2015 (2) TMI 137 - HC - Central Excise

Manufacturing activity or mere repacking activity - Whether activity of re-packing/re-labeling/re-fining of laboratory chemicals undertaken by the appellant in respect of Petroleum Benzine and Hexane for Chromatography Lichrosolv - Held that - there is a far more serious legal infirmity. The appellants claim to be carrying on job work for E.Merck Specialties (P) Ltd.. The principals of the appellants (E.Merk) faced identical allegations and were proceeded against for having carried on manufacturing activity in their premises. The product or goods in relation to which the allegations are made are identical. The Tribunal upheld the arguments of E.Merck and allowed its Appeal. That order was relied upon by the appellants in the proceedings against them. They succeeded before the Commissioner. The Tribunal does not make any reference to all this and does not deem it necessary to consider the arguments based on its earlier orders. These orders were stated to be final. Yet, the Tribunal omits to consider them. Rule of judicial discipline requires reference being made to a larger bench in case of differences of opinions or views between the benches of the Tribunal on identical facts. A healthy way of deciding matters and to maintain purity and sanctity of the judicial process is emphasized by this Court in Mercedes Benz (2010 (3) TMI 300 - BOMBAY HIGH COURT) and relying upon the judgment of the Hon ble Supreme Court of India. This binds the Tribunal. We have also cautioned the Tribunal in number of cases that the process of adjudication and in Revenue matters requires an early finality to vexed issues. If the issues are raised repeatedly then all more there ought to be certainty and end to the litigation. - Order of Tribunal is set aside - Decided in favour of assessee.

Issues Involved:
1. Judicial indiscipline by the Appellate Tribunal.
2. Allowing new arguments and evidence at the final hearing stage.
3. Whether the purification process amounts to "manufacture" under Section 2(f) of the Central Excise Act, 1944.

Detailed Analysis:

1. Judicial Indiscipline by the Appellate Tribunal:
The primary issue was whether the Appellate Tribunal erred in not following the binding precedent set by the Hon'ble Supreme Court in the case of S.D. Fine Chemicals, which was affirmed and followed in the decision of the Appellate Tribunal in the case of E. Merck under identical facts. The appellants argued that the Tribunal should have adhered to its earlier decision, which had attained finality since no appeal was filed against it. The Tribunal's failure to consider its own previous decisions and the principle of finality of judgments was highlighted. The court emphasized the importance of judicial discipline and the need for consistency in legal rulings to maintain public trust and avoid legal uncertainties.

2. Allowing New Arguments and Evidence at the Final Hearing Stage:
The appellants contended that the Tribunal allowed the respondent to introduce arguments and evidence regarding the percentage of value addition achieved in the purification process at the final hearing stage, which was never raised in the show cause notice or at any earlier stage. This was deemed procedurally unfair and contrary to established legal principles. The court agreed that such practices undermine the fairness of the judicial process and highlighted the necessity for all allegations and evidence to be presented at the initial stages of litigation.

3. Whether the Purification Process Amounts to "Manufacture":
The appellants argued that the purification and repacking of Hexane and Petroleum Ether did not constitute "manufacture" under Section 2(f) of the Central Excise Act, 1944. They claimed that the process did not result in a new product with a distinct name, character, or use. The Tribunal, however, concluded that the activities undertaken by the appellants amounted to manufacture, as the purified products had distinct characteristics and uses, and there was substantial value addition. The court noted that the Tribunal failed to adequately distinguish its earlier order in the case of M/s. E. Merk (i) Ltd., which had similar facts and where it was held that such activities did not amount to manufacture. The court criticized the Tribunal for not providing sufficient reasoning for deviating from its previous decision and for not addressing the principles of judicial consistency and finality.

Conclusion:
The High Court quashed and set aside both the Tribunal's orders dated 28th March 2014 and 12th September 2014. The case was remanded back to the Tribunal for a fresh decision, with instructions to consider all contentions raised by both parties, including the earlier adjudication in the case of M/s. E. Merk (i) Ltd. The Tribunal was directed to render a decision after thorough consideration of the legal provisions and relevant judgments, ensuring that the principles of judicial discipline and consistency are upheld. The court emphasized that it had not expressed any opinion on the merits of the show cause notices, the facts, or the questions of law, leaving these to be determined by the Tribunal.

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