2000 (9) TMI 855 - AT - Central Excise

Issues Involved:

1. Classification and liability to pay central excise duty on vegetable extracts.
2. Marketability of compound vegetable extracts.
3. Applicability of extended period of limitation due to alleged suppression of facts.
4. Imposition of penalty under various provisions of Central Excise Rules, 1944.
5. Applicability of the Central Board of Excise and Customs (CBEC) Circular dated 16-9-1997.

Detailed Analysis:

1. Classification and Liability to Pay Central Excise Duty on Vegetable Extracts:

The appeal by M/s. Dabur India Ltd. (referred to as 'M/s. Dabur') challenges the classification and excise duty liability on vegetable extracts manufactured and consumed for manufacturing exempted Ayurvedic Medicaments. The vegetable extracts were classified under sub-heading no. 1301.90 of the Central Excise Tariff. The Commissioner of Central Excise, Meerut-I, in his order-in-original dated 26-11-1997, upheld this classification and confirmed the demand for Rs 2,98,56,449.73. A penalty of Rs 2,98,56,450/- was imposed under Rules 9(2), 52(A), 173(Q), and 210 of the Central Excise Rules, 1944.

2. Marketability of Compound Vegetable Extracts:

The adjudicating authority found that the mixed (compound) vegetable extracts, in their various forms (liquid, paste, and powder), were marketable and satisfied the test of marketability. It was noted that similar products were being marketed by other manufacturers, stored for considerable time without deterioration, and in some cases, preservatives were added to increase their shelf-life. The extracts in question had a definite name, character, and use, and were prepared as per manufacturing formula described in authoritative Ayurvedic Publications.

3. Applicability of Extended Period of Limitation Due to Alleged Suppression of Facts:

The Commissioner concluded that M/s. Dabur had wilfully suppressed the facts of manufacturing vegetable extracts and did not declare these excisable and dutiable products in any classification lists filed with the Central Excise Department during the period from 1-8-1990 to 28-2-1994. This non-declaration amounted to suppression of facts, justifying the invocation of the extended period of limitation for demanding the duty.

4. Imposition of Penalty Under Various Provisions of Central Excise Rules, 1944:

The adjudicating authority imposed a penalty of Rs 2,98,56,450/- on M/s. Dabur under Rules 9(2), 52(A), 173(Q), and 210 of the Central Excise Rules, 1944, for contraventions with intent to evade payment of central excise duty. The penalty was upheld considering the deliberate suppression of facts and non-compliance with prescribed central excise formalities.

5. Applicability of the Central Board of Excise and Customs (CBEC) Circular Dated 16-9-1997:

M/s. Dabur referred to the CBEC Circular No. 334/50/97-CX., dated 16-9-1997, which clarified that mixed or compounded vegetable extracts with therapeutic or prophylactic value were classifiable under Heading No. 30.03 of the Central Excise Tariff. However, the Tribunal found that the vegetable extracts in question were not mixed or compounded for therapeutic or prophylactic purposes and were not classifiable as medicaments under Chapter 30. The Board's Circular did not advance the case of the appellants.

Conclusion:

The Tribunal concluded that the vegetable extracts in question were identifiable, well-defined products, marketable, and classifiable under sub-heading no. 1301.90 of the Central Excise Tariff. The appellants had suppressed the facts of their manufacture, justifying the extended period of limitation and the imposition of penalty. The appeal was rejected, and the order of the Commissioner of Central Excise, Meerut-I, was upheld.

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