ORDER
Jyoti Balasundaram, Member (J)
1. The present appeal arises out of the order passed by the Collector of Central Excise, Meerut directing recovery of Rs. 1,23,32,611/-, representing the Modvat credit allegedly wrongly taken by the appellants by way of reversal in RG 23A-Part II or by way of recovery in cash or through debit in PLA in terms of Rule 57-I of the Central Excise Rules and imposing a penalty of Rs. 25 Lakhs thereupon.
2. The brief facts of the case are that the appellants are manufacturers of various pharmaceutical products and they had entered into agreements with the customers namely M/s. J. R. Sharma Overseas Ltd. and Agnail Traders. As per the agreement Paracetamol B.P. and Analgin B.P. were to be manufactured by the appellants and sold to these two customers above mentioned, which in turn exported the goods to foreign buyers. At the time of clearance of these two products for export excise duty was paid by the appellants @ 10% under sub-heading 3003.10 of the CETA, 1985 as Patent or Proprietary medicines. The duty was paid by utilising the Modvat credit available in RG 23A-Part II account by way of debit in RG 23A-Part II and the exports were made under Rule 12 on payment of duty and a claim for rebate was made. Refund of excise duty paid was claimed and sanctioned by the Assistant Collector after being satisfied about proof of export. Subsequently, a show cause notice dated 15th February, 1994 was issued seeking recovery of the amount refunded on the ground that the two products were not patent or proprietary medicines and that they fell for classification under sub-heading 3003.20 attracting nil rate of duty and therefore not entitled to the benefit of rebates in terms of Rule 12. A Corrigendum was issued on 27-10-1994 in which the department contended that the final products are chargeable to nil rate of duty under heading 3003.20 and hence in view of Rule 57C of the Central Excise Rules the appellants were not entitled to Modvat credit on inputs used in the manufacture of the final product. The Modvat credit taken by the appellants was sought to be recovered. The impugned order was passed confirming the recovery and also imposing the penalty as set out earlier, hence this appeal.
3. At the outset Ld. Counsel for the appellants Sh. V. Sridharan clarifies that he is confining his arguments only to the point of the demand being time barred by limitation and in this case he submits that (a) classification lists alongwith the samples of the products and cartons which indicated that Paracetamol B.P. and Analgin B.P. were bearing the mark of the buyer and bearing the Logo of the buyer and it is only after this material was considered that the classification lists filed during the relevant period were finally approved by the department and this classification list in turn was based upon the appellant’s understanding of the law as it stood during the relevant period. [The Tribunal in the case of Astra Pharmaceuticals reported in 1987 (32) E.L.T. 720 had held that the distinctiveness in regard even to the name of manufacturer was also sufficient for the purpose of considering such medicine as a Patent or Proprietary medicine, relying in turn on the judgment of the Hon. Allahabad High Court in the case of Ramsey Pharma Pvt. Ltd. – 1983 (12) E.L.T. 78 (Allahabad)].
(b) That the judgment cited above got reversed by the Hon. Supreme Court only at the end of 1994 by its judgment reported in 1995 (75) E.L.T. 214. As the appellants had furnished the necessary information required to enable the Assessing Officer to come at a correct conclusion about the classification of the products in dispute and any change in opinion which had subsequently arisen can only operate for the period of six months prior to the issue of the show cause notice and the extended period cannot be invoked as the appellants were not guilty of any suppression or misdeclaration with intent to evade payment of duty. Replying to this contention of the Ld. Counsel, Ld. SDR Sh. Madan, in addition to reiterating the findings of the adjudicating authority, submits that the appellants had resorted to a modus operandi to utilise the Modvat credit available in their account after paying duty on the product even though the products were not Patent or Proprietary medicine attracting duty, but were other than Patent or Proprietary medicines falling under 3003.20 attracting nil rate of duty. He therefore submits that the impugned order is to be sustained and the appeal rejected, holding that the extended period of limitation is available to the department and the present case.
4. We have carefully considered the submissions of both the sides and find great force in the contentions of the appellant’s Counsel. From the narration set out above it cannot be said that the appellants suppressed or concealed or mis-declared any material facts relating to the product so as to attribute any suppression or mis-declaration with intent to evade payment of duty. Not only did the classification list filed by them enclose therewith the sample of the product and the label and the cartons, the classification lists were approved only after this material was placed before the department and so the department, if it felt that the classification of the products as Patent or Proprietary medicines was not correct, was entitled in law to revise this classification and issue a demand within a period of six months backwards. The legal position as expounded by the judgments of the Tribunal which was subsequently followed again by the Tribunal (and based upon the judgment of the Hon. Allahabad High Court) also confirms the bonafide belief on the part of the appellants that their products were entitled to be classified as Patent or Proprietary medicines. The reversal of the judgment of the Tribunal by the Apex Court in the case of Astra Pharmaceuticals (Supra) came only in December, 1994 and till then the appellants were under a bonafide belief based upon the earlier judgments that their products were Patent or Proprietary medicines. In this background of both furnishing of full information to the department and approval of classification list based thereon and the law as it prevailed at the relevant time, it cannot be said that the appellants suppressed or mis-declared any material facts relevant for the case with intent to evade payment of duty. The 1962 circular issued by the Board also confirms their belief regarding classification of the disputed products as Patent or Proprietary medicine. Keeping this in view, we agree with the appellants that the extended period of limitation is not available to the department and that the entire demand is barred by limitation. Accordingly on this ground alone, we set aside the impugned order and allow the appeal without going into the merits of the appeal.