MR. AKIL KURESHI, J.@mdashThe 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 Rs. 28,01,63,832/- with interest should not be recovered from them on the goods, that is, D2 Aminobutanol Tartrate falling under Chapter S.H. 2942.00 of the Central Excise Tariff Act, 1985, illicitly manufactured and removed for captive consumption for manufacture of Ethambutol HCL of Chapter S.H. 2942.00 during the period from 23.7.1996 to 31.03.2001. The facts are peculiar and may be noted in some detail. The petitioner No. 1 is a Company registered under the 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.
2. 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 petitioners for production of the drug with the use of the intermediate chemical. It was, therefore, contended that such intermediate chemical having been used for production of the final product, namely, the drug, and since the drug was exempt from payment of duty, the exemption notification No. 217/1986 granting exemption to the input i.e. the intermediate product for home consumption, would not be available. The notice further referred to statements of the officers and employees of the petitioner No. 1 Company to allege that there was illicit removal of the goods for home consumption and that, therefore, extended period of limitation for recovery of unpaid duty would be available.
3. The petitioners strongly opposed the show cause notice proceedings. They appeared 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.
4. 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 u/s 2(d) of the Central Excise Act. He, therefore, dropped the show cause notice proceedings by his order dated 17.9.1991.
5. 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-examined by the Company in which he admitted that he had not conducted any test regarding the stability of the product and its shelf-life. The Tribunal further observed that merely because the goods are mentioned in the tariff schedule, would not attract the duty unless it is marketed or capable of being marketed. The Tribunal concluded that in the case on hand, the revenue had not produced any evidence to show that the product in question is being ordinarily bought and sold in the market. The Tribunal also noted that in another decision dated 6.1.1999, 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 revenues appeal.
6. 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.
7. 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.
8. To complete recording of the facts and events, we may note that in case of same product being manufactured by another pharmaceutical Company, namely. Cadila Laboratories, the question of excisability of same intermediate chemical came to be decided by the Tribunal in the judgment in the case of Collector of Central Excise, Vadodara v. Cadila Laboratories P. Ltd., reported in 2000 (124) ELT 411 (Tribunal). The Tribunal was of the opinion that mere fact that the goods manufactured by the assessee were captively consumed and were not actually sold was not relevant when goods are otherwise capable of being bought and sold in the market.
The Tribunal reversed the decision of the adjudicating authority observing that the Collector had not examined any chemical analyst to arrive at a conclusion that the product in question is unstable and non-marketable. The Tribunal ultimately allowed the revenue''s appeal and held that 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 nonmarketable.
9. Such decision of the Tribunal was carried in appeal by the Cadila Laboratories. The Apex Court in the decision in case of
10. 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 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.
11. 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. Sharma and Shri J. J. Patadia, Assistant Chemical Examiners had studied the process of manufacturing the drug and the samples of the intermediate chemicals were also tested in the laboratory. It is stated that in case of intermediate chemical, its melting point and rotation was found to be 141 - 142 Centigrade''s and 22.853 Degrees respectively which parameters are fairly close to those mentioned in the patent 3,579,586 dated 18.5.1971 of a similar product which is patented in the U.S.A. In the affidavit, it is further stated that such show cause notice was issued for safeguarding the Government revenue because the matter was pending before the Supreme Court in respect of M/s Cadila Laboratories Pvt. Ltd. The deponent outlined what according to him were new facts which permitted the Department to issue 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. //94-CE dated 1.3.1994 which was effective upto 22.7.1996 has not been rescinded by Notification No. 19/96-CE dated 23.7.1996. Therefore, exemption for payment of duty is not available from 23.7.1996 in the present case.
12. In response to such affidavit in-reply filed by the respondents, the petitioners filed a rejoinder affidavit principally contending that with respect to the intermediate chemical, no patent has been given by the Patent Office in U.S.A. and the patent dated 18.5.1971 mentioned in the show cause notice is not a product patent, but is a process patent. It is further contended that the said patent 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.
