Intermediate use test governs excise exemption for citric acid used in drug and pharmaceutical manufacture

Citric acid qualified for central excise exemption to the extent it was actually used as an intermediate in the manufacture of drugs, medicines and pharmaceuticals. The decisive test was the specific qualifying use, not its general or predominant commercial use in other goods. The Tribunal's approach, treating exemption as available only for such identified use and remanding for verification of the extent of use by the Assistant Collector, was upheld.

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Issues: Whether citric acid, to the extent it was used as an intermediate in the manufacture of drugs, medicines and pharmaceuticals, was entitled to exemption under the relevant central excise notification.

Analysis: The notification exempted intermediates of drugs, medicines and pharmaceuticals. The decisive factor was the actual use of citric acid as an intermediate in the manufacture of such products, and not its predominant or general commercial use in other goods. The Tribunal had correctly held that exemption would be available to the extent of such qualifying use and had remanded the matter for verification of the extent of use by the Assistant Collector.

Conclusion: The exemption was available to citric acid used as an intermediate for drugs, medicines and pharmaceuticals, and the challenge to that view failed.

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