Bombay High Court
Commissioner Of Central Excise ... vs M/S Midas Care Pharma Pvt Ltd ... on 23 November, 2017
Bench: R.V. Ghuge
F.A. No.2860/2008 with
F.A. No.3869/2008
(( 1 ))
IN THE HIGH COURT OF JUDICATURE AT BOMBAY,
BENCH AT AURANGABAD
FIRST APPEAL NO.2860 OF 2008
Commissioner of Central Excise &
Customs, Town Centre, N-5,
CIDCO, Aurangabad ... APPELLANT
VERSUS
M/s Midas Care Pharma Pvt. Ltd
B-16, M.I.D.C. Area, Waluj,
Aurangabad ... RESPONDENT
.....
Shri D.S. Ladda, Advocate for appellant
Shri S.M. Godsay, Advocate for respondent
.....
WITH
FIRST APPEAL NO.3869 OF 2008
Commissioner of Central Excise &
Customs, Town Centre, N-5,
CIDCO, Aurangabad ... APPELLANT
VERSUS
M/s Midas Care Pharma Pvt. Ltd
B-16, M.I.D.C. Area, Waluj,
Aurangabad ... RESPONDENT
.....
Shri D.S. Ladda, Advocate for appellant
Shri S.M. Godsay, Advocate for respondent
.....
CORAM: RAVINDRA .V. GHUGE AND
SUNIL K. KOTWAL, JJ.
DATED : 23rd NOVEMBER, 2017.
F.A. No.2860/2008 with
F.A. No.3869/2008
(( 2 ))
ORAL JUDGMENT (PER RAVINDRA V. GHUGE, J.):
1. In both these appeals, the appellant - Central Excise
& Customs Department, (hereinafter referred to as the Revenue
Department), seeks to challenge the order dated 4.12.2007, and
4.3.2008, passed by the Customs, Excise & Service Tax Appellate
Tribunal (CESTAT), West Zone, Bench at Mumbai in two cases.
The prayers put forth by the appellant are almost identical,
except the dates of the order and the amount mentioned in the
demand notice and penalty under Rule 173-Q.
2. Learned counsel for the respondent assessee is
aggrieved by the lodging of these appeals in this Court, for the
reason that, these appeals are not maintainable under Section
35-G of the Central Excise Act, 1944. It is contended that, this
Court does not have jurisdiction to entertain these appeals, and
notwithstanding the fact that the appeals have been admitted,
jurisdiction cannot vest in this Court when such jurisdiction is not
specifically prescribed by the Statute.
3. Prayer clauses (B) and (C) set out in both the appeals
read as under :
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F.A. No.3869/2008
(( 3 ))
FIRST APPEAL NO.2860/2008
(B) The order dated 4.12.2007, passed by learned
CESTAT, Mumbai bearing No.A/900/WZB/C-II/EB
may kindly be set aside.
(C) That, the order passed by the learned Assistant
Commissioner, Central Excise & Customs,
Aurangabad Division-II vide Order-in-Original
No.434/DMD/97, dated 31.10.1997 may kindly be
confirmed by upholding the demand of
Rs.17,37,276=82 ps. and also to impose penalty of
Rs.2,00,000/- under Rule 173-Q.
FIRST APPEAL NO.3869/2008
(B) The order dated 4.3.2008, passed by learned
CESTAT, Mumbai bearing No.A/317/08/C-I/EB may
kindly be set aside.
(C) That, the order passed by the learned Assistant
Commissioner, Central Excise & Customs,
Aurangabad Division-II vide Order-in-Original
No.164/1999, dated 29.7.1999 may kindly be
confirmed by upholding the demand of
Rs.6,52,354/- and also to impose penalty of
Rs.50,000/- under Rule 173-Q.
4. Considering the pleadings of the litigating sides, we
called upon the learned Advocates to state as to whether they
F.A. No.2860/2008 with
F.A. No.3869/2008
(( 4 ))
would prefer to address the Court on the jurisdiction issue prior
to dealing with the merits of the matter. Learned counsel have
stated that, they would address the Court on the jurisdiction
aspect, and in the event this Court can exercise jurisdiction in
these appeals, the said appeals could then be posted to a
convenient date for hearing them on their merits.
