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TMI Blog1992 (10) TMI 196X X X X Extracts X X X X X X X X Extracts X X X X ..... ol into wooltops by solvent processing. They have claimed in the appeal that the Lanolin that they manufacture has been conforming to the specifications of the Indian Pharmacopoeia (I.P.-1966) - a pharmacopoeial preparation, that is drug. But in the Classification Lists submitted by them from time to time they have not declared it as conforming to the I.P. The allegations against them in the show cause notice, dated 28-11-1985 issued under Rule 9(2) read with Section 11A of the Central Excises & Salt Act, 1944 was that they had contravened the provisions of Rules 173B, 173C, 173F in as much as ; (a) they fraudulently suppressed material facts as to the nature, character and composition of the goods in their Classification Lists for the period 5-3-1979 to 3-4-1979 and 1-3-1983 to the date of issue of the show cause notice (b) wilfully mis-stated the said goods as non-excisable in the Classification Lists for the period 5-3-1979 to 3-4-1979 (c) wilfully and fraudulently did not file requisite Classification Lists for the said goods for the period from (i) 4-4-1979 to 27-2-1982, (ii) 28-2-1982 to 31-10-1982 and (iii) 1-11-1982 to 28-2-1983, with intent to avoid proper classificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5-3-1979 - C.L. 2/79 filed again declaring 'Lanolin Anhydrous' as non-excisable in the category of "other goods" manufactured (C.L. filed because of increase in the rate of duty under Item 68 from 5% to 8%). 9-10-1979 - C.L. 2/79 approved by the Assistant Collector. 28-2-1982 - Notification 104/82-C.E. issued continuing the exemption to "All drugs, medicines, pharmaceuticals and drug intermediates nes". 22-6-1982 - Notification 197/82-C.E. issued. The scope of exemption changed to "All bulk drugs, medicines, and drug intermediates nes" and following Explanation added "In Serial No. 21, "bulk drugs" means any chemical or biological or plant product, conforming to pharmacopoeial standards used for the diagnosis, treatment, mitigation or prevention of disease in human beings or animals, and used as such or as an ingredient in any formulation". 1-11-1982 - Notification 234/82-C.E. issued without making any changes in the scope of exemption. 1-3-1983 - C.L. No. 7/83 filed declaring Lanolin Anhydrous as exempt from duty under Notification 104/82, dated 28-2-1982 as amended by Notification 234/82, dated 1-11-1982. 30-6-1983 - Notification 174/83-C.E. issued amending ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. In view of these findings, he confirmed the demand for the period 1-11-1982 to 31-8- 1985 and also imposed a penalty of Rs. 25,000. While doing so, the learned Collector has arrived at a finding that the goods are used as medium/base in the pharmaceutical preparations and are not used as drug intermediates or bulk drugs or medicines by the actual users. In arriving at his finding the Collector has also taken into account the fact that the appellants did not declare the goods as conforming to the Indian Pharmacopoeia, a plea which they subsequently advanced before him. 5. In the appeal before us, the appellants have contested the correctness of the demand for a period beyond six months on the ground that there had been no suppression of any fact at any time whatsoever; that 'end use' not being a condition for availing exemption granted to bulk drugs, the production of any end use certificate is fully unwarranted. The appellants' further claim is that Lanolin Anhydrous conforming to I.P.-3966 is a pharmacopoeial 'bulk drug' and is entitled to exemption is such by virtue of the notifications issued for the purpose from time to time for being manufactured under a drugs licence and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Director General of Health Services certifying Lanolin Anhydrous - IP manufactured by the appellants to be a bulk drug eligible for exemption from duty under Notification 234/86, dated 3rd April 1986. 8. Shri Ram Prakash, the learned SDR submitted that with the insertion of the Explanation in the exemption notification by the amending notification 197/82, dated 22-6-1982, the scope of exemption had been defined and, since the appellants had at no stage in their classification list indicated that they were manufacturing Lanolin Anhydrous conforming to the Indian Pharmacopoeia, the goods were not eligible for exemption under any of the notifications particularly after the Explanation was added to the Notification. He referred to the decision of the Gujarat High Court in the case of Navsari Oil Products Limited v. Assistant Collector of Central Excise. [1992 (60) E.L.T. 550] and submitted that it was held in this case that exemption dependent on composition or condition of goods was claimable only before the removal of the goods when physical verification thereof was possible. 9. On the question raised by Shri Biswas that once a Classification List had been approved the demands, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndment to the Schedule to the Central Excise Tariff Act, 1985, a change in the chapter heading number, and sub-heading number becomes necessary. Although there is no specific mention in sub-rule (4) of the need for filing a fresh Classification List because of the issue of an exemption notification or its amendment, such a situation appears to be covered by the provision for filing a fresh Classification List because of the change in the rate of duty. Between March 1979 when the appellants had stated that Lanolin Anhydrous was non-excisable, and March 1983 when they claimed exemption under Notification 104/82 as amended by Notification 234/82, the appellants did not consider it necessary to file any Classification List. One could not have taken serious objection for failure to file a fresh Classification list if the exemption notifications were so clear as not to raise any doubt about the liability or otherwise of Lanolin Anhydrous to duty; but with the addition of the Explanation to Notification 104/82, denning the scope of "bulk drugs", it became necessary to declare the position in a fresh Classification List and state that the goods manufactured by the appellants continued to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Supreme Court in the case of Jaishri Engineering (P) Ltd. v. Collector of Central Excise, Bombay. [1989 (40) E.L.T. 214], the Court observed in Paragraph 16 as under :- "16. ......illustrates that the content of the power under Section 11A includes a power to charge the Tariff Item applicable to the goods in question and, if wrong classification had been made earlier, due to mis-statement, fraud, etc. on the part of the assessee, the Revenue can invoke the proviso to Section 11A(1).....The case conclusively establishes that Section 11A vests a larger power in the authorities than the one stated by the petitioner in the instant case and that, while exercising the power under Section 11A, the authorities under the Act are not bound by the approval given to the Classification List earlier". 12. In view of the decisions cited by the learned SDR, it is dear that since the show cause notice was issued under the proviso to Section 11A(1), it was permissible for the authorities to question the correctness of the classification of the goods and also to raise a demand for the duty short levied. The other question that we have to consider is whether there was any wilful mis-statement on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be given at the second place where the words are" .....and used as such or as ingredient in any formulation". The second place at which the requirement of use has been mentioned in the notification implies its use "either as such or as an ingredient", and would signify actual use. Therefore, there is little scope for any doubt that after the insertion of the Explanation in the notification, it became necessary to ascertain that the bulk drug in respect of which the exemption was claimed was actually used either as such or as an ingredient in any formulation. As against the Collector's finding which is based on the test report of the goods that Lanolin Anhydrous was used as medium base in the pharmaceutical preparation and the evidence of its actual use by M/s. Himani Limited, the appellants did not place any evidence to controvert the allegation. It therefore follows that Lanolin Anhydrous which was not used as such or as an ingredient in any formulation was not entitled to the exemption under the notification from 1-11-1982 onwards when the Explanation was added to the notification. Thus, the demand for duty short levied is sustainable. In view of the evidence of finalisation o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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