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Chemifine and ors. Vs. Collector of Customs - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Mumbai
Decided On
Reported in(1984)(18)ELT336Tri(Mum.)bai
AppellantChemifine and ors.
RespondentCollector of Customs
Excerpt:
1. the appeal no. 739/83 is directed against the order s/10-13/83-c dated 18-3-1983 passed by the additional collector of customs, bombay by which he ordered confiscation of the import of goods, tetracyciine urea complex, under section 11 l(d) of the customs act read with section 3 of the import and export control act, 1947, but, however, granted an option to redeem the imported goods on payment of fine of rs. two lakhs in lieu of confiscation.2. appeal 852/83 arises out of and is directed against the order no.s/10-36/83, c-dated 22-6-1983 passed by the collector of customs, bombay by which he directed confiscation of a consignment of urea complex of tetracy-cline but, however, allowed redemption on payment of fine of rs. eight lakhs twenty five thousand in lieu of confiscation.3. appeal.....
Judgment:
1. The appeal No. 739/83 is directed against the order S/10-13/83-C dated 18-3-1983 passed by the Additional Collector of Customs, Bombay by which he ordered confiscation of the Import of goods, Tetracyciine Urea Complex, under Section 11 l(d) of the Customs Act read with Section 3 of the Import and Export Control Act, 1947, but, however, granted an option to redeem the imported goods on payment of fine of Rs. two lakhs in lieu of confiscation.

2. Appeal 852/83 arises out of and is directed against the order No.S/10-36/83, C-dated 22-6-1983 passed by the Collector of Customs, Bombay by which he directed confiscation of a consignment of Urea Complex of Tetracy-cline but, however, allowed redemption on payment of fine of Rs. eight lakhs twenty five thousand in lieu of confiscation.

3. Appeal No. 1075/83 arises out of and is directed against the order bearing No. S/10-11/83, dated 18-3-83 passed by the Additional Collector of Customs, Bombay by which he directed confiscation of a consignment of Tetracycline Urea Complex under Section 111 (d) of the Customs Act read with Section 3 of the Import and Export Control Act, 1947 but allowed redemption on payment of fine of Rs. two lakhs in lieu of confiscation.

4. Appeal No. 1076/83 arises out of and is directed against the order bearing No. S/10-29/84 C-dated 13-5-1983 passed by the Additional Collector of Customs, Bombay by which he ordered confiscation of Tetracycline Urea Complex under Section 111 (d) of the Customs Act read with Section 3 of the Import and Export Control Order, 1947 but, however, allowed redemption on payment of fine of Rs. one lakh fifty thousand in lieu of confiscation.

5. Appeal No. 1150/83 arises out of and is directed against the order bearing No. S/10-23/83 C-dated 6-4-1983 passed by Additional Collector of Customs, Bombay by which he ordered confiscation of a consignment of Tetracycline Urea Complex under Section 111 (d) of the Customs Act read with Section 3 of the Import and Export Control Act, 1947, but however allowed redemption on payment of fine of Rs. two lakhs.

6. Shri A. Hidayatullah, the learned Advocate appeared for the appellants in appeal Nos. 749 and 1076 of 1983. Shri C.R. Patel, the learned Advocate appered for the appellants in appeal No. 852, 1075 and 1150 of 1983. Shri Krishan Kumar, the Junior Departmental Representative represented the Respondent Collector in all the appeals.

7. As common questions of law and facts are involved, in all these appeals they are clubbed together and hence this common order.

8. The undisputed facts are : that the appellants in all the above appeals are the manufacturers of bulk drugs. The appellants in appeal Nos. 739/83 and 1076/83 are the manufacturers of Tetracycline base/Hydrocholoride. The appellants in appeal Nos. 852/83, 1075/83 and 1150/83 are the manufacturers of, among other drugs Tetracycline Hydrochloride. According to the appellants, in appeal Nos. 739 and 1076/83, they manufacture Tetracycline Base/HCL from the raw material Tetracycline Urea Complex. The appellants in the other three appeals namely, 852, 1072 and 1153 of 83 have stated that in the manufacture of drug Tetracycline HCC a drug intermediate commercially known as Tetracycline Urea Complex is required, and therefore, Tetracycline Urea Complex is a raw material for the manufacture of drug Tetracycline HCL.

All the appellants sought clearance of their consignments under OGL under Appendix 10(1) of A-M 1983 policy. The Customs Authorities however, did not permit the import under OGL on the ground that the imported goods is a canalised item falling under Appendix 9.

9. The imports in question are governed by the Policies of the year A-M 1982 and A-M 1983. As there was no change in the policies A-M 1982 and A-M 1983, in so far as they govern the imports, reference will be made only to policy A-M 1983.

10. Shri Hidayatullah and Shri C.R. Patel, the learned Advocates assailed the findings of the learned Additional Collector and the learned Collector on several grounds. The grounds urged by them may be formulated as under:- (1) The learned Collector and the Additional Collector committed an error in law in holding that the imported goods, viz., Tetracycline Urea Complex is a canalised item falling under Appendix 9 of the A-M 83 policy.

(2) The imported goods is not a drug nor an active ingredient nor a salt or ester of a drug and as such the import is permissible under OGL under Appendix 10(1) of A-M 83 policy.

(3) Tetracycline Urea Complex is neither Tetracycline base nor Tetracycline Hydrochloride but it is a different commodity altogether commercially known as "Tetracycline Urea Complex" and as such it falls outside the canalised item.

(4) The burden of establishing that the imported goods fall within Appendix 9 lies heavily on the Deppt. and that there was no material placed on record by the Department from which it could be said that the burden has been discharged. The learned Collector and the learned Additional Collector have totally lost sight of this aspect.

(5) The orders of the Additional Collector and the Collector are vitiated by reason of taking into consideration extraneous matters such as, Circular Instructions issued by the Chief Controller of Imports & Exports; the news item appearing in "Chemical Weekly"; adverse effects of the imports on the production of IDPL and placing reliance on the ambiguous report of the Deputy Chief Chemist; (6) Non-consideration of the relevant matters, such as Certificate issued by CM A Laboratories, Bombay ; Flow sheet of Tetracycline Hydrochlorides I.P. duly certified by the Controller, Food & Drug Administration, Madhya Pradesh ; Certificate issued by C.M.A-Laboratories regarding test carried out on the imported goods ; letter of C.M.A. Laboratories dated 6-9-83 : Certificate dated 12-12-81 issued by the Drug Controller, Government of Karnataka ; the Customs Laboratory's test report dated 21-2-83 ; the manufacturing processes of Tetracycline furnished by the appellant in appeal No. 852 of 1983 marked as Exhibit H in their Paper Book ; (7) Failure to understand what was imported was not a drug but a Chemical.

