2015 (3) TMI 693 - HC - Central Excise

Denial of MODVAT Credit - Classification of goods - whether products of the respondent assessee are proprietary classifiable as patent or proprietary medicaments for they are solely generic drugs therefore, classifiable as such - Held that - Tribunal could not have disposed of the assessee s appeal, even in his absence, without considering the issue as to whether the products are classifiable as patent or proprietary medicaments or medicines other than proprietary and generic name. It is only then the issue whether the Modvat credit is admissible, if the final product attracts Nil duty could have been determined by the Tribunal. In the circumstances, the Tribunal s order does not deal with the entire controversy as projected by the parties. It was the bounden duty of the Tribunal to apply its mind to some vital and basic issues. The Tribunal s approach therefore, is clearly faulty and as a result, it failed to perform its duty as last fact finding authority. Then, its order does not satisfy the requirement in law. - Matter remanded back - Decided in favour of Revenue.

Summary

Issues:
Classification of products as proprietary medicaments, eligibility for Modvat Credit, Tribunal's reliance on previous orders, correctness of classification by adjudicating authority, Tribunal's duty to consider vital issues.

Classification of Products as Proprietary Medicaments:
The appeal challenges the order of the Customs, Excise and Service Tax Appellate Tribunal regarding the classification of products as proprietary medicaments. The appellant argues that the products are generic drugs and should be classified accordingly. The issue of classification is crucial for determining duty liability and Modvat Credit eligibility. The Tribunal's reliance on previous orders is questioned, emphasizing the need to address whether the products are indeed proprietary medicaments.

Eligibility for Modvat Credit:
The show cause notice alleged that the respondent misused Modvat facility by declaring the products as patent or proprietary medicaments when they were generic, attracting Nil rate of duty. The adjudicating authority classified the products as generic medicaments under Sub Heading 3003.20, confirmed by the Commissioner of Appeals. The appellant challenged this classification, highlighting the importance of correctly determining the eligibility for Modvat Credit based on the final product's duty rate.

Tribunal's Reliance on Previous Orders:
The Tribunal's decision was influenced by previous orders from different benches, but the appellant argued that the Tribunal failed to consider the specific circumstances of this case. The Tribunal's approach was deemed faulty for not addressing the core issue of classification and duty liability, indicating a lack of thorough examination and analysis.

Correctness of Classification by Adjudicating Authority:
The adjudicating authority extensively analyzed the nature of the products, focusing on whether they were proprietary medicaments or generic drugs. The authority classified the products as generic medicaments under Sub Heading 3003.20, leading to the denial of Modvat Credit. The correctness of this classification was challenged by the appellant, emphasizing the need for a proper determination based on the product's characteristics.

Tribunal's Duty to Consider Vital Issues:
The High Court found the Tribunal's order lacking in addressing crucial issues related to classification and duty liability. The Tribunal was directed to reconsider the entire controversy, ensuring a comprehensive examination of all grounds raised by the appellant. The Court emphasized the Tribunal's duty as the final fact-finding authority to thoroughly analyze key issues and render a decision without being influenced by previous orders or external factors.

In conclusion, the High Court allowed the appeals, setting aside the impugned orders and remanding the case to the Tribunal for a detailed reconsideration. The Tribunal was instructed to decide on all grounds raised in the Memo of Appeal, specifically evaluating the classification and Modvat Credit eligibility in accordance with the law. All contentions from both sides were to be considered, and the Tribunal was urged to expedite the disposal of the case without any cost orders.