The court emphasized the twin tests of manufacture and marketability, holding that the revenue failed to establish that the petitioner manufactures blank CDs/DVDs or that they are marketable. The court also considered the petitioner's previous bribery complaint as a possible motive behind the show cause notices.

BADAR DURREZ AHMED, J.

1. These writ petitions raise common issues and are, therefore being disposed of by this common judgment. WP(C) 13231/2009 pertains to the period March, 2005 to March, 2009, whereas WP(C) 8165/2011 pertains to the period April, 2009 to February 2011. In WP(C) 13231/2009, the challenge is to the show cause notice dated 05.11.2009 as also the adjudication order dated 24.09.2010, whereas in WP(C) 8165/2011, the challenge is to the show cause notice dated 23.09.2011, there being no adjudication order in this case. We shall refer to the facts of WP(C) 13231/2009 for the sake of convenience.

2. Initially, WP(C) 13231/2009 had been filed challenging the show cause notice dated 05.11.2009. Subsequently, an order was passed by this court on 14.05.2010, whereby this court felt that the ends of justice would be served by directing the petitioner to file his reply to the said show cause notice dated 05.11.2009 within three weeks and, on such reply being filed, the adjudicating authority would grant an opportunity of hearing to the petitioner and / or his authorized representative. It was further directed that thereafter, the adjudicating authority shall pass a reasoned order deciding as to whether to confirm the allegations mentioned in the show cause notice or to reject the same. It was also directed that the adjudication order-inoriginal, which may be passed, shall not be given effect to till further orders from this court. Pursuant thereto, the petitioner filed its reply on 03.06.2010. This was followed by a personal hearing and, ultimately, by the adjudication order dated 24.09.2010. Thereafter, the petitioner sought permission of this court, which was granted, to amend the writ petition. The amended writ petition challenges both the show cause notice dated 05.11.2009 and adjudication order dated 24.09.2010.

3. The case against the petitioner is that during the process of manufacturing of prerecorded audio compact discs, video compact discs and DVDs, “first blank CDs/DVDs are manufactured and thereafter data is transferred and recorded on the said blank CDs/VCDs/DVDs”. It is also alleged that as the petitioner was availing the benefit of exemption from payment of Central Excise Duty under Notification No.6/2006-CE dated 01.03.2006 in respect of pre-recorded audio CDs/DVDs/VCDs, CentralExcise Duty at the appropriate rate was chargeable on the blank prerecorded audio CDs/VCDs/DVDs which allegedly came into existence at the intermediate stage during the process of manufacturing of pre-recorded audio CDs/VCDs/DVDs. It is also the case against the petitioner that as it had suppressed these facts allegedly with a view to evade payment of appropriate Central Excise Duty, the extended period of limitation was invocable and that the petitioner was also liable for penalties.

4. Briefly stated, the case of the petitioner is that it does not manufacture blank audio CDs/VCDs/DVDs, whether, as a final product or as an intermediate product. Therefore, there is no question of levying any Excise Duty on a non-existent product. It is also the case of the petitioner that the revenue has not discharged its burden by bringing any material on record to show that the petitioner’s factory was even capable of manufacturing blank audio CDs/VCDs/DVDs or that it had ever done so. On the contrary, the entire process of manufacture has been explained by the petitioner, stage by stage, with photographs, and expert opinions have also been placed on record which have not been controverted by the revenue. When no blank audio CD/VCD/DVD comes into existence during the manufacturing process of pre-recorded audio CDs/VCDs/DVDs, there is no question of there being any liability towards Central Excise Duty on such imagined blank audio CDs/VCDs/DVDs.

5. Before examining the rival contentions, it would be necessary to place on record some facts. The petitioner had pointed out that in the year 2007, some officers of the Central Excise Depa