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1992 Supreme(MP) 370
1992 (40) ECC 173, 1992 (62) ELT 241 MP
A Qureshi, S Jha
Panama Chemical Works
vs
Union Of India (Uoi)
Decided on : 2 July, 1992
The classification of goods under the Central Excise Tariff is to be made according to the scientific and technical meaning of the product, with the aid of the Drugs and Cosmetics Act, 1940.
Headnote:
CENTRAL EXCISE - CLASSIFICATION - AYURVEDIC MEDICINE - SWAD TABLETS - WHETHER AYURVEDIC MEDICINE OR CONFECTIONERY - CLASSIFICATION LIST - APPROVAL - MODIFICATION - SHOW CAUSE NOTICE - JURISDICTION - LIMITATION - SECTION 11A OF THE CENTRAL EXCISE ACT, 1944 - WRIT PETITION - MAINTAINABILITY.
Fact of the Case:
The petitioner, M/s. Panama Chemical Works, manufactures an Ayurvedic product called SWAD tablets. The petitioner filed a classification list before the Superintendent, Central Excise, which was provisionally approved. After making due enquiry, the classification was approved by the Assistant Collector, Central Excise. However, the enquiries continued and a query about the glucose sugar was made. The petitioner sent all the necessary details. Thereafter, the Collector, Central Excise, issued a show cause notice under Section 11A of the Central Excise Act to the petitioner firm to show cause why the SWAD tablet be not classified under sub-heading 1704.90 relating to sugar confectionery instead of sub-heading 3003.30 relating to pharmaceutical products and why an amount of over one crore be not recovered under Rule 9(2) of the Central Excise Rules, 1944 read with Section 11A of the Central Excises and Salt Act, 1944 and why penalty under Rules 9(2), 52A(5) and 173B(2) of Central Excise Rules be not imposed for contravention of the said Rules.
Finding of the Court:
The Court held that the product of the petitioner is an Ayurvedic preparation and has rightly been classified by the Assistant Collector under Item 3003.30 of the Central Excise Tariff. The Court also held that the notice issued by the Collector, Customs and Central Excise under Section 11A of the Central Excise Act is without jurisdiction and as such the petition is maintainable. The Court further held that the notices issued by the authorities during the pendency of the first petition also deserve to be quashed.
Issues: 1. Whether the SWAD tablets are Ayurvedic medicine or confectionery? 2. Whether the classification list was finally approved? 3. Whether the Collector, Central Excise, has jurisdiction to modify the classification list? 4. Whether the show cause notice issued under Section 11A of the Central Excise Act is valid? 5. Whether the petition is maintainable?
Ratio Decidendi: 1. The Court held that the product of the petitioner is an Ayurvedic preparation and has rightly been classified by the Assistant Collector under Item 3003.30 of the Central Excise Tariff. The Court relied on the following factors: a. The product was manufactured in accordance with the ingredients mentioned in the authoritative text book of Ayurved called Bhavprakash. b. The petitioner had obtained a license from the Controller, Food and Drug Administration, M.P. under the Drugs and Cosmetics Act. c. The classification list was approved by the Assistant Collector, Central Excise after due enquiry. d. The product was tested by the Central Excise Authorities and found to be an Ayurvedic medicine. e. The Drug Controller, M.P. had discharged a show cause notice issued to the petitioner under Section 18(a)(o) of the Cosmetics Act and held that the product is an Ayurvedic product. 2. The Court held that the classification list was finally approved on 9-1-1988 after due enquiry under sub-rule (2) of Rule 173-B. The Court relied on the following factors: a. The Assistant Collector acts as a quasi judicial authority. b. The power to modify classification list is provided in sub-rule (5) of Rule 173B. c. There is no power of review under the Act. 3. The Court held that the Collector, Central Excise, does not have jurisdiction to modify the classification list. The Court relied on the following factors: a. The Assistant Collector acts as a quasi judicial authority. b. The power to modify classification list is provided in sub-rule (5) of Rule 173B. c. There is no power of review under the Act. 4. The Court held that the show cause notice issued under Section 11A of the Central Excise Act is invalid. The Court relied on the following factors: a. The classification list was finally approved on 9-1-1988 after due enquiry. b. The Collector, Central Excise, does not have jurisdiction to modify the classification list. c. The product is an Ayurvedic preparation and not a confectionery. d. There was no misrepresentation, fraud or suppression of fact on the part of the petitioner. 5. The Court held that the petition is maintainable. The Court relied on the following factors: a. The show cause notice is without jurisdiction. b. The petition was filed during the pendency of the first petition.
