2007 (10) TMI 52 - AT - Central Excise

Tribunal Ruling: Vaccine Component Classification & Valuation Method Accepted

WOCKARDT BIOPHARM LTD. Versus COMMISSIONER OF C. EX., AURANGABAD

WOCKARDT BIOPHARM LTD. Versus COMMISSIONER OF C. EX., AURANGABAD - 2008 (222) E.L.T. 97 (Tri. - Mumbai) Issues Involved:1. Classification of Recombinant Hepatitis-B Surface Antigen bulk (r-HbsAg).2. Manufacturer identification in the Wockardt Biopharm Ltd. case.3. Valuation of the product in the Serum Institute case.Issue-wise Detailed Analysis:1. Classification of Recombinant Hepatitis-B Surface Antigen bulk (r-HbsAg):The primary issue was whether r-HbsAg should be classified under Chapter Heading 35.04, which covers 'Peptones and their derivatives; other protein substances and their derivatives, not elsewhere specified or included,' or under Chapter Heading 30.02, which includes 'Antisera and other blood fractions; Vaccines, Toxins, Cultures of micro-organisms (...) and similar products.' The adjudicating authorities classified it under Chapter 35.04 as a purified protein in bulk. However, the appellants argued it should fall under Chapter 30.02 as it is used to manufacture vaccines.The department argued that the product is a purified protein derivative used to manufacture vaccines in bulk by adding adjuvants. Statements from Wockardt Ltd. officials supported this, stating that the bulk alone cannot be used as a vaccine. The department also relied on expert opinions and various documents, including technology transfer agreements and sales invoices, to argue that the product is a protein bulk.The Tribunal found that the product has the essential quality and character of producing antibodies, which is the essential character of a vaccine. Technical literature and definitions from various dictionaries supported this view. The Tribunal concluded that the product should be classified under Chapter 30, Heading 30.02, as it has the properties of a vaccine.2. Manufacturer Identification in the Wockardt Biopharm Ltd. Case:An additional issue in the Wockardt case was determining the actual manufacturer of the disputed product. The department held that the appellant company was the manufacturer based on various documents, including the technology transfer agreement and sales invoices. The Tribunal, however, did not find it necessary to record a finding on this issue due to their decision on classification.3. Valuation of the Product in the Serum Institute Case:The additional issue in the Serum Institute case was the valuation of the product. The Commissioner applied Rule 8 of the Customs Valuation Rules, 1988, to determine the value based on the selling price in India of the goods produced in India. The appellant contended that Rule 7A was the appropriate rule, which involves determining the value based on manufacturing cost plus profit.The Tribunal found substance in the appellant's plea, stating that adopting the price of an identical product from Wockardt was contrary to Rule 8, which prohibits determining value based on the selling price in India of goods produced in India. The Tribunal accepted the appellant's method of valuation based on manufacturing cost plus profit as per Section 14 of the Customs Act, 1962, read with Rule 7A of the Customs Valuation Rules, 1988.Conclusion:The Tribunal set aside the impugned orders and allowed the appeals, holding that:1. The products in dispute, Biovac-B and Genevac-B vaccines, fall under CET sub-heading 3002.00, attracting a nil rate of duty.2. The transaction value of Genevac-B manufactured by M/s. Serum Institute of India Ltd. is required to be accepted.3. Penalties on Shri D.G. Modi and Shri M.K. Sahib were set aside.