TaxTMI 
TaxTMI 
2024 (8) TMI 1722
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.... dt.30.09.2011 2006-2011 - Rs.8,06,000/- 3 E/813/2012 No.37/2011 dt.30.09.2011 2006-2011 - Rs.8,06,000/- 4 E/814/2012 No.37/2011 dt.30.09.2011 2006-2011 - Rs.8,06,000/- 5 E/1271/2012 No.5/2012 dt.25.01.2012 2007-2010 Rs.68,01,595/- Rs.68,01,595/- 6 E/1288/2012 No.5/2012 dt.25.01.2012 2007-2010 - Rs.6,80,000/- 7 E/1289/2012 No.5/2012 dt.25.01.2012 2007-2010 - Rs.6,80,000/- 8 E/1290/2012 No.5/2012 dt.25.01.2012 2007-2010 - Rs.6,80,000/- 3. The facts common in all these appeals briefly are that the appellants M/s. Ivorychem India Pvt. Ltd. (hereinafter referred as M/s. Ivorychem) and M/s. A. G. VET Pharmachem (hereinafter referred as M/s. AG Vet) are registered with the Central Excise department for manufacture of Veterinary Medicaments falling under Chapter Heading 30 of Central Excise Tariff Act (CETA), 1985. The said goods were manufactured under Loan Licensee Agreement with M/s. Makam Pharmachem and were notified under Section 4A of the Central Excise Act, 1944 for Maximum Retail Price (MRP) based assessment. They had availed SSI benefit under Notification No.8/2....
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....s, whereas M/s. Makam Pharmachem manufactures Ectoparasites (Animal Healthcare Products). It is a partnership firm comprising of S/Shri M. S. Venkatachalapathy, M.S. Chandraprakash, M.S. Gopalakrishna as partners. M/s. Makam Pharmachem discharged duty on its clearances and had not availed exemption under Notification No.8/2003-CE dated 1.03.2003. M/s. Ivorychem India (P) Ltd. was started in 2006 and took on rent Shop No.A-281/1 from M/s. Makam Pharmachem. The composition of the said unit consists of following directors viz., S/Shri Rajeev Aiyappa, Akshata Uthappa, M.S. Venkatachalapathy, M.S. Chandraprakash, M.S. Gopalakrishna. M/s. AG Vet is located at A-281/2 and also manufactures Animal Healthcare Products on loan license basis. These are independent and separate legal entities. 4.1 As manufacturer of Animal Healthcare Products require a license from Drug Controller and since M/s. Makam Pharmachem had surplus manufacturing capacity, on approaching the Drug Controller with a request letters from M/s. Ivorychem, M/s. AG Vet and also from M/s. Makam Pharmachem to get the veterinary products manufactured in the factory of M/s. Makam Pharmachem as loan licensee, the Drug Controlle....
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.... (ii) Surface Graphics Pvt. Ltd. & Ors. Vs. CCE, Mumbai-III: 2000 (39) RLT 355 (T) (iii) S.K.N. Gas Appliances & Anr. Vs. CCE, New Delhi: 2000 (39) RLT 528 (T) (iv) P.K. Industries vs. CCE, Chandigarh: 2004 (163) ELT 204 (Tri.-Del.) 4.4 Further, he has submitted that the commonality of premises, telephone, shed, Directors cannot be a ground for treating the units as related for clubbing of clearances. In this connection, reliance is placed on the following decisions: (i) Vivomed Labs Pvt. Ltd. vs. CCE: 1991 (53) ELT 152 (T) confirmed by Supreme Court-1992 (62) ELT A119 (SC) (ii) Rang Udyog vs. CCE, Ahmedabad: 1996 (83) ELT 648 (T) confirmed by Supreme Court - 1999 (106) ELT A66 (SC) (iii) Gajanan Fabrics Distributors vs. CCE, Pune: 1997 (92) ELT 451 (S.C.) (iv) Padma Packages (P) Ltd., vs. CCE, Coimbatore: 1997 (90) E.L.Τ. 175 (T) (v) Spick-N-Span Steel Wools Pvt. Ltd. v. CCE., Nagpur: 2011(274) E.L.T. 568 (Tri. Mum.) 4.5 Further, he has submitted that it is a settled law that if there is an assignment of Trademark/Brand name in favour of the assessee, the assessee is entitled to the benefit of SSI Exemptio....
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.... on M/s. Ivorychem under Section 11AC of Central Excise Act (CEA), 1944 read with Rule 25 of Central Excise Rules (CER), 2002. For the same reasons, the penalties imposed on M/s. Makam Pharmachem, S/Shri M.S, Chandraprakash, M.S. Venkatachalapathy, under Rule 26 of CER, 2002 are also not sustainable in Law. The Appellants M/s. Ivorychem have paid voluntarily an amount of Rs. 15,35,794/-. 5. Per contra, the learned Authorised Representative (AR) for the Revenue has submitted that both the appellants are manufacturing medicaments on loan licensee basis in the premises of M/s. Makam Pharmachem. M/s. Makam Pharmachem's factory premise measures 50*200 sq. ft. and the medicaments are manufactured in their factory for M/s. AG Vet and M/s. Ivorychem on loan license basis. In the Mahazar, it is noted that the said factory has two stirring vessels, two storage tanks, four numbers of volumetric filling machines, a pouch filling machine, two shrink wrapping and packing lines, which are powered by one KPTCL electricity connection. During Mahazar proceedings on 23.06.2010, it was noticed that all manufacturing activities of both the appellants were carried out in the premises of M/s. Makam Ph....
