1. Messrs Glaxo Laboratories (India) Ltd. are the manufacturers of a number of pharmaceutical and chemical preparations and medicines. The petitioners import a substance known as Polyvinyl Pyrrolidone (also known as 'P.V.P.') which is required by the petitioners in the preparation of pharmaceutical products. Polyvinyl Pyrrolidone is marketed internationally under the trade name 'Plasdone' or 'Povidone'.
2. In 1971 the petitioners imported a consignment of 4500 pounds of Plasdone of pharmaceutical grade. The consignment arrived at Bombay in September 1971. The petitioners filed a Bill of Entry in respect of this consignment classifying Plasdone under Tariff Item No. 87 of the Indian Tariff Act 1934. Item 87 was the residuary item under the First Schedule to the Indian Tariff Act, 1934 which was then in force. The rate of duty payable under tariff item No. 87 was 60 per cent. The Customs authorities, however, did not accept this classification. They classified 'Plasdone' under tariff item 82(3) which deals with artificial or synthetic resins. Under tariff item 82(3) the goods were assessable to customs duty at the rate of 100 per cent with countervailing duty at the rate of 36 per cent. The petitioners paid duty under item 82(3) under protest. They submitted an application in March 1972 claiming a refund of Rs. 1,21,816.80 being the difference between the duty paid under tariff item 82(3) and the duty which would have been paid under tariff item 87, and countervailing duty. In their application the petitioners stated that Plasdone was a pharmaceutical grade material and it was used as an adjuvant in their pharmaceutical preparations. The 2nd respondent, namely, Asstt. Collector of Customs by his order dated 15th December, 1972 rejected the application of the petitioners. The petitioners preferred an appeal to the Appellate Collector of Customs. The petitioners' appeal was rejected by the Appellate Collector of Customs by an order dated 18th November, 1974. The petitioners preferred a revision application from this order. In the course of a personal hearing which was granted to the petitioners in respect of their revision application, the petitioners submitted, in the alternative, that Plasdone was classifiable as a 'drug' under tariff item 28. The submissions of the petitioners were rejected by the respondents and the petitioners' revision application was dismissed under an order dated 12th December, 1979. Thereafter, the petitioners have filed the present petition.
3. It is the case of the petitioners that 'Plasdone' should be classified under tariff item 28 and not under tariff item 82(3). In the alternative, it should be classified under the residuary item 87. The petitioners strongly contend that the goods in question cannot be classified under tariff item 82(3).
4. Tariff Entry 82(3) at the material time was as follows :
82 (3)(a) Artificial or synthetic resins and 100 per cent ad
plastic materials in any form, valorem
whether solid, liquid or pasty, or
as powder, granules or flakes, or
in the form of moulding powders.
(b) Articles made of plastics the 100 per cent ad
following, namely : tubes, rods, valorem
sheets, foils, sticks, other
rectangular or profile shapes,
whether laminated or not, and
whether rigid or flexible including
lay flat tubings and polyvinyl
Is P.V.P. a synthetic resin Polyvinyl Pyrrolidone (P.V.P.) comes in several grades. Merck Index describes PVP as a polymer which is produced commercially as a series of products having mean molecular weights ranging from about 10,000 to 700,000. The United States Pharmacopoeia describes Povidone, which is another name for Polyvinyl Pyrrolidone, as 'a synthetic polymer consisting essentially of linear l-vinyl-2-pyrrolidone groups, the degree of polymerization of which results in polymers of various molecular weight. It is produced as a series of products having mean molecular weights ranging from about 10,000 to 700,000. The viscosity of solutions containing 10 per cent or less of Povidone is essentially the same as that of water; solutions more concentrated than 10 per cent become more viscous, depending upon the concentration and the molecular weight of the polymer employed. It is described as white to creamy white powder and it is put in the category of a pharmaceutics aid (tablet binder and coating agent; viscosity-increasing agent). It is soluble in water, in alcohol and in chloroform; and it is insoluble in ether.
