Customs, Excise and Gold Tribunal - Bangalore
Remidex Pharma Ltd. vs Cce on 1 July, 2005
Equivalent citations: 2006(194)ELT228(TRI-BANG)
ORDER T.K. Jayaraman, Member (T)
1. M/s Remidex Pharma (P) Ltd., Bangalore (Appellants) are manufacturers of P or P medicaments. They manufacture the goods on their own behalf as well as on behalf of others with effect from 7.2.03. The appellants opted for the status of job worker of M/s USV Ltd., Mumbai. They intended to adopt the valuation of goods manufactured by M/s USV Ltd., in terms of Board Circular No 619/10/02 dated 19.2.02, according to which, the value of the goods manufactured on job work basis is required to be determined in terms of the goods manufactured on job work basis is required to be determined in terms of the ratio laid down by the Hon'ble Supreme Court in the case of M/s Ujagar Prints Ltd. but, Revenue proceeded against the appellants on the basis of the decision of Hon'ble High Court of Gujarath in the case of Indica Lab Pvt Ltd., v. UOI reported in 1990 (50) ELT 210 (Guj) wherein it was held that in respect of P or P medicaments manufactured on loan licence basis, only the loan licensee should be treated as the manufacturer. In the present case, M/s USV Ltd., Mumbai is the loan licensee. Hence, according to Revenue, duty should be discharged on the value adopted by M/s USV. Relying on the Indica judgement, the adjudicating authority demanded differential duty of Rs 1,64,88,674/- for the period from February 2003 to November 2003 under Section 11 A of the Central Excise Act 1944. The penalty of Rs 10 lakhs was imposed on the appellants under Rule 25 of the Central Excise Rules 2002. Interest in terms of Section 11 AB has also been demanded. It has also been held that the goods manufactured by the appellant on loan licence basis from M/s USV Ltd., Mumbai should be determined in terms of Section 4 of the Central Excise Act read with Rule 7 of the Central Excise Valuation Rules 2000 by taking into account the price on which such goods are sold by M/s USV Ltd., Mumbai. The appellant has strongly challenged the impugned order of the adjudicating authority.
2. Shri E.P. Bharucha Senior advocate and Shri N.P. Baxi advocate appeared on behalf of the appellants. Shri R.N. Viswanath learned DR appeared for the Revenue.
3. Learned advocates urged the following points.
i) In the impugned order, the Commissioner has held that M/s USV Mumbai are the manufacturers of the goods but the demand has not been made on them. On this ground alone, the impugned order is to be set aside.
ii) The issue is well settled by the judgement of the Hon'ble Supreme Court in the Ujagar Prints case and Pavan Biscuits case (2000 (120) ELT 24 SC) holding that in the case of job work, it was the job worker who was the manufacturer in the eyes of law and not the raw material supplier.
iii) As per the Ujagar prints case, decision, the cost of raw materials plus the cost of manufacture plus the job workers carried on private alone constitute the assessable value.
iv) The concept of loan licence arises under Drugs and Cosmetics Act and the Rules made there under and seen a concept under the Central Excise law.
v) The Commissioner ought to have appreciated that the test laid down by Indica laboratories case was of utmost importance namely that it contemplated first that the loan licensee hired on shift or shifts in the factory of the job worker and had the goods manufactured under their control and supervision.
vi) In view of the above, the Indica Lab decision will not be applicable if the goods were independently manufactured by the job worker using their own labour without the control and supervision of the supplier of raw material. As per clause 5.4 of the agreement between the appellants and USV the product in question would be manufactured by the appellants and that the appellant would carry out appropriate quality control of all the raw material, packing material work in process and the product to be processed and manufactured by the appellants. The Indica case has been considered by the Tribunal in the case of Lupin Laboratories v. Commissioner (2003 (162) ELT 803 (Tri-Del) wherein it was held that if the test of control and supervision had not been made in a given case, by the Department by producing cogent evidence in this behalf, the ratio of Indica lab case was inapplicable.
The above reasoning in Lupin lab had been followed by the Tribunal in the following decision.
