1. The present appeal is against an order of Commissioner (Appeals), who while confirming the order of the lower authorities held as under :- (i) The Assistant Commissioner's order in respect of classification of the said bulk drug under Sub-Heading 3003.20 of the Central Excise Tariff was correct and hence upheld. (ii) Since the said bulk drug (the final product) was chargeable to "nil" rate of duty on being classified under Sub-Heading 3003.20 Modvat credit on the inputs utilised for the manufacture of the said bulk drug was not admissible and the Assistant Commissioner's finding in this respect is upheld. (iii) As regards reversal of Modvat credit already availed by the appellant, the matter remanded to the Assistant Commissioner for re-examination in the light of this Hon'ble Tribunal's earlier order setting aside the demand on the ground of the demand being barred by limitation, since the said order of the Tribunal covered a common period as involved in the impugned order of the Assistant Commissioner.
2. The bulk drug being manufactured by the appellant viz. Quiniotochlor was also a subject matter of show cause notice issued and on 12-6-97 by the Commissioner, Bolpur proposing to deny the Modvat credit availed in respect of duties paid on the raw material used as inputs. This was for the period June, 1992 to March, 1996 when allegedly the appellants had irregularly availed of the Modvat credit on the inputs which went to manufacture the said bulk drug. The drug was alleged to be correctly classifiable under sub-heading 3003.20 of the Tariff on which no duty was payable and not under sub-heading 3003.10. By a final order dt.
18-2-99 the Tribunal disposing of the appellants' appeal No. E-453/98 in these proceedings allowing the appeal on the ground that the purported demand in the proceedings initiated and confirmed by the Commissioner by notice dt. 12-6-97 were barred by limitation of time.
This order is reported in 1999 (31) RLT 754 (East India Pharmaceuticals v. CCE, Bolpur) and this order is dt. 18-2-1999.
3. However, during the pendency of the above said proceedings in the Tribunal, another show cause notice dt. 20-12-98 was issued by one Superintendent (Technical) Central Excise, Durgapur-1 Division asking the appellants to show cause why the same said bulk drug should not be classified under sub-heading 3003.20 of the Central Excise Tariff and why the claim of credit of duty on inputs utilised for the manufacture of the said bulk drug should not be denied since bulk drugs were chargeable to 'nil' rate of duty during the period 16-3-95 to 20-2-98.
The Asstt. Collector confirmed this notice which was upheld by the Commissioner (Appeals) and hence the present appeal.
4. We have considered the submissions made by both the sides and the material on record and find - (a) The said product is a specified bulk drug in terms of drugs licence issued by the Drug Control, Govt. of West Bengal and is covered by the Drugs Price 'Control' Orders and specified in the Pharmacopoeia. It is undisputedly a drug under the category "other bulk drugs". Therefore, by Chapter 2(1)(b) of Chapter 30 of Central Excise Tariff it would be covered under the definition of medicament. There is however nothing brought on record that it is being sold with or without an indication thereon that the packages are bearing trade name or mark etc. to call it medicament other than patent or proprietory 'or' a patent or proprietory medicament.
Therefore the classification arrived at by the lower authorities under 3003.20 cannot be upheld. Similarly the classification under 3003.10 as availed and claimed by the appellant cannot be dispensed with.
(b) During the period May, 1995 to 20-2-98 provisions of Rule 173B did not empower or authorise the Asstt. Commissioner to approve or amend the declarations filed, the Asstt. Commr. would carry out an enquiry in connection with such declarations and thereafter issue a notice for duty demand, if found necessary under Section 11A of the Central Excise Act, 1944. The appellants are relying upon Board's Circular No. 124/34/95, dt. 10-5-95 prescribing that such an enquiry was to be conducted and completed within a period of 30 days from the date of filing of said declarations. Board's circular are binding on the department. The present proceedings launched by the Superintendent (Technical) after 30 days of filing the declarations covering the period that to when certain period of which was already covered under the notice issued by the Commissioner cannot be found to be permissible as per Board's instructions which are binding on Revenue.
(c) The classification list effective 16-3-95 to 30-4-95 allegedly pending approval before the Asstt. Collector cannot give him the right to issue and determine the eligibility of Modvat credit claimed. Denial of Modvat credit and its recovery by a notice could be effected and made under Rule 57-1. A perusal of the notice dt.
30-12-98 issued, indicates and reads as follows :- ".......Whereas it further appears that the assessee has declared in the corresponding classification lists Declaration referred to above that they would be availing Modvat Credit of Central Excise duty paid on inputs to be utilised for manufacture of Quiniotochlor I.P. in contravention of Rule 57G of Central Excise Rules, 1944 in much as Quiniotochlor I.P. being rightly classifiable under Chapter subheading 3003.20 of Central Excise Tariff Act, 1985 and being subjected to NIL rate of Central Excise duty, therefore the said assessee is not entitled to take Modvat credit of Central Excise duty paid on inputs, as the final product is chargeable to NIL rate-of duty, in terms of Rule 57A read with Rule 57G of Central Excise Rules, 1944, and Modvat Credit availed by them on such inputs is in contravention of Rule 57G of Central Excise Rules, 1944. M/s.
East India Pharmaceutical Works Ltd., Raturia, Durgapur-15 is therefore Central Excise, Durgapur-I Division, Durgapur-16 within 30(thirty) days of receipt of this Notice as to why - (i) their manufactured Excisable goods viz. Quiniotochlor I.P. shall not be rightly classifiable under Chapter sub-heading 3003.20 of Central Excise Tariff Act, 1985.
(ii) Why their claim for Modvat in respect of inputs utilised for manufacture of Quiniotochlor I.P. shall not be denied, since the impugned product were changed to NIL rate of Central Excise duty during the relevant period." This indicates that provisions of Rule 57-1 are not invoked. Recovery has to be made effected under the provisions of Rule 57-1 and a notice for that purpose could be issued within six months from the date of filing of the return under Sub-rule 8 of Rule 57G. This period could be extended if credit was taken by reason of fraud, wilful misstatement, collusion or suppression of facts or contravention of the provisions of the Act or the Rules made thereunder with intent to evade payment of duty. No such allegations or and material for considering the extended period as prescribed under Rule 57-I(1)(ii) have been found on a perusal of this show cause notice dt. 20-12-98. The demands therefore of reversal of Modvat credit, ordered and as determined by the lower authorities cannot be upheld in pursuance of this notice within the time prescribed under Rule 57-I(1)(i). The following findings of the Asstt. Collector, therefore upheld by the ld. Commissioner (Appeals): The said assessee is directed to reverse the Modvat credit availed on questioned inputs and/or pay the same if utilised within 1 (one) months of receipt of this Notice.
5. In view of our findings, the orders of the lower authorities are set aside and the appeal is allowed.