Customs, Excise and Gold Tribunal - Delhi
Shree Baidyanath Ayurved Bhawan Ltd. vs Cce on 29 July, 2002
Equivalent citations: 2002(84)ECC592, 2002(150)ELT1290(TRI-DEL)
ORDER V.K. Agrawal, Member (T)
1. In all these appeals the issue in respect of classification of Dant Manjan Lal (DML) was referred to the Larger Bench which vide Misc. Order No. 6/2002-C dated 6.1.2002 has answered the Reference by holding that Dant Manjan Lal has to be classified as Tooth Powder under heading 33.06 of the Schedule to the Central Excise Tariff Act. Now the issues to be decided in all these connected appeals are whether the extended period for demanding duty under the proviso to Section 11A(1) of the Central Excise Act is invocable and whether even demand for past six months period can be demanded from the Appellants and whether penalties are imposable on all the Appellants.
2. Shri Vivek Kohli, learned Advocate, mentioned that in Appeal No. E/547/98-C filed by Patna unit of the Appellants the period involved for demanding duty is from June 1991 to December 1993 and the show cause notice has been issued on 1.7.1996 and as such the entire period is beyond 6 months and is time barred. He also mentioned that the connected appeals are E/552-553/98-C filed by Shri Banwari Lal Sharma and Shri Pramod Kumar Sharma upon him the penalties have been imposed under Rule 173Q(1) of the Central Excise Rules. Taking these appeals first the learned Advocate submitted that the impugned product was considered as classifiable under Tariff item 14E of the erstwhile Central Excise Tariff and was not subjected to any duty because of the expressed exclusion of medicine which were Ayurvedic; that with the introduction of Tariff Item 68 the impugned product was held to be classifiable under the said item and accordingly upto 1978 the Appellants paid Central Excise duty on the impugned product: that Notification No. 62/78 dated 1.3.78 provided exemption to all drugs, medicines, pharmaceuticals not elsewhere specified; that they claimed the benefit of the said notification which was extended to them by the Department: that, however, a show cause notice dated 10.3.1980 was issued to them for denying the exemption under Notification No. 62/78 on the ground that Dant Manjan Lal was not an Ayurvedic medicine; that similar show cause notices were issued to the Appellants in other Commissionerates such as Allahabad, Nagpur, Calcutta, etc; that the matter finally reached the Tribunal which vide decision dated 7.6.85 as held that DML is a toilet requisite classifiable under Tariff Item 68 and not entitled to exemption under Notification No. 62/78 as it was neither drug/medicine nor Ayurvedic medicine; that the Appellants preferred appeals to the Supreme Court and also started paying duty on the impugned product. He,further, mentioned that in 1987the first schedule to the Drugs & Cosmetic Act, 1940 was amended by adding the authoritative text "Ayurvedic Sar Sangrah"; that their product DML is manufactured in accordance with the formula given in the said book; that the Appellants filed fresh classification list effective from 1.3.88 in which they claimed there product to be an Ayurvedic medicine; that the classification list was duty approved by the Asst. Commissioner against which an appeal was preferred before the Collector (Appeals); that in the meantime in 1990 they approached the Central Board of Excise & Customs with prayer that the impugned product should be considered as an Ayurvedic medicine on the basis of evidence produced by them; that the Board issued instruction F.No. 103/10/90-CH-3 dated 25.9.91 wherein it was clarified that "DML manufactured by Shree Baidyanath Ayurved Bhawan Ltd. will merit classification as Ayurvedic medicine notwithstanding the CEGAT decision in this case. "The learned Advocate, further, mentioned that the appeal filed by the department against the approval of the classification list was rejected by the Collector (Appeals) under Order-in-Appeal No. 19/92 dated 24.1.92; that no appeal was preferred by the Department against the said Order of the Collector (Appeals).
