Allopathic generic medicaments denied central excise exemption under Notification 01/2011-CE Entry 37 covers only Ayurvedic Unani Siddha formulae

CESTAT New Delhi allowed the appeal partly in a case involving denial of central excise duty exemption under Notification No. 01/2011-CE for allopathic generic medicaments. The tribunal held that allopathic medicaments are not eligible for exemption as Entry No. 37 specifically covers medicaments manufactured according to Ayurvedic, Unani, Siddha formulae mentioned in First Schedule to Drugs and Cosmetic Act, 1940. The word "includes" cannot extend coverage to allopathic medicaments. However, the tribunal set aside the invocation of extended period of limitation and penalty under section 11AC, finding no suppression of facts as all details were correctly disclosed in ER-8 returns and product packaging.

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Issues Involved:

1. Eligibility of allopathic medicaments for exemption under Notification No. 01/2011-CE dated 01.03.2011.
2. Invocation of the extended period of limitation for demand of duty.

Summary:

1. Eligibility of Allopathic Medicaments for Exemption:

The primary issue was whether allopathic medicaments are eligible for the exemption of central excise duty at the rate of 2% under Notification No. 01/2011-CE dated 01.03.2011. The appellant claimed the benefit under Entry No. 37 of the notification, which mentions "medicaments (including those used in Ayurvedic, Unani, Siddha, Homeopathic or Bio-chemic systems)." The Tribunal observed that the term "including" in the notification is used to expand the meaning to cover medicaments from traditional systems but does not extend to allopathic medicaments. The Tribunal held that the language of the notification clearly reflects the intention of the legislature to include only those medicaments prepared in accordance with the formulae described in the authoritative books specified in the First Schedule to the Drugs and Cosmetics Act, 1940. Therefore, allopathic medicaments do not fall under the scope of the said entry, and the benefit of the duty exemption was rightly denied to the appellant.

2. Invocation of Extended Period of Limitation:

The second issue was whether the extended period of limitation could be invoked for the demand of duty. The appellant argued that there was no suppression of facts or mala fide intention, as all relevant information was disclosed to the department, including in the quarterly ER-8 Returns. The Tribunal noted that the appellant had self-assessed and paid duty based on its interpretation of the exemption notification and had filed returns accordingly. The Tribunal emphasized that the department had an obligation to scrutinize the returns and raise any objections within the normal period. The Tribunal found that the extended period of limitation could not be invoked merely because the appellant claimed an ineligible exemption during self-assessment. There was no evidence of fraud, collusion, or wilful misstatement by the appellant. Consequently, the demand for the extended period was set aside, and the penalty under section 11AC was also set aside.

Conclusion:

(i) Allopathic medicaments are not eligible for the exemption under Entry No. 37 of Notification No. 01/2011-CE dated 01.03.2011. The benefit of duty exemption was rightly denied to the appellant.

(ii) The extended period of limitation is not invokable. The demand is confined to the normal period.

The appeal was partly allowed, confirming the demand for the normal period and setting aside the demand for the extended period.

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