Customs, Excise and Gold Tribunal - Mumbai
Icpa Health Products Pvt. Ltd. vs Commissioner Of Customs & Central ... on 13 June, 2001
ORDER
Gowri Shankar, Member (Technical)
1. ICPA Health Products Pvt. Ltd., the appellant was at the relevant time engaged in the manufacture of erythromycin stearate as a "loan licensee" for Abott Laboratories Ltd. The process of manufacture that was involved was conversion of thiocyanate into erythromycin base, which is reacted with stearic acid in order to obtain erythromycin stearate. Abott Laboratories imported thiocyanate and took credit under rule 57A of the additional duties of Customs paid on its importation. After receipt of the goods in its factory, it cleared the thiocyanate on payment of duty to the appellant. The show cause notice alleges that this thiocyanate was not sold to the appellant. There is however no allegation in the notice that it was not physically removed. It is the contention of the appellant that the commodity was physically removed to its factory. The show cause notice says that, after receipt, the appellant "is sending these inputs (thiocyanate etc.) again to M/s. Abott Laboratories I. Ltd." Abott converted these thiocyanate under rule 57F(2) to erythromycin stearate which it sent to the appellant in the form of powder. The appellant tableted and cleared them on payment of duty.
2. The objection issued to the appellant was that in the light of these transactions which we have narrated, it was not permissible for Abott Laboratories to receive under rule 57F(2) the same thiocyanate which it had cleared under rule 57F(1). Therefore it was not permissible for the appellant to take credit of the duty paid by Abott Laboratories on thiocyanate. The notice proposed to recover that duty. In his order, the Commissioner has confirmed the proposal in the notice.
3. The reason that the notice and order of the Commissioner advanced is that it was not permissible for Abott Laboratories to receive back under rule 57F(2), the thiocyanate, which it cleared under rule 57F(1) under payment of duty. The Commissioner proceeds to says that further processing of the thiocyanate should have been carried out by Abott Laboratories.
4. It is evident that the whole process of the thiocyanate removing up and down between the two factories and the general arrangements of affairs between them was undertaken so as to avail benefit of duty involved. Thiocyanate was assessable to duty at 15% ad valorem whereas erythromycin stearate was assessable at 5%. Hence if the erythromycin stearate had been cleared by Abott to the appellant, credit that would have been taken would be 5%. In that case, Abott would have been entitled to the credit at 15% of thiocyanate. There is thus no loss to government. That however is no material. What is material is that however strange or unusual the conduct of the parties, they have acted within the rules. There is no prohibition in the rules against the finished product of a manufacturer coming back to him as an input. On the contrary, by numerous decisions of the Tribunal it has been held that such an input can come back for reprocessing. Therefore, there should be no objection to the finished product being an input received under rule 57F(2). Therefore, it is not really necessary for us to consider the further point raised by the counsel for the appellant that contravention in any manner alleged in the notice, would be of Abott. We do not find any contravention by the appellant of the kind alleged in the notice.
5. The appeal is accordingly allowed and impugned order set aside. Consequential relief.