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Commissioner of C. Ex. Vs. Alembic Chemical Works Ltd. - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Mumbai
Decided On
Judge
Reported in(2006)(193)ELT243Tri(Mum.)bai
AppellantCommissioner of C. Ex.
RespondentAlembic Chemical Works Ltd.
Excerpt:
.....penicillin which was used in the manufacture of (i) fortified procaine penicillin & (ii) benzyl penicillin. these two products when sold in domestic market were sold under a brand name and were exempt, from duty. while being exported, they were cleared in the generic names and hence were chargeable to duty. assessee did not maintain separate records for inputs used in exempt product and discharge of 8% amount was allegedly not effected.1.3 cce (a), set aside the order of the lower authority hence this appeal by revenue on the grounds - (i) commissioner (appeals) while deciding the case observed as under : it is observed that the appellants were using different inputs in the manufacture of their pharmaceutical products which in turn were cleared either on payment of duty or.....
Judgment:
1. Respondents, an assessee under the Central Excise Act avail Modvat credit and discharges duties on me-dicaments/pharmaceuticals etc. They were issued notices seeking to disallow credit availed wrongly during the period May 98 in contravention of Rule 57CC.1.2 The respondents availed credit of duty on inputs and obtained an intermediate product Strepto Penicillin which was used in the manufacture of (i) Fortified Procaine Penicillin & (ii) Benzyl Penicillin. These two products when sold in domestic market were sold under a Brand Name and were exempt, from duty. While being exported, they were cleared in the Generic Names and hence were chargeable to duty. Assessee did not maintain separate records for inputs used in exempt product and discharge of 8% amount was allegedly not effected.

1.3 CCE (A), set aside the order of the lower authority hence this appeal by Revenue on the grounds - (i) Commissioner (Appeals) while deciding the case observed as under : It is observed that the appellants were using different inputs in the manufacture of their pharmaceutical products which in turn were cleared either on payment of duty or without payment of duty. During the manufacture of the said pharmaceutical products two intermediate products namely (1) Fortified Procaine Penicillin and (2) Benzyl Penicillin emerged as inputs which again were used in the manufacture of injections and formulations.

The above mentioned observation is not factually correct. In fact these two products are finished products in this case. The assessee in their defence reply themselves clarified as under : In order to understand the controversy involved in the show cause notice it is necessary to understand the finished products as well as the inputs involved. It is submitted that our clients are engaged in the manufacture of pharmaceutical products, amongst other things, falling under Chapter 30 of the Schedule to the CTA, 1975. The finished products involved in the present case are (a) 45 procaine penicillin and (b) Benzyl Penicillin.

Thus it is clear that Commissioner (Appeals)'s basic observation on this case itself is not factually correct and further argument/observations are also affected due to this wrong observation. So on this ground alone, the order of Commissioner (Appeals) is required to be set aside, (ii) It is clear from the wording of Rule 57CC that this rule is applicable only in such cases where any manufacturer is manufacturing two or more products and using raw material for these products. If he is using same raw material in two different products, one of which is dutiable and another is exempted then only this rule is applicable. The wordings of Rule 57CC made it amply clear that for application of this rule, there must be two or more different products. This rule is not applicable if only one product is being manufactured and the same is dutiable in one condition and exempted in another situation. But in the instant case the assessee themselves clarified in their defence reply dated September 22,1998 : It must be noted that the very same goods when affixed with a label of the noticee company are P&P Medicaments as defined under the central excise tariff, hence exempted and when not affixed with the label of noticee company are generic medicaments as per the central excise tariff hence dutiable. That as and when required the P&P Medicaments can be converted into generic medicaments by merely removing the label.

Thus it is clear that they are not using the intermediate products for two different products but using for only one product (the very same goods). Since Rule 57CC is not applicable in such situation; the order of Commissioner (A) allowing the credit does not appear legal and proper.

2.1 After considering the submission, we cannot accept the proposition that the Intermediate Strepto Penicillin is not being used for two different products viz. Branded fortified Penicillin and Benzyl Penicillin which are classified as Patent and Proprietary medicaments and non-branded Generic fortified Penicillin & Benzyl Penicillin exported classified differently. Therefore, the grounds taken on an assumption of removal of labels/or denial of 8% route adopted of Rule 57CC cannot be upheld as pleaded by Revenue. We find no merits in this appeal.


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