1992 (10) TMI 196 - AT - Central Excise

Issues Involved:
1. Demand for duty on Lanolin Anhydrous.
2. Allegations of fraudulent suppression and misstatement.
3. Eligibility for exemption under various notifications.
4. Non-filing of Classification Lists.
5. End use of Lanolin Anhydrous.
6. Validity of retrospective demand beyond six months.
7. Reopening of Classification Lists.
8. Imposition of penalty.

Issue-wise Detailed Analysis:

1. Demand for Duty on Lanolin Anhydrous:
The Collector of Central Excise, Calcutta, demanded a duty of Rs. 2,47,868.04 on Lanolin Anhydrous manufactured and removed without payment of duty during the period 1-11-1982 to 31-8-1985. The appellants did not correctly declare the goods in the Classification List and did not submit any Classification List during the material period. This led to the imposition of a penalty of Rs. 25,000/- under Rule 173Q of the Central Excise Rules, 1944.

2. Allegations of Fraudulent Suppression and Misstatement:
The show cause notice alleged that the appellants:
(a) Fraudulently suppressed material facts regarding the nature, character, and composition of the goods in their Classification Lists.
(b) Wilfully mis-stated the goods as non-excisable.
(c) Did not file requisite Classification Lists for specific periods with intent to avoid proper classification and duty determination.
(d) Did not submit requisite Price Lists.
(e) Supplied goods to M/s. Himani Ltd., which used them as a medium base in the manufacture of 'Himani Boroplus,' not as drug intermediates or bulk drugs, thus not entitled to exemption under Notification 234/82-C.E.

3. Eligibility for Exemption under Various Notifications:
The appellants claimed that Lanolin Anhydrous conformed to the specifications of the Indian Pharmacopoeia (I.P.-1966) and was a pharmacopoeial preparation, thus a drug. They argued that the change in exemption notification by Notification 197/82, dated 22-6-1982, did not affect their eligibility for exemption. However, the Collector found that the appellants did not make a full declaration in their Classification Lists and availed of exemptions to which they were not entitled.

4. Non-filing of Classification Lists:
The appellants did not file any Classification Lists between March 1979 and March 1983, despite changes in exemption notifications. The Collector concluded that this was done with the intent to avoid determination of duty liability. The Tribunal noted that Rule 173B(4) required filing a fresh Classification List if there was a change in the rate of duty or exemption notification.

5. End Use of Lanolin Anhydrous:
The appellants contended that 'end use' was not a condition for availing exemption granted to bulk drugs. However, the Collector's finding, based on test reports and evidence, was that Lanolin Anhydrous was used as a medium base in pharmaceutical preparations and not as drug intermediates or bulk drugs. The Tribunal agreed that after the insertion of the Explanation in Notification 104/82, it was necessary to ascertain that the bulk drug was actually used as such or as an ingredient in any formulation.

6. Validity of Retrospective Demand Beyond Six Months:
The appellants argued that the demand beyond six months was invalid in the absence of wilful suppression of facts. They cited the Karnataka High Court's decision in Krishnarajendra Mills Ltd., which held that once an approval is accorded, it cannot be recalled under Rule 173-B. However, the Tribunal found that the facts of the present case involved wilful mis-statement and suppression, making the demand valid.

7. Reopening of Classification Lists:
The Tribunal noted that reopening of Classification Lists by invoking Section 11A was permissible, especially in cases involving wilful mis-statement and suppression of material facts. The Karnataka High Court's decision in Gurupriya Tele Auto (P) Ltd. supported this view, stating that Section 11A empowered reopening of an assessment, including the approval of Classification Lists.

8. Imposition of Penalty:
The Tribunal upheld the penalty of Rs. 25,000/- imposed by the Collector, concluding that the appellants had not made a full declaration of the goods and had availed of exemptions to which they were not entitled. The appeal was rejected, subject to recalculation of the amount of duty for the period January 1983 to August 1983, as the assessments for this period were finalized before the issue of the demand notice.

Conclusion:
The Tribunal confirmed the demand for duty and penalty imposed by the Collector, directing recalculation of duty for the specified period. The appeal was rejected, emphasizing the necessity of filing accurate Classification Lists and the validity of reopening assessments under Section 11A in cases of wilful mis-statement and suppression of facts.

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