2005 (8) TMI 456 - AT - Central Excise

Summary

Issues:
1. Demand of excise duty on products "Reishi Gano" and Ganocelium capsules.
2. Imposition of penalties on individuals and companies.
3. Classification of goods under the Central Excise Tariff Act.
4. Claim of exemption from payment of duty based on classification.
5. Waiver of pre-deposit and stay of recovery for duty and penalties.

Analysis:
1. The Commissioner of Central Excise demanded Rs. 2 crores as excise duty from M/s. DXN Herbal Manufacturing Pvt. Ltd. on products "Reishi Gano" and Ganocelium capsules. The goods were classified under SH 2108.99 of the Central Excise Tariff Act based on their M.R.P. This demand was challenged by M/s. DXN seeking waiver of pre-deposit and stay of recovery.

2. Prior to the dispute period, M/s. DXN, M/s. Daehsan, and M/s. Roshan were importing and marketing capsules as food supplements. Subsequently, they started manufacturing in India and marketed as "APM". The dispute arose when they cleared capsules without duty payment, claiming them to be Ayurvedic medicaments under SH 3003.39. Customs authorities initially classified the goods as drugs under SH 3003.90, a classification not changed later. An expert opinion supported the medicinal nature of the ingredients. Considering these facts, the Tribunal found a strong prima facie case for classifying the products under SH 3003.90, granting waiver of pre-deposit and stay of recovery for duty and penalties.

3. The Tribunal noted the importance of proper classification under the Central Excise Tariff Act. The HSN Explanatory Notes and expert opinions played a crucial role in determining the correct classification of the goods. The renewal of the drug license and acceptance by relevant authorities further supported the claim for exemption from duty payment.

4. M/s. DXN's compliance with the demands by depositing a significant amount towards duty and providing a bank guarantee demonstrated their willingness to cooperate. The Tribunal considered these actions along with the strong case for classification under SH 3003.90 in granting the waiver of pre-deposit and stay of recovery for penalties and the balance duty amount.

5. In conclusion, the Tribunal's decision to grant waiver of pre-deposit and stay of recovery was based on the strong prima facie case presented by M/s. DXN for the classification of their products under SH 3003.90 and the compliance shown by the company in depositing a substantial amount towards the duty demand. The judgment emphasized the importance of proper classification under the Central Excise Tariff Act and the supporting evidence provided by the company to claim exemption from duty payment.