2005 (12) TMI 411 - AT - Central Excise

Food supplements - Demand - Limitation - Misdeclaration - Confiscation of goods - Medicament - Classification of goods - Words and phrases

Summary

Issues Involved:
1. Classification of RG and GL capsules.
2. Misdeclaration and evasion of duty.
3. Invocation of the extended period of limitation.
4. Imposition of penalties and confiscation of goods.

Issue-wise Detailed Analysis:

1. Classification of RG and GL Capsules:
The primary issue was whether the products 'Reiki Gano' (RG) and 'Ganocelium' (GL) capsules should be classified as Ayurvedic Proprietary Medicines (APM) under SH 3003.39 or as food supplements under SH 2108.99. The department argued that the products were food supplements, as they were marketed globally and in India as such, without any therapeutic claims. The appellants contended that the products were Ayurvedic medicines, supported by a drug license and consumer perception.

The Tribunal concluded that the products were food supplements based on their composition, marketing, and how they were known in common parlance. The products contained nutritional elements like proteins, carbohydrates, and minerals, fitting the description of food supplements. The Tribunal noted that the products were initially marketed as food supplements and only later classified as APMs without any change in their composition.

2. Misdeclaration and Evasion of Duty:
The department alleged that M/s. DXN misdeclared the products as APMs to evade higher excise duty applicable to food supplements. The investigation revealed that the drug license was obtained fraudulently using forged clinical trial reports. The Tribunal found that the appellants had indeed misdeclared the products' classification with the intent to evade duty, as evidenced by their own admissions and the marketing materials that described the products as food supplements.

3. Invocation of the Extended Period of Limitation:
The show cause notice invoked the extended period of limitation under the proviso to Section 11A(1) of the Central Excise Act, alleging intentional misdeclaration by M/s. DXN. The Tribunal upheld this invocation, stating that the misdeclaration was deliberate and aimed at evading duty. The fraudulent acquisition of the drug license further justified the extended period for duty recovery.

4. Imposition of Penalties and Confiscation of Goods:
The Commissioner imposed penalties and ordered the confiscation of goods based on the findings of misdeclaration and duty evasion. The Tribunal upheld the imposition of penalties but reduced the amounts, considering them too harsh. The penalty on M/s. DXN was reduced to Rs. 25,00,000, and penalties on other appellants were also reduced. The confiscation of goods was set aside due to the lack of evidence of an attempt to clandestinely remove the goods or keep them unaccounted.

Conclusion:
The Tribunal affirmed the classification of RG and GL capsules as food supplements under SH 2108.99, upheld the invocation of the extended period of limitation for duty recovery, and sustained the penalties with modifications. The confiscation of goods was set aside. The appeals were disposed of accordingly.