged that in the matter of interpretation of ITC entries, resort should be had not to the scientific or technical meaning but to the popular meaning or the meaning attached to them by those dealing in them. In other words, his contention was in the interpretation of ITC items, it is improper to refer to Scientific Dictionaries or Authorities and the proper thing to be done is to ascertain the commercial sense or meaning. In support of his contention the Advocate relied upon the decision of the Supreme Court reported in AIR 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pinion of the Dy. Chief Chemist. The Additional Collector, in addition, also took into consideration extraneous matters such as report in the Chemical Weekly, The Times of India and the effect of import on I.D.P.L. We further agree with the contention of the Advocate that learned Additional Collector and the learned Collector ought not to have placed reliance on evidence or materials in respect of which the appellants have no previous notice in that no mention had been made in the show cause notices. But then the learned Advocates submitted that the matter need not be remanded on account of denial of principles of natural justice and the tribunal may consider as to whether the goods imported is a canalised item or not on the basis of the material already on record. We, therefore, proceed to consider whether the goods imported is a canalised item or not. 32. The first question that may be considered is whether Urea Complex is a Chemical Compound as has been contended by the appellants in Appeal Nos. 739 and 1076 of 1983 or it is only an Inclusion compound as contended by Shri Krishan Kumar. Chemical Compound is described in page 268 of the Condensed Chemical Dictionary, 10th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of cage material. 33. The expression Complex or Complexes is not defined in any of the policies. We, however, found in Remington s Pharmaceutical Science, 16th edition in Chapter 14, page 182 the concept of complex has been considered. It may be stated here that the appellants have relied upon this edition in connection with their contention that active ingredients can only be active ingredients of a drug but not a substance. For the present, we only confine ourselves to the concept of complex, given in chapter 14. In this chapter the learned Author deals with various complexes such as Metal Complexes, Inorganic Complexes, Olefin Complexes, Molecular Complexes (Additional Compounds), Charge-Transfer Complexes, Hydrogen-Bonded Complexes, No-Bond (Induction) Complexes, Channel-Lattice Complexes. In our opinion, it is useful to refer to this Chapter to know what the expression Complex means. The term Complex according to the learned author would tend to indicate, especially to a student, a meaning of mysteriousness or even confusion concerning certain properties of these substances. Perhaps this was true at one time since the idea of complexity as originally attributed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s which exist in the same solution with it. One component may be a solid, liquid or gas retained within the cages of the host, it may be released by dissolving, heating, or grinding the clathrate. Such complexes are usually prepared by crystallization of the host substance from a solution containing the guest component. The learned Author further says the Clathrates guest can later be removed by some simple, physical process. In the same page the learned Author gives the description of Channel-Lattice Complexes . Channel Lattice Complexes - This type of inclusion complex occurs primarily when the host component crystalises in such a way as to form channel-like spaces in the crystal lattice. The guest molecule then must be of a shape which will fit into the voids or channels in the lattice. Urea, amylose, the zeolites and other compounds will complex other materials in this fashion. Since the channels are formed by crystallization of the host, in-spring like spirals, the nature of the guest component is usually limited to long, unbranched, straight-chain compounds. Urea will complex n-octane, but not isooctaine.Choleic acids also function as host components in which the guest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Imports Exports, we are unable to agree with his contention that the clarification given by the C.C.I. E. is either binding on the Customs authorities or other persons if the clarification has the effect of modifying, altering, or amending or annulling the policy. From the order of the Additional Collector it is seen that he placed reliance on the TTC circular dated 3-1-1983. As has been stated earlier, Jt. C.C.I. E. in Circular No. 1 of 3-1-83 had clarified that the item Tetracycline in the canalised list also includes Tetracycline Urea Complex. This circular does not incorporate any reason for the clarification given. As has been pointed out by us earlier, what had been canalised in 1983 Policy are the drugs mentioned in paragraph 3, their salts/esters and active ingredients and not even their complexes. It is only in the policy of 1984, the complexes of drugs also came to be canalised. Now, it is not the contention of the department that the Tetracycline Urea Complex as such is a drug or an active ingredient of a drug. When that is so, the clarification given by Jt. C.C.I. E. in no way helps the department. There is considerable force in the contention of the learned Ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etracycline is added to the solution of urea a solid substance is formed. This substance has the properties of the tetracycline and urea and it is a non-bond inclusion complex . It is admitted that Urea as such is not a drug. It has no characteristics or properties of a drug and therefore it cannot be a drug intermediate as contended by the appellants in appeals 852, 1075 and 1150/83. Even the documents produced by the appellants establish that Tetracycline urea complex is not a commodity different from tetracycline and urea. In the certificate of CMA Laboratories it is stated that the test is positive both for Tetracycline and Urea. No doubt in the said certificate it is stated that the sample is not tetracycline or tetracycline hydrochloride, but is an urea complex of tetracycline. We have already in detail considered what this complex means. Further, the reason given in this certificate does not appeal to us. The reason given is that test for urea is positive therefore it is a tetracycline urea complex. But the laboratory failed to notice that test for tetracycline is also positive. This certificate can at best establish that the complex is Tetracycline plus Urea. The seco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er to the properties of tetracycline and also the properties of urea and its use. In page 1146, Chapter 63, in Remington s Pharmaceutical Sciences, 16th edition, it is stated that `Tetracycline are broad spectrum antibiotics. They are mainly bacteriotatic. They bind to the bacterial 30s ribosomes and prevent t-RNA from combining with m-RNA. Thus protein synthesis is inhibited. The drugs have activities both gram-positive and gram-negative bacteria, my cobacteris...... In page 1004 of the Condensed Chemical Dictionary 10th edition by Gessner G. Hawley, the properties of Tetracycline are given as yellow, odorless, crystalline powder, stable in air, affected by strong sunlight. Potency effected in solutions with pH below and destroyed in alkali hydroxide solutions. Practically insoluble in chloroform and ether, very slightly soluble in water; slightly in alcohol ; very soluble in dilute hydrochloride acid and alkali hydroxide solutions; pH...... In page 1073 of the same Dictionary the properties of Urea are given : White crystals or powder, almost odorless, saline taste; sp.gr. 1,334; m.p. 132.7 oC; decomposes before boiling, soluble in water, alcohol and benzene; s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any other means. Making use of the Dictionaries and Pharmaceutical Sciences were not considered as objectionable in any of the decisions cited by the learned Advocate. There cannot be any commercial sense, in so far as what is meant by Complex or Inclusion compound or tetracycline -or urea or their properties. 39. After careful consideration of all the aspects, we are satisfied that the appellants imported two separate and distinct commercial commodities viz., tetracycline and urea. Since tetracycline is one of the drugs specified in appendix 9 item 16 of Policy A-M 83 the import of which under OGL under item 1, Appendix 10 is impermissible. We further hold that urea is not a raw material for the manufacture of Tetracycline Hydrochloride and as such the import of which cannot be made under OGL under Appx. 10(1) of the Policy A-M 1983. 40. The only other aspect which needs to be considered is the contention urged by the learned Advocates for the appellants that uptill the present exports imports of similar goods have been cleared by the Customs, and as such particularly when the imports are intended not for resale but for manufacture of a drug by the Actual Users ..... X X X X Extracts X X X X X X X X Extracts X X X X
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