Customs, Excise and Gold Tribunal - Delhi
Dena Jee Sansthan vs Commissioner Of Central Excise on 25 March, 1998
Equivalent citations: 1998(101)ELT113(TRI-DEL)
ORDER Jyoti Balasundaram, Member (J)
1. These three applications arise out of the common order passed by the Commissioner of Central Excise, Meerut and hence are being heard together and disposed of by this common order.
2. M/s. Dena Jee Sansthan (hereinafter referred to as applicant No. 1) is registered with the U.P. Khadi Gram-Udyog Board and engaged in the manufacture of various types of Shampoos viz. (1) Denajee Brand Satritha Shampoo (2) Denajee Brand Herbal Shampoo and (3) Denajee Brand Neem Shampoo. The department found that these three products were specifically manufactured for use on the hair and would fall for classification under Chapter Heading 3305.90 of the Schedule to the Central Excise Tariff Act, 1985 and therefore, liable to duty at the rates applicable from time to time. The applicants had not applied for registration as a Central Excise unit and had also not filed any classification list for manufacture of these three types of shampoos and therefore, a show cause notice was issued on 14-3-1997 for demand of duty of Rs. 1,70,05,170.92 P. Penalties on applicant No. 1 and its Secretary and Manger were also proposed in the notice. The notice was adjudicated by the Commissioner upholding the classification of the three types of Shampoos under Central Excise Tariff Heading 3305, rejecting the contention of the assessees that what they had manufactured were Ayurvedic medicines. The applicability of the extended period of limitation was also upheld by the Commissioner on the ground that they had failed to follow the Central Excise procedure in the form of application for registration, filing of classification list etc. A penalty of Rs. 1,70,06,000/- was imposed on the applicant No. 1 and penalty of Rs. 10 lakhs each was imposed upon its Manger and Secretary. Hence these applications.
3. Shri Lakshmi Kumaran, learned Counsel appearing for the applicants submits that prima facie the demand is barred by limitation since they were under a bona fide belief, based on the information received by the U.P. Khadi Gram-Udyog Board that the units registered with Khadi Gram-Udyog Board were not liable to pay Sales tax or Central Excise duty and this was mentioned in the reply to the show cause notice as well as in the statement of Shri A.K. Gupta recorded on 16-12-1996. The Commissioner however, has not considered this plea of the applicants nor has he considered the plea that certain other units enumerated by them, were also not paying duty even they were manufacturing similar type of products. The learned Counsel also highlighted the fact that the applicant No. 1 is facing extreme financial hardship and the profit and loss account for the year 31-3-1997 shows a net surplus of approximately Rs. 5 lakhs and a negative bank balance of Rs. 54,000/-. As far as the merits of the matter are concerned, he submits that the plank of the show cause notice is the judgment of the Tribunal in the case of BPL Pharmaceuticals reported in [1994 (69) E.L.T. 798]; however, this decision of the Tribunal has been reversed by the Supreme Court in the case of BPL Pharmaceuticals Ltd. as reported in [1995 (77) E.L.T. 485] and therefore, the foundation of the entire case against the applicants falls to the ground. He submits that it is not open to the department to plead that the product in question in this case is different from that covered by the judgment in the case of BPL Pharmaceuticals. Under these circumstances, he prays for pre-deposit and stay of recovery of the duty amount and the penalty on the applicant No. 1 and adds that the penalty of Rs. 10 lakhs each imposed upon Shri A.K. Gupta and Shri D.N. Gupta is too high in view of the fact that they do not have the funds to comply with the requirement of pre-deposit as they are paid employees earning Rs. 7,000/- and Rs. 4,000/- respectively.
4. The learned DR Shri H.K. Jain refers to the judgment of the Hon'ble Supreme Court in the case of Shree Baidyanath Ayurved Bhawan Ltd. reported in [1996 (83) E.L.T. 492] to substantiate his argument that the products in question do not satisfy the test of common parlance as ayurvedic medicines since they are widely recognised as shampoos and therefore, classification under Central Excise Tariff sub-heading 3305 is appropriate and they cannot be considered as Ayurvedic medicament falling under Chapter 30. The requirement of being prescribed as by a medical practitioner to ascertain if the products confirmed to Ayurvedic medicament or not, is also not satisfied, submits the learned DR. He therefore, submits that the order on merits suffers from no infirmity. On the question of time bar, his submission is that the applicants have not substantiated their claim of bonafide belief that they were exempt from payment of Central Excise duty for the reason that they are a unit registered with the U.P. Khadi Gram-Udyog Board. As far as the financial position is concerned, he submits that looking to the sales turnover of Rs. 16 lakhs, it would not cause them undue hardship if they are asked to deposit the duty and penalty amount. He therefore prays that the assessees may be directed to pay the duty and penalty amounts.
5. We have carefully considered the above submissions. The question of correct classification of the three products, whether as ayurvedic medicaments under Chapter Heading 30.03 as claimed by the appellants or under Chapter Heading 3305 as preparations for use on hair, can be gone into at the time of final hearing of the appeal since this issue is arguable, and on decisions of the Tribunal and the Apex Court in similar situation and on similar product will have to be considered in detail, which can be done only when the appeals are taken up for hearing. The applicants have made out a strong prima facie case for waiver on the ground that the demand is barred by limitation. The Commissioner has not given any finding on the argument of bona fide belief and has held that the extended period of limitation is available to the department for the reasons that the applicant No. 1 did not apply for registration or filed classification lists. The Supreme Court has held in the case of Padmini Products reported in [1989 (43) E.L.T. 195] that the existence of bona fide belief is a ground for an assessee to claim that there was no deliberate intention not to follow the Central Excise law or to evade payment of duty. In other words, the existence of bonafide doubt would entitle the assessees to plead that the extended period of limitation would not be applicable, because they are not guilty of mis-statement or suppression. The financial position reflected in the profit and loss account also shows that it would cause undue hardship to the applicants if they are asked to deposit the duty amount. Having regard to the prima facie view on time bar and the financial position, we dispense with the requirement of duty and penalty on all the three applicants during the pendency of these appeals and stay their recovery during the pendency of the appeals.