1985 (12) TMI 219 - AT - Central Excise

Tribunal classifies empty gelatine capsules as drugs, exempt under Notification No. 62/1978

The Tribunal upheld the classification of empty hard gelatine capsules as drug intermediates eligible for exemption under Notification No. 62/1978. The ... Precedents - Appellate Tribunal’s decision binding until reversed Issues Involved:1. Classification of empty hard gelatine capsules as 'drug intermediate' or 'drug'.2. Eligibility for exemption under Notification No. 62/1978.3. Validity of the demand for duty preceding the date of the show-cause notice.Issue-wise Detailed Analysis:1. Classification of Empty Hard Gelatine Capsules as 'Drug Intermediate' or 'Drug':- Appellant's Argument: The appellants argued that empty gelatine capsules are not 'drug intermediates' but are merely containers/carriers for drugs. They relied on opinions from the Deputy Chief Chemist and Drug Control authorities, which stated that the capsules do not function as drugs and thus do not qualify as drug intermediates. They also cited various judicial decisions to support their stance, emphasizing that the capsules do not chemically contribute to the finished drug.- Respondent's Argument: The respondents contended that empty hard gelatine capsules should be classified as drug intermediates. They cited the Supreme Court decision in Chimanlal Jaggivandas v. State of Maharashtra, which held that substances used in treatment, even if not having therapeutic properties themselves, could be considered drugs. They also referenced various administrative and judicial decisions recognizing gelatine capsules as drugs or drug intermediates, including a letter from the Ministry of Finance and a circular from the Chief Controller of Imports and Exports.- Tribunal's Finding: The Tribunal found that the term 'drug intermediate' should be understood in the commercial sense rather than a narrow scientific sense. They noted that various government authorities and judicial decisions have recognized gelatine capsules as drugs. The Tribunal concluded that the capsules serve a medicinal purpose and are used in the treatment of diseases, thus fitting within the definition of drugs under the Drugs and Cosmetics Act, 1940.2. Eligibility for Exemption under Notification No. 62/1978:- Appellant's Argument: The appellants argued that the Collector of Central Excise (Appeals) erred in classifying the capsules as drug intermediates and granting exemption under Notification No. 62/1978. They emphasized that the capsules are used as containers and do not qualify for the exemption.- Respondent's Argument: The respondents maintained that their classification list, which was initially approved by the department, correctly identified the capsules as drug intermediates eligible for exemption. They cited various decisions and circulars supporting their claim that the capsules are considered drugs or drug intermediates.- Tribunal's Finding: The Tribunal upheld the respondents' classification of the capsules as drug intermediates, making them eligible for exemption under Notification No. 62/1978. They emphasized the broad definition of drugs under the Drugs and Cosmetics Act and the recognition of gelatine capsules by various government authorities as drugs or drug intermediates.3. Validity of the Demand for Duty Preceding the Date of the Show-Cause Notice:- Appellant's Argument: The appellants did not specifically address this issue in their primary arguments.- Respondent's Argument: The respondents argued that any demand for duty should not be enforceable for the period preceding the date of the show-cause notice. They cited the Tribunal's decision in M/s. Inarco Limited v. Collector of Central Excise, which held that demands should only be enforceable from the date of the show-cause notice.- Tribunal's Finding: The Tribunal did not find it necessary to address this issue in detail, given their primary finding that the capsules are drug intermediates eligible for exemption. Consequently, they dismissed the appeal and confirmed the order of the Collector of Central Excise (Appeals).Separate Judgment:- G. Sankaran's Judgment: While agreeing with the final conclusion to dismiss the appeal, G. Sankaran based his reasoning on the classification of empty gelatine capsules as 'drugs' rather than 'drug intermediates.' He cited the Supreme Court decision in Chimanlal Jaggivandas v. State of Maharashtra and the Central Board of Excise and Customs' letter recognizing surgical cotton and other dressings as drugs. He emphasized that the capsules are substances used in treatment, fitting within the definition of drugs under the Drugs and Cosmetics Act, 1940. Therefore, he concluded that the capsules are eligible for the benefit of Notification No. 55/75.Conclusion:The Tribunal dismissed the appeal, confirming the order of the Collector of Central Excise (Appeals) and holding that empty hard gelatine capsules are drug intermediates eligible for exemption under Notification No. 62/1978. G. Sankaran concurred with the dismissal, but classified the capsules as 'drugs' rather than 'drug intermediates.'