Relief to Sun Pharmaceuticals, “Danazol” product entitled to Unconditional Exemption from Excise Duty: CESTAT [Read Order]

The Chennai Bench of Customs Excise and Service Tax Appellate Tribunal (CESTAT) has granted relief to Sun Pharmaceuticals holding that the product “Danazol” is entitled to unconditional exemption from Excise Duty.

The appellant, Sun Pharmaceuticals Industries Ltd 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 impugned goods would get covered under Sl. No. 47B of the said Notification according to which when the goods were used elsewhere other than the factory of production, 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 had been followed.

Since the appellant had cleared the product ‘Danazol’ to other manufacturers like Arvind Remedies without following the above Rules, it appeared that the appellant was not eligible for exemption under Notification No. 4/2006-CE ibid. Therefore, 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 vide the Order in Original confirmed the duty demands and also imposed penalties equal to the duty demands.

Ashok B. Nawal, appeared for the appellant submitted goods falling under Sl. No. 47A were exempt from duty unconditionally, goods falling under Sl. No. 47B were exempt from duty subject to fulfilment of certain conditions, which the appellant failed to meet, whereby the impugned order had confirmed the demand for duty while setting aside the penalties.

He relied on judgments of the Tribunal in support of his stand that the term ‘drug’ had to be considered to include ‘bulk drug’ and the impugned goods were entitled for the benefit of the Notification 4/2006- CE dated 1.3.2006 under Sl. No. 47A.

O.M. Reena, appearing for the Respondent stated that ‘bulk drug’s fall under Sl. No. 47B of Notification No.4/2006-CE dated 1.3.2006. The exemption was conditional to the appellant following certain procedures which they had failed to comply with.

The two-member Bench of Sulekha Beevi C.S., (Judicial) and M. Ajit Kumar, (Technical)

Observed that in many judgments it had been held that since the terms ‘bulk drugs’ and ‘drug and medicines’ had not been defined in the Notification, the definition as per Drugs (Price Control) Order, 1995 was relevant.

As per Drugs (Price Control) Order, 1995, the term ‘drug’ had been defined to include ‘bulk drug’ and formulations. Thus, the said judgments put in mathematical terms could be understood as meaning that while ‘drug’ was a superset, ‘bulk drugs’ was the subset, whereby ‘bulk drugs’ were covered by the term ‘drugs’. Hence, it was for the appellant to choose whichever Sl no of the exemption was more favourable to him.

The Bench held that the appellant was entitled to the benefit of unconditional exemption from tax as per Sl. No. 47A of Notification No. 4/2006-CE dated 1.3.2006.

To Read the full text of the Order CLICK HERE

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