2004 (97) ECC 277 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

South Zonal Bench -- Bangalore

Shri G.A. Brahma Deva, Member (J) and Shri K.C. Mamgain, Member (T)

BPL Limited, Palakkad

Versus

Commissioner of Central Excise, Calicut

Appeal No. E/ST/156/2003 E/230/2003

[Arising out of Order-in-Original No. 1/2003 dated 22.2.2003, passed by the Commissioner of Central Excise, Calicut]

Misc Order No. 455/2003
Stay Order No. 765/2004
Final Order No. 1253/2004, dt. 23.7.2004, Certified on 27.7.2004

Limitation (C. Excise)

Mis-declaration -- Suppression of facts -- Penalty -- Interest -- Extended period for demanding duty -- The appellants have not fully declared the description of the product manufactured by them. They were fully aware that the 99% of this product was going as D.C. Defibrillators for external use only and the internal paddles were only optional and these were supplied only in a few cases where the customers wanted such internal paddles. This fact coupled with the description given in classification declaration describing the goods as `D.C. Defibrillators' without disclosing its correct use clearly establishes that the appellants were aware that mostly the goods are being used for external defibrillators and these are not eligible for exemption. But this fact was suppressed by the appellants with an intention to evade duty. The subsequent events are unimportant and irrelevant for coming to the conclusion whether there was a suppression of facts or mis-statement with an intention to evade payment of duty as the basic declaration filed by them has suppressed the basic and relevant fact. The extended period for demanding duty is rightly applicable. No modification is required in the penalty imposed on the appellants. The demand of duty for the extended period and penalty imposed and interest demanded is upheld.

[Para 5]

Appeals rejected

PRESENT :

Shri Arvind P. Dattar, Sr. Advocate alongwith Smt. Rukmani Menon, Adv. for the appellant.

Smt. Shoba L. Chary, JCDR for the respondent.

Cases Cited :

1. Ballarpur Inds. Ltd. v. UOI 1994 (74) ELT 795 (Del)........................................... [Para 1]

2. CCE v. Chemphar Drugs & Liniments, 1989 (21) ECC 6 (SC)............................. [Para 2]

3. CCE, Baroda v. L.M.P. Precision Engg. Co. Ltd. 2004 (93) ECC 137 (SC).......... [Para 2]

4. Cosmic Dye Chemical v. CCE, Bombay, 1994 (48) ECC 55 (SC)....................... [Para 2]

5. Easland Combines v. CCE, Coimbatore, 2003 (85) ECC 496 (SC)..................... [Para 1]

6. G.C. Jain v. CC, Calcutta, 2003 (162) ELT 733 (Tri-Kol).................................... [Para 1]

7. Jai Prakash Industries Ltd. v. CCE, 2002 (84) ECC 722 (SC)............................ [Para 1]

8. Super Polyfabricks Ltd. v. CCE 1994 (114) ELT 1019 (Tri)................................ [Para 1]

9. Sutham Nylocots v. CCE, Coimbatore, 2003 (87) ECC 403 (Tri-Chen)................ [Para 1]

10. Ugam Chand Bhandari v. CCE, Madras, 2004 (94) ECC 113 (SC)..................... [Para 1]

11. UOI v. New Vinodh Silk Mills Pvt. Ltd., 1997 (95) ELT 165 (SC)....................... [Para 1]

Per : K.C. Mamgain

The issue involved in this appeal is whether the defibrillators Model DF 2389 without Recorder and DF 2389R with Recorder falling under sub-heading No. 9018.00 manufactured by the appellants are entitled for exemption under Notification No. 8/96-CE dated 23.7.1996 (listed at item No. 7) and Notification No. 4/97-CE dated 1.3.1997 (listed at Sl. No. 7 of List No. 6).

2. The appellants M/s. BPL Limited are manufacturing and clearing 2 models of the defibrillators model DF 2389 without Recorder and DF 2389R with Recorder. They filed classification declaration No. 7/96 under Rule 173B of Central Excise Rules, 1944 claiming exemption under Notification No. 8/96-CE dated 23.7.1996 and in declaration No. 9/96-97 dated 1.3.1997 under Notification No. 4/97-CE dated 1.3.1997. On investigation, it was revealed that exemption is available to only DC Defibrillators for Internal use, and they were liable to pay duty @ 5% ad valorem. Accordingly, a Show Cause Notice was issued to them demanding the duty and proposing for penal action. The Show Cause Notice was adjudicated by the Commissioner of Central Excise, Cochin-II, under Order No. 2/99 dated 19.11.1999 wherein he confirmed the duty of Rs. 27,71,236 demanded under the Show Cause Notice and also imposed a penalty of Rs. 27,71,236 under section 11AC of the Central Excise Act, and a penalty of Rs. 1,00,000 under Rule 173Q of Central Excise Rules, 1944 and interest at appropriate rates under section 11AB of Central Excise Act. Appeal was filed by the appellants against this order before CEGAT. The CEGAT vide order No. 288/2002 dated 1.3.2002 remanded back the case for de novo adjudication on eligibility of exemption under the relevant notifications as the Commissioner has come to findings on an `incomplete' reading of the manual and had not considered the well settled law on "FOR USE" as relied upon by the learned Advocate. The case was re-adjudicated by the Commissioner under Order-in-Original No. 1/2003 dated 22.2.2003 and the present appeal is against this order of the Commissioner.

3. Shri Arvind Dattar, learned Senior Advocate appeared for the appellants and the learned Jt. CDR, Smt. Shoba L. Chary appeared for the Revenue.

