2009 (3) TMI 173 - AT - Central Excise

Demand Extended Period of limitation P & P medicaments - The appellants have claimed the classification of the same under heading 3003.10 of Central Excise Tariff Act - , Revenue s contention is that the said product is not a medicament but would fall under the Chapter heading 1901.01 as Malt extract held that - The use of various vitamins and minerals of IP stands cannot convert the product into medicine and the same only reflect upon the higher quality of the product. Merely because materials of pharmacopoeia have been used to enhance the quality of the product and resultant marketability will not be a factor to hold the product to be a medicine - the Sharkoferrol cannot be held to medicament falling under Chapter 30. The same is properly classified under heading 19.01 as held by the Revenue - The dispute involved is bona fide dispute of classification and the proper officer granting approval to the classification list was required to satisfy himself about the correctness of the claim made by the appellant. Extended period of limitation can not be invoked

Issues Involved:
1. Classification of the product "SHARKOFERROL"
2. Applicability of therapeutic or prophylactic use classification
3. Marketing and labeling considerations
4. Impact of manufacturing under a drug license
5. Limitation period for raising demands
6. Imposition of penalties

Detailed Analysis:

1. Classification of the product "SHARKOFERROL":
The primary issue revolves around whether "SHARKOFERROL" should be classified under heading 3003.10 of the Central Excise Tariff Act as Patent or Proprietary medicaments or under heading 1901.01 as Malt extract. The Commissioner reclassified the product under heading 19.01, asserting that its essential character is imparted by malt extract, and it is marketed as a "Malt Nutrient Tonic."

2. Applicability of therapeutic or prophylactic use classification:
The appellants argued that "SHARKOFERROL" should be classified as a medicament under Chapter 30, as it contains therapeutic concentrations of vitamins and minerals used to treat and prevent deficiencies. They cited Chapter Note-2 of Chapter 30, which includes products mixed for therapeutic or prophylactic use. However, the Commissioner and Tribunal observed that the product is marketed for daily use without specific indications for treating any particular ailment, and the vitamins and minerals are present in quantities meant for general health improvement rather than specific therapeutic use.

3. Marketing and labeling considerations:
The Tribunal noted that the product's label does not indicate any specific disease it is meant to treat or prevent. It is marketed as a nutritional supplement to be taken with milk, akin to general health products like Bournvita and Horlicks. The product's label for export depicted body-building imagery, further suggesting it is intended for general health and strength rather than specific therapeutic purposes.

4. Impact of manufacturing under a drug license:
The appellants contended that manufacturing under a drug license should classify the product as a medicament. However, the Tribunal upheld the Commissioner's view that a drug license alone does not determine classification. Many products manufactured under drug licenses fall under various headings other than medicaments. The Tribunal referenced previous decisions affirming that drug license requirements are for public health and hygiene and do not solely dictate classification.

5. Limitation period for raising demands:
The appellants challenged the demand for the period November 1989 to October 1993, issued on 17-11-1994, as barred by limitation. The Tribunal agreed, noting that the classification lists were filed with the Revenue, and the information was available to them. The label for export purposes filed on 12-1-1993 did not indicate suppression or willful misstatement by the appellants. Consequently, the demand raised by the show cause notice dated 17-11-1994 was held to be barred by limitation.

6. Imposition of penalties:
Given the bona fide dispute on classification, the Tribunal set aside the penalties imposed on the appellants. It was determined that the provisions of Rule 173(Q) need not be invoked in this case. For demands within the limitation period, the Tribunal directed the adjudicating authority to quantify the demand after treating the entire realization as cum-duty price and extending the abatement towards duty.

Conclusion:
The Tribunal upheld the classification of "SHARKOFERROL" under heading 19.01 as a food product rather than a medicament under Chapter 30. The demand raised within the limitation period was confirmed, but the penalties were set aside, and the demand was to be recalculated as cum-duty price. The appeal was disposed of in these terms.

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