3. The learned Advocate contended that in view of all these facts, particularly the approval accorded to the classification list filed by them the rejection of the appeal filed by the Department against the approval of Collector (Appeals), issuing of Board's instructions specifically with regard to the impugned product only notwithstanding the decision of the Tribunal the Department cannot claim that any fact was suppressed by the Appellants or there was any intention to evade payment of duty; that it has been held by the Supreme Court in the case of Cosmic Dye Chemicals v. CCE, Bombay 1995 (88) ECR 232 (SC) that to validly invoke the extended period of limitation it is essential to not only establish the contravention by but also the intention to contravene on the assessees; that in view of all the facts the intention to contravene cannot be there on the part of the Appellants; that as held by the Supreme Court in the case of Tamil Nadu Housing Board v. CCE. Madras 1994 (55) ECR 7 (SC), the initial burden is on the department to prove that the situation visualized by the proviso to Section 11A existed: that the department has not discharged its burden. The learned Advocate further submitted that no justification has been given by the Adjudicating Authority for invoking the extended period of limitation, that the Adjudicating Authority has given his finding that no reliance on the instructions issued by the Board can be placed since the same was obtained from the Board on the basis of the mis-statement of the sister unit of the Appellants; that there is no basis for the Adjudicating Authority to give the finding that the said instruction dated 25.9.91 was issued by the Board on any mis-statement made by them. Further, the finding of the Commissioner that they had suppressed the fact of manufacture and the clearance of the impugned product is also not borne by the fact as the matter was always known to the department and had been contested in various forums. He also relied upon the decision in the case of Padmini Products v. CCE, Bangalore 1989 (25) ECR 289 (SC) wherein it was held that if there is a possibility of any doubt being there in respect of correct classification of the product no malafide can be attributed to the assessee and extended period of limitation would not be available to the department. He also relied upon the decision of the Tribunal in the case of Bajaj Auto Ltd. v. CCE wherein it was held that no demand can be raised against the assessee for contravention of Board's Circular/instructions. Finally he submitted that no penalty is imposable as there was no contravention of any provisions of the Act or Rules with the intention to evade payment of duty Reliance has been placed on the decision in the case of Hindustan Steel Ltd. v. State of Orissa 1978 ELT J 159.
4. Countering the arguments Shri A.K. Jain, learned SDR, submitted that the period involved is from June 1991 to December 1993, whereas the Appellants have only referred to the classification list effective from 1.3.88; that the Adjudicating Authority has recorded valid reasons for invoking larger period of limitation by giving first finding that instructions dated 25.9.91 was based on mis-statement of the sister unit of the assessee; that they had not filed classification list after each budget as required under Rule 173B of Central Excise Rules at the relevant time; that they were aware that the earlier classification list had been reviewed which might require payment of duty; that with the sole intention of evading payment of duty they had not filed classification list in respect of impugned product during the relevant period. Finally he relied upon the decision in the case of UOI v. Bajaj Tempo Ltd. it was held that Trade Notice issued by the authorities are not decisive of the question of excisibility of the product.
5. The learned Advocate mentioned that Appeal No. E/546/98-C has been filed by their Hajipur unit wherein the demand pertains to the period from June 1993 to March 1996 whereas the show cause notice was issued on 21.6.96; that the connected Appeals are E/548 to 551/98-C filed by Shri Banwari Lal Sharma, Shri R.K. Sharma, Shri R.P. Sharma and Shri P.K. Sharma, on which penalties have been imposed under Rule 173Q of the Central Excise Rules. The learned Advocate submitted that the appellants have been filing declaration in respect of their product DML claiming classification under Sub-heading 3003.30 as Ayurvedic medicine fully exempted; that the first declaration was filed by them on 27.9.93 and thereafter every year they have filed the declaration; that in view of this it cannot be claimed by the department that the fact of manufacture of impugned product was suppressed by them from the department with an intent to evade payment of duty; that the Commissioner has invoked the extended period of limitation by giving his finding that they had manufactured and cleared DML without having applied for registration as required under Rule 174 of the Central Excise Rules without maintaining the statutory records and without making payment of duty; that the declaration was filed by them in September 1993 whereas original violation of provisions of Central Excise Act and Rules made by them existed; that these findings are not correct as they have clearly stated in the declaration about the manufacture of DML which was treated by them as Ayurvedic medicine; that as DML was exempted from payment of duty they were not required to take any registration or to maintain any statutory records. He, therefore, contended that larger period of limitation is not invocable.