5. Having considered the strenuous submissions of the
learned Advocates for the respective sides, we find that, the
following factors are germane to this case :-
(a) The respondent is a pharmaceutical Company, engaged
in the manufacturing of goods, falling under CH-30 of
the Central excise Tariff Act, 1985.
(b) On 1.3.1994, the respondent assessee had claimed
exemption from paying the tax on the product under
Notification No.6/1994, dated 1.3.1994 and as amended
by the Notification No.114/1994, dated 3.6.1994.
(c) The exemption claimed was with regard to a material
manufactured by product name Lidocaine Tropical
Aerosol (USP), used as an anesthetic and specially
restricted to surgery and used in hospitals and
dispensaries.
(d) The respondent has allegedly fraudulently claimed the
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F.A. No.3869/2008
(( 5 ))
exemption since the said material was being used in the
manufacturing of a spray, which carried the brand
names like 'Climax', 'Numic' and 'Stud'.
(e) The labels applied to the above products on the cans
while being sold, indicate that, the said material is to be
used as a stimulant for the purposes of sexual activities.
(f) Exemption in the taxes on anesthetic material is
specially prescribed by legislation so as to ensure that
the said product used for the purposes of administering
anesthesia by anesthetists, would lead to reducing the
cost of the product, and as such, consequently would
reduce the cost of medical treatment and the financial
burden on the patients.
(g) If the said material is to be used as a sex stimulant and
not for any surgery, the respondent needs to be
deprived of the concessions/ exemption granted.
(h) By the first order dated 31.10.1997, the Assistant
Commissioner of Central Excise & Customs, Aurangabad
confirmed the demand pursuant to the show-cause-
notices issued.
(i) The order dated 31.10.1997 reads as under :
FIRST APPEAL NO.2860/2008
I) I confirm the demand of Rs.17,37,276=82 as
mentioned in the above Show Cause Notices
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F.A. No.3869/2008
(( 6 ))
after denying noticee the exemption notifications
as mentioned in Show Cause Notices dated
31.10.1994.
II) I impose a penalty of Rs.2,00,000/- under Rule
173-Q of Central Excise Rules, 1944 for availing
the inadmissible benefit of exemption
notifications.
FIRST APPEAL NO.3869/2008
I hereby confirm duty liability of Rs.6,52,354/-
and order recovery of the same under Section 11A of
C.Ex. Act, 1944.
I also impose a penalty of Rs.50,000/- under Rule
173Q of C.Ex. Rules, 1944.
I also order to recover the interest on the said
amount under Section 11AA of CEA, 1944.
(j) In the appeal preferred by the respondent before the
Commissioner of Appeals, Central Excise, Mumbai, by
order dated 27.12.2000/ 29.11.2002, the appeal of the
respondent was allowed.
(k) In the appeal before CESTAT, filed by the appellant -
Department, the Tribunal has rejected the said appeal,
by judgment dated 4.12.2007 and 4.3.2008.
F.A. No.2860/2008 with
F.A. No.3869/2008
(( 7 ))
6. We are, therefore, required to consider the effect and
the impact of the impugned orders passed by the Tribunal. The
contention of Shri Godsay, learned Advocate for the respondent
is that, a plain reading of Section 35-G of the 1944 Act, would
indicate that, this appeal is not tenable. He has placed reliance
upon the judgment delivered by the learned Division Bench of
the Allahabad High Court in the case of Commissioner of Cus.
& C. Ex. Vs. ECO Products (I) P. Ltd., reported in 2015
(315) E.L.T. 561 (All.).
