Judgment:
1. The appellants filed this appeal against the order-in-original dated 29-7-1992 passed by the Collector of Central Excise, Meerut. The Collector, Central Excise vide impugned order held that the appellants are not entitled for the benefit of Notification No. 31/88-CE., dated 1-3-1988 and confirmed the demand of duty of Rs. 18,30,444.00 on menthol I.P. under Rule 9(2) of the Central Excise Rules, 1944. The Collector vide impugned order also held that the appellants have contravened the provisions of Rules 52A, 173B, 173C, 173F and 173Q of the Central Excise Rules, 1944 and also imposed a penalty of Rs. 2.0 lac on the appellants.
2. The appellants are engaged in the manufacture of menthols that is menthol ordinary grade and menthol pharmacopoeial grade. Menthol pharmacopoeial grade is bulk drug. Notification No. 31/88-C.E., dated 1-3-1988 exempts bulk drugs specified under the Table to the Notification from the whole of excise duty leviable thereon and prescribed 5% excise duty on the other bulk drugs. The Notification provides the meaning to the explanation to the 'bulk drug' shall have the same meaning assigned to the said expression in the Drugs (Prices Control) Order, 1987. The appellants were clearing the menthol after taking the benefit of Central Excise as provided under the Notification No. 31/88-C.E., dated 1-3-1988.
3. The show cause notice was issued to the appellants on the ground that the appellants had cleared a considerable quantity of menthol I.P.Grade to the parties who do not use the said menthol for the formulation as bulk drug, hence, the appellants are not entitled to the benefit of Notification No. 31/88-C.E., dated 1-3-1988. In the show cause notice, it was alleged that the appellants were clearing menthol at a concessional rate to the manufacturer of tooth paste, powder and shaving cream. The use of menthol in such products is not covered under the definition of 'bulk drug' or formulation as per the definition under Drug (Prices Control) Order, 1987. This representation and suppression of the facts was also alleged against the appellants.
4. After adjudication, the Collector, Central Excise passed the impugned order.
5. The ld. Counsel Shri M.G. Ramachandran appearing on behalf of the appellants submitted that the benefit under the Notification was denied to the appellants only on the ground that the menthol I.P. cleared by the appellants is not used as such, or as an ingredient in any formulation as defined under Clause 2(a) and 2(f) of the Drug (Prices Control) Order, 1987. He submitted that the Notification provides that the expression 'bulk drug' shall have the same meaning assigned to in the Drug (Price Control) Order, 1987. He submits that as per the definition in the Drug (Price Control) Order, 1987, the 'bulk drug' means any substance including pharmaceutical, chemical, biological or plant product or medicinal gas conforming to pharmacopoeial or other standards accepted under the Drugs and Cosmetics Act, 1940 (23 of 1940), which is used as such, or as an ingredient in any formulation.
He submits that the Revenue has wrongly relied upon the expression 'formulation' as defined under Drug (Price Control) Order, 1987. He submits that the objection of the Revenue is that the appellants are non-entitled to exemption as a result of its user, is meaningless. He submits that the end use of menthol I.P. is totally uncalled for and is not germane to decide the eligibility under the Notification No.31/88-CE. He relied upon the decisions of the Tribunal in the case of C.C.E. (sic). He submits that in this case, the Tribunal held that there was no requirement built into Notification No. 31/88-CE. for furnishing the end use certificate. He relies upon the decision of the Tribunal in the case of Sha Harakchand Dharmaji v. C.C., Customs reported in 1996 (88) E.L.T. 764 wherein the Tribunal held that the expression 'for use' does not mean the actual use but means intended for use. He therefore, prays that the appeal be allowed.
5. Shri H.K. Jain SDR appearing on behalf of the Revenue submitted that in this case there is specific allegation against the appellants that the appellants were clearing menthol to the manufacturer of tooth paste, powder and shaving cream which is not a formulation as described under the Drug (Price Control) Order, 1987. He submits that the Notification No. 31/88-C.E., dated 1-3-1988 provides a concessional rate of duty to the bulk drugs which is used as such or as an ingredient in any formulation. 'Formulation' means a medicine processed out or, or containing one or more bulk drugs or drugs with or without the use of any pharmaceutical aids, for internal or external use for, or in the diagnosis... He submits that menthol I.P. is not used in any formulation as prescribed under the Drug (Price Control) Order, 1987.
He therefore, prays that the appeal be dismissed.
