1992 (11) TMI 182 - AT - Central Excise

Summary

Issues Involved:
1. Relationship and Control between Appellant and M/s. Glenmark.
2. Eligibility for Exemption under Notification No. 85/85.
3. Suppression of Facts and Willful Misstatement.
4. Determination of Assessable Value.
5. Time Bar and Validity of Demand.

Summary:

1. Relationship and Control between Appellant and M/s. Glenmark:
The department alleged that the appellants were not independent manufacturers but were controlled by M/s. Glenmark, citing the exclusive marketing rights, control over packing, and commonality of directors and partners. The Collector concluded that the transaction was not on a principal-to-principal basis, but the Tribunal disagreed, finding no evidence of financial flow back or dummy status. The Tribunal referenced the Supreme Court ruling in Union of India v. Cibatul Ltd., which clarified that joint manufacturing programs and quality control by the buyer do not imply manufacturing on behalf of the buyer.

2. Eligibility for Exemption under Notification No. 85/85:
The department argued that since M/s. Glenmark's turnover exceeded the threshold, the appellants were ineligible for exemption. The Tribunal found that the appellants were independent manufacturers and thus entitled to the exemption. The ruling emphasized that the presence of a common registered office, use of a godown, or telephone does not negate the appellants' independent status.

3. Suppression of Facts and Willful Misstatement:
The department alleged suppression of facts regarding the relationship with M/s. Glenmark to evade duty, invoking Rule 9(2) of Central Excise Rules, 1944. The appellants contended that all necessary information was provided during the approval of classification lists. The Tribunal found no suppression or willful misstatement, noting that the appellants had furnished all required details to the department.

4. Determination of Assessable Value:
The appellants initially claimed an assessable value based on their contract price but later adopted the maximum retail price as per the Drug Control Order. The department rejected the contract price, alleging it was too low. The Tribunal held that the appellants' adoption of the maximum retail price was in compliance with regulatory requirements and did not indicate any wrongdoing.

5. Time Bar and Validity of Demand:
The Tribunal found the demands time-barred, as the department had prior knowledge of the agreements and classification lists. The appellants had periodically submitted all necessary documents, and the department's approval of these lists negated any claims of suppression.

Conclusion:
The Tribunal set aside the Collector's order, allowing the appeal and confirming that the appellants were independent manufacturers entitled to exemption under Notification No. 85/85. The Tribunal emphasized the importance of separate legal identities and the absence of financial control or dummy status.