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2015 (5) TMI 248 - SUPREME COURT

2015 (5) TMI 248 - SUPREME COURT - 2015 (319) E.L.T. 556 (SC) - Manufacture of medical equipment - Defibrillators - Disallowance of benefit of the Notification No.8/96 dated 23.07.1996 and Notification No.4/97 dated 01.03.97 - As per the department, Defibrillators manufactured by the appellant were designed to provide external counter shock and the apparatus for which nil rate of duty had been prescribed was for defibrillators meant for internal use only and not for conventional Defibrillators m .....

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cally mentioned. For our purposes what is relevant is that in the original Notification dated 11.06.1986, as amended on 01.03.1989 and 01.03.1994, the goods which qualified for exemption were “Defibrillators for internal and external use and pacemakers and their accessories including patient cable internal defibrillator paddles 45mm and 55mm sizes”. Implantable cardiac pacemaker and accessories were also specifically included. This entry under went a substantial challenge in the notification No. .....

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for exemption any longer. It would be pertinent to note that in Handicraft Export's case this Court also held that importer will have to prove that the goods were not only capable of being utilized as embellishment for shoes but also that the same were imported for and were actually been used for embellishment for footwear. In the present case as defibrillators are sold without paddles, obviously the sale as such is not intended by the purchaser to be used for internal purpose. We are, therefor .....

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unal (for short, 'CESTAT'), Bangalore erred in disallowing the benefit of the Notification No.8/96 dated 23.07.1996 and Notification No.4/97 dated 01.03.97 respectively to the appellant. 2) The appellant herein is engaged in the manufacture of excisable goods falling under Chapter 85 and 90. From January 1997 onwards the appellant had been manufacturing and clearing two models of D.C. Defibrillators which are known as Model No. DF2389R with recorder and Model 2389 without recorder. The a .....

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plantable defibrillators were eligible to the benefit of the Notification. The appellant protested by giving reply and maintaining that the Notification in question encompassed the aforesaid goods manufactured by the appellant as well. The department was not amused by the reply given by the appellant. It resulted in issuance of show-cause notice dated 23.09.1998 whereunder demand duty with respect to Defibrillators manufactured during the period January 1997 to March 1998 was proposed as duty in .....

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in, Medison. It reads as follows:- Some cardiac arrhyhmias can be treated by passing a brief electric shock through heart. Ventricular fibrillation can often be stopped before circulatory arrest has caused irreversible brain damage due to oxygen deficiency. Likewise, atrial fibrillation and atrial flutter can often be stopped by defibrillator. 4) Ventricular fibrillation may be caused by an external electric shock, which occurs near the peak of the T wave- the vulnerable period when the ventricl .....

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passing through the heart along the longitudinal axis. Defibrillator can be performed externally via two electrodes placed on the chest or internally on the exposed heart during an operation. With an electrode about 50 cm in area, the resistance through the thorax is about 100 ft. For internal defibrillator on an exposed heart the resistance is lower, about 50 ft. 5) As per the department, Defibrillators manufactured by the appellant were designed to provide external counter shock and the appar .....

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ct was totally incorrect and therefore the demand was time barred. The appellant attended personal hearing and thereafter the Commissioner by order dated 19.11.1999 confirmed the demand of ₹ 27,71,326/- and imposed equivalent penalty under Section 11AC as well as further penalty of ₹ 1 lakh. 6) Thereafter, the appellant filed an appeal before the CEGAT, Madras (now Chennai) against the order of the Commissioner mainly impressing upon the CEGAT that the Commissioner in the impugned or .....

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nternal use by using internal paddles on the exposed hear during cardiac surgery. They relied upon decisions that the term 'for use' means capable of being used and not actual use and also on interpretation of statute. The CEGAT, by its order dated 01.03.2002, held that the Commissioner had come to a finding on an incomplete reading of the manual and had not considered well-settled law on 'for use'. The CEGAT, therefore, remanded the matter back to the Commissioner to decide elig .....

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ntable Defibrillators were two different pieces of equipment. The appellant again contended that the demand was time barred, as there was no suppression of facts. The appellant appeared for personal hearing and reiterated its submissions and filed additional written submissions. It produced photographs showing the Defibrillator being put to internal use during open heart surgery as well as the Technical Literature to substantiate its claim. 8) The Commissioner, however, by order dated 22.02.2003 .....

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the order of the Judicial Member, the Defibrillator manufactured by the appellant could be used for internal use and therefore they are eligible to the benefit of the notification. Since his opinion was in favour of the appellants on merits, he did not go into the time bar issue. The Technical Member while admitting that the Defibrillator could be used for internal use in rare circumstances when the heart is open and the paddles for internal use are fixed in the Defibrillators as there is a bui .....

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he benefit of the notification to the Defibrillator thereby concurring with the view of the Technical Member. 11) This is how the matter has come up to this court in the form of present appeal filed by the appellant under Section 35 L(b) of the Central Excise Act (herein after refer to as Act), challenging the aforesaid order dated 19.05.2004. 12) We have already taken note of the product in question with its salient features and particular uses it can be put to. Question is as to whether it sat .....

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Material part of these Notifications read as under: Notification No. 339/86-CE dated 11.06.86 amended by Notification Nos.88/89-CE dated 01.03.89 and 58/94-CE dated 01.03.94. 8 DC Defibrillators now internal use and Pacemakers and their accessories including patient cable, internal Defibrillators Paddles 45mm and 55mm sizes but excluding:- (a) Cardiac Monitors (b) Cardioscopes (c) E.C.G. Monitors of any type. (d) E.C.G. Recorder and the following components of D.C. Defibrillators, namely:- (i) C .....

