2024 (6) TMI 174 - AT - Central Excise

Classification of goods - LIV 52 Protec - goods misclassified as Animal Feed Supplement under Central Excise Tariff Heading 230990/23099010 of Central Excise Tariff Act, 1985 - whether the polyherbal preparation Liv 52 Protec manufactured by the appellant is classifiable under CETH 2302/230990/23099010 as Animal Feed Supplement as classified by the appellant or under CETH 300339/30049011 as Ayurvedic Medicaments as adjudged by the revenue? - Extended period of limitation - Penalties imposed under Section 11AC and Rule 25 of Central Excise Rules, 2002. Classification of goods - HELD THAT - It is found that Tariff item Heading 23099010 under Chapter Heading 2309, Preparation of a kind used in animal feeding , under others reads as Compounded animal feed . The Tariff Heading 30049011 under Chapter Heading 3004, Medicaments (excluding goods of heading 3002, 3005 or 3006) consisting of mixed or unmixed products for therapeutic or prophylactic uses put up in measure doses (including those in the form of transdermal administration systems) or in forms or packages for retail sale , under others, Ayurvedic, Unani, Siddha, Homeopathic or Biochemic systems medicaments, put up for retail sale reads as of Ayurvedic systems . The major herbs in Liv 52 Protec are Andrographis paniculata (Yavtika) enhances the body s resistance against common infections by stimulating the production of antibodies. It also acts as a hepato-protective that helps prevent liver damage. Phyllanthus amarus (Bhumyaamalaki) is a rich antioxidant, which is effective in the treatment of infective hepatitis. It contains wedelolactone and dimethyl wedelolactone and stimulates the secretion of digestive enzymes. It eliminates toxins and aids in the regeneration of hepatopancreas. The herbal ingredients in the impugned product also have similar hepatoprotective properties - Liv 52 Protec liquid stabilizes the hepatic cell membrane and promotes regeneration of the liver and also protects the liver from toxins, drugs and chemicals. Liv 52 Protec, is an appetite stimulant that increases and restores appetite in animal. In this case, the appellant is manufacturing a similar product Liv 52 Vet and classifying the same under Chapter Heading 30 as an Ayurvedic medicament and paying the appropriate duty. However, Liv 52 Protec is branded and marketed as animal feed supplement. Animal feed supplements are mixtures that are added either to animal feed or fed directly to animals to provide extra nutrients such as vitamins and minerals. The impugned product Liv 52 Protec does not have vitamins or minerals, which would supplement the animal feed. Further the tariff heading item 2309 9010 reads as Compounded animal feed and not as animal feed supplement. - the classification of the impugned product as animal feed supplement is not proper under chapter heading 23 and it should be classified under Chapter 30. The product Liv 52 Protec is rightly classifiable under Chapter Sub-heading 300339 for the period upto February 2005 and under Chapter subheading 30049011 from March 2005 onwards - the Liv 52 Protec Liquid in bulk is exported under the Chapter Heading 30039011. Invocation of the extended period - HELD THAT - The appellant has been submitting ER-1 showing the details of the goods manufactured and cleared by them. The details of goods cleared inter alia include Liv52 Protec as well as Liv 52 Vet Liquid . Further the Department has also conducted an audit for the period under dispute and no audit point was raised to indicate that there is suppression of facts and the Department is fully aware of the facts and issues and the goods were cleared in accordance with the approved classification list. Therefore, the invocation of extended period for confirmation of demand of duty for the period May 2002 to April, 2007 is not legally sustainable. Penalties imposed under Section 11AC and Rule 25 of Central Excise Rules, 2002 - HELD THAT - In the facts and circumstances of the case and as the issue involved is classification, the penalties imposed under Section 11AC and Rule 25 of Central Excise Rules, 2002 are not legally sustainable, hence they are dropped. Appeal disposed off.

Summary

Issues Involved:
1. Classification of 'Liv 52 Protec' as either 'Animal Feed Supplement' or 'Ayurvedic Medicament'.
2. Invocation of the extended period for demand of duty.
3. Imposition of penalties under Section 11AC and Rule 25 of Central Excise Rules, 2002.

Summary:

Issue 1: Classification of 'Liv 52 Protec'
The appellant, M/s. Himalayan Drugs, classified 'Liv 52 Protec' under Chapter Heading 2309 as an "Animal Feed Supplement" and cleared it without paying central excise duty. The Department argued that 'Liv 52 Protec' should be classified under Chapter 30 as an "Ayurvedic Medicament" due to its therapeutic properties. The product's therapeutic value was confirmed by the Indian Institute of Chemical Technology, which found that the formulation has hepato-protective properties. The Tribunal noted that 'Liv 52 Protec' and 'Liv 52 Vet Liquid', both used for similar purposes, have therapeutic functions and should be classified under Chapter 30. The Tribunal upheld the classification of 'Liv 52 Protec' under Chapter Sub-heading 300339 for the period up to February 2005 and under Chapter Sub-heading 30049011 from March 2005 onwards.

Issue 2: Invocation of the Extended Period
The Department invoked the extended period u/s 11A, alleging that the appellant wilfully misclassified the product to evade duty. However, the Tribunal found that the appellant had been submitting ER-1 returns and the Department had conducted audits without raising any issues. Therefore, the invocation of the extended period for the demand of duty for the period May 2002 to April 2007 was not legally sustainable.

Issue 3: Imposition of Penalties
The Tribunal found that the issue involved was one of classification and not suppression of facts. Therefore, the penalties imposed under Section 11AC and Rule 25 of Central Excise Rules, 2002, were not legally sustainable and were dropped. The demand for the normal period and subsequent periods from May 2007 to June 2014 was upheld along with interest.

Order Pronounced in Open Court on 23.01.2024