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TMI Blog2018 (2) TMI 809X X X X Extracts X X X X X X X X Extracts X X X X ..... sued proposing to deny exemption under the Notification No. 52/2003-Cus dated 31.03.2003 and Notification No. 22/2003-CE and for recovery of the duty, interest and for imposing penalties. After due process of law, the adjudicating authority confirmed the demand, interest and imposed penalties. In the SCN demands proposed were separately under Customs Act, 1962 and Central Excise Act, 1944. Hence assessee has filed appeal No. E/137/2011. However, while confirming the demands, the Commissioner did not specify the provisions of the two Acts separately and also had imposed reduced penalty of Rs. 50,00,000/- instead of imposing equal penalty under Section 11 AC of the Central Excise Act, 1944. The department has filed appeal No. E/146/2011 aggrieved by the non-imposition of equal penalty and also alleging that the Commissioner has erred in not quantifying the demand separately under the proviso to Section 28 of the Customs Act, 1962 and under proviso to Section 11A (1) of CEA, 1944 and also in not imposing equal penalty. 2. On behalf of the assessee, the Ld. Counsel, Shri Raghavan Ramabhadran opened his arguments by explaining the necessity of R&D conducted by the appellants. The submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in relation to R&D are nothing but use of the same in the process of manufacture of final products which are exported. c) In fact, the actual process happening at the R&D Centre is directly linked with the manufacture of the final products and its consequent export. He summarized the process of R&D as under:- "(i) Identification of the chemical entity in the innovator drug, physical characteristics like weight, thickness, hardness and friability and disintegration time of the dosage form. (ii) Identification of chemical characteristics like Assay (to determine the potency of the active compound in the dosage), related substances (to determine the percentage of impurities) (iii) Finding out the Active ingredient in the innovator drug by performing dissolving test. (iv) Finding out the stability of the innovator drug at various storage conditions such as temperature and humidity. (v) The appellant after identifying the above characteristics produces sample drugs at the R & D Centre. This is referred, as stated above, as the generic drug. The generic drug so produces is once again subjected to above tests to ensure the bioequivalence with the innovator drug." Thus, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decisions are not applicable to the facts of the case for the reason that in the said decision only some quantity of the raw materials were used for R&D purposes. In the present case, the appellants have used substantial portion of the raw materials as well as capital goods for R&D purposes only. Such use cannot be equated with the use of the goods in manufacture of finished products. That the demand raised is legal and proper. 3.2 He also adverted to the grounds of appeal in Appeal E/146/2011 and contended that the Commissioner has erred in not imposing equal penalty. Having sustained the allegation that the goods are not used in the manufacture of export of finished products and that the extended period is invokable, the original authority ought to have imposed equal penalty. That the provisions under Section 11 AC of Central Excise Act, 1944 or Section 114A of Customs Act, 1962 does not allow an option to the adjudication authority to reduce the penalty. It is also pointed out by him that though in the SCN the allegations were raised mentioning the provisions under the Customs Act as well as Central Excise Act, the Commissioner erred in not quantifying the demand separately ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of manufacture of the final products of the appellants. The appellants being a 100% EOU, the finished products are exported. Therefore, the availment of concession of duty on inputs and capital goods and Cenvat credit on input services in our view is fully in order. A similar issue was discussed by the Tribunal in the case of Dr. Reddy Laboratories Ltd. (supra), where the Tribunal observed as under:- "3. After hearing both sides and perusal of the records, we find that the adjudicating Commissioner has considered all aspects of the case and has passed a detailed speaking order. He has also taken note of the fact that for manufacturing and exporting pharmaceutical products certain amount of research and development is required for meeting the stringent requirement of the Certification Authorities in the export market before the goods can be actually exported. He has also taken into account the fact that the respondents have fulfilled the export obligation and achieved net NFEP. He has gone by the parameters of the Exim Policy in regard to broad-bonding as also treatment of waste and scrap and rejects involved in the manufacture, of exports goods." 5.3 The Co-ordinate Bench of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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