CEA No. 69 of 2011 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH CEA No. 69 of 2011 (O&M) Date of decision: August 17, 2011 M/s Venus Remedies Ltd. ...Appellant Versus Commissioner of Central Excise ...Respondent CORAM:- HON'BLE MR. JUSTICE M.M. KUMAR HON'BLE MR. JUSTICE GURDEV SINGH Present: Mr. Ankit Goel, Advocate, for the appellant. Mr. PS Ghuman, Central Government Standing Counsel. 1. To be referred to the Reporter or not ? 2. Whether the judgment should be reported in the Digest ? GURDEV SINGH, J. 1. The instant appeal under Section 35-G of the Central Excise Act, 1944 (for brevity—'the Act') has been filed against the order dated 29.10.2010 (Annexure A-15) passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi (for brevity—'the Tribunal'), which was certified by the Registry of that Tribunal on 12.11.2010. 2. The appellant is engaged in production and manufacture of various pharmaceutical products, including intravenous injectible medicaments. As per item No. 47A of Notification No. 6/2000-Central CEA No. 69 of 2011 2 Excise, dated 1.3.2000, as amended by No. 21/2000 dated 2.3.2000, No. 22/2000 dated 6.3.2000, No. 29/2000, dated 31.3.2000, No. 36/2000 dated 4.5.2000, No. 38/2000 dated 12.5.2000, No. 50/2000-CE, dated 29.9.2000 and Notification No. 51/2000-Central Excise, dated 9.10.2010, all “intravenous fluids” were exempted exciseable goods, meaning thereby that the same were exempted from excise duty. As per the explanatory note to the Finance Bill of 2001, the Central Government felt that a clarificatory change was required and accordingly Notification No. 3/2001-CE dated 1.3.2001 (Annexure A-2) was issued and exemption on excise duty was limited to intravenous fluids, which were used for sugar, electrolyte or fluid replenishment, thereby restricting the scope of intravenous fluids. In pursuance of that notification, the respondent-Department issued a show cause notice dated 29.10.2002 (Annexure A-3), proposing a demand of ` 18,12,240/- from the appellant under Section 11-A of the Act. In reply to that show cause, it was submitted by the appellant that it was entitled to exemption and that proposal to levy duty interest and penalty was untenable. The Central Excise Commissionerate, Panchkula, upheld and confirmed the demand raised by the Department, vide order dated 5.8.2003 (Annexure A- 4). The appellant preferred statutory first appeal to the Tribunal, vide memorandum dated 29.10.2003 (Annexure A-5), submitting therein that the subsequent notification was clarificatory in nature and did not revoke the exemption available to it and that addition of medicaments to intravenous fluids did not disentitle the manufacture/assessee from exemption. A cross- appeal was filed by the respondent. The Tribunal, vide order dated 30.11.2005 (Annexure A-6) upheld its contentions and set aside the demand of duty raised by the Department, primarily relying upon its decision dated CEA No. 69 of 2011 3 24.6.2004 rendered in Prem Pharmaceuticals v. CCE, Indore (Annexure A- 7), wherein the Tribunal had similarly held that addition of medicaments to intravenous fluids did not bring such fluids out of the purview of 2001 notification. Against that order, the Department filed an appeal before Hon'ble the Supreme Court, inter-alia, urging that intravenous products falling in Schedule 'H' of the Drugs & Cosmetics Act, 1945 (hereinafter referred to as '1945 Act') cannot claim exemption, apart from 2001-02 budget restricting the definition of 'Intravenous fluids' entitled to exemption. The Hon'ble Supreme Court accepted the appeal of the Department, vide order dated 31.3.2009 (Annexure A-8) and remanded a bunch of appeals to the Tribunal, directing it to ascertain the findings on the second issue i.e. Schedule 'H' of the 1945 Act and its effect. Pursuant to that remand order, the Tribunal at Mumbai re-considered the matter in Parentral Drugs (I) Limited versus The Commissioner of Customs and Central Excise, Indore (Annexure A-9) and vide its order dated 18.12.2009, remitted the matter to the adjudicating authority for re-consideration, after affording the parties sufficient opportunities to adduce adequate material to ascertain the fact of intravenous products being Schedule 'H' drug for the purpose of exemption, in terms of notification dated 1.3.2001. After the remand, it filed detailed submissions and material to support its stand that mere presence of medicaments in the intravenous fluids manufactured by it and used for sugar, electrolyte or fluid replenishment cannot disentitle exemption from duty in terms of notification dated 1.3.2001. The Department took the stand that the goods so manufactured contained medicaments and were lebelled schedule 'H' and, as such, fell outside the purview of that notification. The Tribunal, vide order dated 29.10.2010 (Annexure A-15) accepted the CEA No. 69 of 2011 4 contentions of the Department and dismissed the appeal. Vide that order, the appeals of the other assessees were also decided and some of them challenged that order before the Madhya Pradesh High Court, Indore Bench and the matter is still pending for consideration. 