(8) Ignoring the long course of conduct viz., that similar consignment of similar goods were cleared upto the present import.

(9) Failure to notice the non-reference of the circular in the show cause notice.

(10) Failure to take into consideration the change in the Policy during A-M 1984.

(11) Failure to take into consideration that the opinion of the Dy.

Chief Chemist was based on visual observation and not as a result of any test conducted.

(12) Not giving benefit of doubt to the importers when the policy was ambiguous.

(13) Wrong interpretation of para 218(4) of Chapter XXI of A-M 83, and (14) Non-consideration of the fact that the appellants are actual users (Industrial) and the imports are intended not for making profits but for manufacture of the drug.

11. Shri Krishan Kumar, the Departmental Representative on the other hand urged that the orders passed by the learned Additional Collector and the learned Collector are correct and do not require interference by the Tribunal. The contentions urged by Shri Krishan Kumar may be formulated as under : (d) The substance imported need not necessarily be a drug and in the substance, Tetracycline is an active ingredient; the import under O.G.L. is, therefore, impermissible; (e) Tetracycline Urea Complex is not a marketable commodity and the same is obtained by putting the substance Tetracycline in the solution of Urea.

12. Before we proceed to consider the merits of the appeals and the contentions urged on both sides, it is necessary and useful to make a brief reference to the notices of show cause issued to the appellants ; the findings of the learned Additional Collector and the learned Collector ; their reasonings ; the documents relied upon by the appellants ; the relevant entries and few other paragraphs in the Import Policy of 1983 and 1984.

13 Two sets of show cause notices were issued. In the first set it was alleged, firstly that the import of Tetracycline Urea Complex contravened the Import Trade (Control) Order No. 17/55 on the ground that the imported goods required a valid import licence which had not been produced. Secondly, the item imported is Tetracycline which figures in the canalised list in Appendix 9 of 1983 A-M policy.

Thirdly, Tetracycline Urea Complex is covered by Tetracycline of canalised list. Import under OGL cannot be allowed. The Import is unauthorised. Also there is a case of mis-declaration.

In the second set of show cause notice it was alleged that the goods have been imported in contravention of Government of India, Import Trade Control Order No. 17/55, dated 7-12-55 for the reasons (i) to bring into India, of the said good requires a valid import licence which has not been produced, (ii) the item imported is active ingredient of Tetracycline. Hence covered by Sr. No. 16 of Appendix 9 of A-M 83 policy vide para 218(A). The import against OGL Appendix 10(1) cannot be allowed and, therefore, is unauthorised.

14. The finding of the learned Additional Collector in Appeal Nos. 739 and 1076 reads : "Taking the over all view of the situation, I feel that this importation is hit by the provision of para 207(4) Chapter 20 of A-M 82 policy and the corresponding para of A-M 83 policy also. The drug chemical imported has attained its essential characteristics of Tetracycline. There is therefore no further P.N. necessary.

In so far as the importation has been made without cover of a valid I.T.C. licence an offence attracting the provision of Section 111 (d) of the Customs Act, 1962 read with Section 3 of the Imports & Exports (Control) Act, 1947 is established." The reasons of the learned Additional Collector are found in his order.

The learned Additional Collector after setting out the facts and after referring to the show cause notice and the arguments addressed on behalf of the importers, refers to statement said to have been made by the Chief Chemist and observes : "In case of similar import by the same party, Dy. Chief Chemist said that there was no written authority from which he could identify the imported product as Tetracycline Urea Complex, but the imported goods by appearance, colour, reaction and optical rotation showed that it was tetracycline only and it was not possible to ascertain whether it was tetracycline urea complex.

Shri Shah added that they were manufacturers of tetracycline chemicals and the manufacturers of drugs and Pharmaceuticals.

Dy. D.C. drew their attention to the report appearing in Chemical Weekly dated 28-12-1982, No. 15, page 46 in which it was reported that huge quantity of tetracycline were being clandestinely imported under the brand name of tetra-urea-complex. This report was printed from an earlier report in the Times of India by Shri G.K. Pandey. It was also brought to the notice of the importers that these imports have hit indigenous production of I.D.P.L. who have just overcome from teething trouble and they were facing serious problems with their large inventory of tetracycline." 15. The learned Additional Collector then stated in his order 'Shri Shah's attention was also drawn to I.T.C. circular dated 3-1-83 from C.C.I. & E. addressed to all the Customs, Licensing and Sponsoring authorities that Tetracycline Urea Complex is also included in Tetracycline in the canalised list, in Appendix 9. Shri Shah said that no public notice was issued in the context wheareas, the circular is dated 3-1-83, these goods have been shipped on 30-11-82.

16. It is thus seen that the Additional Collector did rely upon the statement of the Deputy Chief Chemist, the Report appearing in the Chemical Weekly dated 28-12-1982 and also report in the Times of India by Shri G.K. Pandey, besides he also took into consideration the effect of the import on I.D.P.L. and the circular dated 3-1-83 issued by the C.C.I. & E. Now, in the show cause notice issued to the appellants we do not find any reference being made to the Circular dated 3-1-83 issued by C.C.I. & E., statement of the Dy. Chief Chemist and reports in the Chemical Weekly and the Times of India.

17. In Appeal No. 1075/83 the finding of the learned Additional Collector Shri V.S. Naik reads : "In so far as the importation has been made without cover of a valid ITC licence an offence attracting the provisions of Section lll(d) of the Customs Act, 1962 read with Section 3 of the Imports & Exports (Control) Act, 1947 is established." His reasons are set out in the order. The learned Additional Collector after referring to the facts of the case, the show cause notice and the arguments addressed on behalf of the importers, observed 'I told him that the product imported is nothing but Tetracycline Urea Complex which has acquired essential characteristics of tetracycline and as such it is hit by the canalisation restriction. I also told him that C.C.I. & E. has advised CH about this. Shri Gupta argued that the C.C.I. & E. has not issued any public notice in this subject to guide the trade and previously for the last two years these goods were being imported by the Trade. I told him that Public Notice is necessary when the product imported has acquired its essential characteristics of tetracycline. Then follows the findings of the Additional Collector.

18. It is seen that the learned Additional Collector had relied upon the circulation instructions of GC.I. & E. His order also shows that the Dy. Chief Chemist Shri Narayan was present at the personal hearing.

In the show cause notice there is no mention that during the adjudication, the Deptt, would be relying upon the opinion of the Dy.

Chief Chemist.

The finding of the learned Additional Collector in Appeal No. 1150 reads : "The item imported is pure tetracycline in form of Urea Complex, have characteristics of Tetracycline itself. It is formed at the purification stage and active ingredient in this is Tetracycline.

Therefore this item is covered by entry No. 16 Appx. 9(3) of April 83 and being canalised the import is not permissible under Open General Licence." In the order of the learned Additional Collector he has not given any reason for his finding that the imported item is pure Tetracycline in the form of Urea Complex.

