2009 (10) TMI 132 - AT - Central Excise

Manufacturing of blister packs held by Tribunal not exempt due to Rifampicine presence. Export allowed under bond.

The Tribunal held that the process of packing formulations in blister packs amounts to manufacture. The products were deemed ineligible for exemption ... Packing of different drugs (medicaments) in one blister pack – Revenue’s submission that since each of the product marketable, putting them together not confer any attribute of marketability which not possessed earlier - No evidence has been put forth by the Revenue to show that these tablets are being marketed in loose condition in retail market. It is also not the case of Revenue that the appellants have combined different types of packages into a kit. - Another point which supports the case of the appellants is that the anti-tubercular or anti-leprosy drugs sold in the form of a kit are a distinct product with a new name, character and use. – Medicine put together have exclusive use had new name – Names are totally different from names of constituents - in our opinion process amounts to manufacture – hence credit is admissible - we agree with the contention of the appellants that products in question are not eligible for exemption under Notification No. 04/2006-C.E., dated 1-3-2006 in view of the fact that one of the items in the blister pack is not in the list 1 of notification ibid - in view of the fact that once it is held that the process amounts to manufacture and the goods are not eligible for exemption under Notification No. 4/2006-C.E., dated 1-3-2006, appellant’s claim that goods can be exported under bond and when the goods are cleared to the UN Agency, exemption can be claimed under Notification No. 108/95, is to be upheld. Once this claim is upheld, appellants need not have to maintain separate accounts in respect of inputs used in the manufacture of these products since export under bond and clearances under Notification No. 108/95 are covered by the Rule which provides for exemption from maintenance of separate accounts. Issues Involved:1. Classification of pharmaceutical products.2. Whether the process of packing formulations in blister packs amounts to manufacture.3. Eligibility for exemption under Notification No. 04/2006-C.E., dated 1-3-2006.4. Eligibility for exemption under Notification No. 108/95-C.E.5. Requirement to maintain separate accounts for inputs used in manufacturing.Issue-wise Detailed Analysis:1. Classification of Pharmaceutical Products:The appellants classified their products under Chapter sub-headings 30049057 and 30049058, claiming they are 'other anti-tubercular drugs' or 'other anti-leprotic drugs.' The Commissioner, however, classified them under sub-headings 30049055, which attract nil duty under Notification No. 04/2006-C.E., dated 1-3-2006. The Commissioner argued that each formulation in the kit should be classified individually rather than as a combined product.2. Whether the Process of Packing Formulations in Blister Packs Amounts to Manufacture:The Commissioner concluded that the process of packing multiple formulations in blister packs does not constitute manufacture. This conclusion was based on the observation that each product in the blister pack retained its separate identity and marketability. The Commissioner cited the Tribunal's decision in the Lupin Laboratories case, which held that combining marketable products into a single pack does not confer a new marketable identity.3. Eligibility for Exemption under Notification No. 04/2006-C.E., dated 1-3-2006:The Commissioner held that the products should be classified under sub-heading 30049055, making them eligible for nil duty under Notification No. 04/2006-C.E. However, the appellants argued that their products are not entirely manufactured from bulk drugs specified in List-1 of the notification. Specifically, Rifampicine, a component in their formulations, is not listed in List-1, thus making the products ineligible for the exemption.4. Eligibility for Exemption under Notification No. 108/95-C.E.:The Commissioner also held that since the products are unconditionally exempt under Notification No. 04/2006-C.E., they are not eligible for exemption under Notification No. 108/95-C.E., which pertains to clearances to UN organizations. The appellants contended that their products should be eligible for this exemption since they are not entirely exempt under Notification No. 04/2006-C.E.5. Requirement to Maintain Separate Accounts for Inputs Used in Manufacturing:The Commissioner ruled that the appellants must maintain separate accounts for inputs used in manufacturing the disputed products, as the exclusion provided under Rule 6(6) of the Cenvat Credit Rules, 2004, does not apply. The appellants argued that if their products are eligible for export under bond or exemption under Notification No. 108/95, they should not be required to maintain separate accounts.Judgment:The Tribunal found that the process of packing formulations in blister packs does amount to manufacture, contrary to the Commissioner's finding. The Tribunal also noted that the products are not eligible for exemption under Notification No. 04/2006-C.E. because they contain Rifampicine, which is not listed in List-1. Consequently, the appellants are entitled to export the goods under bond and claim exemption under Notification No. 108/95-C.E. The requirement to maintain separate accounts for inputs does not apply in this context. The appeals were allowed, granting consequential relief to the appellants.