Medley Pharmaceuticals Pvt. Ltd. Vs. Collr. of C. Ex. - Court Judgment

Excerpt:
1. this is an appeal filed by m/s. medley pharmaceuticals pvt. ltd., being aggrieved with the order-in-original dated 16-3-1990 passed by the add. collector of central excise, aurangabad. the matter relates to the demand of central excise duty for the period from 1-7-1985 to 31-12-1985 in respect of the branded product trosup liquid' a food supplement. the appellants had claimed classification of the product under item no. 1-b of the erstwhile central excise tariff (hereinafter referred to as the 'tariff'), while the revenue had sought to classify the same under item no. 68 of the said tariff.2. the matter was posted for hearing on 29-1-1998, when shri jawahar lal, advocate, appeared for the appellants. shri r.s. sangia, jdr, represented the respondents/revenue.3. we have carefully considered the submissions made by both the sides and have gone through the facts on record.4. the appellants were engaged in the manufacture of patent or proprietary medicines and had a central excise licence for the manufacture of such medicines. in the year 1983 they proposed to start manufacturing of a new product called trosup'. on 26-7-1983, they wrote to the superintendent of central excise that they intended to manufacture a food product named trosup'. they informed that as per their presumption it was classifiable under item no. 1-b of the tariff (as then in force) and exempted from payment of central excise duty by virtue of its non-inclusion in the schedule given in the notification no. 17/70-c.e., dated 1-3-1970. certain information was called for by the superintendent of central excise under his communication dated 4-8-1983 and the information called for was supplied on 23-8-1983 by the assessee. a classification list was filed on 6-10-1983 in which the product was classified by the assessee under item no. 1-b of the tariff and the exemption was claimed under notification no. 17/70-c.e., dated 1-3-1970. the classification was approved subject to the deputy chief chemist's report. the approved classification list was forwarded to the assessee on 5-3-1984. this position continued up to 2-1-1986 when the superintendent of central excise wrote to the assessee requesting them to classify the product 'prosup' under item no. 68 of the tariff. he also called for information relating to the clearances for the six month period - 1-7-1985 to 31-12-1985. subsequently, the assessee filed a revised classification list bearing no. 83/86 classifying their product under item no. 68 of the tariff and started paying central excise duty at the applicable rate under that item no. 68 of the tariff w.e.f. 14-1-1986.5. the present proceedings start with the issue of show cause notice on 21-1-1986. under show cause notice dated 21-1-1986, the asstt.collector of central excise, aurangabad, proposed classification of the said product under item no. 68 of the tariff. it was a notice for change in classification and no demand was made therein. no period as such was also specified. there was no reference to the deputy chief chemist's report. by way of corrigendum to the show cause notice dated 21-1-1986, the demand of central excise duty at the rate of 12% adv.amounting to rs. 2,56,295.59 for the period 1-7-1985 to 31-12-1985 was made. the corrigendum was issued on 4-3-1986. there was no allegation of any wilful mis-statement or suppression of facts and the only ground for proposing the reclassification under item no. 68 of the tariff was that the said product contained protein hydrolysate and was fortified with vitamins, proteins etc. a part of the demand was made for the period beyond the normal period of limitation. in reply to the show cause notice as well as the corrigendum to the show cause notice, the assessee challenged the classification of the product in question as proposed under item no. 68 and submitted that the demand for part of the period was barred by time. the assistant collector of central excise who adjudicated the matter under his order dated 1-8-1986 classified the said product under item no. 68 of the tariff and confirmed the whole of the demand of rs. 2,56,295.59 under section 11a of the central excises act, 1944 (hereinafter referred to as the 'act'). there was no discussion about the time-bar. the matter was taken up in appeal by the assessee with the collector of central excise (appeals), bombay. the collector of central excise (appeals), bombay, on appeal observed that the show cause-cum-demand notice dated 4-3-1986 was issued by the asstt. collector of central excise for the period 1-7-1985 to 31-12-1985, partly beyond six month and that in view of the amendment to the section 11a of the act, the assistant collector of central excise had no jurisdiction to confirm the demands for the period beyond six months and that