6. The learned Advocate, further, mentioned that as the show cause notice was issued on 21.6.96. some portion of the demand falls within the specified period of 6 months from the date of the issue of the show cause notice; that even the demand for 6 months cannot be confirmed in view of the Board's Circular dated 27.5.97 wherein it was clarified that in view of the change made in Tariff and creation of separate Sub-heading 3003.31 in the 1996-97 budget the Supreme Court decision dated 30.3.95 in the case of Baidyanath Ayurved Bhawan which was in the context of erstwhile tariff is not relevant and the product DML being specified in the Ayurvedic Sar Sangrah and manufactured according to the formula is to be classified in the light of the opinion of Drug Controller of India. The learned Advocate submitted that it has been held by the Supreme Court in the case of CCE, Vadodara v. Dhiren Chemical Industries that regardless of the interpretation placed by the Supreme Court if there are circulars which have been issued by the Board placing a different interpretation, that interpretation will be binding upon the Revenue. The learned Advocate mentioned that Supreme Court again in the case of CCE, Vadodara v. Dhiren Chemical Industries reiterated the view taken in the first case of Dhiren Chemical Industries (supra) to the effect that the circulars of the Board which had placed a different interpretation would apply to the facts of the appeals and accordingly appeals filed by the Revenue were dismissed. The learned Advocate, therefore, contended that in view of the Board's Circular even the demand for the 6 months, period cannot be sustained against them.
7. The learned Advocate mentioned that in Appeal Nos. E/1095/98 and 1252/98 filed by their Jhansi unit the show cause notice has been issued within 6 months and these demands cannot be sustained in view of the decision of the Supreme Court in both Dhiren Chemical Industries cases.
8. In respect of appeal No. E/514/2000 the learned Advocate candidly admitted that the demand has been confirmed for the period of 6 months which is sustainable but for the quantum of the demand it has to be recomputed in terms of decision of the Larger Bench in the case of Shri Chakra Tyres v. CCE . He also mentioned that if the demand is held to be payable by them in other appeals also, the quantum of the demand has to be recalculated treating the same price as cum-duty price.
8.1 In respect of Appeal No. E/2717/99-C the learned Advocate mentioned that in this appeal they have claimed refund of duty paid by them during the period January 1997 to May 1997 on the ground that the impugned product is an Ayurvedic medicine.
9. Countering the arguments the learned SDR reiterated the findings of the Commissioner for invoking the extended period of limitation in Appeal No. E/546/98 C. In respect of demand of duty made for past six months period the learned SDR submitted that the Supreme Court in their own case vide Order dated 30.3.1995 has held that DML is not an Ayurvedic medicament and they were not entitled to the benefit of the Notification No. 62/78; that accordingly the demand for the past 6 months can be rightly demanded from the Appellants who are liable to pay the same after the decision of the Supreme Court. The Board Circular dated 27.5.97 was issued after the period of demand involved in all the matters and it was withdrawn on 10.10.97 also and as such no benefit of this Circular is available to the Appellants. He also mentioned that the Larger Bench of the Tribunal in their own case has held that the product in question is classifiable as Tooth Powder under the heading 33.06 and as such the duty is payable by them for 6 months period without any doubt. He also placed reliance on the decision in the case of Nizam Sugar Factory v. CCE, Hyderabad. .
