2003 (8) TMI 50 - SC - Central Excise

Whether the extracts were goods for the purpose of the Central Excise Act and if so, whether they were classifiable under Chapter 13 or 30 of the Act? Held that - Whichever way we look at it the reasoning of the Tribunal cannot be sustained. That the circular is binding on the Revenue Authorities cannot be disputed in view of the well established law summarised in Collector of Central Excise, Vadodara v. Dhiren chemical Industries reported in 2001 (12) TMI 3 - SUPREME COURT OF INDIA . Since the concurrent finding of act is that the liquid extracts used by the appellant in the manufacture of the medicines had therapeutic value, then they can, according to the CBEC circular be classifiable only under Tariff Entry 30.30 and not 13.03. In favour of assessee.

Summary

Issues:
Classification of herbal extracts under Central Excise Act - Chapter 13 or 30.

Analysis:
The appellant manufactured medicinal products from herbal extracts, leading to a dispute on the classification of the extracts under the Central Excise Act. The Revenue Authorities in West Bengal and Uttar Pradesh raised demands based on differing interpretations. In West Bengal, the extracts were classified under Chapter 30, resulting in nil duty, and proceedings were dropped. However, in Uttar Pradesh, the extracts were classified under Chapter 13, leading to a demand for duty payment. The appellant's appeal to the Tribunal against the Uttar Pradesh decision was rejected, prompting the appeal to the Supreme Court.

The Revenue argued that the extracts were classifiable under Chapter 13 with a 15% duty rate. The appellant contended that the extracts fell under Chapter 30, specifically under Tariff Item 30.03, which covers pharmaceutical products. The appellant relied on a circular issued by the Central Board of Excise and Customs (CBEC), stating that vegetable extracts with therapeutic value are classifiable under Chapter 30. The extracts in question were liquid and had medicinal value, but the authorities held they were not usable as medicaments directly, leading to the classification under Chapter 13.

The Supreme Court analyzed the CBEC circular and found that the extracts, despite not being directly usable as medicaments, were classifiable under Chapter 30 if they had therapeutic value. The Tribunal's misinterpretation of the circular was highlighted, and it was concluded that the extracts should be classified under Tariff Entry 30.30, not 13.03. The Court emphasized that the circular is binding on Revenue Authorities and overturned the decisions of the Tribunal and Commissioner, quashing the demands for duty payment. The appeal was allowed, and no costs were awarded.

In conclusion, the Supreme Court clarified the classification of herbal extracts under the Central Excise Act, emphasizing the importance of therapeutic value in determining the appropriate tariff entry. The judgment highlighted the binding nature of CBEC circulars on Revenue Authorities and provided clarity on the classification of extracts with medicinal properties under Chapter 30.