10 June 2024


Customs, Excise and Service Tax Appellate Tribunal

Confident Dental Equipments Limited Vs. The Commissioner of Central Excise Bangalore III Commissionerate, Bangalore




Notes of HSN can be relied upon to decide the classification

The Appellant is a manufacturer of medical and dental equipment and furniture and is registered with Central Excise department. Its records were audited by the departmental audit party. Audit officers felt that, the goods do not qualify as medical equipment and should be classifiable under Central Excise Tariff Heading 8419.10 (up to February, 2005) and 8419.2010 (from March, 2005). Accordingly, a show cause notice was issued to the Appellant proposing to re-classify the above four goods and assess them to duty @ 16% ad valorem as applicable. It was also alleged in the show cause notice that, the assessee had suppressed the fact of manufacture and clearance of these products from the Department with an intention to evade payment of Central Excise duty. Accordingly, the differential duty was demanded invoking the extended period of limitation for the period August 2002 to March 2007 by the show cause notice and invoking the extended period of limitation under the proviso to Section 11A of Central Excise Act, 1944.

Interest was also demanded at the appropriate rate under Section 11AB of the Act. It was also proposed to impose a penalty on them under Section 11AC read with Rule 25 of the Central Excise Rules, 2002. The appellant contested the demand both on merits and on limitation. The Additional Commissioner confirmed the demands as proposed in the show cause notice along with interest and imposed a penalty under Section 11AC equivalent to the amount of duty. Aggrieved, the appellant appealed to the Commissioner (Appeals) who in the impugned order, upheld the order of the Additional Commissioner and rejected the appeal. Hence, present appeal.

The Autoclave, Glass Bead Sterilizer, Steam Clave and Hot Air Sterilizer are not medical equipment but are used for sterilizing medical/dental equipment. The question which arises is whether such goods should be classified under medical equipment or sterilizers under 8419. The Central Excise Tariff is framed on the lines of the Harmonized System of Nomenclature (HSN). It classifies all goods into Sections, chapters within in each section and headings within each Chapter and sub-headings within the headings.

While the Central Excise Tariff has only Rules of Interpretation, the Harmonized System of Nomenclature based on which the Tariff is drafted, also has detailed explanatory notes explaining the scope of each heading. It has been held in Bakelite Hylam that notes of HSN can be relied upon to decide the classification.

The argument of the Appellant is that, since their sterilizing equipment is used by dentists, the same should be classified under Chapter 90. The argument of the Revenue is that sterilizing equipment, though used by a dentist is not medical equipment and it should fall under 8419 as sterilizing equipment. The Harmonised System of Nomenclature explains that, 8419 includes not only autoclaves for industrial purposes but also those used for installation and operation theatres, etc. The four goods manufactured by the Appellant are classifiable under 8419 as asserted by the Revenue and are chargeable to appropriate duty. Therefore, on merits, the contention of the Revenue should be accepted.

The next issue is regarding invocation of extended period of limitation. As per Section 11A of the Act, demand could be raised only within six months. The proviso to Section 11A of the Act permitted raising of demand within the extended period of limitation of five years if there is an element of (a) fraud (b) collusion (c) wilful mis-statement (d) suppression of facts or (e) contravention of any provisions of the Act or the Rules made thereunder with intent to evade payment of duty. If none of these elements are established in any case, the demand can only be raised within the normal period of limitation.

The assertion in the show cause notice that, the Appellant has not declared the manufacture of these products is not true as can be seen from the declaration made by the appellant under Rule 173B and its acknowledgement by the department. If the excise returns required certain details to be given, it has no obligation to give more details then what is mandated. It is the responsibility of the Central Excise officer to scrutinize whether the return is in order and if considered necessary, he can seek more details. The Appellant cannot be held responsible, if the officer has chosen not to seek more details. Therefore, that allegation of suppression of facts by the Appellant in the show cause notice is completely unfounded. The other elements such as fraud, collusion and wilful mis-statement have not even been alleged in the show cause notice. Therefore, the demand cannot be raised by invoking the extended period of limitation.

As far as the normal period of limitation is concerned, the Appellant submits that although they have been contesting that classification on merits they have already paid the differential duty for the normal period of limitation from September 2006 to March 2007 along with interest. The impugned order is modified to the extent it upholds the demand and interest as applicable within the normal period of limitation but set aside the demand for the extended period of limitation. The penalty imposed under section 11AC read with Rule 24 is also set aside. The appeal is allowed in part.

Tags : Demand Confirmation Legality

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