Similarly the National Formulary also describes Povidone as a synthetic polymer, pharmaceutical grade and it is put in the category of dispersing and suspending agent. The British Pharmaceutical Codex 1973 describes Povidone as the pharmaceutical grade of polyvinyl pyrrolidone. It states as follows :
'POVIDONE SYNONYM : Polyvinyl pyrrolidone : Povidone is the pharmaceutical grade of polyvinyl-pyrrolidone. There are two types, one suitable for oral ingestion and typical application and the other for potentialadministration. The standard in this monograph applies only to the former type used as a pharmaceutical adjuvant in oral preparations; additional requirements are necessary for the injectable material'.
* * * *
'Uses. The type of povidone covered by the above standard is used in concentrations up to 10 per cent as a suspending and dispersing agent in aqueous oral preparations. As a tablet binder it is used in concentrations of 0.5 to 5 per cent; it is particularly useful in effervescent tablets and for other granulation processes in which a non-aqueous liquid recipientis used. It is also used in conjunction with acetylated monoglycerides or polyvinyl alcohol in the film coating of tablets. An injectable type of providone, which is not covered by the above standard, has been used as a plasma extender.
Non-pharmaceutical grades of polyvinyl-pyrrolidone are used in a number of cosmetic preparations such as skin sprays and hair lacquers.'
Other technical literature was also cited in order to show that the type of PVP imported by the petitioners, whether described under the trade name of 'Plasdone' or 'Povidone' is pharmaceutical grade material. It is a synthetic polymer and this grade of polymer is used as a suspending and dispersing agent in aqueous oral preparations. It is also used as a tablet binder. An injectible grade of povidone is used as a plasma extender.
6. In short, all these terms say that PVP is a synthetic polymer. But the petitioners contend that all polymers are not resins. They say that PVP is a synthetic polymer but not a synthetic resin. Further, while all resins are polymers, all polymers are not resins. According to the petitioners, resins are not normally soluble in water. PVP is, however, soluble in water.
7. Now, in McGraw-Mill Encyclopaedia of Science and Technology, there is a description of Polyvinyl resins at page 583. It is as follows :
'Polymeric materials generally considered to include polymers derived from monomers having the structure
R1//CH2 = CR2 in which R1 and R2 represent hydrogen, alkyl, halogen, or other groups. This article refers to polymers whose names include the term vinyl. Of these polymers, several have been used for a number of years, such as polyvinyl chloride, polyvinyl acetate polyvinylidene chloride, polyvinyl alcohol, polyvinyl acetals, and polyvinyl ethers. Indeed the terms vinyland vinyl resins are frequently used to refer to the three polymers of this group. Some polyvinyl resins of more recent origin are polyvinyl fluoride, polyvinylpyrrolidone, and polyvinylcarbazole.'
Thus, polyvinyl pyrrolidone is expressly described here as a polyvinyl resin although it is soluble in water.
8. In the book 'Water-Soluble Resins' edited by Davidson and Sitting, Chapter 6 deals with Polyvinylpyrrolidone. It is described as a relative newcomer among the commercial water-soluble polymers. The fact that PVP merits a chapter in a book on Water-Soluble resins shows that it is considered as a resin. It also shows that resins can be soluble in water.
9. The Condensed Chemical Dictionary, 10th Edition Revised by Hawley defines 'resin, natural' and 'resin, synthetic'. 'Resin, synthetic' is defined as 'A man-made high polymer (q.v.) resulting from a chemical reaction between two (or more) substances, usually with heat or a catalyst'. This definition includes synthetic rubbers and silicones (elastomers), but excludes modified, water soluble polymers (often called resins). There is a note which says, 'Because the term 'resin' is so broadly used as to be almost meaningless, it would be desirable to restrict its application to natural organ-soluble, hydrocarbon-based products derived from trees and shrubs. But in view of the tendency of inappropriate terminology to 'gel' irreversibly, it seems like a losing battle to attempt to replace synthetic resin by 'synthetic polymer'. In other words, the dictionary meaning itself sets out, that though it would be more appropriate to confine the term 'resin' to natural resins like gum, etc. and use the term 'polymers' with synthetic material, in popular terminology the term 'synthetic resin' has come to stay; and it refers to synthetic polymers.
