2006 (8) TMI 346 - AT - Central Excise

Summary

Issues Involved:
1. Classification of "Chyawanprash (Special)" under the Central Excise Tariff.
2. Compliance with the formulae described in "Ayurved Sar Sangraha".
3. Approval and cancellation of the manufacturing formula by Drug Control Authorities.
4. Alleged discrepancies in manufacturing records and test reports.
5. Use of gold in the manufacturing process.
6. Statements and evidence supporting the manufacturing process.

Detailed Analysis:

1. Classification of "Chyawanprash (Special)" under the Central Excise Tariff:
The Commissioner of Central Excise, Kolkata, classified "Chyawanprash (Special)" as a proprietary drug under sub-heading 3003.39, contrary to the appellant's claim of it being an Ayurvedic medicine falling under sub-heading 3003.31, which attracts a nil rate of duty. The appellants argued that their product was manufactured according to the formulae in "Ayurved Sar Sangraha," an authoritative book under the Drugs and Cosmetics Act, 1940. The Tribunal emphasized that if the goods are manufactured exclusively in accordance with the formulae described in the authoritative books specified in the First Schedule to the Drugs and Cosmetics Act, 1940, they should be classified under sub-heading 3003.31.

2. Compliance with the formulae described in "Ayurved Sar Sangraha":
The appellants maintained that "Chyawanprash (Special)" was manufactured according to the formulae in "Ayurved Sar Sangraha," and they kept detailed production records, batch cards, and ledger accounts reflecting this compliance. The Tribunal noted that the appellants had consistently manufactured the product as per the specified formulae and had not faced objections from the Central Excise Department or Audit parties for years.

3. Approval and cancellation of the manufacturing formula by Drug Control Authorities:
The Commissioner argued that the approval granted by the Director Drug Control, West Bengal, was subsequently canceled. However, the appellants clarified that the cancellation was due to a typographical error in the quantities of ingredients, which was corrected upon their request. The Tribunal found the appellants' explanation plausible and noted that the Drug Control Authorities had renewed the Drug Licence without any amendments or objections, indicating continued approval of the product.

4. Alleged discrepancies in manufacturing records and test reports:
The Commissioner relied on a test report showing different ingredients and sugar content, suggesting the appellants were manufacturing a different product. The appellants countered that the test report was related to a trial sample for export purposes, not the domestic product. The Tribunal accepted the appellants' explanation, supported by statements from their production officers, that the domestic product was manufactured as per the prescribed formulae.

5. Use of gold in the manufacturing process:
The Commissioner alleged that the appellants used lesser quantities of gold than required. The appellants clarified that gold was used as a catalytic agent in the manufacture of "Makardhwaj," an ingredient in "Chyawanprash (Special)," and was recovered after the process. The Tribunal found the appellants' explanation supported by expert evidence and noted that the Commissioner's rejection of this explanation was based on surmise and conjecture.

6. Statements and evidence supporting the manufacturing process:
The Tribunal considered statements from various individuals, including the appellants' production officers and label printers, confirming that "Chyawanprash (Special)" was manufactured according to the formulae in "Ayurved Sar Sangraha." The Tribunal found these statements credible and noted that the Commissioner had not effectively rebutted this evidence.

Conclusion:
The Tribunal concluded that the appellants had substantiated their claim of manufacturing "Chyawanprash (Special)" in accordance with the formulae described in "Ayurved Sar Sangraha." Consequently, the Tribunal set aside the impugned order, allowing the appeal with consequential relief to the appellants. The Tribunal did not address the issue of the demand being barred by limitation, as the appeal was allowed on merits.