the order passed by the asstt.collector of central excise was bad in law. he held that the show cause notice for extended period had to be issued by the collector of central excise. the order passed by the assistant collector of central excise was set aside and the assistant collector of central excise was directed to send the case records to the collector of central excise for such action as may be deemed fit. the operative part of his order is extracted below : 3. the show cause-cum-demand notice dated 4-3-1986 issued by the asstt. collr., aurangabad pertains to the period 1-7-1985 to 31-12-1985 i.e. beyond six months. in view of the amendment to section ha of central excise and salt act, 1944 the asstt. collr. central excise has no justification to confirm demands beyond six months period. the impugned order is, therefore, had in law. accordingly to the amendment the jurisdictional collr. is the proper authority to adjudicate such case including the cases pending on 27-12-1985.1, therefore, set aside the impugned order and direct the asstt. collr. to set all the case records to his collector for such action as may be deemed fit by him under central excise law. the appeal is disposed off accordingly.6. the order-in-appeal was passed by the collector of central excise (appeals), bombay, on 14-1-1988. on 2-7-1988, the assistant collector (adj.), central excise, headquarters aurangabad, wrote to the assessee that the case had been remanded for de novo adjudication and that they should furnish their written defence to the collector of central excise, aurangabad. the letter written by the assistant collector (adj.), central excise, is extracted below : "please refer to the collector, central excise (appeals), bombay's order-in-appeal no. ppm-154/aur/87, dated 14-1-1988 passed by the collector, central excise (appeals), bombay, under which the case has .been remanded for de novo adjudication. 2. you are, therefore, requested to furnish your written defence to the collector, central excise, aurangabad, within fifteen days from the date of receipt of this letter. you are also directed to mention in your written defence whether you desire to avail of an opportunity of personal hearing. please note that if no reply is received within fifteen days or you do not appear before the adjudicating authority when the case is posted for hearing, the case will be decided on the basis of the evidence available on records with this office." this letter was written by the assistant collector of central excise.it was taken that the case, had been remanded for de navo adjudication.the assessee was asked to furnish written defence to the collector of central excise. among other points, the appellants had submitted, as under : it is submitted that the notice for demand of rs. 2,56,295.59 was received by us on 6-3-1986. it has been issued by the assistant collector of central excise. the notice has been held as void and without jurisdiction. the said notice cannot be proceeded by the hon. collector. therefore, the issue remain live is only with regard to classification of 'prosup'. hon. collector may therefore decide the classification of 'prosup' or may pass such order as is deemed appropriate for deciding the classification.7. the matter was, however, taken up for adjudication by the addl.collector of central excise, aurangabad. he observed that as there was no suppression of facts or mis-statement on the part of the assessee the duty on the goods cleared during a period of six month from the date of show cause notice was recoverable. as regards the classification, he observed that the classification of the goods already stood decided under item no. 68 of the tariff by the assistant collector of central excise, aurangabad, and that the assessee themselves had submitted the classification list classifying the subject product under item no. 68 of the tariff.8. the assessee filed an appeal with the tribunal and along with the appeal also filed the stay application. the tribunal even at the stage of the stay, set aside the order of the addl, collector and directed him to consider the issue both on merits regarding classification as well as on the question of time bar and pass orders afresh. the matter was re-adjudicated and it was held that the product 'prosup' was correctly classifiable as goods not elsewhere specified under the residuary item no. 68 of the central excise tariff. as regards the demand, he confirmed the same for a period of six month prior to the date of show cause notice dated 4-3-1986.9. we find that the corrigendum dated 4-3-1986 to the show cause notice dated 21-1-1986 was issued by the assistant collector of central excise, aurangabad division. it was in this corrigendum dated 4-3-1986 that the demand of central excise duty of rs. 2,56,295.59 for the period 1-7-1985 to 31-12-1985 was made. there