Excise duty exemption does not remove goods from excisable status, so licensing remains mandatory for manufacture and clearance.

Exemption from excise duty does not change the character of goods as excisable goods if they remain specified in the First Schedule. The exemption only relieves payment of duty subject to its conditions; it does not dispense with the licensing requirement under Section 6 and Rule 174 of the Central Excise Rules, 1944. Manufacturing and clearing such goods without the requisite licence therefore remains contrary to the excise law. On the stated facts, the plea based on duty exemption did not answer the charge of unlicensed manufacture and clearance.

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Issues: Whether goods exempted from payment of excise duty cease to be excisable goods so as to dispense with the requirement of a licence under Rule 174 of the Central Excise Rules, 1944, and whether the conviction for manufacture and clearance of excisable goods without licence was sustainable.

Analysis: The definition of "excisable goods" in Section 2(d) of the Central Excise and Salt Act, 1944 turns on whether the goods are specified in the First Schedule, not on whether duty is actually levied. Exemption notifications only relieve the manufacturer from payment of duty subject to the conditions of the notification; they do not remove the goods from the category of excisable goods. The statutory licensing requirement under Section 6 and Rule 174 continues to apply so long as the goods remain covered by the First Schedule. On the facts, the petitioners admitted manufacture of excisable goods without obtaining a licence, and the plea based on exemption from duty did not answer the charge.

Conclusion: The exemption from excise duty did not dispense with the obligation to obtain a licence, and the conviction was upheld.

Final Conclusion: The revision failed on the main challenge to conviction, while the sentence of fine was reduced.

Ratio Decidendi: Exemption from duty does not change the character of goods as excisable goods, and manufacture of such goods without the requisite licence remains punishable under the excise law.

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