9911796707
TMI Blog1993 (10) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... he factories owned by others for manufacture of P.P. Medicines are called 'Loan Licensees'. Such type of Loan Licensees are recognised under Rules 69A and 74B of the Drugs and Cosmetics Rules, 1945. The first petitioner in W.P. No. 8885 of 1985 and the petitioner in W.P. No. 8 of 1989 are such 'Loan Licensees'. 4. Now let me set out the common question that arises for consideration in all these cases. "Whether the clearances (of the manufactured products, namely, P.P. Medicines) of the factory owner can be clubbed with the clearances of Loan Licensees and vice versa, for the purpose of considering the exemption or concession granted by a relevant notification issued under Rule 8(1) of the Central Excise Rules?" 5. Before proceeding further, it may be stated that the earliest Notification brought to my notice in connection with this issue is Notification No. 80 of 80 dated 19-6-1980, as modified by another Notification dated 25-3-1981. Similar Notifications appear to have been issued every financial year, and we are concerned with Notification Nos. 83/83, 85/85 and 175/86, as amended by Notification No. 174/89. It may at once be stated that though in all these Notifications, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umption - (i) by or on behalf of a manufacturer, from one or more factories, or (ii) from any factory, by or on behalf of one or more manufacturers, had exceeded rupees twenty-five lakhs in the preceding financial year. 3. Where a manufacturer has not cleared any specified goods in the preceding financial year, or has cleared any such goods for the first time on or after the 1st day of August, in the preceding financial year, the exemption contained in this notification shall be applicable to such manufacturer :- (a) if he files a declaration with the Assistant Collector of Central Excise that the aggregate value of clearances of all excisable goods by him or on his behalf, for home consumption, from one or more factories, during the financial year is not likely to exceed rupees twenty-five lakhs, and (b) if the aggregate value of clearances of all excisable goods by him or on his behalf, for home consumption, from one or more factories, during the financial year does not exceed rupees twenty-five lakhs. 4. Where the specified goods have not been cleared from any factory in the preceding financial year, or have been cleared for the first time on or after the 1st day o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omplaint of violation of Article 14 of the Constitution of India falls to the ground." (Underlining mine) This Order of Kanakaraj was taken on appeal in Writ Appeal Nos. 233 to 236 of 1991 (C.J. Hewlett Sons India (P) Ltd. v. Government of India represented by Secretary to Government, Ministry of Finance, Department of Revenue, New Delhi - Judgment dated 13-3-1991), and the first Bench, accepting the Order of Kanakaraj, ]., dismissed the Appeals. 8. Again, Kanakaraj, J. had occasion to consider Clause 3 of Notification 175/86 (one of the Notifications with which we are concerned). The learned Judge, on the scope of Clause 3 of the said Notification, has held in W.P. No. 16340 of 1990 [Vopak Pharmaceuticals rep. by Partner v. The Union of India rep. by its Secretary to Government, Ministry of Finance, Department of Revenue, New Delhi - order dated 5-11-1990 -1991 (52) E.L.T. 377 (Mad.)], as follows :- "The petitioner is a manufacturer of Patent and Proprietary Medicines and Drugs under licence obtained in Drugs Act. The petitioner claims to be a small manufacturer and had been claiming exemption from payment of excise duty or concessional payment of excise duty under various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases, only show cause notices were challenged and the Division Bench directed the parties to file their objections. Therefore, the judgment in the writ appeals certainly does not help the petitioner. Learned counsel then relies on the decision in Shree Packaging Corporation, Hyderabad v. Collector of Central Excise, Hyderabad [1987 (32) E.L.T. 94] which is a decision of the Special Bench of the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT) at Delhi. The facts of the said case have no relevance to the facts of the present case, because the Tribunal was dealing with different kinds of notification. The decision in R. Suresh Jayaseelan v. Collector of Central Excise [1990 (48) E.L.T. 37] only says that in a case where the clearances of one unit are sought to be clubbed with that of another unit, it is essential that evidence should be brought on record to show that all the manufacturing operations and other business transactions in regard to the product were being managed in fact by persons belonging to one particular unit while showing the owners of the other units as merely name lenders. This decision is no doubt on a similar notification as we are concerned with, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing conclusion of the learned Judges can be usefully set out :- "However, we have to see whether the impugned clauses 2 and 3 introducing the system of clubbing the manufactured goods by different manufacturers from the same factory is in any way arbitrary or ultra vires. So far as the first aspect of the matter is concerned, it has to be stated to be rejected. It is true that para 1 lays down general scheme of exemption upto a particular limit of first clearance of specified goods of the same SSI unit and then lays down concessional rate of duty beyond basic