2006 (3) TMI 531 - AT - Central Excise

Summary

Issues: Classification dispute of "P or P Medicaments" under SH 3003.20 for home consumption and under SH 3003.10 for export, Modvat credit disallowance, penalty imposition under Rule 173Q(1)(bb) of Central Excise Rules, 1944.

In this judgment by the Appellate Tribunal CESTAT, Chennai, the issue revolves around a classification dispute concerning the manufacturing of "P or P Medicaments" by the appellants. The goods in question were classified under SH 3003.20 for home consumption at a 'Nil' rate of duty but were claimed to be classifiable under SH 3003.10 for export, attracting a duty of 15% ad valorem. The appellants availed Modvat credit on duty-paid inputs used in manufacturing export goods, leading to a dispute when the credit was disallowed by the Commissioner under Rule 57-I of the Central Excise Rules, 1944. Additionally, a penalty of Rs. 15 lakhs was imposed under Rule 173Q(1)(bb) due to the classification issue, prompting the appeal.

The tribunal noted the absence of representation for the appellants and proceeded to examine the records and hear the SDR due to no request for adjournment. The crux of the dispute lay in the classification based on the presence or absence of a brand name on the goods. The appellants argued that the brand name "SOL" indicated a different product classified under SH 3003.10 for export, citing Chapter Note 2 (ii) of Chapter 30 of the CETA Schedule. Conversely, the Revenue contended that "SOL" was a house-mark, not a brand-name, referencing legal precedents to support their stance.

After evaluating the contentions, the tribunal rejected the Revenue's argument, determining that "SOL" constituted a brand-name based on its usage on the cartons containing the export goods. However, crucially, there was no evidence that the brand-name was affixed on the capsules or blisters themselves, leading to the conclusion that the goods did not meet the criteria for classification under SH 3003.10. Consequently, the export products were classified under SH 3003.20, affirming the duty demand for the normal period and reducing the penalty from Rs. 15 lakhs to Rs. 1,00,000 due to the nature of the dispute and its resolution.

In conclusion, the tribunal settled the classification dispute by determining the appropriate category for the "P or P Medicaments" manufactured by the appellants, emphasizing the significance of brand-name presence for classification under specific tariff headings. The judgment highlights the importance of adhering to classification criteria and the implications of Modvat credit disallowance and penalty imposition in excise matters.