Customs, Excise and Gold Tribunal - Delhi
Collector Of Central Excise vs Ponds (India) Ltd. on 12 November, 1990
Equivalent citations: 1991ECR401(TRI.-DELHI), 1991(52)ELT286(TRI-DEL)
ORDER
S.L Peeran, Member (J.)
1. The revenue has sought for setting aside the Order-in-Appeal No. 295/86 (M), dated 16-12-1986 passed by Collector (Appeals), Madras to be set aside and Order (Original) CN-V/14F/3/1/85 VC, dated 25-3-1986 passed by Assistant Collector, Madras V Division to be restored.
2. The Revenue has stated that the assessee M/s. Ponds (India) Ltd. inter alia manufacture White Petroleum Jelly I..P. under the brand name of Vaseline. Vaseline White Petroleum Jelly I.P. was provisionally classified under TI 68 and the assessee was clearing the same under payment of duty during the period from 26-11-1982 to 16-3-1985 by claiming exemption under Notification No. 104/82 as amended.
2A. It is further stated that White Petroleum Jelly I.P. is a mixture of white mineral oil and wax. It is further stated that it is sometimes used as a vehicle for cosmetics and drugs etc. liable to be graded as pharmaceutical. In terms of Notification No. 104/82, dated 28-2-1982 and the Serial No. 21 of the Schedule specified thereunder, "all drugs, medicines, pharmaceuticals and drug intermediates not elsewhere specified are exempted from whole of duty of excise tenable thereon." It is further stated that the Notification No. 104/82 was subsequently amended by Notification No. 197/82 dated 22-6-1982 by which the word bulk drug was inserted before the word drugs and the word 'pharmaceuticals' as appearing in Sl. No. 21 mentioned above was deleted and the Notification was made applicable only to "all bulk drugs, medicines and drug intermediates not elsewhere specified." Therefore, it is contended that vaseline white petroleum jelly I.P. which is of a pharmaceutical grade cleared during 26-11-1982 to 16-3-1985 was not eligible for exemption under Notification No. 234/82, dated 1-11-1982 and hence, the assessees were issued with a Show Cause Notice as to why the duty on the quantity of vaseline white petroleum jelly I.P. cleared during the aforesaid period should not be demanded. The assessee has taken the stand in reply to the said Show Cause Notice that the amendment to Sl. No. 21 of Schedule to Notification No. 104/82 did not bring in any change with respect to the classification of item Vaseline White Petroleum Jelly I.P. and the deletion of the word "Pharmaceuticals" did not alter the position in respect to the exemption to Vaseline White Petroleum Jelly IP under Notification No. 104/82, dated 28.2.1982 as amended; that Vaseline White Petroleum Jelly I.P. continued to be reckoned as a medicine falling within the admit of Drugs and Cosmetics Act, 1948 and also are not falling under Item 14E but falling under TI 68 and therefore fully covered by the exemption under Notification No. 234/82, dated 1-11-1982.
3. The Assistant Collector of Central Excise, Madras V Division, however, has held that the White Petroleum Jelly I.P. is a mixture of white mineral oil and wax and is sometimes used as a vehicle for cosmetics and drugs etc. Hence, it is not to be called as medicine but can be correctly classified as pharmaceuticals only. He has relied on the definition of the word "Pharmaceuticals" as given in the Chambers 20th Century Dictionary which states "a chemical used in the medicine". He has held that "white petroleum jelly cannot be called as medicine but can be used as vehicle for drugs/medicines and cosmetics." He has concluded that white petroleum jelly IP which is of Pharmaceutical grade is to be classified under TI 68 without exemption under Notification No. 234/82. The Show Cause Notice dated 16-12-1985 raising demand for the period 26-11-1982 to 16-3-1985 for a duty amount of Rs. 5,47,224.23 was confirmed. However, on the assessee's appeal, the Collector (Appeals) by the impugned order, has set aside the order of the Assistant Collector and held that the White Petroleum jelly is specifically mentioned in the Indian Pharmacopoeia which is a book officially published containing list of drugs, the white petroleum jelly IP has to be taken as a drug. He has held that the product in question being a drug will be covered under the Notification No. 234/82 which existed during the disputed period.
