Cce Vs. Medi Herbs and R.K. Herbals Pvt. - Court Judgment

Excerpt:
1. these appeals filed by the department are against a common order passed by the commissioner (appeals), trichy in appeals filed by the respondents against three orders of the original authority. the product viz. "herbal shikakai powder' manufactured and cleared by the respondents during the periods december'96 to december'97 and september'96 to march'97 respectively was classified by the original authority as 'cosmetic' under sh 3305.99 of the ceta schedule.accordingly, duty was demanded from the assessee. the first appellate authority upheld the classification, but held, in view of the board's circular no. 333/49/97-cx dated 10.9.97, that no demand of duty could be raised on the assessee for the period prior to 10.9.97. accordingly, the appellate authority restricted the demand of duty to the period from 10.9.97. in these appeals, it is contended that, once the reclassification of the goods under sh 3305.99 is confirmed w.e.f 10.9.97, duty can be demanded for a period of 6 months prior to the said date, by virtue of the provisions of section 11a of the central excise act. ld.sdr has drawn support to this contention from the supreme court's judgment in itw signode india ltd. v. collector .2. ld.sr.advocate referred to a letter dated 14.9.93 issued by cbec to the collector of customs and central excise, tiruchirapalli on the classification of the subject product manufactured by m/s.r.k.herbal pvt. ltd., pondicherry. in the said letter, the product was held classifiable under sh 3003.30 and the assessments were required to be finalized accordingly. according to learned senior counsel, the above instruction was issued by the board under section 37b of the central excise act in relation to the respondents' product and the same was binding on the department and held the field till 9.9.97. relying on the supreme court's judgment in h.m.bags manufacturer v. collector , ld.counsel argued that any demand of duty could not be raised in terms of the board's circular dated 10.9.97 for any period prior to the said date, on which the contents of the circular were notified to the trade. on this basis, ld.counsel also made an endeavour to distinguish the case of itw signode (supra). in any case, counsel submitted, the dispute between the department and m/s.medi herbs, pondicherry for the period from 10.9.97 had since been settled under the kar vivad samadhan scheme.3. we have given careful consideration to the submissions. ld.counsel has made an endeavour to show that "herbal shikakai powder" manufactured by m/s.r.k.herbal pvt.ltd., pondicherry was classified by the board themselves under sh 3003.30 under section 37b of the central excise act and such classification held the ground till it was revised under the board's circular dated 10.9.97. this claim is based on letter dated 14.9.93 issued by the board to the collector of customs and central excise, tiruchirapalli, which reads as under: office of the collector of customs & central excise 4-a dindigul road sub : central excise - classification dispute m/s. new meera herbal shikakai powder - m/s.r.k.herbals private ltd., pondicherry. please refer to the correspondence resting with your letter no. iv/4/41/92-vc dated 17.5.93 on the above subject. the board has accepted the opinion of drug controller of india that the product new meera herbal shikakai powder manufactured by m/s.r.k.herbals private ltd., pondicherry falls within the definition of patent and proprietory siddha drug. accordingly, the product is classifiable under tariff heading 3003.30. you may finalise the assessments and a report may please be submitted.the above letter classified the product under sh 3003.30 and directed finalization of assessments accordingly. but it was not open to the board, under section 37b, to require the collector to assess the product of a particular manufacturer in a particular manner as above inasmuch as proviso (a) to section 37b had injuncted the board from doing so. for easy understanding of the provision, we reproduce the text of section 37b hereunder : 37b. instructions to central excise officers. - the central board of excise and customs constituted under the central boards of revenue act, 1963 (54 of 1963), may, if it considers it necessary or expedient so to do for the purpose of uniformity in the classification of excisable goods or with respect to levy of duties of excise on such goods, issue such orders, instructions and directions to the central excise officers as it may deem fit, and such officers and all other persons employed in the execution of this act shall observe and follow such orders, instructions and directions of the said board : provided that no such orders, instructions or directions shall he issued- (a) so as to require any central excise officer to make a particular assessment or to dispose of a particular case in a particular manner; or (b) so as to interfere with the discretion of the commissioner of central excise (appeals) in the exercise of his appellate functions.in view of the above provision, we consider the board's direction contained in the above letter as a non est in law and, consequently, the reliance placed by ld.counsel on the said instructions of the board will be of no aid to the respondents' case. it is not much in dispute that the "herbal shikakai powder" manufactured by the respondents during the respective periods of dispute was classifiable as 'cosmetic' under sh 3305.99 of the ceta schedule in terms of the board's circular dated 10.9.97. in the case of henna export corporation v. collector , an identical product, cleared in retail packs, was held to be classifiable under heading 33.05. in the circumstances, there can be no classification dispute over the subject product at this point of time. surviving question is whether duty can be demanded in terms of the revised classification (sh 3305.99) retrospectively. this issue is no longer res integra inasmuch as it was held by the supreme court in the case of itw signode india ltd. (supra) that it was open to the department to raise such demand of duty under section 11a of the central excise act as amended by the finance act, 2000. section 110 of the finance act, 2000, validating demand notices issued under section 11a ibid from 17.11.1980 to the date on which the finance act came into force, notwithstanding any approval, acceptance or assessment relating to the rate of duty on, or value of, the excisable goods by any central excise officer under any provision of the central excise act or the rules made thereunder, was upheld by the supreme court in the said case. the scns issued to the respondents are within the validated category of actions taken under section 11a and, therefore, the respondents are bound to pay duty on the goods in question for a period of 6 months prior to the date of scn. however, it appears, in these appeals, the revenue has claimed duty for a period of 6 months prior to 10.9.97. admittedly, the date of revised classification of the subject goods is 10.9.97. therefore, in terms of the apex court's rulings in itw signode case, the respondents are bound to pay duty on the goods for a period of 6 months prior to the said date. in the result, the impugned order is set aside and these appeals are allowed. however, it is made clear that, if, for any part of the demand of duty raised in any of the scns, the dispute was settled between the department and any of the respondents under the kvs scheme, this order shall not affect such settlement.