was no demand of duty in the original show cause notice dated 21-1-1986. a part of the demand related to the period beyond the normal period of limitation of six months. as part of the demand was beyond the normal period of limitation, the show cause notice had to be treated as the one in which the extended period of limitation had been invoked. under section 11a of the act, as substituted w.e.f. 27-12-1985 by section 3 of the central excises and salt (amendment) act, 1985, where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded by reason of fraud, collusion or any wilful mis-statement or suppression of facts or contravention of any of the provisions of the act or of the central excise rules, 1944 made thereunder with intent to evade payment of duty by such person or his agent, then the collector of central excise could within five years from the relevant date serve notice on the person chargeable with the duty which had not been levied or paid or which had been short levied or short paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice. consequent upon the amendment to the section 11a of the act w.e.f. 27-12-1985 by the central excises and salt (amendment) act, 1985 all proceedings pending as on 27-12-1985 with the assistant collector of central excise under section 11a (1) of the act stood transferred to the collector of central excise by virtue of section 8 of the central excises & salt (amendment) act, 1985. in this case, the demand for central excise duty was only made in the corrigendum dated 4-3-1986 and this corrigendum to the show cause notice had been issued after the amendment in the section 11a w.e.f. 27-12-1985. in fact, the original show cause notice was also issued subsequent to the amendment in section 11-a of the act. as the part of the demand related to the period beyond six month, the notice was required to be issued by the collector of central excise. even when the collector of central excise (appeals) set aside the order passed by the assistant collector of central excise and directed the assistant collector of central excise to send all the case records to his collector for such action as may be deemed fit by him under central excise law, only the assistant collector of central excise wrote to the assessee. there is nothing on record to show that as to what action had been proposed by the collector of central excise. even at that stage when the assistant collector (adj.), central excise, headquarters aurangabad, had written to the assessee, no allegation of any wilful mis-statement or suppression of facts was made. further, we find that the matter was re-adjudicated by the addl. collector.10. although the additional collector of central excise restricted the demand for six month, but even for this demand we do not find that there was any valid show cause notice subsisting at that time. the earlier notice had been vacated and no new notice was issued. the observations of the collector of central excise (appeals) had been taken as directions for de novo adjudication which does not appear to be correct. the collector of central excise (appeals) had asked the assistant collector of central excise to submit the papers to the collector of central excise. there is nothing on record as what view was taken by the collector. in any case proper procedure had to be followed even for de-manuing central excise duty for the normal period of limitation.11. while we consider that a demand for six month period could be confirmed by the appropriate adjudicating authority even when the notice was for a larger period, in this case we find that the matter had not been remanded by the collector of central excise (appeals). he had set aside the order passed by the assistant collector of central excise and had only directed him to send all the case records to the collector of central excise for such action as may be deemed fit by the collector of central excise under central excise law. the issuance of the letter by the assistant collector of central excise in such circumstances was not a compliance with the directions of the collector of central excise (appeals).12. the appellants all along had been taking a plea that the demand had not been validly made. although the matter had come up earlier before the tribunal, the tribunal even at the stage of stay had remanded the matter. there was no occasion for dealing with the aspect of validity of the demand in these proceedings. we, therefore, consider that the procedure adopted for confirmation of the demand even for the normal period of limitation was not proper. thus, without going into the merits of the case, on the ground of improper procedure adopted for confirming the demand, we set aside the impugned order-in-original and as a result the appeal filed by m/s. medley pharmaceuticals pvt. ltd. is allowed. ordered accordingly.

