TaxTMI 
TaxTMI 
2006 (3) TMI 564
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....Drug Licensing authorities and the said medicaments were manufactured by the loan licensees using the factory premises, equipments and staff of the job workers and all records were maintained by the job workers on account of the loan licensees. From these facts and the agreement between the loan licensees and the job worker and in view of the terms of loan licenses and the provisions of Drugs and Cosmetics Act, 1940 along with indication as they appeared on the packaging materials/labour and other evidences as discussed in the notices issued, it appeared that the actual manufacturer in these cases was loan licensee and not the job worker, it also appeared that the loan licensee who got the medicament manufactured through such job workers have evaded Central Excise duty by determining the value with reference to the raw materials cost plus processing charges, relying upon the Hon'ble Supreme Court judgment in the case of M/s. Ujjagar Prints [1988 (38) E.L.T. 535 (S.C.)]. It was the contention of the Revenue that Central Excise duty should have been paid on the value with reference to the selling price of the said medicament by such loan licensee. 2. 25 Show Cause Notices which were....
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....nufactured on account of loan licensee taking infrastructure of job worker on loan and all the documents were maintained by the job worker on loan licensee's account. The loan licensee who were referred to as the "Marketing Company" in the said agreement did not possess any other license from any "Licensing Authority" to sell or distribute in wholesale the "Said Medicaments" except the loan license to manufacture for sale or distribute the "Said Medicaments". (g) All raw materials and packaging materials were supplied by the loan licensee and the job worker did not use any raw material or packaging material of their own. The same was always under the ownership of loan licensee and even hypothecated to the banks and insured by the loan licensee. (h) The packing and labels of the medicaments clearly show the loan licensee as the manufacturer at the location of the job workers factory and it does not contain any mention of the name of the job worker. (i) The balance sheets of both job workers and loan licensee reveal that it is not the job worker but the loan licensees, who have shown these medicaments in th....
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....(a) of the Central Excise Act 1944 and the Valuation Rules. Therefore was required to be determined as per the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 which cover the situation in the present case to apply Rule 7 of the Valuation Rules and held that duty was required to be paid on the normal transaction value of the said goods sold from such other place and not on the basis of costing plus processing charges. (d) Considering that the CBEC Circular No. 619/10/2002-CX dated 19-2-2002 issued under F.No. 6/47/2001-CX-1 clarifying that even after 1-7-2000, the goods manufactured on job work basis of the principles laid down by the Supreme Court case of Ujjagar Prints Ltd. was applicable in normal job work cases and the decision regarding medicaments was different from the position as regards products like biscuits and fabrics he has not relied upon the Board's circular. (e) In view of his findings, he held that the duty demand on the job worker does not stand and the demand of duty will have to be made on the loan licensee and as regards the invocation of the extended period, he held that the assessee....
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....rmined and the Tribunal after considering various provisions of the Central Excise Act and the definition of 'sale' concluded that the appellant i.e. M/s Pawan Biscuits Co. Pvt. Ltd. was an agent of M/s. Britannia Industries Ltd. and was liable to pay duty on the price at which Britannia Industries Ltd. sold the goods in the open market and rejected the appeal of M/s. Pawan Biscuit Co. Pvt. Ltd. The Apex Court, in appeal, vide order reported in 2000 (120) E.L.T. 24 (S.C.), did not share the view of this Tribunal and considering the law as settled by the Apex Court's Constitutional Bench in the case of Ujjagar Prints and other - 1988 (38) E.L.T. 535 (S.C.) and 1989 (39) E.L.T. 493 (S.C.) held : "16. The present case is similar to Ujjagar Print's case. In Ujagar Prints' case, it was grey cloth which was given to the processor whereas in the present case it was the raw material for the manufacture of biscuits given to the appellant. After the biscuits are made, they are given back to or are delivered under the instructions of Britannia. The appellant was entitled to receive processing charges which include its expenses plus profits for the purpose of determining the excise value. Ho....
