of Central Excise, Guntur Vs. Andhra Sugar Ltd.  INSC
326 (26 October 1988)
Sabyasachi (J) Mukharji, Sabyasachi (J) Rangnathan, S.
1989 AIR 625 1988 SCR Supl. (3) 543 1989 SCC Supl. (1) 144 JT 1988 (4) 410 1988
Excises and Salt Act, 1944 Sections 11 B(2) and 35 L (b) and Notifications No.
55/75 dated March l, 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 upon statute
at time of its enactment.
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 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 1st march, 1975 as
amended by Notification No. 62/78 CE dated 1st 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.
Assistant Collector of Central Excise by his adjudication allowed the refund of
the aforesaid claims of the respondent under section 11B(2) of the Central
Excise and Salt Act, 1944.
department preferred appeals against the aforesaid orders to the collector of
Central Excise (Appeals),who allowed the appeals and annulled the orders of the
Assistant Collector granting refund.
appeals preferred by the respondent having been allowed by the customs, Excise
and Gold (Control) Appellate Tribunal, the Revenue appealed to this Court under
Section 35 L(b) of the Act.
1, `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.
543 PG NO 544
Keeping in view the language used in the exemption Notification and the purpose
of the Notification, the expression drug intermediate' is of a wide description
and substance and must be so interpreted. [547B] In the instant case, the
Acetic Anhydride manufactured by the 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, Central Excise, Mysore, 
17 ELT 319 and Shasum Chemicals (Madras) Pvt. Ltd.,  ELT 786, referred
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; 547A]
meaning ascribed by the authority issuing the Notification, is a good guide of
a contemporaneous exposition of the position of law. [546G] K.P. Varghese v. The
Income Tax Officer, Ernakulam, 1 SCR 629, referred to.
APPELLATE JURlSDlCTlON:Civil Appeal Nos. 1568-69 (NM) of 1988 From the Order
dated 26.11.1987 of the Customs Excise & Gold (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.
Judgment of the Court was delivered by SABYASACHI MUKHARJI,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 Acetic
Anhydride manufactured by the respondent and sold to drug PG NO 545
manufacturers i.e. M/s IDPL is eligible to benefit of exemption under the
notification No. 55/75 CE dated 1st March, 1975 as amended by the notification
No. 62/78 CE dated 1.3.1978 as drug intermediate.
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
1,14,587.74 being the duty paid on Acetic Anhydride during the period from
5.2.1981 to 28.6.1981 and from 23.7.1982 1 to 26.2.1982 contending that these
goods were exempt from the payment of duty of excise leviable thereon under the
notification referred to hereinbefore 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 manufacturer then 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
appears that the Assistant Collector of Central Excise by his 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 11B(2) of the Act. The aforesaid orders of the
Assistant Collector were challenged 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 Assistant Collector, Bluru, sanctioning sums of Rs.35,261.74
Rs.87,943.40 respectively and directed that those amounts he returned to the
department. Being aggrieved thereby, the respondent preferred appeals before
the Appellate Tribunal and the same were allowed Hence these appeals.
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, 17 ELT 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 requirement 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
exemption 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 Ltd., where reversing
the order of the PG NO 546 Excise Authorities of Bombay, the Government by its
order dated 14th September, 1981 narrated as follows:
have considered all the written and oral submissions. Government find
considerable force in the contention that the view taken by the lower
authorities tends to defeat the object of the exemption notification.
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
Institute, Lucknow, certifying that Aniline, Para Nitro Chloro Benzene and Acetenilide
find vide application as intermediate for drug among other things The National
Chemical Laboratory, Pune have certified that the above mentioned chemicals are
drug intermediates to the extent they are used in the manufacture of drugs
Government accordingly 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 requirement of end-use though not built into the
exemption notification is not only implied but also becomes imperative 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 drug intermediate." It appears that the same principle
was reiterated in the case of Shasum Chemicals (Madras) Pvt. Ltd.,  ELT
786 It is well settled that the meaning ascribed by the authority issuing the
Notification, is a good guide of a contemporaneous exposition of the position
may be made to the observations of this Court in K.P. Varghese v. The Income
Tax Officer, Ernakulam,  1 SCR 629. It is a well settled principle of
interpretation that courts in construing a Statute will give much weight PG NO
547 to the interpretation put upon it at the time of its enactment and since,
by those whose duty has been to construe, execute and apply the same enactment.
in view the language used in the exemption notification and the purpose of the
notification, the expression `drug intermediate' is of wide description and
substance; and must be so interpreted. Indeed, 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.
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 correct conclusion. In the
premises, the appeals must fail and are accordingly dismissed. There will,
however, be no order as to costs.