Judgment:
1. This is an appeal filed by M/s. Medley Pharmaceuticals Pvt. Ltd., being aggrieved with the Order-in-Original dated 16-3-1990 passed by the Add. Collector of Central Excise, Aurangabad. The matter relates to the demand of central excise duty for the period from 1-7-1985 to 31-12-1985 in respect of the branded product Trosup Liquid' a food supplement. The appellants had claimed classification of the product under Item No. 1-B of the erstwhile Central Excise Tariff (hereinafter referred to as the 'Tariff'), while the Revenue had sought to classify the same under Item No. 68 of the said Tariff.

2. The matter was posted for hearing on 29-1-1998, when Shri Jawahar Lal, Advocate, appeared for the appellants. Shri R.S. Sangia, JDR, represented the respondents/Revenue.

3. We have carefully considered the submissions made by both the sides and have gone through the facts on record.

4. The appellants were engaged in the manufacture of patent or proprietary medicines and had a central excise licence for the manufacture of such medicines. In the year 1983 they proposed to start manufacturing of a new product called Trosup'. On 26-7-1983, they wrote to the Superintendent of Central Excise that they intended to manufacture a food product named Trosup'. They informed that as per their presumption it was classifiable under Item No. 1-B of the Tariff (as then in force) and exempted from payment of Central Excise Duty by virtue of its non-inclusion in the Schedule given in the Notification No. 17/70-C.E., dated 1-3-1970. Certain information was called for by the Superintendent of Central Excise under his communication dated 4-8-1983 and the information called for was supplied on 23-8-1983 by the assessee. A classification list was filed on 6-10-1983 in which the product was classified by the assessee under Item No. 1-B of the Tariff and the exemption was claimed under Notification No. 17/70-C.E., dated 1-3-1970. The classification was approved subject to the Deputy Chief Chemist's report. The approved classification list was forwarded to the assessee on 5-3-1984. This position continued up to 2-1-1986 when the Superintendent of Central Excise wrote to the assessee requesting them to classify the product 'Prosup' under Item No. 68 of the Tariff. He also called for information relating to the clearances for the six month period - 1-7-1985 to 31-12-1985. Subsequently, the assessee filed a revised classification list bearing No. 83/86 classifying their product under Item No. 68 of the Tariff and started paying central excise duty at the applicable rate under that Item No. 68 of the Tariff w.e.f. 14-1-1986.

5. The present proceedings start with the issue of show cause notice on 21-1-1986. Under show cause notice dated 21-1-1986, the Asstt.

Collector of Central Excise, Aurangabad, proposed classification of the said product under Item No. 68 of the Tariff. It was a notice for change in classification and no demand was made therein. No period as such was also specified. There was no reference to the Deputy Chief Chemist's report. By way of corrigendum to the show cause notice dated 21-1-1986, the demand of central excise duty at the rate of 12% adv.amounting to Rs. 2,56,295.59 for the period 1-7-1985 to 31-12-1985 was made. The corrigendum was issued on 4-3-1986. There was no allegation of any wilful mis-statement or suppression of facts and the only ground for proposing the reclassification under Item No. 68 of the Tariff was that the said product contained protein hydrolysate and was fortified with vitamins, proteins etc. A part of the demand was made for the period beyond the normal period of limitation. In reply to the show cause notice as well as the corrigendum to the show cause notice, the assessee challenged the classification of the product in question as proposed under Item No. 68 and submitted that the demand for part of the period was barred by time. The Assistant Collector of Central Excise who adjudicated the matter under his order dated 1-8-1986 classified the said product under Item No. 68 of the Tariff and confirmed the whole of the demand of Rs. 2,56,295.59 Under Section 11A of the Central Excises Act, 1944 (hereinafter referred to as the 'Act'). There was no discussion about the time-bar. The matter was taken up in appeal by the assessee with the Collector of Central Excise (Appeals), Bombay. The Collector of Central Excise (Appeals), Bombay, on appeal observed that the show cause-cum-demand notice dated 4-3-1986 was issued by the Asstt. Collector of Central Excise for the period 1-7-1985 to 31-12-1985, partly beyond six month and that in view of the amendment to the Section 11A of the Act, the Assistant Collector of Central Excise had no jurisdiction to confirm the demands for the period beyond six months and that the order passed by the Asstt.

