K. Prakash Anand, Member (T)

1. This is an appeal filed by the Collector of Central Excise, Bombay-1, against Order No. M-2430-2431/ BI-879-88Q/84 dated 18th December, 1984, passed by the Collector of Central Excise (Appeals), Bombay.

2. It is stated that the respondents are manufacturers of Empty Hard Gelatine Capsules. They had filed. a classification list in respect of this product and claimed exemption for it as a drug intermediate, as per Notification No. 62/1978. The classification list was approved accordingly. Later on, however, it was considered that empty gelatine capsules were not "drug intermediate" and that the respondents were not eligible for exemption. Accordingly, a show-cause-cum-demand notice was issued to the respondents on 24th November, 1978, making a demand of duty amounting to Rs. 2,36,530.45 for the period from July to October, 1978. The demand notice was confirmed by the Assistant Collector on 7th October, 1981, holding that gelatine capsules are used principally as containers/carriers for drugs to be administered and do not by themselves function as drugs. Referring to the opinions of the Deputy Chief Chemist and the Drug Control authorities, it was held that the product could not be considered as a drug intermediate. In appeal before the Collector of Central Excise (Appeals), Bombay, the decision of the Assistant Collector was reversed. It was held that empty hard gelatine capsules were drug intermediate and the Assistant Collector's Order was set aside, with consequential relief to the respondents. It is against this order of the Collector of Central Excise (Appeals), Bombay that the present appeal has been filed before us. Appellants submit that the Collector of Central Excise (Appeals) has erred in taking cognizance of the opinions of the Deputy Chief Chemist and the Drug Control authorities, which clearly stated that the item could not be considered as drug intermediate. The term "drug intermediate", it is stated, would refer chemically to such products which would fall under chemical grouping constituting finished drugs. Gelatine Capsules, it is stated, are principally used as containers/carriers for drugs to be administered and do not by themselves function as drugs. They would not, therefore, merit classification as drug intermediate. It is also stated that the Collector of Central Excise (Appeals) has failed to apply the definition of drugs given under Section 3(b)(iii) in Drugs and Cosmetics Act, 1940, and Circular No. 3/72 dated 18th February, 1982, issued by the Government of India, Ministry of Foreign Trade, New Delhi. Appearing on behalf of the department, the learned S.D.R., Shri B.R. Tripathi, has stated that the relies on the following decisions in his favour :

(1) Supreme Court decision in the case of MSCO Pvt. Ltd. v. Union of India and Ors. MANU/SC/0138/1984 : 1985 (19) E.L.T. 15 (S.C.)

(2) CEGAT decision in the case of Aravind Chemical Industries, Bombay, v. Collector of Customs, Bombay MANU/CE/0108/1984 : 1984 (18) E.L.T. 386.

(3) CEGAT decision in the case of Fairdeal Corporation (Pvt.) Ltd., Bombay, MANU/CE/0351/1983 : 1984 (16) E.L.T. 368.

(4) Government of India decision in Hindustan Organic Chemicals Ltd., 1982 E.L.T. 721.

(5) Madhya Pradesh High Court decision in the case of Hind Syntex Ltd. v. Union of India and Ors., 1985 (19) E.L.T. 35 (M.P.).

(6) Bombay High Court decision in the case of Sainet Private Ltd, and Anr. v. Union of India and Anr., MANU/MH/0531/1984 : 1984 (18) E.L.T. 141 (Bom.).

(7) Bombay High Court decision in the case of Chemicals and Fibres India Limited v. Union of India and Ors., 1982 E.L.T. 917 (Bom.).

(8) Bombay High Court decision in the case of Glaxo Laboratories (India) Ltd. v. Union of India and Ors., MANU/MH/0064/1984 : 1985 (21) ELT 72 (Bom.).

Shri Tripathi has re-iterated the department's stand that the capsules are nothing but packing material. It is stated that the Supreme Court's judgment in MSCO Pvt. Ltd. case (supra), it was decided that for