COLLECTOR OF CENTRAL EXCISE, HYDERABAD. versus CHEMPHAR DRUGS & LINIMENTS, HYDERABAD.

Citation: [1989] 1 S.C.R. 711 · Decided: 14-02-1989 · Supreme Court of India · Bench: SABYASACHI MUKHERJI · Disposal: Dismissed

Cited by 2 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

.¥ 
COLLECTOR OF CENTRAL EXCISE, HYDERABAD. 
v. 
CHEMPHAR DRUGS & LINIMENTS, HYDERABAD. 
FEBRUARY 14, 1989 
[SABYASACHI MUKHARJI ANDS. RANGANATHAN, JJ] 
Central Excise and Salt Act, 1944/Central Excise Rules, 1944: 
Section llA/Rules Wand J73Q-Ma~ufacturer of patent and proprie-
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tary medicines-Levy and demand of excise duty-When arises-
Limitation period of five years for raising demand-Condition for 
w~~ 
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The respondent-firm mannfactnred patent and proprietary 
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(P & P) medicines falling nnder T.I. 14E and also pharmacopoeia! · 
preparations falling under T .I. 68 of the Central Excise Tariff of an 
aggregate value of Rs.20,59,338.60 and cleared the same during the 
period 1.4. 79 to 31.3.80 without payment of duty, availing the benefit of 
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·exemption of excise duty under Notification No. 80 of 1980. The respon-
dent also cleared, during the period from !st April, 1980 to 29th 
October, 1980 (P & P) medicines falling under T.I. 14E valued at 
--f Rs.4,32,050.09. 
The respondent filed a declaration for exemption, under Notifica-
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tion No. 71 of 1978 dated 1.3.1978, and furnished particulars of oilly 
the value of P & P medicine8 manufactured and cleared during the 
preceding financial year 1979-80 and did not furnish the particulars of 
the value of the goods under Tariff Item 68 during that financial year. 
".The manufacturer also did not file any declaration under Notification 
_,~~o. Ill of 1978 dated 9.5.1978, claiming exemption from the licensing 
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lcontrol. However, on July 30, 1980 the firm filed a classification list in 
·respect of P & P medicines claiming exemption under Notification No. 
80/80. 
The appellant issued a show cause notice to the respondent to 
explain as to why excise duty in respect of patent and proprietary 
medicines manufactured and cleared by it should not be demanded 
under proviso (a) to Rule 10(1) of the Central Excise Rules and why 
penalty should not be imposed under Rule I 73Q of the Central Excise 
Rule, 1944 for having cleared the goods without payment of duty in 
contravention of Rule J 73Q(a) and (d) of the Rules. On receipt of reply, 
the appellant held the respondent to be ineligible for the benefit of the 
711 
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712 
SUPREME COURT REPORTS 
[1989] 1 S.C.R 
two notifications and demanded duty in respect of the goods cleared by )r 
them for the period 1.4.1980 to 29.10.80. He also held that in view of 
the respondent's failure to reveal correct position, the firm was liabl.e to 
pay the duty, and that the time limit for the recovery of the duty under 
Rule 10 (Section UA) of the Central Excise Rules would run for five 
years. 
The respondent filed an appeal before the Tribunal contending 
that the demand for the period beyond six months from the receipt of 
the show cause notice was time-barred inasmuch as there was no 
suppression or mis-statement of facts by the appellant with a view to , 
evade payment of duty. The Revenue's plea was that there was suppres-
sion and/or misd~0l~ration and/or wrong information furnished in the 
declaration itself. Hence the appeal by the Revenue. 
Dismissing the appeal, 
HELD: 1.1 In order to make the demand for duty sustainable 
D beyond a period of six months and up to a period of 5 years, in view of 
the proviso to sub-s. llA of the Act, it has to be established that th• 
duty of excise had not been levied or paid or short-levied or short-paid, 
or erroneously refunded by reasons of either fraud or collusion or wilful 
mis-statement or suppression of facts or contravention of any provision i-
of the Act or Rules made thereunder, with intent to evade pa~·ment 
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of duty. Something positive other than mere inaction or failure on the 
part of the manufacturer or producer or conscious or deliberate with-
holding of information when the manufacturer knew otherwise, is 
required before it is saddled with any liability, beyond the period of six 
months. [717A-C] 
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1.2 Whether in a particular set of facts and circumstances theret~
was any fraud or collusion or wilful mis-statement or suppression or 
contravention of any provision of any Act, is a question of fact depend-
ing upon the facts and circumstances ofa particular case. [717C-D] 
In the instant case the assessee declared the goods on the basis of 
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their belief of the interpretation of the provisions of the law that the 
exempted goods were not required to be included and these did not 
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include the value of the exempted goods which the as

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