3. In the appeal, the appellant challenged the impugned order, on the following grounds:- (i) The conclusion of the Tribunal that the properties of intravenous fluids inasmuch as they contained antibiotics and other medicaments were the factor relevant for the purpose of determining the entry in the exemption notification is not supportable from the other notification itself. The emphasis of the legislature is on the use/intended use of the intravenous fluids, which is primary factor to be taken into consideration for interpreting the exemption clause. It is adequately evident from the scientific and technical data that the products manufactured by it are usually put to one of the three uses i.e. sugar, electrolyte or fluid replenishment. The exemption notification being exception to the fiscal law must be interpreted strictly, having regard to the language employed therein. (ii) The approach of the Tribunal in describing their products being of therapeutic value, merely on the ground that the same has been labelled as schedule 'H' drugs is erroneous. The Tribunal has been influenced more by the properties than by the use of the drugs. Under Rule 96 of the Drugs CEA No. 69 of 2011 5 and Cosmetics Rules, 1945 products included in Schedule 'H' of the Rules are to be sold under the prescription of a medical practitioner only, so that they are not sold over the counter drugs. That in no way, takes away the purpose for which the intravenous fluid manufactured by it are being used. (iii) The Tribunal erred in disallowing the appellant from adducing additional evidence to support the contention that addition of medicament to intravenous fluids did not alter the use thereof. The Tribunal adopted a hyper technical approach while disallowing it to adduce additional evidence solely on the ground that the evidence, sought to be introduced did not pertain to labelling or otherwise, as Schedule 'H' drugs. The Tribunal had been given the liberty to examine all necessary fresh evidence and to remit the matter further to the adjudicating authority, if the need so arise. By disallowing the additional evidence, it acted against the order of Hon'ble the Supreme Court. (iv) The Tribunal failed to take into account the judgment dated 18.12.2009 rendered by the co-ordinate Bench at Mumbai in the matter of one of the assessees, who was also party in the appeal before Hon'ble the Supreme Court. The Mumbai Bench allowed the similar evidence and came to the conclusion that the matter requires further detailed examination by the adjudicating authority CEA No. 69 of 2011 6 and accordingly, remanded the case to that authority. (v) The Hon'ble Supreme Court, while remanding the case, had directed the Tribunal to give its finding as to the effect of budget explanatory note. The Tribunal refused to take into consideration the budget explanatory note and recorded the finding only on the common parlance theory, which is against the spirit of the order of Hon'ble the Supreme Court. The Tribunal ought to have considered the budget explanatory note as a guide for the interpretation of the exemption notification, rather relying upon the provisions of Drugs and Customs Act and the Rules framed thereunder. 4. We have heard learned counsel for both the sides. 5. While challenging the order of the Tribunal, learned counsel for the appellant made three-fold submissions. He submitted that Hon'ble the Supreme Court, while remanding the case, vide order dated 31.3.2009, categorically observed that if the Tribunal felt that it required 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 a fresh decision on factual aspect in accordance with law. The appellant moved an application for additional evidence for proving that merely labelling of fluid as Schedule 'H' will not make any difference for its use as sugar, electrolyte or fluid replenishment. That application was disallowed without recording any reason. Had an opportunity been given to lead that evidence, the appellant would have successfully proved that its product was exempted from excise duty. He further argued that medicament of the intravenous CEA No. 69 of 2011 7 fluids, by adding items such as antibiotic etc. and labelling the same as Schedule 'H' drug, as per mandatory provisions of 1945 Act, will not change the dominant purpose of use for sugar, electrolyte or fluid replenishment. Without deeply going into that question, the Tribunal came to the conclusion that after the medicament of intravenous fluids and labelling the same as drug, it ceases to be intravenous fluids used for sugar, electrolyte or fluid replenishment. In the last, he submitted that similar questions were raised before the other bench of the Tribunal, which came to a different conclusion and there was no occasion for the Tribunal to come to the conclusion that similar intravenous fluids manufactured by the appellant were not exempted from excise duty. Uniformity in the findings of different benches of the Tribunal was required to be maintained. He prayed for quashing of the order of the Tribunal and for recording a finding that the appellant is entitled to the benefit of the notification dated 1.3.2001. 6. For proper appreciation of the matter, the relevant portion of the order dated 31.3.2009 passed by Hon'ble the Supreme Court is re- produced below:- “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, CEA No. 69 of 2011 8 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 qualifications. 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 CEA No. 69 of 2011 9 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.” 