2012 (6) TMI 785 - HC - Central Excise

Court quashes show cause notice for lack of new material, abuse of process. Extended limitation period unjustified.

LUPIN LIMITED Versus UNION OF INDIA

LUPIN LIMITED Versus UNION OF INDIA - 2013 (293) E.L.T. 354 (Guj.) Issues involved:1. Legality and validity of the show cause notice dated 1-8-2001.2. Excisability and marketability of the intermediate chemical D2 Aminobutanol Tartrate.3. Invocation of extended period of limitation.4. Jurisdiction and maintainability of the petition.Detailed Analysis:1. Legality and Validity of the Show Cause Notice:The petitioners challenged the legality and validity of the show cause notice dated 1-8-2001 issued by the Commissioner of Central Excise, Surat, demanding excise duty and interest on D2 Aminobutanol Tartrate, an intermediate chemical used in the manufacture of Ethambutol HCL. The petitioners argued that this notice was issued without any new or additional material, following a previous round of litigation where the issue was decided in their favor by the Tribunal, which held that the intermediate chemical was not marketable and thus not exigible to excise duty.2. Excisability and Marketability of the Intermediate Chemical:The core issue revolved around the excisability of the intermediate chemical. The Excise Department initially issued a show cause notice in 1999, claiming that the intermediate chemical was exigible to excise duty. The Commissioner and the Tribunal, however, found that the chemical was unstable, not marketable, and thus not subject to excise duty. The Tribunal's decision was not appealed further by the Department. The Department later issued a fresh show cause notice in 2001, claiming new facts such as the stability of the product and its recognition in the market. However, the court found that the new facts were either not new or not relevant to the marketability of the intermediate chemical. The court reiterated that for a product to be exigible to excise duty, it must be marketable, and mere stability was insufficient to prove marketability.3. Invocation of Extended Period of Limitation:The petitioners argued that invoking the extended period of limitation was not permissible as there was no fraud, collusion, or willful suppression of facts on their part. The court agreed, noting that the Department had full knowledge of the petitioners' manufacturing process for years and that the issue of marketability was a debatable point. The court found that the Department's premise for the second show cause notice was based on further investigations following the Tribunal's decision, which did not justify invoking the extended period of limitation.4. Jurisdiction and Maintainability of the Petition:The court addressed the maintainability of the petition, noting that while the High Court typically does not interfere at the show cause notice stage, it can do so in cases of inherent lack of jurisdiction or failure of natural justice. The court found that the second show cause notice was issued on the same set of facts as the first, without any new material to establish marketability, making the notice without jurisdiction. The court held that permitting the Department to proceed with the show cause notice would be futile, prejudicial to the petitioners, and an abuse of the process of law.Conclusion:The court allowed the petition, quashing and setting aside the impugned show cause notice dated 1-8-2001. The court found that the notice was based on no new material, with no change in law or facts, and that the Department's actions amounted to an abuse of the process of law. The court also held that invoking the extended period of limitation was unjustified.