2010 (10) TMI 649 - AT - Central Excise

Demand - whether Intravenous Fluids having a therapeutic value stood covered under Exemption Notification No. 3/2001 - burden is on the assessee to prove that the item falls within the four corners of the exemption notification - with effect from 1-3-2001 the exemption benefit, which is available to the Intravenous Fluid for sugar, electrolyte and fluid replenishment, does not extend to the Intravenous Fluid comprising of medicines and drugs like, anti-bacterial, anti-biotic and anti-microbial, having therapeutic properties or functions but is restricted strictly to those meant for the sugar, electrolyte and fluid replenishment only. However, there was no such restriction as far as the period prior to 1-3-2001 and since 4-5-2000 is concerned. The impugned order relating to the period from 1-3-2001, thus call for no interference. They cannot, however, be sustained as far as they relate to the period prior from 4-5-2000 to 1-3-2001 and that the notification dated 1-3-2001 has no retrospective effect. Additional Evidence - assessees filed applications for production of additional evidence in terms of Rule 23 of CESTAT Procedure Rule 1982 - no party to the appeal is entitled, as a matter of right, to produce any additional evidence either oral or documentary before the Tribunal. Undoubtedly, if the Tribunal is of the opinion, that for sufficient cause, such opportunity should be given, and then the parties can be permitted to produce such evidence - It is settled law, and the assessees are very well knew that the matters relate to the claim of exemption benefit and therefore the burden in that regard squarely lies upon the assessees to establish the claim and therefore it was necessary for the assessees to produce all the materials in support of their claim before the adjudicating authority - Decided against the assessee.

Issues Involved:
1. Eligibility for exemption under Notification No. 6/2000-C.E. and Notification No. 3/2001-C.E.
2. Retrospective application of Notification No. 3/2001-C.E.
3. Effect of the 2001-2002 Budget on the exemption notifications.
4. Classification of intravenous fluids mixed with therapeutic substances.
5. Effect of the Schedule H drug warning on the eligibility for exemption.
6. Admissibility of additional evidence in the remand proceedings.
7. Imposition of penalties.

Detailed Analysis:

1. Eligibility for Exemption under Notification No. 6/2000-C.E. and Notification No. 3/2001-C.E.:
The assessees claimed benefits under Notification No. 6/2000-C.E., dated 1-3-2000, and Notification No. 36/2000-C.E., dated 4-5-2000, which exempted intravenous fluids from excise duty. From 1-3-2001, this was replaced by Notification No. 3/2001-C.E., which restricted the exemption to intravenous fluids used for sugar, electrolyte, or fluid replenishment. The Tribunal initially ruled in favor of the assessees, but the Supreme Court remanded the matter, emphasizing the need to consider the restricted scope of the new notification.

2. Retrospective Application of Notification No. 3/2001-C.E.:
The Supreme Court clarified that Notification No. 3/2001-C.E. was not retrospective. The earlier notifications provided an open-ended exemption, while the new notification introduced specific qualifications. Therefore, the benefits under Notification No. 3/2001-C.E. could not be applied retrospectively to periods before 1-3-2001.

3. Effect of the 2001-2002 Budget on the Exemption Notifications:
The 2001-2002 Budget introduced an explanation in Notification No. 36/2000, clarifying that only intravenous fluids used for sugar, electrolyte, or fluid replenishment were exempt from duty. The Supreme Court directed the Tribunal to consider the effect of this clarification, which was intended to restrict the scope of the exemption.

4. Classification of Intravenous Fluids Mixed with Therapeutic Substances:
The Tribunal had to determine whether intravenous fluids mixed with substances like Ciprofloxacin, Metronidazole, and other therapeutic agents fell within the scope of the exemption. The Supreme Court emphasized that exemption notifications should be read strictly, and the burden of proof lies on the assessee to show that their products fall within the exemption. The Tribunal concluded that intravenous fluids mixed with therapeutic substances did not qualify for the exemption under Notification No. 3/2001-C.E.

5. Effect of the Schedule H Drug Warning on the Eligibility for Exemption:
The Supreme Court directed the Tribunal to consider the effect of the Schedule H drug warning on the labels of the products. The Tribunal found that products labeled as Schedule H drugs, which require a prescription, indicated that they had therapeutic properties. Therefore, such products did not qualify for the exemption under Notification No. 3/2001-C.E., which was limited to intravenous fluids used for sugar, electrolyte, or fluid replenishment.

6. Admissibility of Additional Evidence in the Remand Proceedings:
The assessees sought to introduce additional evidence to support their claims. However, the Supreme Court's remand order limited the scope of additional evidence to issues related to the Schedule H drug warning. The Tribunal ruled that the applications for additional evidence were beyond the scope of the remand order and dismissed them.

7. Imposition of Penalties:
The Tribunal concluded that penalties should not be imposed because the matters involved the interpretation of exemption notifications. Therefore, the orders imposing penalties were set aside.

Conclusion:
The Tribunal ruled that the assessees were entitled to the benefit of Notification No. 6/2000-C.E., read with Notification No. 36/2000-C.E., for the period up to 28-2-2001. However, they were not entitled to the benefit under Notification No. 3/2001-C.E. from 1-3-2001 onwards. The appeals by the Department were allowed except for the imposition of penalties, which were set aside. The assessees' appeals were partly allowed concerning penalties but dismissed regarding the rejection of benefits under Notification No. 3/2001-C.E.

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