1998 (11) TMI 351 - AT - Central Excise

Summary

Issues:
1. Duty demand confirmation on intermediate products during the manufacture of bulk drugs.
2. Imposition of penalty and confiscation of assets.
3. Marketability and excisability of the disputed intermediate products.
4. Time bar defense for the demand of duty.

Issue 1: Duty Demand Confirmation on Intermediate Products:
The appellants contested the duty demand of Rs. 8,43,417.75 on Diamino Benzophenone, Chloro Acete Zylon Derivative, and Imidazole Alcohol produced during the manufacturing of Mebendazole USP, Lidocaine USP, and Miconazole Nitrate BP. The Central Excise Officers observed the emergence of these intermediate products during the manufacturing process and issued a show cause notice proposing duty recovery, penalty, and confiscation. The adjudicating authority confirmed the duty demand, rejecting the appellants' defense that the intermediate products were not marketable goods. The authority applied an extended period of limitation due to alleged suppression of production and deliberate duty evasion.

Issue 2: Imposition of Penalty and Confiscation of Assets:
The Collector of Central Excise imposed a penalty of Rs. 2.5 lakhs on the appellants and ordered the confiscation of assets used in connection with the manufacture of the intermediate products. The appellants were given an option to redeem the assets on payment of a fine of Rs. 50,000. This penalty and confiscation were based on the confirmed duty demand and the alleged deliberate evasion of duty.

Issue 3: Marketability and Excisability of Disputed Intermediate Products:
The appellants argued that the disputed intermediate products were semi-finished and not marketable goods as they required further processing for utilization in the manufacture of bulk drugs. The Revenue contended that the products were excisable goods falling under Chapter 29 and were marketable. The burden of proving marketability and excisability lay with the Revenue, which had to establish that the items were indeed marketable. The Department failed to discharge this burden adequately, leading to the demand being set aside due to lack of evidence supporting marketability.

Issue 4: Time Bar Defense for Duty Demand:
The appellants raised a time bar defense, arguing that the show cause notice proposing duty recovery for the intermediate products produced during a specific period was beyond the normal limitation period. They contended that the extended period of limitation was not applicable as there was no suppression of facts or willful misdeclaration. The Tribunal accepted the time bar defense, ruling that the demand was time-barred, and penal action was not warranted. Therefore, the appeal was accepted on the ground of time bar without delving into the merits of the case.

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