2004 (7) TMI 416 - AT - Central Excise

Summary

Issues: Interpretation of Clause 3 of Notification No. 175/86-C.E.

Analysis:
The judgment involves an appeal by the revenue against an order-in-appeal passed by the Commissioner (Appeals), rejecting the department's appeal against an adjudication order. The case revolves around M/s. Cyto Pharmaceuticals Pvt. Ltd., engaged in manufacturing medicines under Chapter sub-heading No. 3003.10, claiming Small Scale exemption under Notification No. 175/86 for products manufactured for M/s. Group Pharmaceuticals Pvt. Ltd. The dispute arose when it was found that M/s. Group Pharmaceuticals Pvt. Ltd. had a turnover exceeding the threshold for exemption. The revenue issued a show cause notice proposing denial of exemption to goods manufactured by Cyto Pharmaceuticals for Group Pharmaceuticals. The Assistant Collector and the Commissioner (Appeals) both concluded that the goods manufactured by Cyto Pharmaceuticals cannot be attributed to Group Pharmaceuticals, leading to the revenue's appeal challenging the Commissioner's order.

The central issue in this case is the interpretation of Clause 3 of Notification No. 175/86-C.E., which sets the threshold for exemption based on the aggregate value of clearances. The notification specifies that clearances where a manufacturer affixes goods with another person's brand name not eligible for exemption shall not be considered. The Tribunal noted that Cyto Pharmaceuticals did manufacture the goods on a job work basis using raw materials from Group Pharmaceuticals. However, since there was no use of a brand name issue, the production by Cyto Pharmaceuticals cannot be deemed as Group Pharmaceuticals' production. The Tribunal emphasized that the manufacturing was carried out by Cyto Pharmaceuticals, and therefore, the production cannot be attributed to Group Pharmaceuticals as alleged in the show cause notice.

Based on the above analysis, the Tribunal held that the orders of the lower authorities were justified and did not warrant any interference. Consequently, the appeal filed by the revenue was rejected, affirming the decision in favor of Cyto Pharmaceuticals Pvt. Ltd. The judgment clarifies the application of the exemption under Notification No. 175/86-C.E. concerning the interpretation of clearances and manufacturing attribution in cases involving related entities and job work arrangements.