7. Learned counsel Shri Ladda, appearing on behalf of
the appellant Department submits that, there can be no dispute
that Section 35, was earlier omitted by the introduction of the
National Tax Tribunal Act, 2005. Subsequently, the said Act itself
was held to be unconstitutional by the Hon'ble Apex Court in the
matter of Madras Bar Association Vs. Union of India (UOI)
reported in (2015) AIR (SC) 1571. He, however, submits that,
though Section35-G has been reintroduced, it would not affect
this appeal, and the jurisdiction of this Court would not be
ousted. He relies upon an order passed by the learned Division
Bench of this Court at Bombay in the matter of J.V. Gokul & Co.
(Pvt.) Ltd. Vs. Union of India, reported in 2017(01)
LCX0038, in support of his contentions.
F.A. No.2860/2008 with
F.A. No.3869/2008
(( 8 ))
8. For better understanding, while dealing with the
jurisdictional objection of the respondent, it would be
advantageous to refer to Section 35-G, which permits the filing of
an appeal in the High Court. Section 35-G reads as under :-
"35-G. Appeal to High Court : [Omitted by the
National Tax Tribunal Act, 2005 (49 of 2005),
Section 30 and Schedule, Part VII (w.e.f.
28.12.2005)]
Explanation :
1. ......
2. Prior to its omission, S.35-G read as under :
"35-G. Appeal to High Court : (1) An appeal shall
lie to the High Court from every order passed in
appeal by the Appellate Tribunal on or after the 1st
day of July, 2003 (not being an order relating,
among other things, to the determination of any
question having a relation to the rate of duty of
excise or to the value of goods for purposes of
assessment), if the High Court is satisfied that the
case involves a substantial question of law.
9. The underlined portion of Section 35-G leads to a
plain and simple meaning that an appeal, challenging an order
passed by the Tribunal and relating to, amongst other things, the
determination of any question having a relation to the rate of the
duty of excise or to the value of the goods, for purpose of
assessment, would not be maintainable before this Court.
F.A. No.2860/2008 with
F.A. No.3869/2008
(( 9 ))
10. Learned counsel for the appellant specifically submits
that, the case before this Court is as regards whether exemption
granted to the respondent under a misrepresentation, has led to
payment of lesser taxes. It is further contended by the
appellant that, if this Court holds that the respondent has
acquired exemption by misrepresentation, by terming the
product as being one which should be used exclusively for the
purposes of surgery and medical procedures, the appellant would
succeed in recovering higher taxes with penalty from the
respondent.
11. In the backdrop of these submissions, we find that, a
decision on the merits of these appeals, if is to be delivered by
us, would lead to the determination of a question in relation to
the rate of duty of excise as against the respondent. As such, if
the appellant succeeds, the Department would succeed in raising
the taxes on the product at issue and would, therefore, recover
more taxes at a higher rate of duty of excise on the product,
which was granted exemption by the Department.
12. We have considered the order passed by the learned
Division Bench of this Court in the matter of J.V. Gokul & Co.
(Pvt.) Ltd. (supra). We do not find that Section 35-G of the
F.A. No.2860/2008 with
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(( 10 ))
Central Excise Act or any other provision, similar or identical to
Section 35-G under the Customs Act, having been considered by
the learned Bench.
13. Insofar as the view taken by the learned Division
Bench of the Allahabad High Court in ECO Products (I) P. Ltd.
(supra) is concerned, paragraphs 57, 58 and 59 read as under :
"57. Now the submission of Sri Kesarwani that right of
appeal under Section 35-G of the Act being statutory
remedy and a substantive right, should be interpreted
liberally while that portion of this Section which excludes
the right of appeal to the High Court has to be construed
strictly and in a restrictive sense is to be considered.
58. There is no dispute that right of appeal is a
statutory right given under Sections 35-G and 35-L of the
Act. The scheme of the Act as delineated by Sections 35-
G and 35-L indicates that subject matter of appeal before
the High Court and the Apex Court have been clearly
demarcated. The right of appeal has been granted to the
assessee or revenue before the High Court and the Apex
Court on different grounds. There is no question of
giving any restrictive interpretation to the exclusionary
clause under Section 35-G since the category which was
excluded from the appeal before the High Court under
Section 35-G of the Act is expressly included under
Section 35-L of the Act. The demarcation of the subject
matter of appeal before this Court and the Apex Court
was with some object and purpose and when the words in
sections are plain and unambiguous, the plain and literal
F.A. No.2860/2008 with
F.A. No.3869/2008
(( 11 ))
interpretation has to be adopted. It is useful to refer to
paragraph 44 of the judgment of the Karnataka High
Court in the case of Commissioner of Central Excise,
Mangalore Vs. Mangalore Refineries & Petrochemicals Ltd.
