1987 (7) TMI 229 - AT - Income Tax

Clinical samples not exempt from Excise Duty under Notification 48/77-C.E.

The Tribunal held that clinical samples of Cemizol Vet, Sukcee Drops, and Cebexin were not exempt from Central Excise Duty under Notification No. ... Patent or proprietary medicines Issues Involved:1. Applicability of Central Excise Duty on clinical samples.2. Fulfillment of conditions under Notification No. 48/77-C.E.3. Limitation period for raising demand for duty.Detailed Analysis:1. Applicability of Central Excise Duty on Clinical Samples:The appellants were issued a show cause notice for clearing clinical samples of P or P-Medicines without paying Central Excise Duty, as required under Rule 9(2) of the Central Excise Rules, 1944 read with Section 11A(1) of the Central Excises and Salt Act, 1944. The charge was based on non-compliance with Notification No. 48/77-C.E., which stipulated specific packing conditions for clinical samples to be exempt from duty. The Collector adjudicated that clinical samples of Cebexin, Sukcee Drops, and Cemizol (Vet) did not qualify for exemption due to insufficient distinction from regular trade packing. Consequently, duty was deemed payable on these samples.2. Fulfillment of Conditions under Notification No. 48/77-C.E.:The Notification required clinical samples to be packed in a form 'distinctly different' from regular trade packing and clearly marked 'Physician's sample, not to be sold.' Upon inspection, the Collector found that the differences between trade and sample packs were minimal and did not meet the 'distinctly different' criterion. For instance:- Cebexin: Identical bottles and cartons for both packs, with the sample pack only marked 'Physician's sample, not to be sold' and lacking an indication of the number of tablets.- Sukcee Drops: The sample pack had the same form as the trade pack, differing only in the absence of a retail price.- Cemizol (Vet): The sample pack was identical to the trade pack except for the 'Physician's sample, not to be sold' marking.The Tribunal upheld the Collector's decision, emphasizing that minor differences in printing do not satisfy the requirement of a 'distinctly different form' of packing as per the Notification.3. Limitation Period for Raising Demand for Duty:The appellants contested the five-year limitation period invoked under Rule 9(2) of the Central Excise Rules, arguing that there was no evidence of clandestine removal or suppression of facts. They had regularly filed classification lists and RT-12 Returns, which were approved by the Central Excise authorities. The Tribunal agreed, stating that the longer time limit of five years was inapplicable as there was no proven suppression or wilful mis-statement of facts. Therefore, the demand for duty should be confined to the statutory period of six months as per Rule 10 of the Central Excise Rules and Section 11-A of the Central Excises and Salt Act, 1944.Conclusion:The Tribunal concluded that:- The clinical samples of Cemizol Vet, Sukcee Drops, and Cebexin were not eligible for exemption under Notification No. 48/77-C.E. and thus, duty was chargeable.- The demand for duty on past clearances should be limited to six months, as there was no evidence of clandestine removal or suppression of facts.Disposition:The appeal was disposed of in these terms, affirming the duty liability but restricting the demand period to six months.