4. Shri L.N. Murthy, learned DR contended before us that the White Petroleum Jelly IP falling under TI 68 is a mixture of white mineral oil and wax and can be correctly classified as pharmaceuticals only as also according to the meaning assigned to it in the Chambers 20th Century Dictionary. It cannot be called as a medicine but can be used as a vehicle for drug/medicine and cosmetics. He further contended that Notification No. 197/82-C.E. dated 22-6-1982 as amended by Notification No. 234/82 dated 1-11-1982 Serial No. 21 of the Schedule annexed thereunder exempts only 'bulk-drug' and not drug and hence the exemption Notification No. 234/82 cannot be extended to drug. He further contended that the Product in question is not used for diagnostic or treatment of diseases as per the definition of 'drug' appearing in Hedman's medical dictionary. He submitted that the meaning of medicine and drug are same. The impugned product is being used for cuts and wounds only and it would not come within the meaning of the term "treatment of diseases". He placed before us the extract from Hedman's medical dictionary in respect of term 'drug' appearing at page 423 and that of the term 'medicine' at page 836 and that of "pharmacopoeia" at page 1065. They are reproduced below:
"drug: - A therapeutic agent; any substance, other than food, used in the prevention, diagnosis, alleviation, treatment, or cure of disease in man and animal; for types or classifications of D.'s, see the specific name; see also sub entries under agent. 2. To give or take a d. in this sense usually implying an overly large quantity. 3. To narcotize crude d., an unrefined preparation, usually of plant origin, that occurs either in the entire, nearly entire, broken, cut, or powdered stage."
medicine: - "1. A drug. 2. The art of preventing or curing disease the science that treats of disease in all its relations. 3. The study and treatment of general diseases or those affecting the internal parts of the body, distinguished from surgery."
Pharmacopeia: - "A work containing monographs of therapeutic agents, standards for their strength and purity, and directions for making preparations. The various national pharmacopeias are referred to by abbreviations, of which the following are the most frequently encountered; U.S.P., the Pharmacopeia of the United States of America (United States Pharmacopeia): B.P., British Pharmacopoeia; Codex medicamentarius, the French Pharmacopeia; I.C. Add. (or B.A.), the Indian and Colonial Addendum to the B.P I.P. International Pharmacopeia; P.Austr., the Austrian, Pharmacopeia; P.G., the German Pharmacopeia (D.A.B.); P.Helv., the Swiss Pharmacopeia."
He further contended that mere mention of I.P. will not make the product a drug. His further contention is that there has to be particular dosage in treatment, while prescribing a drug or medicine which is not the case in the impugned product. As the same is merely applied for cuts and wounds. He placed his reliance on the definition of 'drug' as found in Tariff Entry 14E and urged that the impugned product does not act as a therapeutic agent nor is it used in prevention , diagnosis, alleviation, treatment or cure of disease in man or animal. Therefore, the impugned product does not have the necessary qualification of being termed as drug to attract the exemption under Notification No. 234/82. He submitted that in the case of Oil Dale Trading Co. Ltd. v. Collector of Central Excise, Calcutta reported in 1983 (14) ELT 1835, the product petroleum jelly was not considered under Notification No. 234/82 but only classification was dealt with. So also in the case of Mahata Petro Chemicals v. Collector of Central Excise as reported in 1990 (45) ELT page 158.
5. Shri C. Chidambaram, learned Consultant for the respondents submitted that the issue has been decided in the case of Mahata Petro Chemicals case (Supra) and therein it has been held that the impugned product is a drug entitling for exemption under Notification No. 234/82. He submitted that there is no dispute regarding the classification under TI 68 but only the dispute is whether it is a bulk drug. He submitted that the impugned product finds its place in the Indian Pharmacopeia and the same is used as medicine and drug for the treatment of cuts and wounds. The assessee has taken licence under Drugs Act and have employed qualified Chemists to supervise its preparation. It is no longer a chemical but a drug entitling for exemption under Notification No. 234/82. He further relied upon the CEB letter No. 102/26/77-CE 3, dated 11-3-1980 wherein the Board has considered surgical dressing as drugs entitling for benefit of Notification No. 234/82. He placed before us the definition of drug as appearing on page 304 of the Lexicon Webster Dictionary Vol. I 1983 Edition which is noted below:-
"drug:- Formerly, any ingredient used in chemistry, pharmacy, dyeing, or the like; now, any medicinal substance for internal or external use; often, a habit-forming medicinal substance; a narcotic; a commodity that is overabundant, or in excess of demand in the market--v.t.--drugged, drugging. To mix, as food or drink with a drug, esp. a narcotic or poisonous drug; to administer medicinal drugs to; to stupefy or poison with a drug; to administer anything nauseous to; to surffit."
