1992 (10) TMI 102 - HC - Central Excise

Summary

Issues Involved:
1. Classification and exemption of Citric Acid I.P. under Central Excise Rules.
2. Validity of Tribunal's requirement for end-use verification for exemption.
3. Maintainability of the petition under Article 226 of the Constitution of India.

Summary:

Issue 1: Classification and exemption of Citric Acid I.P. under Central Excise Rules
The petitioners, a Public Limited Company, classified Citric Acid I.P. under Tariff Item No. 68 and claimed exemption u/r 8 of Central Excise Rules, 1944, as per Notification No. 62/78. The Superintendent of Central Excise initially approved this classification. However, the Collector of Central Excise later reversed this decision, declaring Citric Acid as a basic chemical, not a drug or pharmaceutical. The Appellate Tribunal overturned the Collector's decision, affirming that Citric Acid is a pharmaceutical and eligible for exemption.

Issue 2: Validity of Tribunal's requirement for end-use verification for exemption
The Tribunal's order required verification of the end-use of Citric Acid to grant exemption, which the petitioners challenged. The High Court held that the liability to pay excise duty accrues upon manufacture, not end-use, and exemption should be granted if the product is classified as a drug or pharmaceutical. The Court referenced the case of Rakesh Enterprises, confirming that exemption is available based on the product's classification, not its end-use.

Issue 3: Maintainability of the petition under Article 226 of the Constitution of India
The Department argued that the petition should be dismissed as an appeal to the Supreme Court was available u/s 35L of the Excise Act. The High Court, however, entertained the petition due to the prolonged pendency and lack of evidence of any pending appeal in the Supreme Court. The Court emphasized that driving the parties to file an appeal now would lead to unnecessary litigation and expenses.

Conclusion:
The High Court quashed the Tribunal's direction requiring end-use verification for exemption and declared that the petitioners are entitled to exemption for the manufacture of Citric Acid without the need for end-use verification. The petition was allowed, and no costs were ordered.