Whether the Atraumatic Needles can be considered as 'part of needled sutures' for claiming exemption?

PJ/Case Laws/2012-13/1525

Case:- Needle Industries (India) Pvt. Ltd. Vs. C.C.E., Salem

Citation:- 2013-TIOL-633-CESTAT-MAD

Brief Facts:- The applicant is manufacturing two types of needles. One type is, 'Eyed Suture Needles', which is sold directly to hospitals for use. On such needles, the applicant is paying excise duty and there is no dispute before us about such needles. They are also manufacturing another type of needles known as ' Atraumatic Needles- (Eyeless)'. These needles are sold to other manufacturers of needled sutures, who attach the needle to the 'string' or 'gut', and then sterilize, pack and sell it to consumers like hospitals. The applicant has not been paying excise duty on this product, as they claim such needle to be 'part and accessories of the instruments and appliances' used in Cardiovascular sutures, Ophthalmic sutures etc. They claimed exemption from Central Excise Duty as per Notification No.6/2006-CE, dated 01.03.2006 (S.No.59 of the Table to the Notification), which is reproduced below:

Sl. No.	Heading	Description	Rate of Duty
59	9018 or 9019 or 9022	(i) Parts and accessories of goods of heading 9018 and 9019 (ii)Parts and accessories of apparatus for medical surgical, dental or veterinary use, falling under heading 9022	NIL NIL

Revenue was of the view that the classification adopted by the applicant for ' Atraumatic Needles - (Eyeless) under Central Excise Tariff Item 9018 9019 was wrong and it should have been classified under CTI 9018 3210. However, this issue is not very crucial for deciding the dispute on hand because the exemption notification specifies classification at four digit level only and not at eight digit level. Revenue's contention is essentially that ' Atraumatic Needles- (Eyeless)' is an item specified under Central Excise Tariff Item 9018 3210 and, therefore, it has to be treated as a 'complete product' and it cannot be treated as 'part of any other item' and that the Exemption Notification cited above will apply only to 'part and accessories of goods' falling under Chapter Heading 9018 or 9019. At this stage, it is also brought to our notice that the classification of 'needled sutures' has been classified under Chapter Heading 9018 by the Hon. Apex court in the case of M/s. Johnson & Johnson Ltd. Vs Union of India reported in1997 (92) E.L.T.23 (S.C.).

Based on the reasoning that a complete product is not eligible for exemption as per Notification No.6 /2006-CE, dated 01.03.2006 (S.No.59 of the Table to the Notification), two show-cause notices were issued and adjudicated confirming demand for the period Apr.'06 to Oct.'10 and Nov.'10 to July, 2011 with penalty of equal amount. Aggrieved by the order, the applicant has filed this appeal along with stay application.

Appellant’s Contention:- The applicant submits that ' Atraumatic Needles -(Eyeless)', which they are manufacturing cannot be used directly by consumer and it can be used only if it is used along with a 'gut'. Such a job of attaching 'guts' to' 'eyeless needles' can be done only in a factory and not by a surgeon. He further submits that such a process is being done by manufacturers like M/ s. Johnson & Johnson Ltd. According to them it is not reasonable to hold that ' Atraumatic Needles - (Eyeless)' is not a part of 'needled sutures' being manufactured by other manufacturers like M/s Johnson and Johnson.

Respondent’s Contention:- The respondent argues that when an item is specifically covered by a Tariff item it can no longer be considered as part of another item and, therefore, he contends that exemption cannot be given to them.

Reasoning of Judgment:- Tribunal heard both the parties and considered the arguments of both sides. For extending the benefit of Exemption under Notification No.6/2006-CE, dated 01.03.2006 (S.No.59 of the Table to the Notification), three issues are to be decided. The first issue is the 'classification of the product' being cleared from the factory of the appellant. Second issue is the classification of 'needled sutures' in the manufacture of which the impugned item is used and the third issue is whether the impugned goods can be considered as 'part of needled sutures'.

The Tribunal also finds that prima facie, the classification adopted by the applicant at eight digit level for ' Atraumatic Needles - (Eyeless)', is 9018 9019, is wrong and the correct classification appears to be 9018 3210. But this change of classification at eight digit level with common four digit level for both the rival classifications does not have any impact on the decision to be made in this application because at any rate, the item is admitted to be falling under Chapter Heading 9018 and the exemption in question is applicable to such goods.

Tribunal considered that the second issue, the classification of ' Atraumatic Needled Sutures has been decided by the Hon'ble Apex Court to be 9018. So, the second issue is already settled in favor of the applicant.

Thereafter, the only issue to be decided is whether the item which is specified in a Tariff Entry can be considered to be part of another item for the purpose of an exemption notification. In our prima facie view, ' Atraumatic Needle (Eyeless)' is a part required or manufacturing 'needled sutures'. On a perusal of the different entries in the said notification it is seen that wherever there is an intention to restrict the scope of exemption to specified parts it is done by specifying the classification of the goods in column 2 of the Table attached to the notification. In this case the impugned goods satisfy such condition. Therefore, prima facie, we see strong merit in the arguments of the applicant. We, therefore, grant waiver of the dues arising from the impugned order for admission of appeal and stay recovery thereof during the pendency of the appeal.

Decision:- Stay petition is allowed.

Comment:- The major issue to be decided in this case was that whether the item which is specified in a Tariff Entry can be considered to be part of another item for the purpose of an exemption notification. It was held that prima facie there is no bar in considering an item as a part of another item even if it is specified in a different tariff entry.

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