Commissioner of C. Ex. vs Aurobindo Pharma Ltd.

V.V.S. Rao, J.—This common judgment would suffice to dispose of these four appeals u/s 35G of the Central Excise Act, 1944 (the Act) filed by the Revenue against the common order of the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Bangalore, (CESTAT), dated 19-3-2009, in Final Order Nos. 578 to 582 of 2009 2010 (249) E.L.T. 415 (Tribunal)]. By the said order, CESTAT dismissed the appeals filed by the Respondent herein, affirming the common order of the Commissioner of Customs and Central Excise (Appeals) being Order-in-Appeals dated 5-4-2007.

The Respondent, M/s. Aurobindo Pharma Ltd., (APL) have their units in different areas surrounding Hyderabad. They are a company engaged in the manufacture of bulk drugs and bulk drug intermediaries. In the process of manufacture, they use considerable varieties of solvents like methylene chloride, methanol, acetone, isoprophy alcohol, ethyl acetate, MIBK, chloroform. It is the admitted case before this Court that the spent solvents are purified by the process of distillation in reactors and re-used by the APL as solvents. The excess spent solvent is sold at Re. 1/- per litre/Kg. to the dealers, who in turn sell it at Rs. 2/- to Rs. 5/-. The APL allegedly assessed nominal excise duty at Re. 1/- per Kg.

During the scrutiny of records, it was revealed that APL had cleared spent/distilled/recovered solvents without raising central excise invoice, and without payment of duty. It was also revealed that certain amount of spent/distilled/recovered solvents, in the guise of waste industrial solvents, was undervalued. Therefore, the jurisdictional Commissioner (Appeals) issued show cause notice dated 30-3-2001 proposing to levy duty, interest and penalty under Rule 173Q of the Central Excise Rules 1944 (the Rules). Be it noted, four such show cause notices were issued to four units of the Respondent covering the period from 1995-1996 to 2000-2001. APL submitted their explanation denying any liability. The Commissioner (Appeals), by order dated 29-11-2003, adjudicated the matter and levied duty, penalty and interest under Sections 11A, 11AB and 11AC of the Act and under Rules 9(2) and 209A of the Rules. The Commissioner (Appeals), however, set aside the order in original relying on the decision in M/s. Vorin Laboratories Ltd., Hyderabad vide Order-in-Appeal Nos. 78 and 79/2003 (H-I) C.E. The appeal filed by the Revenue before the CESTAT was, however, allowed and the matter was remanded. After such remand, the Commissioner (Appeals), by order dated 5-4-2007, held that spent solvent is not a product excisable to duty and accordingly rejected the department''s contention. In the second round of litigation before the CESTAT, the Revenue was again unsuccessful.

The learned CESTAT, in the common order, observed that, earlier in the case of the APL, it was held that spent solvent is not excisable to duty and, accordingly, rejected the appeals. For ready reference, we quote the following from the impugned order.

We have considered the submissions made at length by both sides and perused the records. We find that in the case of the Respondent i.e., 2006 (107) ECC 566 this Bench has held the issue in favour of Respondent and hence the issue is no more res integra. Further, it is also seen that in the case of CCE Hyderabad-IV v. Sreepathi Pharmaceuticals Ltd. 2006 (205) E.L.T. 273 (Tri.-Bang.) and CCE Hyderabad-III v. Natco Pharma Ltd. 2007 (208) E.L.T. 573, the issue was the very same as is before us i.e., spent solvent and excisability thereof. We find that the learned Commissioner (Appeals) reliance upon the decided case-laws of the very same Bench to hold in favour of Respondent seems to be correct. We also note that the learned Commissioner (Appeals) has followed the judgment given by the Tribunal.

In our considered opinion, the excisability in the product goods would decide the leviability of excise duty. If product spent solvents'' are considered as non-excisable, the question of discharge of excise duty on them does not arise. We find that this Bench of the Tribunal in the case of CCE Hyderabad v. Everest Organics Ltd. 2008 (226) E.L.T. 554 (Tri.-Bang.), came to the following conclusion:

We have carefully considered the submissions. We notice that the Revenue has not appealed against the earlier order passed by the Commissioner (A) in the case of M/s. Vorin Lab. The Commissioner (A) has analysed the facts and has noted that the item has lost its utility and has become "spent solvent". The product is required to be disposed of as they are hazardous under the Pollution Control norms. Therefore, such removal cannot be held to be marketable goods and they are subjected to excisability. Although, the Revenue had taken the grounds for valuation but the Assessee had contested the issue of excisability. Since the question of excisability is fundamental to the matter, the Commissioner (A) was justified in taking up this issue and deciding it in the light of the earlier judgment. There is no merit in this appeal and the same is rejected.

It is also seen that this judgment of the Tribunal is a recent judgment given in 2008 and was following various judgments of the Tribunal.

As the learned Commissioner (Appeals) has correctly come to the conclusion that the spent solvent in all these cases are not excisable products, the ratio of the decisions cited by the learned Counsel covers the issue in favour of the Assessee/Respondent, accordingly, respectfully following the same, we find that the issue being no more res Integra, the appeals filed by the Revenue are devoid of merits. All the appeals are rejected and the impugned orders are upheld.

The Standing Counsel for Customs and Central Excise submits that the spent solvent undergoes a process of purification and treatment in the reactors and, therefore, the marketable spent solvent attracts duty. According the Counsel, as per Note-11 to Chapter-29 of the Central Excise Tariff Act, 1985, when once any product in relation to the products thereunder is subjected to a treatment so as to render it a marketable product, the Assessee is liable to pay the duty.