10. We have considered the submissions of both the sides. The classification of DML has been finalized by the Larger Bench of this Tribunal on a reference made in the present matters only as reported in Shri Baidyanath Ayurved Bhawan v. CCE, Patna . According to the said decision the impugned product is to be classified as Tooth Powder under Sub-heading 33.06 of the Schedule to the Central Excise Tariff. In Appeal No. 547/98-C the show cause notice was issued on 1.7.96 for demanding the duty for the period from June 1991 to December 1993 and as such the entire period is beyond the normal period of 6 months specified in Section 11A of the Central Excise Act. The Commissioner has invoked the extended period of limitation on the ground that the Appellants being working under SRP, were duty bound to file classification list every year after the presentation of the budget and they were also required to file price list as DML was leviable to Ad-valoram duty and under Rule 173F of the Central Excise Rules, 1944 the excisable goods could have been cleared by them only after determining the duty liability. It has also been observed by the Commissioner that the Appellants were aware that their earlier classification list effective from 1.3.88 has been reviewed by the Commissioner which might require payment of duty and with the intention to keep fact of manufacture and clearance of the product suppressed they had not filed classification list whereas they had filed classification list in respect of other products. On the other hand the learned Advocate has successfully shown that the fact of manufacture of DML by them since long was known to the department and dispute had arisen about its correct classification under the old Tariff as well as the new Central Excise Tariff, It is mentioned in the impugned Order dated 20.11.1997 which is subject matter of Appeal No. E/547/98-C that the Appellants were aware about review of the approval of the classification list filed by them effective from 1988. This itself goes to show that the department was very much aware of the appellants manufacturing DML and even after reviewing the approval accorded by the Asst. Collector to the classification list no steps had been taken by the department to keep the levy alive. In the light of these facts mala fide intention to suppress the fact of manufacture and clearance of the impugned product with an intent to evade payment of duty cannot be attributed to the appellants. Further, we find that the Government itself under letter dated 25.9.91 came to the conclusion after considering the test laid down in the case of CC, Hyderabad v. Richardson Hindustan Ltd. for determination as to whether a particular product merited classification as an Ayurvedic medicament and after considering the opinion of the Drugs (Controller) India that "DML manufactured by Sree Baidyanath Ayurved Bhawan Ltd. merit classification as Ayurvedic medicine notwithstanding the CEGAT decision in this case (Order No. 22/91-C dated 8.1.91-CCE. Indore v. Sree Baidyanath Ayurved Bhawan Ltd. "In view of these facts and Government letter specifically for the impugned product manufactured by the Appellants the extended period of limitation is not invocable. Accordingly the impugned Order No. 19-MP/Comm/97-98 dated 20.11.97 passed by the Commissioner, Central Excise, Patna is set aside as far as it relates to the demand of duty and imposition of penalty on the appellant company and Shri Banwari Lal Sharma and Shri Pramod Kumar Sharma.
11. In Appeal No. E/546/98-C the demand of duty pertains to the period from June 1993 to March 1996 whereas the show cause notice was issued on 21.6.1996. As such demand prior to the period from December 1995 is beyond the period of six months specified in Section 11A(1) of the Act. The Adjudicating Authority has invoked the larger period of limitation on the ground that the appellants had not got themselves registered under Rule 174 of the Central Excise Rules and had filed declaration belatedly. He has also given a finding to the effect that instruction dated 25.9.91 was based on mis-statement made by the appellants. On the other hand the learned Advocate for the appellants has mentioned that the declarations were filed by them within the relevant period wherein DML was classified under sub-heading 3003.03 as Ayurvedic medicine. Filing of declaration has not been denied by the Revenue except for the fact that the first declaration was filed in September instead of April. In view of the fact that the declarations were filed by the Appellants and the Government instructions dated 25.9.91 were in force being not withdrawn no suppression of facts or intent to evade payment of duty can be attributed to the Appellants. Nothing has been brought on record in support of the findings by the Adjudicating Authority that the Government instructions dated 25.9.91 was got issued on the mis-statement made by the appellants to the Government. The demand for the extended period of limitation is hit by time limit provided under Section 11A(1) of the Central Excise Act and is, therefore, set aside.
