1999 (2) TMI 246 - AT - Central Excise

Issues:
1. Whether the small scale exemption under Notification No. 175/86-C.E. was admissible to the respondents for clearances made to their loan licensee.
2. Whether the value of clearances of the loan licensee could be clubbed with the clearances made by the respondents for determining eligibility for exemption.
3. Whether the respondents were correctly denied the small scale exemption by the Asstt. Collector of Central Excise and whether the decision of the Collector of Central Excise (Appeals) was valid.

Issue 1:
The main issue in this case was whether the small scale exemption under Notification No. 175/86-C.E. was applicable to the respondents, M/s. Cyto Pharmaceuticals, for the clearances made to their loan licensee, M/s. Group Pharmaceuticals. The Asstt. Collector of Central Excise had confirmed a demand for central excise duty and imposed a penalty. On appeal, the Collector of Central Excise (Appeals) observed that the clearances of both companies should not be clubbed for the purpose of the exemption.

Issue 2:
The appeal by the Revenue focused on whether the clearances of the loan licensee from their own factory could be clubbed with the clearances made by M/s. Cyto Pharmaceuticals. The Revenue argued that the loan licensee was the manufacturer of the goods, and the assessee (M/s. Cyto Pharma) was acting as an agent responsible for certain tasks, leading to the loan licensee exceeding the exemption limit, thus disqualifying the exemption.

Issue 3:
The Tribunal noted that M/s. Cyto Pharmaceuticals manufactured medicines for themselves and on behalf of M/s. Group Pharmaceuticals, who were eligible for the small scale exemption. The dispute arose when the respondents claimed that clearances for M/s. Group Pharmaceuticals should not be considered for their exemption eligibility. The Tribunal found that the value of clearances of M/s. Group Pharmaceuticals should not be clubbed with the clearances of M/s. Cyto Pharmaceuticals for determining the eligibility for the small scale exemption.

The Tribunal highlighted that the respondents had already considered the clearances of M/s. Group Pharmaceuticals when determining their total clearances, as noted in the Revenue's appeal. It was emphasized that the value of clearances of M/s. Group Pharmaceuticals should not be combined with the clearances of M/s. Cyto Pharmaceuticals unless both entities were considered the same manufacturer for the small scale exemption. The Tribunal clarified that even if goods bore the brand name of M/s. Group Pharmaceuticals, M/s. Cyto Pharmaceuticals remained the manufacturer, and their clearances had to be included in the aggregate value for exemption assessment.

In conclusion, the Tribunal rejected the Revenue's appeal, affirming that the value of clearances of M/s. Group Pharmaceuticals could not be clubbed with those of M/s. Cyto Pharmaceuticals for determining eligibility for the small scale exemption. The decision of the Collector of Central Excise (Appeals) was upheld, emphasizing that the clearances of both units should not be combined, as M/s. Cyto Pharmaceuticals had already been considered in their eligibility assessment.

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