Customs, Excise and Gold Tribunal - Delhi
Collector Of C. Ex. vs Baidyanath Ayurved Bhavan on 5 July, 1989
Equivalent citations: 1989(24)ECR504(TRI.-DELHI), 1989(44)ELT704(TRI-DEL)
ORDER
G. Sankaran, Sr. Vice-President
1. The facts of the case, briefly stated, are that the respondents are engaged in the manufacture of Ayurvedic medicines. During the period relevant to the present dispute, viz., 1975-76,1976-77 and 1977-78, the department charged the goods to duty of excise under Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944 (the Schedule is referred to hereinafter as the 'CET' and the said Act as 'the Act'). The respondents filed a claim in the Assistant Collector's office on 19-7-1982 for refund of the duty paid as aforesaid, on the ground that the classification of the goods under Item No. 68, CET was wrong. They further contended that they had been paying duty all along under protest and so the limitation in Section 11B of the Act would not apply. The Assistant Collector dismissed the claim as barred by limitation under Section 11B of the Act, as well as on the merits of the dispute. The matter was carried in appeal before the Collector (Appeals) who, in his impugned order, noted that it was clear from the records that the respondents had contested the levy and licence control in respect of their ayurvedic medicines under Item No. 68, CET, and had acquiesced in the same but under protest. He further noted that the application for the licence and its renewal as well as the initial deposit in the Personal Ledger Account (PLA) and its replenishments were under protest even though the individual gate passes did not have the endorsement. On this basis, the Collector found that the claim was not barred by limitation under Section 11B of the Act. He also upheld the respondents' claim on merits. It is against this order allowing the appeal that the Collector of Central-Excise, Kanpur, has filed the present appeal.
2. We have heard Shri A.S. Sunder Rajan, DR, for the appellant and Shri Lachman Dev Consultant, for the respondents.
3. Shri Sunder Rajan's submission is that the impugned order is wrong on the aspect of limitation. If the Collector found that the Assistant Collector's order was untenable on this aspect, he should have remanded the matter to the Assistant Collector for disposal on merits. (We do not agree with this contention because the Assistant Collector had disposed of the claim on merits also and so, there was no purpose in the Collector sending back the case to the Assistant Collector for disposal on merits.) He then submitted that the duty paying documents like gate-passes, and the PLA, did not bear protest endorsements. After the licence was taken, there was no evidence of protest till 9-7-1982. The provision regarding saver of limitation in cases of payments of duty under protest was not in existence prior to 6-8-1977 and, therefore, even if duty had been paid under protest, such saver of limitation was not available during the pre 6-8-1977 period.
4. Shri Lachman Dev, for the respondents, submitted that prior to 1981 when a specific rule regarding protests was inserted in the Central Excise Rules, 1944, there was no prescribed procedure for payment of duty under protest. However, as could be seen from the annexures to the (so-called) "Cross-objection", the respondents had protested against the levy from the very beginning. He further submitted that the Ayurvedic drugs stood excluded from Item 14E and in view of the Gujarat High Court's judgment in Darshan Hosiery Works v. Union of India -1980 (6) E.L.T. 390 (Guj.), they could not be classified under Item No. 68, CET, till its amendment by the Finance Act of 1980. He also submitted that only the product "DANT MANJAN LAL" had been held by this Tribunal to fall under Item No. 68 but could not be considered as an ayurvedic medicine for the purposes of duty exemption.
5. Responding to the above arguments, Shri Sunder Rajan referred to the Tribunal's decision in CCE Bombay v. India United Mills -1986 (24) E.L.T. 436 and submitted that mere endorsements of the words "duty paid under protest" on gate passes would not serve the purpose of saver of limitation. In the present case, the gate passes did not carry such endorsements.
6. We have carefully considered the submissions of both sides. It is seen that in their letter dated 14-3-1975 to the Assistant Collector, the respondents had submitted that the goods manufactured by them did not fall under Item 68 CET and that the Central Excise authorities at Jhansi should be instructed not to press for payment of duty under the said item. This was followed by another letter dated 31-3-1975 in which it was again stated that, for the reasons set out therein, the ayurvedic medicines manufactured by them were not subject to excise duty. These representations were not accepted by the Assistant Collector who, by his letter of 11-4-1975, held that Item 68 was attracted and that any clearance of the goods without obtaining a licence and without payment of duty would invite penal action. Thereupon, on 5-5-1975, the respondents applied for Central Excise licence under protest. Deposit challans dated 15-9-1975, 27-8-1975, 3-10-1975, 18-10-1975 and 28-11-1975 also are marked "under protest".
