SOL PHARMACEUTICALS LTD Vs. COMMR. OF C. EX.

JUDGEMENT

(1.) THIS appeal arises from order -in -original No. 9/98, dated 9 -1 -1998 reclassifying the products which are in the nature of P and Q formulat ions under tariff sub -heading No. 3003.20 and chargeable to NIL rate of duty. As a result, the appellants utilising the Modvat credit has been directed to be reversed to the extent of Rs. 36,04,926. A penalty of Rs. 15 lakhs under Rule 173Q (1) (bb) of Central Excise Rutes, 1944 has also been imposed.

(2.) LD . Consultant Shri B. Kamala Vishnu assisted by Shri M. Narasimha Rao, ld. Cons, submits that there was no charge of suppression or misdeclaration or intent to evade duty invoking larger period under proviso to Section 11A of the Act. Appellants had claimed classification of the product in terms of declaration under heading 3003.10 attracting duty for different periods. After they utilised the Modvat credit on the same, the department had reviewed the classification and in the show cause notice had taken the stand that the goods are required to be reclassified under chapter sub -heading No. 3003.20 attracting NIL rate of duty and therefore a sum of Rs. 36,04,926/ - being the credit of duty paid on the inputs used in the manufacture of final products meant for export attracting NIL rate of duty and utilisation for payment of duty on the products cleared for home consumption should not be recovered from them under provisions of Rule 57(1) of C.E. Rules, 1944. He submits that once the classification list had been approved it will have a binding effect. In circumstances where the department wishes to reopen the classification list without invoking proviso to Section 11A and as a result a review of their earlier order, then such demand will have only prospective effect and not retrospective effect in terms of constitutional Bench judgment of 5 Judges of Apex Court as rendered in the case of C.C.E. v. Cotspun as in 1999 (113) E.L.T. 353 (S.C.). As a result, he submits, the impugned order is required to be set aside by following this judgment.

(3.) HEARD ld. DR Ms. Aruna Gupta, ld. DR who defends the order and submits that in any event the Modvat credit utilised was unlawful utilisation and such wrong utilisation of Modvat credit can be recovered for 6 months. She submits that wrong utilisation of Modvat credit falls on a different footing than the aspect pertaining to reclassification.