13. In reply to such rejoinder statement filed by the petitioners, the respondents have filed a further detailed affidavit in-surrejoinder 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.
14. On the basis of such materials on record, learned Counsel Shri Kamal Trivedi for the petitioners submitted that the show cause notice has been issued without any new or additional material at the command of the Department. Once the entire issue has been examined in detail by the Tribunal in case of these very petitioners, the gamut of going through show cause notice proceedings without any additional material shall be an exercise in futility. Counsel pointed out that in case of identical product manufactured by Cadila Laboratories, the Apex Court had reversed the decision of the Tribunal and ruled in favour of the manufacturer. In short, according to the Counsel, there is no further scope of inquiry.
15. Counsel further submitted that merely because a patent has been obtained by a Company in U.S.A. and that too, with respect to final drug, in no way could establish that the intermediate chemical is a marketable product which is the test to be applied for ascertaining whether such product is exigible to excise duty.
16. 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.
17. Counsel submitted that in any case, invoking of extended period of limitation is not permissible. There was no fraud, collusion or any willful or suppression of facts on part of the petitioners to enable the Department to invoke such extended period of limitation.
18. 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
(b) In case of
Before concluding, we may point out that since 1990, 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
(d) Reliance was also placed on the decision in case of Gujarat Narmada Valley Fert. Co. Ltd. v. Collector of Excise & Customs, reported in 2005 (184) ELT 128 (SC), wherein also, it was reiterated that unless the product is capable of being marketed and is known to those who are in the market as having an identity as a distinct identifiable commodity that the article 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
(f) Reliance was also placed on the decision of the Apex Court in case of
(g) Reliance was also placed on the decision of the Supreme Court in case of
(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
(i) In case of
19. On the other hand, learned senior standing Counsel Shri R. J. Oza for the Department opposed the petition, contending that this Court would not interfere at a stage where only show cause notice has been issued. The petitioners would have full opportunity to defend themselves before the Department. In matters involving extremely technical issues of chemical science, this Court even otherwise would not scuttle the full inquiry. In this respect, Counsel relied on the following decisions :--
(a) In case of
(b) In case of Union of India v. Guwahati Carbon Ltd., reported in 2012 (278) ELT 26 (SC), 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 Special Civil Application No. 13295 of 2004 and connected petitions, wherein 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
20. 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 sufficient evidence, to establish that the product in question was marketable, the decisions were rendered in favour of the manufacturers. None of the decisions, therefore, conclude the issue finally without any possibility of bringing new material on record. In short, Counsel contended that the show cause notice proceedings must be allowed to be completed.
21. Having, thus, heard the learned Counsel for the parties and having taken note of the material on record, we would like to deal with the question of maintainability of the petition at a later stage. Though this contention in the nature of a preliminary objection and should ordinarily be decided first, the answer to the question of maintainability would largely depend on our conclusions on the various aspects emerging in the petition.
22. We may recall that in the previous round of show cause notice proceedings, the issue was decided in favour of the petitioners by the Commissioner as well as by the Tribunal. Both the authorities held that there was insufficient evidence to hold that intermediate chemical was marketable. In case of Cadila Laboratories also, though the Tribunal held that 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.
23. 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 and two decisions of Division Bench of this 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).
24. 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.
25. 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 that the product which is made liable to duty must be marketable in the condition in which it emerges. No evidence has been produced by the Revenue to show the product unvulcanized sandwiched fabric as such as is capable of being marketed, without further processing. 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. The mere fact that the product in question was entrusted outside for some job work such as stitching is not an indication to show that the product is commercially distinct or marketable product. Without proof of marketability the intermediate product would not be goods much less excisable goods. Such a product is excisable only if it is a complete product having commercial identity capable of being sold to a consumer which has to be established by the Revenue.
26. The Apex Court, thus, was of the opinion that mere hypothetical possibility of a purchase and sale of the commodity is not sufficient proof that the product is commercially known.
27. In case of
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 aluminum 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 were not known to the market 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 one cannot get it in the market because at present it is not a commercially known product. For these reasons, the plastic body, which is a part of EMR of the respondents, is not "goods" so as to be liable to duty as parts of EMR under para 5(f) of the said exemption notification.