4. Shri Arvind Dattar, pleaded before us that the only issue he is taking up for consideration is whether the defibrillators manufactured by the appellants are entitled for exemption under Notification No. 8/96-CE dated 23.7.1996 and Notification No. 4/97-CE dated 1.3.1997. He pleaded that the defibrillators manufactured by the appellants are generally used as external defibrillators but there is a built-in mechanism in the defibrillators which can be used by using small paddles for giving shock to open heart during the heart surgery when the heart has already been opened. He pleaded that since the defibrillators manufactured by them can also be used for internal use, as there is provision for making such use in the machine, therefore, they fulfil the requirements of the exemption notification and they are entitled for exemption under the said notifications.

5. Smt. Shoba Chary defended the order of the Commissioner who has relied upon the various write-ups on the defibrillators available on internet and relied on those write-ups. These write-ups were also exchanged by both the sides during the hearing of the appeal.

6. Shri Dattar have also submitted certain write-ups available on internet according to which there are defibrillators which are used only externally and he stated that since the defibrillators manufactured by the appellants are capable of being used for internal use also, they should be covered by the entry `DC Defibrillators and pacemakers' in the notification allowing exemption.

7. Smt. Shoba Chary, on the other hand, stated that the `DC defibrillators for internal use and pacemaker' has got the meaning that the defibrillators should be used internally with pacemakers. Shri Dattar drew our attention towards the entries in the list No. 6 granting general exemption under Notification No. 4/97-`DC Defibrillators and pacemakers' and stated that at Sl. No. 16 of the said list, there is an entry `Implantable cardiac pacemakers' and at Sl. No. 58, there is an entry `Pacemaker'. He, therefore, pleaded that since at Sl. No. 7, the entry is only "DC defibrillators for internal use and pacemakers", it does not say that it should be implantable. Therefore, the Department's view that it should be implanted in the body for making it as for internal use is not correct. The correct position for availing the exemption would be that the DC defibrillators should be capable of being used for internal use. Since there is provision for having small paddles, which can give the energy upto 3 joules to the heart, and these small paddles can be used in open heart surgery when the heart is open to give this energy of upto 3 joules to the heart, it is considered for internal use. He also referred to the letter No. 1(1)/2000-HBT dated 17.7.2000 issued by the Ministry of Information Technology, Electronics Niketan, New Delhi, to the General Manager, BPL Limited, wherein it had clarified that the:

"Defibrillators is a device that delivers electric shock through paddles placed either directly across the heart or on the surface of the body during cardiac emergency resulting from ventricular fibrillation. If the shock is given on the chest wall, it is known as external defibrillators and if the shock is applied directly to the heart, it is Internal defibrillators. Basic equipment used for both the applications may be same except that the different paddles electrodes are used for external and internal defibrillation. In case of Internal defibrillation associated with circuitry to limit the delivery of energy and safety features is incorporated. Besides, defibrillator types (Internal/External) mentioned above, we may like to inform that the totally, automatic fully implantable defibrillators are available. These devices are used in case of patients who have high risk for ventricular fibrillation".

He also referred to the Operating and Service manual for defibrillators issued by BPL Limited from para 3.3 to 3.3.2 under the sub-heading Anterior Paddles-External Defibrillations to expose heart wherein it is mentioned that,

"the paddle PDM-G18 defibrillator are used for adult patients and model PDM-G21 defibrillators are used for child patients. It is recommended that saline-soaked gauze pads be applied to the internal paddles before applying them to the exposed heart. Apply the paddles firmly to the surface of the exposed heart. The heart should be cupped in such a manner as to provide a maximum cross-section area of the fibrillating ventricles to the paddle surfaces. The paddles for internal application are completely insulated except for the contact surfaces".

8. We have carefully considered the submissions made by both sides. The basic issue in this appeal is whether the defibrillators manufactured by the appellants are to be treated as defibrillators for internal use and are entitled for exemption under Notification No. 4/97 (Sl. No. 7 of list 6). We find that the defibrillators manufactured by the appellants are described in para 1.2 of the Operating Instructions and Service Manual supplied by M/s. BPL Ltd. alongwith the defibrillators. According to this para,

"BPL Portable Defibrillators/Monitor is designed to provide external countershocks and to display heart rate and ECG waveforms on the scope screen.

The Portable Defibrillators can operate in either the nonsynchronous or synchoronous mode. When the unit is in the synchronous mode (yellow SYNC indicator illuminated), the delivered countershock is synchronized with the QRS complex and delivered within 40 milliseconds of the peak of R-wave with proper setting of the SIZE control A "SYNC" marker purse, appearing on the solid-trace waveform, indicates within +- 20 milliseconds where the countershock will be delivered.

The energy level of the delivered countershock, measured in joules delivered into a 50 ohm load, is variable from 0 to 320 joules. The energy level is easily obtained by depressing the SET CHARGE-Manual pushbutton until the desired value is indicated on the DELIVERED ENERGY indicator bar at the top of the scope screen. Also, AUTOMATIC pushbutton controls are provided for quick selection of present energy levels -- 160 or 320 joules. Delivery of the monophasic countershock pulse (Lown/Edmark waveform) is triggered by depressing the discharge buttons on both of the anterior paddles, or if internal paddles are used, by depressing the INT. PADDLE DISCHARGE button located on the control panel. Optional anterior paddles are equipped with a CHARGE pushbutton that functions the same way as the SET CHARGE Manual pushbutton does".

