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TMI Blog2004 (12) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... 1-4-1986 to 30-11-1986. The second show cause notice was dated 6-4-1988. Under the said notice, the department has demanded duty for the period 1-3-1984 to 28-2-1986. The last show cause notice was dated 20-6-1988, for the period 1-4-1986 to 30-4-1987. Therefore, section 11A(1) was not applicable. We may mention that in the present case, we have come to the conclusion that there was no wilful suppression of facts on the part of the appellant as the appellant had filed the gate passes, invoices and monthly returns, which were all duly approved by the department from time to time. The invoices, gate passes and the monthly returns indicated the names of the consignees from which it was possible for the department to infer sale of sorbitol solution to non-pharmaceutical companies and yet no steps were taken by the department to raise the demand in time and, therefore, we hold that there was no wilful suppression of material facts for invoking the proviso to Section 11A(1). Although on merits the department succeeds, these appeals need to be allowed as the impugned show cause notices-cum-demands were time barred and as no case is made out by the department for invocation of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly availed nil rate of duty in respect of its clearances by not bringing to the notice of the department the fact that certain quantities of sorbitol solution and vitamin "C" had been sold to non-pharma concerns knowing fully well that the commodities would not be normally used as drugs or medicines by its customers. By the said show cause notices, the appellant was asked to show cause inter alia as to why excise duty should not be recovered under section 11A(1) of the said Act read with Rule 9(2) of the Central Excise Rules, 1944. The said three show cause notices related to the period, April, 1986 to November, 1986, March, 1984 to February, 1986, and April 1986 to 30th April, 1987. The grounds for demand stated that on verification of the records of the appellant, it was noticed by the department that the appellant had cleared sorbitol solution to cigarette manufacturers, which fact was not brought to the notice of the department at the time of clearance. 5.By its reply dated 2-3-1988, 18-7-1988 and 6-10-1988 respectively, the appellant submitted that the Drugs Controller to the Government of India had issued a certificate certifying sorbitol solution etc. as a Bulk Drug after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ona fide believed that the goods in question fell under the said notification. The appellant was allowed to clear the goods by the department and consequently, invocation of Rule 9(2) of the Central Excise Rules by the department was not warranted, as there was no violation of Rule 9(1). It was argued that the normal trade pattern of putting sorbitol solution in the market was through distributors and consequently it was impossible to get an end use certificate at the time of clearance of the consignments at the factory gate. 6.By orders dated 23-11-1990, 22-11-1990 and 23-11-1990, the Collector rejected the contentions of the appellant and confirmed the demands in all the three notices. 7.Being aggrieved by the three orders passed by the Collector, the appellant filed three separate appeals, referred to above, before the Customs, Excise Gold (Control) Appellate Tribunal, New Delhi (hereinafter referred to as "the Tribunal"). The appellant argued the matter before the Tribunal on the point of limitation as well as on merits. The Judicial Member (J.M.) took the view that the above show cause notices were time barred and no case was made out for invoking the extended period of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, the department did not demand duty from the appellant in respect of the quantity sold to pharmaceutical concerns, but the department had demanded duty only in respect of the quantity of sorbitol solution and vitamin 'C' sold to non-pharmaceutical concerns. On facts, the T.M. came to the conclusion that the appellant had deliberately continued to take benefit of the exemption notification even in respect of the quantity about which they were aware would not constitute a drug or medicine in the normal course. That it was evidently done with the intention to sell to the non-pharmaceutical concerns, which fact was withheld from the department. It was further held that indication of names of the consignees on the gate passes was by itself not sufficient to exclude the extended period of time available to the department. Accordingly, the T.M. dismissed the appeals. 9.In view of difference of opinion, the matter was referred by the President of the Tribunal to a Third Member to decide - whether the demand was time barred? By the impugned judgment dated 11-1-1999, the Third Member, concurring with the T.M., came to the conclusion that the appellant had wrongly taken the benefit of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Drugs Controller to the effect that the sorbitol solution was a bulk drug within the meaning of "bulk drug" given in the explanation to the notification as they were normally used for diagnosis, treatment, medication or prevention of diseases in human beings. They were normally usable as "bulk drug" or as an ingredient in any formulation. Since the Drugs Controller had issued the certificate in favour of the appellant certifying sorbitol solution as a bulk drug, the appellant's product met the requirement laid down in the exemption notification. According to the learned Advocate, the word "normally" as used in the notification has to be assigned a dictionary meaning to mean "under normal circumstances" or "ordinarily". The word "normal", according to the learned Advocate, is to be read as opposed to the word "exceptional". According to the learned Advocate, in using the word "normally", one is referring to something which is opposed to abnormal or exceptional. According to the learned Advocate, the word "normally" used in the notification cannot restrict the exemption. That the word "normally" would rule out individual end use of the product. According to the appellant, if it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of the notification exist, the benefit should accrue to the assessee. It was urged that in the present case, the appellant believed that sorbitol solution and vitamin 'C' stood covered under the exemption Notification No. 234/86 and the appellant was allowed to clear the said goods by the department. Therefore, it was not open to the department to raise the dispute at a belated stage, by invoking Rule 9(2) of the Central Excise Rules, 1944, particularly, when there was no violation of Rule 9(1). It was further contended that the normal trade pattern of putting sorbitol solution I.P. in the market was through the distributors and, therefore, it was difficult for the appellant to obtain an end use certificate at the time of clearance of the said goods at the factory gate. Lastly, it was urged that out of quantity, on which duty has been demanded, only 29,850 Kgs. have been cleared to non-pharmaceutical units, namely, soaps, ceramics, rubber and cigarette units which represented 3.87% of the total clearances during the period in dispute and, therefore, 96% of the total clearances was to the pharmaceutical concerns and in the circumstances, the department