Custom, Excise & Service Tax Tribunal
Cce, Chandigarh vs M/S Pfizer Ltd on 5 December, 2017
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SCO 147-148, SECTOR 17-C, CHANDIGARH 160 017
COURT NO. I
APPEAL NO. E/149/2007
[Arising out of Order-in-Appeal No. 1040/CE/CHD/2006 dated 27.10.2006 passed by the Commissioner of Central Excise (Appeals), Chandigarh.]
Date of hearing: 05.09.2017
Date of decision: _________
For approval and signature:
Honble Mrs. Archana Wadhwa, Member (Judicial)
Honble Mr. Devender Singh, Member (Technical)
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CCE, Chandigarh.
:
Appellant(s) VS M/s PFIZER LTD.
:
Respondent(s) ======================================================= Appearance:
Sh. Atul Handa, AR for the Appellant(s) Sh. Udit Jain, Advocate for the Respondent(s) CORAM:
Honble Mrs. Archana Wadhwa, Member (Judicial) Honble Mr. Devender Singh, Member (Technical) FINAL ORDER NO. 62115 /2017 Per : Devender Singh The Revenue is in appeal against the impugned order.
2. The brief facts of the case are that the appellants are manufacturer of bulk drugs under Chapter 29 of Central Excise Tariff Act. Among other bulk drugs, they are also manufacturing a product called TMQ, as named by appellant themselves. The appellants are claiming the classification of said product under sub heading 2302.00, the Department disputed the same and contended that it is correctly classifiable under heading 2941.30. The Department confirmed the demands of Rs. 20,33,890.86/- vide O-I-O No. 204-209/DC/D/2001 dt. 28.02.2001. This O-I-O covered the following show cause notices:-
Sr. No. SCNs No. Date Period Amount (Rs.)
1. V/17/CL/PL/33/88/7827 19.07.91 3/92-8/92 Nil
2. V(29)3/114/D/92 04.01.93
-DO-
2,27,377/-
3. V(29)3/37/93/3306 08.04.93 3/90-2/92 10,11,690.58/-
4. V(29)3/12/D/93/3455 23.04.93 11/92-12/92 1,12,529.28/-
5. V/17/PFIZER/CL/20/96 28.12.99 w.e.f. 11/99 Nil
6. CE-20/TMQ/PFz/R-1/Chd/99 26.5.2K 11/99-04/02 6,82,294/-
The show cause notices at Sr. No. 1 & 2 and at Sr. No. 3 & 4 were initially confirmed by the adjudicating authority. vide O-I-O No. 1/AC/CL/93 dt. 06.01.1993 and 49-50/AC/D/93 dt. 07.06.1993 respectively holding the classification of TMQ under sub heading 2941.30. The OIO at Sr. No. 1 & 2 on the partys appeal were upheld by the ld. Commissioner (Appeals) vide OIA No. 291/CE/CHD/93 dt. 27.05.1993 and the OIO at Sr. No. 3 & 4 was also upheld vide O-I-A No. 518/CE/CHD/93 dt. 30.09.1993 as amended vide C. No. 428/CE/Appl/CHD/93/4154 dt. 11.10.1993. The CESTAT on partys appeal remanded these cases to the original adjudicating authority vide Final Order No. 558-560/99-C dt. 13.07.1999. Subsequent to CESTATs remand order, cases at Sr. No. 1 to 4 which were remanded for denovo proceedings and cases at Sr. No. 5 & 6 which were fresh cases were adjudicated and demand of Rs. 20,33,890.96/- was confirmed vide O-I-O No. 204-209/DC/D/2001 dt. 28.02.2001. Similarly another demand of Rs. 14,04,768/- arising out of the following two show cause notices was confirmed and personal penalty of Rs. 1,00,000/- was imposed vide O-I-O No. 108-109/DC/D/2002 dt. 26.03.2002 by Deputy Commissioner, Central Excise Division, Chandigarh after holding the partys product TMQ classifiable under sub heading 2941.30.
Sr. No. SCNs No. Date Period Amount (Rs.)