9. According to para 1.6.2, the physical dimension of the defibrillators are 230 mm high, 378 mm wide and 470 mm deep, weight 16.1 kg. without writer and 17.5 kg. with writer. According to para 1.6.1., under the heading Power supply, the net requirement is 230 V +-10% AC, 50Hz. Under Section II - Installation, para 2.3 provides Power Connection, where it is mentioned that the unit requires 230 V +-10%, 50Hz AC line voltage or battery power for its operation. AC is fed to the power supply transformer through a fuse of 0.2A rating. The power to the various PCBs is through a 1A Fast-blow Fuse located on the Defib PCB. Defibrillator charging section operates through a 19A Slow-blow Fuse located on the Defib PCB.

10. From the description, of the defibrillators manufactured by the appellants, it is clear that these are defibrillators for external use and these operate under AC. These can be used for internal use only in rare circumstances who during operation of the heart, the heart is open and the paddles for internal use are fixed in the defibrillators as there is a built in mechanism in the defibrillators for making it usable as internal defibrillators during open heart surgery.

11. In order to examine whether the defibrillators manufactured by the appellants are eligible for exemption under Notification No. 8/96-CE dated 23.7.1996 and 4/97-CE dated 1.3.1997 (Sl. No. 7 of List 6), we have to examine the correct interpretation of the entry No. 7 of list 6.

12. We find that under Notification No. 339/86 dated 11.6.1986 as amended by Notification No. 88/89 and 58/94, there was exemption for DC defibrillators for internal and external use and pacemakers and their accessories including patient cable, internal Defibrillators Paddles 45 mm and 55 mm sizes, excluding (i) Cardiac Monitors, (ii) Cardioscopes, (iii) E.C.G. Monitors of any type, (iv) ECG Recorder and the following components of DC Defibrillators viz. (i) Connector, (ii) Discharge/Damp Relay, (iii) High Voltage Refractable, Flexible wire, (iv) Polyester/Paper Discharge Capacitor. This notification was replaced by Notification No. 8/96 wherein this entry was modified and exemption was limited to `DC Defibrillators for Internal use and Pacemakers'. Thus, this gives the clue that the DC defibrillators for internal use are only exempt and not that DC defibrillators which can be used for external use as well as for internal use. We also find that under Notification No. 8/96 and 4/97, there is an entry at Sl. No. 7 `DC defibrillators for internal use and Pacemakers', entry at Sl. No. 16 `Implantable Cardiac Pacemakers' and entry at Sl. No. 58 `Pacemakers'. Reading these 3 entries, if we read harmoniously, will give clue to the correct interpretation of the entry at Sl. No. 7. Since there are separate entries for `implantable cardiac pacemakers' and `pacemakers', therefore, having an entry at Sl. No. 7 with DC defibrillators for internal use and pacemakers can have a meaning only that the DC defibrillators should be in use with the pacemakers and it is possible when these are implanted.

13. The learned JCDR had drawn our attention to the literature available at para 18 of the order of the Commissioner where he has observed that,

"Newer devices are a combination of ICD and pacemaker in one unit. These combination ICD/pacemakers are implanted in patients who require both devices (www.emedicine.com)".

14. Since, there are devices available which are combination of Internal Cardiac Defibrillators and Pacemakers in one unit, the entry at Sl. No. 7 of List 6 can have this meaning only. Therefore, any other DC defibrillators even if it has a provision for using it internally when the heart is open during hear (sic, heart) surgery, still it cannot be covered by this entry, but the correct interpretation of this entry will be only those devices, which are DC defibrillators with pacemakers in one unit and are implantable.

15. Therefore, we are of the view that appellants are not entitled for exemption under Notification Nos. 8/96 and 4/97 and their appeal is hereby rejected.

Per : G.A. Brahma Deva

I have carefully gone through the proposed order written by my Learned Brother Shri K.C. Mamgain, Member (Technical). With respects, I am unable to agree with the conclusion arrived at by him in dismissing the appeal. Hence, this separate order.

2. Whether the DC Defibrillators manufactured by the appellants are entitled for exemption or not in terms of Notification No. 8/96-CE dated 23.7.1996 and Notification No. 4/97-CE dated 1.3.1997, is an issue to be considered herein.

3. This matter is coming before the Tribunal for a second time. Earlier, the Tribunal, as per Order No. 288/2002 dated 1.3.2002, remanded the matter, observing that the Commissioner has come to a finding on an `incomplete' reading of the Manual and has not considered the well settled law on `FOR USE'. Accordingly, it remanded the matter to re-decide the eligibility of the Entity under the Notification. It was also observed that once the matter is being remanded back for de novo adjudication, on eligibility, the question of LIMITATION, penalty and interest, is also left open by setting aside the entire findings as regards the eligibility, duty demand, limitation, penalty, interest to be determined in the remand proceedings.