was not right in invoking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs, which are normally used for diagnosis, prevention and mitigation of diseases and "used as such", as opposed to other classes which are not normally used but which are also capable of being used for the diagnosis, treatment etc. In the circumstances, it was urged that there was no need for using the word "exclusive" as is canvassed on behalf of the appellant. It was submitted that the key expression in the notification, namely, "normally used" and "used as such" should be given their purposive meaning in order to facilitate the taking of the benefit of exemption as also to prevent the abuse of the exemption. The words "normally used" indicated 'bulk drugs' whose predominant use is for the diagnosis, treatment etc. and which were otherwise capable of being used for other purposes. These bulk drugs stood apart from drugs which may not be normally used in diagnosis, treatment, prevention or mitigation of diseases. The latter class of drugs did not fall within the scope of exemption notification. Similarly, the first category of drugs referred to above, if and when diverted for other uses, would also get excluded. In the circumstances, the department was right in raising the demand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at more than one view was possible on interpretation of exemption Notification No. 234/86. The Third Member has recorded a finding that the appellant has not disputed that a certain quantity of sorbitol solution and vitamin 'C' stood cleared to non-pharmaceutical units, namely, soaps, ceramics, rubber and cigarette units. The appellant had conceded before the Tribunal of having cleared 3.87% of the total clearances to non-pharmaceutical companies who could not have used the said solution as drugs or medicines. Moreover, in the present case, the department has not demanded the duty in respect of quantity sold to pharmaceutical concerns for pharmaceuticals or medicinal purposes. In the present case, the dispute was not whether the appellant was entitled to the benefit of the exemption notification in respect of the entirety of goods manufactured and cleared during the period in question, but the dispute was regarding the taking of exemption benefit under the notification in respect of the quantum of bulk drugs cleared to consumers other than the pharmaceutical concerns. In the circumstances, the Third Member was right in deciding the question of limitation as well as the question of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Form 28 No. G/22 dated 17-3-1981 2. Vitamin C 'coated' (Ascorbic acid 'coated') - do - 3. Sodium ascorbate U.S.P. - do - 4. Sorbitol Solution U.S.P. Form 25 No. G-55 on 17-3-1981." 21.A bare reading of the Notification No. 234/86 indicates that the exemption in favour of bulk drugs falling under Chapter 28 or Chapter 29 of the schedule annexed to the Central Excise Tariff Act, 1985 is not an unconditional exemption. The said notification had a proviso. Under the proviso, the manufacturer was required to furnish to the Competent Authority a certificate from the Drugs Controller to the effect that the drug for which exemption was claimed was a "bulk drug" within the meaning of the expression "bulk drug" given in the explanation to the notification and, which was normally used for diagnosis, treatment etc. in human beings or animals and used as such or as an ingredient in any formulation. The explanation to the notification defines "bulk drugs" to mean any chemical, biological or plant product, normally used for diagnosis, treatment etc. in human beings or animals and used as such or as an ingredient in any formulatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lation. Plainly read, the third condition has to mean that the goods, for which exemption was sought, were actually used as such or as an ingredient in any formulation. If the arguments advanced on behalf of the appellant is accepted then the second and third condition would have the same meaning and there would be no point in specifying them as separate conditions. In the explanation to the notification, we have two expressions, namely, "normally used" and "used as such". We have to read both these expressions in juxta position. If so read, it becomes clear that the expression "used as such" in the proviso qualifies the actual use and not the capability of use. These words are by way of emphasis. They are a condition to be actually satisfied before the exemption can be availed and granted. Consequently, every manufacturer of a bulk drug cannot seek the benefit of exemption under the said notification merely by reason of "normal use" of the drug. The words "normal use" indicate the possible use whereas the expression "used as such" indicates the actual use. The certificates issued by the Drugs Controller, quoted above, shows that they did not deal with uses other than "normal uses" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 11A(1) is not applicable just for any omission on the part of the assessee, unless it is a deliberate attempt to escape from payment of duty. Where facts are known to both the parties, the omission by one to do what he might have done and not that he must have done does not constitute suppression of fact. 26.Applying the tests in the aforestated judgments to the facts of the present case, we find that the demands raised by the department in the impugned three show cause notices were time-barred. The first show cause notice was dated 30-12-1987. It was in respect of period 1-4-1986 to 30-11-1986. The second show cause notice was dated 6-4-1988. Under the said notice, the department has demanded duty for the period 1-3-1984 to 28-2-1986. The last show cause notice was dated 20-6-1988, for the period 1-4-1986 to 30-4-1987. Therefore, section 11A(1) was not applicable. 27.The question is, whether in the present case, there was any wilful suppression of facts. On facts, as stated above, we find that the appellant had filed a classification list indicating Notification No. 234/86, dated 3-4-1986 as well as the chapter under which the goods fell. We have gone through the classific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come to the conclusion that there was no wilful suppression of facts on the part of the appellant as the appellant had filed the gate passes, invoices and monthly returns, which were all duly approved by the department from time to time. The invoices, gate passes and the monthly returns indicated the names of the consignees from which it was possible for the department to infer sale of sorbitol solution to non-pharmaceutical companies and yet no steps were taken by the department to raise the demand in time and, therefore, we hold that there was no wilful suppression of material facts for invoking the proviso to Section 11A(1). The facts of the present case are not confined only to gate passes clearances. In such cases, it would not be proper to Courts to rely on the evidence furnished only by gate passes. 29.In the circumstances, although on merits the department succeeds, these appeals need to be allowed as the impugned show cause notices-cum-demands were time barred and as no case is made out by the department for invocation of the proviso to Section 11A(1) of the said Act. 30.Before concluding, we may point out that numerous judgments were cited on behalf of the appellant ..... 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