He further contended that the explanation of bulk drug in Notification is wide enough to include all products derived from any chemical or biological plant conforming to IP standard and used in the treatment of diseases. Therefore, the impugned product is entitled for the exemption under Notification No. 234/82 dated 1-11-1982.
6. We have heard both sides and carefully considered the submissions and perused the records. The question that arises for our consideration is as to whether the impugned product namely White Petroleum Jelly I.P. under the brand name of 'Vaseline' classified under TI 68 is entitled for exemption under Notification No. 234/82, dated 1-11-1982, read with Serial No. 21 of the Schedule annexed thereunder.
7. The contention of the Revenue has been that the exemption under the said Notification in question can be extended only to 'bulk drug' and not to a drug. Their contention is that there is difference between the word 'drug' and 'pharmaceutical'. The impugned product is not a drug and it could be best termed as 'pharmaceutical' item. As the word bulk was inserted before the word drugs and the word 'pharmaceuticals' as appearing in Serial No. 21 mentioned above was deleted and Notification in question was made applicable only to "bulk drugs", medicines, and "drug intermediates not elsewhere specified.", the impugned product being of pharmaceutical grade is not eligible for exemption under Notification No. 234/82 dated 1-11-1982. The impugned drug is not used as therapeutic agent or for preventive, diagnostic, alleviation, treatment or cure of disease in man or animal and it is also not a medicine as it is not prescribed in specific dosage. On the other hand, the assessee's contention has been that it is used for treatment of cuts and injuries and has to be considered as 'bulk drug'.
8. The relevant portion of Serial No. 21 of the Notification No. 234/82 is reproduced below. :-
"21. All bulk drugs, medicines and drug intermediates not elsewhere specified."
If we go by the strict definition of the term 'drug' as given in the Hedman's medical dictionary, the impugned product is not being used for therapeutic purpose or even in prevention, diagnostic, alleviation, treatment or cure of disease in man and animal. It is used for only treatment in cuts and wounds on skin but not in treatment of skin diseases. It has healing properties and helps the skin to heal quickly in cuts and wounds but it does not help in curing skin infections due to bacteria, or fungus. Admittedly, it does not have any germicidal properties or curative effects in skin diseases. Although, the Board has considered surgical dressing as drug by its letter No. 102/26/79 CX 3, dated 11-3-1980 for purpose of granting exemption under Notification No. 234/82, it has to be observed that we have to go by the strict terms of the Notification and not by Board's clarificatory letters. The argument and contention of the Revenue, though very sound, but it is well settled that mere dictionary meaning is not to be relied upon for the purpose of classification but the trade understanding and trade Parlance test has to be applied. The manner in which the trade has understood this product and used in the commercial sense is more important for the purpose of classification. Although the burden of classification is on the department, the benefit of claiming exemption of a Notification is on the assessee. The assessee has merely relied on the term White Petroleum Jelly as described in Indian Pharmacopeia. But this by itself is not sufficient, as the pharmaceutical items have been excluded in the entry Serial No. 21 of the Notification in question. The assessee has also not placed any evidence in support of their contention that in commercial parlance, the White Petroleum Jelly IP is being traded as bulk drug. Therefore, the matter requires to be remanded for de novo consideration to the original authorities to afford full opportunity to the assessee to put forth their evidence pertaining to trade parlance test to seek exemption under the Notification in question. As rightly contended by the learned DR the question of Notification No. 234/82 was not gone into in the case of Oil Dale Trading Co. Ltd. (Supra). In the case of M/s. Mahata Petroleum case, the matter was also remanded for de novo consideration. As regards the question of classification of Petroleum Jelly the matter in that case pertained to contravention of Excise provisions for not obtaining licence and extention of larger period of limitation for claiming duty under proviso of Section 11A was invoked. Further, it is to be observed that in Mahata Petro Chemical case, the contention of department had been that drug licence was necessary for grant of exemption. From this point of view, it was observed at para 18 of the order that there is no need for taking prior licence from Drug Controller for manufacture or importing drugs for the assessment of goods under Item 68. Hence, it was felt that the contention that drug licence is required for grant of exemption to Petroleum Jelly did not merit consideration. The Revenue had not raised the contentions as raised in this appeal and it was not examined from that point of view.
Therefore, the question of exemption under Notification No. 234/82 was not fully examined and the citation is not on all fours. The assessee has relied on the licence obtained under Drugs and Cosmetics Act for grant of exemption. But this is not a proof of trade and commercial understanding. Therefore, the impugned order is set aside and the matter is remanded for de novo consideration on the above terms.