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TAXAP/1570/2009 3/ 23 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX
APPEAL No. 1570 of 2009
For
Approval and Signature:
HONOURABLE
MR.JUSTICE K.A.PUJ
HONOURABLE
MR.JUSTICE RAJESH H.SHUKLA
=========================================================
1
Whether
Reporters of Local Papers may be allowed to see the judgment ?
2
To be
referred to the Reporter or not ?
3
Whether
their Lordships wish to see the fair copy of the judgment ?
4
Whether
this case involves a substantial question of law as to the
interpretation of the constitution of India, 1950 or any order
made thereunder ?
5
Whether
it is to be circulated to the civil judge ?
=========================================================
ANIL
PRODUCTS LIMITED - Appellant(s)
Versus
COMMISSIONER
OF CENTRAL EXCISE AHMEDABAD - II - Opponent(s)
=========================================================
Appearance
:
MR
DV PARIKH for
Appellant(s) : 1,
MR YN RAVANI for Opponent(s) :
1,
=========================================================
CORAM
:
HONOURABLE
MR.JUSTICE K.A.PUJ
and
HONOURABLE
MR.JUSTICE RAJESH H.SHUKLA
Date
: 04/02/2010
ORAL JUDGMENT
(Per
: HONOURABLE MR.JUSTICE K.A.PUJ)
The appellant has filed
this Tax Appeal under Section-35G of the Central Excise Act, 1944
proposing to formulate the following substantial questions of law
for determination and consideration of this Court.
(i)
Whether or not the Hon’ble Tribunal committed an error of law in
not passing a reasoned order and in not considering the outline of
arguments which deal with various decisions of the Hon’ble Tribunal
as well as the Circulars of the Board directly on issue ?
(ii)
Whether or not the Hon’ble Tribunal erred in law in deciding the
classification of Calcium Gluconate without even considering
Chapter Note 2 to Chapter 30 and without even considering whether
the product in question falls under Chapter Note 2(i) (a) or
Chapter Note 2 (i)(b) ?
(iii)
Whether the Hon’ble Tribunal clearly committed an error of law in
relying upon an earlier ex-parte order passed in the case of
products falling under Chapter Note 2(i)(b), when the present case
clearly is a product falling under Chapter Note
2(i)(a) ?
(iv)
Whether the Hon’ble Tribunal clearly committed an error of law in
classifying the product under Chapter heading 2918.00 as organic
chemical instead of Chapter heading 3003.30 ?
(v)
Whether the Hon’ble Tribunal erred in law in proceeding beyond the
SCN, in as much as, the only charge in the SCN was that the product
in question is required to be converted into injection or tablet
before classifying the same as ‘medicament’?
(vi)
Whether the Hon’ble Tribunal erred in law that once the extended
period is dropped / not attracted then shorter period demand cannot
subsist ?
(vii)
Whether the Hon’ble tribunal erred in holding that when
classification under different chapter heads possible favourable
one to assessee be adopted ?
This Court has issued
notice on 27.8.2009. Pursuant to the notice Mr.Y.N.Ravani, learned
Standing Counsel has filed his appearance on behalf of the revenue.
Heard Mr.Devang V.
Parikh, learned advocate appearing for the appellant and
Mr.Y.N.Ravani, learned Standing Counsel appearing for the revenue.
The brief facts giving
rise to the present Tax Appeal are that the appellant is carrying on
business of manufacturing various products which are I.P.grade and
are used only for pharmaceuticals uses. One of such products which
is under dispute is Calcium Gluconate I.P. This product is being
manufactured by the appellant under the drug license. This product
has therapeutic and prophylactic value. The appellant was filling
Form-II as required for non-scheduled drugs under the Drug (Price
Control) Order. The fact that the product is of I.P.grade, is
admitted even in the order-in-original passed by the Commissioner of
Central Excise, who in his first order referred to the Indian
Pharmacopoeia Rules and held that it is manufactured in accordance
with the specifications and standards laid down therein. The
majority of this product is sold to manufacturers of formulations.
These manufacturers are doing the activity of converting calcium
gluconate into tablet or into injectable form. The only active
ingredient in such a medicine is the calcium gluconate.
A dispute arose with
regard to the classification of the said product. The appellant
assessee claimed this product as a medicament, whereas the
department sought to classify the same as organic chemical. The fact
that the product is put to therapeutic and prophylactic uses and the
fact that majority of the sales are to persons who manufacture
injections and tablets therefrom was not disputed even in the show
cause notice dated 28.8.1987. The Commissioner of Central Excise
passed an order-in-original on 28.9.1998 holding that this product
is not medicament but organic chemical and it does not fall under
Tariff heading 3003.30 (medicament) but falls under Tariff heading
2918.00 (organic chemicals).
