MR. AKIL KURESHI, J.

1. The petitioners have challenged the legality and validity of the show cause notice dated 1.8.2001 issued by the Commissioner of Central Excise, Surat, respondent No.2 herein. In the said notice, the petitioners have been 5 called upon to show cause why excise duty of Rs.28,01,63,832/- with interest should not be recovered from them on the goods, that is, D2 Aminobutanol Tartrate falling under Chapter S.H. 2942.00 of the Central Excise Tariff Act, 1985, illicitly manufactured and removed for captive consumption for manufacture of Ethambutol HCL of Chapter S.H. 2942.00 during the period from 23.7.1996 to 31.03.2001. The facts are peculiar and may be noted in some detail.

2. The petitioner No.1 is a Company registered under the Companies Act and is engaged in the business of manufacture of pharmaceutical drugs. One such Anti T.B. Drug manufactured by the petitioner No. 1 Company is Ethambutol Hydrochloride (hereinafter to be referred to as "the drug") falling under Chapter S.H. 2942.00 of the Central Excise Tariff Act, 1985. One of the inputs used by the petitioner in manufacture of such drug is D2 Aminobutanol Tartrate (hereinafter to be referred to as "the intermediate chemical"). Such intermediate chemical the petitioners manufactured in their own factories and used it for home consumption for production of the drug. The entire issue revolves around excisability of the intermediate chemical.

3. The Excise Department holding a belief that such intermediate chemical was exigible to excise duty, issued notice dated 14.12.1999 against the petitioners calling upon them to show cause why duty of excise at an appropriate rate should not be recovered from them on such intermediate chemical which according to the Department, was illicitly manufactured and removed for captive consumption during the period from 1.3.1986 to 26.2.1987. In such notice, the Department had set out the process undertaken by the petitioners for production of the drug with the use of the intermediate chemical. It was, therefore, contended that such intermediate chemical having been used for production of the final product, namely, the drug, and since the drug was exempt from payment of duty, the exemption notification No.217/1986 granting exemption to the input i.e. the intermediate product for home consumption, would not be available. The notice further referred to statements of the officers and employees of the petitioner No.1 Company to allege that there was illicit removal of the goods for home consumption and that, therefore, extended period of limitation for recovery of unpaid duty would be available.

4. The petitioners strongly opposed the show cause notice proceedings. They appeared before the Commissioner and contended that the intermediate chemical is not a stable product. It is also not marketable. In absence of any evidence on record to suggest that such intermediate chemical is a marketable product, the same would not be exigible to any duty of excise.

5. The Commissioner of Central Excise, in his order-in-original, held that intermediate chemical used captively in the production of the drug being unstable and not marketable, i.e., not capable of being sold in the market, nor known in the chemical world, would not fall within the definition of goods under Section 2(d) of the Central Excise Act. He, therefore, dropped the show cause notice proceedings by his order dated 17.9.1991.

6. The Department, aggrieved by such order of the Commissioner of Central Excise, appealed before the Customs, Excise & Gold Control Appellate Tribunal ("CEGAT" for short), in its order dated 15.6.1999, dismissed the revenue's appeal. The Tribunal noted that the Department had relied on the test results of the chemical examiner who had opined that the intermediate chemical can be considered as a well-defined single organic compound. The chemical analyzer was cross-examined by the Company in which he admitted that he had not conducted any test regar