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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 ..... of Tetracycline but, however, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... line Urea Complex is a canalised item 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 o ..... 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 valid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 chlortetr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 base like brothly amin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 leaves tetracycline and such tetracycline is furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... drochloride. 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 Tetracycline base/Hcl. Para 214 (4) of chapter 22 of 84 Policy In the case of drugs appearing in appendices 3, 5, & 9, the names mentioned :- In the case of drugs appearing in appendices 3, 4, 5 & 9, the names mentioned are as they are commonly (i) refer to the respective active ingredients, or know ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Policy A-M 1983 and in the policy A-M 84, besides the above, complexes of drugs are also canalised. Shri Krishan Kumar on the other hand contended that the active ingredient canalised under Policy A-M 1983 need not necessarily be active ingredient of a drug. It can be even an active ingredient of any substance. What is important according to Shri Krishan Kumar is that active ingredient should be a drug in the substance imported. 26. We have carefully considered the policy. To our mind, what has been canalised in Appendix 9 of A-M 1983 Policy was drugs specified under p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 placed either before the authorities below or before us to establish that imported goods is a Chemical. Shri Krishan Kumar on the other hand contended that what had been imported is Tetracycline and Urea. In other words, his contention was that Tetracycline was imported either by putting solid Tetracycline in the urea solution or by putting Urea in the solution of Tetracycline. He refuted the contention of the learned Advocates that Urea Complex is a chemical compound. He did not dispute that it is a complex. According to him it is an 'Inclusion Complex'. He urged that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i 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 1967 S.C. 1454 - Commissioner of Sales Tax, M.P. v. Mrs. Jaswant Singh Charan Singh; 1981 E.L.T. 432 (Bombay) Advani Oerlikon Ltd. & Another v. Union of India and others; AIR 1973-S.C.-page 78, Sales Tax Commissioner, U.P. v. S.N. Bros. Shri Hidyatullah further pointed out that finding of the learned Addl. Collector is not that what had been imported is either Tetracycline Base/Hcl or their active ingredients, salts and esters but that the substance has all the characteristics of Tetracycline. Such a finding according to Shri Hidayatullah does not establish that imported goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount 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 Edition by Gessner G. Hawley as "a substance composed of atoms and ions of two or more elements in chemical combination. The constituents are united by bonds (q.v.) or valence for forces. A compound is a homogeneous entity in which the elements have definite proportions by weight, and are represented by a chemical formula (q.v.). A compound has characteristic properties quite different from those of its constituent elements; it can be decomposed by energy in the form of chemical reaction (q.v.) of heat, or of an electric current". If it is a chemical compound it cannot have the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 to those compounds or structures which did not always conform to the classic theories of valency. Thus, even now, complexes or complex compounds in the broad sense are considered as those compounds having some deviation from the normal concepts of bonding. Yet, many compounds still referred to as complexes, have been studied (e.g. coordination compounds) and their structures sufficiently elucidated to no longer classify them as complex. It is, therefore, difficult to delineate the difference between a simple and complex compound, except for the greater number of common compounds which ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 components are held in canals situated lengthwise to the crystals. Digitonin-Cholesterol complexes are examples of the choleic acid type of complex. The potential and present applications of the channel-lattice complexes are many. Separation of petroleum products, prevention of oxidation (Vitamin A palmitate is successfully complexed with urea and thereby protected), separation of optical isomers (several host compounds have steric features that allow complexation of only one enantiomorph of a racemic mixture), and many analytical uses are illustrative of such applications. The well-known starch iod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Advocates S/Shri Hidayatullah and Patel that the expression 'active ingredient' mentioned in 218(4) of 1983 Policy and in 241(4) of 1984 Policy could mean only an active ingredient of a drug mentioned in appendix 9. Their contention finds support from the description of the active ingredient given in Remington's Pharmaceutical Sciences, 10th edition, page 310. It is stated therein 'by the time a new drug becomes generally available to the Physicians it already has several names. A 'drug' refers to the active ingredient in a 'drug product', such as a tablet, capsule, or other dosage form that is administer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 second document, the flow sheet also indicates that urea is not used in the manufacture of Tetracycline Hydrochloride. On the other hand it is tetracycline that is used in the manufacture of tetracycline Hydrochloride. Urea is used only to obtain Tetracycline free from impurities. In document No. 3, the letter dated 6-5-1983, the C.M.A. Laboratories only stated that the substance is a complex of urea and tetracycline. It is not stated in this letter that the substance is a new substance other than urea or tetracycline. It is significant to note that in this letter the Laboratory stated that the complex is Tet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 132.7oC; decomposes before boiling, soluble in water, alcohol and benzene; slightly soluble in ether, almost insoluble in chloroform. Low toxicity, Non-combustible.' Its uses have been given in the said Dictionary as under : 'Fertilizer; animal feed; plastics; chemical intermediate, stabilizer in explosives; medicine (diuretic); adhesives, separation of hydrocarbons (as urea adducts); pharmaceuticals, cosmetics, dentifrices, sulfamic acid production; flameproofing agents; viscosity, modifier for starch or case in-based paper coatings; preparation of biuret.' It is, nowhere, stated that urea is a raw material for the manufacture of Tetracycline Hydrochloride. One of the raw materials for Te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 (Industrial), the import should have been allowed. Further when there is ambiguity as to the goods that has been canalised and having regard to the fact that the complex came to be canalised only during the Policy A-M 1984, the appellants should have been given the benefit of doubt and the import should have been cleared. The arguments addressed are attractive. But on close scrutiny we find that the contention that there is ambiguity in the Policy is not correct. There is no ambiguity whatsoever in the Policy. The Policy is clear and explicit. The items canalised as have been stated earlier are the drugs specified under p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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