Drug-intermediate exemption depends on actual use in drug manufacture, not a penultimate-stage or predominant-use test.

Aniline, para nitro chloro benzene and acetanilide were treated as eligible drug-intermediates under the exemption notification where they were actually used in the manufacture of drugs. The narrower view that a drug-intermediate must be predominantly used for drugs or must represent the penultimate stage of manufacture was rejected because the notification did not impose those limits. Since the goods had other uses, the exemption depended on end-use verification and proof of actual use to the satisfaction of the authority. The appellate order was set aside, and exemption was confined to the extent of proven use in drug manufacture.

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Issues: Whether Aniline, Para Nitro Chloro Benzene and Acetanilide were entitled to exemption as drug-intermediates under Notification No. 62/78, and whether exemption depended on their actual use in the manufacture of drugs.

Analysis: The lower authorities had adopted a narrow view by treating drug-intermediate as a product predominantly used for drugs and as one that must be the penultimate stage in the manufacture of the drug. The notification, however, did not impose any such limitation. The record contained certificates from scientific bodies stating that the goods were used as intermediates in drug manufacture to the extent of such use. The proper construction of the exemption was therefore that the benefit would extend where the goods were actually used in the manufacture of drugs. Since the goods also had other uses, an end-use verification was necessary and the actual use had to be satisfied to the authority's satisfaction.

Conclusion: The order in appeal was set aside. The goods qualified for exemption only to the extent they were actually used in the manufacture of drugs, and the benefit was to be granted on proof of such end-use.

Ratio Decidendi: A product may be treated as a drug-intermediate for exemption purposes where it is actually used in the manufacture of drugs, and a specific penultimate-stage or predominant-use requirement cannot be read into the exemption notification unless expressly provided.

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