1. The appellant is engaged in the manufacture of potassium iodate conforming to pharmacopoeial standards. It had filed classification lists from time to time claiming exemption from duty on the potassium iodate as a "bulk drug" in terms of notifications which were in force at the relevant time. For the purpose of this appeal, relevant notification is 8 of 1995, dated 9-2-1995. The classification list claiming the benefit of this notification was approved. Subsequently, however, the department issued a notice proposing recovery of duty on clearances of potassium iodate made from 1-5-1994 to 2-5-1994 on the ground that in the absence of an end-use certificate, it could not be said that the product had been used as a "bulk drug". Notice also alleged that the appellant misdeclared potassium iodate in the classification list as "bulk drug". Differential duty was sought to be recovered on the clearances by disallowing the exemption. After considering the cause shown and hearing the appellant, the Collector confirmed the demand for duty. Hence this appeal.
2. Notification 8/95 grants exemption to bulk drugs including to those other than specified in it. Potassium iodate is not specified here. The explanation to Notification defines "bulk drugs" and "formulation" in the following words: "Bulk drug" means any pharmaceutical, chemical, biological or plant product including its salts, esters, stereo-isomers and derivatives, conforming to pharmacopoeial or other standards specified in the Second Schedule to the Drugs and Cosmetics Act, 1940 (23 of 1940), and which is used as such or as an ingredient in any formulation: "Formulation" means medicaments processed out of or containing one or more bulk drugs, with or without the use of any pharmaceutical aids (such as diluent, disintegrating agent, moistening agent, lubricant, buffering agent, stabiliser or preserver) which are therapeutically inert and do not interfere with therapeutical or prophylactic activity of the drugs, for internal or external use, or in the diagnosis, treatment, mitigation or prevention of disease in human beings or animals, but shall not include any substance to which the provisions of the Drugs and Cosmetics Act, 1940 (23 of 1940) do not apply." The Collector in his order holds that from these definitions, it follows that the notification applies only to bulk drugs used as such or as ingredients in any formulation, and the purpose of both uses should be for medicinal. The notification, he says, will not apply to substances to which the provisions of the Drugs and Cosmetics Act would not apply. Since the potassium iodate cleared by the appellant has not been used as a drug as such, but as used in the manufacture of salt it was not used for medicinal purposes, and benefit of notification will not be available.
3. The answer of the appellant is as follows : (i) the definition of the word 'formulation' figuring in the explanation to the notification is identical to the definition of 'bulk drug' in the Explanation to the Drug Prices Control Order, 1995 (DPCO) and the earlier notification exempts bulk drugs stated that the word 'bulk drug' has the same meaning as in the DPCO. Notification 8 of 1995 has been made self contained by incorporating the definition in the DPCO. (ii) The Potassium iodate manufactured by the appellant satisfies the definition of 'bulk drug' in the DPCO. (iii) In the absence of any requirements to this effect in the notification, an end-use certificate cannot be insisted upon. This is particularly so since the Board, following representations from the trade had clarified that its circulation 33 of 1994 that an end-use certificate would not be required for the purpose of notification except for those bulk drugs, the major use of which was not for medicinal purposes and potassium iodate did not figure in the list of such drugs which the Board drew up.
4. The Departmental Representative contends that Notification 8 of 1995 is complete in itself, and any interpretation of terms in the DPCO or any other enactment cannot be made applicable to it. He contends, following the reasoning of the Commissioner that the definitions in the notification of the terms 'bulk drug' and 'formulation' support the view that, for the exemption to be available, the commodity must have been used as a drug. Since this has not been done, the benefit of the exemption has been rightly denied. He contends that the term "used" occurring in the notification should be interpreted to mean "already used" and not (as is contended by the appellant) "capable of being used". The product has not been shown to have been used as a drug either by itself or as an ingredient in any "formulation". The fact that it has manufactured under a drug licence does not render it a bulk drug, in view of the different terminologies contained in the Drugs and Cosmetics Act and in the Notification. For all practical purposes, iodised salt, for the manufacture of which potassium iodate is used, is not a 'formulation' but food item. He seeks to distinguish the various decisions relied upon by the advocate for the appellant.
"To obtain the benefit of Notification No. 8 of 1995, was it necessary for the manufacture of the appellant to show it to have been used as a drug, or is it sufficient to show that the product is capable of being used as a 'bulk drug' either as such or in a 'formulation'. A subsidiary question that may arise would be, whether the use of the product in iodising salt would amount to its use in a 'formulation'.
