Drug intermediate exemption turns on actual end-use, and contemporaneous administrative interpretation supports quashing the notices.

Acetic anhydride supplied to drug manufacturers as a drug intermediate fell within the exemption in Notification No. 62/78-C.E. because the controlling factor was its actual use and character as a drug intermediate, not its general classification as a chemical. The departmental objection that the product's chemical nature excluded exemption was inconsistent with the notification's wording. The court also treated the Government's earlier similar construction of the same notification as persuasive administrative exposition, supported by contemporanea expositio. On that basis, the product was held exempt when supplied as a drug intermediate and the impugned show cause notices were liable to be quashed.

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Issues: Whether acetic anhydride manufactured by the petitioner and supplied to drug manufacturers as a drug intermediate was exempt from excise duty under Notification No. 62/78-C.E. dated 01.03.1978, and whether the impugned show cause notices could be quashed.

Analysis: The exemption notification covered drugs, medicines, pharmaceuticals and drug intermediates not elsewhere specified. The decisive consideration was the character in which the product was supplied, not merely that it was a chemical. The material showed that acetic anhydride was supplied as a drug intermediate to drug manufacturers, and the departmental view that its chemical nature excluded exemption was inconsistent with the notification. The construction adopted by the Government in earlier similar matters was accepted as a relevant and persuasive administrative exposition of the same notification. The principle of contemporanea expositio reinforced that interpretation.

Conclusion: The product was entitled to exemption when supplied as a drug intermediate, and the show cause notices were illegal and liable to be quashed.

Ratio Decidendi: Where an exemption notification grants relief to a product used as a drug intermediate, the decisive factor is its actual end-use as such, and the contemporaneous interpretation adopted by the issuing authority is entitled to substantial weight in construing the notification.

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