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PETITIONER: COLLECTOR OF CENTRAL EXCISE,GUNTUR

       Vs.

RESPONDENT: ANDHRA SUGAR LTD.

DATE OF JUDGMENT26/10/1988

BENCH: MUKHARJI, SABYASACHI (J) BENCH: MUKHARJI, SABYASACHI (J) RANGNATHAN, S.

CITATION:  1989 AIR  625            1988 SCR  Supl. (3) 543  1989 SCC  Supl.  (1) 144 JT 1988 (4)   410  1988 SCALE  (2)1323

ACT:     Central Excises and Salt Act, 1944 Sections 11 B(2)  and 35 L (b) and Notifications No. 55/75 dated March l, 1975 and No.  62/78 dated March 1, 1978--‘Acetic  anhydride’--Whether drug  intermediate-- Whether exempt from duty. %     Statutory   Interpretation--Court  to  give  weight   to interpretation upon statute at time of its enactment.

HEADNOTE:     The  respondent manufactured ‘Acetic Anhydride’  falling under  Tariff Item No. 68 of the Central Excise  Tariff.  It filed   two refund claims in regard to the duty paid on  the acetic  anhydride  during the period 5th February,  1981  to 26th February, 1982, contending  that the goods were  exempt from   payment  of  excise  duty  leviable   thereon   under Notification  No. 55/75 CE dated 1st march, 1975 as  amended by  Notification No. 62/78 CE dated 1st August,  1978,  that Acetic  -Anhydride   is a ‘drug intermediate’  and  that  as delivery had been made to  drug manufacturers i.e. IDPL,  no excise duty was  payable.     The  Assistant  Collector  of  Central  Excise  by   his adjudication  allowed the refund of the aforesaid claims  of the  respondent  under section 11B(2) of the Central  Excise and Salt Act, 1944.     The  department preferred appeals against the  aforesaid orders  to  the collector of  Central  Excise  (Appeals),who allowed  the   appeals  and  annulled  the  orders  of   the Assistant Collector granting  refund.     The  appeals  preferred by the  respondent  having  been allowed by the customs, Excise and Gold (Control)  Appellate Tribunal,  the Revenue appealed to this Court under  Section 35 L(b) of the  Act.     Dismissing the Appeals.     HELD: 1, ‘Acetic Anhydride’ is a chemical but when it is supplied  as a drug intermediate to a drug manufacturer,  it would   be   entitled  to  exemption  under   the   relevant Notification.                                                   PG NO 543                                                   PG NO 544     2.  Keeping in view the language used in  the  exemption

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Notification  and  the  purpose  of  the  Notification,  the expression drug  intermediate’ is of a wide description  and substance and must be so interpreted. [547B]     In  the instant case, the Acetic Anhydride  manufactured by  the  appellant  had  been  used  by  M/s  IDPL  in   the manufacture of  drugs. In the light of the purpose for which the  goods  were  used, the  Tribunal came  to  the  correct conclusion. [547B-C]     Mysore   Acetate  &  Chemical  Co.  Ltd.  v.   Assistant Collector,  Central  Excise, Mysore, [1984] 17 ELT  319  and Shasum  Chemicals  (Madras)  Pvt.  Ltd.,  [1982]  ELT   786, referred to.     3. It is a well-settled principle of interpretation that courts in construing a Statute will give much weight to  the interpretation  put  upon it at the time of  its  enactment, since  those whose duty  has been to construe,  execute  and apply the same enactment. [546H; 547A]     4.  The  meaning ascribed by the authority  issuing  the Notification,    is  a  good  guide  of  a   contemporaneous exposition of the   position of  law. [546G]     K.P.  Varghese  v. The Income  Tax  Officer,  Ernakulam, [1982]1   SCR 629, referred to.

JUDGMENT:     CIVIL APPELLATE JURlSDlCTlON:Civil Appeal Nos.  1568-69 (NM) of 1988     From the Order dated 26.11.1987 of the Customs Excise  & Gold  (Control) Appellate Tribunal, New Delhi in Appeal  No. ED  (SB) 1648/84 C and 1923  of 1984-C.     G.  Ramaswamy. Additional Solicitor General (N.P.),  Ms. Indu Malhotra and Ms. Sushma Suri for the Respondent.     The Judgment of the Court was delivered by     SABYASACHI  MUKHARJI,J. These are appeals under  Section 35L(b)   of   the  Central  Excises  and  Salt   Act,   1944 (hereinafter  referred to as ‘the Act’), arising out of  the order of the Tribunal,  dated 26th November, 1987. The issue involved  in  the  present  case  is   whether  the   Acetic Anhydride  manufactured by the respondent and sold to   drug                                                   PG NO 545 manufacturers  i.e.  M/s  IDPL is  eligible  to  benefit  of exemption  under   the notification No. 55/75 CE  dated  1st March,  1975  as  amended by the notification No.  62/78  CE dated 1.3.1978 as drug  intermediate.     The  respondent  manufactured Acetic  Anhydride  falling under Tariff Item No 68 of the Central Excise Tariff It  had filed   refund claims for Rs.1,57,442.08 and Rs  1,14,587.74 being the duty  paid on  Acetic Anhydride during the  period from  5.2.1981  to   28.6.1981  and  from  23.7.1982  1   to 26.2.1982 contending that these goods  were exempt from  the payment  of  duty  of excise  leviable  thereon  under   the notification referred to hereinbefore It was contended  that Acetic   Anhydride  is  a drug  intermediate  and  all  such clearance  for which the  refund was claimed, had been  made for delivery to the drug  manufacturers If drug intermediate is sold or supplied to a drug manufacturer  then  under  the notification duty was not payable The question.   therefore. is,  was the item manufactured by the petitioner during  the relevant  period, a drug or an intermediate in terms of  the notification.     It  appears  that  the Assistant  Collector  of  Central Excise  by  his  adjudication had allowed the refund  of  Rs 32,261.74  and Rs  87,932.40 out of the aforesaid  claim  of the  respondent  under  Section   11B(2)  of  the  Act.  The