10. In fact not merely in popular terminology, but even in technological literature, the term 'synthetic resin' seems to have been broadly used to cover synthetic polymers. For example, the book 'Water Soluble Resins' deals with synthetic polymers. The McGraw-Hill Encyclopaedia of Science and Technology also classifies synthetic polymers as synthetic resins.
11. In the case of Chemicals and Fibres India Ltd. v. Union of India and others reported in 1982 E.L.T. 917 this High Court was required to consider item 15A of the Central Excise Tariff. Item 15A deals with artificial or synthetic resins and plastic materials and articles thereof. The artificial or synthetic resins are extensively enumerated under item 15A to include, inter alia, polymerisation and copolymerisation products including polyethylene, etc. Looking to the precise scientific meanings of the items which were set out under tariff entry 15A, this Court held that the nature of the products specified in item 15A is highly technical and scientific in character and therefore, the words used therein will have to be given only their technical or scientific meaning. Interestingly enough, as per this scientific description, PVP is classified under Item 15A as a synthetic resin.
12. In tariff item 82(3) of the Customs Tariff, however, there is no such specific scientific enumeration. But the fact that under item 15A of the Excise Tariff, PVP would be included in artificial or synthetic resins, would also indicate that PVP can be classified as a synthetic resin.
13. The petitioners had submitted that synthetic resins are generally used in textile or paint industry and so on. They are not used pharmaceutically. In any event, pharmaceutical grade PVP is not known in the trade as a synthetic resin. There is, however, hardly any evidence on record which would show that PVP of pharmaceutical grade is known in the trade as 'drug' or that it is not known in the trade as a 'synthetic resin'. It is possible that this evidence was not produced by the petitioners because they have originally contended that this item should be classified in the residuary entry 87. But the petitioners could have produced evidence or at least filed some affidavits to this effect in the present petition. That has not been done. From the material on record it is not possible to hold that PVP of pharmaceutical grade is known in the trade as a 'drug' and not as a 'synthetic resin'.
14. Moreover, the end-use of a product is irrelevant for the purpose of interpretation of a tariff entry. The Supreme Court in the case of Dunlop India Ltd. v. Union of India and others reported A.I.R. 1977 S.C. 597 was required to consider whether V. P. Latex should be classified as 'rubber raw' or as a 'synthetic resin'. The Court held that the end-use of an article is absolutely irrelevant for the purpose of its classification under a tariff entry where there is no reference to the end-use of the article in the entry itself. The article must be judged on the basis of its nature at the time of its importation. Its ultimate use is not relevant. The use of PVP in pharmaceutical preparation is, therefore, strictly speaking, not relevant for its classification unless it could be shown that there is something in the nature of PVP per se which would entitle it to be classified as a 'drug'. Such is not the present case.
15. Is PVP of pharmaceutical grade a drug The PVP in question itself does not have any medicinal properties. It is, however, used in the preparation of medicines as a tablet binder. Mr. Shroff, learned counsel for the petitioners, has relied upon the definition of 'drug' under the Drugs and Cosmetics Act, 1940. Section 3(b) of the Drugs and Cosmetic Act, 1940 which gives the definition of 'drug' is as follows :
'3(b) 'Drug' includes -
(i) all medicines for internal or external use if human beings or animals and all substances intended to be used for or in the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings or animals, including preparations applied on human body for the purpose of repelling insects like mosquitoes;
(ii) * * * *
(iii) all substances intended for use as components of a drug including empty gelatin capsules;'
* * * *
It is submitted by the petitioners that all substances which are intended for use as components of a drug should also be considered as a 'drug'. Of course, under the Drugs and Cosmetics Act, 1940 such substances, which are used as components of a drug are by definition considered as drugs. But this is a definition of a drug for the purpose of Drugs and Cosmetics Act, 1940. The Act was promulgated in order to prevent sub-standard drugs and to maintain high standards in medical treatment. It lays down standards for manufacture, sale and distribution of drugs. Bearing in mind the object of the Act, the definition of 'drug' is an extensive and comprehensive definition which includes all components of drugs also. But this definition cannot be read into item 28 for the purpose of interpretation of the language used in item 28.
