ORDER
Gowri Shankar, Member (J)
1. The appellant manufactures vaccines for poultry. These vaccines are of seven types – each for a specific disease. The technology employed by the appellant results in the separation of the vaccines into two constituents. One is a viral preparation, which is freezed dried in the course of manufacture and thereafter transported refrigerated between temperatures 2°C – 8°C; the other is diluent. The vaccine before administration is reconstituted by combining the viral preparation with the diluent which is a liquid. It is this resultant product which is administered to poultry. The diluents are five in number; one diluent is common for three vaccines which is raised to reconstitute all these three.
2. The appellant claimed classification of the viral preparation and the diluent together as vaccines under heading 30.02 of the tariff. The department was of the view that the appellant had not intimated to it the manufacture and clearance of the diluents and issued notice proposing to recover the duty payable on them, by classifying them under heading 3823.00. This heading covers inter alia chemical products and preparations of the chemicals or all not elsewhere specified. The extended period provided in the proviso to Section 11A of the Act was sought to be invoked for demanding duty on the clearance made between September, 1991 and 1996 (Notice being dated 7-10-1996). The Commissioner did not accept the contentions raised on behalf of the appellant before us. He held the product to be classifiable under heading 38.23 of the tariff; considered that the extended period has been rightly invoked; confirmed the demand for duty and imposed penalty under Section 11AC of the Act equal to the duty. Hence this appeal.
3. Advocate for the appellant had the following contentions. The current technology widely in use requires separation of the vaccine into viral preparation and the diluent. This is necessary in order to ensure that the viral preparation does not lose its potency which it will do unless it is kept in very low temperatures or if mixed with the diluent. Therefore, for the purpose of ease of transporation and availability it is necessary for the viral preparation to be freezed dried and transported in a cold condition. This requirement is not necessary for the diluent. The two are mixed together before administration and vaccine in its usable form results. Therefore the vaccine is incomplete without the two portions of viral preparation and diluents being present together. The viral preparation is not a vaccine without the diluent. The appellant manufactures the diluent solely for the purpose of reconstituting the vaccine.
4. It is therefore not justifiable to classify one separately without regard to the other. It is further contended that, alternatively the application of Note (2) to Section VI of the tariff would require the two products to be classifiable together as one. Each of the ingredients of the note is satisfied. There is no dispute that the two are cleared in one set and cannot be used without the other and such uses do not have repacking. Invocation of the extended period contained in the proviso to Section HA is questioned on the ground that the appellant was under the impression that the entire product was a vaccine. Such vaccines being exempted from duty by the tariff, no declaration was required to be filed. There has therefore been no suppression of any facts.
5. The Departmental Representative contends that the fact of the diluent being used to administer the vaccine does not itself make it a part of the vaccine. There can be any number of combinations of two commodities being used together without one of them being considered part of the other. He emphasises the Commissioner’s reliance on the Supreme Court judgment in PSI Data Systems Ltd. v. C.C.E. – 1997 (89) E.L.T. 3 that media containing software such as floppy discs cannot be considered to be parts of the computer solely for the reason that a computer cannot function without such software. He further emphasises the finding of the Commissioner that the diluents are common for more than one vaccine and therefore cannot be considered to be a constituent of a particular vaccine. Therefore, the diluents are to be separately classified. The Deputy Chief Chemists after testing the goods, had reported that the diluents do not have any therapeutic or prophylactic properties use and therefore cannot be considered as medicaments. He adopts the reasoning of the Commissioner with regard to the applicability of the extended period contained in the proviso to Section 11A of the Act. He contends that the applicability of Note 2 to Section VI of the Tariff has been raised before us for the first time was not raised before the Commissioner and therefore it is appropriate that the matter may be sent back if necessary, to the Commissioner for verification.
