In Civil Appeal No. 6024 of 2009 -SC- Supreme Court upholds exemption from Excise Duty on ‘intravenous fluids’, citing ‘accessibility’ & ‘affordability’ of life-saving products
Justice B.V. Nagarathna & Justice Ujjal Bhuyan [26-07-2023]

Read Order: Commissioner of Central Excise, Ahmedabad II V. M/s. Denis Chem Lab Ltd. & Anr.

Chahat Varma

New Delhi, August 18, 2023: The Supreme Court of India has upheld the exemption from excise duty on intravenous fluids used for sugar, electrolyte, or fluid replenishment. The Top Court emphasized that this exemption aims to ensure the accessibility and affordability of these life-saving products for human beings and animals.

The factual matrix of the case was that the Revenue had appealed against a decision made by the Customs Excise and Service Tax Appellate Tribunal (CESTAT), West Zonal Bench, Ahmedabad. The CESTAT had ruled that the exemptions provided under Notification No.6/2000 and subsequent Notification No.3/2001, which pertained to excise duty exemptions for intravenous fluids used for sugar, electrolyte, or fluid replenishment, were clarifications rather than restrictions. The CESTAT had asserted that these clarifications should be interpreted broadly while considering the scope of the exemption under Notification No.3/2001. Furthermore, the CESTAT noted that the exemption benefit was granted in the Chennai circle, and there was no evidence indicating a revision of this stance. It took into account a letter from the Deputy Drug Controller dated 09.02.2004, affirming that substances like Calcium Borogluconate and Calcium Magnesium Borogluconate were recognized sources of electrolytes and were categorized as part of intravenous fluids. The CESTAT determined that these were essential components for which the exemptions were provided, leading to the conclusion that M/s. Denis Chem Lab Ltd. (assesses) were eligible for the claimed exemptions.

The division bench of Justice B.V. Nagarathna and Justice Ujjal Bhuyan noted the vital role of intravenous fluids or solutions, composed of essential chemicals like sugar, electrolytes, and amino acids. The bench observed that these components played a crucial role in enabling the circulatory system to assimilate them, thereby maintaining the electrolyte balance in the body's circulatory system. The primary aim and objective behind granting an exemption for these fluids was to ensure their availability at a reduced cost, facilitating easy access for both human beings and animals.

The bench also addressed a misinterpretation by the Authority regarding the eligibility of assessees for the exemption. It stressed that the product's composition should have been the focus, not whether it was used for treating specific diseases.

The bench highlighted that a thorough examination of the license issued to the assessees distinctly revealed that the product's composition was primarily dominated by Glucose (sugar) and electrolytes (minerals). These components held essential significance in the context of replenishing bodily resources, serving not only as treatment during specific ailments but also as a preventive measure. The bench emphasized that even the minimal inclusion of Boric Acid and Chlorocresol did not disrupt the product's fundamental nature. The core purpose of replenishment remained intact, and the product did not solely serve as a medicinal remedy for specific illnesses.

With the above observations, the division bench endorsed the CESTAT's stance that the assessees were rightfully entitled to the exemptions granted under the Notifications dated 01.03.2000 and 01.03.2001.