Actual use controls drug intermediate exemption; predominant or exclusive use tests cannot defeat eligibility under the notification.

Chemicals used in the drug industry are not assessed for exemption under a predominant-use or exclusive-use test; actual use in drug manufacture is the controlling criterion. The Tribunal held that xylidine and diethylamine, when actually used in producing anesthetics, qualified as drug intermediates for exemption under Notification No. 55/75-C.E. It also rejected a narrow reading of "drug intermediate" as limited to a penultimate product, noting that the expression is not a precise scientific definition. On that basis, the exemption was admissible where actual use in manufacture was shown.

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Issues: Whether xylidine and diethylamine, when actually used in the manufacture of anesthetics, qualified as drug intermediates entitled to exemption under Notification No. 55/75-C.E., and whether the exemption could be denied on the basis of predominant use or exclusive use tests.

Analysis: The Tribunal held that chemicals used in the drug industry do not ordinarily have a single preponderant or exclusive use, and that neither predominant use nor exclusive use is a practical or reliable test for determining entitlement under the notification. The decisive factor is the actual use of the goods. The Tribunal also noted that the expression "drug intermediate" is not a precise scientific definition and rejected the notion that it must be limited to a penultimate product. Since the goods were shown to have been actually used in the manufacture of anesthetics, they satisfied the requirement of being drug intermediates for the purpose of the exemption.

Conclusion: The exemption under Notification No. 55/75-C.E. was held admissible, and the appellants succeeded on the merits.

Ratio Decidendi: For exemption of chemicals as drug intermediates, actual use in drug manufacture is the controlling criterion, and exemption cannot be denied by applying predominant use or exclusive use tests.

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