1. V(29)3/D/296/2K/5083-84 29.05.2K 5/2K-10/2K 4,77,189/-
2. V(29)3/D/34/2K1/11757-58 20.11.2K1 11/2K-05/2K1 9,27,579/-
Aggrieved by the aforesaid O-I-Os the party filed appeals with the Ld. Commissioner (Appeals) who dismissed the appeals of the party vide O-I-A No. 491/CE/Chd/03 dt. 24.06.2003 (pertaining to O-I-O No. 204-09/DC/D/2001) and 296-97/CE/Chd/04 dt. 31.03.04 (Pertaining to O-I-O No. 108-109/DC/D/2002) respectively. Aggrieved by the above orders of the Commissioner (A), the party again filed an appeal with CESTAT who vide Final Order No. 684-86/04-NB-CE and S/461-62/04 dt. 30.09.2004 remanded the case to the original adjudicating authority with the directions to pass a fresh order after allowing cross-examination of the Chemical Examiner. Pursuant to the above final order, the adjudicating authority arranged the cross-examination of the chemical examiner and the adjudication proceedings were finalized vide O-I-O No. 12/CE/AC/CHD/06 dt. 22.02.2006. In the said adjudication, the demand of Rs. 34,38,658/- along with interest was confirmed and also penalty of Rs. 8,50,000/- was imposed upon the party. Aggrieved from the same, the appellant filed the appeal before the Ld. Commissioner (Appeals) who vide O-I-A No. 1040/CE/CHD/06 dt 27.10.2006 set aside the O-I-O and allowed the appeal. Aggrieved from the same the Revenue has filed this appeal.
3. Ld. AR for the Revenue submits that TMQ is the name invented by the party themselves and it is quite difficult to ascertain whether it is Terramycin or Tetracycline or Oxytetracycline. The contention is that the appellants own document of quality assurance profile mentions TMQ as Oxytetracycline Salt, it is clearly covered under heading 2941.30 being a salt of Oxytetracycline which, in turn, is a derivative of tetracycline. He also stated that the affidavit of Sh. H.P.S Chawla, Professor and Head, Department of Pharmaceutical Technology, National Institute of Pharmaceutical Education and research clearly mentioned that TMQ is an active antibiotic from 38% to 50% and thus hit by virtue of exclusion Clause (h) of Heading 23.09. He also submitted that TMQ being an intermediate product does not constitute animal feed or feed supplement in itself and since it was intermediated product and not final product, if is not excluded from 29.41. He also referred to the spot verification done by the first adjudicating authority Sh. Malkiat Singh who concluded that manufacturing process for all the products in appellants factory was same. He also argued that the Ld. Commissioner (Appeals) has erred in the observing that test of the chemical examiner is vague and based on the assumptions and presumptions. He referred to the notes written by the chemical examiner indicating various tests conducted to arrive at the conclusion. He argued that the judgment of the Honble Tribunal in the case of Tetraon Chemie (P) Ltd. Vs. CCE, Bangalore 2001 (138) ELT 414 (Tri. LB) was clearly distinguishable as the goods TMQ are different. He further contended that the appellants themselves cleared the manufactured products as TMQ under chapter Heading 2941.30 vide their classification list No. 105/8889 and thereafter under heading 2302 vide their classification declaration from 22.09.1999. Hence, there cannot be doubt about the products beings goods about their marketability. The same were being transferred to M/s Teekay Menthol Pvt. Ltd., Mumbai and who have declared the product TMQ as raw material/inputs for their final product TM100.
4. Ld. Advocate for the appellant reiterated the findings in the impugned order of the Ld. Commissioner (Appeals) and stated that the issue was squarely covered by the Larger Bench of this Tribunal in the case of Tetraon Chemie (P) Ltd. Vs. CCE, Bangalore (Bangalore).
5. Heard the parties and perused the records.
6. We find that the issue which requires to be determined is the classification of the products named as TMQ. The contending headings are as below:-
(i) Tariff Heading 2302- Preparation of a kind used in animal feeding, including dog and cat food
(ii) Tariff Heading 2941.30- Tetracyclines and their derivates: Salts thereof.
