M/S. MENTHA AND ALLIED PRODUCTS LTD. versus COMMISSIONER OF CENTRAL EXCISE, MEERUT

Citation: [2004] SUPP. 2 S.C.R. 157 · Decided: 05-05-2004 · Supreme Court of India · Bench: S. RAJENDRA BABU · Disposal: Case Partly allowed
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Judgment (excerpt)

MIS. MENTHA AND ALLIED PRODUCTS LTD. 
A 
v. 
COMMISSIONER OF CENTRAL EXCISE, MEERUT 
MAY 5, 2004 
[RAJENDRA BABU, CJ. AND G.P. MATHUR, J.] 
B 
Central Excise Act, 1944: 
S.11-A- 'Bulk Drugs '-Menthol IP-Manufactured for use in 
manufacture of tooth paste, powder and shaving cream-Classified by C 
assessee under the head 'Bulk drugs '-Held, Menthol cleared by assessee 
is not used as such or as an ingredient in any formulation as provided 
under Drugs and Cosmetics Act, 1940-Assessee not entitled for benefit 
of Exemption Notification No. 31188-CE dated 1.3.1988-However, 
application of extended period of limitation for levy of penalty invoking D 
s.11-A is not justified-Drugs and Cosmetics Act, 1940-Drugs (Prices 
Control) Order, 1987-Central Excise Tariff Act, 1985. 
Words and Phrases : 
Expression 'Bulk Drugs' as occurring in Notification No. 31188-CE E 
dated 1.3.1988-Meaning of 
'Formulation' as occurring in Drugs (Price Control) Order, 1987-
Connotation of 
Assessee-Company was engaged in manufacture·, inter a/ia, of F 
Menthol IP as per the .licence granted to it under the Drugs and 
'/}(. 
Cosmetics Act, 1940. It cleared th~ product availing benefit of exemption 
Notification No.11188-CE dated 1.3.1988 classifying the same under 
the head 'Bulk d~11gs'. Later the Collector, Central Excise issued a 
show cause notice to the assessee that it had wrongly.availed the benefit G 
under the said Notification. Ultimately the. assessee was asked to pay 
differential demand of excise duty as also a penalty. The appeal of the 
assessee was dismissed by the Customs, Excise and Gold (Control) 
Appellate Tribunal holding that Menthol cleared by the assessee was 
not used as such or as an ingredient in any formulation as provided H 
157 
158 
SUPREME COURT REPORTS [2004] SUPP. 2 S.C.R. 
A under the Drugs and Cosmetics Act, 1940 and, therefore, the assessee 
was not entitled to the benefit of Notification No. 31/88. 
B 
In the appeal filed by the assessee it was contended that the 
question of ascertaining end use of the product was irrelevant. 
Allowing the appeal in part, the Court 
HELD : I. In view of the Explanation after the Table in Notification 
No. 31/88-CE dated 1.3.1988, the expression 'bulk drugs' shall have the 
same meaning assigned to it in the Drugs (Prices Control) Order, 
C 1987. The substance has to be used as such, or as an ingredient in 
any formulation in terms of the Drugs (Prices Control) Order, 
1987. Further, the expression "formulation" is only with reference 
to a medicine processed out of bulk drug. Therefore, when 
the ingredient used by the appellant, namely, Menthol IP, in the 
D manufacture of tooth paste, powder and shaving cream is not in the 
use of any formulation which is a medicine processed out of or 
containing one or more bulk drugs, the view taken by the Tribunal 
cannot be assailed. (162-A; DJ 
E 
Union of India v. Citric India Ltd., (2002) 146 ELT SC; Calibre 
Chemicals v. Commissioner o/Central Excise, Surat, (1998) 98 ELT 755, 
distinguished. 
2. So far as application ofs. ll·A for the purpose of levy of penalty 
is concerned, in the circumstances, invoking of s.11-A is not called for. 
F Levy of penalty in the instant case would not be appropriate and the 
application of extended period of limitation is not justified. (162-E-F] 
G 
Citric India Ltd. v. Union of India, (1993) 66 ELT 566 Born, 
referred to. 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 9.22 of . 
1998. 
From the Judgment and Order dated 4.11.97 of the Central Excise, 
Customs and Gold (Control) Appellate Tribunal, New Delhi in F.O. No. 
H 560197-C in A. No. E/4748 of 1992-C. 
·• 
MENTIIA & ALLIED PRODUCTS LTD. v. C.C.E. (RAJENDRA BABU, CJ.] 
159 
Joseph Vellapally, Thomas Vellapally and K.V. Mohan for the A 
Appellant. 
Sanjiv Sen and B. Krishna Prasad for the Respondent. 
The Judgment of the Court was delivered by 
B 
RAJENDRA BABU, CJ. : The appellant before us is a company 
engaged in the manufacture of Menthol IP, Menthol BP, Menthol U.S.P. 
and Mentha Oil IP. The appellant was carrying on its activities under a 
licence granted by the drug control authorities constituted under the Drugs 
and Cosmetic Act, 1940. The licence enabled the appellant to manufacture C 
Menthol IP, Menthol BP, Menthol U.S.P. and Mentha Oil IP. 
On 1.3.1988 a notification No. 31188-CE was issued by the 
Department which reads as under :-
"In exercise of the powers conferred by sub-rule (I) of rule 8 of D 
the Central Excise Rules,
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