2019 (5) TMI 216 - AT - Central Excise

Classification of goods - DSN Capsule - Beneficiale Liquid - whether classified under Chapter 3004 and 2106? - SSI Exemption - clearance of goods from the notified area in the state of Uttarakhand - benefit of N/N. 49/2003-CE dated 10.6.2003 - HELD THAT - The department has drawn the sample and sent for the test to the CRCL which is authorised Government body for test of the product in question. In this case the appellant have not contested the report by the CRCL. There is a system of retest in the CRCL on being aggrieved by the test report which has not been followed by the appellant. On other hand the appellant argues that the test report is not conclusive criteria for classification of the goods under the Central Excise Tariff heading. This appears to be not correct proposition. Moreover the appellant themselves has applied for Drug Licence and which was granted to them on 4.12.2007 to manufacture these products. However this grant of drug licence is for the subsequent period and hence not having any bearings on the current proceedings. Impugned order upheld - appeal dismissed - decided against appellant.

Summary

Issues:
Classification of pharmaceutical products and nutritional supplements under Central Excise Act, 1985 - Misclassification leading to non-payment of Central Excise duty - Applicability of exemption under Notification No. 49/2003-CE - Proper classification under Chapter Heading 3004 and 2106 - Interpretation of therapeutic and prophylactic values for classification - Reliance on judicial precedents - Contention regarding curative properties and medicinal nature of products - Consideration of common parlance test for classification - Relevance of packaging, warnings, and marketing practices - Reliance on test reports and expert opinions for classification - Impact of Drug License on product classification - Adherence to test report findings for classification determination.

Analysis:
The case involved an appeal against an order-in-original passed by the Commissioner concerning the misclassification of pharmaceutical products and nutritional supplements by the appellant, leading to non-payment of Central Excise duty. The appellant claimed exemption under Notification No. 49/2003-CE but was found to have misclassified their products under Excise Tariff Sub-Heading, resulting in the imposition of penalties and demands. The appellant contended that their products should be classified under Chapter Heading 3004 and 2106 based on therapeutic and prophylactic values, as supported by judicial precedents emphasizing curative properties and medicinal nature. The appellant argued for the application of the common parlance test for classification, citing Supreme Court decisions and expert opinions.

The appellant further submitted various findings before the adjudicating authority, highlighting discrepancies in the Commissioner's observations regarding dietary supplements, package labeling, and classification notes. The appellant emphasized the presence of ingredients listed in the Indian Pharmacopoeia, indicating a medicinal character and refuting the relevance of packaging warnings for classification. Additionally, the appellant challenged the reliance on the Department of Food Safety's classification and emphasized the non-mandatory nature of a Drug License for product classification, citing relevant tribunal decisions.

The Revenue supported the impugned order based on a test report from CRCL, classifying the products as nutritional supplements under heading 2106, thereby denying the appellant the benefit of the exemption. The Tribunal considered the issue of classification under Chapter 3004 and 2106, noting the CRCL's unchallenged report categorizing the products as non-medicaments. The Tribunal found the appellant's failure to contest the test report significant, emphasizing the importance of test reports for classification. The Tribunal upheld the impugned order, rejecting the appellant's appeal due to the unchallenged test report and the absence of contestation.