Brief Facts of the Case
The appellants are engaged in the activity of purification of excise duty paid Hexane and Petroleum Ether, which are supplied to them on free of costs basis by M/s. Merck Specialties Private Limited (for short, “M/s.Merck”). The appellants carry out purification, if required, on job work basis. During the relevant period, M/s. Merck purchased the above goods, namely, Hexane and Petroleum Ether from various suppliers and directed the suppliers to transport the said goods to the appellants. In addition M/s. Merck also supplied purified Hexane and Petroleum Ether to the appellants for laboratory testing and repacking purposes. The appellants have stated as to how the job work assigned to them has been carried out and they claimed that the process of purification of Hexane and Petroleum Ether as well as that of repacking from bulk to smaller/retail packs does not amount to “manufacture” within the meaning of Section 2(f) of the Central Excise Act, 1944. The appellants claimed that these purified Hexane and Petroleum Ether obtained from duty paid Hexane and Petroleum Ether are cleared from the factory of the appellants in the name of grades such as Guaranteed Reagent Hexane for Chromatography Lichrosolv grades.
Besides Hexane and Petroleum Ether, the appellants were also receiving some other chemicals for purification. M/s. Merck filed declaration under Rule 173C of the erstwhile Central Excise Rules, 1944 in the capacity of a principal manufacturer in the unit of the appellants. In the said declaration, the details of activity undertaken by the appellants on the duty paid Hexane and Petroleum Ether were furnished to the Department. The Revenue had relied upon the visit which was paid by the Superintendent of Central Excise, RangeIV, Belapur I Division. There was a communication dated 27th February, 2001 issued by the said Superintendent. The appellants point out that the above products were classified under SubHeading 27.10 of the Central Excise Tariff. The purified Hexane and Petroleum Benzine 6080 which were cleared by the appellants after repacking to M/s. Merck were also classified under this chapter of Central Excise Tariff. The appellants claimed to have replied to the letter of the Superintendent and made him known this entire process. They were of the view that the Department is satisfied with the explanation and no show cause notice was issued. However, despite such extensive correspondence carried out with the Revenue, the appellants were called upon to pay the duty on the ground that the processing activity carried out by using boiler, reactor etc. amounts to manufacture on account of which the duty demand was raised. This correspondence from March to May 2006 is relied upon. Equally this continued in the year 2007 as well. However, a show cause notice was issued and which resulted in an order of adjudication passed by the Commissioner of Central Excise, Belapur. He held that the activity of purification of Hexane and Petroleum Ether carried out by M/s. Bharat Dye Chem amounts to manufacture and thereby purified grades of Hexane and Petroleum Ether are required to pay duty. The case of that entity, namely, M/s. Bharat Dye Chem was relied upon to seek clarifications from the appellants and pursuant to the alleged nonsatisfaction of the Revenue even the appellants proceeded to receive a show cause notice dated. That show cause notice proposed to demand Central Excise duty under Section 11A (1) of the Central Excise Act, 1944. This was on the clearance of the purified Hexane and Petroleum Ether from January, 2003 to November, 2007. Even interest was also claimed and the notice also proposed to impose penalty.
The Appellate Tribunal passed an order and proceeded to uphold the claim of the Revenue. Aggrieved by the said order, the assessee filed the present appeal.
Contentions of the Assessee
The appellants contended that similar proceedings were initiated against M/s. E. Merk (i) Ltd.. There is an order passed in the case of M/s. E. Merk (i) Ltd., namely, final order No.995/98C dated 12th October, 1998. Now what is done by the appellants is identical in as much as what M/s. E. Merk did earlier has now been assigned as job work to the appellants. M/s. Merck Specialties Pvt. Ltd. is same as M/s. E. Merk (i) Ltd.. M/s. E. Merk (i) Ltd. had undertaken similar process and identical activity at its Taloja Unit. The show cause notices were issued to M/s. E. Merk and alleging that the activity of purification carried out by said M/s. E. Merk amounts to manufacture.
The allegation is that the process undertaken by said M/s. E. Merk cannot be said to be not bringing out any new commodity or article. Yet the Department / Revenue persisted with its stand and a show cause notice was issued to M/s. E. Merk (i) Ltd. On that, an order was passed on 8th August, 1992. Relying upon the findings in that order Mr. Sreedharan submits that this order was upheld by the Commissioner of Central Excise (Appeals) by his order dated 26th September, 1994. The Tribunal also did not deem it fit to interfere with these orders and confirmed them by final order dated 12th October, 1998.
The Tribunal’s final order was accepted by the Department / Revenue. It is in these circumstances that appellant contended that the finding in the final order dated 12th October, 1998 binds the Revenue. These findings were specifically brought to the notice of the Appellate Tribunal when it passed the impugned order. During the course of hearing before the Tribunal, the Tribunal’s attention was extensively invited to these orders. The Tribunal has not adverted to these orders and neither expresses its disagreement nor concurrence therewith.