4. In the re-adjudication, the Commissioner, has mainly relied upon the material obtained from website (www.nyredcross.org) to set out differences between automated external defibrillators, internal defibrillators and internal cardioverter defibrillators. Based on this information, he has come to the conclusion that the Defibrillators manufactured by appellant weighs 16 kgs., is nothing but an automated external defibrillators and is completely different from internal defibrillators, which is implanted inside the body and something more close to the pace maker which is why both appeared to have been clubbed together in the Notification. There is a force in the arguments advanced on behalf of the assessee that the Commissioner has violated the principles of Natural Justice by relying on such extraneous evidences obtained behind the back of the appellant and which was not disclosed to the appellant at any stage in order to enable them to counter the same. It was reiterated that an inference drawn by relying upon such evidences is unsustainable in law and based on such evidences no conclusion can be reached against the appellants to deny the benefit of Notification. However, technical literature was placed before us to show that the said automated defibrillators can only be used to deliver shock on the chest and is not capable of use directly on the exposed heart during open heart surgery. Apart from this, I find that the Commissioner in the impugned order has observed that the item in question manufactured by M/s. BPL is basically for external use with an in-built provision for emitting low voltage with the assistance of internal paddles used rarely during operation that too external to the heart. There is force in the argument advanced on behalf of the assessee that this finding itself goes to prove that the Commissioner has agreed that the defribrillators manufactured by the appellants is capable of internal use. Once having admitted that with the use of internal paddles, the said defribrillators is capable of internal use, I am of the view that the benefit of Notification cannot be denied in the absence of any restriction in the relevant Notifications. I am also not convinced with the arguments advanced on behalf of the Revenue that exemption is applicable only to the implantable cardiac pacemakers. If that was so, there was no necessity for mentioning separate entries in the relevant Notifications. As per the wordings of the Notification, Sl. No. 7 of the relevant Notification exempts DC defibrillators for internal use and pacemakers and Sl. No. 16 exempts implantable cardiac pacemakers. In view of this, it cannot be said that implantable refers to internal use only. As along as it is admitted position that these can be used for internal use and in the absence of any restriction in the Notification, I am of the view that there is no justification in denying the benefit of the relevant Notifications. I also find that the appellants have got a good case on time bar issue also. Since I propose to allow the appeal on merits, I do not feel it necessary to go into the time bar issue. I accordingly propose to allow this appeal.

Difference of Opinion

Since there has been a difference of opinion between the two members of this Bench who heard the matter, Registry is directed to place this matter before the Hon'ble President to refer it to a third member to resolve the issue, in accordance with law.

2. The following point is required to be considered by the third member.

"In the facts and circumstances, whether DC Defibrillators manufactured by the appellants are not entitled for exemption under Notifications No. 8/96 and 4/97 respectively and accordingly, the appeal deserves to be dismissed as per Member (Technical)

OR

Whether DC Defibrillators manufactured by the appellants are entitled for exemption in terms of the relevant Notifications and appeal deserves to the allowed as per Member (Judicial)?"

Sd./- Sd./-

(K.C. Mamgain) (G.A. Brahma Deva)

Per : Justice K.K. Usha

Misc. Order No. 286/2004

The issue that has come up for consideration in this appeal is whether the defibrillators manufactured by the appellant are entitled for exemption under Notification No. 8/96-CE dated 23.7.1996 and Notification No. 4/97-CE dated 1.3.1997. While the learned Member (Judicial) took the view that the appellant's product would be entitled to exemption under the above notifications, the learned Member (Technical) took a contra view.

2. The appellants are manufacturing defibrillators model DF 2389 without Recorder and DF 2389R with Recorder falling under sub-heading No. 9018.00 of the Schedule to the Central Excise Tariff Act. They filed a classification declaration No. 7/97 under Rule 173B of the Central Excise Rules, 1944 claiming exemption under Notification No. 8/96-CE dated 23.7.96 and declaration No. 9/96/97 dated 1.3.97 under Notification No. 4/97-CE dated 1.3.97. The Superintendent of Central Excise under his letter dated 17.2.98 directed the appellants to revise the classification declaration since the department took the view the defibrillators of the type cleared by the appellant are not entitled to exemption from duty. Being not satisfied with the reply given by the assessee, department issued show cause notice dated 23.9.98 proposing to demand duty with respect to the defibrillators manufactured by the appellant during the period January 1997 to March 1998. The proceedings ended in an order of adjudication dated 19.11.99 against the contention by the assessee. On appeal by the assessee this Tribunal by its order dated 1.3.2002 remanded the matter to the Commissioner for fresh adjudication. Thereafter, the Commissioner has passed the order dated 22.2.03 which is under challenge in the present appeal.

3. In order to appreciate the contentions raised by both sides it may be necessary to refer to the different notifications under which exemption is granted to defibrillators:

I. Notification No. 339/86-CE dated 11.6.86 amended by Notification Nos. 88/89-CE dated 1.3.89 and 58/94-CE dated 1.3.94 --

8. D.C. Defibrillators for internal and external use and Pacemakers and their accessories including patient cable, internal Defibrillators Paddles 45 mm and 55 mm sizes but excluding:

(a) Cardiac Monitors

(b) Cardioscopes

(c) E.C.G. Monitors of any type

(d) E.C.G. Recorder

and the following components of D.C. Defibrillators, namely :--

(i) Connector

(ii) Discharge/Damp Relay

(iii) High Voltage Retractable, Flexible Wire

(iv) Polyester/Paper Discharge Capacitor

20. Implantable Cardiac Pacemaker and accessories

30. Pacemaker Wires

31. Patient Cable for Pacemaker

II. Notification No. 8/96 dated 23.7.96-

TABLE

(7) D.C. Difibrillators for internal use and pacemakers

(16) Implantable cardiac pacemakers

(58) Pace Maker

III. Notification No. 4/97 dated 1.3.97 --

TABLE

217. Medical equipment and other goods specified in List 6

LIST 6

(7) DC difibrillators for internal use and pacemakers

(16) Implantable cardiac pacemakers

(58) Pace Maker

4. The operating and Service Manual of the appellant describes the product as portable defibrillator/monitor. In Section 1, Paragraph 1.2 under the Description, it is referred to as follows:--

"Description

BPL's Portable Defibrillator/Monitor is designed to provide external countershocks and to display heart rate and ECO wave forms on the scope screen.

....................Delivery of the monophasic countershock pulse (Lown/Edmark Waveform) is triggered by depressing the discharge buttons on both of the anterior paddles, or if internal paddles are used, by depressing the INT. PADDLE DISCHARGE button located on the control panel. Optional anterior paddles are equipped with a CHARGE pushbutton that functions the same way as the SET CHARGE Manual pushbutton does."

In Table 1.1 containing Standard Accessories. Item 2 is Adult Anterior Paddles type PDM-G16.