"There is no substance in the contention that just because sub-para (4) of para 218 mentions only esters and salts, compounds would not be covered. The basic point is the active ingredient in the substance and it cannot be denied that the active ingredient in Tetracycline Urea Complex is only Telracycline a material covered by Appendix 9.

In view of the above, I hold that ?the goods cannot be imported under O.G.L. The goods are confiscated under Section lll(d) of the Customs Act, 1962." The learned Collector has spelled out his reasons in the order. The learned Collector, Shri K. Srinivasan has observed that the imported goods were tested in Customs Laboratory and reported to have characteristics of Tetracycline'. He has further observed that as per information available in literature, 'Urea-Complex of Tetracycline' is known to be formed at the last stage of purification after the complete synthesis of 'Tetracycline, is over. After referring to the contentions urged on behalf of the importers and referring to the items in the ITC Schedule, the learned Collector observed : "It is an admitted fact that Tetracycline Urea Complex does not figure in any of the pharmacopoeiae. Tetracycline and Tetracycline HCL are drugs which figure in the standard pharmacopoeiae. What is Tetracycline Tetracyclines are a group of antibiotics having an identical 4-ring combocy-clic structure as a basic skelton and differing from each other chemically only from substituent variation. It is an antimicrobial substance produced by the growth of certain strains of chlortetracycline. It is an active ingredient in salts and esters such as Tetracycline HCL. It is no doubt true that when we talk of active ingredient, we refer to drug. Sub-para (4) of para 218 also refers to active ingredients in that sense only. But does this mean that in any chemical imported a drug mentioned in Appx. 9 is the main substance, it cannot be considered an active ingredient In my view, it does not mean that we could ignore the fact that the active ingredient is a substance mentioned in Appendix 9. It is a known fact that carboxamide complex of Tetracycline like the material imported is made at the last stage of purification after the complete synthesis is over and tetracycline is obtained in a single step from the complex. In other words, in this case, if urea is removed, we could obtain tetracycline. The importers have claimed that they imported the goods for the purpose of manufacture of Tetracycline is HCL. Tetracycline is required in the manufacture of Tetracycline HCL, but not Urea. In fact, Tetracycline HCL is formed in a single step from this complex. The importer's contention that Tetracycline Urea Complex is a method for manufacture of Tetracycline Hydrochloride is difficult to swallow.

It is evident that tetracycline or tetracycline hydrochloride has been converted into urea complex only to get over the canalising routine." From the order of the learned Collector it is clear that he did refer to certain test report, literature on Chemical Dictionary but he did not mention in his order to which literature or Dictionary he referred to. In the show cause notice issued to the appellants it is not stated that the department was going to rely upon any test report or literature or dictionary and the only ground urged in the show cause notice was that the item imported was an active ingredient of Tetracycline and hence covered by Sr. No. 16 of Appendix 9 of the A-M 83 policy.

20. The appellants in appeal Nos. 739 and 1076 have relied upon the following documents : I. Certificate issued by CM.A. Laboratories regarding the test carried out on the imported goods.

This certificate among other things, discloses that the test for tetracycline positive and test for amide positive. The certificate also contains a Note which reads "The sample is not Tetracycline or Tetracycline Hydrochloride, but it is an Urea Complex of Tetracycline, as it gives a positive test for Urea." II. Flow Sheet of Tetracycline Hydrochloride I.P. duly certified by the Controller, Food & Drug Administration, Madhya Pradesh.

PART I: Conversion of Tetracycline Urea Complex to Tetracycline base : 5 kg. Tetracycline-Urea complex dissolved in 100 litres alkaline alcohol with warming and stirring. The clear solution is filtered and the undissolved residue discarded. The filterate is fed to the neutralization vessel where it is allowed to cool and then neutralised with enough dilute sulphuric acid to effect the precipitation of free tetracycline base, the PH being not allowed to drop below about 3-4 units. The reaction mixture is allowed to stand overnight for completion of precipitation and then centri-fuged. The filtrate is discarded, the cake is washed with enough water till free of sulphate. The crude tetracycline cake is dried and used without further purification in the next step.

PART II: The crude tetracycline from the first stage is stirred in about 35 litres alcohol; collosive (3:1) mixture and the dissolution is effected by the addition of an organic base like brothly amine etc. Any soluble residue is filtered off and the clear filtrate transferred to a glass lined reactor. To this clear solution hydrogen chloride is added with stirring till the PH is approximately 2-2-5. The reaction mixture is stirred for over 24 hour for the separation of the hydrochloride which is then centrifuged. The filtrate is sent for solvent recovery. The crude tetracycline hydrochloride is purified by recrystallization from butanol HCL mixture with dioniourishing carbon reatment if found necessary.

III. Letter dated 6th May, 1983 addressed by C.M.A. Laboratories to M/s. Chemifine.

This letter among other things states "Tetracycline Urea Complex is neither a salt nor an ester of Tetracycline Base or of Tetracycline Hydro-chloride, but a Complex of Urea and Tetracycline with the Chemical name : Penthahydroxy Ethylin-Dimethylamino Hapthacandion Carboxamide Carbamide, a penultimate intermediate for the manufacture of Tetracycline Hydrochloride or Tetracycline Base.

21. The appellants in Appeal Nos. 852, 1075 and 1150 of 83 relied upon the following documents: I. A certificate dated 12-12-81 issued by Drug Controller, Government of Karnataka.

It is a certificate certifying that M/s. Varson Chemicals Private Ltd. are possessing manufacturing licence in form 28 bearing No. SP-78/81 dated 3-9-81 valid upto 31-12-82 and the firm has been permitted to manufacture the following drugs using the intermediate indicated against the drug. The certificate mentions the names of the drug and also the names of the intermediate. Against Tetracycline Hydrochloride IP, the name of the intermediate given is "Pentahydroxy Methyl-N N-Dimethylamino Naphta II. Customs Laboratory's Test Report of 21-3-83. Among other things, this report reads "Sample is in the form of yellow coloured powder.

On the test of its appearance, colour reaction and specific rotation, the sample has characteristics of Tetracycline. However, it is not possible to ascertain by this Laboratory, whether it is Tetracycline or its complex." It also contains a note which reads "It is seen from the literature available that such carbomide complex of Tetracycline is made at the last stage of purification.

After complex synthesis is over, tetracycline is obtained in a single step from the complex.

1. Strains of tetracycline which are soil micro-organisms are cultured i.e. fermented in broth by constant agitation of the broth.

Besides, sucrose (i.e. cane sugar) other sources of energy such as starch, dextrin, maltose, destrose, lactose, mannitol and glycerol are used. This process of fermentation is carried on for a few days-one to four days. During this process the fermentation is continuously agitated and aerated.

