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Issues: Classification of flavouring agents for exemption under excise duty notification; validity of show cause notice challenging classification.
Analysis: 1. The petitioners, who manufacture edible flavouring agents, claimed exemption from excise duty under a notification issued by the Central Government. Despite initially being allowed the exemption by the Appellate Collector of Central Excise, they were later informed by the Superintendent of Central Excise that their products did not qualify for the exemption and were to be provisionally assessed under a different tariff item, leading to the petitioners paying duty under protest. 2. Subsequently, the Superintendent issued a show cause notice specifying the amount of excise duty due, based on the contention that the flavouring agents did not fall under the category eligible for exemption. The petitioners argued that the earlier decision of the Appellate Collector should preclude the Excise authorities from challenging the classification, especially since no further order had been passed despite the petitioners' payment of duty under protest. 3. The petitioners' counsel relied on the appellate order and contended that the Excise authorities were bound by that decision and could not take a contradictory stance. However, the respondents argued that subsequent testing of samples by the Deputy Chief Chemist led to the conclusion that the flavouring agents did not qualify as food preparations, justifying the issuance of the show cause notice based on new information. 4. The Court noted that the Appellate Collector had the opportunity to order sample testing before issuing the initial decision but chose not to do so. Despite this, the Appellate Collector's decision was binding on the Excise authorities unless overturned or set aside. The Court clarified that a mere Superintendent of Central Excise could not unilaterally disregard or act contrary to an order of the Appellate Collector. 5. Ultimately, the Court allowed the petition, quashing the letters and show cause notice issued by the Excise authorities challenging the classification of the flavouring agents. The judgment emphasized the binding nature of decisions made by higher authorities within the Excise department, highlighting the importance of adherence to such decisions unless properly reviewed or overturned.
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