Judgment:
1. These appeals filed by the department are against a common order passed by the Commissioner (Appeals), Trichy in appeals filed by the respondents against three orders of the original authority. The product viz. "Herbal Shikakai Powder' manufactured and cleared by the respondents during the periods December'96 to December'97 and September'96 to March'97 respectively was classified by the original authority as 'cosmetic' under SH 3305.99 of the CETA Schedule.

Accordingly, duty was demanded from the assessee. The first appellate authority upheld the classification, but held, in view of the Board's Circular No. 333/49/97-CX dated 10.9.97, that no demand of duty could be raised on the assessee for the period prior to 10.9.97. Accordingly, the appellate authority restricted the demand of duty to the period from 10.9.97. In these appeals, it is contended that, once the reclassification of the goods under SH 3305.99 is confirmed w.e.f 10.9.97, duty can be demanded for a period of 6 months prior to the said date, by virtue of the provisions of Section 11A of the Central Excise Act. Ld.SDR has drawn support to this contention from the Supreme Court's judgment in ITW Signode India Ltd. v. Collector .

2. Ld.Sr.Advocate referred to a letter dated 14.9.93 issued by CBEC to the Collector of Customs and Central Excise, Tiruchirapalli on the classification of the subject product manufactured by M/s.R.K.Herbal Pvt. Ltd., Pondicherry. In the said letter, the product was held classifiable under SH 3003.30 and the assessments were required to be finalized accordingly. According to learned Senior Counsel, the above instruction was issued by the Board under Section 37B of the Central Excise Act in relation to the respondents' product and the same was binding on the department and held the field till 9.9.97. Relying on the Supreme Court's judgment in H.M.Bags Manufacturer v. Collector , ld.counsel argued that any demand of duty could not be raised in terms of the Board's circular dated 10.9.97 for any period prior to the said date, on which the contents of the circular were notified to the trade. On this basis, ld.counsel also made an endeavour to distinguish the case of ITW Signode (supra). In any case, counsel submitted, the dispute between the department and M/s.Medi Herbs, Pondicherry for the period from 10.9.97 had since been settled under the Kar Vivad Samadhan Scheme.

