2005 (3) TMI 222 - AT - Central Excise

Summary

Issues:
1. Whether M/s. Dolphin Laboratories Ltd. are the manufacturers of Gesdyp and Dolamide or M/s. Ranbaxy Laboratories Ltd.

Analysis:
In the appeals filed by M/s. Dolphin Laboratories Ltd., the main issue revolves around determining whether they are the manufacturers of Gesdyp and Dolamide or if this manufacturing responsibility lies with M/s. Ranbaxy Laboratories Ltd. The Deputy Commissioner initially held that M/s. Ranbaxy are the manufacturers, and M/s. Dolphin is merely manufacturing the goods on behalf of M/s. Ranbaxy under a loan license agreement. The Department imposed duty on M/s. Ranbaxy, considering them as manufacturers, and not on M/s. Dolphin. The Appellants argued that the agreement between them and M/s. Ranbaxy is on a principal-to-principal basis, with no control or supervision exercised by M/s. Ranbaxy over the manufacturing process. They cited legal precedents to support their position, emphasizing that the valuation of goods should be based on principles established by the Supreme Court and not on the selling price of M/s. Ranbaxy. They contended that Rule 7 of the Central Excise Valuation Rules does not apply in this case, as there is no sale by the Appellants from the depot, which is a prerequisite for the rule's application.

The Tribunal analyzed the submissions from both sides and emphasized that Central Excise duty is levied on excisable goods manufactured in India, with the duty payable at the time of goods' removal by the producer. The Deputy Commissioner's finding that M/s. Ranbaxy is the manufacturer was crucial, as it led to the application of Rule 7 of the Central Excise Valuation Rules. However, the Tribunal disagreed with this assessment, noting that the depot belonged to M/s. Ranbaxy, making them the assessee responsible for duty payment. The Tribunal concurred with the Appellants' argument that M/s. Ranbaxy did not supervise or control the manufacturing process at M/s. Dolphin's premises. The terms of the agreement indicated that M/s. Dolphin was liable for the costs in case of batch failures, highlighting their independent manufacturing status. Legal precedents were cited to support the view that in such scenarios, the job worker, not the raw material supplier, should be considered the manufacturer for duty calculation purposes.

The Tribunal referenced various cases to establish that goods produced on a job work basis should be valued according to the principles laid down by the Supreme Court. It was clarified that under the new Valuation provisions, there was no departure from these established principles. The Tribunal set aside the impugned order and allowed both appeals, emphasizing that the assessable value should be determined based on the principles outlined by the Supreme Court, rather than the selling price of M/s. Ranbaxy.