2005 (10) TMI 303 - AT - Central Excise

Summary

Issues:
Interpretation of exemption notification under notification 29/88 for specific products used for eye diseases.

Analysis:
The appeal in question was filed against the order of the Commissioner (Appeals) who rejected the department's appeal as unsustainable. The dispute revolved around the exemption claimed by the respondents for three specific products used for treating eye diseases under notification 29/88. The contention was whether these products fell under the first or second schedule of the Drugs (Price Control) Order, 1987 (DPCO). The Commissioner (Appeals) held that the authority to categorize the drugs into the first or second schedule lies with the Government as per para 27 of DPCO 1987. He also stated that any reclassification of goods would only lead to prospective duty demands.

The Revenue, dissatisfied with the decision, argued that the Commissioner (Appeals) failed to assess the exemption eligibility based on the ingredients used and the conditions of notification 29/88. They emphasized that the notification clearly specified nil rate of duty for formulations based on bulk drugs listed in the first schedule to DPCO 1987, excluding those based on tetracycline or hydrocortisone for non-ophthalmological uses. The Revenue contended that the notification's language was unambiguous and did not require interpretation by any authority. They also disagreed with the Commissioner (Appeals) regarding the retrospective recovery of duty in cases of reclassification, asserting that a demand could be issued for the past six months.

Upon hearing both sides, the Tribunal analyzed notification 29/88, which exempted formulations based on bulk drugs listed in the first schedule to DPCO for ophthalmological uses, even if they contained tetracycline or hydrocortisone. The Tribunal referenced a letter from the Ministry of Petroleum and Chemicals confirming that the products in question were intended for ophthalmological use as they were eye ointments. The Tribunal concluded that products meant for such use, even with tetracycline and hydrocortisone, were eligible for the notification's benefits. They disagreed with the Commissioner's view on the prospective duty demand in case of goods reclassification, deeming it legally unfounded. Consequently, the Tribunal upheld the appeal of the respondents, ruling that the products were entitled to the notification's benefits, and rejected the Revenue's appeal.