Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise vs Relief Laboratories Pvt. Ltd on 7 June, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,WEST ZONAL BENCH AT MUMBAI COURT No. I APPEAL No.E/3243/05 (Arising out of Order-in-Appeal No.SVS/149-150/NGP-II/2005 dated 23/05/2005 passed by Commissioner of Central Excise & Customs (Appeals), Nagpur) For approval and signature: Honble Mr.M.V. Ravindran, Member (Judicial) Honble Mr. Raju, Member (Technical) 1. Whether Press Reporters may be allowed to see :No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it should be released under Rule 27 of the :Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether Their Lordships wish to see the fair copy :Seen of the Order? 4. Whether Order is to be circulated to the Departmental :Yes authorities? ========================================
Commissioner of Central Excise, Nagpur Appellant Vs. Relief Laboratories Pvt. Ltd., Respondent Appearance:
Shri.SV Nair, Supdt. (AR) for appellant Shri.Gajendra Jain, Advocate for respondent CORAM:
Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. Raju, Member (Technical) Date of Hearing : 07/06/2016 Date of Decision : 07/06/2016 ORDER NO Per: M.V. Ravindran
1. This appeal is filed by the Revenue against Order-in-Appeal No.SVS/149-150/NGP-II/2005 dated 23/05/2005 passed by Commissioner of Central Excise & Customs (Appeals), Nagpur.
2. Heard both sides and perused the records.
3. The issue involved in this case is regarding the valuation of goods manufactured by the respondent herein. The respondent is a manufacture of various pharmaceutical products and has also undertaken to produce medicaments on behalf of M/s.Maharashtra Antibiotics and Pharmaceuticals Ltd., (herein after referred to as MAPL) under loan license arrangements, as per in terms of an agreement/authorisation from MAPL. While manufacturing such goods of MAPL, the appellant has procured the raw materials himself and discharged the duty liability based upon the cost of production and the profit margin. The duty paying documents indicate that MAPL as a purchaser and the appellant as a supplier. Subsequently, MAPL clears the same pharmaceutical goods from their depot at higher price. It is the case of the Revenue that Central Excise duty needs to be discharged by the appellants on the prices at which MAPL sells the pharmaceutical goods to their dealers. To come to such conclusion, the adjudicating authority relied upon the contract entered by the appellant and MAPL and held that MAPL is a manufacturer of the goods. The first appellate authority after going through the entire contract and the memorandum of understanding between the appellant and MAPL reversed the order of the adjudicating authority and held in favour of the respondent herein.
4. On consideration of the submission made by the learned DR and perusal of the records, we find that the issue involved is regarding the valuation of the goods manufactured and cleared by the respondent. It is the case of the Revenue that the respondent has under valued the goods. We find no merit in the appeal filed by the Revenue for more than one reasons. Firstly, it is undisputed that the respondents herein is functioning loan license agreement from MAPL which permits them to manufacture of goods on behalf of MAPL. The respondent has done so as per the agreement entered by them with MAPL. The first appellate authority in his impugned order has recorded very detailed findings after considering the agreement which has been entered into by MAPL and the respondent. The specific findings which have bearing the entire issue are reproduced herein under:
(xii) CLAUSE 2 of the agreement is relevant spelling out the price mechanism. As per this clause the price of the product between the appellant and MAPL has to be such that there is a margin of 12% to MAPL which in effect means that the price to MAPL has to be less than 12% of MAPL price to their distributors. This mechanism is not a mere formality in fact this has been translated in to actual practice by them as is evident from the work sheet forming part of the SCN. This work sheet shows the difference of 15% to 16% between the price of MAPL to distributors and price to MAPL by the appellant No.1.
(xiv) There is neither any allegation nor any suggestion that the appellant No.1 has got any extra consideration from MAPL over and above the price quoted between them. There is no relationship between the appellants and MAPL so as to bring them in to the mischief of related persons under Section 4 of Excise Act. Whether in the circumstances existing between the appellant No.1 and MAPL the transactions should be considered as principle to principle or there is a case for adopting the price of MAPL for the purpose of duty has been dealt in many cases by various judicial forums to say that in such cases the transaction are to be treated principle to principle basis. The important being Merc Pharmaceuticals Vs. CCE Chandigarh 2005 (68) RLT 455 (CESTAT) (ii) CCE Mumbai Vs.Pharma Com Remedies Ltd. 2003 (156) 934 (iii) Taggas Industrial Development Ltd. Vs. CCE Kanpur 9 order No.777/88 dated 31/10/1988 in appeal No.E/1252/85-C)
(xv) Having regards to the aforesaid findings, I am to conclude that the real manufacturer in this case in terms of Section 2 (f) of Central Excise is M/s.RLPL (the appellant No.1) and the duty is to be charged on the cum duty price charged by the appellant from MAPL. This being the case, the duty since is already paid based on the price charged by the appellant No.1 to MAPL the demand on this count does not survive.
5. We find from the above reproduced findings as recorded by the first appellate authority are not controverted effectively by the Revenue in the grounds of appeal.
6. If that as it may, the similar issue came up before the Tribunal in the case of CCE Vs. Group Pharmaceuticals Ltd. 2010 (261) ELT 238 (Tri-Bang) as also in the case of Cosme Remedies Ltd. Vs. CCE 2006 (203) ELT 567 (Tri-Mum) wherein the Tribunal held in favour of the assessee holding that the loan licensee is a manufacturer and the value as per the contract entered into needs tobe considered as a normal value/transaction value. The judgement of the Cosme Remedies was taken in appeal by the Revenue before the Apex Court and their Lordship in Civil Appeal as disposed of by the judgement as reported in 2015 (318) ELT 545 (SC) by holding that manufacturing of the drugs by the loan licensee would tantamount that they are manufacturers.
7. In our considered view, the findings of the first appellate authority on the issue are no consonant with the law as the contract entered into by the respondent with MAPL was for the supply and sale of the pharmaceutical goods at pre-determined price during the relevant period normal price as well as transaction value were the requirement of the law for discharge of the Central Excise duty, which we find has been correctly applied in the case in hand.
8. In view of the foregoing, we do not find any merit in the appeal filed by the Revenue, the appeal is rejected.
(Operative part of the order pronounced in Court) (Raju) Member (Technical) (M.V. Ravindran) Member (Judicial) pj 1 5 Appeal No.E/3243/05