Being aggrieved by the
order of the Central Excise the appellant preferred an Appeal before
the Tribunal and the Tribunal vide its order dated 5.1.2004 remanded
the matter to the Commissioner with certain directions. On remand
again the Commissioner passed his order on 24.1.2006 upholding the
classification of the product as canvassed by the Revenue. Being
further aggrieved by the said order the appellant preferred an
Appeal to the Tribunal. It is the case of the appellant that
detailed submissions were made to the Tribunal and detailed outline
of argument was also filed before the Tribunal. Without considering
this submission which go to the very root of the matter, the
Tribunal passed an order after four months on 22.6.2009 and
dismissed the Appeal filed by the appellant. It is this order which
is under challenge in the present Tax Appeal.
Mr.Devang Parikh, learned
advocate appearing for the appellant has submitted that the impugned
order is ex-facie non-reasoned and non-speaking order. It fails to
deal with the submissions raised before the Tribunal in their true
perspective. There is settled legal position by now that a
non-speaking or non-reasoned order cannot be sustained under any
circumstances. He has further submitted that issue with regard to
the classification of product as a medicament or in its base
category as an organic chemical is answered by the provisions of the
Central Excise Tariff Act itself. There are lot of products which
have primarily of therapeutic use but they would also qualify for
classification as organic chemical. In this context, the Central
Excise Tariff Act itself provides a complete answer. He has further
submitted that for classifying the product as a pharmaceuticals
product under Chapter 30, one has to look at Chapter Note.2 which
contains the specific definition of ‘medicament’. It states that
‘medicaments’ means goods (other than foods or beverages such as
dietic, diabetic or fortified foods, tonic beverages) not falling
within heading No.30.02 or 30.04 which are either (a) products
comprising two or more constituents which have been mixed or
compounded together for therapeutic or prophylactic uses (b) unmixed
products suitable for such uses put up in measured doses or in
packings for retail sale or for use in hospitals. He has submitted
that on the basis of this definition it is obvious that a product
comprising of two or more constituents which have been mixed or
compounded for therapeutic and prophylactic uses would be
classifiable as medicament. The product need not be put in a state
as to be directly administered as medicine. If these were the
intent, the Chapter note would have become wholly unnecessary, and
it would only have read that the product which is sold in the market
as a medicament should be classified as a medicament. He has,
therefore, submitted that the product falling under Chapter
Note.2(i)(a) need not be a product which is directly to be
administered to a patient. It thus covers products which are
recognized as bulk drug . These products, out of which the
medicaments are made, can be directly administered to a patient.
Thus undoubtedly such bulk drugs are made for their therapeutic and
prophylactic uses. He has further submitted that Central Excise
Tariff provides that if the intent is to use the product for
therapeutic and prophylactic uses and the manufacturer does mixing
or compounding two constituents for these purposes, then such a
product would classify as medicament.
Mr.Parikh further
submitted that Part (b) of the definition refers to unmixed product.
With regard to such unmixed product, it is required that unmixed
product which are basically organic chemicals, must be put up in
measured dosages or packed in such a way to be fit for medical use
directly, before they can be classified as ‘medicaments’. Thus, the
need for the product to be directly administrable to a patient is
necessary only in the case of unmixed product and certainly not in
the case of a product which consists of two constituents which are
put together for therapeutic or prophylactic uses. He has,
therefore, submitted that the Tribunal has failed to appreciate this
clear language of the chapter note. The Tribunal has further failed
to appreciate that even the show cause notice itself admits that the
product has therapeutic and prophylactic uses. The only case made in
the show cause notice was that, Calcium Gluconate is yet to be
converted into injection or tablet and unless it is in tablet or
injection form irrespective of any change in composition or content
of the product, it cannot be classified as a ‘medicament’. He has
submitted that this very perception is ex-facie opposed to the
definition of ‘medicament’ as contained in the chapter note No.2 of
Chapter 30. Mr.Parikh relies on the decision of the Apex Court in
the case of State of Haryana Vs. Dalmia Dadri Cement Ltd.,
reported in 2004 (178) ELT, 13
wherein it is held that the words for use must be read as
intended for use and not actually used . He has further
submitted that when the product made is of I.P.grade, and it
satisfies the requirement of Drug Rules, as held by the
Commissioner, and when it is made under a Drug License, and
necessary forms under the Drugs (Price Control) Order are also
submitted, in that case it can certainly be said that the product
is being made for therapeutic and prophylactic use. He has further
submitted that this Chapter note -2 of Chapter 30 has been
interpreted by the tribunal itself in various cases. In two of the
cases the Tribunal clarified the proposition of classification. In
the case of East India Pharmaceutical Works
Ltd., Vs. Commissioner of Central Excise Bolpur, 2003 (154) ELT 527,
it was held that the need to pack the same for ready use is only
required in the case of a single component product falling under
Chapter note 2 (i)(b). In the case of BECOAT vs.
