2007 (7) TMI 165 - AT - Central Excise

Liquid oxygen merits classification under Heading 2804.11 as medicinal grade oxygen Supply for industrial as well as medical purpose Appellants are voluntarily paying duty on industrial supply By classifying it under 2809.19 demand cannot be raised on oxygen supplied for actual medicinal use

Summary

Issues:
Classification of liquid oxygen under sub-heading 2804.11 and chargeable duty rate, conformity to Indian Pharmacopoeia standards, classification irrespective of ultimate use, duty payment on oxygen supplied for medicinal use, classification under Heading 2804.11 as medicinal grade oxygen, absence of test by Department, applicability of Indian Pharmacopoeia standards, voluntary duty payment on industrial supply, compression not changing product nature, classification at factory gate and compressing unit.

Analysis:
The dispute revolves around the classification of liquid oxygen under sub-heading 2804.11 and the applicable duty rate. The appellants argue that the oxygen they manufacture, with 99.7% purity, meets Indian Pharmacopoeia standards requiring 99% purity, and is used for medicinal purposes. They hold a drugs license for the goods, supported by drug control authorities' approval. The same oxygen is supplied to hospitals, clinics, and industrial consumers, stored together, indicating the consistency of the product. The classification must consider the goods' manufacturing standards, not their end use. The appellants voluntarily pay duty on industrial supply, distinguishing it from medicinal use, where duty exemption applies.

The Department contends that oxygen supplied to compressor units for repackaging is not for medicinal use and should be dutiable. They argue that since duty is paid on trial unit oxygen, duty should apply to the rest sent to compressor units. However, the Tribunal finds that the appellants sell the same liquid oxygen directly and through compressor units, primarily for medicinal purposes. The absence of Department-conducted tests to disprove conformity to Indian Pharmacopoeia standards supports the classification under Heading 2804.11 as medicinal grade oxygen. The Tribunal upholds the use of Indian Pharmacopoeia standards for classification and rejects the argument that compression alters product nature, maintaining consistent classification at the factory gate and compressing unit.

In conclusion, the Tribunal rules in favor of the appellants, setting aside the impugned orders and allowing all four appeals. The judgment emphasizes the adherence to Indian Pharmacopoeia standards for classifying liquid oxygen as medicinal grade under sub-heading 2804.11, regardless of its ultimate use. The voluntary duty payment on industrial supply does not negate the duty exemption for medicinal use, as the product's nature remains unchanged by compression. The decision ensures consistent classification and tariff treatment for liquid oxygen at both the factory gate and compressing unit, extending duty exemption to medicinal grade oxygen.