The Chennai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the product ‘Danazol’ of Sun Pharmaceuticals Industries Ltd. is eligible for excise duty exemption.The bench of Sulekha Beevi C.S. (Judicial Member) and M. Ajit Kumar (Technical Member) has observed that since the terms ‘bulk drugs’ and ‘drug and medicines’ have not been defined in...
The Chennai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the product ‘Danazol’ of Sun Pharmaceuticals Industries Ltd. is eligible for excise duty exemption.
The bench of Sulekha Beevi C.S. (Judicial Member) and M. Ajit Kumar (Technical Member) has observed that since the terms ‘bulk drugs’ and ‘drug and medicines’ have not been defined in the exemption notification, the definition as per the Drugs (Price Control) Order, 1995, is relevant. As per the Drugs (Price Control) Order, 1995, the term ‘drug’ has been defined to include ‘bulk drugs’ and formulations. Thus, the said judgments put in mathematical terms could be understood as meaning that while ‘drug’ is a superset, ‘bulk drugs’ is the subset, whereby ‘bulk drugs’ are covered by the term ‘drugs’. Hence, it is for the appellant to choose whichever Sl number of the exemption is more favourable to him.
The appellant/assessee, Sun Pharmaceuticals Industries, had been clearing the goods ‘Danazol’ without payment of duty by claiming exemption under Sl. No. 47A of the Notification No. 4/2006-CE dated 1.3.2006. However, the department felt that the goods would get covered under Sl. No. 47B of the Notification, according to which, when the goods are used elsewhere other than the factory of production, the exemption shall be allowed only if the procedure laid down in the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001, is followed.
Since the appellant had cleared the product ‘Danazol’ to other manufacturers like M/s. Arvind Remedies without following the Rules, it appeared that the appellant was not eligible for exemption under Notification No. 4/2006-CE.
The two show cause notices covering the period from April 2009 to March 2010 were issued to the appellants, denying the exemption. After due process of law, the adjudicating authority confirmed the duty demands and also imposed penalties equal to the duty demands.
The appellant filed appeals before the Commissioner (Appeals), who upheld the duty while setting aside the penalties.
The assessee contended that it cleared product 'Danazol’ to Arvind Remedies Silvassa without payment of duty by claiming exemption under Notification No. 04/2006, under Sl. No. 47 (A) of Notification 4/2006-CE with NIL rate of duty without fulfilling any condition. However, the benefit of the notification was denied to them by the Commissioner (Appeals), as he was of the opinion that the product Danazol being a ‘bulk drug’ would be covered under Sl. No. 47B of Notification No. 4/2006-CE and not under Sl. No. 47A claimed by the appellants, as the heading covered only ‘drugs or medicines’. While goods falling under Sl. No. 47A are exempt from duty unconditionally, goods falling under Sl. No. 47B are exempt from duty subject to the fulfillment of certain conditions, which the appellant failed to meet, by which the order has confirmed the demand for duty while setting aside the penalties.
The department contended that ‘bulk drugs’ fall under Sl. No. 47B of Notification No.4/2006-CE dated 1.3.2006. The exemption is conditional on the appellant following certain procedures that they have failed to comply with. Hence, the appeal has been rightly rejected by the Commissioner (Appeals), and the same may be upheld.
The issue raised was whether the product 'Danazol', which is a ‘bulk drug', would fall under Sl. No. 47A of Notification No. 4/2006-CE dated 1.3.2006, or whether it has to be considered a ‘drug or medicine’ that falls under Sl. No. 47B of the said notification.
The tribunal held that the appellant is entitled to the benefit of unconditional exemption from tax as per Sl. No. 47A of Notification No. 4/2006-CE dated 1.3.2006.
Counsel For Appellant: Ashok B. Nawal
Counsel For Respondent: O.M. Reena
Case Title: M/s. Sun Pharmaceuticals Industries Ltd. Versus Commissioner of GST & Central Excise
Case No.: Excise Appeal Nos.40682 and 40684 of 2014