TaxTMI 
TaxTMI 
TaxTMI 
2012 (6) TMI 785
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.... Companies Act and is engaged in the business of manufacture of pharmaceutical drugs. One such Anti T.B. Drug manufactured by the petitioner No. 1 Company is Ethambutol Hydrochloride (hereinafter to be referred to as "the drug") falling under Chapter S.H. 2942.00 of the Central Excise Tariff Act, 1985. One of the inputs used by the petitioners in manufacture of such drug is D2 Aminobutanol Tartrate (hereinafter to be referred to as "the intermediate chemical"). Such intermediate chemical the petitioners manufactured in their own factories and used it for home consumption for production of the drug. The entire issue revolves around excisability of the intermediate chemical. 3. The Excise Department holding a belief that such intermediate chemical was exigible to excise duty, issued notice dated 14-12-1999 against the petitioners calling upon them to show cause why duty of excise at an appropriate rate should not be recovered from them on such intermediate chemical which according to the Department, was illicitly manufactured and removed for captive consumption during the period from 1-3-1986 to 26-2-1987. In such notice, the Department had set out the process undertaken by the....
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....hat the product in question is being ordinarily bought and sold in the market. The Tribunal also noted that in another decision dated 7-1-1999, in the case of very same manufacturer, involving the same product, the Tribunal had found that the Revenue had produced no evidence to establish that the product was a finished product capable of being marketed. On such grounds, the Tribunal rejected the Revenue's appeal. 7. Insofar as the proceedings arising out of show cause notice dated 14-12-1989 are concerned, the matter rested there. Such decision of the CEGAT was not carried further in appeal by the Department. It is admitted position that the Department accepted such decision of the CEGAT, of course, subject to liberty for making further inquiries. 8. Long after the CEGAT passed the above order, a fresh impugned show cause notice dated 1-8-2001 came to be issued seeking to recover unpaid duty with interest and also to impose penalty. It is this show cause notice that the petitioners have challenged in this petition on various grounds. 9. To complete recording of the facts and events, we may note that in case of same product being manufactured by another pharmaceuti....
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....ion could not have been invoked. 11. The petitioners have challenged the show cause notice proceedings on the ground that in the previous round of litigation when the issue has achieved finality, without any new material on record, fresh show cause notice could not have been issued. It is also the case of the petitioners that after the decision of the Apex Court in the case of Cadila Laboratories Pvt. Ltd. (supra), issue must rest in favour of manufacturers. It is also the case of the petitioners that without any additional or new material at the command of the Department, second show cause notice which would not only cause prejudice to the petitioners, but would also amount to abuse of the powers. 12. The respondents have appeared and filed two affidavits. In the first affidavit dated 29-9-2003 filed by Shri Ravindra K. Das, Assistant Commissioner of Central Excise, Ankleshwar, it is stated that the final order dated 15-6-1999 passed by the Tribunal was accepted by the Commissioner and he asked to draw samples of the products and have it tested for its shelf-life, identity, purity, etc., and also asked to obtain market opinion in the matter. It is stated that Shri V.K.....
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....atent pertains to the final drug. The petitioners have also produced a copy of the abstract of the disclosure made by the manufacturer for obtaining such a patent from the U.S. Office. 14. In reply to such rejoinder statement filed by the petitioners, the respondents have filed a further detailed affidavit in-sur-rejoinder dated 13-11-2009 filed by Dr. Mohan Kumar Meena, Deputy Commissioner, Central Excise & Customs, Ankleshwar. In addition to repeating many points already raised in the first affidavit of the Department, with respect to the pointed averments of the petitioners that the patent referred to and relied upon by the Department is a process patent and not a product patent and in any case, it pertains to final product and not intermediate chemical, no serious challenge has been made in the sur-rejoinder. The respondents, of course, have further elaborated the exercise undertaken by the chemical analyzers to explain the process undertaken by the petitioners for manufacture of the intermediate chemical as well as the final drug, to suggest that the intermediate chemical is a stable product. 15. On the basis of such materials on record, learned counsel Shri Kamal ....
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....990, when the case of Hindustan Zinc Ltd. (supra) came to be decided, the question of excisability of silver chloride has been cropping up and yet till this day, no steps have been taken by the department to go to the market and collect proper evidence of marketability. In most of the matters, we find lethargy and reluctance on the part of the department to collect evidence on marketability and even in cases where market inquiry is made it is made in a perfunctory manner. Consequently, despite the department having good case on classification, we are constrained to allow the appeal of the assessee on marketability for want of evidence." (c) In case of Bhor Industries Ltd. v. Collector of Central Excise, reported in 1989 (40) E.L.T. 280 (S.C.), wherein while examining the question of attraction of excise duty, the Apex Court noted with approval the observations in case of Union Carbide India Ltd. v. Union of India, reported in (1986) 2 SCC 547 = 1986 (24) E.L.T. 169 (S.C.), wherein it was observed that in order to attract excise duty, the article manufactured must be capable of sale to a consumer. The Apex Court referring to other decisions on the point, hel....
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....was nothing but a repetition of the earlier show cause notices with slight variations. (h) Counsel also relied on two decisions of this Court for the purpose of canvassing that in the second round, onus would be on the Department to show that there was new material to examine the question afresh. In case of Elecon Engineering Co. Ltd. v. Union of India, reported in 2005 (188) E.L.T. 257 (Guj.), the Division Bench of this Court held that during tax proceedings, the principles akin to res judicata would apply and a decision which has achieved finality would be binding on the party in absence of material changes in facts, circumstances or legal provisions. Referring to several decisions of the Apex Court, the High Court in the said case concluded that in the factual background arising in the matter, it was not open for the Revenue to raise the same issue over and over again. (i) In case of Gujarat Ambuja Exports Ltd. v. Union of India, reported in 2011 (269) E.L.T. 159 (Guj.) = 2012 (26) S.T.R. 165 (Guj.), the Division Bench of this Court once again held that the show cause notice impugned in the petition was not based on any new or di....
