1984 (3) TMI 412 - AT - Central Excise

Issues Involved:
1. Entitlement to exemption under Notification No. 71/78-C.E.
2. Validity of the duty demand and penalty imposed by the Collector.
3. Classification and exemption status of Piyamycetine Vet under Notification No. 116/69-C.E.
4. Procedural correctness of the Collector's actions under rule 9(2) and Section 11A of the Central Excise Rules, 1944.
5. Alleged suppression of facts and misdeclaration by the appellant.

Detailed Analysis:

1. Entitlement to Exemption under Notification No. 71/78-C.E.:

The primary issue in the case was whether M/s. Piya Pharmaceutical Works was entitled to exemption under Notification No. 71/78-C.E., dated 1-3-1978. The notification provided total exemption for specified goods up to the first Rs. 5 lakhs cleared in a financial year, subject to certain conditions. The conditions included that the exemption would not apply if:
- The aggregate value of specified goods cleared during the preceding financial year exceeded Rs. 13.75 lakhs for the year 1978-79.
- For subsequent financial years, if such clearances exceeded Rs. 15 lakhs.

The notification was amended on 30th March 1979 by Notification No. 141/79-C.E., adding a third condition which disqualified manufacturers who produced excisable goods under more than one tariff item and whose aggregate value of clearances exceeded Rs. 20 lakhs in the preceding financial year.

2. Validity of Duty Demand and Penalty Imposed by the Collector:

The Central Excise authorities found that M/s. Piya Pharmaceuticals cleared goods under Tariff Item Nos. 14E and 68, with values exceeding Rs. 20 lakhs during the financial years 1978-79 and 1979-80. Consequently, they were deemed ineligible for the exemption for the years 1979-80 and 1980-81. The Collector demanded duty of Rs. 1,09,095.35 (basic) and Rs. 3,09,291 (special) under rule 9(2) and imposed a penalty of Rs. 25,000/- under rules 9(2) and 173Q.

3. Classification and Exemption Status of Piyamycetine Vet under Notification No. 116/69-C.E.:

The Collector also charged M/s. Piya Pharmaceuticals with misdeclaring Piyamycetine Vet as a life-saving drug to avail exemption under Notification No. 116/69-C.E. It was found that the medicine did not qualify for the exemption as it contained vitamins, which were not considered therapeutically inert or pharmaceutical necessities as per the notification.

4. Procedural Correctness of the Collector's Actions under Rule 9(2) and Section 11A:

The appellant argued that the Collector exercised powers under rule 9(2), which were reserved for the Assistant Collector. Rule 9(2) specifies that the duty demand must be made by the proper officer within the period specified in Section 11A. The Tribunal found that the incorporation of Section 11A in rule 9 was to impose a time limit on demands, not to restrict the power to determine duty to the Assistant Collector alone. Therefore, the Collector's actions were deemed procedurally correct.

5. Alleged Suppression of Facts and Misdeclaration by the Appellant:

The appellant claimed that they were under the bona fide belief that exempted goods were not excisable and relied on judgments from the Delhi High Court in Sulekh Ram and the Allahabad High Court in Nagrat Paints. However, the Tribunal noted that these judgments were not cited before the Collector and that subsequent judgments clarified that exempted goods remained excisable. The Tribunal concluded that the appellant failed to make proper declarations after the amendment of Notification No. 141/79-C.E., and there was no evidence that the appellant genuinely relied on the cited judgments.

Conclusion:

The Tribunal upheld the Collector's order, rejecting the appeal. It was determined that M/s. Piya Pharmaceuticals was not entitled to the exemption under Notification No. 71/78-C.E. due to the aggregate value of clearances exceeding the specified limits and the manufacturing of goods under more than one tariff item. The duty demand and penalty imposed by the Collector were found to be valid, and the procedural actions taken were appropriate. The arguments regarding the classification of Piyamycetine Vet and the alleged suppression of facts were also dismissed.

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