Custom, Excise & Service Tax Tribunal
M/S Nicholas Piramal (I) Ltd. vs Cce Raigad on 24 August, 2018
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
APPEAL NO: E/505/2008
[Arising out of Order-in-Appeal No: SRK/83/RGD/2008 dated 15th
February 2008 passed by the Commissioner of Central Excise
(Appeals), Mumbai - II.]
Nicholas Piramal India Limited ... Appellant
versus
Commissioner of Central Excise
Raigad ...Respondent
Appearance:
Shri Archit Agarwal, Chartered Accountant for appellant Shri N N Prabhudesai, Superintendent (AR) for respondent CORAM:
Hon'ble Shri C J Mathew, Member (Technical) Hon'ble Shri Ajay Sharma, Member (Judicial) Date of hearing: 24/07/2018 Date of decision: 24/08/2018 ORDER NO: A/87140 / 2018 Per: C J Mathew The issue in this appeal of M/s Nicholas Piramal India Limited against order-in-appeal no. SRK/83/RGD/2008 dated 15th February 2008 of Commissioner of Central Excise (Appeals), Mumbai - II E/505/2008 2 pertains to the order of remand requiring the lower authority to determine the value of 'chloroquine' at 115% of the cost of manufacture for discharge of liability at 8% under rule 57AD of the erstwhile Central Excise Rules 1944.
2. Appellant manufactures 'chloroquine phosphate' and 'bulaquine' which are cleared and sold in composite pack comprising of five tablets of the former and five capsules of the latter. The composite product is sold as 'aablaquin' and it is the claim of the appellant that they have cleared the goods on payment of duty at appropriate rate applied to the price of composite pack. Accordingly, they had claimed CENVAT credit on the input used in common for manufacture of both which was sought to be denied in show cause notice dated 14th January 2003 as the prescriptions of rule 57AD permitted the availment of such credit conditional upon discharge of liability @ 8% on the value of the exempted product on which, otherwise, the CENVAT credit could not have been availed.
3. Learned Chartered Accountant submits that they had filed the classification list for the relevant period under rule 173B of Central Excise Rules, 1944 and the duty liability had been discharged at 16% of the total value of the composite pack. It was further argued that the order-in-original was in their favour and that, on appeal of Revenue, the impugned order has remanded the matter to compute the E/505/2008 3 value of the 'chloroquine' being an exempted product that disentitled the duty paid on inputs used therein from availment of CENVAT credit.
4. It is also his contention that the remand order is incorrect inasmuch as there is no clear finding, with cogent reason, on the issue of the composite package subsuming the exempt product. Reliance was placed on the decision of the Tribunal in Commissioner of Central Excise, Mumbai - IV v. Gupta Soaps [2007 (213) ELT 372 (Tri.Mumbai)] and on Manik Machinery Manufacturers Pvt Ltd v. Commissioner of Central Excise, Mumbai - IV [2016 (339) ELT 334 (Tri.Mumbai)]. Citing the decision of the Hon'ble Supreme Court in Commissioner of Central Excise, Bangalore v. Himalaya Drug Company [2015 (324) ELT 9 (SC)], Learned Chartered Accountant submits that aggregation of free product with dutiable product amounted to manufacture of a new product. It was further contended that their filing of the classification list under section 173B of the Central Excise Rules, 1944 made it amply clear that the goods were so packed and duty liability was so discharged owing to which the extended period under section 11A of the Central Excise Act, 1944 could not be invoked.
5. Learned Authorised Representative submits that the appellant had been changing their stand by first claiming that the duty liability E/505/2008 4 had been discharged on both the 'chloroquine phosphate' and 'bulaquine' whereas it was now claimed that the goods being packed together amounted to manufacture. Furthermore, it is his contention that composite pack has a specific connotation which does not apply to the claim of the appellant. Relying upon rule 122E of Drugs and Cosmetic Rules, 1945, he contended that both the 'chloroquine phosphate' and 'bulaquine' are separate drugs and a new drug or method of selling under a different name which required appropriate licence from the competent authority under the said Rules which has not been produced in relation to 'aablaquin'. He placed reliance on the decision of the Hon'ble High Court of Karnataka in Davangere Cotton Mills Limited v. Union of India and Others [1986 (24) ELT 507 (Kar.)].
6. The issue in dispute, though argued on various aspects pertaining to dutiability, revolves around the availment of CENVAT credit on inputs used in manufacture of both exempted goods and dutiable goods. 'Chloroquine phosphate' is an exempted goods while 'bulaquine' is a dutiable product; both are manufactured by the appellant and undisputedly sold in a package of five units each as 'aablaquin'. Taking note of their declaration under rule 173B of the Central Excise Rules, 1944 it would appear that these were two distinct products with distinct classification. The said declaration, though narrating the clearance of both in a single pack, has not E/505/2008 5 classified the goods in the form in which they were cleared. Accordingly, it would appear that the two products are separate and distinct and their combined packaging does not bring any new goods into existence. In the absence of a chemical description of 'aablaquin', supported by necessary licence referred to in Drugs and Cosmetics Rules, 1945, the goods manufactured by the appellant are to be cleared separately and distinctly as 'chloroquine phosphate' and 'bulaquine'.
7. That 'chloroquine phosphate' is an exempted product is not in dispute. Payment of duty on exempted products does not, in any way, take it out of sphere of the definition of the 'exempted goods' in the Central Excise Rules, 1944 or the successor rules carved out for administration of CENVAT Credit Rules, 2004. Accordingly, to the extent that 'chloroquine phosphate' is an exempted goods and that in the manufacture of those, and other dutiable goods, the appellant has utilized common inputs taking credit thereof, without distinguishing between utilization on exempted goods and on dutiable goods, the liability under rule 57AD of Central Excise Rules, 1944 cannot be avoided.
8. The appellant has claimed that duty liability has been discharged on both 'chloroquine phosphate' and 'bulaquine' by adopting a value which takes into account both these products. If that E/505/2008 6 is so, the duty discharged on 'chloroquine phosphate' is liable to be set off against liability under rule 57AD owing to the exempt nature of the 'chloroquine phosphate'. That is an aspect that needs to be ascertained by the lower authorities.
9. The remand order of the first appellate authority for ascertaining of value is modified as:
(i) to ascertain if duty liability has been discharged on 'chloroquine phosphate' at 16% of the value;
(ii) determine the value of 'chloroquine phosphate' for the purpose of liability under rule 57AD of Central Excise Rules, 1944; and
(iii) to compute the resultant duty liability that remains.
10. Appeal is accordingly disposed off.
(Pronounced in Court on 24/08/2018)
(Ajay Sharma) (C J Mathew)
Member (Judicial) Member (Technical)
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