16. Under the Drugs (Price Control) Order, 1979 issued under section 3 of the Essential Commodities Act, 1955 'bulk drug' is defined in section 2(a) as follows :
''bulk drug' means any substance including pharmaceutical, chemical, biological or plant product or medicinal gas conforming to pharmacopoeiaor other standards accepted under the Drugs and Cosmetics Act, 1940, (23 of 1940), which is used as such, or as an ingredient in any formulations.'
Under the Second Schedule to this order a list of bulk drugs is annexed. Under the heading 'Plasma Expanders and Transfusion Solution' item (2) is Polyvinyl Pyrrolidone. Since Polyvinyl Pyrrolidone of injectible grade is used as 'plasma expander', this classification is of no assistance to the petitioners who have imported a non-injectible grade of polyvinyl pyrrolidone.
17. In fact, it is not the case of the petitioners that every grade of Polyvinyl pyrrolidone can be classified as a 'drug'. There are grades which are not pharmaceutical grades at all; and it is nobody's case that these grades can be classified as drugs. The petitioners, however, have imported a grade of polyvinyl pyrrolidone which can be used in pharmaceutical preparations. The submissions in the present case are confined to this particular grade of polyvinyl pyrrolidone.
18. Can this grade of PVP be considered as a drug The term 'drug' must be understood as it is understood in the trade and in common parlance. There is nothing in tariff entry 28 which suggests that the definition of 'drug' under the Drugs and Cosmetics Act, 1940 or under the Drugs (Price Control) order should be read into it.
19. What is a drug in common parlance Murray's Oxford English Dictionary defines 'drug' as 'an original, simple, medicinal substance, organic or inorganic, whether used by itself in its natural condition or prepared by art, or as an ingredient in a medicine or medicament. Formally used more widely to include all ingredients used in chemistry, pharmacy, dyeing and the arts, generally, as still in French. In early use always in the pl. : ....' The former wide use of the term 'drug' is no longer current. A 'drug' has, therefore, been defined as a medicinal substance used either by itself or as an ingredient in medicine.
20. Chamber's Dictionary of Science and Technology defines 'drug' as 'any substance natural or synthetic which has a physiological action on the living body, either when used for the treatment of disease or the alleviation of pain or for purposes of self-indulgence, lending in some cases to progressive addiction.' In other words, a drug is a substance which is understood ordinarily as having a physiological action on a living body. It is probably a term wider in meaning than medicine because physiological action of a drug may or may not be beneficial. There are drugs which can cause harmful effects on the human body also. But a substance which does not react physiologically at all is not a drug. Hence even an ingredient in any pharmaceutical preparation which does not have any therapeutic effect on the human body at all - either beneficial or harmful - cannot be classified as a 'drug'. For example, there are several medicinal preparations which have as their ingredients, sugar or sugar syrup, sweetening agents. They may also have colouring material. These items cannot be called 'drugs', simply because they are used in medicines. PVP of the grade imported by the petitioners is not used for any medicinal qualities. It is used as a binding agent for tablets. It is not a material which causes any physiological interaction. In a book entitled 'Water-Soluble Resins' edited by Robert L. Davidson and Marshall Sittig, at page 117 'Physiological Acceptability' of PVP has been described as follows :
'A long clinical history has shown PVP to be an essentially physiologically inert material.'
In fact, it is precisely for this quality that it is used for pharmaceutical preparations because it is found to be non-toxic. At page 119 it is stated, 'The adhesiveness and lack of toxicity of PVP have led to its use in pharmaceutical tablets as a granulating agent or for coating; Plasdone grade PVP K-30 is sold by General Aniline for this purpose. The classical binders such as starch or gelatin are used in water systems. However, where the ingredients are unstable in water, alcohol-soluble PVP permits granulation.' In my view, a material which is physiologically inert cannot be considered as a drug simply because it is an ingredient of a drug or medicine.
