CCE & Customs vs Parenteral Drugs (I) Ltd.

Commnr. of Central Excise & Customs, Indore ...Appellant(s)

Versus

M/s. Parenteral Drugs (I) Ltd. ...Respondent(s)

WITH

CIVIL APPEAL NOS.6519/2005, 1152/2006, 2127/2006, 2628/2006, 2630/2006 & 4059/2006

ORDER

Delay condoned.

In this batch of Civil Appeals, the main issue which arose for determination

before the Adjudicating Authority was whether Intravenous Fluids having a

therapeutic value stood covered under Exemption Notification No.3/2001.

In the lead matter - M/s. Parenteral Drugs (I) Ltd. - the respondents were

engaged in the manufacture of various types of Intravenous Fluids. They were

availing the benefits of Notification No.6/2000, dated 1.3.2000. The said Notification

was amended by Notification No.36/2000, dated 4.5.2000, whereby Entry No.47-A

was added thereby exempting "Intravenous Fluids" from payment of excise duty.

However, from 1.3.2001, the earlier notifications were replaced by Notification

No.3/2001 which defined "Intravenous Fluids" as those which are used for sugar,

electrolyte or fluid replenishment. In other words, open-ended exemption stood

restricted by the above three qualifications.

1 Accordingly, show cause notices were issued in which it was alleged that

the respondents were engaged in the manufacture of intravenous infusions of various

kinds which becides the fluids included certain medicines having anti-bacterial,

antibiotic and antimicrobial properties. It was alleged in the show cause notice that

by addition of the following items to the Intravenous Fluids, the product attained

therapeutic value and, consequently, it fell outside Notification No.3/2001 which

defined 'IV Fluids' as those used for sugar, electrolyte or fluid replenishment.

The items added to the fluids are as follows:

(a) Ciprofloxacin I.P. (b) Metronidazole I.P. (c) PDZOLE-D (d) Ciprodex (e) Tinipidi Isotonic Infusion, and (f) Mannitol I.P.

The most important aspect to be noted is that in the 2001-2002 Budget, an

explanation was inserted in Notification No.36/2000, clarifying that only such IV

fluids which were used for sugar, electrolyte or fluid replenishment, were exempt

from duty and not other IV fluids. This provision in the Budget was relied upon by

the Department in the show cause notice(s) to deny the benefit of exemption claimed

by the respondents under Notification No.3/2001. Unfortunately, despite detailed

analysis of the notification in question by the Commissioner, the Tribunal has not

examined this aspect and, therefore, the matter needs to be remitted to the Tribunal

to give its finding as to what is the effect of the 2001-2002 Budget which restricts the

definition of 'IV Fluids' in terms of the above three qualifications.

There is one more aspect which the Tribunal is required to consider. In the

2 labels of the respondent-Company, there is a warning stating that IV fluid

manufactured by the assessee is Schedule-H Drug. What is argued on behalf of the

assessee(s) is that because of addition to the IV Fluid of one of the above-mentioned

six items, the product manufactured is required to be sold as a Schedule-H drug. On

the other hand, the Department has placed reliance on the Drugs and Cosmetics

Rules, 1945 read with Schedule-H to indicate that when IV Fluid has dominant

therapeutic value, it will not come within the exemption because it has to be treated

as a Schedule-H drug. We do wish to express any opinion on this point. Suffice it to

state that on the above two questions/issues, the matter needs to be remitted to the

Tribunal for consideration in accordance with law.

We may add that exemption notifications have to be read strictly. We may

also add that the burden is on the assessee to prove that the item falls within the four

corners of the exemption notification.

Before concluding, we may state that if on the second issue, regarding

Schedule-H Drug, as spelt out hereinabove, if the Tribunal feels that the matter

requires further evidence, it may either itself decide that point after giving

opportunity to the parties or it may remit the matter to the Adjudicating Authority

for its decision on factual aspect in accordance with law.

Subject to what is stated above, the Department's Appeals are allowed, the

impugned judgment is set aside and the matters are remitted to the Tribunal for fresh

consideration in accordance with law. In the facts and circumstances, there will be

no order as to costs.

3 ..................J. (S.H. KAPADIA)

...................J. (AFTAB ALAM) New Delhi, March 31, 2009.

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