In Table 1.2 the following Optional Accessories are given:-

S.No. 1-Adult Anterior-Posterior Paddles Type : PDM-G19

S.No. 2-Adult Internal Paddles Type: PDM-G18

S.No. 3-Adult Anterior Paddles with Remote Charge button, Type PDM-G16 RC

S.No. 4- Pediatric Internal Paddles, Type: PDM-G21

The meaning of Cardiac Defibrillation as given in Medicine and Clinical Engineering Physiological and Clinical Medicine by Bertil Jacobson Karolinska Institute, Stockholm, Sweden, Jhon G. Webster, University of Wisconsin, Madison quoted by the appellant it reads as follows: --

"Some cardiac arrhyhmias can be treated by passing a brief electric shock through the heard. Venticular fibrillation can often be stopped before circulatory arrest has caused irreversible brain damage due to oxygen deficiency. Likewise, atrial fibrillation and atrial flutter can often be stopped by defibrillation.

Ventricular fibrillation may be caused by an external electric shock, which occurs near the peak of the T wave- the vulnerable period when the ventricle is repolarising. It may also be caused when a PVC occurs during this same vulnerable period; in this case the heart electrocutes itself. Fibrillation has been likened to a dog chasing its tail, with continuous travel of the waves of depolarization and repolarization. During defibrillation, a large electric shock causes simultaneous depolarization of all cardiac muscle fibres. When they recover, normal packing resumes. An energy of 50-500 Ws (joules) has been found most effective, with the current passing through the heart along its longitudinal axis. Defibrillation can be performed externally via two electrodes placed on the chest or internally on the exposed heart during an operation. With an electrode about 50 cm in area, the resistance through the thorax is about 100 ft. For internal defibrillation on an exposed heart the resistance is lower, about 50 ft."

The appellant's contention is that the defibrillator cleared by it can be used as internal defibrillator on the exposed heart at the time of heart Surgery, if it is fitted with internal paddles and therefore the product would satisfy Notification Nos. 8/96 and 4/97 for exemption. It is also contended that since the notification does not refer to `implantable defibrillators', Revenue's contention cannot be accepted. The adjudicating authority has taken the view that DC Defibrillators for internal use referred alongwith Pacemakers in the above-mentioned two notifications would take in an Internal Defibrillator which is implanted in the body of the patient in combination with Pacemaker.

5. As mentioned earlier, the Notification No. 339/86 as amended by Notification Nos. 88/99 and 58/94 took in both DC Defibrillator for internal and external use. While including accessories in the above items specific reference was made to `internal defibrillator paddles with 45 mm and 55 mm sizes'. It is relevant to note that there is a marked difference in the description of the item when it came to Notification Nos. 8/96 and 4/97. There is no reference to D.C. Defibrillators for external use or a specific reference to `internal defibrillator paddles'. Even according to the assessee, its product can be treated as D.C. Defibrillators for internal use only when it is fitted with internal defibrillators. Admittedly assessee is clearing defibrillators without such `internal defibrillators paddles' also. A reference to assessee's Operating and Service Manual also would show that `internal defibrillator paddles' are only optional accessories. Defibrillators for external use which were once included in the exempted category are now taken out of such category under Notification Nos. 8/96 and 4/97. If the assessee's contention is to be accepted then in spite of such specific exclusion its product will continue to get benefit of exemption on the basis of supply of some optional accessories like internal paddles.

6. The material produced by the Revenue before the Commissioner and accepted by him were later made available to the assessee before this Tribunal. Arguments were addressed by both on that basis. The relevant portion from the Commissioner's order is quoted below:

"Internal Cardioverter Defibrillators (ICD) were originally developed and have been most frequently used for prevention of sudden cardiac death (www.americanheart.org). A modern internal defibrillator is much smaller and is implanted in the upper chest. Newer devices are a combination of ICD and pacemaker in the unit. These combination ICD/pacemakers are implanted in patients who require both devices (www emedcine com). .........This device is a small electric generator hooked up to wires called leads. A typical ICD weighs about 4 ounces and measures about 1/2 inch thick by 2 inches wide and is implanted under the skin in the upper chest. Leads are the wires that conduct the ICD to the heart the tip of which is placed against the heart's inner wall and carries electric impulses from the ICD to the heart through the cut vein into the heart's chambers beginning with the right ventricle (www chfpatients com).

7. The above would show that D.C. Defibrillators for internal use included in the exempted category cannot be taken as a defibrillator for external use cleared by the appellant with an accessory of internal defribrillators paddles. A reference to reply received from Jerry Potts to the appellant's query would also lead to such a conclusion. The reply reads as follows:

"Implantable defibrillators are definitely distinct from `Internal' defibrillators used during surgery to countershock the heart. If anything, the term internal defibrillator, as you defined it in your message, more closely relates to an external defibrillator. That is because the device typically used to manually deliver a countershock to the myocardium during open heart surgery is identical to those defibrillators that externally deliver transthoracic shocks to a closed chest (except for the paddles that are used."

Therefore, the defibrillator used during open heart surgery is identical to the defibrillators used to deliver transthorasic shocks externally except for the internal paddles additionally provided. Exclusion of defibrillators for external use from the exemption provisions in Notification Nos. 8/96 and 4/97 cannot be ignored. Appellant's product which is basically a defibrillator for external use but capable of using during open heart surgery if the optional accessory of internal defibrillators paddles are also provided, cannot be treated as defibrillators for internal use as contemplated in the exemption provisions.

8. I, therefore, agree with the view taken by Member (Technical) that the appellant is not entitled to claim exemption under Notification Nos. 8/96 and 4/97 in respect of its product D.C. Defibrillators.