7. Thus, the matter was remitted to the Tribunal for deciding the following two questions/issues:- (i). What is the effect of 2001-2002 budget, which restricts the definition of intravenous fluid, in terms of three classifications that those are used for sugar, electrolyte on fluid replenishment? (ii). Whether by the addition of one of the following items i.e. (a) Ciprofloxacin I.P. (b) Metronidazole I.P. (c) PDZOLE-D (d) Ciprodex (e) Tinipidi Isotonic Infusion, and (f) Mannitol I.P. the fluids get dominant therapeutic value and is considered as Schedule 'H' drugs and, as such, will not come within the exemption notification dated 1.3.2001. CEA No. 69 of 2011 10 8. It was also observed by Hon'ble the Supreme Court that if regarding question No.2, the Tribunal feels that the matter required 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. Thus, the Tribunal was authorized to take further evidence for deciding that point. It is very much clear from the order of the Tribunal that the applications were filed by the appellant and other assessees, whose appeals were decided by means of the common order, for production of additional evidence in terms of Rule 23 of the CESTAT Procedural Rule 1982. It is also very much clear from that order that those applications were not allowed. However, the Tribunal recorded reasons while disposing of those applications. At the time of arguments, learned counsel for the appellant failed to disclose as to what type of evidence it wanted to produce before the Tribunal and what prejudice has been caused to it by the non-production thereof. It was categorically recorded by the Tribunal in para No. 30 of its order that the material sought to be produced by way of additional evidence do not relate to the issue under consideration. The Tribunal felt that it can decide point No. 2 without any further evidence, on the basis of the evidence already produced before it. We do not find any infirmity or illegality in the reasoning so recorded by the Tribunal, while disallowing the prayer of the appellant to lead additional evidence. 9. Both the above said points were decided by the Tribunal against the appellant on the basis of sound reasoning and after taking into consideration the budget proposal for the year 2001-2002 and after duly interpreting the notification in question and the relevant provisions of 1945 CEA No. 69 of 2011 11 Act. The exemption from excise duty was in respect of intravenous fluids, which are used for sugar, electrolyte or fluid replenishment. What is the effect of the addition of any of the above said items ? Once, any of those items is added in the intravenous fluids, it becomes schedule 'H' drug, as per the provisions of the 1945 Act and statutory warning is to be inscribed thereon. Addition of those items not only change the medicaments value of the intravenous fluids but it is also a factor for increasing the price on the ground that it is schedule 'H' drug. Under the previous notification, all intravenous fluids were exempted from excise duty but by way of notification dated 1.3.2001, a condition was imposed and it specifically speaks of intravenous fluids, which is used for sugar, electrolyte or fluid replenishment. The medicaments of intravenous fluid will certainly make the use thereof for a particular disease, for eradication of which any of the said items is to be administered. The spirit of the notification appears to be that only those intravenous fluids are exempted from excise duty which are exclusively used for sugar, electrolyte or fluid replenishment and not in respect of intravenous fluids, which, besides sugar, electrolyte or fluid replenishment, are also being used for the purpose of medicines. The dominant purpose loses its significance once the intravenous fluids can be put to use for other purpose also. The addition of medicines restrict the use thereof for a particular purpose and it cannot be used for the common purpose of sugar, electrolyte or fluid replenishment. The intention of the legislature can easily be inferred from the amendment made in the subsequent notification and restricting intravenous fluid, for being exempted from excise duty, which are used for sugar, electrolyte or fluid replenishment. The potential of the intravenous fluids changes, once it is CEA No. 69 of 2011 12 medicated. It is only for three categories so mentioned that it is exempted from excise duty and not otherwise. Therefore, we are not inclined to endorse the view of the learned counsel for the appellant that even after addition of any of the above said items in the intravenous fluid, the dominant purpose for being used as sugar, electrolyte or fluid replenishment remains the same. A correct finding was recorded by the learned Tribunal that after any of the above said items is added and by virtue of which it becomes Schedule 'H', it no more falls in item No. 47A of the notification for being exempted from excise duty. 10. The well reasoned order recorded by the Tribunal cannot be set aside merely on the ground that a co-ordinate bench of the Tribunal had come to a different conclusion. This Court is not bound by the finding recorded by the other bench and it is to adjudicate upon the correctness or legality of the order, which has been challenged in this appeal. 11. From the above discussion, we conclude that this appeal does not merit admission and is dismissed accordingly. (M.M. KUMAR) (GURDEV SINGH ) JUDGE JUDGE August 17, 2011 prem