Commissioner of Central Excise vs Oboi Laboratories

These appeals of the Revenue challenge the order passed by the Customs, Excise and Service Tax Appellate Tribunal, West Regional Bench, at Mumbai dated 3 February 2005. Ms. Shah appearing on behalf of the Revenue in support of these appeals submits that though these appeals are admitted on substantial question of law formulated in this Court''s order dated 10 January 2006, the question going to the root of the controversy is whether products of the respondent-assessee are proprietary classifiable as patent or proprietary medicaments for they are solely generic drugs therefore, classifiable as such. She submits that so long as this issue has not been addressed, it would be possible to assume that the final product is attracting Nil rate of duty. Thus, the issue of classification and the duty liability are inter connected and one cannot be isolated from the other. Even for determination of the issue as to whether the assessee is eligible for Modvat Credit, classification of the product proprietary medicaments is important, that will have to be addressed.

Ms. Shah also submits that the Tribunal relied upon its own order passed by its Chandigarh and Delhi Bench. However, there is no denial of the fact that the assessee and the respondent before us had proceeded against the department''s stand which was accepted by the CESTAT. Thus, in the case of this very assessee, the Tribunal took a view in favour of the Revenue. Reliance is placed by her on a copy of the order of the Tribunal passed in the case of the respondent and reported in 2001 (132) E.L.T. 238 . It is claimed that though the issue is determined, the respondent''s stand is accepted by the assessee.

With the assistance of Ms. Shah we have perused the entire paper book. We have also perused the show cause notice issued by the Revenue. We find that the Tribunal had passed a very short order at Page 69 and 70 of the paper book which reads as under:

"Modvat credit of duty paid on inputs used in the manufacture of medicaments by the Appellants herein has been denied on the ground that such medicaments were other than P and P Medicaments and that they felt for classification under CET Sub heading 3003-20 chargeable to Nil rate of duty and penalties have been imposed.

None appeared for the Appellants in spite of notice; hence we heard the learned DR and perused the records. We find that in the case of PL Agro Technologies Ltd. v. CCE Chennai - 2000 (36) RLT 199 , it has been held that credit taken in respect of inputs used in the manufacture of final products cleared on payment of duty as per approved classification list is not required to be reversed on the ground that the department was subsequently of the view that the final product was not dutiable. The same idea has been expressed by the Tribunal in ACE Laboratories Ltd. v. CCE, New Delhi - 2001 (128) E.L.T. 376 . Following the ratio of the above orders which are on all fours applicable to the facts of the present case we set aside the impugned order and allow the appeals."

However, on perusal of the show cause/demand notice, it indicates that as to how the Revenue alleged that the assessee is engaged in the manufacture of medicaments falling under Chapter 30 Sub Heading 3003.10 and 3003.20 of the Central Excise Tariff Act, 1985 and availing Modvat facility under Central Excise Rules, 1944. This facility has been misused and with an intent to mis-utilized it, the respondent assessee has not properly declared the classification of its products and wrongly claimed that they are patent or proprietary medicaments falling under Chapter 30 Heading 3003.10. The assessee claimed that the goods attract 15% tariff duty and therefore, they are entitled to avail of Modvat Credit. However, the goods cannot be classified as patent or proprietary medicaments but are generic products. They are correctly classified as Sub Heading 3003.20 attracting Nil rate of duty. The Modvat credit is not admissible in the event the final product attracts Nil rate of duty. If this is so, how the show cause notice and the allegations proceed and they are replied by the assessee, then, it is necessary to advert to the findings in the order in original. The order in original, copy of which is at Page 26 of the paper book reveals that, the adjudicating authority extensively referred to the nature of the product, whether they are medicaments in preparation and whether they are patent or proprietary medicaments and having generic name. The finding of fact is that the assessee has displayed generic name prominently and in a insignificant portion and manner described alleged proprietary or patented name. That is how the classification was questioned and the adjudicating authority proceeded to classify the product under Sub Heading 3003.20 of the Central Excise Tariff Act being generic medicaments and attracting Nil rate of duty. This finding is confirmed by the Commissioner of Appeals and a copy of which is to be found in the paper book at Page Nos. 50 to 52.

Even from the grounds raised by the assessee to challenge the correctness of the orders as found in the Memo of Appeal lodged in the CESTAT, it would be apparent that it questions the correctness of the finding in the order of the first appellate authority on classification of the medicaments as other than proprietary medicaments. In view of the above, they should fall under Chapter 30 Sub Heading 3003.10 and not 3003.20. There is extensive reference to the forma copia and other work so also decisions of the Hon''ble Supreme Court. In the circumstances, we are in agreement with Ms. Shah that the Tribunal could not have disposed of the assessee''s appeal, even in his absence, without considering the issue as to whether the products are classifiable as patent or proprietary medicaments or medicines other than proprietary and generic name. It is only then the issue whether the Modvat credit is admissible, if the final product tracts Nil duty could have been determined by the Tribunal. In circumstances, the Tribunal''s order does not deal with the entire controversy as projected by the parties. It was the bounden duty of the Tribunal to apply its mind to some vital and basic issues. The Tribunal''s approach therefore, is clearly faulty and as a result, it failed to perform its duty as last fact finding authority. Then, its order does not satisfy the requirement in law.

As a result of the above discussion, we set aside the impugned orders. We are constrained to restore the appeals of the assessee to the file of the Tribunal for being decided on all grounds as raised in the Memo of Appeal. The Tribunal shall render its decision without being influenced by its earlier order. It should specifically hold as to whether the orders in original and the orders of Commissioner (Appeals) both on classification and Modvat Credit are in accordance with law. All the contentions of both sides are kept open. The Tribunal should also not be influenced by our order though we have not expressed any final opinion on the rival contentions and in all fairness to the assessee who is absent though duly served.

The Appeals are allowed. Since these are old matters, we expect the Tribunal to dispose of the same expeditiously. The Record and Proceeding be sent back immediately. No order as to costs.