9. I find that the appellant had raised an issue on limitation about which no view is expressed by Member (Technical). Member (Judicial) even though felt that the appellant has a good case on the issue of limitation, did not go into it as he was inclined to allow the appeal on merits. Since the Members have not expressed any view on the issue of limitation, it is not proper for me to consider the question of limitation on merits, even though, it was contended on behalf of the appellant that the dispute relates to interpretation of a notification and when the issue is not very clear as there was difference of opinion between the two learned Members, it is a fit case to accept the contention of the assessee that there was no wilful mis-statement or suppression of facts or contravention of any of the provisions of the Act or the Rules with intent to evade payment of duty. It is for the regular Bench to consider the issue on merits.

10. Appeal will be placed before the Regular Bench for passing appropriate orders.

MAJORITY ORDER

Per : K.C. Mamgain

The appeal was heard on issue of limitation. Shri Arvind P. Dattar, Ld. Senior Advocate pleaded that the show cause notice for larger period under Proviso to Sec. 11A of the Central Excise Act is unsustainable in law as there has been no suppression on the part of the appellant. The issue relates to interpretation of Notification and when the issue was not very clear and there has been difference of opinion on the issue of classification even between the Members of the Tribunal it cannot be taken that the appellants had mis-declared the applicability of exemption Notification. The Department was not disputing the classification of the product earlier and only when audit objection was raised then the Department has started the process of raising the demand treating the DC Defibrillators manufactured by them as not for internal use and accordingly not eligible for exemption under Notfn. No. 8/96-CE and 23.7.96 dated Notfn. No. 4/97 dated 1.3.97 (List No. 6 Item No. 7). M/s. BPL Limited had filed the declaration of the goods as DC Defibrillators under sub-heading 9018.00 claiming exemption from the whole of the excise duty by virtue of the exemption Notfn. No. 4/97-CE dated 1.3.97 and also indicated the entry reference i.e. entry No. 7 of list 6 of the Notification. There is full disclosure of the facts and there is no mis-statement as alleged by the Department. If the Department was not at all aware of the fact that the appellants are making an equipment which weighs 16 kgs., the necessity of making enquiry and seeking further clarification from the appellants vide their letter dated 17.2.98 and 15.6.98 would not have been necessary. It is a question of interpretation of the term `used' in the notification. Merely for the reason that the term `internal use' mentioned in the said notification is interpreted by the Department differently cannot be a ground to allege suppression of fact or misstatement of fact. The appellants have filed their classification declaration, declaring all the particulars to claim the benefit of the said notifications and the process of manufacture and clearance have also been verified by the Departmental officers. The appellants have clarified in writing all the queries of the Department. This itself proves that appellants never had any intention whatsoever to evade payment of duty. The Notification was not crystal clear whether the equipment was for external/internal use. Since the issue was not clear, therefore the appellants have declared the classification and claimed the exemption as they have interpreted and made the declaration to the Department. Accordingly, there cannot be any suppression of the fact with an intention to evade payment of duty. He relied on the following decisions:

(i) M/s. G.C. Jain v. CC, Calcutta, 2003 (162) ELT 733 (Tri-Kolkata)

In this case it was held that goods cleared by appellants after declaring the same in Bills of Entries and giving their correct classification - availing of benefit of a notification by assessee which held to be not available subsequently, by Revenue, not amounts to mis-declaration or mis-statement -- extended period of limitation not invocable.

(ii) UOI v. New Vinodh Silk Mills Pvt. Ltd., 1997 (95) ELT 165 (SC)

(iii) Easland Combines v. CCE, Coimbatore, 2003 (85) ECC 496 (SC) : 2003 (152) ELT 39 (SC)

(iv) Sutham Nylocots v. CCE, Coimbatore, 2003 (87) ECC 403 (Tri-Chen) : 2003 (161) ELT 287 (Tri-Chennai)

In this case it was held that extended period of demand not invocable when classification of product itself in doubt and despite Board's clarificatory Circular different Benches of Tribunal classified it under different heading culminating in constitution of a Larger Bench.

(v) M/s. Jai Prakash Industries Ltd. v. CCE, 2002 (84) ECC 722 (SC) : 2002 (146) ELT 481 (SC)

In this case it was held that bonafide doubt as to non-excisability of goods due to divergent view of high courts -- extended period of five years not invocable as no evidence of any fraud, collusion, wilful mis-statement or suppression of facts available with Department -- mere failure for negligence in not taking licence or not paying duty not sufficient to invoke extended period.

(vi) M/s Ugam Chand Bhandari v. CCE, Madras, 2004 (94) ECC 113 (SC) : 2004 (167) ELT 491 (SC)

(vii) M/s Ballarpur Inds. Ltd. v. UOI, 1994 (74) ELT 795 (Del)

It was held in this case that even if it is assumed that petitioners' interpretation of the Notification is wrong and that they cannot claim duty concession of paper cut and ruled -- it cannot be said that they have made any mis-statement or suppression in material. Mis-statement and suppression relate to information on facts and not interpretation of notification in the realm of law. The Revenue cannot on its own interpretation of the notifications hold the petitioners guilty of mis-statement or suppression.

(viii) Super Polyfabricks Ltd. v. CCE 1994 (114) ELT 1019 (Tri) It was held that about the availability of exemption notification availed to make payment of duty and had contested the duty demanded on a point of law, it will not be appropriate to impose penalty just because intention to evade duty in fiscal status was not necessary to be proved.

