2009 (1) TMI 162 - AT - Customs

SSI notification No. 09/2003 - computation of value of total clearances - if the factory of the assessee is given on hire basis to various loan licensees, who manufacture the medicament themselves under their own brand name, then the total clearances being made from their factory are required to be taken into consideration for arriving at the eligibility criteria clearances - if the same assessee manufacture the goods under the brand name of these loan licensee, who may supply raw material themselves, such clearances have to be taken as clearance of brand name bearing clearances not entitled to exemption in terms of para 4 of notification ibid and thus not to be added in the total clearances of particular financial year

Summary

Issues:
1. Interpretation of small scale exemption notification No. 09/2003.
2. Determination of eligibility for exemption based on aggregate value of clearances.
3. Dispute regarding manufacturing of goods under brand name or trade name of loan licensee.
4. Consideration of factory being given on hire basis to loan licensees.
5. Examination of evidence to determine the actual manufacturer of goods.

Analysis:
1. The judgment concerns the interpretation of small scale exemption notification No. 09/2003. The appellants, engaged in manufacturing medicaments, were availing the benefit of this notification. The issue arose when proceedings were initiated against them for exceeding the total clearances limit in the previous financial year, impacting their eligibility for the exemption in the subsequent year.

2. The dispute centered around whether clearances of goods bearing the brand name or trade name of another person, manufactured on behalf of a loan licensee, should be considered for computing the aggregate value of clearances. The appellants argued that such clearances should not be included, as they were not entitled to exemption under the notification. However, the lower authorities rejected this argument, stating that the branded goods were manufactured by the loan licensee in the appellant's factory, thereby making them ineligible for the exemption.

3. The appellate authority accepted the legal position that if the factory is given on hire basis to loan licensees who manufacture goods under their own brand name, those clearances must be considered for eligibility criteria. On the other hand, if the appellant manufactures goods under the brand name of the loan licensee, such clearances are not entitled to exemption. The crux of the issue was determining the actual manufacturer of the goods in question.

4. The appellant contended that they were the manufacturers of the branded goods, while the Revenue asserted that the goods were manufactured by the loan licensee in the appellant's factory. The appellate authority emphasized the need for evidence to establish whether the factory was hired to the loan licensee and directed a reexamination of the factual position based on documentary evidence presented by the appellants.

5. The judgment referred to various decisions to support the argument that the mere existence of a loan licensee agreement does not automatically imply that the factory was hired to the loan licensee. It highlighted the importance of examining the control and supervision of the manufacturing process to determine the actual manufacturer. The impugned order was set aside, and the matter was remanded for a detailed examination of the evidence to ascertain the factual position regarding the manufacturing of goods under the brand name of the loan licensee.