Customs, Excise and Gold Tribunal - Delhi
T.T.K. Pharma vs Collector Of Central Excise on 17 February, 2000
Equivalent citations: 2000(117)ELT320(TRI-DEL)
ORDER V.K. Agrawal, Member (T)
1. In these four appeals arising out of a common order the issue invovled is whether the product 'OSSOPAN' manufactured by M/s. T.T.K. Pharma Ltd. is classifiable as a medicament under Sub-heading 3003.10 of the Schedule to the Central Excise Tariff Act and whether penalty is imposable on all the appellants.
2. Briefly stated the facts are that M/s. T.T.K. Pharma Ltd., appellant No. 1, manufacture a product, namely, 'OSSOPAN' which was declared by them as "Meat or Meat Offal" classifiable under Chapter 2 of CETA. The Collector under the impugned order, dated 23-6-1994, held that the impugned product is classifiable under Sub-heading 3003.10 of CETA, confirmed the demand of duty amounting to Rs. 1,95,78,811/- and imposed a penalty of Rs. 10 lakhs on appellant No. 1, and penalty of Rs. 25,000/- on Shri M.V. Kumar, Managing Director, Rs. 10,000 on Shri Ramamurthy, Manager and Rs. 5000/-on Shri V.R. Sundaraman, Executive (Excise). The Collector also ordered confiscation of Plant & Machinery with an option to redeem the same on payment of fine of Rs. 10,000/- holding that the impugned product is capable of curing osteoporatic disease and also counteracts periodical disease due to pregnancy and is prescribed for various ailments; that the impugned product has been classified as 'Ethical Drug' by the Appellants themselves; that it is a patented product mentioned in the Martindale Extra Pharmacopoeia itself. She gave the findings that the therapeutic and prophylactic properties of OSSOPAN were well established by documentary evidence, oral admission and corroborated by the opinion of the State Drug Controller of Tamilnadu; that there are several medical journals which extol the efficacy of OSSOPAN as drug in treatment of several diseases connected with bones, fracture of bones, pregnancy, etc.; that TTK's own bio-data of the products is replete with reference to OSSOPAN being a drug; that it is marketed under the strict control of the State Drug Controller. She also held that there had been wilful suppression of information, misdeclaration of the product by them while seeking reclassification of OSSOPAN; that they omitted to declare the characteristics of the final product.
3. Shri V. Lakshmikumaran, learned Advocate, submitted that OSSOPAN products are made out of bone powder procured from bovine bones from the carcasses of young animals; that the bone powder in non-palatable form is converted by a process of manufacture to palatable form and are made available in variance such as tablets, suspension and granules; that the addition of various substances are in the nature of binding agents, disintegrating agents, lubricants etc., that the final product, though tasteless is edible; that bone powder is technically known as micro-crystalline, hydroxy apatite complex (MCHC), and is one of main natural resource for calcium and phosphorous content. The learned Advocate further submitted that veterinary granules are mixed with animal feed and are thus classifiable under Heading 23.02 of CETA, in view of the decision of the Larger Bench in the case of Tetragon Chemie (P) Ltd. v. CCE, Bangalore, 1999 (30) RLT 366. In respect of OSSOPAN Tablets and suspension, the learned counsel mentioned that these are edible products of animal origin, not elsewhere specified or included classifiable under Heading 4.04 of the Tariff; that as bone powder which is a product of animal origin is converted into edible form to get OSSOPAN, it is an edible product of animal origin; that if a product can be classified as food, it cannot fall under Chapter 30 of the Tariff in view of Note l(a) to Chapter 30 which excludes foods or beverages from the purview of Chanter 30; that, further, Chapter 4 does not contain any exclusive clause excluding the edible products of animal origin from the purview of Chapter 4.