28. In case of Cadila Laboratories Pvt. Ltd. v. Commissioner of Central Excise, Vadodara (supra), the Apex Court referred to several decisions and observed as under :--
9. Thus, the law is that in order to be excisable, not only goods must be manufactured i.e. some new product brought into existence, but the goods must be marketable. By marketable it does not mean that the goods must be actually bought and sold in the market. But the goods must be capable of being bought or sold in the market. The law also is that goods which are in the crude or unstable form and which require a further processing before they can be marketed, cannot be considered to be marketable goods merely because they fall within the Schedule to the Excise Act.
29. In case of
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.
30. 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.
31. In the present case, having first issued show cause notice in the year 1986 and having lost up to the level of the Tribunal, 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.
32. 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 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.
33. With respect to patent issued by the U.S. Office, there are several reasons why such ground is not germane. Firstly, the petitioners have pointed out that such patent is not the product patent, but a process patent. Secondly, the patent is issued with respect to the final drug and not intermediate chemical. These two significant aspects which the petitioners have brought about in the rejoinder affidavit have not been seriously contested by the respondents though detailed sur-rejoinder affidavit has been filed. Additionally, the petitioners have also produced the disclosure statement made by the manufacturer for obtaining such a patent which suggests that the patent was for the process. Therefore, the conclusion of the respondents that the intermediate chemical involved in the present case resembles very closely in its properties to the chemical referred to in the patent, 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.
34. 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 u/s 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 license/ 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.
35. 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 favour of the petitioners.
36. We would now in view of the above conclusions, deal with the question of maintainability of the petition. It is undoubtedly true and well settled that the High Court would be loath to interfere in the show cause notice proceedings. The Apex Court has stated, time and again, that such interference at the show cause notice stage should be kept to the minimum. However, it is not inviolable rule and alternative remedy would not be a bar if there is inherent lack of jurisdiction or there is failure of natural justice or that the action is opposed to statutory provisions. In case of
20. Much water has since flown beneath the bridge, but there has been no corrosive effect on these decisions which, though old, continue to hold the field with the result that law as to the jurisdiction of the High Court in entertaining a writ petition under Article 226 of the Constitution, inspite of the alternative statutory remedies, is not affected, specially in a case where the authority against whom the writ is filed is shown to have had no jurisdiction or had purported to usurp jurisdiction without any legal foundation.
37. 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.
38. 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 u/s 35-L of the Central Excise 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), nonsuited 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 bypass appellate remedy and entertain the writ petition directly ignoring such alternative remedy available, in the present case, petitioners must take the appeal route.
39. 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 inherent jurisdiction. Question of driving the petitioners to avail of alternative remedy, therefore, would not arise.
40. With respect to invocation of extended period of limitation, we find no substance whatsoever in the stand of the Department. The petitioners have been manufacturing the drug in question since years, utilizing intermediate chemical by way of captive consumption. Such process is known to the Department since decades. Contention of the petitioners is that such intermediate chemical is not a marketable goods and therefore, not exigible to excise duty. Whatever be the legal validity of such a stand, surely, it is highly a debatable and arguable point. Particularly when the Department has full knowledge that the petitioners are manufacturing such drugs, it can clearly be stated that there is any fraud, concealment or willful misstatement on the part of the petitioners. In fact, the very premise of the second show cause notice is that in the first round of litigation, the Tribunal having observed that there is no evidence to hold that the product is marketable, and on further investigations, the Department has issued the second show cause notice. If this be so, we are left to wonder on what basis does the Department contend that the evasion of duty if at all is on account of fraud, collusion or willful misstatement on the part of the petitioners so as to invoke extended period of limitation. Looking from any angle, we are of the opinion that the petition must succeed. The same is, accordingly, allowed. The impugned show cause notice dated 1.8.2001 issued by the Commissioner of Central Excise, Surat, is hereby quashed and set aside. Rule is made absolute with no order as to costs.