6. Heard both sides. In this case, the appellants cleared the menthol I.P. availing the benefit of Notification No. 31/88-C.E., dated 1-3-1988. The Notification No. 31/88-C.E., dated 1-3-1988 provides as under : "In exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts goods of the description specified in column (2) of the Table hereto annexed and falling under Chapter 28, 29 or 30 as the case may be, of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), from so much of the duty of excise leviable thereon under the said Schedule as is in excess of the amount calculated at the rate specified in the corresponding entry in column (3) of the said Table.------------------------------------------------------------------------S.No. Description of the goods Rate of duty------------------------------------------------------------------------(1) (2) (3)------------------------------------------------------------------------01.
Bulk drugs (including salts, easters and derivatives, if Nil any) specified under the First Schedule to the Drugs (Prices Control) Order, 1987, as amended from time to time.02.
Other bulk drugs 5% ad valorem05.
Anaesthetics Nil------------------------------------------------------------------------ Explanation :- In this notification, the expression "bulk drugs" shall have the same meaning assigned to it in the Drugs (Prices Control) Order, 1987." The Notification provides that the expression 'Bulk drugs' shall have the same meaning assigned to it in the Drugs (Prices Control) Order, 1987. The Drugs (Prices Control) Order, 1987 defines 'bulk drug' as under :- "Bulk Drug" means any substance including pharmaceutical, chemical, biological or plant product or medicinal gas conforming to pharmacopoeial or other standards accepted under the Drugs and Cosmetics Act, 1940 (23 of 1940), which is used as such, or as an ingredient in any formation." 7. As per the Drugs (Prices Control) Order, 1987, Formulation means as under: "Formulation" means a medicine processed out of, or containing one or more bulk drugs or drugs with or without the use of any pharmaceutical aids, or internal or external use for...".
8. The definition of 'Bulk Drug' provided under the Drugs (Prices Control) Order, 1987 means any substance provided under the definition, which is used as such, or as an ingredient in any formulation and the 'Formulation' means a medicine processed out of, or containing one or more bulk drugs or drugs with or without use of any pharmaceutical aids, for internal or external use for, or in the diagnosis, treatment, mitigation or prevention of disease in human beings or animals. In the present case, the appellants are not disputing the fact that they are clearing the menthol I.P. to the manufacturer of tooth paste, powder and shaving cream. Therefore, the menthol I.P. manufactured by the appellants is not for use as such or as an ingredient in any formulation as provided under the Drugs (Prices Control) Order, 1987.
The judgment of the Tribunal in the case of C.C.E., Ahmedabad v. Maize ProductsMaize Products v. C.C.E., Ahmedabad reported in 1997 (94) E.L.T. 680 (Tribunal) the Tribunal held that end use certificate not to be furnished in the absence of any such requirement built into Notification No. 31 /88-C.E. In this case, the department proceeded against the assessee on the ground that they have not produced an end use certificate in respect of 'bulk drugs' and the Tribunal held that there is not requirement of end use certificate as it is required under the Notification No. 31/88-C.E., dated 1-3-1988. In the case of Sha Harakchand Dharmaji v. C.C., Madras reported in 1996 (88) E.L.T. 764 (Tribunal), the Tribunal while interpreting the Customs Notification held that the expression 'for use' to be read as intended the bulk for use for granting the benefit of Notification at the time of clearance of the goods.
9. In the present case, the facts are that the appellants cleared the menthol I.P. to the manufacturer of tooth paste powder and shaving cream which was not denied by the appellants. The Revenue is relying upon the definition of the 'Bulk Drug' as given in the Drugs (Prices Control) Order, 1987 and as per the definition, the 'bulk drug' means any substance mentioned in the definition which is used as such, or as an ingredient in any formulation and 'Formulation' means a medicine processed out of, or containing one or more bulk drugs. In the present case admittedly the menthol I.P. cleared by the appellants is not being used as such, or as an ingredient in any of the formulation mentioned under the Drugs (Prices Control) Order, 1987. Therefore, the facts of the present case are different from the cases relied upon by the appellants.
10. In view of the facts as discussed above, we find that menthol I.P.cleared by the appellants is not used as such, or as an ingredient in any of the formulation as provided under the Drugs (Prices Control) Order, 1987. Therefore, the appellants are not entitled for the benefit of Notification No. 31/88-C.E., dated 1-3-1988.
11. The Collector, Central Excise in the impugned order held that the extended period of limitation is invokable in this case and the appellants had made no arguments challenging this finding.
12. In view of the above discussion, we do not find any infirmity in the impugned order. The appeal filed by the appellants is dismissed.