2010 (9) TMI 744 - AT - Central Excise

Demand - Time limitation - Suppression of facts - Evasion of duty - Notification No. 6/2002-C.E., dated 1-3-2002 - Sterilised Atraumatic Needled Sutures - It is submitted that the Central Excise Range Superintendent even issued certificates to the assessee to the effect that the sutures manufactured by the latter were exempt from payment of duty by virtue of Notification 6/02-C.E. (as amended) - It is claimed that the goods were actually cleared to hospitals for being used as cardio-vascular sutures and that this aspect is covered by the certificates issued by such hospitals. From the records, it appears that several such certificates were issued by reputed hospitals and these documents were produced before the Commissioner, but none was considered - where the Central Excise Range Officer certified from time to time that the assessee was exempted from payment of duty by virtue of certain Notification thereby driving them to believe that they were not liable to pay duty on the product at all, it cannot be said that the assessee had acted with intent to evade payment of duty Regarding penalty - The learned Commissioner is requested to reconsider the applicability of Sl. No. 267 of Notification No. 6/2002-C.E., dated 1-3-2002 (as amended) to the subject goods for the period from March, 2003 to February, 2006 in accordance with law and having regard to the relevant observations contained herein, and also to take fresh decision on all ancillary issues including the limitation issue - Appeals are disposed of

Issues Involved:
1. Denial of benefit of exemption under Notification No. 6/2002-C.E. for the period 1-3-2003 to 28-2-2006.
2. Allegation of suppression of facts and invocation of the extended period of limitation under Section 11A(1) of the Central Excise Act.
3. Imposition of penalty on the Company under Section 11AC and Rule 25 of the Central Excise Rules, 2002.
4. Denial of benefit of Notification No. 10/2006-C.E. for the period 1-3-2006 to 31-1-2007.
5. Imposition of penalty on the Managing Director under Rule 26 of the Central Excise Rules, 2002.

Detailed Analysis:

1. Denial of Benefit of Exemption under Notification No. 6/2002-C.E.:
The Department proposed to deny the benefit of exemption under Notification No. 6/2002-C.E. (as amended) to the assessee for the period 1-3-2003 to 28-2-2006 for goods classified under sub-heading 3006.10 of the Central Excise Tariff Act (CETA) Schedule. The goods, "Sterilised Atraumatic Needled Sutures," were claimed to be exempt under Sl. No. 268 of Notification No. 6/2002-C.E., which was contested by the Department on the grounds that the goods fell under CSH 3006 10 10 and were not eligible for exemption. The assessee alternatively argued for exemption under Sl. No. 267 of the same Notification, which covers "Cardio-vascular sutures including sternum steel sutures" as mentioned at Sl. No. 4 of List 37 attached to Customs Notification No. 21/02. The adjudicating authority initially rejected this claim, but the Tribunal found merit in the alternative plea, noting that the evidence provided by the assessee, including certificates from hospitals, was not considered. The Tribunal remanded the matter for fresh consideration of the applicability of Sl. No. 267.

2. Allegation of Suppression of Facts and Invocation of Extended Period of Limitation:
The Department invoked the extended period of limitation under Section 11A(1) on the grounds of alleged suppression of facts by the assessee. The assessee argued that all material facts were disclosed through declarations and returns, and that certificates from the Central Excise Range Superintendent indicated the goods were exempt from duty. The Tribunal noted that these documents were not adequately considered by the adjudicating authority and remanded the issue for reconsideration, emphasizing that the assessee could not be said to have acted with intent to evade duty if they were led to believe by official certificates that their goods were exempt.

3. Imposition of Penalty on the Company under Section 11AC and Rule 25:
The penalties imposed under Section 11AC and Rule 25 were challenged by the assessee. Given the remand for reconsideration of the exemption and limitation issues, the Tribunal implied that the penalties would also need to be re-evaluated based on the fresh findings on these issues.

4. Denial of Benefit of Notification No. 10/2006-C.E.:
For the period 1-3-2006 to 31-1-2007, the Department denied the benefit of Notification No. 10/2006-C.E. (Sl. No. 28) for the same product. The assessee classified the sutures under Heading 90.18 and paid duty at a concessional rate of 8%. The Tribunal found that the assessee's claim was supported by the Supreme Court's judgment in Johnson & Johnson Ltd. v. Commissioner, which held that sutures with needles are surgical appliances classifiable under Heading 90.18. Therefore, the Tribunal concluded that the benefit of the Notification was admissible, and no demand of duty or penalty could be sustained for this period.

5. Imposition of Penalty on the Managing Director:
The penalty on the Managing Director was related to the first show-cause notice. Given the remand of the primary issues, the Tribunal also remanded the penalty issue for reconsideration by the adjudicating authority, ensuring that all relevant observations and evidence are duly considered.

Conclusion:
The Tribunal remanded the case to the adjudicating authority for fresh consideration of the applicability of Sl. No. 267 of Notification No. 6/2002-C.E. for the period 1-3-2003 to 28-2-2006, and for reconsideration of the limitation issue. The demand and penalties for the period 1-3-2006 to 31-1-2007 were set aside, and the penalty on the Managing Director was also remanded for reconsideration. The Tribunal emphasized the need for a thorough examination of all evidence and a reasonable opportunity for the assessee to be heard.

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