Customs duty exemption for diagnostic agents upheld where bulk import for test kit manufacture was not expressly excluded.

Imported diagnostic agents used to manufacture diagnostic test kits were treated as eligible for customs duty exemption as life-saving drugs or medicines, because prior exemption notifications and trade understanding had consistently covered diagnostic agents and test kits for Hepatitis B detection. The later notification did not expressly exclude bulk imports, and the Drugs and Cosmetics Act materials, including the Second Schedule and section 3(b)(iv), supported classification of such products as life-saving medicines. In the absence of a specific restrictive definition, a beneficial interpretation applied and the duty benefit was upheld for the assessee.

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Issues: Whether the imported diagnostic agent used for manufacture of diagnostic test kits was entitled to customs duty exemption as a life-saving drug or medicine, and whether bulk import of such material could be denied the benefit of the exemption notifications.

Analysis: The earlier customs notifications consistently treated diagnostic agents and diagnostic test kits used for detection of Hepatitis B as falling within the category of life-saving drugs and medicines. The relevant exemption history showed that such goods had been covered in prior notifications, and the later notification did not indicate an intention to exclude them merely because the material was imported in bulk for manufacture of diagnostic kits. The Second Schedule to the Drugs and Cosmetics Act and section 3(b)(iv) supported the understanding that such products were known in trade and by users as life-saving drugs or medicines. In the absence of any specific restrictive definition in the exemption notification, the beneficial interpretation favoured continuation of the exemption.

Conclusion: The imported bulk diagnostic agent was held eligible for exemption and the denial of duty benefit was set aside in favour of the assessee.

Ratio Decidendi: Where prior exemption notifications and trade understanding treat a diagnostic agent as a life-saving drug or medicine, exemption cannot be denied merely because the goods are imported in bulk for manufacture of diagnostic test kits, unless the later notification expressly excludes them.

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