3. To separate Tetracycline from the remaining isomers and other impurities in the said formation, Urea (liquid i.e. Urea+Water) is added to the formation. The result is that Tetracycline and Urea combine and form a solid substance while the other six isomers and other impurities remain dissolved in the liquid i.e. water. The said solid substance comprising Tetracycline and Urea is commercially called Tetracycline Urea Complex. From this Tetracycline Urea Complex, the Urea is first removed by proper process which leaves tetraeycline and such tetracycline is further processed with ammonium chloride and Hydrochloric Acid so as to obtain the drug Tetracycline Hydrochloride.

Note: If Tetracycline so obtained becomes impure by reason of long storage or for want of proper storage or otherwise, it can be purified by the reverse process i.e. by adding Urea to such tetracycline so as to form the Tetracycline Urea Complex and then by proper process Urea is removed as above so as to leave pure tetracycline. The impurities remain mixed with the liquid i.e.

water+urea.

IV. IPC Circular No. 1/83 issued by C.C.I. & E. to all Customs Authorities, all licensing authorities and all sponsoring authorities.

Among other things, in this Circular, the Jt. C.C.I & E. clarified that that item Tetracycline in the canalised list also includes "Tetracycline Urea Complex" and "Tetracycline Phosphate Complex". He further clarifies that these items are canalised through S.T.C. Among other things, in reply to the show cause notice it is contended that Tetracycline Urea Complex is not a derivative but in fact Tetracycline is obtained from the same, this being the penultimate product in the process of manufacture of the Tetracycline. It was further contended in this reply that the Customs House had permitted clearance for several years identical goods and as late as on 3-10-81 the import of identical goods by M/s. Tata Exports Ltd. was released after obtaining the opinion of the Dy. Chief and A.D.C. and at that time it was held that Tetracycline Urea Complex is a drug intermediate and hence permissible for import under O.G.L. App. 10(1).

VI. A letter dated 3-5-1983 addressed to the Additional Collector of Customs.

In this letter the learned Advocate for the appellant brought to the notice of the Additional Collector the change in the policy for A-M 84 and further pointed out that it was improper for the Customs authorities to rely upon the ITC Circular which has no retrospective effect.and, lastly VII. A letter dated 2-4-83 addressed to the Assistant Collector which purports to be an answer to the query raised on the backside of the Original Bill of Entry.

It was clarified that the item imported is a drug intermediate and does not have Therapeutic, Prophylactic or medicinal value. It is not an active ingredient of Tetracycline covered by Appendix 9 and is a raw material to manufacturing Tetracycline Hydrochloride.

22. Item No. 1 in Appendix 10 of A-M 83 policy (Identical in policy A-M 84), reads Item Categories of eligible importers1. Raw Materials, components and Actual Users (Industrial) consumables (non-iron and steel In the Import Policy A-M 83 in Paragraph 3 of Appex. 9,17 drugs have been mentioned and in 1984 A.M policy, 16 drugs have been mentioned.

We will only refer to such of the items on which the parties placed reliance:Description as per A-M 83 policy Description as per A-M 84Item 6.

Doxycycline base, its hydrate/ Item 7. Doxycycline base, its hydrate/ hyclate/hydrochloride/ hyclate/hydrochloride/calcium calcium complex and inter- complex and intermediates mediates thereof.

thereof.Item 16. Tetracycline base/Hel Item 15. Tetracycline Base/Hcl.Para 218 (4) of Chapter 21 of 83 Para 241(4) of Chapter 22 of Policy 84 PolicyIn the case of drugs appearing in In the case of drugs appearing inappendices 3, 5 & 9, the names men- appendices 3, 4, 5 & 9, the names mentioned:-tioned are as they are commonly(i) refer to the respective active known, and each entry includes the ingredients, or salts, esters and complexes of the same(ii) are as they are commonly drug, as well as its active ingredients.

With this we now proceed to consider the question involved in these appeals and the contentions urged on both sides.

23. As noticed earlier two sets of show cause notice were issued. In the first set it was alleged; firstly, that the import of Tetracycline Urea Complex contravened the Import Trade (Control) Order No. 17/55 on the ground that the imported goods required a valid import licence which has not been produced. Secondly, the item imported is Tetracycline which figures in the canalised list in Appendix 9 of 1983 A-M policy. Thirdly, Tetracycline Urea Complex is covered by Tetracycline of canalised list. Import under OGL cannot be allowed. The import is unauthorised. Also there is a case of mis-declaration.

In the second set of show cause notice it was alleged that the goods have been imported in contravention of Government of India, Import Trade Control Order No. 17/55 dated 7-12-55 for the reasons (1) to bring into India of the said goods requires a valid import licence which has not been produced, (ii) the item imported is active ingredient of Tetracycline. Hence covered by Sr. No. 16 of Appendix 9 of A-M 83 policy vide para 218(A). The import against OGL Appx. 10(1) cannot be allowed and therefore is unauthorised.

Having regard to the show cause notices, the one and the only question that falls for consideration in these appeals is : Whether the imported goods 'Tetracycline Urea Complex' is a canalised item under Appendix 9 of the Import Policy A-M 1983 or is it a raw material, the import of which actual users (Industrial) is permitted under O.G L. under item No. 1 of Appendix 10 of the Import Policy, A-M 1983 24. We have in detail referred to the findings of the learned Additional Collector as well as the findings of the learned Collector and reasons assigned by them. We have also in detail referred to and considered the document and evidence relied on by the appellants and also set out the relevant items in I.T.C. Schedules, and other relevant paragraphs and further formulated the contentions urged on both sides.

Shortly stated, the Additional Collector considered the imported goods as a Tetracycline itself though, of course, he recorded a finding that the imported goods has the essential characteristics of Tetracycline.

The learned Collector, however, found that the Tetracycline is an active ingredient in the substance Tetracycline Urea Complex.

25. The first question that arises for consideration is what is it that has been canalised under Appendix 9 The answer to this question depends on our interpretation of para 218(4) and relevant entries in Appendix 9 of the Policy A-M 83. The learned Advocates for the appellant contended that only drugs, their esters, salts and active ingredients have been canalised under the Policy A-M 1983 and in the policy A-M 84, besides the above, complexes of drugs are also canalised. Shri Krishan Kumar on the other hand contended that the active ingredient canalised under Policy A-M 1983 need not necessarily be active ingredient of a drug. It can be even an active ingredient of any substance. What is important according to Shri Krishan Kumar is that active ingredient should be a drug in the substance imported.

26. We have carefully considered the policy. To our mind, what has been canalised in Appendix 9 of A-M 1983 Policy was drugs specified under paragraph 3 of Appx. 9, their salts and esters and active ingredients.