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....rein finding that the appeal would lie to the Apex Court, this Court relying on and referring to the above decision in the case of Union of India v. Guwahati Carbon Ltd. (supra), refused to entertain the writ petition leaving it open to the petitioners to avail other remedy. (c) Reliance was also placed on the decision of the Supreme Court in case of Special Director v. Mohd. Ghulam Ghouse, reported in 2004 (164) E.L.T. 141, wherein the Apex Court deprecated the practice of the High Courts entertaining the writ petitions questioning legality of the show cause notice proceedings and observed that in such matters, the petitioner should be directed to respond to the notice and take all stands highlighted in the writ petition. 21. Counsel also submitted that in the present case, new and important material was collected by the Department upon which, fresh notice is based. He submitted that such material of technical nature needs to be gone into by the adjudicating authority for which the petitioners be relegated before such authority. Counsel highlighted that in case of these petitioners as well as in case of M/s. Cadila Laboratories, for want of sufficien....
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....his Court in case of Gujarat Ambuja Exports Ltd. v. Union of India (supra) and in case of Elecon Engineering Co. Ltd. v. Union of India (supra). 25. The test to be applied in ascertaining whether a product would be exigible to excise duty, one of the important aspects is its marketability. What is to be ascertained is not merely that a product is manufactured, but that it is also marketable. On this point, there is clearly no dispute. Several decisions cited before us of the Apex Court bring about such a legal proposition. It is also well settled that merely because the product is mentioned in one of the entries in the Central Excise Tariff Act or finds place in the notification issued for the purpose of claiming duty drawback under the customs law, by itself would not be conclusive of the fact that such produce is either marketable or that, therefore, it is exigible to excise duty. 26. In case of Bata India Ltd. v. Commissioner of Central Excise, New Delhi (supra), the Apex Court observed as under : "18. Revenue in this case has not succeeded in establishing that the product in question was either marketed or was capable of being marketed. The test of marketability is....
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....et as such. The 'marketability' is thus essentially a question of fact to be decided on the facts of each case. There can be no generalization. The fact that the goods are not in fact marketed is of no relevance." 9. It may be noticed that in the cases referred to in the passage, quoted above, the reasons for holding the articles "not marketable" are different, however, they are not exhaustive. It is difficult to lay down a precise test to determine marketability of articles. Marketability of goods has certain attributes. The essence of marketability is neither in the form nor in the shape or condition in which the manufactured articles are to be found, it is the commercial identity of the articles known to the market for being bought and sold. The fact that the product in question is generally not being bought and sold or has no demand in the market would be irrelevant. The plastic body of EMR does not satisfy the aforementioned criteria. There are some competing manufacturers of EMR. Each is having a different plastic body to suit its design and requirement. If one goes to the market to purchase the plastic body of EMR of the respondents either for replacement or otherwise ....
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....unal, the Department has issued second show cause notice. The decision of the Tribunal in the first round of litigation achieved finality. In the present case, under the fresh show cause notice impugned in this petition, the respondents seek to levy excise duty on the same product virtually on the same grounds. Only additional material, if one may so hold, is the chemical examination to suggest that the product is stable. The Department also heavily relies on the patent issue by U.S. Office to contend that the product being identical, should be held exigible to excise. Other than these two factors, we find virtually no further evidence collected by the Department to subject the petitioners to fresh round of litigation. We may deal with these two questions presently. 33. Insofar as the opinion of the chemical examiner that the product is stable, that by itself as held by the Apex Court in the case of Cadila Laboratories Pvt. Ltd. (supra), would not be conclusive. What is 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 possibilit....
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....cture under Section 3 of the Central Excise Act, can hardly be stated to be a new fact. (iv) The contention that after the decision in the earlier round of show cause notice, the petitioners have obtained central excise licence/registration, is also of no consequence. Firstly, it is not stated whether such registration has been obtained for the purpose of manufacture of the final drug, intermediate chemical or any other drug, and secondly, mere registration would not decide the legal issue of excisability of a product. (v) The ground that previously the exemption notification for the manufacture of goods used for captive consumption later on having been withdrawn, to our mind, has no bearing on the excisability of the product itself which depends on various factors noted and discussed above. 36. In the result, we are of the opinion that the second show cause notice is based on no new material. There is no change either in law or in facts. On same set of facts, without any additional evidence to establish that the product was marketable, the respondents have issued a fresh notice once earlier show cause notice has resulted in a decision in....
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....ise Act, appeal would lie before the Supreme Court to the exclusion of the High Court. It was in this background that the Apex Court found that it would not be appropriate for the writ court to entertain the writ petition under Article 226 of the Constitution. Notably even in such decision, the Apex Court did not hold that the writ petition is not maintainable. It was in this very background that we had in our order dated 20-6-2012, following the decision of the Apex Court in the case of Union of India v. Guwahati Carbon Ltd. (supra), non-suited the petitioners. The petitioners had approached in writ petitions challenging the decision of the Tribunal which looking to the controversy involved, was appealable before the Supreme Court. We, therefore, came to the conclusion that ordinarily though it may be open for the High Court to by-pass appellate remedy and entertain the writ petition directly ignoring such alternative remedy available, in the present case, petitioners must take the appeal route. 40. In the present case, facts are different. The petitioners have approached at a stage where show cause notice has been issued. Such show cause notice, we have held, is lacking inh....