Collector of Central Excise was bad in law. He held that the show cause notice for extended period had to be issued by the Collector of Central Excise. The order passed by the Assistant Collector of Central Excise was set aside and the Assistant Collector of Central Excise was directed to send the case records to the Collector of Central Excise for such action as may be deemed fit. The operative part of his order is extracted below : 3. The show cause-cum-demand Notice dated 4-3-1986 issued by the Asstt. Collr., Aurangabad pertains to the period 1-7-1985 to 31-12-1985 i.e. beyond six months. In view of the amendment to Section HA of Central Excise and Salt Act, 1944 the Asstt. Collr.

Central Excise has no justification to confirm demands beyond six months period. The impugned order is, therefore, had in law.

Accordingly to the amendment the jurisdictional Collr. is the proper authority to adjudicate such case including the cases pending on 27-12-1985.1, therefore, set aside the impugned order and direct the Asstt. Collr. to set all the case records to his Collector for such action as may be deemed fit by him under Central Excise Law. The appeal is disposed off accordingly.

6. The Order-in-Appeal was passed by the Collector of Central Excise (Appeals), Bombay, on 14-1-1988. On 2-7-1988, the Assistant Collector (Adj.), Central Excise, Headquarters Aurangabad, wrote to the assessee that the case had been remanded for de novo adjudication and that they should furnish their written defence to the Collector of Central Excise, Aurangabad. The letter written by the Assistant Collector (Adj.), Central Excise, is extracted below : "Please refer to the Collector, Central Excise (Appeals), Bombay's Order-in-Appeal No. PPM-154/AUR/87, dated 14-1-1988 passed by the Collector, Central Excise (Appeals), Bombay, under which the case has .been remanded for de novo adjudication.

2. You are, therefore, requested to furnish your written defence to the Collector, Central Excise, Aurangabad, within fifteen days from the date of receipt of this letter. You are also directed to mention in your written defence whether you desire to avail of an opportunity of personal hearing.

Please note that if no reply is received within fifteen days or you do not appear before the adjudicating authority when the case is posted for hearing, the case will be decided on the basis of the evidence available on records with this office." This letter was written by the Assistant Collector of Central Excise.

It was taken that the case, had been remanded for de navo adjudication.

The assessee was asked to furnish written defence to the Collector of Central Excise. Among other points, the appellants had submitted, as under : It is submitted that the notice for demand of Rs. 2,56,295.59 was received by us on 6-3-1986. It has been issued by the Assistant Collector of Central Excise. The notice has been held as void and without jurisdiction. The said notice cannot be proceeded by the Hon. Collector. Therefore, the issue remain live is only with regard to classification of 'Prosup'. Hon. Collector may therefore decide the classification of 'Prosup' or may pass such order as is deemed appropriate for deciding the classification.

7. The matter was, however, taken up for adjudication by the Addl.

Collector of Central Excise, Aurangabad. He observed that as there was no suppression of facts or mis-statement on the part of the assessee the duty on the goods cleared during a period of six month from the date of show cause notice was recoverable. As regards the classification, he observed that the classification of the goods already stood decided under Item No. 68 of the Tariff by the Assistant Collector of Central Excise, Aurangabad, and that the assessee themselves had submitted the classification list classifying the subject product under Item No. 68 of the Tariff.

8. The assessee filed an appeal with the Tribunal and along with the appeal also filed the stay application. The Tribunal even at the stage of the stay, set aside the order of the Addl, Collector and directed him to consider the issue both on merits regarding classification as well as on the question of time bar and pass orders afresh. The matter was re-adjudicated and it was held that the product 'Prosup' was correctly classifiable as goods not elsewhere specified under the residuary Item No. 68 of the Central Excise Tariff. As regards the demand, he confirmed the same for a period of six month prior to the date of show cause notice dated 4-3-1986.

