1998 (9) TMI 319 - AT - Central Excise

Summary

Issues:
Departmental Appeal against Collector (Appeals) order demanding duty and imposing a penalty based on clearances made on behalf of loan licensee M/s. Pharmasia Ltd. claiming concessional rate of duty under Notification No. 175/86.

Analysis:
The case involved a Departmental Appeal against the Collector (Appeals) order concerning the demand of duty and penalty imposition on the respondent, who manufactured P & P Medicaments for loan licensee M/s. Pharmasia Ltd. The respondents claimed a concessional rate of duty under Notification No. 175/86, stating that clearances did not exceed Rs. 75 lakhs and that M/s. Pharmasia Ltd. was a Small Scale Industry (SSI) Unit. The Department alleged that M/s. Pharmasia Ltd. had exceeded the clearance value, leading to a show cause notice for differential duty at the normal rate of 15%. The Assistant Collector upheld the demands, imposing a penalty as well.

Upon appeal, the Collector (Appeals) interpreted the proviso to Notification No. 175/86, stating that clearances where a manufacturer affixes goods with a brand name of another ineligible for exemption should not be considered. Citing a Gujarat High Court decision, the Collector (Appeals) ruled that loan licensees overseeing manufacturing at SSI factories, using their material and brand name, are entitled to exemption. Consequently, the Assistant Collector's order was set aside, granting relief to the respondents.

During the proceedings, the Departmental Representative argued that M/s. Pharmasia Ltd. had crossed the Rs. 75 lakhs clearance value in 1992, making them ineligible for the concessional rate of duty under Notification No. 175/86. Thus, the respondents should pay duty at the effective rate of 15% for clearances exceeding Rs. 75 lakhs. Distinguishing the Gujarat High Court judgment, the representative emphasized the requirement for the unit to be an SSI Unit to qualify for exemption.

After considering the submissions, the Tribunal found that the respondents did not contest the Department's factual submissions, noting that M/s. Pharmasia Ltd. had crossed the clearance limit before the respondents filed the Classification List. Consequently, the Tribunal upheld the Department's submissions, restoring the Assistant Collector's Order-in-Original while annulling the appealed Order-in-Appeal.