Custom, Excise & Service Tax Tribunal
(India) Ltd vs Cce-Chandigarh on 18 February, 2015
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
R.K. PURAM, WEST BLOCK NO. 2, NEW DELHI-110066
COURT NO. III
Date of hearing: 18/2/2015
Appeal No. E/76 and E/409/2006-EX [DB]
[Arising out of Order-in-Original No. 40-41/CE/2005 dated 29.09.2005 passed by CCE-Chandigarh]
1.
Whether Press Reporter may be allowed to see the Order for Publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2.
Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3.
Whether their Lordships wish to see the fair copy of the order?
4.
Whether order is to be circulated to the Department Authorities?
M/s. RGR Pharmaceuticals
Derabassi/Ms. Nicholas Piramal
(India) Ltd. Appellant
Vs.
CCE-Chandigarh Respondent
Appearance: Shri B.L. Narsimhan, Advocate for the appellant Shri M.S. Negi, DR for the respondent Coram: Honble Shri Rakesh Kumar, Member (Technical) Honble Shri Ashok Jindal, Member (Judicial) Final Order No. 50727-50728/2015 Per: Ashok Jindal The appellants are in appeals against the impugned order demanding duty from M/s. RGR Pharmaceuticals ALS Derabassi and imposing penalty on both the appellants.
2. The facts of the case are that the appellant RGR is a job worker of the medicaments of M/s. Nicholas Pharmaceuticals (India) Ltd. (NPIL). RGR is manufacturing goods and clearing the goods and paying duty to their NPIL on the value arrived as per the formula in the case of Ujagar Prints Vs. Union of India reported in 1989 (39) ELT 493 Supreme Court, i.e., cost plus job charges. An investigation was conducted and it was found that on the basis of agreement between the parties, the licence holder is NPIL and on behalf of NPIL, RGR is manufacturing the goods only for NPIL of these products. On the packets of the product, it is also mentioned that the goods manufacture by NPIL Derabassi address of RGR. In these circumstances, it was concluded that the real manufacturer is NPIL. Consequently the duty is payable by the appellant, RGR, at the value on which NPIL sold the goods in market. In these set of facts, 2 show cause notices were issued to the appellants demanding duty on the ground of under valuation of goods, also proposed penalty on the appellants. The show cause notices were adjudicated, demands were confirmed against the RGR at the selling price of NPIL along with interest and penalty on both the appellants were imposed.
3. Aggrieved from the said order, the appellants are before us.
4. Ld. Counsel for the appellants drew our attention to the impugned order wherein the Ld. Commissioner has held that the manufacturer in this case is M/s. NPIL. He further submits that when the manufacturer is NPIL, therefore, duty cannot be demanded from RGR. In these circumstances, he prayed impugned order be set aside. He further submits that, in fact, RGR are the manufacturer/job worker and undertaken the activity on job basis independently for NPIL. As per the agreement appellant, RGR, is the manufacturer and NPIL is the principle thereof. In these circumstances, duty is payable by RGR.
5. He also submits that RGR is paying duty on the value arrived at cost plus job charges as per the formula determined by the Apex Court in the case of Ujagar Prints Vs. Union of India. Therefore, duty cannot be demanded from RGR at the selling price of NPIL. In these circumstances, impugned order is set aside.
6. On the other hand, ld. DR opposes the contention of the ld. Counsel and submits that in this case as per the agreement, although they are working on principle to principle basis but the authorize representative of M/s. RGR in his statement has submitted that they are manufacturing goods only for NPIL. Moreover, the manufacturer shows on the packets of the goods is manufactured by NPIL. Therefore, NPIL is the real manufacturer and on the selling price of NPIL, duty has to be demanded. He further submits that loan licence were also in the name of RGR on the account of NPIL. Therefore, duty is rightly demandable from M/s. RGR on the selling price of NPIL.
