By TIOL News Service

AHMEDABAD, DEC 24, 2015: THE petitioner company 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. The departmental officers entertained a view that washing of clay with acid resulted into "activated clay" which was chargeable to excise duty. The petitioner went in appeal before the Commissioner (Appeals) who, 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 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, the Commissioner (Appeals) decided the appeals filed against the orders of the Additional Commissioner and directed that in view of the conflicting test reports, it would be appropriate to send both the reports to the Chief Chemist of CRCL, New Delhi.

Again, the Additional Commissioner confirmed the demand and the petitioner filed appeal before the CCE(A). This time, the CCE(A) dismissed the appeals. However, the Tribunal remanded the matter to the original authority to strictly follow the remand directions of the order of Commissioner (A) passed on 12.07.2006.

Before the Joint Commissioner, the Petitioner requested that they may be allowed to cross examine the Chief Chemist, CRCL as all the issues and evidence were not referred to the Chief Chemist, CRCL. However, the Joint Commissioner straightaway passed an adjudication order confirming the demand of excise duty with interest and penalty without affording any opportunity to the petitioners to cross-examine the Chief Chemist, which is impugned in the present Writ Petition.

After hearing both sides, the High Court held:

++ Reading the communication by the Joint Commissioner in juxtaposition with the directions issued by the Commissioner (Appeals) in the order dated 12th July, 2006, makes it amply clear that while opinion of the Chief Chemist has been called for pursuant to the directions issued by the Commissioner (Appeals), the true purport of the directions issued by the Commissioner (Appeals) has not been conveyed to the Chief Chemist. Under the circumstances, the Chief Chemist has not applied his mind to the matter in the light of the directions issued by the Commissioner (Appeals). The adjudicating authority, having regard to the directions issued by the Commissioner (Appeals) was required to furnish the operative part of the order passed by the Commissioner (Appeals) to the extent of the directions issued by him as well as the supporting documents, namely, the two reports of the different chemical examiners of the same laboratory as well as the documents furnished by the petitioner to the adjudicating authority in support of its case were also required to be forwarded to the Chief Chemist. While from the affidavit-in-reply as well as the impugned order, it appears that the said documents have been forwarded to the Chief Chemist, however, in the absence of the specific directions issued by the Commissioner (Appeals) being brought to the notice of the Chief Chemist, the report does not appear to have been prepared keeping the said parameters in mind. In these circumstances, the directions issued by the Commissioner (Appeals) have not been observed in letter and spirit by the adjudicating authority.

++ The request of the petitioner to refer the matter to the Chief Chemist to submit a report as well as the request to cross-examine the Chief Chemist has been turned down on the ground that it was an attempt to evade the liability to pay central excise duty and the request for personal hearing has also been ignored. Non grant of opportunity of cross-examination is violative of the principles of natural justice. Moreover, no opportunity of personal hearing has been granted despite specific request having been made in that regard. The adjudicating authority, by not complying with the directions issued by the Commissioner (Appeals) in true letter and spirit and by not complying with the principles of natural justice has needlessly given rise to another round of proceedings.