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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 ..... ted its classification list for approval claiming exemption under the said notification. By letter dated 17-4-1986, the Assistant Collector permitted the appellant to clear the bulk drugs under the above notification subject to production of a certificate from the Drugs Controller, Government of India. The appellant obtained certificates from the Drugs Controller dated 17-4-1986, 15-5-1986, 21-5-1986 and 6-8-1990, in respect of their claim for exemption under the aforestated notification. In the classification list, exemption was sought by the appellant under Notification No. 234/86 on the basis of certificates received by the appellant from the Drugs Controller, Government of India. The classification lists were scrutinized, verified and approved by the Assistant Collector. The appellant cleared the goods upon submission of the gate passes in which they disclosed the names of the consignees. The appellant also submitted its monthly returns on excisable goods manufactured by it in the prescribed RT-12 forms, which gave the particulars of the goods removed, gate passes under which the goods were removed etc. 4.Three show cause notices were received by the appellant on 30-12-1987, 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egarding the end use of the product on the part of the proper officer to grant exemption to the product which was certified as 'bulk drug' by the Drugs Controller. It was submitted that the Government did not intend to put the burden of production of end use certificate on the appellant; that had the Government intended to do so, some such provision would have been made in the notification. It was further submitted that the certificate granted by the Drugs Controller was final for all clearances of bulk drugs for exemption. It was submitted that the demand of duty by the department on sorbitol solution was without jurisdiction and without any authority of law; that it was based on misinterpretation of the word "normally" used in the notification and consequently, the demand notice was bad-in-law and a nullity. It was submitted that a conjoint reading of the proviso and the explanation given in the notification indicated that when the Drugs Controller issues a certificate under the notification to the effect that the goods in question were bulk drugs as given in the explanation, the goods were entitled to exemption. On the point of limitation, it was submitted that the appellant had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred and allowed all the three appeals filed by the appellant. However, in his concluding paragraph, the J.M. clarified that the appeals stood allowed only on the question of limitation and that he was not recording any order on the merits of the case. 8.The Technical Member (T.M.) disagreed with the J.M. holding that the product cleared to a pharmaceutical factory alone became "bulk drugs"; that "bulk drugs" cleared to a pharmaceutical factory alone could be manufactured and sold for diagnosis or treatment or prevention of diseases in human beings and animals; that the appellant was well aware that if they sold their product to a non-pharmaceutical company (consumer), it was evidently intended for non-medicinal use and, therefore, would not be covered by the exemption notification. It was observed that mere obtaining a certificate from the Drugs Controller by itself would not absolve the appellant, when they knowingly sold a specified quantity to non-pharmaceutical concerns being fully aware that those customers are not going to use the product as drugs or medicines. The T.M. further observed that since the language of the notification was clear and since it did not admit any amb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d accordingly dismissed the appeals. 10.Being aggrieved by the majority decision, the assessee has come to this Court by way of appeal under Section 35L(b) of the Central Excise Act, 1944. 11.Two points arise for determination, one is on merits and other is on limitation. 12.Mr. Ravindra Narain, learned Advocate appearing on behalf of the appellant submitted, at the outset, that, the impugned majority decision was patently erroneous. In this connection, it was urged that the J.M. had decided the question of limitation in favour of the appellant holding the demands to be time barred and, therefore, he did not decide the question of the applicability of the exemption notification. It was urged that when the T.M. disagreed with the J.M. on the question of limitation, the matter was referred to the Third Member, who while concurring with the T.M., on the question of limitation, erroneously dismissed the appeals instead of referring them back to the Division Bench to decide the question on merits. In the circumstances, it was urged that the impugned majority decision dated 11-1-1999 dismissing the appeals, without going into merits, was patently erroneous. 13.On the question of ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l solution was without jurisdiction and without authority of law. The authority had wrongly denied legitimate exemption to the appellant and, therefore, the demand notices were bad-in-law and nullity. 14.On the question of limitation, it was submitted on behalf of the appellant that they were manufacturing bulk drugs for which they have filed classification list from time to time under Chapter 29 (Tariff Item 29.42). The department had approved the classification lists. On approval, the appellant had cleared the goods. The department had never objected to such clearances. The appellant was not asked to clear the goods under provisional assessment. The appellant has been filing RT-12 forms from time to time. These forms were approved by the department from time to time. According to the appellant, as per the proviso to the exemption notification, the manufacturer who sought to take exemption was required to furnish a certificate from the Drugs Controller, to the effect that the drug for which exemption was claimed was a bulk product within the meaning of "bulk drugs" given in the explanation to the notification. It was submitted that on conjoint reading of the proviso and the expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicability of exemption notification, have been decided by the impugned decision and in the circumstances, there was no merit in the contention advanced on behalf of the appellant that the Third Member should have referred back the matter to the Division Bench for deciding the question on merits. 