TMI Blog1985 (12) TMI 219X X X X Extracts X X X X X X X X Extracts X X X X ..... was issued to the respondents on 24th November, 1978, making a demand of duty amounting to Rs. 2,36,530.45 for the period from July to October, 1978. The demand notice was confirmed by the Assistant Collector on 7th October, 1981, holding that gelatine capsules are used principally as containers/carriers for drugs to be administered and do not by themselves function as drugs. Referring to the opinions of the Deputy Chief Chemist and the Drug Control authorities, it was held that the product could not be considered as a drug intermediate. In appeal before the Collector of Central Excise (Appeals), Bombay, the decision of the Assistant Collector was reversed. It was held that empty hard gelatine capsules were drug intermediate and the Assistant Collector s Order was set aside, with consequential relief to the respondents. It is against this order of the Collector of Central Excise (Appeals), Bombay that the present appeal has been filed before us. Appellants submit that the Collector of Central Excise (Appeals) has erred in taking cognizance of the opinions of the Deputy Chief Chemist and the Drug Control authorities, which clearly stated that the item could not be considered as drug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f India s decision in the case of Hindustan Organic Chemicals Ltd. (supra), it was admitted that the Government of India had held that the end use should determine the classification but this was not acceptable to the learned S.D.R. It is stated that, as decided in the case of Hind Syntex Ltd. (supra), if in the case of classifying a product the authorities adopt a construction, which no reasonable person could adopt, then the Court is competent to interfere. If, however, there are two constructions which an entry could reasonably afford and one of them, which is in favour of the Revenue, is adopted, the Court has no jurisdiction to interfere merely because the other interpretation is favourable to the appellant. Referring to the decision of the High Court of Judicature, Bombay, in the case of Fibres India Limited v. Union of India Others (supra), it is stated that if a statute contains a language which is capable of being construed in a popular sense such statute is not to be construed according to the strict scientific or technical meaning of the language contained in it but if it is a word which has a technical or scientific character then it must be construed according to tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utset that the respondents had declared in their classification list that the empty hard gelatine capsules manufactured by them were exempted as per Notification No. 62/78. They had also stated that their products were classifiable under Item 68. This was approved by the Department on 7th March, 1978. It is stated that in the case of M/s. Inarco Limited v. Collector of Central Excise, Bombay, this Tribunal has held, vide Order No. 167/84-D, dated March 23, 1984, that demand of duty for the period preceding the date of the show-cause notice cannot, in .such circumstances, be justified. Although the appellants had urged that the demand should be enforced with effect from the date of the Review Order of the Collector, the Tribunal held that it would be justified in law as well as in equity if the demand for Excise Duty is held enforceable with effect from the date of the show-cause notice when the party was put on a notice that the department was likely to review the existing position as regards classification. It is, therefore, pleaded that no demand for duty should be enforceable prior to the date of show-cause notice. Shri Ganesh pointed out that gelatine capsules were not packing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter meant to be used for dissolving other medicines for injection into human bodies is a drug within the meaning of Section 3(b) of the Drugs and Cosmetics Act (1940). Pointing out that not any or every water can be used for such purpose and that the water for injections in the instant case was distilled for the purposes of being used along with the medicine for injection into human body, it was held that, clearly, this would come within the definition of drug as contained in Section 3 of the Drugs and Cosmetics Act. On the ratio of both these decisions, it was contended by the respondents that their product also should be held to be falling within the definition of drug. Further, they pointed out that in a letter of the Government of India, Ministry of Finance (D.R.), Letter No. 102/26/79-CX3 dated 11-3-1980, it had been clarified that surgical cotton (absorbent cotton wool), guazes, bandages and other non-medicated surgical dressings are drugs within the definition of the term as contained in Section 3(b) (i) of the Drugs and Cosmetics Act. Therefore, there was nothing repugnant to the accepted interpretation in holding gelatine capsules also to be drugs within the meaning of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e evidence of the fact that empty hard gelatine capsules are treated as drugs by the Chief Controller of Imports and Exports, the Ministry of Petroleum and Chemicals and the Ministry of Finance, Department of Revenue. It is further pointed out that as early as on 18th September, 1978, respondents had asked the department for copies of the opinions of the Drug Controller and the Deputy Chief Chemist or to allow them inspection of the same. They were only furnished extracts in a letter dated 9th November, 1979, but denied access to the entire reports and they were in no position to examine the