2015 (6) TMI 335 - AT - Central Excise

Denial of exemption claim - whether subject Cannula are eligible for full duty exemption under Notification No. 6/03-CE dated 01/3/03 and its successor exemption notifications - Held that - On the basis of the certificates of various experts certifying that the scalp vein infusion sets, in question, are Cannula which can be used for blood vessels, the Tribunal held that the same would be eligible for exemption. In the same para, the Tribunal s has accordingly given a finding on perusal of all the certificates from both the sides, a clear string of opinion is in favour the respondents and the item having satisfied the term Canula and it is used in blood vessels, therefore, the Commissioner (Appeals) having granted the benefit is totally justified . Thus, the Tribunal in this order has held that the term blood vessels in the entry No. 34 in the Notification No. 55/95-CUS is not qualified by the word similar appearing before the word veins and has to be read independent of the expression for aorta, vena cavae and similar veins . Notification is not confined only to the IV Cannula meant for aorta or vena cavae and for intra-corporal spaces. It is also applicable to IV Cannula meant for the arteries and veins similar to aorta and vena cavae, if the Department s stand that similar veins and blood vessels means the veins and arteries similar to vena cavae and aorta is accepted. In this Regard, Dr. Prabhu Vinayagam, Assistant Manager (Training) of the appellant company has claimed that cipahlic veins, basilic veins and metacarpal veins etc. are similar to vena cavae and the IV Cannula can be used for these veins. The Department, however, has chosen to rely only on the opinion of Dr. P. Ravindran which, as discussed above, is silent on the point as to which blood vessels are similar to aorta and vena cavae and whether the Cannula, in question, can be used for the blood vessels similar to aorta and vena cavae. In view of this, permitting the cross examination of Dr. P. Ravindran was necessary, but unfortunately the same has not been allowed. In our view, therefore not permitting the cross examination of Dr. P. Ravindran in the circumstances of the case has vitiated the proceeding. Impugned orders denying the exemption under Notification No. 6/03-CE and its successor notification to the IV Cannula being manufactured by the appellant would not be sustainable. - Decided in favour of assessee.

Issues Involved:
1. Eligibility for duty exemption under Notification No. 6/03-CE and its successor notifications.
2. Interpretation of the exemption entry in List 37 of Notification No. 21/02-CUS.
3. Validity of the Department's reliance on the opinion of Dr. P. Ravindran from DGHS.
4. Applicability of the doctrine of merger and stare decisis.
5. Requirement of cross-examination of the DGHS official.
6. Limitation period and applicability of Section 11AC.

Detailed Analysis:

1. Eligibility for Duty Exemption:
The appellant company manufactures IV Cannula under the brand names Venflon and Neoflon. They claimed exemption from Central Excise duty under Notification No. 6/03-CE and its successor notifications, which exempted medical equipment specified in List 37 of Notification No. 21/02-CUS. The Department issued multiple show cause notices and confirmed duty demands, arguing that the IV Cannula did not qualify for the exemption as they were not meant for aorta, vena cavae, or similar veins and blood vessels.

2. Interpretation of Exemption Entry:
The primary dispute was whether the exemption entry "Disposable and non-disposable Cannula for aorta, vena cavae and similar veins and blood vessels and Cannula for intra-corporal spaces" covered the IV Cannula manufactured by the appellant. The appellant argued that the term "blood vessels" should be read independently of "similar veins," thus covering their product. They relied on the Tribunal's decision in CCE, Coimbatore vs. Saberwal Surgical (P) Ltd., which held that the term "blood vessels" in a similar exemption entry was not qualified by "similar" and thus should be read independently.

3. Validity of DGHS Opinion:
The Department relied on the opinion of Dr. P. Ravindran from DGHS, who stated that the IV Cannula were primarily used in peripheral veins and arteries and could not be treated as Cannula for aorta, vena cavae, or similar veins and blood vessels. The appellant contended that the opinion was not binding and that cross-examination of Dr. Ravindran was necessary to challenge his findings.

4. Doctrine of Merger and Stare Decisis:
The appellant argued that the Tribunal's decision in Saberwal Surgical, which was affirmed by the Supreme Court, should be treated as a binding precedent due to the doctrine of merger. The Supreme Court's dismissal of the civil appeal against the Tribunal's order, even without detailed reasons, entailed the application of stare decisis, making the Tribunal's interpretation of the exemption entry binding.

5. Cross-Examination Requirement:
The appellant argued that the entire case against them was based on Dr. Ravindran's opinion, and without allowing his cross-examination, the opinion could not be acted upon. The Tribunal agreed that denying cross-examination vitiated the proceedings, as it was crucial to determine the validity of the DGHS opinion.

6. Limitation Period and Section 11AC:
The appellant claimed a bona fide belief in their eligibility for exemption based on the Tribunal's earlier decision, which justified not invoking the longer limitation period under Section 11A (1) and not imposing penalties under Section 11AC. The Tribunal accepted this argument, noting that the appellant had a reasonable basis for their belief in the exemption.

Conclusion:
The Tribunal set aside the impugned orders, holding that the IV Cannula manufactured by the appellant were covered by the exemption entry in List 37 of Notification No. 21/02-CUS. The appeals were allowed, and the duty demands were quashed. The Tribunal emphasized that the interpretation of the exemption entry in the Saberwal Surgical case, affirmed by the Supreme Court, was a binding precedent, and the denial of cross-examination of the DGHS official had vitiated the proceedings.

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