2013 (3) TMI 259 - AT - Central Excise

Exemption under Notification No. 56/2002-C.E. denied - unit of the assessee is in the State of Jammu & Kashmir - dispute on Gulabari, Kewra Water and Shilajit capsules for the period from April, 2004 to March, 2008 - Held that - So far as the Kewra water and Gulabari are concerned, it is found that while gulabari, which is nothing but rose water, is specifically covered by sub-heading No. 3303 00 20, Kewra water is specifically covered by sub-heading No. 3303 00 30 of the tariff. While the expression aqueous solution of essential oil in Heading 3301 is a general term, sub-heading No. 3303 00 20 and 3303 00 30 specifically cover rose water and kewra water respectively. In terms of Rule 3(a) of the General Rules for Interpretation of the Tariff the heading which provides the most specific description is to be preferred over the heading providing a general description. Since sub-heading 3303 00 20 and 3303 00 30 specifically cover the rose water and kewra water respectively and since the goods, in question, are nothing but rose water and kewra water, the goods in question would have to be held as specifically covered by Heading No. 3303 not under heading 3301. Moreover, gulabari (rose water) and kewra water are the products commercially different from rose oil and kewra oil with different name and usages and, therefore, the process carried out by the appellant amounts to manufacture and as such, the duty had been correctly paid by the appellant in respect of these products and exemption under Notification No. 56/2002-C.E. has been correctly availed. Shilajit capsules - According to the Appellant, the formulation of shilajit capsules being manufactured is different and is not based on the formula prescribed in the standard books on ayurveda specified in the first schedule to the Drugs and Cosmetics Act. Moreover, also find that the Department does not refute, that in Sahibabad unit of the appellant, duty is being paid on the same product without availing exemption under Notification No. 3/2005. Besides the above points while the appellant s stand is that they are entitled for refund of duty to the extent paid through PLA after exhausting the Cenvat credit in both the cases, there would be no revenue to the Government and as such, prima facie, there is no difference between the stand of the Department and the stand of the appellant. It is also not the case of the Department that the products, in question, are being used by some other manufacturers as inputs in respect of which in accordance with the provisions of Rule 12 of the Cenvat Credit Rules, 2004 those manufacturers are availing full Cenvat credit as if no part of the duty was exempt. Thus, even if the Department s stand is accepted, it will be a revenue neutral situation. Merits in the appellant s plea for waiver from the requirement of pre-deposit of duty demand, interest and penalty - stay applications are allowed.

Summary

Issues:
Dispute over exemption under Notification No. 56/2002-C.E. for Hair oils, Shampoo, perfumes, and Ayurvedic Medicaments in Jammu & Kashmir unit. Classification of Gulabari, Kewra Water, and Shilajit capsules. Duty payment process under Notification No. 56/2002-C.E. Demand for erroneously granted refunds and penalties imposed by Commissioner. Appeal against Commissioner's orders.

Issue 1: Exemption Dispute under Notification No. 56/2002-C.E.
The appellant, engaged in manufacturing various products, availed exemption under Notification No. 56/2002-C.E. for their Jammu & Kashmir unit. The dispute arose regarding the classification of three products - Gulabari, Kewra Water, and Shilajit capsules. The Department contended that Gulabari and Kewra Water were aqueous solutions of essential oils, not subject to duty, hence no exemption under the notification. Four show cause notices were issued for demand of duty and penalties confirmed by the Commissioner under Section 11A(1) of the Central Excise Act.

Issue 2: Classification of Products
The Commissioner classified Gulabari and Kewra Water as aqueous solutions of essential oils under Heading No. 3301, not subject to duty. The appellant argued that the products were specifically covered by sub-headings 3303 00 20 and 3303 00 30, commercially different from rose oil and kewra oil, thus amounting to manufacture. The Tribunal found that the specific headings covered the products, indicating a different classification under Heading No. 3303, supporting the appellant's claim for exemption under Notification No. 56/2002-C.E.

Issue 3: Shilajit Capsules Classification
Regarding Shilajit capsules, the Commissioner held them as exempt ayurvedic medicine under Notification No. 3/2005-C.E. The Tribunal noted the lack of evidence proving adherence to the specified formula in standard books on Ayurveda. The Department failed to establish compliance with the formula, and the Tribunal found the formulation different from the prescribed standard, supporting the appellant's duty payment and exemption claim.

Issue 4: Waiver of Pre-Deposit
The appellant sought waiver of pre-deposit, arguing for refund of duty paid through PLA. The Department contended that no duty was payable, resulting in a revenue-neutral situation. The Tribunal agreed with the appellant, finding no revenue difference between the Department's and appellant's stands. Consequently, the requirement of pre-deposit was waived, and recovery stayed until the appeal's disposal.

In conclusion, the Tribunal ruled in favor of the appellant, upholding their classification arguments for Gulabari, Kewra Water, and Shilajit capsules. The exemption under Notification No. 56/2002-C.E. was deemed valid, and the demand for duty and penalties was set aside. The waiver of pre-deposit was granted, allowing the appeal to proceed without immediate financial obligations.