2018 (8) TMI 1274 - AT - Central Excise

Extended period of limitation - Oxytetracycline Injectable Solution (Veterinary) manufactured on Loan License basis - Benefit of N/N. 06/2002 dated 01.03.2002 - Held that - The notification granted exemption only to the formulations mentioned in list No. 2. On careful consideration of list No. 2, it is found that the ingredient used by the respondent Oxytetracycline is not mentioned in the products for the manufacture of entry No. 57 - impugned order not sustainable. Time Limitation - Held that - On perusal of the monthly returns submitted for the period in question, it is found that the respondent had indicated that they are clearing Oxytetracycline Injectable Solution (Veterinary) without payment of duty by claiming exemption under Notification. It is also a fact that their ER1 monthly returns indicate number of notification as 06/2003 - the First Appellate Authority was correct in coming to a conclusion that the entire demand in the case is hit by limitation. Appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Interpretation of exemption notification regarding duty payment for specific formulations.
2. Whether the derivative of a specified bulk drug is eligible for exemption.
3. Application of limitation period for demanding duty.

Analysis:

Issue 1: Interpretation of Exemption Notification
The case involved a dispute over the interpretation of Entry No. 57 of Notification No. 06/2002, which exempts formulations manufactured from bulk drugs specified in List 2 from Central Excise duty. The appellant contended that the ingredient used, "Oxytetracycline," was not mentioned in List 2, thus challenging the exemption claimed. The First Appellate Authority had erred in considering "Oxytetracycline Injectable Solution" as a derivative of "Tetracycline Hydrochloride" based on an expert certificate. However, the tribunal found that the notification only granted exemption to formulations listed in List 2, and the derivative argument was not supported by the notification's language. Therefore, the tribunal held in favor of the appellant on this issue.

Issue 2: Eligibility of Derivative for Exemption
The respondent argued that "Oxytetracycline Injectable Solution" was a derivative of "Tetracycline Hydrochloride," making it eligible for exemption under the notification. The tribunal disagreed, emphasizing that the notification did not extend exemption to derivatives of specified bulk drugs. The tribunal found no merit in this argument and ruled against the respondent, upholding the First Appellate Authority's decision.

Issue 3: Application of Limitation Period
Regarding the limitation period for demanding duty, the tribunal analyzed the timeline of filings and declarations by the respondent. It was observed that the respondent had consistently filed declarations and returns reflecting the clearances made, including claiming exemption under a specific notification. The tribunal agreed with the First Appellate Authority's finding that the entire demand was barred by limitation. The respondent's timely filings and the absence of any notification exempting goods under the mentioned number supported the conclusion that the demand was beyond the limitation period. Consequently, the tribunal rejected the appeals filed by the revenue on the grounds of limitation.

In conclusion, the tribunal ruled in favor of the appellant on the interpretation of the exemption notification, rejected the derivative argument for exemption, and upheld the limitation defense, resulting in the dismissal of the revenue's appeals.