Final Decision: The Court allowed both the petitions and quashed the notices issued by the authorities.
A.G. Qureshi, J.
1. This order shall govern the disposal of M.P. No. 1297 of 89 (Panama Chemical Works and Manoj Kumar) and M.P. No. 682 of 1991 (Panjon Pvt. Ltd. and Anr. v. Union of India and 3 Ors.).
2. M.P. No. 1297 of 1989 has been filed by the petitioners against the respondents under Articles 226 and 227 of the Constitution of India seeking the relief of quashing the show cause notice Annexure-P19 being without jurisdiction and barred by limitation hence being illegal and biased. During the pendency of this petition the petitioners in M.P. No. 682 of 1991 started the manufacture of the same product which was the subject matter of the earlier petition. They, therefore, submitted a classification list for suitable classification of the Ayurvedic product 'SWAD' for treating it as an Ayurvedic preparation, whereupon the respondent No. 4, Superintendent, Central Excise, issued a show cause notice dated 8-1-1991 to the petitioner Company that why the product SWAD be not classified as confectionery instead of Ayurvedic medicine. Thereafter a corrigendum was also issued by the Superintendent, Central Excise. Then the Assistant Collector, Central Excise, Indore issued a notice of show cause to the petitioner Company as to why the product be not classified as a confectionery. The petitioner Company requested the Authorities to extend the time for submission of reply in view of the pendency of a similar petition on similar grounds before this Court. But the Assistant Collector refused to stay the proceedings. Hence a writ petition was filed by the petitioner seeking the issuance of a writ restraining the Assistant Collector, Central Excise and the Superintendent, Central Excise, Indore from taking any further action on the show cause notices Annexures P-6, P-7 and P-8 being illegal and without jurisdiction.
3. As the main petition which was pending before this Court is M.P. No. 1287 of 1989, the facts leading to this petition may be briefly stated. The petitioner M/s. Panama Chemical Works manufactures an Ayurvedic product at their factory at Niran-janpur. As a part of their preparation they manufacture a product called SWAD tablets. According to the petitioners the SWAD tablet is used as therapeutic prophylactic purposes and is an Ayurvedic product and as such the product falls under Chapter 30 of pharmaceutical products, Heading 30.03, sub-heading 3003.30. SWAD tablets are medicaments as defined in note 2(i) to Chapter 30. These tablets have been prepared in accordance with the ingredients mentioned in the authoritative text book of Ayurved called Bhavprakash. There are two commentaries on this book by well-known Ayurvedic experts, which have also been stated in the petition. The petitioner Company after taking the ingredients from the book, evolved its own formula and got it patented in the name of SWAD tablets from the Drug Controller of M.P. under the Drugs and Cosmetics Act. The formula of the tablet was filed before the Controller, Food and Drug Administration, M.P., Bhopal on 6-6-1986 and it was approved on 18-7-1986. The approval letter is Ex. P-2. A classification list was filed by the petitioner firm before the Superintendent, Central Excise on 25-8-1986 (Annexure-P3). On demand by the Authorities the necessary papers of purchase etc. were submitted by the petitioners, vide Annexure-P4. The licence issued by the Controller, Food and Drug Administration was also submitted on 26-9-1986 by Annexure-P5. Thereafter the Assistant Collector, Central Excise provisionally approved the classification list on 15-10-1986 under Rule 9B of the Central Excise Rules, 1944. Thereafter enquiries were made by respondents Nos. 3 and 4 under Rule 173B of the Central Excise Rules regarding the final approval of the classification list, wherein the formula of the tablet was also sought. The petitioner firm sent all the necessary details, vide Annexure P-8. As such, after making due enquiry the classification was approved by the letter da
