1996 (12) TMI 256 - AT - Central Excise

Issues Involved:
1. Classification of "Dant Manjan Lal" under Tariff Item 68.
2. Eligibility for exemption under Notification No. 179/77.
3. Use of power in the manufacture of "Dant Manjan Lal."
4. Invocation of the extended period of limitation under Section 11A.
5. Inclusion of trade discounts and excise duty in the assessable value.

Detailed Analysis:

1. Classification of "Dant Manjan Lal" under Tariff Item 68:
The primary issue was whether "Dant Manjan Lal" should be classified under Tariff Item 68 (T.I. 68) of the Central Excise Tariff. The Collector (Appeals) and the Tribunal had previously held that "Dant Manjan Lal" was classifiable under T.I. 68 and not as an Ayurvedic medicine, thus not entitled to exemption under Notification No. 55/75. This classification was upheld by the Supreme Court in Civil Appeal No. 2199 of 1991, confirming that "Dant Manjan Lal" is not an Ayurvedic medical preparation.

2. Eligibility for Exemption under Notification No. 179/77:
BAB claimed exemption under Notification No. 179/77, arguing that "Dant Manjan Lal" was an Ayurvedic medicine. The Collector (Appeals) rejected this claim, citing the Supreme Court decision in M/s. Sarin Chemicals Laboratory v. Commissioner of Sales Tax, U.P., which classified tooth powder as a toilet article. The Tribunal upheld this decision, noting that "Dant Manjan Lal" was used for dental cleanliness, making it a toilet article, not a medicine. The Tribunal also noted that the burden of proof for exemption lies with the assessee, which BAB failed to meet.

3. Use of Power in the Manufacture of "Dant Manjan Lal":
The Collector found that power-operated grinding machines were used in the manufacturing process, based on a statement from Shri Sadanand Mishra, an employee of BAB. Despite BAB's contention that power was not used, the Tribunal upheld the Collector's findings, noting that BAB had not provided the "Nirman Register," which would have documented the use of power. The Tribunal concluded that the use of power disqualified BAB from exemption under Notification No. 179/77.

4. Invocation of the Extended Period of Limitation under Section 11A:
BAB argued that the extended period of limitation under Section 11A could not be invoked as there was no wilful misstatement or suppression of facts. However, the Collector and the Tribunal found that BAB had consistently refused to take an L-4 license, file classification lists, or maintain prescribed records, which constituted suppression of facts with intent to evade duty. The Tribunal upheld the Collector's decision to invoke the extended period of limitation, citing BAB's non-compliance with mandatory provisions and persistent evasion tactics.

5. Inclusion of Trade Discounts and Excise Duty in the Assessable Value:
BAB contended that the assessable value should exclude trade discounts and the element of excise duty. The Collector rejected this claim, stating that trade discounts should have been approved by filing price lists, and since no duty was paid, the element of excise duty must form part of the assessable value. The Tribunal upheld this decision, noting that deductions for trade discounts and excise duty are inadmissible without compliance with Rule 226.

Conclusion:
The Tribunal found no infirmity in the Collector's order dated 21-9-1990, upholding the classification of "Dant Manjan Lal" under T.I. 68, rejection of exemption under Notification No. 179/77, and invocation of the extended period of limitation. The Tribunal also upheld the inclusion of trade discounts and excise duty in the assessable value. Consequently, BAB's appeal was rejected, and the Department's appeal was allowed, setting aside the order granting exemption to BAB.

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