1994 (8) TMI 138 - AT - Central Excise

Summary

Issues:
1. Eligibility for exemption under Notification No. 175/86-C.E. for P.P. Medicines manufactured by appellants.
2. Suppression of facts regarding manufacturing activity by M/s. Morgendew Laboratories.
3. Imposition of penalty under Rule 173Q of the Central Excise Rules, 1944.

Detailed Analysis:

Issue 1:
The appeals involved a dispute regarding the eligibility of P.P. Medicines for exemption under Notification No. 175/86-C.E. The Collector held that the appellants had manufactured and cleared medicines bearing the brand name of M/s. Morgendew Laboratories, which were not eligible for exemption under the notification. The Collector confirmed the demand and imposed a penalty under Rule 9(ii) of the Central Excise Rules, 1944. The appellants argued that M/s. Morgendew Laboratories, as a loan licensee, were eligible for exemption under the notification. They presented an affidavit claiming that Morgendew Laboratories were registered with the Director of Industries and had a valid license for manufacturing medicines. However, the evidence provided during the hearing did not conclusively prove that Morgendew Laboratories manufactured the goods out of their own raw material and under their own supervision in the appellants' factory. The Tribunal found no merit in the appellants' contention and rejected the appeals.

Issue 2:
The Collector also noted that the appellants had suppressed the fact that M/s. Morgendew Laboratories were not engaged in any manufacturing activity themselves. The respondent argued that Morgendew Laboratories could not be considered a loan licensee eligible for exemption under the notification as there was no evidence to support that they manufactured the goods using their own raw material and labor under their supervision. The Tribunal agreed with the respondent's contention and held that the goods were not manufactured by Morgendew Laboratories as claimed by the appellants.

Issue 3:
In addition to the demand confirmation, penalties were imposed on the appellants under Rule 173Q of the Central Excise Rules, 1944. The appellants' arguments based on the Gujarat High Court judgment in the case of Indica Laboratory (P) Ltd. were considered. However, the Tribunal found that the evidence provided did not establish that Morgendew Laboratories were eligible for separate exemption under the notification. Therefore, the penalties imposed by the Collector were upheld, and the appeals were rejected.

This detailed analysis highlights the key arguments, evidence presented, and the Tribunal's decision on each issue involved in the legal judgment.