2015 (5) TMI 248 - SC - Central Excise

Supreme Court rules Defibrillators not exempt under Notification, emphasizes strict interpretation

M/s. BPL. Limited Versus Commissioner of Central Excise, Cochin-Ii Commissionerate

M/s. BPL. Limited Versus Commissioner of Central Excise, Cochin-Ii Commissionerate - 2015 (319) E.L.T. 556 (SC), [2015] 32 GSTL 392 (SC), 2015 32 G S.T.R. ... Issues Involved:1. Eligibility for exemption under Notification No. 8/96 and Notification No. 4/97.2. Classification of the appellant's Defibrillators.3. Invocation of the extended period of limitation under Section 11A of the Excise Act.4. Imposition of penalties under Section 11AC of the Excise Act.Detailed Analysis:1. Eligibility for Exemption under Notification No. 8/96 and Notification No. 4/97:The primary issue was whether the Defibrillators manufactured by the appellant qualified for exemption under Notification No. 8/96 dated 23.07.1996 and Notification No. 4/97 dated 01.03.1997. The appellant argued that their Defibrillators, which could be used both externally and internally, should be eligible for exemption. However, the Tribunal found that the goods were primarily meant for external use and the internal paddles were optional accessories. The Tribunal emphasized that the exemption notifications required strict interpretation and that the appellant's Defibrillators did not meet the criteria as they were not inherently designed for internal use without the optional paddles. The Supreme Court upheld this reasoning, stating that the appellant's product did not satisfy the conditions of the exemption notifications as the defibrillators were predominantly for external use and the internal paddles were not integral components.2. Classification of the Appellant's Defibrillators:The classification of the appellant's Defibrillators was another critical issue. The appellant classified their Defibrillators under C.E.T. heading 9018 and claimed exemption under the relevant notifications. The Revenue, however, contended that only miniaturized implantable defibrillators were eligible for the exemption. The Tribunal noted that the appellant's Defibrillators were primarily for external use and the internal paddles were optional. The Tribunal concluded that the appellant's Defibrillators did not qualify as 'DC Defibrillators for internal use' as specified in the notifications. The Supreme Court affirmed this view, noting that the appellant's product was not inherently designed for internal use without the optional paddles and thus did not meet the criteria for exemption.3. Invocation of the Extended Period of Limitation under Section 11A of the Excise Act:The department invoked the extended period of limitation under Section 11A of the Excise Act, alleging suppression of facts by the appellant. The appellant contended that there was no suppression of facts and that the demand was time-barred. The Tribunal initially left the issue of limitation open for consideration during re-adjudication. The Supreme Court noted that the Third Member of the Tribunal did not decide the issue of limitation and left it for the regular bench to consider. The Supreme Court affirmed the majority decision of the Tribunal and directed that the issue of limitation be considered by the Tribunal.4. Imposition of Penalties under Section 11AC of the Excise Act:The Commissioner had imposed a penalty of Rs. 27,71,326/- under Section 11AC of the Excise Act, along with a further penalty of Rs. 1 lakh. The Tribunal's decision on the imposition of penalties was also left open for consideration during re-adjudication. The Supreme Court, by affirming the majority decision of the Tribunal, directed that the issue of penalties be considered by the Tribunal along with the issue of limitation.Conclusion:The Supreme Court dismissed the appeals, upholding the Tribunal's decision that the appellant's Defibrillators did not qualify for exemption under Notification No. 8/96 and Notification No. 4/97. The Court emphasized the need for strict interpretation of exemption notifications and noted that the appellant's product did not meet the criteria as it was primarily for external use and the internal paddles were optional accessories. The Court also directed the Tribunal to consider the issues of limitation and penalties.