1997 (5) TMI 163 - AT - Central Excise

Issues Involved:
1. Classification of "Liquid Paraffin (heavy) I.P."
2. Applicability of Notification No. 242/88-C.E.
3. Bar of limitation on demand of duty.
4. Imposition of penalty.

Detailed Analysis:

1. Classification of "Liquid Paraffin (heavy) I.P."

The appellant, a manufacturer of "Liquid Paraffin (heavy) I.P.," filed a classification list under Heading 30.03 of the Central Excise Tariff Act, 1985, which prescribed a nil rate of duty. The department issued a show cause notice (SCN) proposing classification under Heading 27.10. The Assistant Collector classified the product under sub-heading 2710.99, carrying a rate of duty of 20% ad valorem plus Rs. 250/- per M.T. This classification was contested by the appellant, leading to multiple appeals.

The appellant argued that the product conformed to the Indian Pharmacopoeia (I.P.) standards and was packed in drums containing 6900 adult doses, thus satisfying the definition of 'medicament' under Chapter Note 2(i) of Chapter 30. The appellant cited the Supreme Court's judgment in Amrutanjan Ltd., which held that if a product met I.P. standards, it should be classified as a medicament.

The department contended that the term "measured doses" in Chapter Note 2(i) implied that the medicament should be in predetermined units, such as tablets or ampoules, ready for therapeutic use. The product in question, packed in 207-liter drums, did not meet this requirement as it was not in pre-measured doses but merely contained a quantity equal to 6900 doses.

The Tribunal held that the product did not qualify as a 'medicament' under Heading 30.03 because it was not packed in "measured doses." The product was classified under Heading 27.10 as it was a petroleum oil-based product.

2. Applicability of Notification No. 242/88-C.E.

The appellant argued that even if the product was classified under Heading 27.10, it should be entitled to the benefit of Notification No. 242/88-C.E. The adjudicating authority did not independently consider this plea but relied on the Assistant Collector's classification order.

The Tribunal observed that the appellant was not estopped from raising this plea in resisting the proposed demand of duty. The matter was remanded to the adjudicating authority to reconsider the applicability of Notification No. 242/88-C.E. and to examine the appellant's request for testing the samples of inputs from the National Test House, Alipore.

3. Bar of Limitation on Demand of Duty

The appellant contended that the SCN for the demand of duty was barred by time as there was no willful misstatement or suppression of facts. The department had full knowledge of the classification list filed in May 1988.

The Tribunal refrained from giving a finding on this issue at this stage, considering it academic until the question of the sustainability of the demand on the extension of the benefit of Notification No. 242/88-C.E. was determined. The issue was left open for the adjudicating authority to decide during the remand proceedings.

4. Imposition of Penalty

The Collector had imposed a penalty of Rs. 5 lakhs on the appellant. The Tribunal noted that the question of penalty was linked with the question of duty and would also be open before the adjudicating authority during the remand proceedings.

Conclusion:

The Tribunal dismissed Appeal No. E/1549/91 concerning the classification of the product under Heading 30.03. However, it set aside the impugned order in Appeal No. E(SB) 4009/95 and remanded the matter to the Commissioner of Central Excise to readjudicate the issues of the applicability of Notification No. 242/88-C.E., the bar of limitation on the demand of duty, and the imposition of penalty, in accordance with the principles of natural justice.

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