21. My attention was drawn to a decision in the case of Ramesh Chemical Industries v. Union of India and ors. reported in 1980 E.L.T. 598 where the Madhya Pradesh High Court relied upon the definition of 'drug' in the Drugs and Cosmetics Act, 1940 to reinforce its interpretation of an entry relating to drugs in the Central Excises and Salt Act. With all due respect to the Madhya Pradesh High Court, in my view it would not be correct to use an extensive definition given in one Act for interpretation of the same term in another Act, unless there is a reference to such an Act in the other Act.
22. In the case of The State of Maharashtra v. Shantilal Chhaganlal Sareiya reported in 1980 Bom. L.R. 1 the Bombay High Court classified Barbour's surgical linen thread as a 'drug' under the Drugs and Cosmetics Act, 1940. This decision is based entirely on the definition of 'drug' under the Drugs and Cosmetics Act, 1940 and it cannot be applied to the present case.
23. Similarly, the Calcutta High Court in the case of Ram Chandra Sundarka v. State of West Bengal reported in held that distilled water used for dissolving other medicines for injection, was a drug under section 3(b) of the Drugs and Cosmetics Act, 1940. This decision is also based on the Special provisions of the Drugs and Cosmetics Act, 1940 and cannot be applied to the present case.
24. The Allahabad High Court in the case of H.T. Chemical Laboratories v. The State of U.P. and ors. reported in (1972) 29 S.T.C. 148 held that distilled water was not a medicine or pharmaceutical preparation nor was it prepared through any manufacturing process and was not taxable under the U.P. Sales Tax Act, 1948.
25. Essentially an ingredient in a drug which is used for the purpose of its binding qualities cannot be considered as a drug, although it may be widely used in the preparation of drugs. Such a binding agent is in the same category as a gelatin capsule. In the absence of any express inclusion of such an item in item 28, the generic use of the word 'drug' does not cover such an item.
26. It is, however, an accepted position that an injectible grade of povidone is classified under Tariff item 28A as a patent or proprietary medicine. The pharmaceutical grade 'PVP' which has been imported by the petitioners is a different grade from the injectible type of PVP. It is nobody's case that this grade of PVP is classifiable under entry 28A. All grades of PVP need not be classified under the same tariff entry. The petitioners have confined their contentions only to pharmaceutical grade of P.V.P. Classification of another grade of PVP under a different entry is, therefore, not relevant.
27. Mr. Sethna had also submitted that if the Custom authorities have classified PVP under entry 82(3), this classification should not be disturbed unless it is found not to be wholly unreasonable or perverse. He relied upon a decision of the Supreme Court in the case of V. V. Iyer v. Jasjit Singh, Collector of Customs and anr. : AIR1973SC194 . The Supreme Court in that case was considering two alternative reasonable interpretations of an item in Import (Control) Order, 1955. It observed that correctness of conclusions reached by customs authorities in adopting one reasonable view as against another while interpreting an entry under taxation law, cannot be disturbed. As against this submission made by Mr. Sethna, Mr. Shroff relied upon a decision of the Supreme Court in the case of Dunlop India Ltd. as also the decision of the Supreme Court in the case of Diwan Brothers v. Central Bank of India : AIR1976SC1503 where the Supreme Court has held that in the case of a fiscal statute the provisions must be strictly interpreted giving every benefit of doubt to the assessee. Where two interpretations are possible, the one more favourable to the assessee should be adopted. Hence if an item can be classified under more than one entry, the entry more favourable to the assessee may be considered as the appropriate entry. This argument deals with the manner of interpretation in cases where two reasonable interpretations are possible. Such is not the present case. The question of approach in the present case is academic because in my view the item in question cannot be classified under Tariff entry 28. Since it is covered by tariff entry 82(3), it also cannot be relegated to the residuary entry 87. For the reasons aforesaid, the petition fails and the rule is discharged with costs.