2007 (1) TMI 317 - AT - Central Excise

Summary

Issues:
1. Valuation of medicaments sold by M/s. Novartis India Ltd. for assessment purposes.
2. Determination of the nature of the agreement between the assessee and Novartis.
3. Classification of the assessee as hired labor or manufacturer under a loan license agreement.

Issue 1 - Valuation of medicaments:
In the appeals, the Revenue contended that the price at which M/s. Novartis India Ltd. sold medicaments should be considered as the assessable value for the medicaments in the hands of the assessee. The Commissioner of Central Excise held that the agreement between the parties was not a sale of goods but a contract for work, distinguishing between a contract of sale and a contract involving labor skill. The Commissioner classified the assessee as hired labor, considering the arrangement as a loan license. The Commissioner (Appeals) in another appeal also held the assessee to be a loan licensee for Novartis.

Issue 2 - Nature of agreement:
The Tribunal observed that the show cause notice only alleged that the assessee was the hired labor of Novartis. As per the Tribunal, any duty demand should have been raised against M/s. Novartis based on the department's case. The Tribunal concluded that the duty demand against the assessee could not be sustained based on the finding that the assessee was hired labor, setting aside the duty demand and penalty without determining the actual manufacturer.

Issue 3 - Classification of the assessee:
Regarding the second appeal, the Tribunal noted that the challenge by the Revenue was solely on the grounds that the assessee was hired labor of Novartis. The Tribunal held that the finding of the Commissioner (Appeals) that the assessee was working under a loan license scheme for Novartis was beyond the scope of the show cause notice and could not be sustained. The Tribunal set aside the impugned order based on the department's case that Novartis was the manufacturer, thus confirming that duty demand could not be imposed on the assessee. Consequently, both appeals were allowed based on the department's position that Novartis was the manufacturer, absolving the assessee of the duty demand.