Case Note & Summary
The Bombay High Court disposed of Central Excise Appeal No.179 of 2014 and Civil Writ Petition No.279 of 2015 by a common order. The appellant, Sunbel Alloys Co. of India Ltd., was engaged in the purification of excise duty paid Hexane and Petroleum Ether on a job work basis for M/s. Merck Specialties Private Limited. The goods were supplied free of cost by M/s. Merck, and the appellant carried out purification if required. The dispute arose when the Revenue contended that the purification activity amounted to manufacture under Section 2(f) of the Central Excise Act, 1944, and demanded excise duty on the clearances of purified goods. The Tribunal upheld the Revenue's contention. The appellant challenged this order, arguing that the Tribunal failed to follow binding precedents, including the decision in S.D. Fine Chemicals affirmed by the Supreme Court and followed in E. Merck under identical facts, which held that such purification does not amount to manufacture. The appellant also contended that the Tribunal allowed the respondent to raise a new ground regarding percentage of value addition at the final hearing stage, which was not raised in the show cause notice or appeal. The High Court admitted the appeal on three substantial questions of law: (i) whether the Tribunal erred in not following binding precedent; (ii) whether the Tribunal was correct in allowing new evidence at the final hearing stage; and (iii) whether the Tribunal was justified in holding that purification amounts to manufacture. With consent of both sides, the court disposed of the appeal finally. The court held that the Tribunal's order was unsustainable as it violated judicial discipline by ignoring binding precedents and permitting new evidence without prior notice. Consequently, the court set aside the Tribunal's order and allowed the appeal. The writ petition was rendered academic and disposed of accordingly.
Headnote
A) Central Excise - Manufacture - Section 2(f) Central Excise Act, 1944 - Purification Activity - The issue was whether purification of excise duty paid Hexane and Petroleum Ether on job work basis constitutes manufacture - The court held that the Tribunal erred in holding that purification amounts to manufacture, as the activity did not result in a new and distinct product and was covered by precedents including S.D. Fine Chemicals and E. Merck (Paras 2-4). B) Judicial Discipline - Binding Precedent - The Tribunal committed judicial indiscipline by not following the binding precedent in S.D. Fine Chemicals affirmed by the Supreme Court and followed in E. Merck under identical facts - The court held that the Tribunal was bound to follow these decisions (Paras 2, 4). C) Evidence - New Grounds at Final Hearing - The Tribunal erred in allowing the respondent to argue and lead evidence on percentage of value addition at the final hearing stage when such allegation was not raised in the show cause notice or appeal - The court held that this was impermissible (Para 2).
Issue of Consideration
Whether purification of Hexane and Petroleum Ether amounts to manufacture under Section 2(f) of Central Excise Act, 1944, and whether the Tribunal erred in not following binding precedents and allowing new evidence at final hearing
Final Decision
Central Excise Appeal No.179 of 2014 is allowed. The order of the Tribunal is set aside. Civil Writ Petition No.279 of 2015 is disposed of as academic.
Law Points
- Purification of excise duty paid goods on job work basis does not amount to manufacture under Section 2(f) of Central Excise Act
- 1944
- Tribunal bound by precedents
- new evidence cannot be introduced at final hearing stage without prior notice
