1990 (4) TMI 153 - AT - Central Excise

Issues Involved:
1. Classification and excisability of the product 'Dant Manjan Lal'.
2. Legality of the seizure of goods.
3. Use of power in the manufacturing process.
4. Entitlement to exemption under relevant notifications.
5. Procedural propriety and justification of the seizure and subsequent actions.

Issue-wise Detailed Analysis:

1. Classification and Excisability of the Product 'Dant Manjan Lal':
The primary contention was whether 'Dant Manjan Lal' should be classified as an Ayurvedic medicine entitled to exemption or as a dentifrice subject to duty. The product was initially treated as an Ayurvedic medicine under T.I. 14E and exempted from duty. However, with the introduction of T.I. 68, the Excise Department considered it liable to duty. Although the Gujarat High Court's decision in Darshan Hosiery Works v. Union of India influenced a reversion to T.I. 14E, an explanation added to T.I. 68 in 1981 reclassified Ayurvedic medicines under T.I. 68, but they continued to be exempt under Notification 62/78.

2. Legality of the Seizure of Goods:
The seizure of goods on 17-2-1986 was challenged on the grounds that it was effected without reasonable belief of contravention. The appellant argued that the seizure was illegal as it was based on information gathered months later and not at the time of seizure. The Tribunal noted that the seizure must be based on reasonable belief at the time it was made, and subsequent information cannot justify prior actions. The Tribunal found that the seizure was premature and not in accordance with law, as the excisability of the product was still under dispute.

3. Use of Power in the Manufacturing Process:
The appellant contended that no power was used in the manufacture of 'Dant Manjan Lal', which would entitle them to exemption under Notification 179/77 as amended by Notification 74/83. The Assistant Collector's investigation initially found no use of power, but subsequent statements and documents suggested otherwise. The Tribunal observed that the statements recorded months after the seizure and the use of power for other products did not conclusively prove the use of power for 'Dant Manjan Lal' during the relevant period.

4. Entitlement to Exemption Under Relevant Notifications:
The appellant argued that 'Dant Manjan Lal' was entitled to exemption under Notification 234/82 as an Ayurvedic medicine. The product was manufactured according to the formula in 'Ayurved Sar Sangraha', an authoritative book listed under the Drug and Cosmetics Act, 1940. The Tribunal noted that the incorporation of 'Ayurved Sar Sangraha' in the authoritative list provided a new dimension to the classification, supporting the claim that 'Dant Manjan Lal' was an Ayurvedic medicine entitled to exemption.

5. Procedural Propriety and Justification of the Seizure and Subsequent Actions:
The Tribunal emphasized that the power to seize goods must be exercised cautiously, ensuring all prerequisites are satisfied. The grounds for seizure should be clear and communicated at the time of action. The Tribunal found that the department did not provide sufficient grounds for the seizure at the time it was made, and the subsequent investigations did not justify the initial action. The seizure was deemed improper, and the penal action was considered premature.

Conclusion:
The Tribunal set aside the impugned order, concluding that the seizure was not proper and the goods were not liable to seizure and confiscation. The consequential relief was limited to the refund of fine and deposit, with the refund of the amount charged as duty subject to the final determination of excisability and duty liability by the Tribunal/Courts.

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