3. We have given careful consideration to the submissions. Ld.counsel has made an endeavour to show that "Herbal Shikakai Powder" manufactured by M/s.R.K.Herbal Pvt.Ltd., Pondicherry was classified by the Board themselves under SH 3003.30 under Section 37B of the Central Excise Act and such classification held the ground till it was revised under the Board's circular dated 10.9.97. This claim is based on letter dated 14.9.93 issued by the Board to the Collector of Customs and Central Excise, Tiruchirapalli, which reads as under: Office of the Collector of Customs & Central Excise 4-A Dindigul Road Sub : Central Excise - Classification Dispute M/s. New Meera Herbal Shikakai Powder - M/s.R.K.Herbals Private Ltd., Pondicherry.

Please refer to the correspondence resting with your letter No. IV/4/41/92-VC dated 17.5.93 on the above subject.

The Board has accepted the opinion of Drug Controller of India that the product New Meera Herbal Shikakai Powder manufactured by M/s.R.K.Herbals Private Ltd., Pondicherry falls within the definition of Patent and Proprietory Siddha drug. Accordingly, the product is classifiable under Tariff Heading 3003.30. You may finalise the assessments and a report may please be submitted.

The above letter classified the product under SH 3003.30 and directed finalization of assessments accordingly. But it was not open to the Board, under Section 37B, to require the Collector to assess the product of a particular manufacturer in a particular manner as above inasmuch as proviso (a) to Section 37B had injuncted the Board from doing so. For easy understanding of the provision, we reproduce the text of Section 37B hereunder : 37B. Instructions to Central Excise Officers. - The Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963), may, if it considers it necessary or expedient so to do for the purpose of uniformity in the classification of excisable goods or with respect to levy of duties of excise on such goods, issue such orders, instructions and directions to the Central Excise Officers as it may deem fit, and such officers and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the said Board : Provided that no such orders, instructions or directions shall he issued- (a) so as to require any Central Excise Officer to make a particular assessment or to dispose of a particular case in a particular manner; or (b) so as to interfere with the discretion of the Commissioner of Central Excise (Appeals) in the exercise of his appellate functions.

In view of the above provision, we consider the Board's direction contained in the above letter as a non est in law and, consequently, the reliance placed by ld.counsel on the said instructions of the Board will be of no aid to the respondents' case. It is not much in dispute that the "Herbal Shikakai Powder" manufactured by the respondents during the respective periods of dispute was classifiable as 'cosmetic' under SH 3305.99 of the CETA Schedule in terms of the Board's circular dated 10.9.97. In the case of Henna Export Corporation v. Collector , an identical product, cleared in retail packs, was held to be classifiable under Heading 33.05. In the circumstances, there can be no classification dispute over the subject product at this point of time. Surviving question is whether duty can be demanded in terms of the revised classification (SH 3305.99) retrospectively. This issue is no longer res integra inasmuch as it was held by the Supreme Court in the case of ITW Signode India Ltd. (supra) that it was open to the department to raise such demand of duty under Section 11A of the Central Excise Act as amended by the Finance Act, 2000. Section 110 of the Finance Act, 2000, validating demand notices issued under Section 11A ibid from 17.11.1980 to the date on which the Finance Act came into force, notwithstanding any approval, acceptance or assessment relating to the rate of duty on, or value of, the excisable goods by any Central Excise officer under any provision of the Central Excise Act or the Rules made thereunder, was upheld by the Supreme Court in the said case. The SCNs issued to the respondents are within the validated category of actions taken under Section 11A and, therefore, the respondents are bound to pay duty on the goods in question for a period of 6 months prior to the date of SCN. However, it appears, in these appeals, the Revenue has claimed duty for a period of 6 months prior to 10.9.97. Admittedly, the date of revised classification of the subject goods is 10.9.97. Therefore, in terms of the apex court's rulings in ITW Signode case, the respondents are bound to pay duty on the goods for a period of 6 months prior to the said date. In the result, the impugned order is set aside and these appeals are allowed. However, it is made clear that, if, for any part of the demand of duty raised in any of the SCNs, the dispute was settled between the department and any of the respondents under the KVS Scheme, this order shall not affect such settlement.