4. The learned Counsel contended that OSSOPAN cannot be treated as a medicament under Heading 30.03 in view of the definition of Medicament given in Note 2 to Chapter 30; that OSSOPAN is used for the calcium and phosphorus requirements in the cases of pregnancy, lactation, old age, for the speedy growth of the bones; that OSSOPAN is not used for the treatment of any ailment or disease; that the supplementation of Calcium, phosphorus requirement in the body by OSSOPAN cannot be called as prevention or a treatment of any disease or ailment; that a product which is for general well-being and not having therapeutic property, is not a medicament classifiable under Heading 30.03 of the Tariff. The learned Advocate also submitted that there is no basis in the impugned order to treat osteoporosis as a disease state, that reliance by the Collector on Martindale Pharmacopoeia is incorrect as, according to the preface to Martindale Pharmacopoeia, "Martindale is based on published in formation. It is not a book of standards. Inclusion of a substance or a preparation is not to be considered as a recommendation for use". He mentioned that OSSOPAN has all the characteristics of a dietic food and the same is applied mainly natural physiological instances. He referred to "Manual of Dietetic Practice", edited by Briony Thomas, according to which OSSOPAN is proprietary energy and nutrient supplement. He also referred to Doctors' Desk Reference, 1990-91, VII Edition in which it is mentioned that OSSOPAN Tablets /suspension promotes remineralisation and stimulates osteogenesis; that the product was mentioned under 'Product Information (Nutrition)'. He also mentioned that even in Martindale Pharmacopoeia, Hydroxyapatite has been described as a natural mineral with composition similar to that of the mineral in bone and that Hydroxyapatite is administered for supplenting calcium and phosphorus deficiency; that it has nowhere been mentioned that Hydroxyapatite is having therapeutic or prophylatic uses. The learned Advocate submitted that they had submitted affidavits of Doctors to the effect that OSSOPAN is merely a calcium and phosphorous supplementation and cannot be considered as a drug. He contended that the major portion of the demand is barred by limitation; that the Appellants had filed classification list claiming reclassification of the impugned product under Chapter 2 and the same was approved by the Assistant Collector; that they had claimed classification under Chapter 2 as the classification of a similar product of a competitor was approved; that in these circumstances, it cannot be alleged that they had suppressed the fact that the impugned product has therapeutic or prophylactic uses.
5. Finally, he contended that if the impugned product is to be classified under Chapter 30, the appropriate heading would be 30.01 and not 30.03; that they will be eligible to avail of Modvat credit of duty paid on inputs and he relied upon the decision in Jagron Machine Tools v. CCE, 1993 (65) E.L.T. 300 (T); that the demand has been confirmed treating the invoice price of the product as assessable value instead of treating the same as the normal price; that if duty is to be demanded, the same has to be allowed as abatement from the invoice price. Reliance was placed on the decision in the case of Sri Chakra Tyres, 1999 (32) RLT 1 (CEGAT). He concluded by submitting that question of imposition of penalty does not arise on all the appellants as the impugned product was removed after the approval of the classification list and for the same reason, confiscation of the plant and machinery would not arise.
6. Countering the arguments, Shri K. Srivastava, learned S.D.R., submitted at the outset that the matter regarding "NATCOL" manufactured by M/s. American Remedies Ltd., their competitor, has been decided by the Appellate Tribunal in American Remedies Ltd. v. CCE, Madras, 1999 (111) E.L.T. 517 (T). The Tribunal has held that "both by its process of manufacture as well as its intended use the product is one which is clearly entering into the realm of being a medicinal preparation". Further, the learned SDR referred to various findings of the Collector to submit that the impugned product is a medicament. He specifically referred to paragraphs 36, 39, 52 & 55 of the impugned order. He mentioned that M/s. Robopharm who were the manufacturer of OSSOPAN and who transferred the know how to the Appellants have treated it as a drug and introduced in the market only after clinical tests as is evident from the Publication 'OSSOPAN' released by them. It is claimed therein that the impugned product is capable of curing osteoporatic disease and also counteracts periodical disease due to pregnancy; that it also indicates that OSSOPAN is a drug prescribed for various ailments, some of which are :
(i) It speeds fracture healing in elderly patients.
(ii) OSSOPAN increases the rate of weight gain in poorly thriving infants.
(iii) OSSOPAN improves the general condition and shortens convalescence.
(iv) It counteracts periodonatal disease due to pregnancy.
(v) The stimulation of bone formation by OSSOPAN prevents the progression of Osteoporosis; etc.
7. The learned SDR also referred to Martindale Pharmacopoeia which refers to the following study and report -
(a) A study of OSSOPAN and its mineral content in the treatment of Osteoporosis - R.A. Durance et al, Clin, Trials J, 1973, 10(3), 67.
(b) A favourable report of the use of OSSOPAN for prophylaxis of Osteoporosis in corticosteriod - treated rheumatoid arthritis - K.H. Nitsen et al., Br. med. J., 1978,2,1124.
8. The learned SDR also submitted that the impugned product is not classifiable under Heading 30.01 in view of Explanatory Notes of H.S.N. which clearly mention that Heading 30.01 excludes "Products having the character of medicaments of heading 30.03 or 30.04". He also mentioned that Note 2(i) to Chapter 30 only excludes foods or beverages; it does not exclude food supplements; that the impugned product is covered by Note 2(i)(b) to Chapter 30 and as such is a medicament; that there are ample evidence of the product having therapeutic and prophylactic uses and it is not in the nature of a food supplement and as such is classifiable under Heading 30.03 for the Tariff. He also referred to Explanatory Notes of H.S.N. in Chapter 4 according to which Chapter 4 excludes medicaments of Chapter 30. He mentioned that in Tetragon Chemie (P) Ltd. case, the rival Chapters for consideration of the Larger Bench were 23 and 29 and not Chapter 30; that further medicaments are excluded by H.S.N. from the purview of heading 23.09 (Heading 23.02 of CETA) and this was noted in Tetragon Chemie's case also.