12. As far as demand for the period of 6 months is concerned in Appeal No. E/546/98-C and in other Appeal Nos. E/1095/98, E/1252/98 and 514/2000 we do not agree with the contention of the learned Advocate that even the demand for 6 months cannot be confirmed against them in view of the Government's instructions dated 25.9.91. He has placed reliance on two decision delivered by the Hon'ble Supreme Court in the case of CCE v. Dhiren Chemicals (supra). We find that the ratio of these two decisions is not applicable to the fact of the present matters. In Dhiren Chemical Industries , Hon'ble Supreme Court has held that "regardless of the interpretation that we have placed on the said phrase, if there are Circulars which had been issued by the Central Board of Excise & Customs which place a different interpretation upon the said phrase, that interpretation will be binding upon the Revenue." In this matter the issue before Supreme Court was whether the benefit of exemption notification is available if nil rate of duty has been paid on the inputs. The Supreme Court interpreted the phrase "on which appropriate amount of duty of excise has already been paid." It was held by the Supreme Court that "unless the manufacturer has paid the correct amount of excise duty, he is not entitled to the benefit of the exemption notification." In our view in Dhiren Chemical case Supreme Court's decision regarding binding nature of the circular refers to the past period and not to the period subsequent to the decision. If there were any circulars which had placed different interpretation upon the phrase which was the subject matter of the interpretation in Dhiren Chemical case, according to the Supreme Court, that interpretation would be binding upon the Revenue. Obviously the interpretation now placed by the Supreme Court in Dhiren Chemical will be the Law of the Land for the future. This is apparent from the second decision in the case of CCE v. Dhiren Chemical Industries that there are circular issued by the Central Board of Excise & Customs which placed a different interpretation upon that phrase and which apply to the facts of the two appeals before the Supreme Court and accordingly the appeals were dismissed. In the present matters before us the period involved in all the appeals is from December 1995 onward and the decision of the Supreme Court in the appellants own case for the same product holding it not classifiable as Ayurvedic medicine was pronounced on 30.3.1995. After the decision of the Supreme Court which is the law of the land as per the provisions of the Constitution of India the said decision will prevail and Government's instructions dated 25.9.91 cannot hold good for concluding that demand for six months cannot be raised. We do not find any substance in the submissions of the learned Advocate that the said decision of the Supreme Court as was under old Central Excise Tariff. The change in the Tariff will not make that product an Ayurvedic Medicament. Further, the Appellants cannot draw any benefit from the Board's Letter No. 10372791 dated 27.5.97 as the said letter has been issued subsequent to the period involved in all these appeals. The Revenue is justified in demanding the Central Excise duty for the normal period of limitation. However, we find force in the submissions of the learned Advocate that the price at which impugned product had been sold has to be treated as cum duty price and the assessable value has to be determined therefrom in view of the decision of the Larger Bench of the Tribunal in the case of Sri Chakra Tyres Ltd. v. CCE, Madras, . The Adjudicating Authority is, therefore, directed to recalculate the quantum of duty in terms of the decision in the case of Sri Chakra Tyres Ltd. and intimate the same to the Appellants who have to pay the same. In view of our findings no penalty is imposable in Appeal No. E/546/98-C on the Appellant company as well as on the officials of the company in Appeal Nos. E/548 to 551/98-C.
13. In Appeal No. E/2717/00-C the Appellants have come in appeal against the Order-in-Appeal No. 224-CE/KNP/1/99 dated 1.9.99 passed by the Commissioner (Appeals) confirming the rejection of refund claim filed by them for the duty paid during the period January 1997 to May 1997. The appeal is rejected in view of the decision of the Larger Bench holding the impugned product classifiable under heading 33.06 as tooth powder.
14. Thus all the appeals are disposed of as under:
(i) Appeal No. E/547/98 and appeal Nos. 552-553/98 - Demand of duty and penalty set aside.
(ii) In Appeal No. E/546/98-C demand for the period from June 1993 to November 1995 is set aside. Demand for the period from December 1995 to March 1996 is upheld but the demand is to be recalculated in terms of the decision in Sri Chakra Tyre case Penalty imposed under Appeal Nos.546/98 and 548-551/98-C set aside.
(iii) In Appeal Nos. E/1095 & 1252/98-C and Appeal No. 514/2000-C duty is payable by the Appellants subject to recalculation of the duty in terms of decision in Sri Chakra Tyre case.
(iv) Appeal No.E/2717/99-C is rejected.