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....(Products - Krimlin) (iv) M/s. TTK Healthcare - (Product - Lytik) (v) M/s. Concern Health Care - (Products - Amitraz) 5.2 M/s. Ivorychem entered into agreement with the following customers: (i) M/s. RFCL (ii) M/s. Ventex Animal Health India Ltd. (iii) M/s. Pfizer Health Products 5.3 From the agreements, it can be seen that the rights to use the brand names were extended to the appellants and as per the said agreements, brand names are owned by the customers. In the statement dated 15.09.2011/15.01.2012 of Shri M.S. Venkatachalapthy, it is made clear that these agreements gave them exclusive rights to manufacture and supply the goods back to the respective brand owners. From the agreement and the assignment deed, it is clear that though the brand name have been assigned to the appellants but it is mandatory in terms of the said agreement that the products manufactured with the said brand names are to be returned to the original brand name owners and to be cleared as per the conditions and directions/orders of brand name owners only. They have no freedom to sell the branded goods independently to other customers using the brand name.....
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....ification No.8/2003-CE dated 01.03.2003 during the relevant period from 2006-07 to 2010-11; (ii) Extended period of limitation applicable; and (iii) penalty is imposable on M/s. AG-Vet, M/s. Ivorychem and other Appellants. 8. Undisputed facts are that the appellants' premises were visited by the officers of the Department and Mahazar was drawn on 23.06.2010 regarding the activities carried in the factory premises of M/s. Makam Pharmachem and M/s. AG Vet and M/s. Ivorychem. On the basis of Mahazar and subsequent statements of various persons and other evidences, the Revenue issued show-cause notices to the appellants alleging that since the specified goods were manufactured on loan licensee basis only at the factory premises of M/s. Makam Pharmachem, the SSI exemption under Notification No.8/2003-CE dated 01.03.2003 has been wrongly availed by M/s. AG Vet and M/s. Ivorychem when the exemption limit of Rs.1.00 crores / Rs.1.50 crores as applicable had already exhausted by M/s. Makam Pharmachem for each of the Financial Year. The crux of the allegation of the department is that both the appellants are loan licensee holders under the Drugs and Cosmetics Rules, 1945 to manufacture Ve....
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....mmissioner analysing the gamut on evidences which we find more or less common in both the appeals, observed in Order-in-Original No.37/2011 dated 27.12.2011 relating to M/s. AG Vet has held as follows: "34.1 In this connection the admitted facts corroborated by evidence on record with regard to the utilisation of the factory of M/s. Makam are as follows: (i) The Mahazar drawn in the first instance on 23.6.2010 (Annexure A1) clearly records the fact that all the manufacturing activities of M/s. Ivorychem were carried out in the factory premises of M/s. Makam. The said Mahazar recorded as witnessed by the panchas indicated that M/s. Ivorychem did not have any separate premise or infrastructure (other than the factory and infrastructure of M/s. Makam) for the manufacture of medicaments. Further, it is also seen that only one power connection from M/s. KPTCL is available for the entire premise, which was registered in the name of M/s. Makam. (ii) The ground plan submitted to the department (Annexure A7) indicates that the premises at A 281 included the factories of M/s. Makam, M/s. Ivorychem and M/s. AG-Vet. They have also indicated the premises of M/s. Makam....
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....ng packing / sealing / weighing machineries belonged to M/s. Makam. The said fact is corroborated by Shri K. Hanumanthappa, Production Chemist of M/s. Makam, on 28.6.2010 (Annexure A4) that M/s. Makam were having the necessary infrastructure and a testing laboratory in the factory for the manufacture of medicaments. It is also seen that there was only one power connection obtained for the entire premises from KPTCL which was in the name of M/s. Makam and there were no separate power connections in the name of M/s. Ivorychem. (vi) The above facts have been corroborated and fully endorsed by Shri M. S. Venkatachalapathy, (Managing Partner of M/s. Makam) in his statements, dated 23.6.2010 [Annexure A2(1) to the SCN] and statement dated 26.7.2011 [Annexure A2(2) to the SCN] and Shri M. S. Chandraprakash (Partner of M/s. Makam) in his statements dated 28.6.2010 [Annexure A3(1)], and further statement dated 26.7.2011, [Annexure A3(2)] recorded under summons proceedings. The said partners in the said statements also confirmed the fact that M/s. Makam at A-281, 6th Main Road, 2nd Stage, Peenya Industrial Estate was registered with the Central Excise Department for the manufacture ....
