Excise exemption for indigenous manufacture cannot be denied for negligible foreign-linked shareholding and ended collaboration

An excise exemption notification intended to promote indigenous pharmaceutical manufacture was read as unavailable only where foreign interest in the manufacturer was real and material. Minor shareholding through the custodian of enemy property and by a deceased foreign national, together with an earlier foreign collaboration that had ended, was treated as too insignificant to defeat the benefit. Denial of exemption on such technical grounds was therefore inconsistent with the notification's object, and the company's entitlement to the exemption and related refund verification was affirmed.

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Issues: Whether the petitioner company was entitled to the benefit of the excise exemption notification notwithstanding the presence of a foreign collaborator in the past and the existence of a negligible portion of shares held through the custodian of enemy property and by a deceased foreign national.

Analysis: The exemption was designed to encourage indigenous pharmaceutical manufacture and to deny the benefit only where foreign interest in the manufacturer was real and material. The petitioner was an Indian company, and the foreign-linked shareholding relied upon by the department was insignificant. The company's earlier Malaysian collaboration had ended, and the minute shares standing in the custodian's name and in the name of a deceased British national were held not to defeat the object of the notification. The denial of exemption on such technical grounds was held to be inconsistent with the purpose of the notification.

Conclusion: The petitioner company was entitled to the exemption and the order denying that benefit was unsustainable.

Final Conclusion: The petition was allowed, the company's entitlement to exemption was affirmed, and the refund claim was directed to be verified and paid in accordance with the court's directions.

Ratio Decidendi: An exemption meant to promote indigenous industry cannot be denied on the basis of remote or negligible foreign-linked shareholding when such denial would frustrate the object of the notification.

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