Under the policy A-M 1984, besides the above, the complexes of the drugs mentioned in App. 9 are also canalised. As has been rightly contended by Shri C.R.Patel, the learned Advocate for the appellants, if the intention of the policy makers was to canalise all substances containing drugs then they could have simply stated all substances containing drugs appearing in appendices 3, 5, & 9 are canalised. There was no need for the policy makers to take the trouble of stating in para 218(4) of A-M 1983 policy that drugs appearing in appendices 3, 5 & 9 referred to their respective salts, esters and active ingredients.

They intended to canalise only drugs and their active ingredients, salts, esters and complex of the drugs. It is necessary to remember that appendix 9 contained banned items. In the matter of banned items, the policy has to be clear, specific and explicit or else there would be chaos and confusion. The implementation may also become difficult and it might even tend to be subjective. It is because of this the policy makers in paragraph 218(4) of A-M 1983 and after gaining experience, in the Policy 1984, took care to include the salts, esters, active ingredients and complexes of the drugs specified in appendix 9, as canalised item.

In the above view of the matter, we reject the contention of Shri Krishan Kumar and accept the contention of S/Shri Hidayatullah and C.R.Patel, the learned Advocates and hold that under the Import Policy A-M 83, what appears to be canalised are drugs specified in Appendix 8, their salts, esters and their active ingredients. Under the Policy A-M 84, besides the above, complexes of the drugs mentioned in Appx. 9 have also been canalised.

27. Let us now proceed to consider whether the goods imported is a drug appearing in appendix 9, its salts, esters or active ingredients.

According to the appellants, they are the manufacturers of Tetracycline Hydrochloride and that Tetracycline Urea Complex is a raw material for the manufacture of Tetracycline Hydrochloride. The appellants in appeal Nos. 739 and 1076 have contended that the imported goods is a chemical compound. They also gave the chemical name and composition. The appellants in other appeal did not state that the imported goods is a chemical compound. In their Memorandum of Appeal they have stated that they are engaged in the manufacture of bulk drugs and one of the bulk drugs manufactured and marketed by them is Tetracycline Hydrochloride.

This bulk drug is manufactured with the aid of an intermediate called Pentahydroxy Methyl-N, N-Dimethyl Amino Naphtacendion Carboxamide Carbamide Compound which is commercially known as Tetracycline Urea Complex and that it is a raw material. Tetracycline Urea Complex does not find place in any Pharmacopoeiae or in any chemical dictionary.

During the course of the arguments the learned Advocates contended that 'Urea Complex' is a chemical. No material is placed either before the authorities below or before us to establish that imported goods is a Chemical Shri Krishan Kumar on the other hand contended that what had been imported is Tetracycline and Urea. In other words, his contention was that Tetracycline was imported either by putting solid Tetracycline in the urea solution or by putting Urea in the solution of Tetracycline. He refuted the contention of the learned Advocates that Urea Complex is a chemical compound. He did not dispute that it is a complex. According to him it is an 'Inclusion Complex'. He urged that there has been unbonded association of Tetracycline and Urea. He described the process as follows. An unbonded association of two molecules in which a molecule of one component is either wholly or partly locked within the crystal lattice of the other and they are separable by easy process. In support of his contention Shri Krishan Kumar relied upon the definition of Chemical Compound, Inclusion Complex, properties of Tetracycline and the properties and use of Urea as given in the Condensed Chemical Dictionary, 10th edition by Gessner G. Hawley. Shri Krishan Kumar also relied upon the very documents on which the appellants relied, viz., Certificate issued by CMA Laboratories regarding the test carried out on the imported goods, flow sheet of Tetracycline Hydrochloride duly certified by the Controller of Food & Drug Administration, M.P, and also the manufacturing process described by the appellants in appeal No. 852/83. Shri Krishan Kumar pointed out that in the CMA certificate it has been clearly stated that test for Tetracycline is positive, so also for Amide. He therefore urged that the imported goods cannot be a chemical compound because chemical compound is a homogeneous entity in which the elements have definite proportion by weight, and are represented by chemical formula.

A chemical compound according to Shri Krishan Kumar has characteristic properties quite different from those of its constituent elements. Shri Krishan Kumar then pointed out the process described by the Drug Controller, M.P. also establishes that by simple process urea could be separated from Tetracycline. Referring to the manufacturing process given by appellants in appeal 852/83, he drew our attention to the note contained in the process which according to Shri Krishan Kumar supports his contention that Tetracyclline Urea Complex is formed either by adding Urea solution to the solid Tetracycline or adding Urea to Tetracycline solution. He also drew our attention to paragraph 3 of the manufacturing process wherein it is stated that the solid substance comprising Tetracycline and Urea is commercially called Tetracycline Urea Complex. From this Tetracycline Urea Complex, the Urea is first removed by proper process which leaves Tetracycline and such Tetracycline is further processed with Ammonium Chloride and Hydrochloric Acid so as to obtain the drugTeiracycline Hydrochloride.

28. Shri Hidayatullah the learned Advocate for the appellants in Appeal 739 and 1076 vehemently urged that in the matter of interpretation of ITC entries, resort should be had not to the scientific or technical meaning but to the popular meaning or the meaning attached to them by those dealing in them. In other words, his contention was in the interpretation of ITC items, it is improper to refer to Scientific Dictionaries or Authorities and the proper thing to be done is to ascertain the commercial sense or meaning. In support of his contention the Advocate relied upon the decision of the Supreme Court reported in AIR 1967 S.C. 1454-Commissioner of Sales Tax, M.P v. Mrs. Jaswant Singh Charan Singh ; 1981-ELT-482 (Bombay) Advani Oerlikon Ltd. and Anr. v.Union of India and Ors.; AIR 1973-S.C.-page 78, Sales Tax Commissioner, U.P. v. S.N. Bros. Shri Hidyatullah further pointed out that finding of the learned Addl. Collector is not that what had been imported is either Tetracy-cline Base/Hcl or their active ingredients, salts and esters but that the substance has all the characteristics of Tetracycline. Such a finding according to Shri Hidayatullah does not establish that imported goods is a canalised item and therefore the order of confiscation and imposition of fine by the Addl. Collector is bad in law. He urged that once the Tribunal comes to the conclusion that there is no finding by the Addl. Collector that what had been imported is Tetracycline Base/Hcl or their active ingredients, salt or ester, then their appeals shall have to be allowed.

29. Shri C.R. Patel, the learned Advocate urged that the finding of the learned Collector was that Tetracycline is an active ingredient of the substance Tetracycline Urea Complex and the Collector did not say that the substance imported is a drug or its active ingredient, or salt or ester and therefore his order of confiscation is bad in law.

30. The appellants only attempted to establish that the imported goods is not a drug or ester or salt or active ingredient of drug and therefore not canalised item. We have agreed with their contentions that what had been canalised in the Policy, A-M 83 is a drug, its ester, salt and active ingredient and not active ingredient of any substance which is not a drug.