The Counsel for APL relies on Indian Oil Corporation Ltd. v. Collector of Central Excise Baroda 2006 (202) E.L.T. 37 (S.C.) and CCE Hyderabad v. Novapan Industries Ltd. 2007 (209) E.L.T. 161 (S.C.) and submits thast when the issue of excisability of spent solvent is already decided in the earlier cases in respect of the same Assessee or when a similar question is decided by the Commissioner (Appeals) or the CESTAT, the department, having not filed an appeal against the earlier judgment, cannot reagitate the matter. He also relies on various judgments in Collector, Central Excise, Bombay Vs. S.D. Fine Chemicals Pvt. Ltd., , Collector of Central Excise, Baroda Vs. United Phosphorus Ltd., , Commissioner of Central Excise, Chandigarh-I and Collector of Central Excise, Chandigarh Vs. Markfed Vanaspati and Allied Industries and Others, , Collector of Central Excise, Patna Vs. Tata Iron and Steel Co. Ltd., and CCE Hyderabad-III v. Natco Pharma Ltd. 2007 (208) E.L.T. 573 (Tri.) and contends that the spent solvent does not satisfy the twin tests laid down by the Supreme Court in Markfed Vanaspati and Allied Industries and S.D. Fine Chemicals Ltd., and, therefore, no interference is called for.

Two issues arise for consideration. First, whether the department, having accepted the principle in the earlier case, can be permitted to take contra stand in subsequent cases. Secondly, whether the resultant spent solvent in the manufacturing activity of APL is liable to duty in view of Note-11 under Chapter 29 of the Central Excise Tariff Act. We may make it clear that if the answer to the first question is in the negative, there is no need for this Court to go into the second aspect of the matter.

The first question is no more res integra. It is well settled. To avoid burdening this judgment with precedents, we need to excerpt only from Indian Oil Corporation Ltd., wherein it was held.

The learned Additional Solicitor General has fairly conceded that against the order passed by the Tribunal in the case of 2000 (68) ECC 346 , no appeal was preferred by the department and the said order has attained finality. Since no appeal was preferred against the order passed by the Tribunal in Hindustan Petroleum Corporation Ltd., and the same has become final, the department is not entitled to raise the same point in other cases in view of the decisions of this Court in Union of India (UOI) and Ors. v. Kaumudini Narayan Dalai and Anr. (2001) 10 S.C.C. 231 ; Collector of Central Excise, Pune Vs. Tata Engineering and Locomatives Co. Ltd., , Birla Corporation Ltd. Vs. Commnr. of Central Excise, and Jayaswals Neco Ltd. v. Commissioner of Central Excise, Nagpur 2006 (195) E.L.T. 142 (S.C), wherein it has been held that if no appeal is filed against an earlier order of the earlier appeal involving the identical issue was not pressed by the revenue, the revenue is not entitled to press the other appeals involving the same question. In Birla Corporation Ltd., this Court observed as follows:

In the instant case the same question arises for consideration and the facts are almost identical. We cannot permit the Revenue to take a different stand in this case. The earlier appeal involving identical issue was not pressed and was, therefore, dismissed. The Respondent having taken a conscious decision to accept the principles laid down in Pepsico India Holdings Ltd., 2001 (130) E.L.T. 193, cannot be permitted to take the opposite stand in this case. If we were to permit them to do so, the law will be in a state of confusion and will place the authorities as well as the assesses in a quandary. Birla Corporation Ltd. (supra) is being followed consistently.

Since the point involved in the present case is identical to the point involved in Hindustan Petroleum Ltd., (supra) and the department having accepted the principle laid down in Hindustan Petroleum Corporation Ltd., (supra), the department cannot be permitted to take a different stand in the present appeals.

Yet again, in Novapan Industries Ltd., following Birla Corporation Ltd., v. CCE and Jayaswals Neco Ltd., v. CCE Nagpur the SC reiterated the law that, "the department having accepted the principles laid down in the earlier case cannot be permitted to take a contra stand in subsequent cases.

In CCE Hyderabad v. Aurobindo Pharma Ltd. the learned Tribunal considered the question, whether spent solvent (spent methanol, in that case) is liable to duty. It was held as follows.

On a careful consideration, we notice from the extracted order of the Commissioner v. Herren Drugs and Pharmaceutical Ltd., Order-in-Appeal No. 99/2005, dated 28-6-2005, that the Commissioner has examined the issue in depth and in detail. It has been clearly brought out that the spent solvents had already been utilized in the factory and latter it had undergone further purification for reuse. The excess spent solvents were sold to the outsiders, as it had lost its value and therefore, what was sold was not new goods but only spent solvents which had undergone certain purification process. Such purification process of chemicals has been held to be not a process of manufacture as held in the case of S.D. Fine Chem, this issue has been affirmed by the Supreme Court. The Tribunal ruling in the case of 2005 (129) ECR 1 67 held that recovery of caustic soda from spent caustic soda lye by increasing the concentration of spent caustic soda lye does not amount to manufacture inasmuch as caustic soda itself was initial product used for mercering the fabrics.

Therefore, the department accepted the Assessee''s contention that at the relevant period the spent solvent is not a marketable product after process of manufacture. The question now - we are afraid - cannot be reagitated on the strength of the ratio in Birla Corporation Ltd., which received approval in Indian Oil Corporation Ltd. and Novapan Industries Ltd.

These appeals fail and are, accordingly, dismissed. No costs.