(supra) where the Karnataka High Court has noticed the
intention behind the bifurcation of jurisdiction between
the Apex Court and the High Court. Following was laid
down by the Karnataka High Court in paragraph 44,
which is as under :
"44. The intention behind this bifurcation of
jurisdiction between the Apex Court and the High
Court seems to be that more often than not, any
decision on these aforesaid aspects nor only affects
the interest of the manufacturers who are parties
thereto, but also to the manufacturers of those
products throughout the country. In a country
governed by Parliamentary legislation because of the
territorial bifurcation in forming states and because
of the divergent opinion which is possible, the excise
duty payable would vary from place to place. In
order to bring uniformity in the levy of excise duty
throughout the country and consequently to see that
the country's finance is not affected, the Parliament
has vested the jurisdiction to decide the disputes
with the Apex Court. Therefore, we see a duty policy
underlining this bifurcation of the jurisdiction
between the Apex Court and the High Courts. All
other matters other than what is set out above,
which relates to the individual manufacturers and all
disputes based on assessment orders which have
attained finality, such as the benefits to which they
are entitled to, refunds, duty drawbacks, rebates,
etc., which relate to a particular manufacturer falls
within the jurisdiction of the High Courts."
F.A. No.2860/2008 with
F.A. No.3869/2008
(( 12 ))
59. In view of the foregoing discussions, we are of the
view that since the question raised in the appeal relates
to eligibility of the goods manufactured by the assessee
for exemption under Notification No.1/93-C.E., dated
28.2.1993 and goods were manufactured without
payment of duty and no assessment had taken place, the
proceedings initiated under Section 11-A were for
determination of duty liability in which the eligibility of
the said goods for exemption was disputed. The question
of exemption is directly and proximately related to the
rate of duty for the purposes of assessment of excise
duty payable by the respondent. The appeal on the said
question is clearly excluded under Section 35-G and can
be filed by the revenue before the Apex Court under
Section 35-L of the Act. Thus, the preliminary objection
of the respondent regarding maintainability of appeal is
upheld and Central Excise Appeal Defective No.402 of
2005 is held not maintainable under Section 35-G of the
Act."
14. Considering the above, and in the light of the specific
pleadings of the appellant, and the submissions of the litigating
sides, we find that the issue which we are called upon to
adjudicate, would lead to a decision (if the appellant succeeds)
determining the question of the rate of duty of excise, on the
goods, which the respondent sells to the consumers, and the
assertion of the appellant that the exemption granted cannot be
made applicable. This would lead to permitting the appellant to
impose higher rate of duty of excise on the value of the goods, in
F.A. No.2860/2008 with
F.A. No.3869/2008
(( 13 ))
relation to which the impugned order has been passed.
15. We, therefore, find that, as the subject matter of
both these appeals are squarely covered by the prohibition
flowing from Section 35-G. Both these appeals would not be
maintainable before this Court. Consequentially, both these
appeals are dismissed on the ground of maintainability.
16. At this juncture, learned counsel for the appellants
prays that, liberty may be granted to the appellants to approach
the Hon'ble Apex Court for filing a proper appeal. We find that,
the appellant would have a statutory right to approach the
Hon'ble Apex Court in the light of Section 35-L. Naturally, the
appellant would be canvassing the point of limitation, keeping in
view the time spent by the appellant in this Court from
30.6.2008/ 26.8.2008, when the appeals were instituted, till the
passing of the order today. On that count, the period of
pendency of these appeals would be a good ground for
condonation of delay.
( SUNIL K. KOTWAL ) ( RAVINDRA V. GHUGE )
JUDGE JUDGE
fmp/