9. Learned SDR submitted that the extended period of limitation is invokable as there was mis-declaration on the part of the appellants in classifying OSSOPAN under Chapter 2 of the Tariff. He drew our attention to pages 100 & 101 of the paper book furnished by the Department and submitted that the note OSSOPAN filed by Shri Ram Murthy did not give the correct picture of the impugned product, nor it was mentioned that Shri Ram Murthy was their employee; that it is not taken in large quantities as edible meat; that further in their letter, dated 9-4-1991 while filing classification list 1/91 classifying OSSOPAN under Chapter 2 of the Tariff, they had mentioned that OSSOPAN is not treated as a drug which was a mis-declaration; that similarly the information contained about the product in Martindale Pharmacopoeia was also suppressed from the Department which was very well known to them as is evident from their letter, dated 11-6-1987 to the State Drug Association in which they had mentioned that mention of "Extract of bone of young animals" made many doctors shy away from prescribing the product and they had requested the Drug Controller to permit them to use Hydroxyapatite which finds a place in Martindale, the Extra Pharmacopoeia. Finally, the learned SDR mentioned that their intention to evade the payment of duty is apparent from the letter dated 15-7-1992 of their Managing Director addressed to their Hyderabad factory wherein it was mentioned that the presentation of their case has been weakened as someone has handed over the OSSOPAN Forte literature; that OSSOPAN Forte mentioned therapeutic superiority of OSSOPAN in osteoporosis. It was also mentioned in the said letter that in Pallavaran they had avoided any description regarding therapeutic OSSOPAN. The learned SDR also contended that in view of these facts the penalty imposed not only on appellant company but on the Managing Director and other officials of the appellant company is justified as they had suppressed information or made misdeclaration. Regarding availability of Modvat credit he submitted that question of availability of Modvat credit was not an issue before the Collector and as such no order need be passed on this aspect. In reply Shri V. Lakshmikumaran, learned Advocate, referred to page 21 of the paper book of the Revenue regarding a chapter on "Post Menopausal Osteoporosis and mentioned that according to this all women experience a progressive loss of bone mass following the menopause; that most women who survive into their eighties will have a bone density below the so-called fracture threshold and thus be at the risk of fracture; that the role of calcium intake in preventing post menopausal bone loss is much less certain then that of Estrogen. He, further, submitted that it was also mentioned in the said article that it is questionable whether losses of bone mass is truly a disease. He also mentioned that the Department has relied upon their literature regarding OSSOPAN wherein it was mentioned that "It is a helpful, prophylactic and therapeutic agent in the prevention of disorder of calcium and phosphorus metabolism"; that this shows that OSSOPAN need easily absolable and it is only a food supplement; that Hon'ble Supreme Court in the case of Frozen Food (P) Ltd. v. CCE, Pune, 1998 (98) E.L.T. 295 (SC) held that Dietary supplement of superior Protein is classifiable under Heading 21.07 in view of Note l(a) to Chapter 30. Regarding classification of OSSOPAN in granule form, the learned Advocate mentioned that in Tetragon Chemie case Chapter 30 of the Tariff was also discussed and therefore, OSSOPAN in granule form has to be classified under heading 23.02. He relied upon the decision in CCE, Bangalore v. Kemwell Pvt. Ltd. (Final Order No. 321/99-C, dated 23-4-1999) wherein it was mentioned that the product was classifiable under heading 23.02 and not under heading 30.03. He also mentioned that as held by the Supreme Court in the case of Shree Vaidyanath Ayurved Bhawan Ltd. v. CCE, 1996 (83) E.L.T. 492 (SC), in interpreting statute like the Excise Act the primary object of which is to raise revenue and for which purpose various products are differently classified resort should not be held to the scientific and technical meaning of the terms and expression used but their popular meaning. He finally submitted that the decision in American Remedy case (supra) was a decision on concession from the appellants as is evident from para 7 of the said decision. It was not disputed by the appellants that the product Natcol is capable of use either for therapeutic or prophylactic purposes.
10. We have considered the submissions of both the sides. It is an admitted fact that appellant company has been manufacturing OSSOPAN since 1961 which was being classified as patent or proprietary medicament under Tariff item 14E of the erstwhile Central Excise Tariff.