The appellant contended that if the Tribunal is shown an earlier order passed by it taking a particular view on the same issue or question, then, it is the bounden duty of the Tribunal to refer to its own findings and then conclude as to whether they bind it in the successive or second round or is there is reason to hold that these findings have lost their binding nature. However, this cannot be a mere ipse dixit or a bare conclusion but reasons would have to be assigned which must stand the scrutiny by a higher Court. The earlier order if brought to the notice of the Tribunal and relied upon so as to support the argument that it is identical on facts and in law, then, the Tribunal must advert to it in details. It must advert to the legal principles referred above. It must then conclude whether on account of any changes in law or because the facts and circumstances are not identical and similar, that a departure can be made from the earlier view and conclusion. Meaning thereby, the Tribunal must hold that its earlier order is no longer a good law or is distinguishable on facts. In the instant case the Tribunal has without adverting to any of these principles, proceeded to allow the appeal of the Revenue and directed remand of the matter to the adjudicating authority for recomputation of the duty demand within the normal period and also for allowing Cenvat Credit of the duty paid on the raw materials, subject to submission of documentary evidence.
Contentions of the Revenue
The Revenue contended that neither the Central Excise Appeal deserves to be admitted or allowed nor the Writ Petition. Pure findings of fact are being sought to be reappreciated and reappraised. This is not permissible in an appellate jurisdiction. The Tribunal has assigned reasons as to why it takes a view that the activities undertaken would amount to manufacture. The Revenue further contended that the entire process has been considered and it is clearly amounting to manufacture. The Tribunal has assigned reasons for its factual conclusion that a new product has merged having a distinct character, name and use after various processes undertaken by the appellants. That would attract Section 2(f) of the Central Excise Act, 1944. The revenue relied on the decisions of the Hon’ble Supreme Court in the case of Pio Food Packers reported in [1980 (6) ELT 343 (SC) and in the case of Empire Industries Ltd. reported in 1985(20) ELT 179 (SC) to support the Tribunal’s order. The revenue further contended that the factual conclusion of the Tribunal that the value addition which the appellant has achieved on account of these processes is of 200% which is substantial and which is not achievable in mere repacking. In such circumstances, both the proceedings deserve to be dismissed.
Held by Hon’ble High Court, Bombay
The Hon’ble High Court stated that the ground alleged in the show cause notice is that the activity of repacking / relabeling / refining of laboratory chemicals undertaken by the appellants in respect of Petroleum Benzine and Hexane for Chromatography Lichrosolv would amount to “manufacture” and, therefore, it was required to discharge excise duty liability. The adjudicating authority came to the conclusion that these activities did not result into manufacture of a new product and held that the said process undertaken by the appellant does not amount to “manufacture”. The Hon’ble court found that the Tribunal has neither distinguished its earlier order in the case of M/s. E. Merk (i) Ltd. nor there was any conclusion being rendered that in the light of subsequent changes or subsequent rulings including of the Hon’ble Supreme Court earlier order is no longer a good law. The Hon’ble court stated that substance in the argument that judicial discipline requires all this to be done and carefully and meticulously. There is a larger purpose being served by certainty and finality of judgments. It has been repeatedly emphasized that judicial Tribunals and Courts of law have to follow the rule of consistency and certainty so also finality of judgments. There is a definite purpose being served because of all this and namely parties before the Court of law or a Tribunal and litigants and citizens can then proceed on the assumption that the judgments and decisions rendered earlier in their own at least cases on facts would have a binding effect. If certain issues and questions have been dealt with earlier then such orders may also govern cases of other litigants if they involve identical facts and circumstances. Thus public interest is subserved when a Court of law or judicial Tribunal follows such principles. This is embodied in the explanation to Section 11 of the Code of Civil Procedure. That is pertaining to finality of judgments. There is a rule, namely, res judicata and constructive res judicata. These rules may not apply strictly in proceedings under a taxing statute, but there is another principle which equally applies and with full force and that is impressed upon the Tribunals such as CESTAT in the case of Mercedes Benz (supra). In the case of Mercedez Benz (Supra) this Court noted the argument that a decision of the coordinate bench has been disregarded by the Tribunal in the case of Mercedez Benz, rather it was completely ignored. This Court concluded that the grievance is not wholly unjustified.
The similar expressions were found in the case Lala Shri Bhagwan v. Ram Chand, AIR 1965 SC 1767 and Mahadeolal Kanodia v. The Administrator General of West Bengal, AIR 1960 SC 936 (at p.941.
The Hon’ble court further stated that is its bounden duty in law to have adverted to an order passed by it or its coordinate bench on the same point, may be in earlier round of litigation. If it is relevant to the adjudication in the present appeal, then, it is the further bounden duty to deal with it in details. If the judgment is distinguishable on facts a definite conclusion on that count has to be reached. If the judgment is not correct then equally reasons have to be assigned for such a crucial conclusion.
In the light of the above, the Hon’ble High Court, Bombay quashed and set aside both orders of the Tribunal. The Revenue’s appeal now shall be reheard by the Tribunal on merits and in accordance with law uninfluenced by its earlier conclusions. The Tribunal must render a decision after dealing with all the contentions which have been raised by the parties. It should permit the appellants to rely upon the earlier adjudication and also bring to its notice the factual matrix involved therein. It must also allow the assessee an opportunity to rely upon the legal provisions and the judgments relevant to the same.