1985 (11) TMI 121 - AT - Central Excise

Tribunal confirms duty-free clearance for clinical samples under Notification No. 48/77-C.E.

COLLECTOR OF CENTRAL EXCISE, BOMBAY Versus E. MERCK INDIA (P) LTD.

COLLECTOR OF CENTRAL EXCISE, BOMBAY Versus E. MERCK INDIA (P) LTD. - 1986 (23) E.L.T. 161 (Tribunal) Issues Involved:1. Eligibility for duty-free clearance of clinical samples under Notification No. 48/77-C.E.2. Compliance with the conditions of Notification No. 48/77-C.E.3. Validity and impact of the Gujarat High Court judgment in M/s. Suhrid Geigy Ltd. v. Union of India.4. Scope of review proceedings under Section 36(2) of the Central Excises & Salt Act, 1944.Detailed Analysis:1. Eligibility for Duty-Free Clearance of Clinical Samples Under Notification No. 48/77-C.E.:The primary issue was whether M/s. E. Merck India (P) Ltd. was entitled to the benefit of duty-free clearance of clinical samples under Notification No. 48/77-C.E., dated 1st April 1977. The Assistant Collector of Central Excise denied this benefit, asserting that the company did not meet the conditions specified in the notification, particularly due to foreign interest in the company. However, the Appellate Collector of Central Excise overturned this decision, referencing the Gujarat High Court's judgment in M/s. Suhrid Geigy Ltd. v. Union of India, which deemed such discriminatory provisions as lacking rational nexus to the objective of the notification and thus invalid under Article 14.2. Compliance with the Conditions of Notification No. 48/77-C.E.:The Assistant Collector's decision was based on the belief that M/s. E. Merck India (P) Ltd. did not comply with sub-clauses (1) & (2) of Clause B of the explanation below the second proviso to the Notification. However, the respondent argued that the review show cause notice did not mention any non-compliance with other conditions of the notification, implying that the Department had no other objections. The Tribunal agreed, stating that it was not fair to demand evidence of compliance at the review stage for conditions not previously contested.3. Validity and Impact of the Gujarat High Court Judgment:The Gujarat High Court in M/s. Suhrid Geigy Ltd. v. Union of India had ruled that the discriminatory provisions in the notification were ultra vires Rule 8 of the Central Excise Rules, 1944, and Article 14. The Tribunal upheld this judgment, emphasizing that the mere pendency of a Special Leave Petition (SLP) against the Gujarat High Court's decision could not deprive the respondent of its benefits. The Tribunal cited the Supreme Court's stance in Shri Baradakanta Mishra v. Shri Bhimsen Dixit, which held that failing to follow a High Court decision, even if under appeal, constituted contempt of court.4. Scope of Review Proceedings Under Section 36(2) of the Central Excises & Salt Act, 1944:The Tribunal scrutinized the review proceedings initiated by the Government of India under Section 36(2) of the Central Excises & Salt Act, 1944. It was noted that the review show cause notice only raised the issue of the pending SLP and did not allege any non-compliance with the notification's conditions. The Tribunal concluded that the Department could not expand the scope of the review beyond what was originally specified in the show cause notice. Consequently, the Tribunal quashed the review proceedings and upheld the Appellate Collector's decision, thereby rejecting the appeal.Conclusion:The Tribunal's judgment reaffirmed the respondent's eligibility for duty-free clearance of clinical samples under Notification No. 48/77-C.E., dated 1st April 1977, in line with the Gujarat High Court's ruling. It emphasized the importance of adhering to judicial precedents and the limitations on expanding the scope of review proceedings. The appeal was ultimately dismissed.