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aforesaid orders of the Assistant Collector  were challenged by the department by preferring appeals before the Collector of Central Excise (Appeals). Madras The Collector  (Appeals) allowed  the  appeal  filed on behalf  of  the  revenue  and annulled  the   order  of the  Assistant  Collector,  Bluru, sanctioning  sums of Rs.35,261.74 Rs.87,943.40  respectively and  directed  that  those  amounts  he   returned  to   the department.   Being   aggrieved  thereby,   the   respondent preferred appeals before the Appellate Tribunal and the same were  allowed Hence these appeals.     The question was considered in a decision of the learned Single  Judge  of  the High Court  of  Karnataka  in  Mysore Acetate &  Chemical Co. Ltd. v.Assistant Collector,  Central Excise,  Mysore,[1984] 17 ELT 319, wherein it was held  that Acetic Anhydride is a chemical  but when it is supplied as a drug  intermediate  to  a drug  manufacturer,  it  would  be entitled  to exemption under the relevant  Notification  The requirement of end-use, though not built into the  exemption notification    is  not  only  implied  but   also   becomes imperative in a situation  where the product has uses  other than as drug intermediate whereas the  exemption is  limited only  to drug intermediate, i.e. only when the   product  is used  as drug intermediate. In this connection reliance  was placed on a decision of the Government of India in Hindustan Organic   Chemicals  Ltd., where reversing the order of  the                                                   PG NO 546 Excise  Authorities of  Bombay, the Government by its  order dated 14th September, 1981  narrated as follows:     "Government  have  considered all the written  and  oral submissions.  Government  find  considerable  force  in  the contention  that  the view taken by  the  lower  authorities tends  to defeat the object of the  exemption  notification. The   interpretation  on  the  scope  of  the   term   ‘Drug Intermediate’ put by the lower authorities is not  warranted on  a plain reading of the notification. Government  observe that  the notification does not specify the state of use  of the  item  claimed as drug intermediate as  the  penultimate state  i.e., immediately prior to the obtaining of the  drug in  the  process of its manufacture.  The  petitioners  have produced  enough evidence to show that the three  items  are used  in  the  manufacture of drugs.  The  petitioners  have enclosed  copies of the certificates issued by the  National Chemical  Laboratory,  Pune and the  Central  Drug  Research Institute,  Lucknow,  certifying that  Aniline,  Para  Nitro Chloro  Benzene  and Acetenilide find  vide  application  as intermediate  for  drug  among  other  things  The  National Chemical  Laboratory,  Pune have certified  that  the  above mentioned  chemicals  are drug intermediates to  the  extent they  are  used  in  the  manufacture  of  drugs  Government accordingly  set  the  order in appeal  and  hold  that  the petitioners   should  get  the  benefit  of  the   exemption notification for the three items to the extent that they are actually used in the manufacture of drugs In the  Government s  view. this  requirement of end-use though not built  into the  exemption  notification is not only  implied  but  also becomes imperative in a situation where the produce has uses other  than  as drug intermediate whereas the  exemption  is limited  only  to drug intermediate that is  only  when  the product is used as drug intermediate."     It appears that the same principle was reiterated in the case of Shasum Chemicals (Madras) Pvt. Ltd., [1982] ELT  786 It  is   well  settled  that the  meaning  ascribed  by  the authority  issuing the  Notification, is a good guide  of  a contemporaneous   exposition  of  the   position   of   law. Reference may be made to the observations of this  Court  in

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K.P. Varghese v. The Income Tax Officer, Ernakulam, [1982] 1 SCR  629. It is a well settled principle  of  interpretation that   courts in construing a Statute will give much  weight                                                   PG NO 547 to  the  interpretation  put  upon it at  the  time  of  its enactment  and  since,  by those whose  duty   has  been  to construe, execute and apply the same enactment.     Keeping  in  view  the language used  in  the  exemption notification  and  the  purpose  of  the  notification,  the expression  ‘drug  intermediate’ is of wide description  and substance; and must be so  interpreted. Indeed, it was found in  the  facts  of  this case  that  the  Acetic   Anhydride manufactured by the appellant has been used by M/s. IDPL  in the manufacture of drugs.     In  the  light  of the purpose for which  the  goods  in question  were  used,  we are of the  opinion  that  in  the context  the Tribunal  came to a correct conclusion. In  the premises,  the  appeals  must  fail   and  are   accordingly dismissed. There will, however, be no order as  to costs. N.V.K.                                   Appeals dismissed.