TMI Blog2012 (6) TMI 785X X X X Extracts X X X X X X X X Extracts X X X X ..... required to be ascertained was whether such product is marketable. In other words, the product was known in the market and that it was possible to be bought and sold in the market. Mere hypothetical possibility of some availability in the market by itself would not be sufficient. The Department’s stand, therefore, that merely because chemically the product is found to be stable, in our view, cannot be stated to be new or sufficient material to enable the Department to hold the view that such product is marketable. Petition allowed - decided in favor of petitioner. - Special Civil Application No. 7670 of 2001 - - - Dated:- 27-6-2012 - Akil Kureshi and Harsha Devani, JJ. Shri Kamal Trivedi, Sr. Advocate with Rakesh Gupta and Uday Joshi for M/s. Trivedi Gupta, Advocates, for the Petitioner. Shri R.J. Oza, Counsel, for the Respondent. JUDGMENT The petitioners have challenged the legality and validity of the show cause notice dated 1-8-2001 issued by the Commissioner of Central Excise, Surat, respondent No. 2 herein. In the said notice, the petitioners have been called upon to show cause why excise duty of ₹ 28,01,63,832/- with interest should not be re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the Commissioner and contended that the intermediate chemical is not a stable product. It is also not marketable. In absence of any evidence on record to suggest that such intermediate chemical is a marketable product, the same would not be exigible to any duty of excise. 5. The Commissioner of Central Excise, in his order-in-original, held that intermediate chemical used captively in the production of the drug being unstable and not marketable, i.e., not capable of being sold in the market, nor known in the chemical world, would not fall within the definition of goods under Section 2(d) of the Central Excise Act. He, therefore, dropped the show cause notice proceedings by his order dated 17-9-1991. 6. The Department, aggrieved by such order of the Commissioner of Central Excise, appealed before the Customs, Excise Gold (Control) Appellate Tribunal ( CEGAT for short), in its order dated 15-6-1999, dismissed the Revenue s appeal. The Tribunal noted that the Department had relied on the test results of the chemical examiner who had opined that the intermediate chemical can be considered as a well-defined single organic compound. The chemical analyzer was cross-examine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the product in question was exigible to excise duty. The Tribunal stubtly shifted the burden of establishing that the product was not marketable in the negative when it observed that the Collector had not examined any chemical analyzer to arrive at a conclusion that the product was unstable and non-marketable. 10. Such decision of the Tribunal was carried in appeal by the Cadila Laboratories. The Apex Court in the decision in case of Cadila Laboratories Pvt. Ltd. v. Commissioner of Central Excise, Vadodara, reported in 2003 (152) E.L.T. 262 (S.C.), reversed the decision of the Tribunal. The Apex Court noted with approval the observations in case of Collector of Central Excise, Baroda v. United Phosphorus Ltd., reported in 2000 (4) SCC 18 = 2000 (117) E.L.T. 529 (S.C.), to the effect that merely because some of the items were entitled to duty drawback under a notification did not mean that the test of marketability was satisfied. The Court noted that in the case on hand, no attempt was made to find out whether the products are bought and sold in the market and more importantly, it has not been verified by getting the products chemically analyzed, whether their claim is false. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a second show cause notice. Such new facts are as follows : [1] The product D-2 Amino Butanol Tatrate is a stable product as it can be kept in packed condition (in bags) till entire quantity is captively used as input. [2] The same is distinctly known in the market and well defined compound, on which patents has been given by the Patent Office of U.S.A. [3] The Central Excise duty is leviable on production/manufacture as per Section 3 of the Central Excise Act, 1944. [4] The decision given earlier in the matter, for the period from 1-3-1986 to 22-6-1987, when M/s. Lupin Labs Ltd., has not taken Central Excise License/ Registration. At present, they are having Central Excise Registration No. 07/Ank/11/29/92 issued on 30-6-1992. [5] The exemption notification for captive consumption of manufactured goods for manufacture of other final product has not been exist after 23-7-1996. The applicable earlier Notification No. 7/94-C.E., dated 1-3-1994 which was effective upto 22-7-1996 has not been rescinded by Notification No. 19/96-C.E., dated 23-7-1996. Therefore, exemption for payment of duty is not available from 23-7-1996 in the present case. 13. In response to suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chemical is a marketable product which is the test to be applied for ascertaining whether such product is exigible to excise duty. 17. Counsel submitted that without any evidence on record with respect to marketability of the product, the Department has raised a second show cause notice on the very same set of facts and circumstances on which the earlier demand was quashed by the Tribunal. 