16.On the question of applicability of the notification, learned Senior Advocate appearing on behalf of the department submitted that the word "bulk drug" is defined under Section 2(a) of the Drugs (Prices Control) Order, 1979, enacted in exercise of the powers conferred under Section 3 of the Essential Commodities Act, 1955. It was urged that the explanation to the exemption Notification No. 234/86 has borrowed the definition of "bulk drug" from Section 2(a) of the Drugs (Prices Control) Order, 1979 to mean any substance including pharmaceutical, chemical, biological or plant product conforming to pharmacopoeial standards accepted under the Drugs & Cosmetics Act, 1940, which is used as such or as an ingredient in any formulation. It was submitted that the certificate issued by the Drugs Controller, in the present case, was a reproduction of the explanation to the notification. The said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, except the name of the consignee, would amount to suppression of facts. In the alternative, it was submitted that even assuming for the sake of arguments that the proper officer was either remiss, negligent or in default in not asking for further information, at the time of endorsing the RT-12 returns every month, the omission on the part of the assessee in not disclosing the end use cannot be condoned. The law allows a period of five years to trace the wrong in any manner. In this connection, reliance was also placed on Section 11A of the Act. In any event, the satisfaction of the proper officer, even when there is no full disclosure, cannot be said to be final and beyond review. It cannot debar the department from reopening the approvals and assessments. The assessee cannot be permitted to take advantage of its own illegal act. In the circumstances, it was urged that no inference is called for in the present case. 18.We do not find any merit in the preliminary submission made on behalf of the appellant. In the present case, we are concerned with exemption notification. It is well settled that an exemption notification has to be strictly interpreted. The conditions for taking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or chemicals which are claimed for exemption under this notification are the bulk drugs within the meaning of the bulk drugs given in the Explanation to this notification, and are normally used for the diagnosis, treatment, mitigation or prevention of diseases in human beings or animals, and used as such or as an ingredient in any formulation. Explanation : - In this notification, "bulk drugs" means any chemical or biological or plant product, conforming to pharmacopoeial standards, normally used for the diagnosis, treatment, mitigation or prevention of diseases in human beings or animals, and used as such or as (Emphasis supplied byingredient in any formulation." us) 20.To understand the controversy, we also quote herein below the certificate dated 17-4-1986 issued by the Drugs Controller : "This is to certify that the undermentioned Bulk Drugs manufactured by M/s. Sarabhai M. Chemicals, a Divn. of Ambalal Sarabhai Enterprises Ltd., Baroda, under the Drug Licence number as shown against each are the bulk drugs which can be used in the manufacturer of formulation i.e. drugs which are used for the diagnosis, treatment, mitigation or prevention of diseases in human bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... han in pharmaceuticals. A sorbitol solution could be called a drug for the purposes of exemption only when it was actually used as drug or as an ingredient in any formulation. The Notification No. 234/86 gave exemption to only those substances, which are, in reality, drugs and not to the substances, which are not drugs even though they are capable of acting as drugs. Therefore, the exemption was extendable to sorbitol solution, cleared by the appellant, when used in the manufacture of drugs, medicines, pharmaceuticals. By diverting a specified quantity of sorbitol solution etc. to liquor units, cigarettes units, soap units etc., the appellant lost the benefit of exemption and in the circumstances, the department was right in raising the aforestated demand. 22.Our interpretation is supported by the language of the notification. Under the proviso read with the explanation to the said notification, there were three conditions required to be satisfied by way of certification by the Drugs Controller. Firstly, that the bulk drugs should have the same meaning as mentioned in the explanation to the notification. Secondly, that such bulk drugs should be normally used for the specified pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11A(1). Under that proviso, in cases where excise duty has not been levied or paid or has been short-levied or short-paid or erroneously refunded on account of fraud, collusion or wilful misstatement or suppression of facts, or in contravention of any provision of the Act or Rules with intent to evade payment of duty, demand can be made within five years from the relevant date. In the present case, we are concerned with the proviso to Section 11A(1). 24.In the case of Cosmic Dye Chemical v. Collector of Central Excise, Bombay reported in [1995 (75) E.L.T. 721], this Court held that intention to evade duty must be proved for invoking the proviso to Section 11A(1) for extended period of limitation. It has been further held that intent to evade duty is built into the expression "fraud and collusion" but misstatement and suppression is qualified by the preceding word "wilful". Therefore, it is not correct to say that there can be suppression or misstatement of fact, which is not wilful and yet constitutes a permissible ground for invoking the proviso to Section 11A. 25.In case of Pushpam Pharmaceuticals Company v. Collector of Central Excise, Bombay reported in [1995 (78) E.L.T. 40 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). However, this was not done. In the absence of evidence of suppression of facts, the J.M. was right in setting aside the show cause notices. 28.In the case of Jayant Vitamins Limited v. Union of India reported in [1991 (53) E.L.T. 278], show cause notice-cum-demand was issued by the department alleging non-user of bulk drugs for specified purpose. In that matter, goods were cleared without payment of duty, as in the present case, on the basis of certificate from Drugs Controller. In that case, same Notification No. 234/86 was relied upon by the assessee. However, on facts, the High Court found that the assessee had disclosed the relevant facts in the gate passes and, therefore, it was held that the department was not entitled to invoke the proviso to Section 11A(1). In our view, the judgment of the Madhya Pradesh High Court in Jayant Vitamins Ltd. (supra), is not on the applicability of the Notification No. 234/86, as it is sought to be urged on behalf of the appellant. The said judgment is only on the point of limitation. It only states that the department was not entitled to invoke the proviso to Section 11A(1) as the assessee had indicated in the gate passes the material fact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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