Marketable vegetable extracts are excisable goods, not medicaments, and suppression of clearances justifies extended limitation and penalty.

Mixed or compounded vegetable extracts were treated as marketable excisable goods because they had a distinct name, character and use, could be stored and traded, and were only intermediate raw materials for Ayurvedic medicaments; they were not medicaments merely because the source herbs had medicinal properties. Non-disclosure of their manufacture and clearances amounted to suppression of facts, so the extended limitation period was applicable and the duty demand was in time. On the same factual basis of suppression, the penalty was upheld as consequential and appropriate.

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Issues: (i) Whether the mixed or compounded vegetable extracts manufactured by the assessee were excisable goods marketable in the market and classifiable as medicaments or as vegetable extracts under the Central Excise Tariff; (ii) Whether the demand was barred by limitation or the extended period was invocable on account of suppression of facts; (iii) Whether the penalty imposed was sustainable.

Issue (i): Whether the mixed or compounded vegetable extracts manufactured by the assessee were excisable goods marketable in the market and classifiable as medicaments or as vegetable extracts under the Central Excise Tariff.

Analysis: The extracts had a definite name, character and use, were capable of storage, were in fact marketed by others, and were also procured and sent for job work by the assessee. They were not usable as medicaments by themselves and were only intermediate raw materials for the manufacture of finished Ayurvedic medicaments. Merely because the herbs from which they were derived had medicinal properties did not make the extracts medicaments within Chapter 30. The Board circular relied upon by the assessee did not help because it distinguished between liquid extracts not subjected to preservative processes and mixed or compounded extracts having therapeutic or prophylactic value; on the facts, the goods in question were not medicaments.

Conclusion: The extracts were marketable excisable goods and were not classifiable as medicaments; the classification adopted by the adjudicating authority was upheld, against the assessee.

Issue (ii): Whether the demand was barred by limitation or the extended period was invocable on account of suppression of facts.

Analysis: The assessee had not declared the production of the extracts in classification lists or otherwise disclosed their manufacture and clearances to the Department. The record showed that similar extracts were being purchased on duty payment and that the assessee was aware of the excisable nature of the goods. In these circumstances, the omission amounted to suppression of facts, and the extended period under the excise law was attracted.

Conclusion: The demand was within time by reason of suppression of facts, and the extended limitation period was rightly invoked, against the assessee.

Issue (iii): Whether the penalty imposed was sustainable.

Analysis: Since the assessee had failed to declare the goods and the suppression was established, the consequential penalty followed. The quantum was found to be appropriate on the facts.

Conclusion: The penalty was sustained, against the assessee.

Final Conclusion: The appeal failed on classification, limitation and penalty, and the departmental demand and penalty were maintained.

Ratio Decidendi: Intermediate vegetable extracts are excisable only if they are marketable goods in their own right and not merely because the source herbs possess medicinal properties; concealment of their manufacture and clearance attracts the extended limitation period and consequential penalty.

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