Manufacture by combination blister packing: loose medicines formed distinct medicaments, and the claimed excise exemption failed.

CESTAT held that packing loose antitubercular and antileprotic medicines into MDT blister packs or combination kits created a new commercial identity, name and use, so the process amounted to manufacture and the kits were classifiable as distinct medicaments. It further held that exemption under Notification No. 4/2006-C.E. was unavailable because the kits contained Rifampicin, which was not among the listed bulk drugs required by the notification. On that basis, the connected objections on export under bond, exemption for supplies to UN agencies, and separate accounts under Rule 6 of the Cenvat Credit Rules could not survive, and the demands and penalties were set aside.

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Issues: (i) Whether packing multiple antitubercular and antileprotic formulations into MDT blister packs/combination kits amounts to manufacture and whether the kits are classifiable as distinct medicaments. (ii) Whether the disputed products are eligible for exemption under Notification No. 4/2006-C.E., and consequently whether denial of export under bond, exemption under Notification No. 108/95-C.E., and the requirement to maintain separate accounts under Rule 6 of the Cenvat Credit Rules, 2004, were justified.

Issue (i): Whether packing multiple antitubercular and antileprotic formulations into MDT blister packs/combination kits amounts to manufacture and whether the kits are classifiable as distinct medicaments.

Analysis: The combination packs were made by placing loose capsules and tablets together in blister packs for month-wise dosage, and the Revenue did not establish that the individual items were marketable to retail consumers in that condition. The packing created a kit with a new commercial identity, name and use, and the process was not a mere regrouping of already retail-packaged goods. The reasoning that governed earlier combination-pack cases did not apply on the facts here, because the present case involved packing of loose medicines into a single blister pack, not the reassembly of separate retail packs.

Conclusion: The process amounted to manufacture, and the combination kits were to be treated as distinct medicaments for excise purposes.

Issue (ii): Whether the disputed products are eligible for exemption under Notification No. 4/2006-C.E., and consequently whether denial of export under bond, exemption under Notification No. 108/95-C.E., and the requirement to maintain separate accounts under Rule 6 of the Cenvat Credit Rules, 2004, were justified.

Analysis: The exemption covered formulations manufactured from the bulk drugs specified in List 1 of the notification, but the disputed kits contained Rifampicin, which was not included in that list. Since the kits were not wholly manufactured from the listed bulk drugs, the exemption was unavailable. Once the goods were held to be manufactured products not covered by the unconditional exemption, the connected objections regarding export under bond, clearances to UN agencies, and maintenance of separate accounts could not stand.

Conclusion: The disputed products were not entitled to exemption under Notification No. 4/2006-C.E., and the connected departmental objections were unsustainable.

Final Conclusion: The appeals succeeded, the impugned demands and penalties were set aside, and consequential relief followed.

Ratio Decidendi: Packing loose medicines into a combination blister kit that acquires a distinct commercial identity and use amounts to manufacture, and exemption under a notification confined to formulations made only from listed bulk drugs is unavailable where the kit contains a non-listed bulk drug.

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