Collector of C. Ex. Vs. Ganesh Chemicals Industries - Court Judgment

Excerpt:
1. the question for decision in this appeal by the collector of central excise, bombay-ii is whether respondents manufacture dimethyl sulphate is eligible for exemption under notification 55/75-c.e., dated 1-3-1975 as drug intermediate.2. the central government in exercise of powers conferred by sub-rule (1) of rule 8 of the central excise rules, 1944 published notification march 1, 1975 prescribing that the goods specified in the schedule annexed to the notification are exempt from whole of the duty of excise leviable thereon. item 19 of the schedule reads as under: "all drugs, medicines, pharmaceuticals and drug intermediates not elsewhere specified." the respondents in respect of their product dimethyl sulphate claimed exemption under the notification as drug intermediate. the assistant collector of central excise, kalyan-i division by communication dated 14-3-1980 intimated the respondents that from the process of manufacture disclosed by them to the department it is noticed that dimethyl sulphate is used only as a methylating agent to introduce a particular group in the drug. he added by chemical intermediates are understood intermediate products obtained in the manufacture of final products. he held that in view of this position the product did not merit consideration as drug intermediate and no exemption as required could be granted. in appeal, however, the collector of central excise (appeals), bombay by his order dated 21-3-1983 found in favour of the respondents and the product eligible for exemption under the notification. he accordingly allowed the appeal. aggrieved with this decision the collector of central excise, bombay-ii has filed this appeal to the tribunal.3. at the hearing of the appeal, shri s.r. kunte, jdr represented the appellant and shri r.t. bandodkar, partner of the respondents - the respondents. the respondents submitted their comments on the grounds of appeal. they were heard and the record perused.4. the respondents have filed a certificate dated 4-4-1980 issued by drugs controller and food (health) authority, government of andhra pradesh in favour of one m/s. vani chemicals & intermediates pvt. ltd. from which it appears that dimethyl sulphate is a drug intermediate for manufacture of analgin i.p. the collector (appeals) we observe that in deciding in favour of the respondents followed the interpretation made by the govt. of india in the case of hindustan organic chemicals ltd. [1982 (10) e.l.t. 721]. besides this, high court of judicature at bombay in rakesh enterprises & another v. union of india & another - 1986 (25) e.l.t. 906 (bombay), to which our attention has been drawn by the respondents, has held that it is impossible to accede to the submission of the department that apart from the product being branded as a drug or drug intermediate it must further be shown that this is so used. such an interpretation according to the high court in respect of the notification is not permissible. the high court in para 4 of its decision also referred to a decision of the tribunal in trichem laboratories, bombay v. collector of customs, bombay - 1984 (17) e.l.t.185 (tribunal). the tribunal in that decision held that there is no such thing as a drug intermediate because all substances having such uses find many more different uses. it was further held that the claim that drug intermediate is a penultimate substance from which a drug is obtained by simple process is too narrow an interpretation for a term carrying wide description.5. while the respondents have placed on record certificate which shows that the product would appear to be drug intermediate in respect of certain drugs, the appellant's only argument is that because the product is a methylating agent and is not found in the end-product it would not merit treatment as drug intermediate.in view of the precedents referred to above, we feel that such a contention is not acceptable. we, therefore, dismiss this appeal.

Judgment:
1. The question for decision in this appeal by the Collector of Central Excise, Bombay-II is whether respondents manufacture Dimethyl Sulphate is eligible for exemption under Notification 55/75-C.E., dated 1-3-1975 as drug intermediate.

2. The Central Government in exercise of powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944 published notification March 1, 1975 prescribing that the goods specified in the Schedule annexed to the notification are exempt from whole of the duty of excise leviable thereon. Item 19 of the Schedule reads as under: "All drugs, medicines, pharmaceuticals and drug intermediates not elsewhere specified." The respondents in respect of their product Dimethyl Sulphate claimed exemption under the notification as drug intermediate. The Assistant Collector of Central Excise, Kalyan-I Division by communication dated 14-3-1980 intimated the respondents that from the process of manufacture disclosed by them to the Department it is noticed that Dimethyl Sulphate is used only as a methylating agent to introduce a particular group in the drug. He added by chemical intermediates are understood intermediate products obtained in the manufacture of final products. He held that in view of this position the product did not merit consideration as drug intermediate and no exemption as required could be granted. In appeal, however, the Collector of Central Excise (Appeals), Bombay by his order dated 21-3-1983 found in favour of the respondents and the product eligible for exemption under the notification. He accordingly allowed the appeal. Aggrieved with this decision the Collector of Central Excise, Bombay-II has filed this appeal to the Tribunal.

3. At the hearing of the appeal, Shri S.R. Kunte, JDR represented the appellant and Shri R.T. Bandodkar, Partner of the respondents - the respondents. The respondents submitted their comments on the grounds of appeal. They were heard and the record perused.

4. The respondents have filed a certificate dated 4-4-1980 issued by Drugs Controller and Food (Health) Authority, Government of Andhra Pradesh in favour of one M/s. Vani Chemicals & Intermediates Pvt. Ltd. from which it appears that Dimethyl Sulphate is a drug intermediate for manufacture of Analgin I.P. The Collector (Appeals) we observe that in deciding in favour of the respondents followed the interpretation made by the Govt. of India in the case of Hindustan Organic Chemicals Ltd. [1982 (10) E.L.T. 721]. Besides this, High Court of Judicature at Bombay in Rakesh Enterprises & Another v. Union of India & Another - 1986 (25) E.L.T. 906 (Bombay), to which our attention has been drawn by the respondents, has held that it is impossible to accede to the submission of the Department that apart from the product being branded as a drug or drug intermediate it must further be shown that this is so used. Such an interpretation according to the High Court in respect of the notification is not permissible. The High Court in para 4 of its decision also referred to a decision of the Tribunal in Trichem Laboratories, Bombay v. Collector of Customs, Bombay - 1984 (17) E.L.T.185 (Tribunal). The Tribunal in that decision held that there is no such thing as a drug intermediate because all substances having such uses find many more different uses. It was further held that the claim that drug intermediate is a penultimate substance from which a drug is obtained by simple process is too narrow an interpretation for a term carrying wide description.

5. While the respondents have placed on record certificate which shows that the product would appear to be drug intermediate in respect of certain drugs, the appellant's only argument is that because the product is a methylating agent and is not found in the end-product it would not merit treatment as drug intermediate.

In view of the precedents referred to above, we feel that such a contention is not acceptable. We, therefore, dismiss this appeal.