Custom, Excise & Service Tax Tribunal
Aarti Drugs Ltd vs Commissioner Of Central Excise, ... on 24 July, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. Appeal No. E/1079/2012 (Arising out of Order-in-Original No. II/PKA/COMMR/Th-II/2012 dated 21.5.2012 passed by the Commissioner of Central Excise, Thane-II ) For approval and signature: Honble Mr. P.S.Pruthi, Member (Technical) Honble Mr. S.S.Garg, Member (Judicial) ============================================================
1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : No
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
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Aarti Drugs Ltd.
:
Appellant
VS
Commissioner of Central Excise, Thane-II
:
Respondent
Appearance
Shri R.V. Shetty, Advocate for Appellant
Shri V.K. Agarwal, Additional Commissioner (A.R) for respondent
CORAM:
Mr. P.S.Pruthi, Member (Technical)
Mr. S.S. Garg, Member (Judicial)
Date of hearing : 24/07/2015
Date of decision : 24/07/2015
ORDER NO.
Per : P.S. Pruthi
This appeal is directed against Order-in-Original No. II/PKA/COMMR/Th-II/2012 dated 21.5.2012 passed by the Commissioner of Central Excise, Thane-II.
2. The main issue in this appeal is the classification of the product Niacin (feed grade) manufactured by the appellant. The appellant manufacture bulk products like Niacin falling under Chapter Heading 29.36 of the Central Excise Tariff Act, 1985. They also manufacture Niacin (Feed Grade) which is used in animal feed and classify it under Tariff Item 23099090 and clear the same at nil rate of duty. Whereas Niacin is 99% pure and used in pharmaceutical formulations as vitamin the purity of Niacin (Feed Grade) is 95% and it is further mixed with wheat powder for use as animal feed. Under the impugned order, the Commissioner classified the Niacin Feed Grade under Tariff Item 29362920 and confirmed a duty demand of Rs.65,43,700/- invoking the extended time period. He also imposed equivalent penalty under Section 11AC of the Act. The goods valued at Rs.6,54,57,800/- cleared without payment of duty were subjected to fine of Rs.33,00,000/- in lieu of confiscation under Section 34 of the Act.
3. Heard both sides.
4. The contentions of the appellant are-
(i) The product in question does not satisfy specification of Indian Pharmacopoeia and, therefore, rightly classifiable under Chapter 23 reads as Preparation of a kind used in animal feeding and the tariff rate of duty is nil. It was contended that the goods will fall under Heading 23.09 even if not directly used as animal feed. They relied on Apex Court judgment in the case of Collector of Central Excise, Bangalore Vs. Tetragon Chemie Pvt. Ltd. 2001 (132) ELT 525 (S.C.).
(ii) Board Circular 188/22/96-CX dt. 26.3.1996 states that Niacin feed grade used in manufacture of animal feeding is covered under Chapter Heading 2309.
(iii) Niacin (Vitamins) cannot be equated with Niacin (Feed Grade) because the later has purity of 95% and is specially prepared for use in animal feed.
(iv) Tribunal in the case of M/s. Roche Products Ltd. Vs. CCE Order No. 1101/9C dt.9.10.1990 classified identical products in under Heading 2303.00
(v) The benefit of Cenvat Credit should not be denied and Central Excise duty should be reduced to that extent.
(vi) They are entitled for cum-duty price benefit to arrive at the assessable value as they have not recovered Central Excise duty from their customers.
(vii) Extended period is not invokable as it is a question of interpretation to arrive at the correct classification. They started manufacturing Niacin Feed Grade from December 2008 and cleared the same without payment of duty. The appellant cleared the exempted product on reversal Cenvat Credit under Rule 6 of the Cenvat Credit Rules. The E.R.1 returns show that during the period December 2008 to May 2011, the description of the goods was shown as Niacin, (Feed Grade.)
5. The Ld. AR contended that Chapter Note 1 to Chapter 23 states that Heading 2309 includes products of a kind used in animal feeding, obtained by processing vegetable or animal materials to such an extent that they have lost the essential characteristics of the original material. Whereas the product in dispute is obtained by a chemical process. He further stated that description of CH 2309 itself refers to animal feed preparations. Even as per the HSN Notes of Chapter 23, Vitamins are specifically exclude from Chapter 23. He relied upon the case law in Commissioner of Customs Vs. Sonam International 2012 (275) ELT 326. In view of above, he stated that the product is clearly covered under Tariff Item 29362920 which specifically covers Niacin (Nicotinic acid).
