2003 (6) TMI 359 - AT - Central Excise

Rebate of duty - Fraudulent claim for encashing unutilised Modvat credit - Demand - Limitation - Suppression - EXIM - Export of medicine - Statement - Threat of arrest used

Summary

Issues Involved:
1. Whether there was suppression on the part of the appellants.
2. Whether the goods exported by the appellants were P & P medicines or generic medicines.
3. Whether the rebate was sanctioned erroneously.

Issue-wise Detailed Analysis:

1. Suppression by the Appellants:
The department alleged that the appellants submitted different sets of documents to the Central Excise, Customs, and Bank authorities to claim rebates fraudulently. The appellants contended that generic names were mentioned due to foreign buyer requirements and banking regulations. The Tribunal noted that the shipping bill, AR4, and other documents were verified by the rebate sanctioning authority, and there was no evidence of unaccounted goods or failure to file necessary returns. The Tribunal cited the case of Orissa Cement v. CCE, which held that extended limitation under Section 11A(1) is not applicable when refunds were allowed after due scrutiny. Therefore, the charge of suppression was not sustained, and this issue was resolved in favor of the appellants.

2. Classification of Exported Medicines:
The appellants manufactured both P or P medicines and generic medicines, with the latter being negligible. The Tribunal observed that the appellants complied with foreign buyer requirements by prominently displaying generic names, which did not preclude mentioning brand names. The Tribunal referred to the case of ACE Laboratories Ltd. v. CCE, which held that goods classified and assessed as P & P medicines at the time of export cannot later be alleged as generic medicines. The Tribunal concluded that the appellants predominantly manufactured and exported P or P medicines, and the department's charge that only generic medicines were exported was rejected. This issue was also resolved in favor of the appellants.

3. Erroneous Rebate Sanction:
The appellants paid duty on inputs and earned Modvat credit, which they could not fully utilize due to negligible domestic sales. The Tribunal noted that Rule 57F(13) allows refund of unutilized Modvat credit if it cannot be adjusted against domestic clearances. The Tribunal found that the appellants were eligible for the rebate as they did not draw double benefits and complied with the substantial requirements of the law. The Tribunal concluded that the rebate was correctly sanctioned and there was no manipulation of records. This issue was resolved in favor of the appellants.

Conclusion:
The Tribunal set aside the impugned order and allowed the appeal, finding no suppression by the appellants, confirming that the exported goods were P or P medicines, and upholding the correctness of the rebate sanction.