31. We cannot agree with the contentions of the learned Advocates that the learned Additional Collector and learned Collector did not record a finding that what had been imported is a Tetracycline. The Collector, no doubt, described the imported goods to include Tetracycline as an active ingredient. The Additional Collector contended by stating that the imported goods has characteristics of Tetracycline. The ultimate finding of both was that the imported goods is a canalised item. We do agree with the contention of the learned Advocate that the learned Additional Collector as well as the learned Collector have been influenced by the I T.C. Circular dated 3-1-1983 and they also placed reliance on the opinion of the Dy. Chief Chemist. The Additional Collector, in addition, also took into consideration extraneous matters such as report in the Chemical Weekly, The Times of India and the effect of import on I.D.P.L. We further agree with the contention of the Advocate that learned Additional Collector and the learned Collector ought not to have placed reliance on evidence or materials in respect of which the appellants have no previous notice in that no mention had been made in the show cause notices. But then the learned Advocates submitted that the matter need not be remanded on account of denial of principles of natural justice and the tribunal may consider as to whether the goods imported is a canalised item or not on the basis of the material already on record. We, therefore, proceed to consider whether the goods imported is a canalised item or not.

32. The first question that may be considered is whether Urea Complex is a Chemical Compound as has been contended by the appellants in Appeal Nos. 739 and 1076 of 1983 or it is only an 'Inclusion compound' as contended by Shri Krishan Kumar. Chemical Compound is described in page 268 of the Condensed Chemical Dictionary, 10th Edition by Gessner G. Hawley as "a substance composed of atoms and ions of two or more elements in chemical combination. The constituents are united by bonds (q.v.) or valence for forces. A compound is a homogeneous entity in which the elements have definite proportions by weight, and are represented by a chemical formula (q.v.). A compound has characteristic properties quite different from those of its constituent elements ; it can be decomposed by energy in the form of chemical reaction (q.v.) of heat, or of an electric current".

If it is a chemical compound it cannot have the properties of either Urea or Tetracycline. But the documents relied upon by the appellants viz. Certificate issued by CMA Laboratories mentions as under: "Identification : (1) Test for tetracycline positive (2) Test for Amide positive." In the flow-sheet of the Asstt. Drugs Controller, M.P. the process of conversion of Tetracycline Urea Complex to Tetracycline base has been given. This process clearly indicates that by simple process of dissolving the complex in Alkaline alcohol, the tetracycline gets separated from urea. So, neither heat nor electric current is required to decompose the compound. The process mentioned in other appeal, viz., Appeal No. 852 also goes to show that after tetracycline is separated from the remaining isomers and other impurities, liquid, i.e. urea water is added. This result in a solid substance comprising Tetracycline and Urea. From this substance Urea is first removed by proper process, though what that proper process has not been stated.

The note given in the process is very significant. The note indicates that Urea is added for the purification of the Tetracycline. We are satisfied that the goods imported is not a chemical compound as contended by Shri Hidayatullah. Shri Krishan Kumar on the other hand contended that it is an inclusion compound. In that connection he placed reliance on the description of Inclusion Complex (adduct) given at page 559 of the Chemical Dictionary mentioned above.

"An unbonded association of two molecules, in which a molecule of one component is either wholly or partly locked within the crystal lattice of the other. There are several types of such complexes, the most familiar being the so-called clathrates.

The formula for any clathrate compound is determined by the ratio of available cavities to the amount of cage material." 33. The expression "Complex" or "Complexes" is not defined in any of the policies. We however, found in Remington's Pharmaceutical Science, 16th edition in Chapter 14, page 182 the concept of complex has been considered. It may be stated here that the appellants have relied upon this edition in connection with their contention that active ingredients can only be active ingredients of a drug but not a substance. For the present, we only confine ourselves to the concept of complex, given in chapter 14. In this chapter the learned Author deals with various complexes such as Metal Complexes, Inorganic Complexes, Olefin Complexes, Molecular Complexes (Additional Compounds), Charge-Transfer Complexes, Hydrogen-Bonded Complexes, No-Bond (Induction) Complexes, Channel-Lattice Complexes. In our opinion, it is useful to refer to this Chapter to know what the expression "Complex" means. The term 'Complex' according to the learned author would tend to indicate, especially to a student, a meaning of mysteriousness or even confusion concerning certain properties of these substances. Perhaps this was true at one time since the idea of complexity as originally attributed to those compounds or structures which did not always conform to the classic theories of valency. Thus, even now, complexes or complex compounds in the broad sense are considered as those compounds having some deviation from the normal concepts of bonding.

Yet, many compounds still referred to as complexes, have been studied (e.g. coordination compounds) and their structures sufficiently elucidated to no longer classify them as complex. It is, therefore, difficult to delineate the difference between a simple and complex compound, except for the greater number of common compounds which adhere to the elementary concepts of bonding. The learned Author further states the term 'Complex' is not (now) usually extended to cover a multitude of compounds in which the bonding is simple, intricate, or a combination thereof.

Dealing with the classification the learned Author states 'Classification of complex compounds' according to a rigid set of conventions is of necessity a difficult, if not impossible task. For example, a type of complex compound (inclusion compounds) has been investigated, that is considered a non-bond complex. That is no bonding evidence is available to support the actuality that two or more molecules may form a somewhat stoichiometric combination without the necessity of being adjoined by some form of adhesive force.

Having regard to the contention of Shri Krishan Kumar, we confine ourselves to the 'inclusion complex' or 'inclusion compound'. This complex is dealt with by the learned Author at page 186. The relevant portion reads : 'No Bond (inclusion) Complexes'.

As previously stated the inclusion compound or complexes are characterized by the lack of adhesive forces between the components of the complex. They arise from the ability of one compound spatially to enclose another. It is not possible in most cases to predict the formation of an inclusion compound between two selected components.

Clathrates-Inclusion Compound, which are formed by the envelopment of a molecule of a 'guest' compound in the cage-like hollow space formed by combination of several molecules of the 'host' compound are known as clathrates (Latin, clathri, lattice). This type of compound is frequently non-stoichiometric. Clathrates can be depicted by C(M) in which the molecular component M is trapped during the formation of cage C from molecule or other complexes which exist in the same solution with it. One component may be a solid, liquid or gas retained within the cages of the host, it may be released by dissolving, heating, or grinding the clathrate. Such complexes are usually prepared by crystallization of the host substance from a solution containing the guest component. The learned Author further says the Clathrates guest can later be removed by some simple, physical process. In the same page the learned Author gives the description of 'Channel-Lattice Complexes'.