7. In the case of Collector v. India United Mills (supra), the gate passes bore the endorsements "duty paid under protest" but there were no reasons nor any letter to the Central Excise authority as to why the duty was being paid under protest. Nor were the debits in the PLA under protest. The respondents did not also raise any dispute about the rate of duty after receipt of the Superintendent's letter in this behalf. It appears that they agreed to the classification suggested by the Assistant Collector. It is on these facts and circumstances that the Tribunal held that the mere endorsements on Gate passes did not amount to payment of duty under protest. The facts and circumstances in the instant case are different. As we have seen, the respondents have been protesting against classification of the goods and their being called upon to pay duty on the subject goods under Item No. 68, CET. The cited decision is, therefore, of no application to the present case.
8. In Tata Oil Mills Co. Ltd., Ghaziabad v. CCE, Meerut -1987 (30) E.L.T. 766, the Tribunal held that a protest recorded on the classification list would amount to payment of duty under protest.
9. In Pure Drinks (New Delhi) Ltd. v. CCE, Delhi - 1987 (31) E.L.T. 138 (Tribunal) the Tribunal held that a letter written by the manufacturers reiterating their stand that they were entitled to deduct the average freight (for the purpose of arriving at assessable value) was a letter of protest and by writing the said letter, they had protected their interests from the limitation angle. In the instant case, even after the Assistant Collector conveyed his decision on the respondents' letters of 14-3-1975 and 31-3-1975 by his letter of 11-4-1975, the latter applied for licence under protest, they recorded their protest at the time of renewal of the licence and made deposits in the PLA under protest. If all these do not add up to payment of duty under protest, we fail to see what does. In the circumstances, we are of the view that the refund claim in the present case was not barred by limitation.
10. Prior to the insertion of Rule 233B in the Central Excise Rules, 1944, by Notification No. 115/81, dated 11-5-1981, there was no procedure statutorily prescribed for registering protest against duty payments. What is important, in our view, is that there should have been a protest setting out the reasons therefor. This, there has been in the present case. In the case of Western India Plywood Ltd., Baliapatam v. CCE, Cochin -1986 (23) E.L.T. 227, the manufacturer had lodged a letter of protest on 8-7-1963 (before 1977 and 1981) contending that their product compreg was not plywood and hence not excisable on the department's seeking to charge duty thereon under Item No. 16B, CET. The Tribunal held that the refund claim in respect of duty payments after the lodging of the protest were saved from limitation. The ratio applies to the present case.
11. We may discuss now the merits of the dispute. Item No. 14E of the CET read as follows at the material time :-
"Patent or Proprietary Medicines not containing alcohol, opium, Indian hemp or other narcotic drugs or other narcotics other than those medicines which are exclusively Ayurvedic, Unani, Sidha or Homoeopathic."
It may be seen that Ayurvedic medicines were clearly excluded from scope of the said item. In 1975 an omnibus residuary Item No. 68 was inserted in the CET to cover all goods not elsewhere specified in Item Nos. 1 to 67 of the Schedule. The dispute arose whether the goods excluded from the other entries in the Schedule would fall within the residuary Item No. 68. This dispute reached the Gujarat High Court in the case of Darshan Hosiery Works v. Union of India -1980 (6) E.L.T. 390 (Guj.). The Court held that the expression "not elsewhere specified" in Item No. 68 meant the total omission or failure to specify goods in the Schedule either for the purpose of taxability or for the purpose of exemption from liability to duty. Therefore, once an article or goods is specified in any of the Tariff Items, 1 to 67, irrespective of the purpose for which they are specified, Item 68 does not come into play and does not render such goods liable to duty. Applying the ratio of the judgment it will be seen that since Ayurvedic medicines are specified in Item No. 14E-though for the purpose of exclusion, they would not fall under Item No. 68 CET. It was evidently to overcome the effect of the above judgment that an explanation was inserted in Item No. 68 CET by the Finance Bill, 1980, reading as follows :-
"Explanation :- For the purposes of this Item, goods which are referred to in any preceding Item in this Schedule for the purpose of excluding such goods from the description of goods in that Item (Whether such exclusion is by means of an Explanation to such Item or by words of exclusion in the description itself, or in any other manner) shall be deemed to be goods not specified in that Item."
As such the respondents' contention that the subject goods did not attract duty either under Item No. 14E or No. 68 is correct and is upheld.
12. In the result, the impugned order is upheld and the appeal is dismissed.