E.MERCK (INDIA) LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) THE Petitioners by the present petition have challenged the show cause-cum-demand notice No.F.No.V.68 (18) RC-109/86 dated 3rd June, 1988 issued by the second respondent (hereinafter referred to as 'the impugned demand notice'). By this impugned demand notice, the Respondent No.2 has purportedly demanded a sum of Rs.4,58,982.11 from the petitioners which sum had been refunded to them by the second respondent himself after the petitioners classification list was finally approved on 24th Feb. 1986. The petitioners carry out certain purification process on certain chemicals as a result of which the impurities are removed from the said chemicals. Accordingly the petitioners filed a classification list dated 18th March, 1985 being classification list No.2/85 wiht effect from 18th March, 1985, herein after referred to as "the classification list". In this classificatin list they had listed 22 items on which they carry out the aforesaid process. The process, according to the petitioners, fell outside the definition of "manufacturing" under section 2(f) of the Central Excise and Salt Act, 1944 (hereinafter referred to as"the Act"). The petitioners had classified the said items under the residuary item No.68 of the erstwhile first Schedule to the Act. This was done under protest and the excise duty was paid as the relevant period thereon. By their letter dated 18th March, 1985, the petitioners wrote to the second respondent clarifying therein that they subjected the said 22 items to purification by physical processes such as distillation, purification, crystallisation etc. Thus they stated that the said process did not amount to manufacture under the said Act. In other words, the raw material did not undergo any change or transfomation and as a result of the said process no different or new article emerged having any distinctive name, character or use. Commercially also the 22 items remained the same as they were known as the same articles in the trade. The process carried out by the petitioners merely removed the impurities in the said 22 items. The samples of the 22 items were submitted to the Range Superintendent to obtain the necessary report from the Deputy Chief Chemist. Samples were submitted of each item before processing and after processing. As stated earlier, in the meantime the petitioners were paying duty under protest and classifying the said 22 items under item No.68 of the erstwhile first Schedule to the Act.

(2.) ON 24th February, 1986 the second respondent finally approved the classification list as a result of which all the 22 items were held to be non-excisable and hence not excisable goods under the Act and the Rules. The said list finally approved was forwarded by the second respondent to the Petitioners on 25th Feburary, 1986. On coming to know that the list has been approved as non-excisable, the petitioners on 18th June, 1986 wrote to the second respondent submitting their refund claim for Rs.4,58,982.12 ps. This was the amount of excise duty paid by petitioners under protest inconnection with the said 22 items during the period 18-3-1985 to 28-2-1986. The Petitioners on 28-1-87 again addressed a letter to second respondent calling upon him to pay the refund of the amount. The petitioners further claimed payment of interest at the rate of 18 percent per annum from the date of payment of central excise duty till 31st May, 1986 which came to Rs.58,090.68. The period of review available tothe respondents under section 35-E of the said Act expired on 23rd February, 1987.

(3.) ON 3rd June, 1988 second Respondent issued the impugned demand notice requiring the petitioners to show cause as to why a sum of Rs.4,58,982.11 erroneously refunded should not be recovered from them as per the provisions of sub-section (1) of Section 11-A of the said Act. The impugned demand notice appears to have been issued on the ground that the classification list was finally approved on the basis that the petitioners procured duty paid raw materials but no evidence regarding the same was available and that the Petitioners had allegedly not followed the procedure under Rule 173-H of the Rules. The Petitioners by their letter dated 9th June, 1988 sought fro time to reply to the impugned demand notice. On 28th July, 1988, the petitioners addressed a letter to second respondent calling upon him not to enforce the impugned demand notice and to with drawn the same on the grounds mentioned in the letter.