ORDER
S.L. Peeran, Member (J)
1. In all these 23 appeals, common question of law and facts arises. Hence they are taken up together for disposal as per law. The appellants had filed refund applications for claiming refund of 10% CVD paid more of Lactose BP/USP imported and cleared under various Bills of Entry. The Department had collected 15% CVD instead of 5% CVD as claimed by the appellants in terms of exemption Notification No. 31/88-C.E., dated 1-3-1988. The department’s plea is that Lactose is classifiable under Chapter Heading 1702.19 of the Customs Tariff Act, 1985 and as such, the lower authorities have rejected their claim on the ground that the exemption is made applicable only to those items falling under Chapter Headings 28, 29 and 30 as stipulated in the said notification. The appellants’ claim is that the item Lactose BP/USP imported by them, is a Bulk Drug as certified by the Drug Controller of India, New Delhi and that all bulk drugs fall under Chapter Heading 28 or 29 only. It is claimed that the item Lactose BP/USP is being used as an ingredient in manufacturing tablets and capsules. The Lactose appearing under Chapter Heading 1702.19 ‘Sugar and Sugar Confectionery’ contained more than 90% sugar and cannot be used in the manufacturing of tablets and capsules. The item contains less than 5% sugar and although it is called ‘milk sugar’, its sugar content is less than 5% and as such, it cannot be classified under Chapter Heading 1702.19 but only under Chapter Heading 2940 as ‘Other Organic Chemical’. It is further pleaded by the appellants that by classifying the item under Chapter Heading 2942 ‘Other Organic Chemicals’, there will be no change in the rate of Customs duty payable in view of exemption under Notification No. 77/86 dated 17-2-1986. Hence, the appellants are claiming the classification of their item under Chapter Heading 2942 as ‘Other Organic Chemicals’ and for the benefit of exemption under Notification No. 31/88-C.E., dated 1-3-1988 and to grant them consequential benefit in CVD.
2. The learned Collector (Appeals) in order No. C-3/1849 to 1853/89 dated 29-3-1990 in Appeal No. C/2570/90-D has held as follows –
“I have carefully considered the appeal memorandum and the submissions made therein.
The product under importation viz. Lactose even in its chemically pure form is classifiable only under heading 17.02 for the purpose of levy of additional customs duty. The mere fact that it is an organic compound and is of medicinal quality will not take it out of Tariff Heading 17.02 because of the specific coverage of this item under this tariff heading. The certification by Drugs Controller that the said Lactose is a bulk drug is not material since CEN 31 /88 extends the concessional duty only to goods falling under Chapter 28, 29 or 30. Thus there is a conscious exclusion of bulk drugs falling under any other headings from the purview of the said CE notification.
In view of the above findings, the order of the original authority is upheld and the appeal rejected as inadmissible.”
3. We have heard Shri Vaidya Lingam, learned advocate for the appellants and Smt. Vijay Zutshi, learned CDR for the respondents. The learned advocate has relied on the certificate issued by the Drug Controller dated 9-1-1987, to the effect that among other items, Lactose IP/BP/USP are eligible for exemption under Notification No. 234/86 dated 3-4-1986. In support of this certificate, he has relied on the ruling rendered in the case of Wimpex Dyechem (P) Ltd. v. Collector of Customs [1992 (62) E.L.T. 741] wherein the Bench has held that once the Drug Controller has satisfied himself on the basis of documents or otherwise that the goods in question are Bulk Drugs as defined in Notification No. 234/86-CE, it will not therefore, be proper for the Customs authorities to find fault in the certificate issued by the Drug Controller to the Govt. of India. The learned Counsel contended that the item Lactose is an organic compound and in support of this contention, he has relied on the extract from the book – Bentley and Driver’s Textbook of Pharmaceutical Chemistry, Eighth Edition, revised by L.M. Atherden published by Oxford University Press, 1969. There is a reference at page 485 of the book wherein it is stated that “Lactose C12 H22 On Lactose (Milk sugar) occurs to the extent of about 5% in milk from which it can be obtained by adding rennet to precipitate caseinogen and fat (curds), filtering and evaporating the filtrate (whey) to small bulk. The sugar separates in crystals when the liquid is cooled and can be recrystallized from water. Lactose is a comparatively sparingly soluble sugar and is not very sweet. It reduces Fehling’s solution but does not ferment readily with yeast. It forms an osazone with phenylhydrazine. Lactose has the same structure as maltose with which it is stereoisomeric, it yields a mixture of D-glucose and a sugar D-galactose which is a stereoisomer of glucose.”
