1998 (8) TMI 95 - HC - Central Excise

Issues Involved:
1. Conviction under Section 9(1)(i) of the Central Excise and Salt Act.
2. Requirement of a license under Rule 174 of the Central Excise Rules, 1944.
3. Exemption from excise duty and its effect on licensing requirements.
4. Validity of the prosecution and sentence imposed.

Detailed Analysis:

1. Conviction under Section 9(1)(i) of the Central Excise and Salt Act:
The petitioners, a company and its Managing Director, were convicted for manufacturing and clearing excisable goods without a license, as required under Rule 174 of the Central Excise Rules, 1944. They were sentenced to pay a fine of Rs. 7,500 each, with a default penalty of rigorous imprisonment for 21 months. This conviction was confirmed on appeal, leading to the current revision petition.

2. Requirement of a License under Rule 174 of the Central Excise Rules, 1944:
The petitioners argued that since their goods did not exceed the value of Rs. 30 lakhs for home consumption, they were exempt from excise duty and hence did not require a license. The respondent countered that exemption from duty does not negate the requirement for a license for manufacturing excisable goods.

3. Exemption from Excise Duty and Its Effect on Licensing Requirements:
The court examined whether goods exempted from excise duty under various notifications ceased to be excisable goods, thereby negating the need for a license. The court referenced several judgments:
- Sulekh Ram and Sons v. Union of India: Held that exempted goods are not excisable, thus no license is required.
- Vishal Andhra Industries v. Union of India: Contradicted the above, stating that exemption from duty does not change the excisable nature of goods.
- Karnataka Cement Pipe Factory v. Superintendent of Central Excise: Supported the view that exemption from duty does not remove the goods from the excisable category.
- Wallace Flour Mills Company Ltd. v. Collector of Central Excise: Affirmed that excisable goods remain so despite exemptions.

The court concluded that the exemption from excise duty does not eliminate the need for a license to manufacture excisable goods. The goods remain excisable, and the statutory requirement for a license under Rule 174 persists.

4. Validity of the Prosecution and Sentence Imposed:
The court found that the petitioners had admitted to manufacturing excisable goods without a license and had requested leniency based on their ignorance of the law. The court dismissed the argument that ignorance of the law could be a defense and upheld the conviction. However, considering the circumstances, the court deemed it appropriate to reduce the fine from Rs. 7,500 to Rs. 1,500 each, directing the refund of the balance amount.

Conclusion:
The court dismissed the revision petition, affirming the conviction but modifying the sentence to reduce the fine amount. The judgment emphasized that exemption from excise duty does not negate the requirement to obtain a license for manufacturing excisable goods, thereby upholding the statutory provisions under the Central Excise and Salt Act.

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