COLLECTOR OF CENTRAL EXCISE, GUNTURversusANDHRA SUGAR LTD.

,,I

              COLLECTOR OF CENTRAL EXCISE, GUNTUR
                                         v.
                                                                                 A
                            ANDHRA SUGAR LTD.

                               OCTOBER 26, 1988

                                       . MISRA,
      [SABYASACHI MUKHARJI AND RANGANATH     .  JJ.]                             B

           Central Excises and Salt Act, 1944--Sections 11 B(2) and.35 L(b)
      and Notifications No. 55/75 dated March 1, 1975 and No. 62/78 dated
      March 1, 1978-'Acetic anhydride'-Whether drug intermediate--
      Whether exempt from duty.

           Statutory Interpretation-Court to give weight to interpretation put   C
      upon statute at time of its enactment.

            The respondent manufactured 'Acetic Anhydride' falling under
      Tariff Item No. 68 of the Central Excise Tariff. It filed two refund
      claims In regard to the· duty paid on the acetic anhydride during the D
      period 5th February, 1981 to 26th February, 1982, contending that the
      goods were exempt from payment of excise duty leviable thereon under
      Notification No. 55/75 CE dated lst march, 1975 as amended by Notiti·
      cation No. 62/78 CE dated lst August, 1978, that Acetic Anhydride is a
      'drug Intermediate' and that as delivery had been made to drug
      manufacturers i.e. IDPL, no excise duty was payable.                   E

            The Assistant Collector of Central Excise hy his adjudication
      allowed the refund of the aforesaid claims of the respondent under
      section 11 8(2) of the Central Excises and Salt Act, 1944.

           The department preferred appeals against the aforesaid orciers tu     F
      the Collector of Central Excise (Appeals), who allowed the appeals and
      annulled the orders of the Assistant Collector granting refund.

           The appeals preferred by the respondent having been allowed by
      the Customs, Excise and Gold (Control) Appellate Tribunal, tne
      Revenue appealed to this Court under Section 35 L(bJ of the Act.    G

           Dismissing the Appeals,

            HELD: 1. 'Acetic Anhydride' is a chemical but when it is sup·
      plied as a drug intermediate to a drug manufacturer, it would be
      entiUed to exemption under the relevant Notification.                      H
                                       543
     544         SUPREME COURT REPORTS               [1988] Supp. 3 S.C.R.



                                                                                I
           2. Keeping in view the language used in the exemption Notifica-
A    tion and the purpose of the Notification, the expression 'drug inter-
     mediate' is of a- wide description and substance and must he so
     interpreted. [547B]

           In the instant case, the Acetic Anhydride manufactured by the
B    appellant had been used by M,.s IDPL in the manufacture of drugs. In
     the light of the purpose for which the goods were used, the Tribunal
     came to the correct conclusion. [547B-C]

          Mysore Acetate & Chemical Co. Ltd. v. Assistant Collector, Cent-
     ral Excise, Mysore, [1984] 17 ELT 319 and Shasum Chemicals
     (Madras) Pvt. Ltd., [1982] ELT 786, referred to.
c
           3. It is a well-settled principle of interpretation that courts in
     construing a Statute will give much weight to the interpretation put
     upon it at the time of its enactment, since those whose duty has been to
     construe, execute and apply the same enactment.- [546H; 547 A]
D
            4. The meaning ascribed by the authority issuing the Notifica-
     tion, is a good guide of a contemporaneous exposition of the position of
     taw. [546GJ

          K.P. Varxhese v. The Income Tax Officer, Ernakulam, [1982] l
B    SCR 62'1, referred to.

          CIVIL APPELLATE JURISDICTION: Civil Appeal Nos.
     1568-69 (NM) of 1988

          From the Order dated 26.11. 1987 of the Customs Excise & Gold
F    (Control) Appellate Tribunal, New Delhi in Appeal No. ED (SB)
     1648/84 C and 1923 of 1984-C.

         G. Ramaswamy, Additional Solicitor General (N.P.). Ms. Indu
     Malhotra and Ms. Sushma Suri for the Respondent.

G          The Judgment of the Court was delivered by

        SABYASACHI Mt;KHARJI, J. These are appeals under Section
  35L(b) of the Central Excises and Salt Act, 1944 (hereinafter referred
  to as 'the Act'), arising out of the order of the Tribunal, dated 26th
  November, 1987. The issue involved in the present case is whether the
H Acetic Anhydride manufactured by the respondent and sold to drug
·'
 ;-.          COLLECTOk OF C.E. v. ANDHRA SUGAR [MUKHARJI, l.]            545

       manufacturers i.e. M;s. IDPL is eligible to benefit of exemption under
                                                                                 A
       the notification No. 55/75 CE dated 1st March, 1975 as amended by
       the notification No. 62178 CE dated 1.3.1978 as drug intermediate.