Channel Lattice Complexes-This type of inclusion complex occurs primarily when the host component crystalises in such a way as to form channel-like spaces in the crystal lattice. The guest molecule then must be of a shape which will fit into the voids or channels in the lattice. Urea, amylose, the zeolites and other compounds will complex other materials in this fashion. Since the channels are formed by crystallization of the host, in-spring like spirals, the nature of the guest component is usually limited to long, unbran-ched, straight-chain compounds. Urea will complex n-octane, but not iso-octaine. Choleic acids also function as host components in which the guest components are held in canals situated lengthwise to the crystals.

Digitonin-Cholesterol complexes are examples of the choleic acid type of complex.

The potential and present applications of the channel-lattice complexes are many. Separation of petroleum products, prevention of oxidation (Vitamin A palmitateis successfully complexed with urea and thereby protected), separation of optical isomers (several host compounds have steric features that allow complexa-tion of only one enantiomorph of a racemic mixture), and many analytical uses are illustrative of such applications. The well-known starch iodine color has been shown to involve formation of an inclusion compound of iodine in the central channel of the screw like starch molecule. Other compounds such as the flavones, coumarin, benzophenone, benzamide and barbituric acid are also capable of giving the blue iodine-addition compound'.

On consideration of various aspects we are inclined to agree with Shri Krishan Kumar that the imported goods is an inclusion complex. It is a no-bond (inclusion complex).

34. The next question that arises for our consideration is whether the goods imported is Tetracycline and Urea or a commodity altogether different from Tetracycline and Urea and as such falls outside the canalised item. When the import is objected to, the burden certainly lies on the department to establish by satisfactory evidence that the import is either banned or restricted or not covered by the licence. It is true that the department has not placed sufficient material to discharge this burden. But then when both sides adduced evidence the abstract proposition of burden of proof does not assume much importance. When the evidence is balanced then only the onus of proof assumes importance. In the instant case the department relied upon the test carried out by the Deputy Chief Chemist and was also influenced by the circular instructions, viz. ITC Circular dated 3-1-83. The importers have relied upon various documents to which we have made reference earlier. We agree with the learned Advocates of the appellants that the circular instructions cannot override the policy.

We also agree with their contention that circular instructions have no retrospective effect. Though we agree with the contention of Shri Krishan Kumar that the Customs Authorities may seek clarification from the Chief Controller of Imports & Exports, we are unable to agree with his contention that the clarification given by the C.C.I. & E. is either binding on the Customs authorities or other persons if the clarification has the effect of modifying, altering, or amending or annulling the policy. From the order of the Additional Collector it is seen that he placed reliance on the ITC circular dated 3-1-83. As has been stated earlier, Jt. C.C.I. & E. in Circular No. 1 of 3-1-83 had clarified that the item Tetracycline in the canalised list also includes Tetracycline Urea Complex. This circular does not incorporate any reason for the clarification given. As has been pointed out by us earlier, what had been canalised in 1983 Policy are the drugs mentioned in paragraph 3, their salts/esters and active ingredients and not even their complexes. It is only in the policy of 1984, the complexes of drugs also came to be canalised. Now, it is not the contention of the department that the Tetracycline Urea Complex as such is a drug or an active ingredient of a drug. When that is so, the clarification given by Jt. C.C.I. & E. in no way helps the department. There is considerable force in the contention of the learned Advocates S/Shri Hidayatullah and Patel that the expression 'active ingredient' mentioned in 218(4) of 1983 Policy and in 241(4) of 1984 Policy could mean only an active ingredient of a drug mentioned in appendix 9. Their contention finds support from the description of the active ingredient given in Remington's Pharmaceutical Sciences, 10th edition, page 310.

It is stated therein 'by the time a new drug becomes generally available to the Physicians it already has several names. A 'drug' refers to the active ingredient in a 'drug product', such as a tablet, capsule, or other dosage form that is administered to the patient'. We are satisfied that Tetracycline" Urea Complex as such is not active ingredient of either Tetracycline Base or Tetracycline Hydrochloride.

But then we are unable to agree with the contention of the learned Advocates that the imported goods is a commodity different from Tetracycline and Urea. We have already pointed out that the appellants have not produced any material to show that Tetracycline Urea Complex is a Chemical or a Chemical Compound. Admittedly it is not a drug.

Tetracycline Urea Complex is not a marketable commodity. In any case, no evidence is adduced to establish that is a marketable commodity.

35. The appellants, no doubt, contended that the Tetracycline Urea Complex is an intermediate in the manufacture of Tetracycline Hydrochloride. In that connection they placed reliance on the certificate issued by the Drug Controller, Government of Karnataka. We have already referred to this certificate. It is only a certificate certifying that the appellants are possessing manufacturing licence to manufacture Tetracycline Hydrochloride and that the licence is valid upto 31-12-1982. It no doubt states that the appellants are permitted to use Tetracycline Urea Complex as an intermediate for the manufacture of Tetracycline Hydrochloride. This certificate does not establish that Tetracycline Urea Complex is a commodity different from Urea and Tetracycline.

We have already pointed out how this complex comes into existence and how they could be separated. The only function the urea performs is purification of the Tetracycline from other impurities. In the process no change is brought about in the chemical properties of either urea or tetracycline. There is no doubt when urea is added to the solution of Tetracycline or when solid tetracycline is added to the solution of urea a solid substance is formed. This substance has the properties of the tetracycline and urea and it is a 'non-bond inclusion complex'. It is admitted that 'Urea' as such is not a drug. It has no characteristics or propeities of a drug and therefore it cannot be a drug intermediate as contended by the appellants in appeals 852, 1075 and 1150/83. Even the documents produced by the appellants establish that Tetracycline urea complex is not a commodity different from tetracycline and urea. In the certificate of CMA Laboratories it is stated that the test is positive both for Tetracycline and Urea. No doubt in the said certificate it is stated that the sample is not tetracycline or tetracycline hydrochloride, but is an urea complex of tetracycline. We have already in detail considered what this complex means. Further, the reason given in this certificate does not appeal to us. The reason given is that test for urea is positive therefore it is a tetracycline urea complex. But the laboratory failed to notice that test for tetracycline is also positive. This certificate can at best establish that the complex is Tetracycline plus Urea.

The second document, the flow sheet also indicates that urea is not used in the manufacture of Tetracycline Hydrochloride. On the other hand it is tetracycline that is used in the manufacture of tetracycline Hydrochloride. Urea is used only to obtain tetracycline free from impurities.

In document No. 3, the letter dated 6-5-1983, the C.M.A. Laboratories only stated that the substance is a complex of urea and tetracycline.

It is not stated in this letter that the substance is a new substance other than urea or tetracycline. It is significant to note that in this letter the Laboratory stated that the complex is Tetracycline and Urea.

