1991 (2) TMI 236 - AT - Central Excise

Issues Involved:
1. Eligibility for exemption under Notification No. 104/82-C.E., as amended by Notification No. 197/82.
2. Classification of "Potassium Mercuric Iodide Concentrated Solution" as a bulk drug.
3. Alleged mis-declaration and suppression of facts by the appellants.
4. Applicability of the extended period for demand under Section 11A of the Central Excises and Salt Act, 1944.

Detailed Analysis:

1. Eligibility for Exemption under Notification No. 104/82-C.E., as amended by Notification No. 197/82:
The primary issue in both appeals was whether "Potassium Mercuric Iodide Concentrated Solution" (the product) was eligible for exemption from duty under Notification No. 104/82-C.E., as amended by Notification No. 197/82. The appellants argued that the product qualified as a bulk drug, which is defined in the notification as any chemical or biological product conforming to pharmacopoeial standards, used for diagnosis, treatment, mitigation, or prevention of diseases in human beings or animals, and used as such or as an ingredient in any formulation. The Department, however, contended that the product did not meet these criteria and was not exclusively used as a drug.

2. Classification of "Potassium Mercuric Iodide Concentrated Solution" as a Bulk Drug:
The appellants provided evidence, including certificates from the Joint Commissioner, Food and Drug Administration, Maharashtra State, and references from the British Pharmaceutical Codex (B.P.C.) 1954 and Martindale Extra Pharmacopoeia, to support their claim that the product was a bulk drug. The Assistant Collector and the Collector (Appeals) rejected these contentions, stating that the product was used as a chemical ingredient in the formulation of Neko soap and not as a drug. They emphasized that the product did not conform to the pharmacopoeial standards for use as a drug in its concentrated form.

3. Alleged Mis-declaration and Suppression of Facts by the Appellants:
The Department alleged that the appellants had mis-declared the product as a drug and suppressed the correct information, leading to wrong classification and exemption from duty. The appellants countered this by arguing that they had consistently filed classification lists, which were approved by the Department, and had submitted all relevant documents, including the drug license. They contended that there was no suppression of facts or mis-declaration on their part.

4. Applicability of the Extended Period for Demand under Section 11A:
The Department invoked the extended period under the proviso to Section 11A, alleging suppression of facts by the appellants. The appellants argued that the demand was time-barred as they had been transparent in their dealings, filing classification lists and RT-12 returns, which were finalized by the Department. The Tribunal agreed with the appellants, stating that there was no suppression or mis-declaration, and the extended period could not be invoked.

Conclusion:
The Tribunal concluded that the product "Potassium Mercuric Iodide Concentrated Solution" conformed to the definition of a bulk drug as per the relevant notifications. The product was used as an ingredient in the manufacture of Neko medicated soap, which was recognized as a medicated soap under the drug license. Therefore, the product was eligible for exemption from duty under Notification No. 104/82-C.E., as amended by Notification No. 197/82. The demands raised by the Department were also found to be time-barred, as there was no suppression or mis-declaration by the appellants. The appeals were allowed, and the appellants were granted consequential relief.

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