2000 (2) TMI 128 - AT - Central Excise

Summary

Issues Involved:
1. Classification of the product 'OSSOPAN'.
2. Imposition of penalty on the appellants.
3. Applicability of the extended period of limitation.
4. Eligibility for Modvat credit.

Issue-Wise Detailed Analysis:

1. Classification of the Product 'OSSOPAN':
The primary issue was whether 'OSSOPAN' manufactured by M/s. T.T.K. Pharma Ltd. is classifiable as a medicament under sub-heading 3003.10 of the Central Excise Tariff Act (CETA). The Collector's order dated 23-6-1994 classified 'OSSOPAN' under sub-heading 3003.10, confirming a duty demand of Rs. 1,95,78,811/- and imposing penalties. The appellants argued that 'OSSOPAN' is made from bone powder, a natural resource for calcium and phosphorous, and should be classified under Chapter 2 or 4 of CETA as an edible product of animal origin or food supplement, not as a medicament. The Tribunal, however, noted that 'OSSOPAN' had been classified as a medicament for almost 30 years and was marketed under strict control as a drug. The product's literature and medical references indicated its therapeutic and prophylactic uses, such as treating osteoporosis and aiding in bone healing. The Tribunal upheld the classification under sub-heading 3003.10, rejecting the appellants' claims.

2. Imposition of Penalty on the Appellants:
Penalties were imposed on M/s. T.T.K. Pharma Ltd. and its executives for alleged wilful suppression and misdeclaration of the product's characteristics. The Tribunal found that the appellants had sought reclassification based on the classification of a competitor's similar product. Given the long-standing classification as a medicament and the Department's approval of the reclassification, the Tribunal concluded that there was no suppression or misdeclaration. Consequently, all penalties imposed on the appellants were set aside.

3. Applicability of the Extended Period of Limitation:
The Tribunal addressed whether the extended period of limitation was applicable for demanding the duty. The appellants argued that the major portion of the demand was time-barred, as they had filed a classification list approved by the Assistant Collector. The Tribunal agreed, noting that the reclassification was based on the Department's approval and the classification of a similar product. Therefore, the extended period of limitation could not be invoked, and the demand for duty was restricted to the normal period.

4. Eligibility for Modvat Credit:
The appellants contended that if 'OSSOPAN' was classified under Chapter 30, they should be eligible for Modvat credit on inputs. The Tribunal allowed this benefit, subject to the appellants producing duty-paying documents to the satisfaction of the jurisdictional Assistant Commissioner. Additionally, the demand was to be recomputed in light of the Tribunal's decision in the case of Sri Chakra Tyres, allowing for duty abatement from the invoice price.

Conclusion:
The Tribunal upheld the classification of 'OSSOPAN' as a medicament under sub-heading 3003.10 of CETA, rejected the extended period of limitation for duty demand, allowed the benefit of Modvat credit, and set aside all penalties imposed on the appellants. The appeals were disposed of accordingly.