6. We first not propose to consider what the classification of the diluent would be, by applying Note (2) to Section VI of the tariff. It is true that the applicability of this note was not raised before the Commissioner. We do not propose to send the matter back to him for consideration. In our view, the data required to be considered for the applicability of this note are available before us, and it would be appropriate that one more round of litigation is avoided. We refer in this context the judgment of the Supreme Court in M.G. Sahni v. C.C.E. -1994 (73) E.L.T. 3 which has held that where all the materials required for decision is available before the Tribunal, the matter should not be sent back.
7. Let us consider whether the provisions of Note (2) of Section VI which reads as follows apply to the product under consideration:
“2. Goods put up in sets consisting of two or more separate constituents, some or all of which fall in this Section and are intended to be mixed together to obtain a product of Section VI or VII, are to be classified in the heading appropriate to that product provided that the constituents are:
(a) having regard to the manner in which they are put up, clearly identifiable as being intended to be used together without first being repacked;
(b) presented together; and
(c) identifiable whether by their nature or by the relative proportions in which they are presented as being complementary one to another.”
8. It is not in dispute that viral preparation and the diluent are cleared together. The statement of Dr Apte, General Manager of the appellant company, on which the notice has placed reliance is clear that the appellant does not charge its buyer separately for the diluent and viral preparation, and that the cost of the vaccine includes the cost of the viral preparation as well as diluent. He says “The vaccine from vaccine plant goes with diluent but at times as, both requires separate transport condition it goes independently. Sometimes on demand from depots/customers we have supplied diluent due to breakage or expiry problem. We are not selling this diluent at any time or not recovering any amount for the diluent. Even in replacing we do not charge any extra amount to depots/customers because our main concern is that vaccine virus should go alive in the body”. It is clear from this that, except for an occasional case of replacement supply, the vaccine and the diluent are cleared together. There can, in fact, be little doubt that such freezed dried vaccine has to be reconstituted by mixing with diluent before capable of being administered. The Extra Pharmacopoeia of Martindale says that “vaccine may be significantly containing vaccine are mixed combined vaccine. It will have first number of vaccines which are required to be reconstituted – BCG vaccine (page 1613), Botulism anti toxins (page 1615)”. The appellant had also cited before the Commissioner The British Veterinary Pharmacopoeia in regard to living fowl pox vaccine – one of the vaccine manufactured by the appellant to be vaccine requiring reconstitution before use. The Manual for Production of Marek disease, gumboro disease and inactivated new vaccine published by the Food and Agricultural Organisation of the United Nations also indicates that many such poultry vaccine has to be reconstituted. The opinion given by the Head of the Division of Standardisation of Indian Veterinary Research Institute and the Drugs Controller of the Directorate of Health Services and Dr. M.A. Sherikar, Professor, Department of Microbiology, Bombay Veterinary College that vaccines are required to be reconstituted by mixing with a diluent also supports this view.
9. It is therefore clear that the vaccine and viral preparation is complementary to one another. The fact that one diluent is used to reconstitute three vaccines newcastle, bronchitis, gumboro was cited by the Departmental Representative to exclude the applicability of the note. We are not able to appreciate this point. Insofar as a particular vaccine that is concerned, it cannot be reconstituted without use of a diluent. In other words, that vaccine cannot come into existence for use as vaccine without the two components being mixed together. Each by itself without other would not be of any use as a vaccine. The diluent being common to one vaccine therefore has no relevance to its application.
10. The goods are identifiable as being intended to be used together having regard to the manner in which they are put together. The leaflet for the vaccine, which we are told accompanied both the diluent and the viral preparation indicates the necessity for reconstitution by using the final preparation and the diluent together. Labels on the bottles of the diluent themselves indicate for what vaccine they are to be used. The three requirements of the Note 2 to Section VI are therefore, in our view, satisfied. One of the two items is classifiable under Note 2 to Section VI and the requirement in this regard is therefore satisfied. The product would be classifiable as a vaccine under heading 30.02. This being classifiable at nil rate of duty the demand for duty could not be sustained.
11. In view of this conclusion, we do not consider it necessary to deal with the other arguments on limitation.
12. Appeal allowed. Impugned order set aside. Consequential relief.
