1999 (10) TMI 422 - AT - Central Excise

Issues Involved:
1. Classification of the product "Dant Manjan Lal" under the Central Excise Tariff.
2. Invocation of the larger period of limitation for the demand of duty.
3. Imposition of penalty on the appellants.

Detailed Analysis:

1. Classification of the Product:
The appellants argued that "Dant Manjan Lal" should be classified under Tariff Heading 30.03 as an Ayurvedic Medicine, while the Department classified it under Heading 33.06 as a cosmetic product. The appellants referenced various authoritative Ayurvedic texts and government notifications to support their claim. They highlighted that post-1987, "Dant Manjan Lal" was manufactured according to the formulae in the "Ayurveda Sara Sangraha," included in the First Schedule to the Drugs and Cosmetics Act, 1940. The Ministry of Health and Family Welfare and the Drug Controller of India recognized it as an Ayurvedic medicine. Circulars from the Ministry of Finance further supported this classification, stating that products manufactured according to Ayurvedic texts should be treated as Ayurvedic Medicines.

The Department countered by referring to the Supreme Court's earlier judgment, which classified "Dant Manjan Lal" as a tooth powder, not a medicine. They argued that the common parlance test should apply, meaning the product should be classified based on how it is perceived by the general public. The Department also questioned the adherence to the Ayurvedic formulae by the appellants, suggesting a lack of evidence.

2. Invocation of the Larger Period of Limitation:
The appellants contended that the demand for duty from 1-5-1992 to 31-7-1996, issued on 10-6-1997, was time-barred. They argued that they had cleared the product under the correct classification with the knowledge and approval of the Central Excise Authorities, supported by various Circulars from the Central Board of Excise and Customs. They pointed out that similar show cause notices had been issued and dropped previously, and their classification list had been approved by the Assistant Commissioner. The appellants maintained that there was no suppression of facts or intent to evade duty.

The Department argued that the appellants failed to file the required classification lists annually, justifying the invocation of the extended period for duty demand.

3. Imposition of Penalty:
The appellants argued against the imposition of a Rs. 10 lakh penalty, stating that they had complied with the law based on the Circulars and approvals from the Central Excise Authorities. They asserted that there was no intent to evade duty, and the penalty was unwarranted.

Judgment:
The Tribunal considered the arguments and evidence presented. It noted that the various Circulars issued by the Central Board of Excise and Customs supported the appellants' classification of "Dant Manjan Lal" as an Ayurvedic Medicine. The Tribunal observed that the Department had knowledge of the classification and had previously accepted it. The Tribunal held that the extended period of limitation was not applicable as there was no deliberate suppression or mis-statement by the appellants. Consequently, the demand for duty was time-barred, and the penalty was unjustified.

The Tribunal set aside the impugned order on the ground of limitation and did not express an opinion on the classification issue, leaving it open.

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