S. Rajendra Babu, C.J. - (1.) 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 Menthol IP, Menthol BP, Menthol U.S.P. and Mentha Oil IP.
(2.) On 1.3.1988 a notification No. 31/88-CE was issued by the Department which reads as under :- "In exercise of the powers conferred by sub- rule (1) of rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts goods of the description specified in column (2) of the Table thereto annexed and falling under Chapter 28, 29 or 30 as the case may be, of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1985), from so much of the duty of excise leviable thereon under the said Schedule as is in excess of the amount calculated at the rate specified in the corresponding entry in column (3) of the said Table. THE TABLE ----------------------------------------------------------------- S N Description of the Goods Rate of Duty ----------------------------------------------------------------- 1 Bulk drugs (including salts, easters and derivatives, if any) specified under the First Schedule to the Drugs (Price Control) Order, 1987, as amended from time to time NIL ----------------------------------------------------------------- 2 Other bulk drugs 5% ad valorem ----------------------------------------------------------------- 3 Medicinal grade oxygen NIL ----------------------------------------------------------------- 4 Medicinal grade Hydroxgen Peroxide NIL ----------------------------------------------------------------- 5 Anaesthetics NIL ----------------------------------------------------------------- Explanation - In this notification, the expression "bulk drugs" shall have the same meaning assigned to it in the Drugs (Prices Control) Order, 1987. The Notification provides that the expression "Bulk drugs" shall have the same meaning assigned to it in the Drugs (Prices Control) Order, 1987. The Drugs (Prices Control) Order, 1987 defines bulk drug as under :- "Bulk Drug" means any substance including pharmaceutical, chemical, biological or plant product or medicinal gas conforming to pharmacopoeial or other standards accepted under the Drugs and Cosmetics Act, 1940 (23 of 1940), which is used as such, or as an ingredient in any formulation." The appellant claimed that he had been manufacturing and supplying Menthol as falling under the expression "bulk drugs" as set out in the Notification referred to above and filed classification list. Returns also were filed in appropriate forms and goods were also cleared. The appellant was availing of the exemption till 27.6.1990. On 27.6.1990 the Assistant Collector, Central Excise, Rampur proposed that the appellant should pay the excise duty without availing of the benefit of the exemption referred to earlier and issued a show cause notice proposing imposition of penalty. Objections were raised by the appellant that the Assistant Collector was not competent to issue a show cause notice claiming excise duty for the past period exceeding six months. Thereafter, the Collector, Central Excise, Meerut, issued a show cause notice alleging that the appellant had wrongly availed of the benefit of the Notification No. 31/88 dated 1.3.1988 during the period from April 1988 to December 1988 and January 1990 to 5 April 1990. After hearing the appellant and examining the replies filed by the appellant to the show cause notice, the Collector ultimately decided that the appellant was liable to pay differential demand of excise duty and also imposed penalty of Rs. 2 lakhs.
(3.) The matter was carried in appeal to the Custom, Excise & Gold (Control) Appellate Tribunal (hereinafter referred to as the Tribunal) which dismissed the appeal on the basis that Menthol cleared by the appellant is not used as such, or as an ingredient in any formulation as provided under the Drugs and Cosmetics Act, 1940 and, therefore, the appellant was not entitled for the benefit of Notification No. 31/88-CE dated 1.3.1988;