1990 (9) TMI 88 - HC - Central Excise

Summary

Issues:
1. Whether the manufacture of baking powder is entitled to exemption under Notification No. 55/75-C.E., dated March 1, 1975.

Analysis:

The judgment by the High Court of Judicature at Bombay involved a dispute regarding the classification of baking powder for excise duty exemption. The petitioner, a company manufacturing various products including baking powder, claimed exemption under a notification. The Assistant Collector initially denied the exemption, stating that baking powder is not a food product. However, the Appellate Collector reversed this decision, considering baking powder as a food product or preparation eligible for exemption.

The Government of India then reviewed the matter and concluded that baking powder did not fall under the exemption notification. The court analyzed the definitions of 'food products' and 'food preparations' as per a Supreme Court ruling. It was highlighted that the notification should be interpreted favorably for the taxpayer when in doubt. The court referred to a past case regarding the definition of 'foodstuff' to determine the broader context of the term.

The court examined the composition and usage of baking powder, noting its common understanding as a food preparation essential for various culinary items. It differentiated between 'food products' and 'food preparations,' emphasizing that even if an item is not directly consumed as food, it can still be classified as a food preparation. The court rejected the revenue's argument that spices, including baking powder, are not food preparations, citing a contrary Allahabad High Court decision.

Ultimately, the High Court ruled in favor of the petitioner, declaring that baking powder is indeed a food preparation eligible for exemption. The impugned order by the Government was set aside, confirming that the manufacture of baking powder is exempt from excise duty as long as the notification is in effect. The court also discharged the bank guarantees furnished by the petitioners and made no order as to costs in this case.