1995 (12) TMI 124 - AT - Central Excise

Issues Involved:
1. Whether the two medicines in dispute were PP medicines having a brand name owned by M/s. Mercury Laboratories or the appellants.
2. Whether the concessional rate of duty under Notification No. 175/86 was available to the appellants.
3. Whether the demand was hit by limitation.

Issue-Wise Detailed Analysis:

1. Ownership of Brand Name:
The Tribunal examined whether the two medicines in question were PP medicines registered in the name of M/s. Mercury Laboratories or the appellants. The appellants claimed that from 1-1-1988, the medicines were registered in their name, whereas the Department relied on an Agreement dated 6-1-1988, which indicated that the brand names were owned by M/s. Mercury Laboratories. The Tribunal concluded that since the Agreement was executed on 6-1-1988, the medicines were the property of M/s. Mercury Laboratories. The Tribunal found no evidence to support the appellants' claim of ownership and held that the branded medicines were indeed the property of M/s. Mercury Laboratories.

2. Concessional Rate of Duty:
The Tribunal considered whether the appellants were entitled to the benefit of Notification No. 175/86. This notification stipulated that a manufacturer using the brand name of another manufacturer who is not eligible for the concession cannot avail the concessional rate of duty. Since M/s. Mercury Laboratories were not eligible for the benefit of Notification No. 175/86, and the medicines were branded goods of M/s. Mercury, the Tribunal held that the appellants were not entitled to the concessional rate of duty under Notification No. 175/86.

3. Price Assessment and Dummy Unit Allegation:
The Tribunal examined whether the price at which M/s. Mercury sold the goods should be taken for assessment under Section 4 of the Central Excises and Salt Act, 1944. It found no evidence of additional consideration or financial flow between M/s. Mercury and the appellants, nor any evidence that they were related persons. The Tribunal held that the appellants were not a dummy unit of M/s. Mercury Laboratories and that the price charged by the appellants should be used for computing the assessable value.

4. Limitation:
The Tribunal addressed whether the demand was hit by limitation. It found that the agreement for manufacturing the medicines was not disclosed in the price list, classification list, or RG 12 returns, constituting suppression of facts and a willful misstatement with the intent to evade duty. Therefore, the Tribunal held that the demand was not hit by limitation and was sustainable in law.

5. Penalty:
The Tribunal considered the imposition of penalties on the firm and its partners. It found that the claim for a concessional rate of duty was intentional and aimed at evading duty. However, it deemed the penalties excessive and reduced them: from Rs. 3 lakhs to Rs. 1 lakh for M/s. Sarpin Pharmacal, from Rs. 50,000 to Rs. 30,000 for Shri Nandkishore Balubhai Desai, and from Rs. 40,000 to Rs. 20,000 for Shri Kiranbhai Dahyabhai Patel.

6. Natural Justice:
The Tribunal observed that the issue of denial of natural justice had been addressed earlier and concluded that the principle of natural justice was not violated by the Collector.

Conclusion:
The Tribunal upheld the impugned order and rejected the appeals, holding:
(a) The two medicines were PP medicines with the brand name owned by M/s. Mercury Laboratories.
(b) The concessional rate of duty under Notification No. 175/86 was not available to the appellants.
(c) The appellants were not related persons or a dummy unit of M/s. Mercury Laboratories; thus, the price charged by the appellants should be used for assessment.
(d) The demand was not hit by limitation.

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