Full Judgment
2. The ld. Counsel stated that in this case the appellants are manufacturers of Homeopathic medicines and one of their products is Arnica Oil.
3. A dispute has arisen as to whether Arnica Oil was classifiable under Chapter 33 as cosmetic and toilet preparation falling under Chapter 3305.10 or it was classifiable under 3303.30 as homeopathic medicine.
4. First and foremost, we would like to point out that the demand is time-barred.
5. The show cause notice was issued on 5-11-1992 and the demand relates to the period 12-7-1987 to 24-10-1988, i.e., much after the normal period of six months.
6. It was their contention that the longer period of limitation was not attracted in this case as the Department was aware that they were manufacturing Arnica Oil and the Superintendent had himself written a letter to them asking for detailed particulars regarding the method of manufacture and clearances etc. and the reports and in the correspondence exchanged in this regard they had supplied all the information required during the period to which demand relates.
7. This would be apparent from the letters exchanged between March and December, 1988, the last letter being of 30-12-1988 (enclosed in their paper book). It was therefore their submission that the department could have issued a Show Cause notice at least within six months of the receipt of this information but chose to wait for another couple of years and ultimately issued the Show Cause notice only on 5-11-1992.
8. It was their submission that there was no suppression or mis-statement of facts involved and therefore the entire demand was time-barred.
9. It was also their contention that in the classification list filed for perfumed hair oil they had also indicated that they were manufacturing homeopathic medicines and shown the Tariff Heading as 3003.30 with Nil duty. Therefore, there was no justification for confirming this demand.
10. It was also their contention that according to them Arnica oil is not a hair oil but a homeopathic medicine which is manufactured under a drug licence and sold only through licensed dealers of homeopathic medicines. It is recognised as such by others dealing with this item and used as such. Even the labels of their bottled indicated its use as a medicine.
11. The department's case is based on a Chemical Examiner's report which they had questioned and asked for its re-test but the department did not conduct a re-test and therefore the report lost validity, (On the contrary they had produced a certificate to the effect that it was a homeopathic medicine.). In this connection he will draw attention to Rule 56 as well.
12. It was also their submission that all the ingredients of their product are in accordance with Homeopathic Pharmacopoeia and it does not contain any added perfume. The essential ingredient is Arnica Montana which is a recognised homeopathic medicine, and the aroma is natural to its flowers from which it is extracted.
13. It was also their submission that the calculation of demand of duty is also incorrect in as much as the discount given by them has not been taken into account and further it was their contention that it was based on clearance value and not assessable value.
14. The ld. DR strongly opposed the prayer stating that the appellants were filing classification lists for perfumed oils and in the case of classification lists, it was necessary to clearly show the excisable as well as non-excisable products distinctly to enable the officers to come to a correct conclusion. But they had merely indicated 'Homeopathic medicines' without indicating the names, particulars or specifications of the product in question and therefore right from the beginning there was a suppression on their part. Even when the deptt.
had come to know that they were manufacturing Arnica Oil and asked for the details and particulars they did not give the same immediately and entered into a protracted correspondence. It was his submission that the relavant date for purpose of calculating time bar is required to be considered in the light of provisions of relevant date in Section 11A.The date of supply of information is not the relavant date but what is important is that they could not issue the Show Cause notice unless all the required information was supplied and the demand could be raised in any case for five years period taking into account the relevant date as per Section 11A. * 15. In so far as merits are concerned , it was the department's case that it was a cosmetic preparation used as hair oil and therefore it was classifiable only under 3305.10 and was chargeable to duty as such.
16. We have considered the above submissions. We observe that looking to the totality of facts and circumstances prima facie the appellants appear to have a better case on time bar in as much as the departmental officers did not issue the Show Cause notice for a long time even after the receipt of the relevant information.
17. The question which arises even at this stage is as to how the classification list initially filed was approved. Copies filed are not very clear and legible but once the appellants had declared that they were also manufacturing Homeopathic medicines, this aspect was required to be taken into cosideration by the proper officer. Of course, the details were required to be furnished by the appellants but if they had failed to do so, it was open to the department to call for the same and in the absence thereof to keep approval provisional if necessary.
18. The question of calculation of exact amount etc. is a matter of detail which could be considered more appropriately at the time of the hearing of the main appeal and so also the question of the test reports or certificates filed by either sides which is a matter of evidence.
19. In view of the above, looking to the totality of the facts and circumstances, we waive the pre-deposit of amount in question and stay the recovery during the pendency of the appeal.