1999 (5) TMI 110 - AT - Central Excise

Summary

Issues Involved:
1. Correct classification of the product 'Borocalendula Anti-Septic Cream'.
2. Presence of alcohol in the product.
3. Applicability of Central Excise duty.
4. Validity of test reports and laboratory capabilities.
5. Classification under Tariff Item 14-F or Chapter 33.
6. Determination of the product as a homoeopathic medicine or cosmetic.
7. Admissibility of post-adjudication evidence.
8. Imposition of personal penalty.

Detailed Analysis:

1. Correct Classification of the Product:
The primary issue revolves around the classification of 'Borocalendula Anti-Septic Cream'. The department argued it was a skin care preparation falling under Tariff Item 14-F, while the appellant contended it was a homoeopathic medicine containing alcohol, thus not subject to Central Excise duty.

2. Presence of Alcohol in the Product:
The appellant claimed the cream contained 2% alcohol derived from Mother Tincture. Initial tests in 1982 confirmed the presence of alcohol. However, subsequent tests in 1986 showed no alcohol, leading to a dispute over the accuracy and consistency of these reports. The appellant requested retests, which again showed no alcohol, but a later test by the Homoeopathic Pharmacopoeia Laboratory, Ghaziabad, confirmed the presence of alcohol and other active ingredients.

3. Applicability of Central Excise Duty:
Based on the initial test reports confirming alcohol presence, the appellant argued no Central Excise duty was payable. However, conflicting test results led to show cause notices demanding duty for different periods, which the Collector confirmed, imposing a substantial penalty.

4. Validity of Test Reports and Laboratory Capabilities:
The appellant challenged the validity of the test reports, highlighting the lack of proper equipment and expertise in the testing laboratories. The Collector acknowledged these inadequacies but still relied on the test results. The issue of proper testing and the reliability of the reports was central to the dispute.

5. Classification under Tariff Item 14-F or Chapter 33:
The classification under Tariff Item 14-F or Chapter 33 depended on whether the product contained alcohol. The appellant cited Supreme Court decisions indicating that even if alcohol was present as a component of another ingredient, the product should be classified accordingly.

6. Determination of the Product as a Homoeopathic Medicine or Cosmetic:
The department argued the product was a cosmetic with mild antiseptic properties, widely available without prescription. The appellant maintained it was a homoeopathic medicine, supported by the presence of homoeopathic ingredients and alcohol. The classification as a medicine or cosmetic would significantly impact its dutiability.

7. Admissibility of Post-Adjudication Evidence:
The appellant presented a post-adjudication clarification from the Homoeopathic Pharmacopoeia Laboratory, Ghaziabad, confirming the presence of alcohol. The department objected, arguing it was new evidence not considered during adjudication. The Tribunal agreed that this evidence needed to be reviewed by the original adjudicating authority.

8. Imposition of Personal Penalty:
The Collector imposed a personal penalty of Rs. 1.50 crores on the appellant firm under Rule 173Q(1) of the Central Excise Rules, 1944. This penalty was part of the broader dispute over the classification and dutiability of the product.

Conclusion:
The Tribunal set aside the impugned order and remanded the matter for de novo adjudication, emphasizing the need for a thorough review of the post-adjudication clarification and proper testing of the product. The adjudicating authority was instructed to provide an effective opportunity for the appellant to present their case. The Tribunal did not address other issues not argued during the hearing, leaving them open for consideration during the remand. The appeal was allowed by way of remand, with both judges providing separate but concurring judgments.