CESTAT directs appeals to be decided on merits, dismissing Orchid Bio-Tech's appeal for excise duty evasion on dietary supplements.
In a significant ruling, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), New Delhi Principal Bench, upheld the penalties imposed on M/s Orchid Bio-Tech Pvt. Ltd. for misclassifying dietary supplements as pharmaceutical products to evade excise duty. The tribunal, comprising Ms. Binu Tamta and Mr. P.V. Subba Rao, emphasized that appeals must be decided on their merits, even in the absence of the appellant's representation during hearings.
The case stems from Orchid Bio-Tech's production and clearance of dietary supplements without paying excise duty from July 2011 to March 2015. The company claimed exemptions under Notification No. 49/2003-CE by misclassifying these supplements under Central Excise Tariff Heading (CETH) 3003, intended for pharmaceutical products.
The tribunal cited the Supreme Court's decision in Balaji Steel Re-Rolling Mills, affirming that appeals cannot be dismissed solely for non-prosecution and must be adjudicated based on merits. Following this precedent, CESTAT examined the merits of the case, determining that dietary supplements are explicitly excluded from Chapter 30 of the Central Excise Tariff, thereby disqualifying them from the claimed exemptions.
The tribunal found Orchid Bio-Tech's actions to be a deliberate attempt to evade duty, as evidenced by the company’s declaration of manufacturing pharmaceutical products while actually producing dietary supplements. Consequently, the tribunal upheld the imposition of penalties under Section 11AC of the Central Excise Act, 1944, reinforcing the extended period of limitation due to the demonstrated intent to evade duty.
The ruling also addressed Orchid Bio-Tech's claim of procedural injustice and incorrect duty calculation, finding no merit in these arguments due to lack of alternative calculations or substantive evidence. As a result, the tribunal confirmed the demand for unpaid duty amounting to Rs. 1,63,92,750, with interest, and upheld the penalties imposed on both the company and its Plant Head, Shri Anil Kumar Singh.
This judgment reiterates the tribunal's commitment to adjudicating cases based on substantive merits, ensuring compliance with excise regulations and penalizing willful non-compliance to uphold the integrity of tax enforcement.
Bottom Line:
Tribunal cannot dismiss an appeal for non-prosecution even if the appellant does not appear for the hearing; the appeal should be decided on merits.
Statutory provision(s): Customs, Excise and Service Tax Appellate Tribunal (Procedure), Central Excise Tariff Act, 1985 Chapter 30, Central Excise Act, 1944 Section 11AC
