SARABHAI M. CHEMICALS versus COMMISSIONER OF CENTRAL EXCISE, VADODARA

Citation: [2004] SUPP. 6 S.C.R. 1010 · Decided: 16-12-2004 · Supreme Court of India · Bench: S.N. VARIAVA · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
B 
SARABHAI M. CHEMICALS 
V. 
COMMISSIONER OF CENTRAL EXCISE, V ADO DARA 
DECEMBER 16, 2004 
(S.N. VARIA VA, DR. AR. LAKSHMANAN 
AND S.H. KAPADIA, JJ.] 
Central Excise Act, 1944-Section 11A(J)-Central Excise Rules, 
1944-Rule 9(2)-Excise Duty-Exemption from-Of bulk drug-By Noti-
C fication-Product certified ds bulk drug by Drugs Controller-Exemption 
granted-Classification List and monthly returns filed by manufacturer 
approved by the Revenue-Demand of Duty by Revenue at belated stage 
denying exemption on the ground that certain amount of the goods were 
sold to the non-pharma concerns-Appeal to Tribunal-Difference of 
D opinion on the point to /imitation between Judicial Member and Technical 
Member-Matter referred to Third Member-Matter dismissed on the point 
of limitation as well as merit-On appeal, held : Third Member rightly 
decided the question of limitation as well as merit-Demand rightly raised 
by Revenue as manufacturer last the benefit of exemption Notification 
because certain quantity of the goods was admittedly diverted to non-
E pharma concern-However the demand was time barred-No case was 
made out for invoking proviso to Section 11A(J) for extended period of 
limitation-Drugs (Price Control) Order, 1979-Section 2(a). 
Appellant was manufacturer of bulk drugs. It used to manufacture 
F Ascorbic Acid and Salts ofl.P. (Vitamin 'C') as well as sorbitol Solution 
U.S.P. By a Notification, the bulk drugs ·as- d.eflned in the Notification 
were exempted from levy of excise duty. Appellant claimed exemption 
in respect of its products. It obtained certificates from Drugs Controller 
in respect of the claim. In the Classification List exemption was sought 
on the basis of the certificates. The Classification Lists were approved 
G 
by the Department. Appellant cleared the goods upon submission of the 
gate passes wherein they had disclosed the names of the consignees. 
Appellant also submitted its monthly returns on excisable goods manu-
factured by it in the prescribed RT.12 Forms, giving the particulal's of 
the goods removed, gate passes under which the goods were removed 
H etc. 
1010 
. .., 
' ...... 
SARABHAI M. CHEMICALS v. C.C.E., VADODARA 
1011 
Three show-cause notices were issued to the appellants after a A 
period of one year on the ground that appellant had wrongly availed 
nil rate of duty in respect of its clearances by not bringing to the notice 
of the department the fact that certain qualities of sorbitol solution and 
Vitamin 'C' had been sold to non-pharma concerns. Knowing fully well 
that the commodities would not be normally used as drugs or medicines B 
by its customers and demanded excise duty u/s. llA(l) of Central Excise 
Act, 1944. The demand was confirmed by the Department. 
In appeal before Custom, Excise, Gold (Control) Appellate Tribu-
nal, Judicial Member was of the view that as the show cause notices were 
time barred and no case was rriade out for invoking extended period of C 
limitation and hence set aside the show cause notices. Technical Member 
disagreed with the Judicial Member. In view of difference of opinion, 
the matter was referred to the Third Member to decide whether the 
demand was time barred. He agreed with the Technical Member and 
accordingly dismissed the appeals. 
In appeal to this Court appellant contended that the Third Member 
after concurring with the Technical Member on the question of limita-
tion should have referred the matter back to Division Bench to decide 
on merits, and dismissal of appeal without going into the merits was 
erroneous; that since the Drugs Controller had issued the certificate in 
favour of the appellant certifying the product as a bulk drug, its product 
met the requirement laid down in the exemption Notification and no 
further requirement remained to be complied with; that the word !Nor-
mally' used in the Notification means "under normal circumstances" 
D 
E 
and the same would rule out individual end use of the product; that the p 
Notification did not require production of end use certificate by the 
assessee and in absence of such provision Department was not entitled 
to insist on production of end use certificate; that it was not open to the 
Department to raise the dispute at belated stage by invoking Rule 9(2) 
of Central Excise Rules; that the appellant had filed Classification List G 
and monthly Returns in RT-12 Forms from time to time which were 
duly approved and the goods were cleared after approval of 

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