2011 (6) TMI 371 - AT - Central Excise

Classification of Helmisol - under Tariff Heading 23.02 as claimed by the assessees or under Tariff Heading 30.03 as medicaments as held by the Revenue - Held that - No merit in the claim of the assessees regarding classification of the product for the reason that there is no evidence on record to show that the product is commonly known as animal feed supplement in the market and further the assessees had themselves classified the product under Tariff Heading 30.03 and had obtained a drug licence for the same until 22.7.2002 and they subsequently changed the classification to Tariff Heading 23.02 although there was no change in the composition of the product.Therefore, uphold the order on classification. As regards the penalty of Rs.10,000/- imposed under the provisions of Rule 25 of the Central Excise Rules, 2002, it is justified in view of the clear finding that the assessees changed the classification of the product, adding the words poultry feed supplement on the label and deleting the drug licence number which is with a view to evade payment of appropriate duty under Tariff Heading 30.03. However having regard to the duty demand of Rs.65,567/- confirmed penalty reduced to Rs.6500/- only. The penalty of Rs.5000/- imposed under Rule 13 of the CENVAT Credit Rules, 2002 is upheld for the reason that 8% amount of the price, since they are manufacturing both dutiable and exempted products, was reversed by them only after issue of show cause notice. Partly in favour of assessee.

Summary

Issues involved: Correct classification of "Helmisol" under Tariff Heading 23.02 or 30.03, penalty imposed under Rule 25 of Central Excise Rules, 2002, penalty imposed under Rule 13 of CENVAT Credit Rules, 2002.

Correct Classification Issue Analysis:
The dispute in the appeal pertains to the classification of "Helmisol" as either animal feed under Tariff Heading 23.02 or as medicaments under Tariff Heading 30.03. The Tribunal found no merit in the appellant's claim, noting the lack of evidence that the product is commonly known as an animal feed supplement in the market. Additionally, the appellant had initially classified the product under Tariff Heading 30.03 and obtained a drug license for it before changing the classification to Tariff Heading 23.02 without altering the product composition. Consequently, the Tribunal upheld the classification under Tariff Heading 30.03.

Penalty under Rule 25 of Central Excise Rules, 2002 Analysis:
Regarding the penalty of Rs.10,000 imposed under Rule 25 of the Central Excise Rules, 2002, the Tribunal deemed it justified due to the appellant's actions of changing the product classification, adding "poultry feed supplement" on the label, and removing the drug license number to potentially evade the appropriate duty under Tariff Heading 30.03. However, considering the duty demand confirmed at Rs.65,567, the Tribunal reduced the penalty to Rs.6,500.

Penalty under Rule 13 of CENVAT Credit Rules, 2002 Analysis:
The Tribunal upheld the penalty of Rs.5,000 imposed under Rule 13 of the CENVAT Credit Rules, 2002. This decision was based on the appellant's reversal of 8% of the amount of the price, applicable as they manufactured both dutiable and exempted products, only after receiving a show cause notice. The Tribunal found this reversal to be post-facto and upheld the penalty.

In conclusion, the appeal was partially allowed by the Appellate Tribunal CESTAT, CHENNAI, with the classification of "Helmisol" under Tariff Heading 30.03 upheld. The penalty under Rule 25 of the Central Excise Rules, 2002 was reduced to Rs.6,500, and the penalty under Rule 13 of the CENVAT Credit Rules, 2002 was upheld at Rs.5,000.