18. Counsel submitted that in any case, invoking of extended period of limitation is not permissible. There was no fraud, collusion or any wilful or suppression of facts on part of the petitioners to enable the Department to invoke such extended period of limitation. 19. In support of his contentions, in addition to relying on the decisions of the Apex Court in case of Cadila Laboratories (supra), counsel placed reliance on the following decisions : (a) In case of Lupin Laboratories Ltd. v. Commissioner of Central Excise Customs, Baroda, reported in 1999 (110) E.L.T. 983 (Tribunal), wherein the Tribunal in case of these very petitioners had held that the product was not marketable and therefore, not exigible to excise duty. The Tribunal held that in any case, extended period of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticle is not subject to excise duty. (e) For the same purpose, reliance was also placed on the decision of the Apex Court in case of Collector of Central Excise, Baroda v. United Phosphorus Ltd., reported in 2000 (117) E.L.T. 529 (S.C.), wherein the mere fact that the goods were mentioned in the dictionary and in the excise tariff as one of the items entitled to drawback, was not held sufficient to conclude that the same were marketable. (f) Reliance was also placed on the decision of the Apex Court in case of Bata India Ltd. v. Commissioner of Central Excise, New Delhi, reported in 2010 (252) E.L.T. 492 (S.C.), wherein in the context of marketability of a product to ascertain whether excise duty can be levied thereon, the Apex Court observed that, The question is not whether there is an hypothetical possibility of a purchase and sale of the commodity but whether there is sufficient proof that the product is commercially known. . (g) Reliance was also placed on the decision of the Supreme Court in case of Union of India v. Vicco Laboratories, reported in 2007 (218) E.L.T. 647 (S.C.), wherein the Apex Court though agreeing that normally, the writ court should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, as is the stand in the present case, the matter has to be re-examined, and it would not be proper for the High Court to interfere in such matters at the stage of issuance of show cause notice. (b) In case of Union of India v. Guwahati Carbon Ltd., reported in 2012 (278) E.L.T. 26 (S.C.), wherein the Apex Court observed that the Excise Law is a complete code in order to seek redress in excise matters and hence it would not be appropriate for the writ court to entertain a petition under Article 226 of the Constitution. It was a case where the assessee had approached the High Court in a writ petition challenging the judgment of the Tribunal involving the question of rate of duty and in which case, the appeal would be available only before the Supreme Court. Thus, the contention of the counsel was that in the present case, since the question of excisability of the product itself was concerned, ultimately if the Tribunal had decided the issue, the appeal would be available only to the Apex Court. This would be additional ground why this Court should not entertain this petition. For this purpose, reliance was also placed on a recent judgment dated 20-6-2012 in Spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat this very product was exigible to excise duty, the Apex Court reversed that decision on the ground that there was no evidence on marketability of the product. Mere stability would not establish its marketability. 24. It is, of course, true that such decisions did not conclude the issue on merits for all times to come. The central theme of the decision of the Tribunal in the case of the present petitioners and that in case of Cadila Laboratories was that in absence of any evidence to hold that the product was marketable, the same would not be exigible to excise duty. In that view of the matter, if there was further material at the command of the Department to prima facie suggest its marketability, surely it was open to the Department to issue fresh show cause notice and also to insist that the petitioners reply to such notice and participate in further proceedings. However, surely if there was no material in the nature of fresh evidence which would touch on this pivotal aspect of the matter, on the same set of facts with some cosmetic changes, it would not be open to the Department to initiate fresh proceedings. This much is clear from series of decisions of various courts an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hem (P) Ltd. and