Commissioner of Central Excise, Cochin,
it was held that if a product comprises of two or more constituents,
it need not be put up in measured dosages or packed for retail
sale. Even this issue or manner of classification is settled by a
Circular issued by the Government being Circular No.13/89 dated
21.2.1989 which says that a product made of two constituents having
therapeutic
and prophylactic use need not be put in retail packs so as to render
it directly usable. He has, therefore, submitted that despite this
clear position as per the provisions of the Tariff Act and the
judgments of the Tribunal, this issue was not at all considered in
this light and without going into this basic issue the Tribunal held
that the product in question is classifiable under Chapter 29.
Mr.Parikh
further submitted that the Tribunal has committed an error in
holding that the product in question is not a medicament. For
arriving at this conclusion the Tribunal relied on the decision in
the case of Shanpur Industries Vs. Commissioner
of Customs & Excise, reported in 2000 (119) ELT 416.
The Tribunal has, however, not considered the fact that the said
decision was not only an ex-parte but various other products were
packed for classification together
and it was presumed that the case fell under Chapter note 2(i)(b)
and not under 2(i)(a). He has further submitted that a reference to
the statement of the person concerned with Shanpur Industries is
highly irrelevant in as much as his statement was taken in 1997,
even prior to the Tribunal’s own decision in that case. In any case,
all these aspects which go to the very root of the matter and hence
the sole reliance on the decision of Shanpur
Industries (Supra)
is wholly unjustified. He has, therefore, submitted that the
substantial questions of law do arise out of the order of the
Tribunal and since the notice is issued by this Court calling upon
the department to make its stand clear, appropriate order may be
passed either accepting the Appeal in toto or at the most remanding
the matter back to the Tribunal to decide the Appeal afresh in light
of the submissions made by the appellant.
Mr.
Y. N.Ravani, learned Standing Counsel appearing for the Revenue, at
the outset raised a preliminary issue and submitted that this Appeal
itself is not maintainable. When the issue regarding classification
is involved Appeal lies to the Apex Court and not to this Court. He
has, therefore, submitted that this Appeal should be dismissed only
on this short ground. Even with regard to other submissions made on
behalf of the appellant, Mr. Y. N.Ravani has submitted that there is
no substance in the arguments canvassed by Mr.Parikh that the
Tribunal has not considered all the issues raised before it. He has
submitted that the Tribunal has referred to various submissions made
on behalf of the appellant before it. The Tribunal has also
considered the submissions made on behalf of the Revenue. The
Tribunal has referred to the submissions made by the learned
Departmental Representative and documents which inter alia includes
opinion of Shri A. Venkatasubramanian, Senior Executive and
Production Incharge who admitted that calcium gluconate manufactured
by them was for industrial use and sold in unit quantity of 25 Kgs.
Shri D.K.J.Padia of M/s. Bhakthi Pharma engaged in trading of bulk
drugs chemicals had stated that calcium gluconate IP in powder from
was not a medicament but a chemical compound. Shri Nilesh Bhupendra
Shah, Manager of M/s. Shanpur Industries, had stated that they are
manufacturing calcium gluconate IP and classifying the same under
sub heading 2918.00. Shri Maheshbhai M. Mehta Partner of M/s.
Dexoline Pharmaceuticals Ltd., has said that they were engaged in
the manufacture of IV Fluids and they were using calcium gluconate
as raw material. He has also stated that calcium gluconate IP
received by them in powder form was nothing but an organic chemical
capable of being used as bulk drugs. Shri Ravindra Natwarlal Shah,
Director
of M/s. Comet Pharmaceuticals Pvt. Ltd., also stated that calcium
gluconate IP in powder form was a pure organic chemical and a raw
material for manufacture of medicaments. The Tribunal has,
thereafter, referred to the decision of Shanpur Industries (Supra)
wherein it was held that calcium gluconate is classifiable under
CETH 2918.00. The Tribunal, thereafter, observed that for deciding
classification of a product, recourse should not be had to be a
scientific or technical meaning of terms and expressions but to
their popular meaning as attached to it by persons dealing with that
product. While applying from common parlance test also calcium
gluconate is classifiable under CETH 2918.00. The Tribunal has also
referred to the new Central Excise Tariff introduced with effect
from 28.2.2005, calcium gluconate appears under sub-heading
2918.1610.