He, therefore, pleaded that in view of all these decisions, simply on the ground that the appellants have claimed exemption under Notfn. No. 4/97 it cannot be held that they have suppressed the facts or mis-declared the goods with an intention to evade payment of duty. He also pleaded that they had taken opinion dated 17.7.2000 from Ministry of Information Technology, Government of India (Page 150 of Paper book) regarding internal and external defibrillators. Since the classification of the goods was not very clear and even the Tribunal members have taken different view, therefore, suppression of fact or mis-statement with an intention to evade duty is not established against the appellant and accordingly extended period for demanding duty is not applicable. When a new view has been taken on classification, mandatory penalty under Sec. 11A and penalty under Section 173Q is not imposable on the appellants.

2. Smt. Shobha L. Chary, Ld. JCDR appearing for the Revenue pleaded that the appellants who manufactured the goods and their users can only know that what is the exact use of the equipment manufactured by them. Simply making a declaration in the classification list mentioning only the name of the equipment i.e., DC defibrillators with or without recorder is not sufficient to claim exemption when they were knowing that where these goods were used. Whether these were used/sold as defibrillator for external use or internal use was not disclosed to the Department. If a person claims benefit of a notification then all the information about the equipment/articles should be furnished and the claimant has to establish that they are eligible for such exemption. She relied on the decision of the Supreme Court in the case of CCE, Baroda v. L.M.P. Precision Engg. Co. Ltd., 2004 (93) ECC 137 (SC) : 2004 (163) ELT 290 (SC) wherein it was held that "description of goods given in C.L.I Form by the appellant for the period in question did not tally with the description in the invoices of the same period -- No attempt to describe the goods in C.L.I Form at all, let along fully or truly -- Consequent upon the issuance of exemption notification assessee itself classified the goods under Heading 87.05 of Central Excise Tariff Act, 1985 and given a full description of goods for the first time while claiming exemption -- extended period of limitation applicable". She stated that the appellants were fully knowing that the defibrillators sold by them were for external use and optional internal paddles were not provided in 99% cases.

Optional use of internal paddle was not disclosed by them to the Department. It was most vital for the classification of the product. If this information would have been disclosed earlier, the Department would have investigated earlier. There was a clear intention on their part to evade the payment of duty. There is no change in the opinion of the Department but on investigation it was found that they did not fully disclose the nature of product. The onus was on the appellants to establish that the exemption notification was applicable to their product. She relied on the judgment of the Supreme Court in the case of CCE v. Chemphar Drugs & Liniments, 1989 (21) ECC 6 (SC) : 1989 (40) ELT 276 (SC) wherein it was held that extended period of five years applicable only when something positive other than mere inaction or failure on the part of manufacturer is proved -- conscious or deliberate withholding of information by manufacturer necessary to invoke larger limitation of five years. She stated that the difference of opinion came only when case came before the tribunal Members. If the information would have come earlier the result would have been known earlier. She thus stated that the appellant were fully knowing about the sale and use of equipment as external defibrillator and the option of using internal paddles as optional was not disclosed. She also stated that the appellants were importing same product and there also even after the decision of the Tribunal on classification issue continued to import the goods by giving wrong classification. Therefore, their intention to evade payment of duty is quite clear. She pleaded that in view of the decision of Supreme Court in the case of CCE v. Chemphar Drugs & Liniments, 1989 (40) ELT 276 (SC), Cosmic Dye Chemical v. CCE, Bombay, 1994 (48) ECC 55 (SC) : 1995 (75) ELT 721 (SC), extended period is fully applicable and the appellants are liable for penalty under Sec. 11AC.

3. Shri Arvind P. Dattar, the Ld. Senior Advocate stated that it is not correct that the appellants had not declared about the external use of the equipment. Rule 173B declaration was filed right from January 1997. Full description of the equipment manufactured and exemption notification claimed was indicated in classification list. Department was aware of the size of the equipment as indicated in their letter dated 17.2.98. The interpretation of the term in the notification was done differently by the Department. They were not liable to make any declaration about the external use. Information not require to be declared as per law not amounts to suppression.

4. We have carefully considered the submissions made by both the sides. From the show cause notice we find that the appellants have filed declaration No. 7/96 dated 9.1.97 under Rule 173B of Central Excise Rules, 1944 and in the said declaration they had declared the item in dispute as "Defibrillator Model 2389, 2389R" under chapter sub-heading 9018.00 and have claimed exemption under Notfn. No. 8/96-CE dated 23.7.96 and cleared the item without payment of Central Excise duty. They filed another declaration under Rule 173B vide Declaration No. 9/96-97 dated 1.3.97 and claimed exemption under Notfn. No. 4/97-CE dated 1.3.97 and cleared the goods without payment of Central Excise duty. In both the declarations the appellants had declared under Column 2 (description of goods) as "Defibrillators with or without recorder" and based on these declarations they had cleared the defibrillators without payment of duty from January 1997 to March 1998. On investigation it was found that the exemption is available only for DC Defibrillators for internal use and hence the appellants were asked by the Superintendent of Central Excise, Palakkad-II Range to file revised declarations classifying the item as medical equipment falling under Chapter sub-heading No. 9018.00 of CETA. In their reply dated 2.4.98, the appellants informed the Superintendent that both these models manufactured by them are DC Defibrillators, which can be used for both internal as well as external use. Vide their letter dated 22.5.98 they informed their decision to pay duty at the rate of 5% on the above items under protest.