The expression used is 'and' not Tetracycline Complex, a new substance altogether. This letter supports the contention of Shri Krishan Kumar that what has been imported are two commodities, viz., Tetracycline and Urea. At this stage, we may note the contention of Shri C.R. Patel, the learned Advocate. He had contended that the goods imported cannot be administered as a drug because Tetracycline is an antibiotics and it falls under the category of broad spectrum. It has medicinal value whereas Tetracycline Urea Complex has no medicinal value. It has no therapautic value. It is not prophylactic. It cannot be used for any treatment. It the arguments of Shri Patel is pushed to its logical conclusion then any import of tetracycline mixed with some impurities which could be removed by simple physical process ceases to be a canalised item, because in the form in which it is imported it cannot be administered as a drug. If such argument is accepted then an importer can successfully defeat the policy by putting some impurities to the Tetracycline. If what is imported is Tetracycline plus Urea, then the imported goods shall have to be considered as a canalised item, not because Tetracycline is an active ingredient of this substance Tetracycline Urea Complex, but because, firstly, from the Complex Urea can be separated by a simple physical process and secondly, because import was both Tetracycline and Urea. They are two distinct independent commodities.

36. We have explained earlier by reference to the documents produced by the appellants how this complex of Urea and tetracycline is formed. We have also referred to the process by which tetracycline is separated from the complex. We have pointed out the function of Urea. We may briefly refer to the properties of tetracycline and also the properties of urea and its use. In page 1146, Chapter 63, in Remington's Pharmaceutical Sciences, 16th edition, it is stated that "Tetracycline are broad spectrum antibiotics. They are mainly bacteriotatic. They bind to the bacterial 30s ribosomes and prevent t-RNA from combining with m-RNA. Thus protein synthesis is inhibited. The drugs have activities both gram-positive and gram-negative bacteria, my-cobacteris..." In page 1004 of the Condensed Chemical Dictionary 10th edition by Gessner G. Hawley, the properties of Tetracycline are given as 'yellow, odorless, crystalline powder, stable in air, affected by strong sunlight. Potency effected in solutions with pH below and destroyed in alkali hydroxide solutions. Practically insoluble in chloroform and ether, very slightly soluble in water; slightly in alcohol ; very soluble in dilute hydrochloride acid and alkali hydroxide solutions; pH...' 'White crystals or powder, almost odorless, saline taste; sp.gr.

1,334; m.p. 132.7 C; decomposes before boiling, soluble in water, alcohol and benzene; slightly soluble in ether, almost insoluble in chloroform. Low toxicity, Non-combustible.' 'Fertilizer; animal feed; plastics; chemical intermediate, stabilizer in explosives; medicine (diuretic); adhesives, separation of hydrocarbons (as urea adducts); Pharmaceuticals, cosmetics, dentifrices, sulfamic acid production; flameproofing agents; viscosity, modifier for starch or case in-based paper coatings; preparation of biuret.' It is, nowhere, stated that urea is a raw material for the manufacture of Tetracycline Hydrochloride. One of the raw materials for Tetracycline Hydro-chloride is Tetracycline itself. We have pointed out earlier, that adding urea solution to the tetracycline the properties of tetracycline are in no way altered or effected. Similarly, the properties of the urea also remain unaltered. The two substances remain as they are. But then the two combine and become a no-bond inclusion complex.

37. The appellants' import can be aptly described as a clear case of clever camouflage. In the guise of import of 'Tetracycline Urea Complex' they actually inported Tetracycline adding an innocuous substance Urea to disguise and brand the imported goods as 'Tetracycline Urea Complex' which is nothing but Tetracycline and Urea.

The appellants were aware that they cannot be prosecuted under the Drugs and Cosmetics Act; 1940, because their action of adding urea an innocuous substance does not result in adulteration or mis-abranding of the drug 'tetracycline'. The adding of urea to tetracycline was not to conceal the inferior quality or other defects of tetracycline.

Therefore, no action under the Drugs & Cosmetics Act, 1940, can be taken against them.

38. Before we conclude we may notice the contention of Shri Hidayatullah that for interpretation of I.T.C. Schedule it is not open to refer to treatises or dictionaries. There cannot be any quarrel as to the proposition canvassed by Shri Hidayatullah, but then we have made reference to the Condensed Chemical Dictionary and Remington's Pharmaceutical Sciences just to understand what is meant by 'Complex', what is 'Inclusion Compound', what is 'tetracycline', what is 'urea', what are their properties and their uses. These aspects could be understood or known only by referring to the books of the nature we did and cannot be ascertained by any other means. Making use of the Dictionaries and Pharmaceutical Sciences were not considered as objectionable in any of the decisions cited by the learned Advocate.

There cannot be any commercial sense, in so far as what is meant by 'complex' or 'Inclusion compound' or 'tetracycline' or 'urea' or their properties.

39. After careful consideration of all the aspects, we are satisfied that the appellants imported two separate and distinct commercial commodities viz., Tetracycline and urea. Since tetracycline is one of the drugs specified in appendix 9 item T6 of Policy A-M 83 the import of which under OGL under item 1, Appendix 10 is impermissible. We further hold that urea is not a raw material for the manufacture of Tetracycline Hydrochloride and as such the import of which cannot be made under OGL under Appx. 10(1) of the Policy A-M 1983.

40. The only other aspect which needs to be considered is the contention urged by the learned Advocates for the appellants that uptill the present exports imports of similar goods have been cleared by the Customs, and as such particularly when the imports are intended not for resale but for mannfacture of a drug by the Actual Users (Industrial), the import should have been allowed. Further when there is ambiguity as to the goods that has been canalised and having regard to the fact that the complex came to be canalised only during the Policy A-M 1984, the appellants should have been given the benefit of doubt and the import should have been cleared. The arguments addressed are attractive. But on close scrutiny we find that the contention that there is ambiguity in the Policy is not correct. There is no ambiguity whatsoever in the Policy. The Policy is clear and explicit. The items canalised as have been stated earlier are the drugs specified under paragraph 3 of Appeendix 9, their salts, esters and active ingredients.

So far as the past conduct is concerned at best the appellants may not be penalised by way of imposition of penalty or absolute confiscation of the goods imported. In all these cases the learned Additional Collector as well as the learned Collector have not imposed any personal penalty. They have also not ordered absolute confiscation.

There cannot be any estoppel in a matter of this nature. If there had been an improper understanding of the Policy during the earlier period, the appellants cannot continue to have that benefit and urge that as a ground for the release of the goods. As has been stated earlier it may cause injustice if the appellants were made to pay penalty or if the goods have been confiscated absolutely. When that had not been done, there is not much scope for the grievances now made. We, therefore, reject the contention* of the learned Advocates.

41. In the result, for the reasons set out in this order, we hold that the imported goods which are the subject matter of all the appeals are banned items and therefore dismiss these appeals and confirm the orders passed by the learned Additional Collector and the learned Collector.


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