1970 (12) TMI 34 - HC - Central Excise

Summary

Issues:
Challenge to excise duty demand on patent and proprietary medicines.

Analysis:
The petitioner, a public limited company in the pharmaceutical trade, challenged an excise duty demand imposed by the Assistant Collector, Central Excise. The dispute arose from the classification of pre-excise book stock and the imposition of duty on unlabelled medicines stored in cold storage. The main contention was whether the imposition of duty was valid after goods had been cleared from the factory under gate passes.

The court examined the application of Rule 9(2) of the Central Excise Rules, 1944, which allows for the imposition of excise duty on excisable goods even after removal from the manufacturing premises. The court held that the introduction of item No. 14E in the First Schedule to the Central Excise Act, 1944, made the goods liable for duty post-clearance. Referring to previous judgments, the court rejected the argument that once goods are cleared, no duty can be imposed, emphasizing the applicability of Rule 9(2) in such cases.

Regarding the definition of manufacture under Section 2(f) of the Central Excises Act, the court considered the extended definition post the Finance Act of 1962, which included processes like labelling for patent and proprietary medicines. The court emphasized that compliance with the Drugs Act was essential for the marketability of medicines, making labelling a crucial part of the manufacturing process. Citing relevant case law, the court concluded that labelling constituted manufacture for excise duty purposes, and unlabelled medicines could not be considered patent and proprietary medicines.

In light of the above analysis, the court dismissed the application, upholding the validity of the excise duty demand on the petitioner. The Rule Nisi was discharged, and the interim order was vacated, with no costs awarded. The operation of the order was stayed until a specified date in 1971.