2000 (10) TMI 163 - AT - Central Excise

Issues Involved:
1. Demand of duty and penalty on M/s. Vax Institute Laboratory Ltd.
2. Imposition of penalty on M/s. Albert David Ltd.
3. Invocation of the extended period for demand under Section 11A(1) of the Central Excise Act, 1944.
4. Allegations of mis-statement and suppression of facts.
5. Validity of the small scale exemption Notification No. 175/86.

Issue-wise Detailed Analysis:

1. Demand of Duty and Penalty on M/s. Vax Institute Laboratory Ltd.:
The Tribunal confirmed a demand of Rs. 15,31,260.52 (basic) and Rs. 73,939.77 (special) against M/s. Vax Institute Laboratory Ltd. under the proviso to Section 11A(1) of the Central Excise Act, 1944, read with Rule 9(2) of the Central Excise Rules. Additionally, a penalty of Rs. 1 lakh was imposed under Rule 173Q(1). The company was engaged in manufacturing Anaflam Tablets under a contract with M/s. Albert David Ltd. (ADL), using ADL's brand monogram, which allegedly disqualified them from the small scale exemption Notification No. 175/86.

2. Imposition of Penalty on M/s. Albert David Ltd.:
A penalty of Rs. 1 lakh was imposed on M/s. Albert David Ltd. under Rule 209A. The Tribunal found that M/s. ADL was not involved in the manufacture or determination of the assessable value of the Anaflam tablets, which were the responsibilities of M/s. Vax Institute Laboratory. The Tribunal concluded that M/s. ADL could not be held responsible for any short payment of duty by M/s. Vax Institute Laboratory and hence set aside the penalty imposed on M/s. ADL.

3. Invocation of the Extended Period for Demand:
The Tribunal examined whether the extended period for demand under Section 11A(1) was justified. M/s. Vax Institute Laboratory argued that the show cause notice issued on 21-2-1991 for the period 1-10-1987 to 31-3-1990 was time-barred, as they had filed classification lists claiming small scale exemption and disclosed all relevant facts. However, the Tribunal found that the appellants did not disclose their agreement with M/s. ADL in the classification lists, justifying the invocation of the extended period due to suppression of facts.

4. Allegations of Mis-statement and Suppression of Facts:
The Tribunal upheld the adjudicating authority's finding that M/s. Vax Institute Laboratory had suppressed material facts by not disclosing their agreement with M/s. ADL in the classification lists. The Tribunal noted that the labels submitted did not clearly indicate the agreement between the two companies, thus supporting the allegation of suppression of facts with intent to evade duty.

5. Validity of the Small Scale Exemption Notification No. 175/86:
The Tribunal found that M/s. Vax Institute Laboratory was not entitled to the benefit of Notification No. 175/86 due to the use of ADL's brand name, which brought them under the purview of Notification No. 223/87-C.E. The Tribunal confirmed the duty demand and penalty on M/s. Vax Institute Laboratory but set aside the penalty on M/s. ADL.

Separate Judgments Delivered by the Judges:
The Vice President (S.K. Bhatnagar) disagreed with the Member (Judicial) on the issue of time-bar, emphasizing that the approval of classification lists and labels indicated the Department's awareness of the relationship between the two companies. However, the third Member (Dr. S.N. Busi) agreed with the Member (Judicial), holding that the appellants failed to disclose their relationship with M/s. ADL, justifying the extended period for demand and rejecting the appeal of M/s. Vax Institute Laboratory.

Final Order:
In terms of the majority opinion, the appeal filed by M/s. Vax Institute Laboratory Ltd. was rejected, and the appeal filed by M/s. Albert David Ltd. was accepted.

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