2015 (9) TMI 819 - AT - Central Excise

Clandestine removal of goods - Shortage of goods - Held that - Commissioner has examined the duty demand on the goods covered by 17 invoices alleged to have been parallel invoices. While he held the duty amount of ₹ 1,38,912/- on goods covered by 17 parallel invoices is sustainable there was no discussion regarding the dutiablity of goods namely generic medicines or PP medicines in the said impugned order. He only observed that there is no logic or wisdom of clearing exempted goods on parallel invoices and the appellant also did not raise the issue during investigation. It is necessary to segregate dutiable PP medicines from exempted generic medicines for arriving at the correct duty liability in respect of goods cleared under the cover of parallel invoices. Similarly, regarding shortage of various types of medicines on physical verification vis- -vis the RG-1 account, it is necessary to co-relate the destruction and export made under ARE-4 and clearances declared in RT-12 return with reference to dutiable or exempted medicines. These has to be done by Original Authority after due verification of records. - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
Manufacture of medicines falling under Chapter 30 of the Schedule to the Central Excise Tariff Act, 1985; Exemption benefit availed; Demand of Central Excise duty; Allegations of clandestine clearance; Duty liability on generic and PP medicines; Segregation of dutiable PP medicines from exempted generic medicines; Shortage of excisable items; Destruction and export of medicines; Duty liability on unaccounted/clandestinely cleared PP medicines; Appeal against the order of the Commissioner.

Analysis:
The appellants, engaged in manufacturing medicines falling under Chapter 30 of the Schedule to the Central Excise Tariff Act, 1985, appealed against the Commissioner's order confirming a demand of Rs. 7,81,799 and imposing an equal penalty while dropping the demand of Central Excise duty of Rs. 23,01,680. The case originated from a show cause notice issued in 1999 alleging clandestine clearance of goods under the cover of parallel invoices without duty payment. The Commissioner's order-in-original was dated 07/12/01, which was appealed and remanded for fresh consideration by the CESTAT. The current impugned order resulted from these remand proceedings.

The appellant contested the order, arguing that the invoices relied upon were proforma and covered generic medicaments with nil Central Excise duty chargeable at that time. They claimed no segregation was made between PP medicines and generic medicaments. Regarding shortages of excisable items, the appellant explained that some final product quantities did not meet standards and were destroyed as per Drug Control Rules, with duty paid and entered in returns. They also mentioned exporting medicines without proper entries and argued that duty liability on PP medicines should not arise due to turnover not exceeding Rs. 30 lakhs.

During the appeal, the appellant presented a comparison chart on shortages of Ampoules and Vials, emphasizing that segregation between generic and PP medicines was crucial to determine duty liability correctly. The Authorized Representative reiterated the findings of the impugned order, emphasizing duty demand on unaccounted/clandestinely cleared PP medicines, even if turnover was below Rs. 30 lakhs.

After hearing both sides and examining the records, the Tribunal noted the Commissioner's failure to discuss the dutiablity of generic and PP medicines in the impugned order. The Tribunal emphasized the necessity to segregate dutiable PP medicines from exempted generic medicines to determine the correct duty liability for goods cleared under parallel invoices. They highlighted the importance of correlating destruction, export, and clearances with dutiable or exempted medicines, directing the Original Authority to verify records and reconsider the matter, providing the appellant an opportunity to present their case. Consequently, the appeal was disposed of by way of remand for further consideration and appropriate orders.