7. Heard both the sides and considered the submissions in detail.
8. We find that in this case, RGR is manufacturing goods on principle to principle basis. Moreover, they are manufacturing goods on behalf of the NPIL but they cannot be said as they are not manufacturer and NPIL is the real manufacturer in the light of decision of this Tribunal in the case of Glenmark Pharmaceuticals Limited reported in 2008 (224) ELT 267 Tri-Mumbai wherein this Tribunal has observed as under:
We find that it has been admitted that facts and circumstances of the case including the terms of agreement are similar to the one to involving in the case of Cosme Remedies wherein after analyzing several decision it was clearly held that unless there is an evidence to the effect that the premises of the job worker has been hired shiftwise or otherwise by the raw material supplier and the goods are manufactured under the control and supervision of the raw material supplier, the raw material supplier cannot be considered as a manufacturer. In the present case no evidence has been brought out on record to show that the premises of the job workers were so hired nor there is any evidence to show that the goods were manufactured under the complete control and supervision of the raw material supplier. Merely giving manufacturing instructions, manufacturing programme and specifications of the medicines does not mean that the goods were manufactured under the control and supervision of M/s. Glenmark Pharmaceutivals unless there is evidence to show that the staff was completely lent to M/s. Glenmark Pharmaceuticals and their salaries were paid by M/s. Glenmark Pharmaceuticals and they were accountable to M/s. Glenmark Pharmaceuticals and not to M/s. Niramay Pharma. In the absence of any such evidence ewe follow the decision of Gujarat High Court, in the case of M/s. indica Laboratories, Lupin Laboratories (P) Ltd., Dolphin Laboratories Ltd., Remidex Pharma Ltd. and Cosme Remedies Ltd. and hold that M/s. Glenmark Pharmaceuticals cannot be considered as the manufacturer and duty ahs been rightly paid on the basis of cost of production plus manufacturing expenses including manufacturer profit as held by the Honble Supreme Court in the case of Ujagar Prints. The other plea that medicines were not marketable at the premises of M/s. NPPL as they do not have licence to sell is not maintainable as this was neither a ground in the show cause notice nor is there any finding on that.
9. We further, find that in the case of Dolphin Laboratories Limited reported on 2005 (185) ELT 206 Tribunal Delhi against this order Tribunal has held as under:
We also agree with the learned Advocate that the Revenue has not brought on record any material to show that M/s. Ranbaxy were supervising and controlling the manufacture in the premises of the Appellants. The provision in Agreement is to make available all facilities to Ranbaxy to inspect, audit and take samples for the purpose of analysis and to ascertain the quality and other specification of the Medicines does not make M/s. Ranbaxy as a manufacturer. On the other hand the agreement makes it clear that for the failure of batches, the appellants would be liable to pay the cost of all inputs, raw materials and packing material. This clearly goes to show that eh appellants are manufacturing the goods independently and not under the control and supervision of M/s. Ranbaxy. In similar facts in the case of Mayo India., Ltd., where the appellants were getting manufacture the medicines as loan licensee out of raw materials supplied by them as per their specifications requirement and bearing their trade mark and brand name, the Tribunal has held that the terms and conditions of the agreement reveal that the transactions between the appellants and the manufacturers of the medicines was on principal to principal basis and that the question whether the producer is or is not the owner of goods is not determinative of the liability and it is now well settled law that job worker using his own machinery and labour force and not supplier of raw material is to be considered manufacturer of goods. As the appellants are manufacturing the impugned goods on job work, the assessable value has the appellants are manufacturing the impugned goods on job work, the assessable value has to be determined for the purpose of levy and collection of duty on the basis of principles laid down by the Supreme Court in the case of Ujagar Prints, 1989 (39) ELT 493 (S.C.). It is not the case of Revenue that the value has not been ascertained by the appellants accordingly. The Tribunal has also held in many cases, such as Tara Industries Ltd. Vs. CCE-2003 (161) ELT 758 (T)-2003 (57) RLT 623 that goods produced on job work basis are required to be valued according to the rule laid down by the Apex Courts judgment in the case of Ujagar Prints Ltd.. The Tribunal in the said decision has also referred to Boards Circular No. 619/10/2002-C.X., dated 19-2-2002 wherein it was clarified that under the new valuation provisions, there is no departure from the principles laid down by the Apex Court in Ujagar Prints and Pawan Biscuit Co. P. Ltd.-2000 (120) ELT 24 (S.C.). The Board further clarified that In other words , after 1/7/2000, in respect of goods manufacture on job work basis valuation would be governed by Rule 11 of the new Valuation Rules of 2000 read with Rule 6 with the above two decisions of the Apex Court..
10. On going through the decisions mentioned here in above we hold that in this case, manufacturer is RGR and NPIL is not the real manufacturer. RGR is discharging their duty liability on cost plus job work charges as per the formula prescribed by the Apex Court in the case of Ujagar Prints considering and also as per the CBEC Circular no. 619/10/2002 Central Excise dated 19/2/2002, duty demand against RGR on the selling price of NPIL is not sustainable.
11. In view of these findings, we set aside the impugned order and also hold that as appellant RGR has paid duty correctly, therefore, penalty on both the appellants is not imposable. Accordingly, impugned order is set aside. Appeals are allowed with consequential relief if any.
(Rakesh Kumar) Ashok Jindal
Member (Technical) Member (Judicial)
RITU