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TMI Blog1998 (8) TMI 533X X X X Extracts X X X X X X X X Extracts X X X X ..... and 3401.10, instead of ayurvedic medicines under CET sub-heading 3003.30 as claimed by the assessee. A penalty of Rs. 1 crore has been imposed on the first applicant and penalty of Rs. 25 lakhs has been imposed under Rule 209A of the Central Excise Rules, 1944 on M/s. Ishan Marketing P. Ltd. (hereinafter to be referred as the second applicant) on the ground that it was also involved in evasion of duty by the first applicant through under valuation of goods sold to it by the first applicant. A penalty of Rs. 35 lakhs has been imposed under Rule 209A on Smt. Vinita Jain, (hereinafter referred to as the third applicant) holding that she is the main person managing both the first and second applicant company. 2. The basis on which the Department has concluded that the items in dispute are in the nature of cosmetics and toilet preparations is that the first applicant had introduced itself as a reputed manufacturer of cosmetics, ordered were being placed by Taj Mahal Hotels, etc. for cosmetics, rates were being quoted as cosmetics, Hotel Managers, etc., who were examined, did not say that the products were used as medicines, and the extracts from the literature showed that the items w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the first applicant, that the first applicant, inspite of knowledge that the disputed items were not cosmetics, requested hotels not to mention shampoo , etc. on the product but to mention bioapple etc. to avoid excise problems the drug licence was obtained fraudulently by suppressing the facts before the Drug Control authorities and the Collector s order in the case of Shahnaz Herbals stated to be accepting similar products to be ayurvedic medicines was not produced before the Commissioner by the applicants herein. 3. Shri M. Chandrasekharan, learned Counsel appearing on behalf of the first applicant submits that the products in question are ayurvedic medicines as seen from the Licence granted by the Drug Control Authorities which has been renewed up to 31-12-99. He further submits that the very same products manufactured by M/s. Shahnaz Herbals have been accepted by the Department to be ayurvedic medicines by adjudication orders of August, 1989 September, 1991. On the allegation that all three applicants are related persons, he submits that the holding of shares by the third applicant and her husband and brother in the first and second applicant company or the fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re approved, the demand can only be prospective as held by the Hon ble Supreme Court in the case of Bhiwani Textiles v. CCE reported in 1996 (88) E.L.T. 639 (S.C.) and CCE v. Bengal National Textile Mills Ltd. reported in 1997 (94) E.L.T. 284 (S.C.). Learned Counsel also pleads financial hardship highlighting the fact that the first applicant company made a meager profit of Rs. 12 lakhs in the year ending 31-3-1997. For all these reasons, he prays for waiver of pre-deposit of duty and penalty and stay of recovery thereof pending the appeal. 5. Appearing on behalf of the second and third applicants, Dr. A.M. Singhvi, learned Sr. Counsel in addition to adopting the arguments of the first applicant, submits that the applicants were under the bona fide belief that the products manufactured by the first applicant company were ayurvedic medicines on the basis of the Drug Licence and there was no wilful intention on their part to evade payment of duty and, therefore, penalty is not warranted. He relies upon the decision of the Tribunal in the case of Dena Jee Sansthan v. CCE, Meerut reported in 1998 (101) E.L.T. 113 in support of his contention that the existence of bona fide belief is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee Baidyanath Ayurved Bhavan reported in 1985 (22) E.L.T. 844 (which has been upheld by the Supreme Court). He submits that the first and second applicants are related persons as per Section 4(4)(c) of the Central Excise Act, 1944 since very low prices were being charged by the first applicant from the second applicant, originally financing and funding of both the companies was from the same source, there was a special relationship between the two companies wherein they were seen to be functioning as one company, with the employees of one being performing the job of the other company, without any formal appointment letter or extra remuneration, merely up the orders of the Director, Smt. Vinita Jain, the 3rd applicant. He reiterates the conclusion of the Commissioner that the transactions between first and second applicant company were not at arms length and that they had a mutual interest in the business of each other. On the applicability of the extended period of limitation, he submits that the first applicant obtained a drug licence fraudulently by not declaring the use of non-ayurvedic ingredients used in the products, such as foaming agents, astringents, antiseptic, etc. He al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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