clearances upto The ceiling provided therein. But that does not mean that this is an absolute provision. It has to be read conjointly with paras 2 and 3. There is nothing like parent provision, as wrongly assumed by the learned counsel for the petitioners. This is an exemption notification and exemption can be granted by the Central Government in certain cases subject to conditions which may be laid down in the notification. In the present case, absolute exemption has not been granted by the Central Government but a hedged in concessional scheme of exemption without limiting absolute exemption given in para 1. Therefore, par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised the same infrastructure at some other time during the same financial year will get total benefit for Rs. 30 lakhs by way of first clearance of his own goods. Thus, total exemption limit would stand inflated to Rs. 60 lakhs instead of Rs. 30 lakhs, which is the total limit of full exemption envisaged by the exemption notification, so far as first clearances of concerned goods from the given factory for the financial year go. With a view to avoiding this unexpected and uncontemplated result, the aforesaid system of clubbing envisaged by paras 2 and 3 has been brought in. It works as a safety valve for avoiding such unexpected result and ensures that from the same factory, permissible extent of total goods by way of first clearances as contemplated by notification are allowed to be cleared without payment of duty and, thereafter subsequent total clearances of specified goods from the same factory in the same year would earn concessional rate of duty. Thus, paras 2 and 3 instead of being arbitrary and irrational, are in full consonance with the scheme of exemption envisaged by the notification in question and but for them, the nature of exemption would be rendered arbitrary and lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the exemption notification subject to the terms and conditions laid down therein and that question has to be examined by the competent authority on merits. We cannot and we do not say anything on the merits of controversy between the parties and it would depend upon the factual data being laid before the competent authority and will have to be examined and scrutinised by the authority in the light of what is stated hereinabove." (Underlining mine) I respectfully agree with the above view taken by the Division Bench. 11. Mr. Alagar, learned Sr. Counsel, brought to my notice several orders of Collector (Appeals) or the Tribunal dealing with Central Excise matters. I find that they relate to manufacture of electrical lighting, fittings or plywood veneers and flushdoors, where the question of manufacture by Loan Licensee did not arise and the terms of notification are not identical. Of course, in S.O.L. Pharmaceutical Ltd. v. Collector of C. Excise reported in 1992 (57) E.L.T. 290, the Tribunal has considered the question of loan licensee clearances, but that case is distinguishable on facts. The facts as set out in that Order read as follows :- "The brief facts of the case a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. Natco Fine Pharmaceuticals Pvt. Ltd. out of raw materials supplied by the appellants as a loan licensee could be deemed as goods having been manufactured on behalf of the appellants for being added to the value of the goods cleared by the appellants from their own factory during any financial year for computation of the overall limit of Rs. 75 lacs for the purpose of exemption under Notification No. 85/85. In this regard it is seen that the question whether the goods manufactured by a licensee out of raw materials supplied by another independent manufacturer could be deemed to have been manufactured on behalf of the supplier of raw material was examined by the Tribunal in the case of Shakti Udyog, Jallandhar v. Collector of Central Excise, Chandigarh reported in 1986 (25) E.L.T. 423. It was held that the manufacturer of the goods is that person who actually makes the goods and not the supplier of the raw material or even the owner of the manufactured goods...." (Underlining mine) (Para 6) * * * * * "From the records of this case we find that the Department has not led any evidence to establish that the appellants were carrying out th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o hesitation to answer the point set out above, in the affirmative. 14. Now, one important point to be considered in W.P. No. 9766 of 1985 is, whether the order impugned in this writ petition is sustainable. By the order under challenge, the second respondent has rightly clubbed the clearances of the loan licensee. One other point advanced was that the loan licensee in this case has paid the excise duty on the clearances and, therefore, that should not be clubbed. That also is not correct as clause 2 does not make any distinction between duty paid excisable goods or non-duty paid excisable goods. The words used in that clause are 'all excisable goods'. Therefore, there is no substance in that argument. 15. In the result, W.P. Nos. 8885 and 9766 of 1985, 5484 and 7333 of 1988, 5484 of 1988, 7333 of 1988 and W.P. Nos. 8 and 1539 of 1989 are dismissed. However, there will be no order as to costs. W.P. No. 7533 of 1986 16. The petitioner challenges the constitutional validity of paragraphs 2 and 3 of Notification No. 175 of 1986 dated 1 -3-1986, and prays for a declaration that they are ultra vires the provisions of the Central Excise Act and Article 14 of the Constitution of I ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