Another, reported in (2002) 7 SCC 433 = 2002 (245) E.L.T. 274 (S.C.), the Supreme Court observed as under : 8. We do not consider it necessary to discuss the cases on the question of marketability, as this Court has dealt with all relevant cases in A.P. SEB case. In that case, the question was whether electric poles manufactured with cement and steel for the appellant Board were marketable. After considering various cases on the question of marketability of goods, Jeevan Reddy, J., speaking for the Court, summed up the position thus : 10. It would be evident from the facts and ratio of the above decisions that the goods in each case were found to be not marketable. Whether it is refined oil (non-deodorised) concerned in Union of India v. Delhi Cloth and General Mills Co. Ltd. or kiln gas in South Bihar Sugar Mills Ltd. v. Union of India or aluminium cans with rough uneven surface in Union Carbide India Ltd. v. Union of India or PVT films in Bhor Industries Ltd. v. CCE or hydrolysate in CCE v. Ambalal Sarabhai Enterprises (P) Ltd., the finding in each case on the basis of the material before the court was that the articles in question were not marketable and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Supreme Court observed as under : 29. Except raising the vague and general objections that the arbitrator was biased and had predisposition to decide against the contractor, no materials, much less cogent materials, have been placed by the contractors to show bias of the arbitrator. No sufficient reason appears on record as to why the arbitrator should not have proceeded with the arbitral proceedings. The test of reasonable apprehension of bias in the mind of a reasonable man is not satisfied in the factual situation. 31. The law on the point, therefore, is sufficiently clear i.e. for the Department to levy excise duty on the product in question, it would have to establish that the product itself is marketable. It is equally settled that while doing so, the chemical being stable would not be conclusive, but only one of the aspects. In case of Cadila Laboratories Pvt. Ltd. (supra), the Supreme Court while accepting that this new product may be stable, refused to uphold the Department s stand that it is marketable without any other evidence on record. 32. In the present case, having first issued show cause notice in the year 1986 and having lost up to the level of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent, is of no consequence. Even if the two are identical, it may at best establish that the process is similar and the final product may also be identical. Insofar as our inquiry is concerned, these aspects have no bearing since the question involved is whether the intermediate chemical is marketable or not. 35. In the affidavit in reply filed by the respondents, as noted earlier, five points are highlighted, which according to the respondents are new facts. We may deal with each point separately. (i) That the product, namely, intermediate chemical is a stable product and can be kept in a packed condition till entire quantity is captively used, in isolation, would not be sufficient to hold that such product is marketable. (ii) That such product is distinctly known in the market on which the patent has been given by the Patent Office in U.S.A., is by itself a fallacious contention. We have noted that the patent has been obtained for the process and not the product. In any case, the patent pertains to final drug and not intermediate chemical. (iii) The contention that excise duty is leviable on the production/manufacture under Section 3 of the Central Excise Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egal foundation. 38. In the present case, as we have held earlier, first show cause notice resulted in dropping of the proceedings. The Tribunal held that there was no material to establish that the product was marketable. On the same set of facts, a fresh show cause notice has been issued. Such notice is based on no new material which would even prima facie suggest that the product can be treated to be marketable. Permitting the Department to proceed with such show cause notice proceedings would be wholly futile, would cause prejudice to the petitioners and would amount to abuse of the process of law. In that sense of the matter, issuance of second show cause notice on same set of facts on which the first show cause notice had been terminated, would also be without jurisdiction. 39. The decision of the Apex Court in the case of Union of India v. Guwahati Carbon Ltd. (supra) was rendered in the background where the assessee had challenged the decision of the Tribunal by filing a writ petition before the High Court. Against such decision of the Tribunal under Section 35L of the Central Excise Act, appeal would lie before the Supreme Court to the exclusion of the High Court. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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