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.... provisions of Drugs and Cosmetics, Rules and in the job worker's factory [as referred in the order of Ld. Member (Technical)], have to be considered as independent manufacturer under the Central Excise Act, or the job worker, in whose factory they have manufactured the goods by taking his factory on loan basis, has to be considered as the manufacturer. In my views the dispute on the valuation of the medicines would mainly and solely is dependent upon the said fact. 7. The Commissioner vide his impugned order has concluded on the basis of evidences in the form of proposal letter of the loan licensee to the job worker, acceptance by the job work, terms of the loan licence, the provisions of Drugs and Cosmetics Act, the fact of taking on loan the premises and infrastructure of the job worker, the manner of maintaining a records, as accounts and balance sheet, the description on the labels and packings, the responsibility regarding quality of the product that the loan licence holder are independent manufacturers. In fact I find that the fact of holding a loan licence in terms of Rule 69A of the Drugs & Cosmetic Rules, 1945 for manufacture of medicines has not been disputed by the app....
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.... has held that normal transaction value of the goods is the correct assessable value and has rejected the appellants claim of arriving at assessable value on the basis of stock of raw material plus processing charges. 11. I do not find any infirmity in the above view of the adjudicating authority. The Hon'ble Supreme Court's decision in the case of Ujjagar Prints and Pawan Biscuits has laid down the guide lines for arriving at the assessable value of the final product where the final product was being manufactured on job work basis out of the raw material supplied by another person and by charging job charges etc. In the present proceedings before us it is not a simple case of supply of raw material to the job worker for conversion into final product on payment of job charges. As already discussed loan licences are independent manufacture, manufacturing the medicaments on there own account. The only difference that instead of having their own factory for manufacturing the medicines, they are utilizing the premises of another person, who is having a fully equipped factory. As such the ratio laid down in the case of Ujagar Prints or Pawan Biscuits Pvt. Ltd. will not apply to the fac....
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.... expenses, while computing the assessable value, which stands rejected by the adjudicating authority on the ground of non furnishing of data. However. I am of the view that the assessable value is to be arrived at after allowing admissible deductions for which the appellant should be given an opportunity. Accordingly the assessable value should be redetermined after allowing the admissible deductions available under the law and subject to production of evidence by the appellant and demands of duties to be confirmed accordingly. Appeals are disposed of in above terms. Sd/ (Archana Wadhwa) Member (Judicial) DIFFERENCE OF OPINION 16. Whether the appeals are to be allowed as held by Member (Technical) or the same have to be rejected, but quantification of demand has to be done after allowing admissible deduction, as held by Member (Judicial). Sd/ (S.S.Sekhon) Member(Technial) dated 27-3-06 Sd/ (Archana Wadhwa) Member (Judicial) dated 27-3-06 17. [Order per : K.K. Agarwal, Member (T)]. - I have perused the order passed by Member (Technical) Shri S.S. Sekhon and Member (Judicial) Mrs. Archana Wadhwa and the difference of opinion referred to me. 18. The above or....
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....oods." It was further held that "I am to respectfully follow the decision of the Tribunal in the True Chem Pharma reported in 1991 (56) E.L.T. 690 (Tribunal) in deciding the question posed before me. Going by this decision, I am to hold that in absence of any evidence brought out by Revenue to show that Lupin Laboratories engaged the factory of M/s. Jay chem Product on shift basis and produced the drugs under their own control or supervision, they cannot be held be manufacturer. M/s. JP only can be construed to be manufacturer." Thus it was held that the ratio of Indica Laboratories judgment was inapplicable as the test of control and supervision had not been made in a given case by the tribunal by producing cogent evidence in this behalf. 23 They referred to the various clauses of the agreement entered into between job worker and the loan licensee which makes it clear that the job workers were independently, carrying out the manufacture of said medicaments at their premises and were in fact responsible for ensuring that the said medicines conform to the prescribed quality of standards as also applicable laws. Clause 3 of the agreement states that the manufacturer shall foll....
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.... Yadav, on the other hand, referred to the decision of the Hon'ble Supreme Court and its clarificatory order in Ujjagar Prints case reported at 1988 (38) E.L.T. 535 (SC) and submitted that as per this decision over and above the value of raw material and job work charges, manufacturing profit and expenses are required to be added and these manufacturing profit and expenses are that of the supplier of the raw material and what is prohibited to be included is trader's profit which meant that profit or expenses of the trader only cannot be added and since the first sale takes place from the hands of raw material supplier only; the profit and expenses of a raw material supplier can be added. 27 I have considered the submissions. I find that the learned DRs contention goes beyond the point of reference as the Hon'ble Supreme Court's decision in the Ujjagar Printing case has been interpreted by them in their own way inspite of a catena of judgments to the effect. This decision means that the value is to be arrived on the basis of cost of production plus job worker charges including job worker profit. I therefore do not consider necessary to deal with the contention raised by the DRs. 2....