Excise & Customs, Indore Vs. M/S. Parenteral Drugs (I) Ltd.  INSC 658
(31 March 2009)
JURISDICTION CIVIL APPEAL NO. 4944 OF 2004 Commnr. of Central Excise &
Customs, Indore ...Appellant(s) Versus M/s. Parenteral Drugs (I) Ltd.
...Respondent(s) WITH CIVIL APPEAL NOS.6519/2005, 1152/2006, 2127/2006,
2628/2006, 2630/2006 & 4059/2006 ORDER Delay condoned.
In this batch of
Civil Appeals, the main issue which arose for determination before the
Adjudicating Authority was whether Intravenous Fluids having a therapeutic
value stood covered under Exemption Notification No.3/2001.
In the lead matter -
M/s. Parenteral Drugs (I) Ltd. - the respondents were engaged in the
manufacture of various types of Intravenous Fluids. They were availing the
benefits of Notification No.6/2000, dated 1.3.2000. The said Notification was
amended by Notification No.36/2000, dated 4.5.2000, whereby Entry No.47-A was
added thereby exempting "Intravenous Fluids" from payment of excise
1.3.2001, the earlier notifications were replaced by Notification No.3/2001
which defined "Intravenous Fluids" as those which are used for sugar,
electrolyte or fluid replenishment. In other words, open-ended exemption stood
restricted by the above three qualifications.
1 Accordingly, show
cause notices were issued in which it was alleged that the respondents were
engaged in the manufacture of intravenous infusions of various kinds which becides
the fluids included certain medicines having anti-bacterial, antibiotic and
antimicrobial properties. It was alleged in the show cause notice that by
addition of the following items to the Intravenous Fluids, the product attained
therapeutic value and, consequently, it fell outside Notification No.3/2001
which defined 'IV Fluids' as those used for sugar, electrolyte or fluid
The items added to
the fluids are as follows:
(c) PDZOLE-D (d) Ciprodex
(e) Tinipidi Isotonic Infusion, and (f) Mannitol I.P.
The most important
aspect to be noted is that in the 2001-2002 Budget, an explanation was inserted
in Notification No.36/2000, clarifying that only such IV fluids which were used
for sugar, electrolyte or fluid replenishment, were exempt from duty and not
other IV fluids. This provision in the Budget was relied upon by the Department
in the show cause notice(s) to deny the benefit of exemption claimed by the
respondents under Notification No.3/2001. Unfortunately, despite detailed
analysis of the notification in question by the Commissioner, the Tribunal has
not examined this aspect and, therefore, the matter needs to be remitted to the
Tribunal to give its finding as to what is the effect of the 2001-2002 Budget
which restricts the definition of 'IV Fluids' in terms of the above three
There is one more
aspect which the Tribunal is required to consider. In the labels of the
respondent-Company, there is a warning stating that IV fluid manufactured by
the assessee is Schedule-H Drug. What is argued on behalf of the assessee(s) is
that because of addition to the IV Fluid of one of the above-mentioned six
items, the product manufactured is required to be sold as a Schedule-H drug. On
the other hand, the Department has placed reliance on the Drugs and Cosmetics
Rules, 1945 read with Schedule-H to indicate that when IV Fluid has dominant
therapeutic value, it will not come within the exemption because it has to be
treated as a Schedule-H drug. We do wish to express any opinion on this point.
Suffice it to state that on the above two questions/issues, the matter needs to
be remitted to the Tribunal for consideration in accordance with law.
We may add that
exemption notifications have to be read strictly. We may also add that the
burden is on the assessee to prove that the item falls within the four corners
of the exemption notification.
Before concluding, we
may state that if on the second issue, regarding Schedule-H Drug, as spelt out
hereinabove, if the Tribunal feels that the matter requires further evidence,
it may either itself decide that point after giving opportunity to the parties
or it may remit the matter to the Adjudicating Authority for its decision on
factual aspect in accordance with law.
Subject to what is
stated above, the Department's Appeals are allowed, the impugned judgment is
set aside and the matters are remitted to the Tribunal for fresh consideration
in accordance with law. In the facts and circumstances, there will be no order
as to costs.
..................J. (S.H. KAPADIA)