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TMI Blog1985 (2) TMI 289X X X X Extracts X X X X X X X X Extracts X X X X ..... te true that the predominant use for citric acid is elsewhere than in pharmaceutical, the substance being widely used as an acidifier; but we cannot agree that this will mean that citric acid is not a pharmaceutical. We have held in various judgments that there is no such thing as a pharmaceutical or a drug-intermediate which does not have many uses totally different from drugs and pharmaceuticals and which are preponderant over the medicinal use. All pharmaceutical drugs are chemicals which have uses more varied than one can easily list. There is not a single substance that is used only as a drug or a pharmaceutical or even whose predominant use is as a drug or pharmaceutical. To go by the department s argument there would be no drug, drug-intermediate or pharmaceutical. We wilt show here what an authority like the Kirk-Othmer Encyclopaedia of Chemical Technology has to say. 2. The Kirk-Othmer Encyclopaedia of Chemical Technology, Volume 6, 3rd Edition carries an article on citric acid. We reproduce below a few selected passages from the article. Many citrates, especially the neutral sodium salt, are used extensively in food and pharmaceutical products and in detergents. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for cathartics and analgesics. Blood clotting is dependent upon the presence of ionic calcium. Removal of the calcium to prevent clotting is necessary in the preparation of fluid whole blood for further processing or for transfusion purposes. Citric acid and sodium citrate are used in the preparation of anticoagulant solutions. 2.6. The uses of salts of citric acid has been treated in several paragraphs. In pharmaceutical uses under salts, it is said that sodium citrate is used in a broad range of pharmaceuticals as a buffer to maintain optimum pH for maximum stability of active ingredients. Sodium or potassium citrate is used in pharmaceutical preparations as a blood and urinary alkalizer. In larger doses, sodium citrate is used as a saline cathartic. 2.7. The anticoagulant property of sodium citrate is employed in sodium citrate solutions for plasma and blood fractionation. Sodium citrate- citric acid combinations are also used for this purpose. Ferric ammonium citrates, brown and green, are mild tasting, very soluble deliquescent salts used in syrups and elixirs as iron sources for treatment of anaemia. Calcium citrate is used in prenatal products as a calcium source. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. To look for direct use of a chemical or a substance or a drug in modern medicine is futile. If by this, the department means use as a single chemical substance, the answer is the same. A number of substances forming the ingredients of one pharmaceutical prescription are the rule today. And we do not see why a drug or a pharmaceutical must be a single chemical/substance. There are no such rules in medical science. 5. Having said the above and disposed of the question whether citric acid is a pharmaceutical or not, we will deal with the other arguments advanced before us. We need to mention here that the department does not challenge the claim that the citric acid manufactured by M/s. Citric India Limited is a pharmacopoeial standard acid. The learned counsel Mr. Lahoty submitted before the Tribunal that under Notification No. 55/75-CE, after its amendment by Notification No. 62/78-CE, dated 1-3-1978, item 19 (of this notification) reads : All drugs, medicines, pharmaceuticals and drug-intermediates not elsewhere specified. 6. The Collector has not disputed that the appellants products are in accordance with pharmacopoeial standard. He rejects the claim because he held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmediate. The Collector s mind appears to have been influenced by a Tariff conference in November, 1980, in Bombay which decided that citric acid was not a pharmaceutical, and should not be given the benefit of the exemption. This action was in disregard of the Supreme Court s pronouncement in M/s. Orient Paper Mills v. Union of India (1978 E.L.T. J 345). No authority however high can control the decision of a judicial or a quasi-judicial authority. While functioning as quasi-judicial officers, they should not allow their judgments be influenced by administrative considerations or by the instructions or directions given by their superiors. Any such direction from above is invalid and will only vitiate the quasi-judicial proceedings. 9.1. Against these facts, the impugned order of the Collector is patently illegal. 