SHREE BAIDYANATH AYURVED BHAWAN Vs. CCE

JUDGEMENT

(1.) In all these appeals the issue in respect of classification of Dant Manjan Lal (DML) was referred to the Larger Bench which vide Misc. Order No. 6/2002 -C dated 6.1.2002 has answered the Reference by holding that Dant Manjan Lal has to be classified as Tooth Powder under heading 33.06 of the Schedule to the Central Excise Tariff Act. Now the issues to be decided in all these connected appeals are whether the extended period for demanding duty under the proviso to Section 11A(1) of the Central Excise Act is invocable and whether even demand for past six months period can be demanded from the Appellants and whether penalties are imposable on all the Appellants.

(2.) Shri Vivek Kohli, learned Advocate, mentioned that in Appeal No. E/547/98 -C filed by Patna unit of the Appellants the period involved for demanding duty is from June 1991 to December 1993 and the show cause notice has been issued on 1.7.1996 and as such the entire period is beyond 6 months and is time barred. He also mentioned that the connected appeals are E/552 -553/98 -C filed by Shri Banwari Lal Sharma and Shri Pramod Kumar Sharma upon him the penalties have been imposed under Rule 173Q(1) of the Central Excise Rules. Taking these appeals first the learned Advocate submitted that the impugned product was considered as classifiable under Tariff item 14E of the erstwhile Central Excise Tariff and was not subjected to any duty because of the expressed exclusion of medicine which were Ayurvedic; that with the introduction of Tariff Item 68 the impugned product was held to be classifiable under the said item and accordingly upto 1978 the Appellants paid Central Excise duty on the impugned product: that Notification No. 62/78 dated 1.3.78 provided exemption to all drugs, medicines, pharmaceuticals not elsewhere specified; that they claimed the benefit of the said notification which was extended to them by the Department: that, however, a show cause notice dated 10.3.1980 was issued to them for denying the exemption under Notification No. 62/78 on the ground that Dant Manjan Lal was not an Ayurvedic medicine; that similar show cause notices were issued to the Appellants in other Commissionerates such as Allahabad, Nagpur, Calcutta, etc; that the matter finally reached the Tribunal which vide decision dated 7.6.85 as held that DML is a toilet requisite classifiable under Tariff Item 68 and not entitled to exemption under Notification No. 62/78 as it was neither drug/medicine nor Ayurvedic medicine; that the Appellants preferred appeals to the Supreme Court and also started paying duty on the impugned product. He,further, mentioned that in 1987the first schedule to the Drugs and Cosmetic Act, 1940 was amended by adding the authoritative text "Ayurvedic Sar Sangrah"; that their product DML is manufactured in accordance with the formula given in the said book; that the Appellants filed fresh classification list effective from 1.3.88 in which they claimed there product to be an Ayurvedic medicine; that the classification list was duty approved by the Asst. Commissioner against which an appeal was preferred before the Collector (Appeals); that in the meantime in 1990 they approached the Central Board of Excise and Customs with prayer that the impugned product should be considered as an Ayurvedic medicine on the basis of evidence produced by them; that the Board issued instruction F.No. 103/10/90 -CH -3 dated 25.9.91 wherein it was clarified that "DML manufactured by Shree Baidyanath Ayurved Bhawan Ltd. will merit classification as Ayurvedic medicine notwithstanding the CEGAT decision in this case. "The learned Advocate, further, mentioned that the appeal filed by the department against the approval of the classification list was rejected by the Collector (Appeals) under Order -in -Appeal No. 19/92 dated 24.1.92; that no appeal was preferred by the Department against the said Order of the Collector (Appeals).

(3.) The learned Advocate contended that in view of all these facts, particularly the approval accorded to the classification list filed by them the rejection of the appeal filed by the Department against the approval of Collector (Appeals), issuing of Board's instructions specifically with regard to the impugned product only notwithstanding the decision of the Tribunal the Department cannot claim that any fact was suppressed by the Appellants or there was any intention to evade payment of duty; that it has been held by the Supreme Court in the case of Cosmic Dye Chemicals v. CCE, Bombay 1995 (88) ECR 232 (SC) that to validly invoke the extended period of limitation it is essential to not only establish the contravention by but also the intention to contravene on the assessees; that in view of all the facts the intention to contravene cannot be there on the part of the Appellants; that as held by the Supreme Court in the case of Tamil Nadu Housing Board v. CCE. Madras 1994 (55) ECR 7 (SC), the initial burden is on the department to prove that the situation visualized by the proviso to Section 11A existed: that the department has not discharged its burden. The learned Advocate further submitted that no justification has been given by the Adjudicating Authority for invoking the extended period of limitation, that the Adjudicating Authority has given his finding that no reliance on the instructions issued by the Board can be placed since the same was obtained from the Board on the basis of the mis -statement of the sister unit of the Appellants; that there is no basis for the Adjudicating Authority to give the finding that the said instruction dated 25.9.91 was issued by the Board on any mis -statement made by them. Further, the finding of the Commissioner that they had suppressed the fact of manufacture and the clearance of the impugned product is also not borne by the fact as the matter was always known to the department and had been contested in various forums. He also relied upon the decision in the case of Padmini Products v. CCE, Bangalore 1989 (25) ECR 289 (SC) wherein it was held that if there is a possibility of any doubt being there in respect of correct classification of the product no malafide can be attributed to the assessee and extended period of limitation would not be available to the department. He also relied upon the decision of the Tribunal in the case of Bajaj Auto Ltd. v. CCE wherein it was held that no demand can be raised against the assessee for contravention of Board's Circular/instructions. Finally he submitted that no penalty is imposable as there was no contravention of any provisions of the Act or Rules with the intention to evade payment of duty Reliance has been placed on the decision in the case of Hindustan Steel Ltd. v. State of Orissa 1978 ELT J 159.