7. We find that the goods were got tested in CRCL and pursuant to this Tribunal final order dt. 30.09.2004, the cross-examination of the chemical examiner was conducted. After going through the contents of the cross-examination, we are in complete agreement with the following observations of the Ld. Commissioner (Appeals):-
I also gone through the test report of the Chemical Examiner and the results of the cross-examination in the form of questionnaires and answers thereto. Besides vague and indefinite answers, the Chemical Examiner admitted that the test residue on ignition or loss on drying was not conducted. She could not answer in affirmative whether there was any inorganic substance in the product or not. Even the test report is vague in as much as it is not specify the exact nature of the contents of the sample. On one hand it says that the sample is in the form of brown coloured powder having the characteristics of organic compound and the note appended to it says that it may be considered as a derivative of tetracycline. The entire cross-examination clearly demonstrates that she proceeded on assumptions and presumptions and the test report is incomplete and the contentions of the appellants cannot be ignored. Therefore, no reliance on the test report can be placed.
8. The Revenues main ground is that in their own document TMQ has been called as Oxytetracycline Salt and therefore being a derivative of Tetracyclines, it should be classified under Heading 2941.30. It is also contended by the Revenue that TMQ is an intermediate product. In this context, it would be relevant to refer to the manufacturing process of TMQ, as given in the Order-in-Appeal reproduced below:-
Further the contention of the Appellant are that they procure various energy nutrients and function nutrients which are mixed with mineral nutrients. The combination of these raw materials is fermented and a broth is developed. The fermented broth is acidified and filtered on the rotary vaccum filter. The filtrate is then treated with Calcium Carbonate and its PH is adjusted. Arquad is added to complete TMQ precipitation. This slurry is filtered, the solids washed with water, dried and pulverized. This pulverized product is called TMQ. In accordance with the appellants, this is an in-process material obtained while manufacturing bulk drug namely Oxytetracycline. This in process material is transferred for further use as pre-mix with other carriers and diluents to make animal feed supplement by the appellants known as TM 100.
9. In this background, we find force in the argument of the Ld. Commissioner (Appeals) that the TMQ, being in process material is used as an additive to namely feed supplement and hence classifying the same as antibiotic or derivative or salts of the same was not correct. In this context, the following findings of the Ld. Commissioner (Appeals) are very relevant:-
The adjudicating authority admits that the product TMQ is an in-process material which is used as a pre-mix in the manufacture of TM 100 i.e. feed supplement. He has not disputed that the product is in crude form and is not a pure antibiotic. In its findings he has admitted while trying to distinguish the case of Tetragon Chemie that the product TMQ cleared from Chandigarh is used as an input for the manufacture of TM 100. Therefore, once it is established that TMQ, an in-process material, is used as an additive to the animal feed supplement, classifying the same as antibiotics or derivates or salt of the same was erroneous.
10. Considering the manufacturing process and in-process nature of the material, we are convinced that the issue is covered by the judgment of the Larger Bench in the case of Tetraon Chemie (P) Ltd. Vs. CCE, Bangalore (supra) wherein this Tribunal held as under:-
110. We have? examined the above observations. We note that the word includes clearly shows that in addition to preparations mentioned under Heading 23.02, it includes products of a kind used in animal feeding..., and by products of such processing. We note that the Tribunal failed to observe the words product in the Note of Chapter 23 of CETA 1985 and preparation under Heading 23.02 of CETA 1985. We have observed elsewhere that product and preparation are not the same thing. They represent 2 different distinct items. In case the word include is interpreted to read as means and includes, then, perhaps preparations as described under Heading 23.02 of CETA 1985 will not be included. We have discussed at length the significance of the word includes and have held that includes used in Chapter Note extends the scope and coverage of the Chapter and, therefore, preparation described under Heading 23.02 of CETA 1985 will be covered even if they are not obtained by processing vegetable or animal material. We also note that the Honble Bombay High Court held that animal feed is genre and animal feed supplement is a specie.
11. In view of the above, we find no infirmity in the impugned order and the same is upheld.
12. The appeal filed by the Revenue is dismissed.
(Order pronounced in the open court on ____________) Archana Wadhwa Member (Judicial) Devender Singh Member (Technical) NS 9 E/149/2007- CHD