5. We find that the Superintendent in his letter dated 17.2.98 has informed the appellants that the description of the item No. 7 of List No. 6 of the Notification No. 4/97 as given therein is "D.C. Defibrillators for internal use and pacemakers'. As such it is unambiguous that the item for which `nil' rate of duty has been prescribed is for defibrillators, which are for internal use like implantable miniaturized defibrillators which are usually implanted in the anterior abdominal wall in the pararectal position and connected to the heart via a number of electrodes for providing defibrillation shock. The appellants in reply to the Superintendent's letter dated 17.2.98 had informed him that DC Defibrillator manufactured by them is having multipurpose utility from its usage point of view as it could be used internally and externally. The expression internally and externally connotes usage of D.C. Defibrillator inside (or into) the human body (internal) and also outside (external) the human body. In medical parlance the conventionally used expression internal use D.C. Defibrillator denotes internal defibrillation of the heart and the expression external use denotes external defibrillation of the heart. The D.C. Defibrillator manufactured by them have multipurpose utility, in fact counter shock could be administered directly on the external surface of the heart during open heart surgery. With this letter only they have submitted the documents to prove that the D.C. Defibrillator manufactured by them for internal use can also be used externally. Thus, it is clear that in their declaration filed by them on 9.1.97 under Notfn. No. 8/96-CE, where the exemption was for Defibrillator for internal use they had described the goods as D.C. Defibrillator without mentioning whether these are for internal use or external use or both for internal and external use.

In their second declaration No. 9/96-97 dated 1.3.97 they described the goods as Defibrillator with and without recorder without intimating the Department whether these were for internal use, when the requirement of exemption under the Notfn. No. 4/97-CE dated 1.3.97 was D.C. Defibrillator for internal use and pacemakers. Thus, the basic fact that the D.C. Defibrillator manufactured and cleared by them whether these are for internal use or for external use was not disclosed by them in their declaration under Rule 173B of the Central Excise Rules. At the relevant time there was no requirement for getting the classification declaration approved but since the assessees were working under self-removal procedure, it was obligatory for them to file the classification declaration with the Superintendent of Central Excise giving full description of the goods, the chapter heading and sub-heading number of the Schedule to CETA under which the goods fall, the rate of duty leviable and the exemption notification availed or proposed to be availed. The appellants had not given full description of the goods for availing the exemption Notfn. No. 8/96-CE dated 4/97. Rule 173B(ii) required that the proper officer may after such further inquiry as he may consider necessary re-assess the correct amount of duty payable following the provisions of Sec. 11A of the Act and assessee shall pay the deficiency, if any. Rule 173B(iii) authorizes the proper officer to conduct enquiry in connection with the declaration filed under sub-rule (1) by the assessee. Under this provision the Superintendent started enquiry by writing letter dated 17.2.98 to the appellants and in reply to the letter dtd. 17.2.98 of the Superintendent the appellants had for the first time disclosed that the D.C. Defibrillators duly classified by them under sub-heading 9018.00 is for internal use and is entitled to nil rate of duty in terms of Notfn. No. 4/97 dated 1.3.97 as the D.C. Defibrillator manufactured by them is having multipurpose utility from its usage point of view and it would be used internally and externally.

In this letter also on Page 4 Para 1, they have stated that "in the premise it is obvious that the D.C. Defibrillator manufactured by us, would not only be used externally but also could be used internally answering in affirmative to the expression internal as used in the notification under reference. This makes the position very clear that the D.C. Defibrillator manufactured by us could be used for internal defibrillation and we are entitled to claim benefit of nil duty vide the exemption notification. While concluding we are enclosing the documents which proves beyond doubt that our D.C. Defibrillator manufactured by us is for internal use and also could be used externally". Thus, it is clear that the appellants deliberately did not give the correct description of the defibrillator manufactured by them in the classification list to avail the exemption notification. It was only on the enquiry from the Department that this fact came to notice and admitted by them first time that the D.C. Defibrillator manufactured by them weighs 16 kgs. and it is used by them for internal use but it could also be used externally. During investigation it was found that the main use of the D.C. Defibrillator manufactured by the appellants was only for external use and the internal paddles for making use as internal defibrillators were optional and in 99% cases they have sold only the D.C. Defibrillator for external use and this optional paddle for internal use was not sold. This fact was well-known to the appellants despite that they did not disclose these facts to the Department nor gave the proper description in the classification list and cleared the goods under exemption. Thus, the intention to evade duty by mis-declaration is clear. The subsequent events leading to difference of opinion between the two members of the Tribunal in any manner does not rectify the basic defect of giving incomplete declaration in the classification list which cannot be rectified by the subsequent events. The opinion dated 17.7.2000 of Ministry of Information Technology was taken to defend their case after issue of show cause notice which was issued on 23.9.1998. Therefore the appellants have not fully declared the description of the product manufactured by them.

We find that there is a force in the arguments of the Revenue that the appellants were the technical people who were manufacturing the product and selling product to the various customers like hospitals, etc. where the product was being used. They were fully aware that the 99% of this product was going as D.C. Defibrillators for external use only and the internal paddles were only optional and these were supplied only in a few cases where the customers wanted such internal paddles. This fact coupled with the description given in classification declaration describing the goods as `D.C. Defibrillators' without disclosing its correct use clearly establishes that the appellants were aware that mostly the goods are being used for external defibrillators and these are not eligible for exemption. But this fact was suppressed by the appellants with an intention to evade duty. When the Department started making enquiries, they started taking the plea that these defibrillators can be used externally and internally and since these are capable of being used internally these are exempted. Therefore, we do not consider the subsequent events so relevant for coming to the conclusion whether there was a suppression of facts or mis-statement with an intention to evade payment of duty as the basic declaration filed by them has suppressed the basic and relevant fact. Therefore, we are convinced that extended period for demanding duty is applicable in this case. Therefore we do not find that any modification is required in the penalty imposed on the appellants. We accordingly, uphold the demand of duty for the extended period and penalty imposed and interest demanded. The appeal is rejected.

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