He also referred to the definition of Lactose appearing at page 686 of Hawley’s Chemical Dictionery. He produced the extracts from Martindale, The Extra Pharmacopoeia, Twenty-eighth Edition, Edited by James E.F. Reynolds and referred to item at page 582-g which is ‘Anhydrous Dextrose’. Referring to these two definitions, he stated that Lactose is also referred as D-Glucose and the Hon’ble Bombay High Court in Tata Exports Limited v. Union of India [1989 (43) E.L.T. 245 (Bom.)] has held that Dextrose Anhydrous is classifiable under Heading 29.01/45 of the Customs Tariff Act, 1975 and not under Heading 17.02 and, therefore, the Court having also examined the extension of benefit of Notification No. 104/82-C.E., dated 28-2-1982, the ratio of the said decision would squarely apply to the facts of the present case. He also drew strength from the ruling rendered by the Tribunal in the case of Collector of Customs v. Atul Products Limited [1985 (20) E.L.T. 147 (Tri.)] wherein it has been held that the products which are chemically defined compounds, would fall under Chapter 29 of the Customs Tariff and the Bench was dealing with the item Naphthalene. He also referrd to the ruling rendered in the case of Pacific Exports v. Collector of Customs [1990 (45) E.L.T. 651 (Tribunal)] wherein the Bench has held that Liquid/Paraffin I.P. being a medicament, is classifiable under Heading 3003.20 of Central Excise Tariff Act, 1985. He further relied in the case of Rakesh Enterprises and Anr. v. Union of India and Anr. [1986 (25) E.L.T. 906 (Bombay)], wherein it has been held that Phenol USP being basic drug and drug intermediate, countervailing duty not leviable and the item is entitled for the benefit of Notification No. 55/85-C.E., dated 1-3-1975. It is his argument that Chapter Note in the Old and the New Tariff is the same and, therefore, the product being separately chemically defined organic compound would fall under Chapter 29 and more particularly under Heading 2942.00 as ‘Other Organic Compounds’ and more particularly when Note l(b) states that separately chemically defined organic compounds whether or not containing impurities would fall under Chapter 29.
4. Mrs. V. Zutshi, learned CDR appearing for the department, defined the order and contended that even if the item Lactose is a chemically defined organic compound but still it would fall under Chapter Heading 1702 as Note l(b) does not exclude Sucrose, Lactose, Maltose, Glucose and Fructose. Heading 1702.10 specifically refers to Lactose and lactose syrup and Heading 17.02 refers to other sugars including chemically pure lactose, maltose, glucose and fructose in solid form. She also pointed out that Chapter Heading 2940.00 refers to sugar, chemically pure, other than sucrose, lactose, maltose, glucose and fructose. In view of these chapter notes of specific exclusion from Chapter 2940.00 and in view of specific inclusion in Chapter 17.02 as per note l(b) specific entry under Heading 1702.10, the classification admitted by the lower authorities is correct. She pointed out that the importer had accepted the classification of the item for the purposes of Customs classification under Chapter 17 and, therefore, the party cannot seek a different classification for the purpose of paying CV duty. She pointed out that the case before the lower authorities was one for claim for benefit of Notification No. 31/88-C.E. The notification specifically laid down that the item should fall under Chapter 28, 29 or 30 of the Tariff as the case may be of the Schedule of the Central Excise Tariff Act, 1985. The Sl. No. 1 to the Table referred to the bulk drugs. The fact that the item bulk drug is not in issue but it has to fall under Chapter 28, 29 or 30, as the case may be for the purpose of grant of benefit of notification. She pointed out that the rulings referred by the learned advocate, do not support his case as the facts in those cases were quite different and they are distinguishable. In the case of Rakesh Enterprises the notification dealt with the basic drug and drug intermediate and there was no Chapter note for classification in the erstwhile Tariff. In the case of Tata Exports Ltd. also, the question was that Dextrose Anhydrous was a drug intermediate and there was no dispute of the classification under Chapter 29. Moreover, the issue was also under the erstwhile Tariff. Even in the case of Atul Products Ltd., the classification pertained to erstwhile tariff. She pointed out that as per the Interpretative rules, the goods which are specifically classified in the heading by virtue of Chapter notes, are to be preferred to headings providing a more general description.