After referring to the
arguments of both the sides the Tribunal ultimately came to the
conclusion that the decision in the case of Shanpur Industries was
rendered considering the products as calcium gluconate only. In that
case also the decision was rendered considering that the product was
covered by the very Chapter notes. Further, the Manager of the very
same Shanpur Industries, has stated that they were classifying the
product under CETH 2918.00 only. The Tribunal has also referred the
other decisions and observed that those decisions are
distinguishable on facts. Mr.Ravani has, therefore, submitted that
there is no infirmity in the order passed by the Tribunal and the
Appeal deserves to be dismissed.
We
have considered the rival submissions made by the learned advocates
appearing for the parties. We have also gone through the impugned
order of the Tribunal as well as all other
documents produced before the Court. Dealing with the preliminary
objection raised by Mr.Ravani against the maintainability of this
Appeal, we are of the view that this objection would have held good
if we would have decided the issue regarding the classification in
the present Tax Appeal. However, the bare perusal of the questions
framed by the appellant would clearly indicate that the main
grievance of the appellant is about the non-speaking and
non-reasoned order passed by the Tribunal. The appellant’s other
grievance is that despite various submissions were made and several
judgments were relied upon by the appellant, the same were not
considered in their true perspective and the Tribunal has merely
relied on the decision of Shanpur Industries
(Supra)
which was an exparte decision and while deciding the said matter,
the Tribunal had not an advantage of considering the submissions
that may be made on behalf of the assessee.
If we concentrate only on this question leaving aside the question
regarding classification of the appellant’s product, we are of the
view that this Tax Appeal is certainly maintainable before this
Court. Once we take this view that this Appeal can be entertained
only on this limited aspect there is no hesitation on our part to
hold that the Tribunal has not considered all the submissions of the
appellant that were made before it. Mere reproduction of submissions
in the body of the order is not enough. The finding of the deciding
authority on these submissions is equally necessary. Mere reliance
on an earlier decision, that too, when it was decided exparte, is
also not sufficient to take any decision one way or the other.
Despite the fact that the submission was made to the effect that the
said decision is not applicable to the facts of the case and the
real controversy was not highlighted in that decision, the Tribunal
has
not considered this aspect. As a matter of fact, if we peruse the
order passed by the Tribunal in the case of Shanpur Industries it
reveals that the appellant sought classification of ten products
under Sub heading 3003.30, which inter alia includes calcium
gluconate. The Assistant Collector classified the product under Sub
heading 2915.90 as organic chemicals. The Collector (Appeals) upheld
the classification. Before the Tribunal there was no appearance on
behalf of the appellant. The Tribunal merely refers to the fact that
the assessee continues to maintain that Note 2(1)(a) would apply to
their products. Without discussing anything else the tribunal in
that case observed that the manner in which the products have been
described, makes it difficult to believe that they are mixture of
different constituents. In the manner the goods are described, the
provision that would attract is sub-clause (b). For such products to
become medicaments, they have to be put up in measured doses or in
packings for retail sale. Since the products do not fit under
Chapter Note 2 at all, the Tribunal upheld the impugned order passed
by the Commissioner (Appeals). It is relevant to observe that there
was no discussion worth its name in the decision of Shanpur
Industries. Again this decision is rendered in respect of ten
products. The product in question in the present Appeal i.e.
Calcium Gluconate has not at all been separately considered.
In
the above view of the matter, we are of the opinion that the sole
reliance placed by the Tribunal in the decision of Shanpur
Industries (Supra)
is not justified and the Tribunal ought to have given its specific
findings on the various submissions made, judgments relied upon and
the distinguishing features pointed out by the appellant before the
Tribunal. We, therefore, set aside the impugned
order passed by the Tribunal and remand the matter back to the
Tribunal to decide the whole issue afresh after giving an adequate
opportunity to the parties and after considering various submissions
that may be made before it and to pass a reasoned as well as
speaking order.
It is made clear that we
have not expressed any opinion on the classification of the product
in question. It is open for the Tribunal to take appropriate
decision in accordance with law and after considering the
submissions that may be made by the parties before it.
Subject to the aforesaid
directions and observations this Appeal is allowed to the above
extent and questions proposed to this Court are answered
accordingly.
(K. A. PUJ, J.)
(RAJESH H. SHUKLA, J.) kks
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