10. The statute has not defined drug or drug-intermediate. The explanation inserted by Notification No. 197/82-C.E. describes what bulk drug means. Their citric acid meets the test of the explanation of the notification. Therefore, the meaning of the word drug and drug-intermediate and pharmaceutical must be understood by referring to authoritative and standard w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the paragraph above this passage, the Collector has quoted 5 or 6 authorities which have defined pharmaceuticals. None of these definitions can be met by citric acid because, as observed by the Collector, it is not used directly as a drug or drug-intermediate. He referred to the article Citric Acid in the Pharmacopoeia of India. There is a list of pharmaceutical parties at page 105 of the paperbook prepared by the appellants. This list does not contain the name of M/s. Spencers, to whom M/s. Citric India Ltd. sold some of their citric acid. M/s. Spencers are not manufacturers of drugs; they are manufacturers of bottled drinks and beverages. The learned counsel referred to McGraw Hill Encyclopaedia on Citric Acid and Dorland s Medical Dictionary where citric acid is shown as anti-scorbutic. This might show that it has some uses as a drug, but that will not make it a drug-intermediate. The fact that it is manufactured under the licence issued by the State Government Drugs Control Authorities is only to prevent use of sub-standard qualities in food processing since citric acid is widely used as a flavoring agent in bottled drinks, sweets etc. He even showed a sample of citric acid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o actual use in the manufacture of pharmaceuticals and medicines. The only thing that the Tribunal can do is to see if citric acid is a drug/drug-intermediate and pharmaceutical. If it is, and he has shown conclusively that it is, it is entitled to the exemption without going into the end use. He also countered the argument of the learned counsel for the department that its sales to IDPL had been on duty by saying that was because they had been denied the exemption. Certain sales by a firm called M/s. Citrugia were of citric acid below pharmacopoeial standard. Only M/s. Citric India Ltd. produced pharmacopoeial grade citric acid in India. Their product fully satisfied even the explanation inserted by Notification No. 104/82-CE though this came only on 24-2-1982. 17. To go by end use or to accept the suggestion of the learned counsel for the department would import into the notification an ingredient that is not in it. The exemption was to a drug or a drug-intermediate or a pharmaceutical: their- product, being a drug/pharmaceutical, should be given the exemption unconditionally no matter how it is used. There is justification for this because the Government by its Notification N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parations of preserved foods etc. But the Collector himself says that - Its use is only as a vehicle and as an ingredient of a compound just as other chemicals and substances like alcohol, sodium, and potassium, which though mentioned in pharmacopoeias are not regarded as drugs. 19.1. If the citric acid is used as a vehicle and as an ingredient of a compound, we cannot understand why it should not be a pharmaceutical. We are doubtful, furthermore, whether citric acid of IP grade is used as an acidifier in beverages because less expensive grades would do just as well. However, the fact to be borne in mind is that citric acid does find uses in the preparation of medicines and pharmaceuticals and there is no basis for saying that it is not a drug or pharmaceutical. 20. The learned counsel for the department referred to the Tribunal s Order No. 482/84-C, dated 24-7-84 holding that lithium aluminum hydride was not in the class of drug, drug-intermediate or pharmaceutical. The difference is that lithium aluminum hydride is only a reducing agent in a reaction to arrive at a particular product. It is not a substance that is integrated in the final medicine or pharmaceutical prepar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, we are giving exemption not to a drug or a pharmaceutical, but only to a chemical-and that is not what the exemption permits. We, therefore, can interpret the exemption notification only by giving it to those substances which are, in reality drugs and not sub- stances which are not drugs even though they are capable of acting as drugs. 23. The learned counsel for M/s. Citric India argued that the end use was irrelevant because a product may have diverse uses. Therefore, the description of the goods alone should govern its classification, quoting the Supreme Court decisions in Porrits Spencer [1983 E.L.T. 1607 (S.C.)] and in M/s. Dunlop India. [1983 E.L.T. 1566 (S.C.)]. He overlooks the fact that those decisions are true only in situations where the goods are described by name. In such a case, it is clear that use cannot be relevant for determination of the assessment. In the case before us, no description has been given of the goods but a general categorization by use and function. We have said that there is no such thing as a drug or pharmaceutical; it is only a chemical and other substance which is put to such use. The term drug/drug-intermediate and pharmaceuticals are n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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