2023 (5) TMI 189 - AT - Central Excise

Captive Consumption - sterile water for injection was captively consumed - benefit of N/N. 67/95-CE dated 16.03.1995 as amended by notification no. 16/2003-CE dated 01.03.2003 - HELD THAT - In the show cause notice, the charge made by the revenue was the Sterile Water cleared in the combi pack along with Rabipur vaccines is classifiable under chapter heading no. CETH 28510010 as bulk drugs and the same was liable to duty - the vaccine cannot be administered without sterile water therefore the sterile water is also considered to be the vaccine which attracts only the nil rate of duty under CETH 3002. From the Note 3, it is clear that when the goods are cleared in sets consisting of two or more separate constituents in that case if the product is included to be mixed whether to obtain a product of Section VI or Section VII are to be classified in the heading prior to that product. In the present case, after mixing of the vaccine powder with sterile water, it is clearly intended to be administered as vaccine therefore, entire combi pack shall be correctly classified under the Central Excise Tariff Heading No. 3002 which is meant for vaccine. The condition from (a) to (c) given in Note 3, is clearly satisfied in as much as all the constituents of combi pack are used altogether at the time of administering the vaccine to the human body. Being combi pack it is presented together and since the Rabipur vaccine powder cannot be used without mixing of sterile water, it is undoubtedly complementary to each other - Note 3 of Section VI there is absolutely no doubt that the sterile water cleared in a combi pack with vaccine and syringe will also fall under CETH 3002 which is a vaccine. When this be so, then the entire combi pack attracts nil rate of duty under CETH 3002. On this basis, the demand is not sustainable. Even if it is assumed that the sterile water is used captively for manufacture of vaccine in such case also the sterile water is not liable to duty on the ground that from June 1998 till 24 February 2005, the distilled or conductivity water and water of similar purity used within the factory of production was attracting nil rate of duty and from 24th February 2005 to 30 December 2006, the said product was exempted under notification 3/2005-CE dated 24.02.2005 when used within the factory of production therefore even if the contention of the review order of the revenue is considered even then the product was not liable to duty. Appeal allowed.

Summary

Issues Involved:
The issue involved in the judgment is whether the impugned order correctly reversed the Order-In-Original and allowed the appeal filed by the revenue on the ground that sterile water for injection was captively consumed and hence ineligible for exemption under specific notifications.

Comprehensive Details:

Classification of Goods:
The judgment addressed the classification of the goods in question, specifically the Rabipur vaccine and sterile water for injection. It was established that the sterile water is an integral part of the vaccine and is necessary for its administration. Therefore, the entire combi pack, including the sterile water, falls under the Central Excise Tariff Heading No. 3002, which is meant for vaccines attracting a nil rate of duty. The judgment referred to relevant section notes of the Central Excise Tariff Act to support this classification.

Scope of Show Cause Notice:
The judgment also analyzed the scope of the show cause notice issued by the revenue. It was noted that the review and the Commissioner (Appeals) order extended beyond the scope of the show cause notice. The revenue's argument that the sterile water was used as an intermediate product for captive consumption, making it ineligible for exemption, was deemed to be outside the original charge in the notice. This discrepancy rendered the impugned order unsustainable.

Exemption and Duty Liability:
Furthermore, the judgment considered the applicability of previous notifications exempting the sterile water from duty. It was highlighted that from June 1998 to February 2005, the sterile water was attracting a nil rate of duty, and from February 2005 to December 2006, it was exempted under a specific notification. Even if the sterile water was used captively for vaccine production, it was determined that the product was not liable to duty based on the historical duty exemptions.

Conclusion:
Based on the discussions and findings, the impugned order was deemed unsustainable, and the appeal was allowed. The judgment set aside the impugned order, emphasizing the correct classification of the goods, the limitations of the show cause notice, and the historical exemptions from duty applicable to the sterile water for injection.