It is also not disputed by the appellants that even after introduction of present CETA w.e.f. 28-2-1986, the impugned product OSSOPAN was classified by them under Heading 30.03 as a medicament. According to the appellants' own submission they changed the classification of the impugned product as their competitor American Remedies, manufacturer of product Natcol, similar to impugned product was classified by the Assistant Commissioner, Madras under Chapter 2 of the Tariff. Now the Tribunal in American Remedies v. CCE, Madras, 1999 (111) E.L.T. 517 has held that the product Natcol obtained as raw material by the appellants is subjected to a complicated manufacturing process and not only this results in the product changing its physical form of powder into tablets or liquid suspension, but a number of chemicals are added to it to give it a desired flavour, colour etc. so as to make it fit for administering to a human being. The Tribunal also observed that the product is capable of use either for therapeutic or for prophylactic purpose and supplied calcium to the human body when so required by it to either treat an exceeding deficiency or prevent a likely future deficiency, either of which would take an adverse effect on the health of the patient. The Tribunal, therefore, concluded that both by its process of manufacture as well as its intended use the product is one which is clearly entering into the realm of being medicinal preparation. It was also decided by the Tribunal that the product is not classifiable under Heading 30.01.
10. The appellants have vehemently submitted that the impugned product OSSOPAN is not classifiable as medicament. After considering the product as medicament for almost 30 years it is difficult to accept any of their submission that the impugned product is not a medicament and osteorosis is not a disease. They have themselves in their literature on OSSOPAN has clearly mentioned as under :-
"The effect of OSSOPAN appears, to be exerted selectively upon the supportive connective tissue, which is under strain in pregnancy. This is clearly shown by the marked improvement of pelvic, perineal and joint pain, the improvement in gum tissues and by the prevention of the striae. Finally, OSSOPAN seems to be effective in preventing fall of hair and brittleness of the nails...It is a helpful prophylactic and therapeutic agent in the prevention of disorders of calcium and phosphorus metabolism...Gazette Medicale de France 84:2839-2843; 1977."
11. Further, we find that the Collector in the impugned order has referred to literature to come to the conclusion that the impugned product is a drug with specific properties in relation to the treatment of various bone diseases. Both the Adjudicating authority and the learned SDR have shown that OSSOPAN is drug prescribed for various ailments (refer para 6 above). According to Martindale, The Extra Pharmacopoeia, the product is a medicament which is evident from the studies mentioned therein. We also observe from the booklet OSSOPAN, published by the appellants, that Osteoporosis is one of the commonest disease of the skeleton. It affects about 12% of the total population. The over ageing population in Europe will result in an increase in the morbidity rate of the disease. According to Butter Worths Medical Dictionary, Osteoporosis means "rarefaction of bone, localised rarefaction of the bones of the skull; Schueller's disease." According to Harrison's Principles of Internal Medicine, published by McGraw-Hill Books company, Health Professions Division, "Osteoporosis - A reduction of bone density below level required for mechanical support. Remodelling of bone (formation and resorption) is continuous, and density decrease whenever rate of resorption exceeds formation. Vertebrate, Wrist, hip, humerus, and tibia, are particularly prone to fracture." One of the treatment suggested is oral calcium. From the technical books, their own publication and Martindale, The Extra Pharmacopoeia, it is apparent that the impugned product is a medicament having therapeutic and prophylactic uses and as such is classifiable under Heading 33.03 of the Central Excise Tar iff. As OSSOPAN is held to be a medicament under Heading 30.03 of the Tariff even the veterinary grade cannot be classified under Heading 23.02 as a food supplement.
12. We, however, find sufficient substance in the submissions of the learned Advocate that the demand for Central Excise duty cannot be made for extended period as the reclassification of the product OSSOPAN under Chapter 2 in view of the classification of product Natcol manufactured by American Remedies Pvt. Ltd. under Chapter 2 by the Department. As mentioned earlier the product was being classified as P or P medicine for the last 30 years, and if the appellants had sought reclassification under Chapter 2 of the Tariff it has to be presumed that the Department before reclassification must have examined the aspect of classification in detail. It is not open to the Department in the light of these facts to allege that the facts were suppressed or any misdeclaration was made. This was the view held by the Appellate Tribunal in the case of CMMS Computers (P) Ltd. v. CCE, Bombay -1999 (108) E.L.T. 525 (T) wherein it was held that it is settled law that where classification has been approved the claim is barred by limitation. Further, the demand, if any, has to be recomputed in the light of the decision of the Larger Bench of the Tribunal in the case of Sri Chakra Tyres v. CCE, 1999 (32) RLT 1. We also extend the benefit of Modvat credit to the appellants for the period they have to pay the duty subject to the condition of producing the duty paying documents to the satisfaction of the jurisdictional Assistant Commissioner. In view of the fact that suppression and misdeclaration of facts is not being held against the appellants all the penalties imposed against all the appellants are set aside.
13. All the appeals are disposed of in the above terms.