6. There can be no dispute that potassium iodate possesses therapeutic properties. The following extract from the Martindale Extra Pharmacopoeia and Marck Index show : "Potassium Iodate has the actions of iodine and the iodides (see p.
1601). It is used for the prophylaxis and treatment of iodine deficiency disorders described in detail under Iodine p. 1601. It may be used similarly to potassium iodide as an adjunct to antithyroid agents in the pre-operative management of hyperthyroidism and to prevent the uptake of radio-iodine by the thyroid. The overall management of hyperthyroidism is discussed on p. 1597 while radiation protection of the thyroid with iodide or iodate is discussed on p. 1604." "While, odorless crystals or cryst powder d 3-899 mp 560 with partial decompn. Slowly sol in 12 parts water in 3.1 parts boiling water : insol in alcohol Use : Oxidizing agent in volumetric chemical analysis." In addition, the advocate for the appellant produced during the course of the hearing, containers of potassium iodate tablets manufactured by M/s. C.I. Laboratories, Calcutta. These are to be administered to counter the effect of nuclear radiation on the functioning of the thyroid gland. It is not in dispute that potassium iodate provides iodine in form in which it can be [absorbed] by the body. Adequate intake of iodine is essential for the normal activity of the thyroid gland. The iodine manufactured by the appellant is used in the manufacture of iodized salt. This is salt to which a prescribed proportion of potassium iodate is added. The object is to ensure that sufficient iodine is available to the populations so that they do not suffer from iodine deficiency, with consequent disorders of the thyroid gland such as goitre.In Balakrishna Pillar, Chief Inspector of Drugs Intelligence Squad Trivandrum and Anr. v. Matha Medicals and Ors. - (1991) 2 Supreme Court Cases 203, the Supreme Court considered the meaning of the term "bulk drug" occurring in the Drug (Price Control) Order, 1979. It noted in paragraph 8 the definition of "bulk drug" as under : "The definition of 'bulk drug' given in clause (a) of para 2 shows that it means any substance 'which is used as such' or 'as an ingredient in any formulations'. Thus a bulk drug is one in which may be capable of use by itself or as an ingredient in any formulation. Drug is defined in clause (d) of para 2 to include 'bulk drugs' and 'formulations'. Clause (f) then defines 'formulation' to mean any medicine processed out of or containing one or more bulk drugs or drug. Thus formulation is a medicine which may comprise even of one bulk drug by itself or more than one bulk drug. The definition of 'formulation' is thus very wide and includes even one bulk drug where that one bulk drug by itself is treated as a medicine..." The Departmental Representative seeks to contend that this judgment would not apply to the notification. We note however, that the definition of the term 'bulk drug; occurring in the various Central Excise notifications has been identical with the definition of the term occurring in the DPCO as it existed from time to time. Thus Notifications 31/88 and 6/94 incorporated to meaning given in DPCO, 1987 and Notification 8 of 1995, the meaning given in DPCO, 1995. The contention of the Departmental Representative that the observations of the Supreme Court were made in a different context therefore would not apply to the definition in the notification cannot be accepted in view of the clear finding given by the Court in para 8. The same view has been taken by the Supreme Court in Patna Municipal Corporation v.Dularchand Rao - AIR 1964 " Patna 965. The Court held that for an article to be "food" for the purposes of the Provision of Food Adulteration Act, 1954, 'it is enough that the article in question is usable as food or drink for human consumption. The word 'use' which is to be found in Section 2(v) of the Act which means "usable or capable of being used", not "to be used" or "for the purpose of being used." 9. The same view has been taken by this Tribunal in Collector of Custom, v. Gufic Private Ltd. - 1990 (45) E.L.T. 280 (Tribunal). It held the propylene glyccl to be a bulk drug as defined in Notification No. 234/82-C.E. on the ground that it is used in the treatment of bovine ketosis and pregnancy toxaemia was mentioned in a pharmacopoeia.
This decision was rendered in the context of the fact that the item itself was to be put to use not as a drug but as a solvent. The Bench said "It is thus clear that propylene glycol is used in the treatment of animals. In that event, it would be a bulk drug as defined in Notification No. 23/82." 10. A contrary view, that exemption as a bulk drug to citric acid should be limited to the quantity used in the manufacture of drug or medicine, was held by this Tribunal in Citric India Ltd. v. CCE - 1985 (22) E.L.T. 447 and the same view was repeated [incidently by a Bench consisting of the same members, and in a decision of few days after this decision Haresh Kumar & Co. v. CCE - 1985 (20) E.L.T. 400]. In appeal against the Citric India's case, the Bombay High Court reversed the Tribunal's Order - 1993 (66) E.L.T. 566 (Bom). It held, relying on its judgment in Union of India v. Rakesh Enterprises - 1991 (56) E.L.T.39 (Bom.), that once a product is found to be drug, drug intermediate pharmaceuticals exemption is available to it and cannot be limited only to those quantities used in the manufacture of drug.
