1985 (6) TMI 193 - AT - Central Excise

Issues Involved:

1. Classification of 'Dant Manjan Lal', 'Dant Manjan Black', and 'Dant Manjan White' under Tariff Item 68 or 14-E.
2. Whether the products are Ayurvedic medicines and entitled to exemption under Notification No. 62/78.
3. Classification of other products like Surmas and Churans under Tariff Item 14-E or 68.
4. Validity of the extended period of limitation for duty recovery.
5. Imposition of penalty under Rule 173-Q of the Central Excise Rules.

Issue-wise Detailed Analysis:

1. Classification of 'Dant Manjan Lal', 'Dant Manjan Black', and 'Dant Manjan White':

The Tribunal examined whether these products should be classified under Tariff Item 68 (CET) or 14-E (CET). The Department argued that these products were not exclusively Ayurvedic medicines and thus should be classified under Tariff Item 68. The Tribunal noted that the products did not meet the definition of Ayurvedic medicines as per Section 3(a) of the Drugs and Cosmetics Act, 1940, since they were not manufactured exclusively in accordance with the formulae described in authoritative Ayurvedic texts. Consequently, the Tribunal upheld the classification of these products under Tariff Item 68, CET, as tooth powders and not entitled to exemption under Notification No. 62/78.

2. Whether the Products are Ayurvedic Medicines Entitled to Exemption:

The Tribunal considered the argument that the products contained Ayurvedic ingredients and were manufactured under an Ayurvedic license. However, it emphasized that the end product should not be known by its ingredients alone. The Tribunal relied on the common parlance test, stating that in common understanding, these products were considered tooth powders and not medicines. The Tribunal concluded that the products did not qualify as Ayurvedic medicines and were not entitled to exemption under Notification No. 62/78.

3. Classification of Other Products like Surmas and Churans:

The Tribunal examined the classification of other products such as Himalaya Surma, Moti Surma, Agnimukh Churan, and others. The Department argued that these products contained allopathic ingredients and should be classified under Tariff Item 14-E. The Tribunal, however, noted that the use of certain pharmacopeal items in Ayurvedic preparations did not render them non-Ayurvedic if their use was recognized in authoritative treatises on Ayurveda. The Tribunal upheld the classification of these products under Tariff Item 14-E but excluded them from duty as they were exclusively Ayurvedic medicines.

4. Validity of the Extended Period of Limitation for Duty Recovery:

The Tribunal addressed the issue of whether the extended period of limitation for duty recovery under Rule 9(2) of the Central Excise Rules was applicable. It found that the Department had not established that the assessments were provisional or that the goods had been removed clandestinely. The Tribunal concluded that the demand could only be restricted to six months prior to the issue of the show cause notice dated 16-7-1981, and not for a period of five years as claimed by the Department.

5. Imposition of Penalty under Rule 173-Q of the Central Excise Rules:

The Tribunal examined the imposition of a penalty under Rule 173-Q. It found that the Department had not shown any mala fide intention on the part of the assessee. The Tribunal cited the Supreme Court's decision in Hindustan Steel Ltd. v. State of Orissa, which held that no penalty should be imposed for technical or venial breaches of legal provisions. The Tribunal quashed the penalty of Rs. 10,000 imposed on Shree Baidyanath Ayurved Bhawan Limited.

Conclusion:

The Tribunal partially accepted the Department's appeal regarding the classification of 'Dant Manjan Lal', 'Dant Manjan Black', and 'Dant Manjan White' under Tariff Item 68, CET, and confirmed that these products were not entitled to exemption under Notification No. 62/78. It upheld the classification of other products under Tariff Item 14-E but excluded them from duty as they were exclusively Ayurvedic medicines. The Tribunal restricted the duty demand to six months prior to the show cause notice and quashed the penalty imposed on the assessee.

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