             The respondent manufactured AcetiC Anhydride falling under
       Tariff Item No. 68 of the Central Excise Tariff. It had filed refund
       claims for Rs. 1,57,442.08 and Rs. l, 14,587. 74 being the duty paid on   B
       Acetic Anhydride during the period from 5.2.1981 to 28.6.198 land
       from 23.7. 1981 to 26.2.19§2 contending that these goods were exempt
       from the payment of duty of excise leviable thereon under the notifica-
       lion referred to herein before. It was contended that Acetic Anhydride
       is a drug intermediate and all such clearance for which the refund was
       claimed, had been made for delivery to the drug manufacturers. If
       drug intermediate is sold or supplied to a drug ma~ufacturer then
                                                                                 c
       under the notification duty was not payable. The question, therefore,
       is, was the item manufactured by the petitioner, during the relevant
       period, a drug or an intermediate in terms of the notification.

             It appears that the Assistant Collector of Central Excise by his D
       adjudication had allowed the refund of Rs.32,261. 74 and Rs.87 ,932.40
       out of the aforesaid claim of the respondent under Section l 1B(2) of
       the Act. The aforesaid orders of the Assistant Collector were cha!-
       lenged by the department by preferring appeals before the Collector of
       Central Excise (Appeals), Madras. The Collector (Appeals) allowed
       the appeal filed on behalf of the revenue and annulled the order of the E
       Assistant Collector, Bluru, sanctioning sums of Rs.35,261. 74 and
       Rs.87,943.40 respectively and directed that those amounts be returned
       to the department. Being aggrieved thereby, the respondent preferred
       appeals before the Appellate Tribunal and the same were allowed.
       Hence these appeals.
                                                                                 F
              The question was considered in a decision of the learned Single
       Judge of the High Court of Karnataka in Mysore Acetate & Chemical
       Co. Ltd. v. Assistant Collector, Central Excise, Mysore, I 1984] 17 ELI
       319, wherein it was held that Acetic Anhydride is a chemical but when
       it is supplied as a drug intermediate to a drug manufacturer, it would
       be entitled to exemption under the relevant Notification. The require- G
       ment of end-use, though not built into the exemption notification, is
       not only implied but also becomes imperative in a situation where the
       product has uses other than as drug intermediate whereas the exemp-
       tion is limited only to drug intermediate, i.e., only when the product is
       used as drug intermediate, In this connection reliance was placed on a
       decision of the Government of India in Hindustan Organic Chemicals H

;·
      ~46         SUPREME COURT REPORTS               [1988] Supp. 3 S.C.R.

A Ltd., where reversing the order of the Excise Authorities of Bombay,
  the Government by its order dated 14th September, 1981 narrated as
  follows:

                 "Government have considered all the written and oral sub-
                 missions. Government find considerable force in the con-
                 tention that the view taken by the lower authorities tends
                 to defeat the object of the exemption notification. The
                 interpretation on the scope of the term 'Drug Intermediate'
                 put by the lower authorities is not warranted on a plain
                 reading of the notification. Government observe that the
                 notification does not specify the state of use of the item
,,.              claimed as drug intermediate as the penultimate state i.e.,
"                immediately prior to the obtaining of the drug in the
                 process of its manufacture. The petitioners have produced
                 enough evidence to show that the three items are used in
                 the manufacture of drugs. The petitioners have enclosed
                 copies of the certificates issued by the National Chemical .
                 Laboratory, Pune and the Central Drug Research Insti-
                 tute, Lucknow, certifying that Aniline, Para Nitro Chloro
                 Benzene and Acetenilide find vide application as inter-
                                                                                  .   '
                 mediate for drug among other things. The National Chemi-
                 cal Laboratory, Pune have certified that the above men-
                 tioned chemicals are drug intermediates to the extent they
E                are used in the manufacture of drugs. Government accord-
                 ingly set the order in appeal and hold that the petitioners
                 should get the benefit of the exemption notification for the
                 three items to the extent that they are actually used in the
                 manufacture of drugs. In the Government's view, this re-
                 quirement of end-use though not built into the exemption
                 notification is not only implied but also becomes impera-
                 tive in a situation where the produce has uses other than as
                 drug intermediate whereas the exemption is limited only to
                 drug intermediate that is only when the product is used as a
                 drug intermediate."

G           It appears that the same principle was reiterated in the case of
      Shasum Chemicals (Madras) Pvt. Ltd., [1982] ELT 786. It is well set-
      tled that the meaning ascribed by the authority issuing the Notifica-
      tion, is a good guide of a contemporaneous exposition of the position
      of law. Reference may be made to the observations of this Court in
      k.P. Varghese v. The Income Tax Officer, Emakulam, (1982] 1 SCR
H     629. It is a well settled principle of interpretation that courts in con-
                 COLLECTOR OF C.E. v. ANDHRA SUGAR IMUKHARJI, J.]              547

          struing a Statute will give much weight to the interpretation put upon it   A
          at the time of its enactment and since, by those whose duty has been to
          construe, execute and apply the same enactment.
 •
                Keeping in view the language used in the exemption notification
          and the purpose of the notification, the expression 'drug intermediate'
                                                                                      B
     "'   is of wicle description and substance; and must be so interpreted. In-
          deed, it was found in the facts of this case that the Acetic Anhydride
          manufactured by the appellant has been used by M/s. IDPL in the
          manufacture of drugs.                                              ·

               In the light of the purpose for which the goods in question were
          used, we are of the opinion that in the context the Tribunal came to a      C
          correct conclusion. In the premises, the appeals must fail and are
          accordingly dismissed. There will, however, be no order as to costs.

          N.V.K.                                               Appeals dismissed.




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