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2017 (11) TMI 608 - AT - Central ExciseClassification of goods - whether the product Reishi Gano and Ganocelium are classifiable under chapter 3003.39 of the First Schedule to the Central Excise Tariff Act, 1985, as contended by appellants or as food supplements under 2108.99 of CETA?. Held that: - the appellants were taking great pains to emphasize the distributors that they should sell the items as food supplements only and not to misrepresent it as a drug. From the facts on record, it also emerges that the statements of various stockists had been taken who have admitted that the impugned goods were sold only as food supplement. Appellants have themselves registered the trade mark REISHI and GANO with the Trade Mark Registry under the category of food supplements even while they have obtained license for manufacture of Ayurvedic drugs. All these facts go to prove that inasmuch as in common parlance test, the impugned goods are definitely products sold and known only as food supplements and certainly not as a drug and most certainly not as an ayurvedic drug. The second clinical trial report which was submitted for issue of Drug Licence was in the name of Dr. S.S. Raviselvan, AMO, Aringnar Anna Government Hospital, Chennai. It emerges that the said Dr. Raviselvan though admits having issued such report nonetheless also admitted that the report was issued at the request of Daeshan without conducting any clinical test. Appellant did not seek examination of any of these two doctors. At the cost of repetition, it is to be noted that even Dr. Athisayaraj has confessed that he had wrongly recommended issuance of drug license to the appellant for manufacture of the impugned products as Ayurvedic medicine. We find from the record that Dr. Athisayaraj even wrote to the Drug Control Authority to cancel the license - The Drug Licence by itself cannot be the basis for classification. The classification for the purpose of collection of revenue is to be on the basis of Excise / Customs legislations. The primary object of Excise Act being to raise revenue, the classification of the product so as to determine the rate of duty has to be considered independent from the Drugs and Cosmetics Act, 1940 and like legislations. Correct classification of goods - Revenue have contended that said goods merit classification under sub heading 2108.99 of the CETA as food supplement requiring assessment of the goods under Section 4A for the purpose of payment of duty of excise in view of N/N. 13/2002-CE (NT) dt. 1.3.2002 notifying the goods falling under that sub heading for assessment under Section 4A - Held that: - As per chapter Note 9 (b) of Chapter 21 of the CETA 1975, the Heading No. 21.08, inter alia, includes "preparations for use, either directly or after processing (such as cooking; dissolving or boiling in water, milk or other liquids), for human consumption". From the HSN Chapter Note 16 of the Harmonised System of Nomenclature (HSN), it is indicated that "Preparations often referred to as food supplements, based on extracts from plant, fruit concentrates, honey, fructose etc. and containing added vitamins and sometimes minute quantities of iron compounds often put up in packagings with indication that they maintain general health or well being" would be included within that entry "FOOD PREPARATIONS NOT ELSEWHERE SPECIFIED OR INCLUDED.HSN further goes on to elucidate that such similar preparations however intended for the prevention of treatment of diseases or ailments are excluded from that entry and would feature in 30.03 or 30.04 - From the facts and the findings and discussions herein above, both the impugned goods fail both the twin tests for being considered as Ayurvedic Medicament. On the other hand, from application of both these tests, the indubitable conclusion that has resulted is that the products in question are nothing but a food supplement promoted mainly only for general health or well being and therefore meriting classification only under 2108 of the CETA and more specifically in 2108.99 as it stood at the appointed time, and assessed accordingly under Section 4A of the Act for discharge of duty liability. The issue of classification is thus held in favour of Revenue and against assessee. Extended period of limitation - Held that: - the intention of changing the classification and claiming the products to be Ayurvedic Proprietary Medicines was only to evade payment of duty. The appellants have consciously declared on the labels that the products contain Chatrakh & Bhuchatra as an endeavour to create an impression that the products are different from that what was earlier imported by them - But for the investigation conducted by department, the misdeclaration and undervaluation would not have come to light. Hence in our view, the invocation of extended period is not without grounds. The argument of the appellants on this count fails - extended period rightly invoked. Penalty - Section 11AC - Held that: - Having found that the invocation of extended period is justified, the provisions of Section 11AC will statutorily require to be invoked and hence penalty equal to the duty or differential duty determined will necessarily have to be imposed - penalty upheld. Penalty u/r 25 - Held that: - as the equal penalty under Section 11AC has already been imposed, we hold that the same will meet the ends of justice and further penalty on DXN under Rule 25 is uncalled for - penalty u/r 25 set aside. Appeal allowed in part.
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