2000 (2) TMI 403 - AT - Central Excise

Issues Involved:
1. Classification of Penicillin G. Amidase (PGA) Biocatalyst.
2. Allegation of misclassification with intent to evade payment of duty.
3. Invocation of the extended period for the demand of duty.

Issue-wise Detailed Analysis:

1. Classification of Penicillin G. Amidase (PGA) Biocatalyst:
The primary issue was whether the PGA Biocatalyst should be classified under SH 3002.00 or SH 35.07. The appellants classified PGA under SH 3002.00, which includes "Vaccines, Toxins, Cultures of microorganisms (including ferments but excluding yeasts) and similar products," attracting a nil rate of duty. The department contended that PGA, being an enzyme, should be classified under SH 3507.00, which includes "Enzymes, prepared enzymes not elsewhere specified or included."

The manufacturing process of PGA involves cultivating E. Coli bacteria, which contains enzymes. The Commissioner relied on various scientific literature and expert opinions, including the research paper by Dr. J.G. Shewale and Dr. H. Sivaraman, which referred to PGA as an enzyme. The Commissioner concluded that PGA is essentially an enzyme and should be classified under SH 3507.00.

The appellants argued that PGA is a culture of microorganisms and not merely an enzyme. They cited letters from Dr. J.G. Shewale and other experts, stating that PGA is an immobilized whole-cell biocatalyst, not an enzyme. However, the Tribunal found the scientific literature and expert opinions supporting the enzyme classification more credible and consistent.

2. Allegation of Misclassification with Intent to Evade Payment of Duty:
The department issued several Show Cause Notices alleging that the appellants misclassified PGA under SH 3002.00 with the intent to evade payment of duty. The Commissioner confirmed the misclassification and raised a total demand of Rs. 3,36,18,021/-.

The Tribunal, however, found that the appellants had consistently declared the classification of PGA under SH 3002.00 in their classification lists since 1989, which were approved by the Assistant Commissioner. The Tribunal observed that the appellants provided a correct description of the product and classified it under the appropriate heading to the best of their understanding. The Assistant Commissioner's approval without verification could not be blamed on the appellants.

3. Invocation of the Extended Period for the Demand of Duty:
The department invoked the extended period under the proviso to Section 11A (1) of the Central Excise Act, 1944, to demand duty for the period from February 1990 to July 1994, alleging suppression of facts. The Tribunal held that the extended period could not be invoked as there was no suppression, mis-statement, or intent to evade duty by the appellants. The demand of Rs. 1,47,93,521/- for the period from 2/90 to 7/94 was set aside as time-barred.

However, the Tribunal upheld the demands totaling Rs. 1,88,24,500/- for the periods covered by the Show Cause Notices issued within six months of the respective periods of demand, as these were within the normal limitation period.

Conclusion:
The Tribunal concluded that PGA Biocatalyst is classifiable under SH 3507.00 as an enzyme. The allegations of misclassification with intent to evade duty were not supported, and the extended period for the demand of duty was not applicable. The demand for the period from 2/90 to 7/94 was set aside as time-barred, while the demands within the normal limitation period were confirmed.

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