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....1 dated 28.8.2010 (Annexure A9 to SCN) had clarified the fact that the manufacdture of veterinary medicaments was to take place in terms of the loan licensee issued under the Drugs and Cosmetics Rules, 1945 in the premises of M/s. Makam. The relevant portion of the clarification is reproduced below as follows:- (a) As per rule 69A of Drugs and Cosmetics Rules, 1945 a loan license means a license which a licensing authority may issue to an applicant who doesn't have his own arrangements for manufacture but who intends to avail the manufacturing facilities owned by a licensee in Form 25. M/s. Makam possesses license in Form 25. In this case, two firms decided to get the drugs manufactured on loan license with M/s. Makam. Since M/s. Ivorychem and M/s. Ivorychem are the loan licensees of M/s. Makam, they need to get their products manufactured, packed/labelled only in the premises of M/s. Makam and shall comply the conditions of License as stipulated under Rule 74-B of Drugs & Cosmetics Rules, 1945; (b) M/s. Ivorychem do not have their own manufacturing plants to manufacture drugs. It is therefore clear from the above facts corroborated by documentary evidenc....
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.... of license issued to manufacture the said Medicaments on Loan Licensee basis. The learned advocate referred to the individual Lease Agreements for availing the premises on rental basis and ground plan of each of the appellant to show that they are separate units, but however, that cannot in any manner rebut the allegation that the goods were manufactured only at the premises of M/s. Makam Pharmachem using the machinery installed in the said premises. 12. The next arguments advanced on behalf of the appellant is that each of the manufacturer i.e., M/s. Makam Pharmachem, M/s. AG Vet and M/s. Ivorychem as Loan Licensee is entitled to the prescribed SSI exemption limit of Rs.1.00 crore for the period 2006-07 and Rs.1.50 crores for the period 2007 to 2011. We find that the issue has been considered by the Hon'ble Gujarat High Court, in the case of Indica Laboratories Pvt. Ltd. vs. UOI: 1990 (50) ELT 210 (Guj.), in the context of SSI Exemption Notification No.175/1986-CE dated 01.03.1986, para materia with the Notification No.8/2003-CE dated 01.03.2003. 12.1 Briefly stated the facts of the said case [M/s. Indica Laboratories (supra)] are that the petitioners in their factories wer....
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....hen, but for para 2, both A and B would be entitled, as per para 1, to claim individual exemption on their respective first clearances of goods manufactured by them in the factory to the extent of Rs. 30 lakhs each but because of concept of clubbing brought in by para 2, the goods manufactured from the very same factory, by A and B will be clubbed and their first clearances of the respective goods would amount to Rs. 60 lakhs i.e. Rs. 30 lakhs each. Consequently, exemption from excise duty will be available upto total value of Rs. 30 lakhs only and the rest will attract duty Similarly clubbing of further clearances of these manufacturers from the same factory would attract ceiling of Rs. 60 lakhs and would not entitle them to have concessional duty on their respective additional clearances upto Rs. 40 lakhs each. Even for the last year, eligibility criterion for the same factory being aggregate value of clearance of the excisable goods for home consumption as the rate of 150 lakhs of rupees would apply conjointly if more than one manufacturers like A and B manufacture from the same factory. 12.2 Upholding the vires of the Notification, their Lordships held as follows: "....
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....mstances, it is not possible to agree with the submission of the learned counsel for the petitioners that impugned paras 2 and 3 of the notification are ultra vires Art. 14 or that they hostilely discriminate against the plurality of manufacturers manufacturing from the same factory. The second point, therefore, fails and stands rejected." 12.3 From the above observations of the Hon'ble High Court, it is clear that in computing the aggregate value of manufactured goods by more than one manufacturer by utilisation of same infrastructure in a factory in the manufacture of specified goods would be admissible up to the limit of Rs.1.00 crore or Rs.1.50 crore as the case may be in a financial year. In the present case, it is an admitted fact that M/s. Makam Pharmachem had already exceeded the clearance value of Rs.1.50 crores in each financial year during the disputed period, therefore the appellant M/s. AG Vet and M/s. Ivorychem would not be eligible for SSI exemption in excess of clearances of Rs.1.00 crore and Rs.1.50 crore as the case may be in the respective Financial Years. 13. Also, the arguments advanced by the learned advocate for the appellants that the department had wr....
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....dicaments manufactured by the appellants are notified under Section 4A of CEA, 1944, accordingly, the value should be determined taking into consideration the MRP of the product. 16. On the issue of suppression of facts, we find that the appellant had not disclosed the fact to the department that they have wrongly availed SSI benefit when M/s. Makam Pharmachem had already exceeded the aggregate turnover limit prescribed under the Notification No.8/2003-CE dated 01.03.2003; even though periodically they had filed the 'Nil' returns with the department, therefore, invoking of extended period is justified. 17. In the case of M/s. Makam Pharmachem, we find that they were fully aware of the fact that the aggregate value of clearances of manufactured specified goods had already exceeded Rs.1.50 crore and still they continue to manufacture and clear the goods without payment of duty to loan licensees without proper documents, hence, they are liable to be penalised under Rule 26 of the Central Excise Rules, 2002. Consequently, taking into consideration the overall circumstances of the case, to meet the ends of justice, the penalty imposed in both the appeals on M/s. Makam Pharmachem i....