Small scale exemption for loan licencee upheld where no independent factory was required under the governing notification.

A loan licencee manufacturing pharmaceutical products in another manufacturer's factory, without owning an independent unit, was treated as eligible for small scale exemption under the successor notification because the governing exemption had to be read consistently with the settled position under the earlier notification and the applicable precedent did not require factory ownership. In remand, the authorities could not depart from the interpretation already adopted by the appellate remand order on the same issue. The contrary view taken in remand was therefore impermissible, the duty demand was set aside, and consequential relief followed.

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Issues: (i) Whether a loan licencee manufacturing pharmaceutical products in another manufacturer's factory, without owning a factory of its own, was eligible for small scale exemption under Notification No. 1/93-C.E. as the successor to Notification No. 175/86-C.E.; (ii) whether the authorities in remand proceedings could take a view contrary to the interpretation already placed on the exemption by the remanding appellate order.

Issue (i): Whether a loan licencee manufacturing pharmaceutical products in another manufacturer's factory, without owning a factory of its own, was eligible for small scale exemption under Notification No. 1/93-C.E. as the successor to Notification No. 175/86-C.E.

Analysis: The exemption under the successor notification had to be read in the light of the legal position already settled for the earlier notification. The loan licencee had no factory of its own, but the earlier Gujarat High Court ruling had treated such loan licencees as covered by the exemption. The successor notification did not justify a different result on the same legal question.

Conclusion: The loan licencee was eligible for the small scale exemption and the duty demand was not sustainable.

Issue (ii): Whether the authorities in remand proceedings could take a view contrary to the interpretation already placed on the exemption by the remanding appellate order.

Analysis: The remanding appellate order had proceeded on the basis that the Gujarat High Court ruling governed the issue and had accepted that ownership of an independent manufacturing unit was not a precondition. In the remand proceedings, a contrary view could not be adopted when the issue had already been settled for the purpose of the remand.

Conclusion: The contrary view taken in remand was impermissible.

Final Conclusion: The demand was set aside and the appellant obtained consequential relief.

Ratio Decidendi: A loan licencee manufacturing pharmaceutical products in another unit is entitled to small scale exemption where the governing notification, read in light of the controlling precedent, does not require ownership of an independent factory.

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