1997 (1) TMI 167 - AT - Central Excise

Summary

Issues:
Interpretation of exemption notification for patent medicines under Tariff Item 14E; Choice between retail price minus 25% discount or retailer's price minus 10% discount; Allegations of duty evasion based on pattern of sale to wholesalers; Time bar for duty demand; Adjudication of duty demand by Collector and Assistant Collector; Appeal by Department against Collector (Appeals) decision.

Analysis:
The judgment concerns the interpretation of an exemption notification for patent medicines assessable under Tariff Item 14E. The appellant, a manufacturer of such medicines, claimed exemption under Notification No. 161/67-C.E., choosing between retail price minus 25% discount or retailer's price minus 10% discount. The Department issued a show cause notice alleging duty evasion based on the pattern of sale to wholesalers, demanding duty based on the retailer's price minus 10% discount. The Collector confirmed the duty demand, leading to the appeal.

In the appeal filed by the Department, the Assistant Collector upheld the duty demand, while the appeal by the appellant company was allowed by the Collector (Appeals), prompting the Department's appeal. The appellant argued that they had the option to choose the exemption based on the retail price minus 25% discount, irrespective of the pattern of sale to wholesalers. They contended that the duty demand was time-barred as no specific allegation of suppression was made in the notice.

The Tribunal analyzed the exemption notification, emphasizing that the choice between wholesale price and retail price was at the discretion of the assessee, independent of the pattern of sale. The absence of a link between the choice of exemption and the sale pattern indicated that the choice made by the assessee was final. The Tribunal noted that medicines are typically sold in wholesale trade, making the condition of retail sale for exemption impractical. Since there was no evidence that retail prices exceeded the prices used for excise duty calculation, the duty demand was deemed unsustainable.

Consequently, the Tribunal set aside the Collector's order, allowing the appeal filed by the assessee. Regarding the Department's appeal against the Collector (Appeals) decision, the Tribunal upheld the decision and dismissed the appeal, affirming the allowance of the appellant's exemption choice based on the retail price minus 25% discount.