MANEK CHEMICALS (P.) LTD. Vs. UNION OF INDIA

JUDGEMENT

(1.) By this petition under Article 226 of the Constitution of India, the petitioners seek the following substantive reliefs:-

(2.) The facts giving rise to the present petition are that the petitioner company for the period 1995-96 to 7th November, 1998 was producing "Washed Clay" by using Hydrochloric Acid or Sulphuric Acid for washing natural clay and selling the product under the trade name "Bleach-9" claiming exemption from payment of excise duty. On 7th November, 1998, the Central Excise officers visited the petitioner's factory, drew a panchnama and commenced inquiry in respect of the petitioner's manufacturing activities on the basis that washing of clay with acid resulted into "activated clay" which was chargeable to excise duty. With effect from November, 1998, due to the above inquiry, the petitioner company discontinued use of acid and started washing natural clay with water only, immediately upon commencement of inquiry on 7th November, 1998 and clearing such washed clay under exemption. The Commissioner of Central Excise passed an order dated 8th November, 2000 and confirmed demand of excise duty for the period from 1995-96 to November, 1998 on the ground that the petitioner company had caused activation by using acid for washing natural clay and such activated clay/activated earth was chargeable to excise duty. By an order dated 21st May, 2002, the Customs, Excise and Service Tax Appellate Tribunal (hereinafter referred to as "the Appellate Tribunal") allowed the appeal preferred by the petitioner against the above adjudication order on the ground that the demands were barred by limitation but upheld the Department's case about activation of earth upon use of acid. During the period June, 2001 to May, 2003, in all, six adjudication orders were passed by the Assistant Commissioner of Central Excise on various show-cause notices issued for the intervening period of November, 1998 to October, 2002 confirming demand of duty with penalty against the petitioner company. The petitioner went in appeal before the Commissioner (Appeals) who, by an order dated 10th August, 2004, directed the Assistant Commissioner to draw samples of the goods and get analysis report from the Departmental Chemical Examiner. Accordingly, the Chemical Examiner Grade II, Baroda submitted a report on the samples tested by him to the effect that there was no activation as a result of washing of clay with water by the petitioner company. Subsequently, a request was made by the Assistant Commissioner to another Chemical Examiner for a second opinion and the other Chemical Examiner, viz., Chemical Examiner Grade I gave a report dated 3rd September, 2004 to the effect that the product was activated earth. By an order dated 28th January, 2005 made in all the six appeals, the Commissioner (Appeals), in view of the conflicting reports, remanded the matter for fresh adjudication. In January and February, 2006, the Additional Commissioner of Central Excise passed various adjudication orders and confirmed the demand of excise duty on the basis that "Bleach-9" was activated earth. By an order dated 12th July, 2006 (Annexure 'C' to the petition), the Commissioner (Appeals) decided the appeals filed against the orders of the Additional Commissioner wherein he inter alia observed thus:-

(3.) On 21st October, 2007, the petitioner company obtained a report and opinion from IIT, Bombay on parameters of raw clay used as the initial material and Bleach-9, according to which, Bleach 9 was not activated clay. Another report of Vaibhav Enviro Consultant, a GPCB recognised laboratory, was also obtained according to which also, Bleach 9 was not activated earth. These reports were submitted by the petitioner before the excise authorities who were to decide the case.