contexts in which these reports had been asked for and furnished. Shri Ganesh also emphasises that, clearly, the product in question falls in the category of a pharmaceutical. For this purpose, he referred to the meaning of Pharmacy and Pharmaceutical, as appearing in Chambers Twentieth Century Dictionary and Webster s Dictionary. According to these definitions Pharmacy is the art of preparing and compounding medicines and pharmaceuticals refers to the knowledge of art of pharmacy, medicine or drug product. Respondents have strongly relied on the decision of the Government of India in Shasun Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms, Bombay (supra), in which it was held that the impugned product was clearly shown to be used as a drug intermediate. Two Govt. authorities concerned with the Drug Industry also treated the item as such. Therefore, it was entitled to exemption to duty in terms of Notification No. 55/75. 4. We have carefully considered the facts of the case and the submissions made by both sides. The Department s case is that gelatine capsule is used principally as a container or carrier for drug to be administered and it does not by itself function as a drug. Mere use in the manufacture of drugs for filling medicament would not qualify the product for classification as a drug intermediate. Reliance is heavily placed on the advice of the Deputy Chief Chemist, Drug Control authorities and the classification by authorities such as DGTD, Chief Controller of Imports and Exports, as well as decision of the Supreme Court in the case of Chimanlal Jaggivandas (supra), which was dismissed by the Assistant Collector as, in the first case, not relevant and, in the second, not applicable, without elaborating on the reasons for this view. We find that the learned Departmental Representative is disagreeing wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other decisions have been cited by the respondents in their favour. The most important of these in Supreme Court decision in the case of Chimanlal Jaggivandas v. the State of Maharashtra (supra), which held that absorbent wool, roller bandages and gauzes fall it to the definition of drug in Section 3(b) of the Drugs and Cosmetics Act, 1940, as amended. Again, in the Calcutta High Court decision in the case of Ram Chandra Sundarka (supra), it was held that even distilled water used for dissolving other medicines for injection into human bodies would be considered as a drug within the meaning of the Drugs and Cosmetics Act, 1940. We have also a very clear pronouncement of the Madhya Pradesh High Court in the case of Ramesh Chemical Industries v. Union of India and Others (supra), holding that although there is no definition of drugs contained in the Central Excises and Salt Act, 1944, yet the definition of drug in Section 3(b) of the Drugs and Cosmetics Act should guide the interpretation of the Central Excise Tariff. The Bombay High Court decision in the case of Glaxo Laboratories (India) Ltd. v. Union of India and Others (supra) has successfully been differentiated by the responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to deal with the alternative plea that the demand of duty would not in any case, be valid for the period preceding the date of the show cause notice. 6. Pursuant to our findings, we dismiss the appeal and confirm the order of the Collector of Central Excise (Appeals), Bombay. [per : G. Sankaran]. - 7 I have perused the Order proposed by my learned Brother Shri K. Prakash Anand. I agree with the final conclusion to dismiss the appeal but I would rather base it on the footing that empty gelatine capsules are drugs rather than drug intermediate. Drug intermediates, as the Tribunal has held in a number of decisions, notable one among them being Satyadev Chemicals Ltd., Baroda v. Collector of Central Excise, Baroda - [1985 (20) E.L.T. 335 = 1985(5) E.T.R. - 804] are chemical substances which contribute to the ultimate chemical structure of the drug. From this point of view, it would not be proper to held gelatine capsules as drug intermediates since they do not enter into the chemical structure of drugs. 8. However, it would be correct, in my view, to appropriately describe gelatine capsules as drugs for the following reasons : (i) They are substances used for or in the treatm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly indicates that capsules are not regarded as something entirely divorced from the manufacture or preparation of drugs.) (v) The Ministry of Petroleum Chemicals, which is administratively concerned with the drug industry has, in letter No. 8(8)/74-CH I dated 19.4.1974 to the respondent, fixed the maximum selling prices of gelatine capsules which has been shown under the description of bulk drug. (vi) The Central Excises and Salt Act does not contain a definition of drug . Therefore, one has to fall back on the trade of commercial understandings on the term. But the drug industry has to work within the parameters laid down by the Drugs and Cosmetics Act. The term drug has been defined in this Act. Though, as a general proposition one should not turn to other enactments for ascertaining the meaning of expressions in a given Act, in the present case, having regard to the all-pervasive nature of the Drugs Act, the understanding of gelatine capsules as a drug by the administrative authority (Ministry of Petroleum Chemicals) and the other circumstances narrated above, we do not see any good reason not to rely on this understanding for the purpose of determining whether gelati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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