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Anand Synthochem Pvt. Ltd. Vs. Collector of Central Excise - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1984)(17)ELT583TriDel
AppellantAnand Synthochem Pvt. Ltd.
RespondentCollector of Central Excise
Excerpt:
.....use that should govern its assessment. the chemical has an i.p. rating and has to be used only in drug manufactures. it cannot be used or dispersed it in any other way.the appellant has a licence to manufacture this substance, from the drugs licensing authority of the state government. it is not open to central excise to classify it as surface-active agent. [there was no contest about the test results]. an item marketed as a drug, even if it has surface activity, must be assessed only as a drug. and if there is any doubt about the assessment, the benefit must go to the assessee.the counsel compared item 15aa with item 12 which contains the words "all sorts". the absence of these words from item 15aa will require assessment under this item (15aa) to be made with a great deal of.....
Judgment:
1. I his appeal filed by M/s. Anand Synthochem Pvt. Ltd., Bombay against order-in-appeal No. 1695/79 passed by the Collector of Central Excise (Appeals), Bombay.

2. The appellant manufacture sodium lauryl sulphate. This product is made to Indian Pharmacopoeia standard and is supplied to factories which use it as an ingredient in the manufacture of drugs and formulations. It claims that this product is a drug and must be classified under Item 68 CET and be given the exemption available to the drugs under Notification 55/75-CE. The Central Excise, however, assessed the chemical under Item 15 A A as a surface active agent because it has surface-activity. The appellant says that though it has surface-active properties, it is an ingredient in a drug formulation and deserves classification as a drug rather than as a surface-active substance.

3. The learned counsel for M/s. Anand Synthochem Pvt. Ltd. argued before the Tribunal that it is its use that should govern its assessment. The chemical has an I.P. rating and has to be used only in drug manufactures. It cannot be used or dispersed it in any other way.

The appellant has a licence to manufacture this substance, from the drugs licensing authority of the state government. It is not open to Central Excise to classify it as surface-active agent. [There was no contest about the test results]. An item marketed as a drug, even if it has surface activity, must be assessed only as a drug. And if there is any doubt about the assessment, the benefit must go to the assessee.

The counsel compared Item 15AA with Item 12 which contains the words "all sorts". The absence of these words from Item 15AA will require assessment under this Item (15AA) to be made with a great deal of discrimination. There is no "all sorts" clause like Item 12 which will permit any kind of like substances to be placed there. He referred to 1981 E.L.T. 72 Godrej Soaps.

4. He also referred to this Tribunal's decision Order No. C-53/83, dated 18-3-1983. M/s. Anand Synthochem Pvt. Ltd. to argue that their reasonings are supported by the Tribunal itself. The product cannot be sold to any one but a person licensed to manufacture drugs.

5. The learned counsel for the department opened his address by pointing out that Hiwley's Condensed Chemical dictionary does not refer to sodium lauryl sulphate finding use as a drug; the Merck Index lists its use as a wetting agent in textile industry etc. etc., nor does the Kirk Othmer Encyclopaedia mention drug as a use of the substance. The appellant does not dispute the test that found the product to have the capacity to reduce surface tension. The Tribunal's decision quoted by the appellant's counsel was in relation to a dispute about classification as a drug intermediate; this case is different.

6. The assessee is not required to manufacture only I.P. grades. He quoted the Dunlop Judgment that use should not form a basis for assessment; the classification must always be based on the composition and character of the thing assessed. Sugar and alcohol find use as or in drug manufacture, but nobody has suggested their assessment as drugs. Hawley's dictionary defines "drug"- "A substance that acts on the central nervous system e.g., a narcotic, hallucinogen barbiturate, or psychotropic drug.

(2) A substance that kills or inactivates disease-causing infectious organisms.

(3) A substance that affects the activity of a specific bodily organ or function.

(4) According to the FDA, a drug is a substance "intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease, or to affect the structure or function of the body." Under this definition, high-potency preparations of vitamins A and D are classified as drugs, though other vitamins are not; antiperspirants and suntan lotions are also considered to be drugs." 7. The learned counsel for M/s. Anand Synthochem replied that SLC has different specifications for different uses. That non-pharmacopoeial grades can be produced does not detract from his arguments. And because the SLS is no by itself used by physicians does not mean it is not a drug. Hardly any doctor today mixes his bottle of mixture for his patients. He usually prescribes a formulation i.e. a pill or a liquid, patented by a drug-maker, which contains the ingredient the doctor thinks is necessary to counter the disease.

8. One fact that weighs against M/s. Anand Synthochem is that the Central Excise Tariff has no item for drugs. The Notification 55/75-C.E., under which drugs are given exemption cannot classify a substance under Item 68 if there is a more suitable heading for it.

Sodium lauryl sulphate has distinct surface-active properties and is in fact used in patented preparation for this very property as it enables proper penetration of the active therapeutic components into otherwise impenetrable tissues and areas. That it is used as a drug for healing or to aid healing may be true and we think is quite true. But unfortunately, we are on the matter of assessment and our only objective is to see, what, of the many headings, is the most suitable heading. Item 68 is not a heading as it has no description or nomenclature. It covers only goods that cannot be covered by the preceding 140 or so heading. Unless the product has been rejected by all, Item 68 cannot accept it.

9. Can we say that SLS has no heading into which it fits Cannot. Item 15AA fits it well and perfectly, because this heading is designed for just such surface active preparations. All the arguments advanced on behalf of M/s. Anand Synthochem Pvt. Limited will avail it nothing in view of this fundamental fact.


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