1. The captioned appeals were initially filed as revision applications before the Central Government and have come as transferred proceedings, in terms of Section 131B(2) of the Customs Act 1962, to this Tribunal for disposal as they were appeals filed before it.
2. The issue involved in these three appeals is common and this common order disposes of all the appeals.
3. The issue is whether the chemical -GLYOXAL 40% -imported by the appellants (hereinafter referred to as FALRDEAL) was eligible for exemption from additional duty of customs with reference to Central Excise notification No. 55/75 dated 1-3-1975 as a "drug intermediate" falling under item No. 68 of the Central Excise Tariff Schedule (CET.) 4 The lower authorities held that the chemical was a raw material for the manufacture of a drug intermediate, namely, 2-Methyl Imidazole. It was a versatile chemical having multifarious uses. Since it was not exclusively or even predominantly used in the manufacture of drugs, it was not entitled to exemption as a "drug intermediate" in terms of the notification referred to above.
5. The appeal was heard on 18-11-1983. Shri Rajadhyaksha, the learned Counsel for FAIRDEAL, made the following submissions :- (i) Glyoxal 40% is used by FAIRDEAL for manufacture of Metroni-dazole I.P., a drug for which they hold a licence from the Commissioner, Food & Drugs Administration, Maharashtra State. The process could be briefly summed up thus - Glyoxal 40%- 2 Methyl ImidazoIe-"-Metronidazole I.P. The licence covers also the manufacture of 2-Methyl Imidazole.
(ii) Glyoxal 40% which is used in the manufacture of the drug Metronidazole is a "drug intermediate" within the meaning of Notification No. 55/75-C.E. (iii) Tne predominant use of Glyoxal 40% is in the manufacture of Metronidazole I.P. This has been acknowledged by the very same Appellate Collector (whose orders are under challenge before us) who, in a later order dated 15-12-80 on three appeals filed by the same appellants (FAIRDEAL), held, after study of the voluminous data placed before him by FAIRDEAL, that the principal use of Glyoxal 40% is as raw material in the manufacture of drugs. In view of this principal use, the Appellate Collector concluded in that order that Glyoxal is a drug intermediate falling within the scope of Notification No. 55/75-C.E. (iv) Glyoxal 40% manufactured indigenously by M/s. Rajasthan Glyoxai Ltd. was being assessed to 'Nil' duty in terms of Notification No. 55/75-C.E. by the concerned excise authorities, as may be seen from the photostat copy of the relevant classification list submitted as evidence (Pages 45 to 49 of the Paper Book in Appeal No. 689/1980-C).
6. Appearing on behalf of the respondent, Shri A.K. Jain submitted that- (i) the word "intermediate" has not been defined in the relevant notification. It is, therefore, useful to turn to a standard book like Hawley's Condensed Dictionary which has this to say : - "An organic compound, either cyclic (derived from coal tar or petroleum product such as benzene, toluene, naphthalene, etc.) or acyclic (e.g., ethyl and methyl alcohol). These compounds may be considered as chemical stepping stones between the parent substance and the final product. The cyclic type (e.g., aniline, beta-naphthol, and benzoyl-benzoic acid) still predominate as intermediates for synthetic dyes and have few other uses; the acyclic type in general have many independent uses. Exceptions are hexamethylenetetramine, an acyclic intermediate for phenol formaldehyde resin, and butadiene for synthetic elastomeis.
Intermediates are the foundation of the modern approach to organic technology. The distinction between an intermediate and an end-product is not always precise." (ii) The same Dictionary gives the following information : On the uses of Glyoxal: - Uses : Permanent-press fabrics; dimensional stabilization of rayon and other fibres. Insolublizing agent for compounds containing polyhy-droxyi groups (polyvinyl alcohol, strach and cellulosic materials,); insolubiliZing of proteins (casein, gelatin and animal glue); embalming fluids; leather tanning; paper coatings with hydroxyethylcellu-pse, reducing agent in dying textiles.
There is no reference to its use as a drug intermediate. Hence, even if such use is there, it cannot be said to be its predominant use.
(iii) On the concept of predominant use, reference may be made to the Tribunal's decision in M/s Sirpur Mills case reported in 1983 ECR 1179.
(iv) 2-Methyl Imidazcle which FA1RDEAL produces from Glyoxal 40% is a drug inteimediate. Hence Glyoxal 40% can only be a chemical used as a starting material and cannot be deemed to be a drug intermediate by itself. In this context, reference was made to a book published by Small Business Publications, Delhi, in their Chemical Engineering Series No. 43 entitled 'Fine Chemicals, Drugs, Pharmaceuticals". In this bock Imidazole but not Glyoxal 40% stood identified as a drug intermediate.
7. In reply, Shri Rajadhyaksha contended that there was no warrant to say that a "drug intermediate" to be so called should directly result in production of a drug when processed.
8. We have carefully considered the submissions of both bides. We must take note of the fact that the Appellate Collector has recorded, in his order dated 15-12-1980 (though in relation to some other appeal but of the same appellants), after study of voluminous data placed before him, that the principal use of Glyoxal 40% is as raw material in the manufacture of drugs. This finding has not been rebutted by the Department before us nor has the Deptt. produced any evidence of their own in this regard. We shall, therefore, proceed on the basis that the principal use in India of Glyoxal 40% is as a raw material in the manufacture of drugs.
9. The relevance of the SDR's reference to the Tribunal's decision in 1983 ECR 1179-D is not clear. In that case, the trade opinion and predominant use supported the appellants claimed classification under item 17(3) CET as unspecified varieties of printing and writing papers.
The Tribunal accepted the appellants claim. We fail 10 see the relevance of his decision to the matter before us.
10 We cannot also fail to take note of the fact that Rajasthan Central Excise authorities are considering Glyoxal 40% as entitled to the benefit of Notification No. 55/75-C.E.-Serial No. 19 thereof; "Drugs, medicines, pharmaceuticals and diug intermediates", Confronted with this, the SDR could only say, and rightly so, that there was no estoppel in taxation matters. But then, it has to be established that the said classification was erroneous.
11. The basic issue herein is what is an "intermediate". Shri Jain has referred to the meaning of the said expression as given in Hawley's Condensed Chemical Dictionary (10th edition-page 565). According to this dictionary, "Intermediates are organic compounds" which may be considered as chemical stepping stones between the parent substance and the final product."...The distinction between an intermediate and an end-product is not always precise." 12. The rather vague, imprecise meaning of "intermediate" is brought out by reference to that three other authorities have to say on it: - (i) Organic product to be subjected to further chemical treatment to produce finished product such as dyes and pharmaceutical. [Page : 80 of Concise Chemical and Technical Dictionary (III edition) by H. Bennett].
(Chem.) - A precursor to a desired product, ethylene is an intermediate for polyethylene, and ethane is an intermediate for ethylene." [Page 829-830 McGraw Hill Dictionary of Scientific and Technical Terirs II Edition] (Chem) A general term for any chemical compound which is manufactured from a substance obtained from raw materials, and which serves as a startin material for the synthesis of another product." [page 624- Chambers Dictionary of Science and Technology Revised Edition].
13. The use of Glyoxal 40% in the manufacture of 2-Methyl Imidazole and ultimately of Metronidazole I.P. has not been disputed. Having regard to the several definitions of the expression "intermediate" which we have extracted above, we do not see any reason why the benefit of Notification No. 55/75-C.E. should not be extended in the instant cases.
14. Accordingly, we allow the three appeals and direct that consequential relief shall be granted by the concerned customs authorities to the appellants within three months from the date of communication of this order.