9. We find that the corrigendum dated 4-3-1986 to the show cause notice dated 21-1-1986 was issued by the Assistant Collector of Central Excise, Aurangabad Division. It was in this corrigendum dated 4-3-1986 that the demand of central excise duty of Rs. 2,56,295.59 for the period 1-7-1985 to 31-12-1985 was made. There was no demand of duty in the original show cause notice dated 21-1-1986. A part of the demand related to the period beyond the normal period of limitation of six months. As part of the demand was beyond the normal period of limitation, the show cause notice had to be treated as the one in which the extended period of limitation had been invoked. Under Section 11A of the Act, as substituted w.e.f. 27-12-1985 by Section 3 of the Central Excises and Salt (Amendment) Act, 1985, where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded by reason of fraud, collusion or any wilful mis-statement or suppression of facts or contravention of any of the provisions of the Act or of the Central Excise Rules, 1944 made thereunder with intent to evade payment of duty by such person or his agent, then the Collector of Central Excise could within five years from the relevant date serve notice on the person chargeable with the duty which had not been levied or paid or which had been short levied or short paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice. Consequent upon the amendment to the Section 11A of the Act w.e.f. 27-12-1985 by the Central Excises and Salt (Amendment) Act, 1985 all proceedings pending as on 27-12-1985 with the Assistant Collector of Central Excise Under Section 11A (1) of the Act stood transferred to the Collector of Central Excise by virtue of Section 8 of the Central Excises & Salt (Amendment) Act, 1985. In this case, the demand for Central Excise Duty was only made in the corrigendum dated 4-3-1986 and this corrigendum to the show cause notice had been issued after the amendment in the Section 11A w.e.f. 27-12-1985. In fact, the original show cause notice was also issued subsequent to the amendment in Section 11-A of the Act. As the part of the demand related to the period beyond six month, the notice was required to be issued by the Collector of Central Excise. Even when the Collector of Central Excise (Appeals) set aside the order passed by the Assistant Collector of Central Excise and directed the Assistant Collector of Central Excise to send all the case records to his Collector for such action as may be deemed fit by him under Central Excise Law, only the Assistant Collector of Central Excise wrote to the assessee. There is nothing on record to show that as to what action had been proposed by the Collector of Central Excise. Even at that stage when the Assistant Collector (Adj.), Central Excise, Headquarters Aurangabad, had written to the assessee, no allegation of any wilful mis-statement or suppression of facts was made. Further, we find that the matter was re-adjudicated by the Addl. Collector.

10. Although the Additional Collector of Central Excise restricted the demand for six month, but even for this demand we do not find that there was any valid show cause notice subsisting at that time. The earlier notice had been vacated and no new notice was issued. The observations of the Collector of Central Excise (Appeals) had been taken as directions for de novo adjudication which does not appear to be correct. The Collector of Central Excise (Appeals) had asked the Assistant Collector of Central Excise to submit the papers to the Collector of Central Excise. There is nothing on record as what view was taken by the Collector. In any case proper procedure had to be followed even for de-manuing central excise duty for the normal period of limitation.

11. While we consider that a demand for six month period could be confirmed by the appropriate adjudicating authority even when the notice was for a larger period, in this case we find that the matter had not been remanded by the Collector of Central Excise (Appeals). He had set aside the order passed by the Assistant Collector of Central Excise and had only directed him to send all the case records to the Collector of Central Excise for such action as may be deemed fit by the Collector of Central Excise under Central Excise Law. The issuance of the letter by the Assistant Collector of Central Excise in such circumstances was not a compliance with the directions of the Collector of Central Excise (Appeals).

12. The appellants all along had been taking a plea that the demand had not been validly made. Although the matter had come up earlier before the Tribunal, the Tribunal even at the stage of stay had remanded the matter. There was no occasion for dealing with the aspect of validity of the demand in these proceedings. We, therefore, consider that the procedure adopted for confirmation of the demand even for the normal period of limitation was not proper. Thus, without going into the merits of the case, on the ground of improper procedure adopted for confirming the demand, we set aside the impugned Order-in-Original and as a result the appeal filed by M/s. Medley Pharmaceuticals Pvt. Ltd. is allowed. Ordered accordingly.