1) SOL Pharmaceuticals Ltd., v. CCE (1992 (57) ELT 290 (T)
2) Nickson Pharmaceutical v. CCE (1998 (102) ELT 223 (T)
3) Mayo India Ltd., v. CCE (1999 (113) ELT 1036 (T)
4) Invinex Pharmaceuticals v. CCE (2000 (124) ELT 856 (T)
5) Ebers Pharmaceuticals Ltd., v. CCE (1999 (34) RLT 730)
6) Anuja Laboratories v. CCE (1999 (105) ELT 356 (T)
7) CCE v. Pharmacom Remedies (P) Ltd (2003 (156) ELT 934)
vii) The Revenue had failed to produce any evidence to establish that M/s USV were physically carrying out the manufacture of products in question at the appellants premises using their own labour or under their own control or supervision.
viii) In view of the Apex Court decision in the Pavan Biscuits case, the concept of additional control and the examination of the contract clause of the contract entered into by the raw material supplier and the process were not relevant in terms of the decision of the Hon'ble Tribunal in the case of ICI India Ltd., v. Commissioner (2000 (133) ELT 500 Tri-Bang). The appellants were manufacturers of the products in their factory premises with their work force and they had not at all rented or leased the said premises to USV which was contemplated in para 12 of the judgement in the Indica Lab case.
ix) The Commissioner ought to have appreciated that the hiring of shifts means that the labour force should have been that of USV and not of the appellants. It was not the department's case. Consequently, the Commissioner could not at all rely upon any of his judgement referred to in the impugned order.
x) The Commissioner erred in holding that the appellants were manufacturing medicines for other loan licensees on the basis of sale price of the loan licensees. Even if these were true by settled law, there was no estoppel in matters of taxation. The Commissioner erred in imposing a penalty of Rs 10 lakhs on the appellant in the absence of a malafide intention.
4. Learned SDR reiterated the points in the OIO. We have gone through the records of the case carefully. M/s USV Ltd Mumbai hold loan licence under the Cosmetics and Drugs Control Act. They supplied raw materials to the appellants. The appellants manufacture the required goods as per the specification of M/s USV and supplied to them for the above work. They get processing charges. There is an agreement between the appellants and M/s USV Bombay. On going through the agreement, we are convinced that the appellant is a job worker who carries out the entire manufacturing process in their factory after receiving raw materials from M/s USV. The agreement has got a termination clause also. According to Clause 13.2 cited, each party may terminate the agreement at any time by giving to either party three months notice in writing. The adjudicating authority has mainly relied on the Indica decision of the Gujarath High Court and held that M/s. USV are the manufacturers of the goods manufactured in the appellants premises. The Indica case, has been elaborately gone through in the Lupin Lab case. In the Lupin lab case, the Hon'ble Tribunal observed as follows "After considering the judgement of Indica Lab the bench consisting three member held that unless such loan licencees get their goods manufactured out of raw materials supplied by them by exercising supervision, control in another factory by hiring the factory on shift or shifts they can not be held to be manufacturer of medicines in the other factory", and even in the Indica case, Gujarath High Court after going into the drugs and Cosmetics Act and also Section 2(F) of the Central Excise Act has held as follows:-
"From the various other judgements of different high courts and the Supreme Court interpreting provisions of Section 2 f of the Act on the same line, in view of the aforesaid settled legal position and in the light of the provisions of the Central Excise Act and Rules, it must be held that the loan licensees are also manufacturers within the meaning of the term as envisaged by the said act and the rules. In other words, the court has held that the loan licensees are also the manufacturers. That means the court has not ruled out the possibility of the job worker also being a manufacturer. Therefore in our view, the Indica lab case, has not ruled that the loan licensee along is the manufacturer and not the job worker. Moreover, the decision of the Gujarat High Court in Indica case, relates to clubbing of clearances and availment of notification under SSI Scheme. In view of the Ujagar prints case, and Pavan Biscuits case, the valuation of goods cleared by job worker is well settled by Hon'ble Supreme Court. Therefore, Revenue cannot ignore the Supreme Court ruling in the valuation of goods cleared by job worker. Moreover, various courts and the Tribunals have held that the supplier of raw materials is not the manufacturer and it is only the job worker who is the manufacturer. In any case, if Revenue holds that M/s SUV are the real manufacturers, they should have demanded duty from them which they have not. On going through the contract, between the appellants and M/s USV, we find that there is no evidence to show that M/s USV the loan licencee had hired shifts in the premises of the appellants. Under these circumstance, the reliance of the Commissioner in the case of Indica is misplaced. Hence the OIO has no merits. Therefore, we allow the appeal with consequential relief.