2016 (1) TMI 336 - AT - Central Excise

Extended period of limitation - wrong classification of the product of Diclofenac Potassium Diclofenac Diethyl Ammonium and Diclofenac Free Acid in the classification limit. - Benefit of exemption notification No. 6/94-CE dated 01.03.1994, 8/95-CE dated 09.02.1995 and 8/96-CE dated 02.03.1996 - Confiscation of land building, plant and machinery under Rule 173 Q (2) (a) - Held that - the Central Excise Officers approved the Declaration dated 01.10.1995 filed under Rule 173 B of the erstwhile Rules. There is no dispute that the appellant declared the product and claimed the benefit of the exemption notification. In our considered view, the claim of exemption notification in their Declaration was approved by the Department, would not amount a suppression of fact with intent to evade payment of duty. We find that on the identical situation in the same product, the Tribunal in the case of M/s. Cipla Ltd., set-aside the demand on the ground of limitation - demand of duty alongwith interest and penalties on the appellant company and other appellants are set-aside on the ground as barred by limitation - Decided in favour of assessee.

Summary

Issues:
1. Duty demand and penalty imposition for misclassification of goods.
2. Application of exemption notification and benefit availed by the appellants.
3. Invocation of extended period of limitation for duty demand.
4. Consideration of Martindale Extra Pharmacopoeia in classification of bulk drugs.
5. Suppression of material facts by the appellants and intent to evade payment of duty.

Analysis:
1. The judgment addresses the duty demand and penalty imposition on the appellants due to the misclassification of goods, specifically Diclofenac Potassium, Diclofenac Diethyl Ammonium, and Diclofenac Free Acid under Chapter Heading No. 2942.00 of CETA 1985. The Adjudicating Authority confirmed a demand of duty along with interest and penalties for the period from 01.04.1994 to 28.02.1997 based on a show cause notice. However, the Tribunal, in a previous order, remanded the matter emphasizing the importance of correct classification and the use of Martindale Extra Pharmacopoeia for reference in such cases.

2. The appellants had filed a Declaration under Rule 173 B of the Central Excise Rules, claiming the goods as Bulk Drugs and availing the benefit of exemption notifications. The Adjudicating Authority had initially confirmed a significant duty demand and imposed penalties on the appellants, including confiscation of assets. However, the Tribunal considered the approval of the Declaration by the Central Excise Officers as crucial, indicating that the claim of exemption in the Declaration could not be considered as a suppression of facts with intent to evade duty payment.

3. Regarding the invocation of the extended period of limitation for duty demand, the appellants argued that the demand made through a show cause notice beyond the normal limitation period could not be sustained. Citing relevant case laws, the appellants contended that their compliance with classification requirements and approval of classification lists should preclude any allegations of suppression or misdeclaration to evade duty payment.

4. The Tribunal highlighted the importance of considering the Martindale Extra Pharmacopoeia in the classification of bulk drugs, as it could impact the applicability of exemption notifications and duty liabilities. The Tribunal directed the lower appellate authority to reevaluate the matter in light of the Martindale Extra Pharmacopoeia and previous Tribunal decisions, ensuring that the appellants are given a fair opportunity to present their case.

5. The judgment also delves into the issue of suppression of material facts by the appellants and the alleged intent to evade duty payment. However, based on the approval of the Declaration by the Department and the consistency in product classification by the appellants, the Tribunal found no grounds to establish suppression or misdeclaration with an intent to evade duty payment. Consequently, the demand of duty, interest, and penalties imposed on the appellants were set aside on the grounds of being barred by limitation, aligning with previous Tribunal decisions on similar matters.