11. The Departmental Representative contended that the Supreme Court has held in its judgment in CCE, Guntur v. Andhra Sugar Ltd. - 1988 (38) E.L.T. 564 (S.C.) that the requirement of end-use was imperative in a situation when the products are used other than as a raw material or intermediate for manufacture of drugs. This contention had been urged before the High Court in Citric India's appeal. The Court did not accept this contention for the reason that the Supreme Court had found that acetic andydride was used in the manufacture of drugs and that therefore, the question as to whether end-use has to be considered before exemption can be granted did not come up for consideration before the Supreme Court. The Departmental Representative relied upon the decision of a single judge of the Karnataka High Court in Mysore Acetate and Chemical Co. v. Asstt. Collector -1984 (17) E.L.T. 319 in order to say that since the assessee is located in Gujarat, Bombay High Court judgment is not binding upon it and that the Tribunal can choose between either of these two decisions. This judgment in fact does not lay down that an end-use certificate has to be produced before exemption could be availed of. The assessee had challenged before the Court demand for duty of acetic andydride manufactured by it on the ground that it was a chemical and not a drug, pharmaceutical or similar product exempted by Notification No. 62/78-C.E. The Court found that although it was a chemical, the product had been supplied as a drug intermediate and held that therefore it was entitled to the benefit of the notification.
12. The Supreme Court judgment, which refers to this judgment and on a decision of Government of India in Hindustan Organic Chemicals was interpreted by the Bombay High Court in Citric India's judgment to say that the question of necessity of end-use did not come up for consideration. Interpretation by High Court or the Supreme Court Judgment is binding on us (Amruta v. Kondabai - AIR 1994 Bom. 293).
Apart from this judgment, there is no judgment contrary to the judgment of the Bombay High Court in Union of India v. Rakesh Enterprises. In addition, there is also a judgment of Bombay High Court in Kumar Prabhudas Shah v. U.O.I. - 1987 (28) E.L.T. 192. The decisions of this Tribunal and also the decisions of the High Court are consistently of the view that evidence of end-use is not essential. (We have noted that the decision in Harish Kumar & Co. which has been overruled by the Bombay High Court).
13. There is another aspect to the matter. Both the Supreme Court and the Karnataka High Court had referred to the Government of India's decision in Hindustan Organic as contemporaneous exposition of the law.
We have therefore to consider the circular issued by the Board dated 30-3-1994. Issue of this circular was necessitated as a result of representations against an earlier Circular of 1990 according to which, end-use certificate would be required before exemption would be granted to "all other drugs" and cited another classificatory circular issued in 1991. The second circular waived the end-use condition for bulk drugs specified in the Second Schedule to the Drug Prices Control Order. The Board considered the submission that a number of bulk drugs were not listed in the First or Second Schedule to the DPCO and also considered the list of other bulk drugs whose major use was not for medicinal purposes. It provided that end-use certificate may be insisted upon only in respect of "other bulk drugs" listed by it.
Potassium iodate does not figure in the list of about 70 drugs appearing in the circular. The circular of the Board therefore is an indication of the recognition of the acceptance by the department that end-use condition is not required for goods the major use of which is formulation of drugs and that potassium iodate is one of the goods.
14. Thus the question formulated is answered by saying that an end-use certificate is not necessary for potassium iodate in terms of the judgment of Bombay High Court and the decisions of this Tribunal. It is therefore not necessary to answer the subsidiary question.
17. Normally I would not write any assertive or concurring order. But in view of the fact that Bombay High Court had distinguished the case of Andhra Sugar decided by SC 1988 (38) E.L.T. 564 I am citing this concurring judgment.
18. In Citric India Ltd.'s case the Division Bench of the Bombay High Court has taken note of the decision of the Supreme Court referred to above. The question involved in this case as well as in the case decided by the Bombay High Court referred to above are similar. This Tribunal is working under the jurisdiction of the High Court of Bombay.
In paragraph 8 of the judgment, the Bombay High Court has elucidated as to how Supreme Court judgment is not applicable in that case. Hence following the Bombay High Court judgment and for the reasons recorded by my brother, I agree that the appeal has to be allowed.