Commnr. Of Central Excise, Delhi vs M/S. Ishaan Research Lab. (P) Ltd.& Ors

2. All these appeals relate to the order passed by Customs Excise and Gold (Control) Appellate Tribunal, New Delhi whereby the Tribunal held that 22 products manufactured by M/s.Ishaan Research Lab Private Limited (hereinafter referred to as "IRLP") are covered under the Central Excise Tariff Sub-heading 3003.30 and not under Chapter 33 of Central 2 Excise Tariff and thus the said products would invite the duty as "Ayurvedic medicines" at the rate of 10% advalorem and not at the rate of 40% advalorem as claimed by the Revenue Department. The Revenue Department's claim was that these products were cosmetics such as skin beautification creams, lotions, moisturisers, shampoos, etc., and were as such the "cosmetics" and "toilet preparations" chargeable to 40% duty. The Tribunal further held that IRLP and M/s.Ishaan Marketing Private Limited (hereinafter referred to as "the IMPL") were not related persons in terms of Section 4(4)(c) of the Central Excise Act and as such the price at which IRLP sold the products was to be adopted as the basis for determining the assessable value. Similarly, the IRLP and IRL Marketing Pvt. Ltd. (hereinafter referred to as "IRL (M)") were also not related persons and as such the price at which the IRLP sold the goods would form the basis for determining the assessable value. The Tribunal further held that the extended period of limitation was not applicable in all the cases. Resultantly, the Tribunal held that the duty demand on the products which were held to be cosmetics by the Commissioner, Central Excise was to be re-quantified with the normal period of limitation of six months, adopting the price of IRLP as the basis of the computation of the assessable value. The Tribunal, however, left open the question of penalty on IRLP to be decided by the Commissioner, Central Excise. The Tribunal further set aside the penalities imposed upon IMPL, IRL (M) and Smt.Vinita Jain under Rule 209A of Central Excise Rules in view of the finding that the IRLP, IRMP and IRL(M) are not the related persons as also the finding that 3 the extended period of limitation was not applicable. Lastly the Tribunal set aside the confiscation of land and machinery.

3. The proceedings in these cases were initiated by Show Cause Notice dated 10.4.1996 covering the period of 1st April, 1991 to 16th January, 1996, demanding a total duty of Rs.3,10,17,993/- and imposed a penalty of Rs.1 crore on IRLP, Rs.25 lakhs on IMPL and Rs.35 lakhs on one Ms.Vineeta Jain. The second notice was given on 30.9.1996 covering a period of 17.1.1996 to 31.3.1996 demanding a duty of Rs.60,16,359/-. The Third Notice was dated 31.12.1996 whereby the duty of Rs.1,15,68,744/- was demanded and a consolidated penalty under Second and Third Show Cause Notices was imposed to the tune of Rs.40 lakhs on IRLP, Rs.25 lakhs on IMPL and Rs.40 lakhs on Ms.Vineeta Jain. Fourth Show Cause Notice was dated 2.5.1997 covering a period of 1.10.1996 to 31.3.1997 whereby the duty demanded was Rs.92,82,309/- whereas the penalty imposed was Rs.20 lakhs on IRLP, Rs.15 lakhs on IMPL, Rs.15 lakhs on IRL(M) and Rs.20 Lakhs on Ms.Vineeta Jain. The last Show Cause Notice was dated 28.10.1997 covering the period from 1.4.1997 to 30.6.1997 wherein the duty demanded was Rs.68,26,881/- and the penalty imposed was Rs.10 lakhs on IRPL, Rs.5 lakhs on IRL(M) and Rs.2 lakhs on Ms.Vineeta Jain.

6. On the appeals filed before the Tribunal, the Tribunal allowed the claim of the IRLP in respect of as many as 22 products out of the total 92 products in respect of which the Show Cause Notices were given, they were at Sl.Nos.3,8,9,10,17,20,21,23,25,27,28,29,34,35,36,38,39,42,45 and 46, The remaining 70 products were held to be the "cosmetic" and "toilet preparations" falling under Chapter 33 of the Scheduled under Central Excise Act. The Tribunal further held that IRLP and IMPL were not the related persons and further the extended period of limitation could not be made available to Revenue in all the cases.

30. All these cases would, therefore, suggest that the products in question were found to be and rightly held to be covered under Chapter 30 and not Chapter 33. We must immediately point out that the expert opinion was pressed into service before the Tribunal of Dr.V.N. Pandey who had in details analysed all these products and noted that the products contained the elements having Ayurvedic medicinal value. It was also noted rightly by the Tribunal that all these products were produced under the drugs licence issued under the Drugs and Cosmetics Act. Shri Radhakrishnan could not dispute this fact.

To this Shri Radhakrishnan has no objection. We, therefore, hold accordingly.

34. Lastly, the question was raised regarding the limitation. In view of our findings that these products were genuinely Ayurvedic medicaments, it would not be necessary for us to go into that question. However, since the parties have argued the question, we would consider the same. 29

We are satisfied with the reasoning given by the Tribunal and affirm the same.

37. Accordingly all the above Appeals are dismissed. However, in the facts and circumstances of the case we do not propose to inflict any costs.

September 8, 2008.

Judgment delivered by : Hon'ble Mr. Justice V.S. Sirpurkar Nature of Judgment : Reportable