5. We have carefully considered the submissions made by both the sides and have perused the material on record. The claim of the appellants is that the item should be classified under Chapter Heading 29 as the item is an organic chemical compound and Chapter 29 is more specific entry than Chapter 17. The learned CDR has relied on Chapter Note l(b) of Chapter 17 which reads – “This Chapter does not cover :
“Chemically pure sugars (other than sucrose, lactose, maltose, glucose and fructose) or other products of heading No. 29.4”;
Chapter heading 17.02 reads –
“Other sugars, including chemically pure lactose, maltose, glucose and fructose in any form and preparations thereof; sugar syrups not containing added flavouring or colouring matter; artificial honey, whether or not mixed with natural honey; caramel”
Heading 1702.19 reads –
"Sub-heading Description of Rate of duty
goods Basic
1702.19 Other 15%"
The appellants are claiming the classification under Chapter 29. Heading 2940.00 reads as follows -
"Sugars, chemically pure, other than sucrose, lactose, maltose, glucose and fructose; sugar ethers and sugar esters and their salts, other than products of heading Nos. 29.37, 29.38 or 29.39".
6. As can be seen from these notes, the item in question namely, Lactose has been specifically included in Chapter 17 and excluded from Chapter 29. A specific entry has been carved out in Heading 1702 as – Other sugars including chemically pure sugar, lactose, maltose, fructose in any form. Rule (1) of Rules of Interpretation clearly states that the classification shall be determined according to the terms of the heading and in relative section or Chapter notes. Rule 3(a) also states that heading which provides most specific description shall be preferred to headings providing a mere general description. It further states that two more headings each referred to part only of the materials or the substances contained in mixed or composed compounds or to part only of the items in a set, those headings are to be regarded as equally specific in relation to those goods even if one of them becomes a more complete or precise description of the goods. As can be seen from the reading of the Chapter Notes, the item in question has been specifically included in Chapter 17 and Chapter Heading 2940 excluded Lactose. Therefore, the classification admitted by the lower authorities under Heading 1702.19 CET is a correct classification. The notification in question specifically referred to drugs falling under Chapter 28, 29 or 30 as the case may be. As the item is held to be falling under Heading 1702.19 CET, the benefit of the notification cannot be granted. The order passed by the lower authorities in this regard is correct. The learned counsel has relied on the various rulings. A detailed study of these rulings would indicate that they have been rendered under the old tariff where the classification was not as per Section notes or Chapter notes and hence these rulings are not relevant in this case.
Further as pointed out by the learned CDR, the question in Rakesh Enterprises pertained to a different notification which granted benefit to drugs, medicines and drug intermediate not elsewhere specified. The notification in the present case clearly laid down that it has to be classified under Chapter 28, 29 or 30 to the Schedule of the Central Excise Tariff Act, 1985. The case of Tata Exports Ltd. (supra) is also on identical issue and the Bombay High Court had held that the Dextrose Anhydrous is a drug intermediate. The terms of the Notification No. 104/82-C.E., dated 28-2-1982 in that case were different than the one in hand. Likewise the case of Atul Products is also clearly distinguishable as the item in question was Nephthalene and the same is not applicable to the facts of the case.
In view of our findings, there is no merit in the appeals and the same are dismissed.