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diac pacemakers. (58) Pace Maker. III. Notification No.4/97 dated 01.03.97 TABLE 217. Medical equipment and other goods specified in List 6. LIST 6 (7) DC Defibrillators for internal use and pace\ makers. (16) Implantable cardiac pacemakers. (58) Pace Maker. 14) From the reading of the aforesaid notifications, it becomes apparent that originally those D.C. Defibrillators which were meant for both internal as well as external use and also pacemakers and their accessories etc. were eligible for ex .....

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emakers and their accessories including patient cable internal defibrillator paddles 45mm and 55mm sizes . Implantable cardiac pacemaker and accessories were also specifically included. This entry under went a substantial challenge in the notification No. 8/96 dated 23.07.1996. In this Notification, replacing the earlier notifications, defibrillators for external use are no more eligible for exemption. The entry now reads D.C. Defibrillator for internal use and pacemaker . Thus, what is omitted .....

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Notification No.8/96. This position is maintained in Notification No.4/97 dated 01.03.1997. 15) Keeping in view the aforesaid characteristic and feature of the Notifications in question, in contradistinction to the position which prevailed in the earlier Notification dated 11.06.1986 as amended from time to time and taken note of above, we have to examine as to whether the defibrillator of the appellant would be covered by these two Notifications. 16) It is not disputed by the appellant that th .....

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d by the appellant only as an accessory. Not only this, while selling the defibrillators said paddlers are not sold as an integral component/accessory of the main equipment. To the contrary, their purchase is optional, meaning thereby the choice is that the buyer to purchase paddle or not. During the arguments it was conceded that 99 per cent sale of these defibrillators were without paddles which means that predominantly the goods are sold for external use only. We would also like to reproduce, .....

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addles, or if internal paddles are used, by depressing the INT, PADDLE DISCHARGE button located on the control panel Optional anterior paddles are equipped with a CHARGE push button that functions the same way as the SET CHARGE MANual push button does. 17) Going by the aforesaid features of the appellant's goods in question which are primarily meant for external use, simply because it can be used internally as well but not without the paddles and paddle is optional accessory, it is difficult .....

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uding accessories in the above items specific reference was made to 'internal defibrillator paddles with 45mm and 55mm sizes'. It is relevant to note that there is a marked difference in the description of the item when it came to Notification Nos.8/96 and 4/97. There is no reference to D.C. Defibrillator for external use or a specific reference to 'internal defibrillator paddles'. Even according to the assessee, its product can be treated as D.C. Defibrillators for internal use .....

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to be accepted then in spite of such specific exclusion its product will continue to get benefit of exemption on the basis of supply of some optional accessories like internal paddle. 6. The material produced by the Revenue before the Commissioner and accepted by him were later made available toe the assessee before this Tribunal. Arguments were addressed by both on that basis. The relevant portion from the Commissioner s order is quoted below:- Internal Cardioverter Defibrillators (ICD) were o .....

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sures about ½ inch thick by 2 inches wide and is implanted under the skin in the upper chest. Leads are the wires that conduct the ICD to the heart the tip of which is placed against the heart's inner wall and carries electric impulses from the ICD to the heart through the cut vein into the heart's chambers beginning with the right ventricle (www.chfpatients.com). 7. The above would show that D.C. Defibrillators for internal use included in the exempted category cannot be taken as .....

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ternal defibrillator. That is because the device typically used to manually deliver a counter shock to the myocardium during open hart surgery is identical to those defibrillators that externally deliver transthorascic shocks to a closed chest (except for the peddles that are used.) Therefore, the defibrillator used during open heart surgery is identical to the defibrillators used to deliver transthorascic shocks externally except for the internal paddles additionally provided. Exclusion of defi .....

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the conclusion that the goods of the appellant would not qualify the description contained in Notification Nos.8/96 and 4/97. It is trite that strict interpretation is to be given to the exemption notifications and it is upon the assessee to approve that he fulfills all the conditions of eligibility under such Notifications. This is so held by this Court in Rajasthan Spinning and Weaving Mills, Bhilwara, Rajasthan v. Collector of Central Excise, Jaipur, Rajasthan (1995) 4 SCC 473, wherein this p .....

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n be given to the exempted item to enlarge the scope of exemption granted by the notification. 19) This principle has been reiterated time and again. It is not necessary to take note of all such cases. We would however like to reproduce the restatement of this member by the Constitutional bench of this Court in Commissioner of Central Excise, New Delhi v. Hari Chand Shri Gopal & Ors. (2001) 1 SCC 236, as follows: 29. The law is well settled that a person who claims exemption or concession ha .....

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fulfilled exactly, though at times, some latitude can be shown, if there is a failure to comply with some requirements which are directory in nature, the non-compliance of which would not affect the essence or substance of the notification granting exemption. 30. In Novopan India Ltd. (Novopan India Ltd. v. CCE and Customs, 1994 Supp (3) SCC 606) this Court held that a person, invoking an exception or exemption provisions, to relieve him of tax liability must establish clearly that he is covere .....

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that regard must be had to the clear meaning of the words and that the matter should be governed wholly by the language of the notification i.e. by the plain terms of the exemption. 20) Having regard to the above it is difficult to accept the contention of Mr. Datar, learned senior counsel who appeared for the appellant, predicated on the submission that such defibrillator of the appellant is capable of internal use and, therefore, it would be covered by the aforesaid notifications. No doubt the .....

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ase of Collector of Customs, Bombay v. Handicraft Exports (1997) 7 SCC 144 will also have no application to the instance case. In that case exemption from import duty was provided in respect of 'embellishment for footwear under the notification. The Court held that the imported goods need not be capable of being exclusively used as embellishment for footwear but may also be capable for being used for other purposes. Here, as noted above, defibrillators are not capable of being used internall .....

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