6. We have carefully considered the submissions made by both sides. The two competing entries for the product in question are Tariff Items 23099090 and 29362920. We find that the process of manufacture of Niacin follows a synthetic route and it is manufactured from chemicals. The process involved and the raw materials used are the same for Niacin I.P. Grade as well as Niacin (Feed Grade). Niacin Feed Grade is crude Niacin with 95% purity. Thereafter, Niacin I.P. Grade is formed by increasing the purity to 99%. Thus, the only difference is in purity and further steps required for making 99% Pure Niacin. Even the Niacin meant for feed grade is labeled on the container as Niacin/Feed Grade Supplement. Not for human used only for Poultry Feed purpose. This label itself indicates that the feed grade Niacin is sold as Niacin only. The certificate of analysis issued by Quality Control Department of the appellant also refers to the product as Niacin only.
6.1. Having seen that essentially the two types of Niacin differ only in their purity, we may now determine the classification. The Chapter Note 1 to Chapter 23 states that Heading 2309 includes products of a kind used in animal feeding obtained by processing vegetable or animal material to such an extent that they have lost the essential characteristics of the original material. On reading this note itself, we would disagree with the appellant that their product is covered under heading 2309. Their product is not obtained by processing vegetable of animal material. Their product is obtained from chemicals i.e. Beta Picoline, Sulphuric Acid, Nitric Acid. Therefore Heading 2309 which covers products of a kind used in animal feeding, can by no means include Niacin.
6.2. We also find that Tariff Item 29362920 specifically covers Nicotinic acid (nicotinamide). Following cannons of interpretation of the Central Excise Tariff, a more specific heading is to be preferred in terms of Rule 3(a) of the Rules for Interpretation of the Tariff Act. Even according to the HSN Notes of Chapter 23 (our tariff being based on HSN System of Nomenclature) under heading 23.09 it is specifically mention in exclusion clause (e) that vitamins are excluded from heading 23.09. We may also mention that the case law cited by the Ld. AR supports the classification under Tariff Item 29362920. On the other hand, the citations and Board circulars cited by the Ld. Counsel only establish the classification of the goods which are actually preparations used in animal feed. In the present case the goods are not a preparation for animal feed. The goods are Niacin itself. It is not used as animal feed directly. As held in the case of Sonam International (supra) a vitamin is added in a miniscule proportion in animal feed. That the appellant mixed Niacin with Atta before clearance makes no difference because we are concerned with the classification of the product manufactured by them i.e. Niacin. Therefore we hold that the product Niacin Feed Grade has been correctly classified under Tariff Item 29362920 and duty is payable accordingly.
6.3. The plea that the appellant should be allowed the benefit of cum-duty price is not acceptable because duty was paid on the Niacin of 99% purity which was cleared for pharmaceutical use. The assessee had sold the goods that is Niacin Feed Grade at price assuming that no duty is payable. The Commissioner has rightly relied on the case of Asian Alloys Ltd. Vs. Commissioner of Central Excise, Delhi 2006 (203) ELT 252 (Tri.-Del.) which held that when the appellant had itself proceeded on the basis that no duty was payable there was no question of its having recovered any cum-duty price from the customers. Therefore, the appellants pea is rejected.
7. The show cause notice was issued on 23.8.2011 for the period December 2008 to May 2011 by invoking the extended time period under proviso to Section 11 A(1). We see no justification to invoke the extended time period. The case is a matter of interpretation. We have seen the ER.1 returns for the said period. The appellant had clearly declared the description of the product as Niacin Feed Grade in all their E.R.1s. Therefore there being no misstatement, duty is payable only for the normal period of time limitation. For the same reason that extended time period is not applicable, confiscation, fine and penalty are also not sustainable. However, interest would be payable under Section 11AB corresponding to the amount of duty upheld.
8. Appeal is dismissed and classification of Niacin (Feed Grade) under Tariff Item 29362920 is upheld. However, duty demand is upheld only for normal period of limitation under Section 11A of the Central Excise Act. Interest would be payable accordingly. Fine in lieu of confiscation and penalty are set aside. The duty already paid shall be adjusted against the duty confirmed.
(Pronounced in court) (S.S.Garg) Member (Judicial) (P.S.Pruthi) Member (Technical) SM.
2Appeal No. E/1079/2012