2005 (7) TMI 249 - AT - Central Excise

Manufacturers of the goods Or Not - P or P medicaments manufactured on loan licence basis - Job worker - valuation of goods - demand differential duty - HELD THAT - We have gone through the records of the case carefully. M/s. USV Ltd., Mumbai hold loan licence under the Cosmetics and Drugs Control Act. They supplied raw materials to the appellants. The appellants manufacture the required goods as per the specification of M/s. USV and supplied to them for the above work. They get processing charges. There is an agreement between the appellants and M/s. USV, Bombay. On going through the agreement, we are convinced that the appellant is a job worker who carries out the entire manufacturing process in their factory after receiving raw materials from M/s. USV. The agreement has got a termination clause also. According to Clause 13.2 cited, each party may terminate the agreement at any time by giving to either party three months notice in writing. The adjudicating authority has mainly relied on the Indica decision 1989 (5) TMI 72 - HIGH COURT OF GUJARAT AT AHMEDABAD of the Gujarat High Court and held that M/s. USV are the manufacturers of the goods manufactured in the appellants premises. The Indica case, has been elaborately gone through in the Lupin Lab case 1996 (9) TMI 559 - CEGAT, NEW DELHI . In any case, if Revenue holds that M/s. USV are the real manufacturers, they should have demanded duty from them which they have not. On going through the contract, between the appellants and M/s. USV, we find that there is no evidence to show that M/s. USV the loan licensee had hired shifts in the premises of the appellants. Under these circumstances, the reliance of the Commissioner in the case of Indica is misplaced. Hence the OIO has no merits. Therefore, we allow the appeal with consequential relief.

Issues:
1. Determination of manufacturer in case of P or P medicaments manufactured on loan license basis.
2. Valuation of goods manufactured by a job worker on behalf of another entity.
3. Applicability of Board Circular No. 619/10/02 and previous judgments in similar cases.
4. Imposition of duty, penalty, and interest under Central Excise Act, 1944.
5. Interpretation of agreements between parties to determine manufacturing responsibilities.
6. Consideration of control and supervision in determining the manufacturer.
7. Comparison of judgments in similar cases to establish legal position.
8. Assessment of the role of loan licensees and job workers in the manufacturing process.
9. Application of Supreme Court rulings on valuation of goods cleared by job workers.
10. Evaluation of evidence to establish manufacturing responsibilities.

Detailed Analysis:
1. The case involves the determination of the manufacturer of P or P medicaments manufactured on a loan license basis. The dispute arises from conflicting interpretations of the relevant laws and previous judgments, particularly the Indica Lab case, regarding whether the loan licensee or the job worker should be considered the manufacturer.

2. The valuation of goods manufactured by a job worker on behalf of another entity is a key issue. The appellant opted for job worker status of M/s. USV Ltd., Mumbai, intending to adopt valuation principles outlined in Board Circular No. 619/10/02. However, the Revenue proceeded against the appellants based on the Indica Lab case decision, leading to the demand for duty, penalty, and interest under the Central Excise Act, 1944.

3. The applicability of Board Circular No. 619/10/02 and previous judgments, such as the Ujagar Prints case and Pawan Biscuits case, in similar scenarios is crucial. The advocates argued that these judgments establish that in job work situations, the job worker is considered the manufacturer, not the raw material supplier.

4. The imposition of duty, penalty, and interest under the Central Excise Act, 1944, was challenged by the appellants, highlighting the need for a clear determination of the manufacturer and proper valuation of goods manufactured on a loan license basis.

5. The interpretation of agreements between the parties to ascertain manufacturing responsibilities is essential. The agreement between the appellants and M/s. USV Ltd., Bombay, played a significant role in determining whether the appellants acted as job workers or manufacturers in the manufacturing process.

6. The consideration of control and supervision in determining the manufacturer was a key argument raised by the advocates. They emphasized that if the job worker independently manufactured goods without the control and supervision of the raw material supplier, the Indica Lab case precedent would not be applicable.

7. A comparison of judgments in similar cases was made to establish the legal position regarding the roles of loan licensees and job workers in the manufacturing process. The Tribunal referred to various decisions to support the argument that the job worker should be considered the manufacturer.

8. The assessment of the role of loan licensees and job workers in the manufacturing process was crucial in determining the liability for duty payment. The Tribunal scrutinized the evidence to establish whether M/s. USV Ltd. physically carried out the manufacturing process at the appellants' premises.

9. The application of Supreme Court rulings on the valuation of goods cleared by job workers was emphasized to ensure proper determination of the assessable value. The Tribunal highlighted that the supplier of raw materials is not considered the manufacturer, reiterating the role of the job worker in the process.

10. The evaluation of evidence to establish manufacturing responsibilities was a critical aspect of the judgment. The Tribunal found that there was no evidence to show that M/s. USV Ltd., the loan licensee, had direct control or supervision over the manufacturing process at the appellants' premises, leading to the decision in favor of the appellants.

← Previous Next →