TMI Blog2006 (3) TMI 564X X X X Extracts X X X X X X X X Extracts X X X X ..... to inspect and draw samples at each stage to ensure that the standards prescribed by him are being followed especially so in the case of drugs where he ultimately has to be held liable for any deficiency in quality where the human lives are involved. No evidence has been brought out to show that the premises had been hired on a shift basis or otherwise and on the contrary, the agreement clearly shows that the manufacturing charges will be paid at the rate specified in the Schedule on the basis of per unit and there is no reference to payment on the basis of any shift or any particular period. The agreement may be at variance with the undertaking given to the Drug Licensing Authorities but there is no evidence that the agreement has been departed with and that the payments were not being made as per the agreement or that the entire supervision was that of the raw material supplier. I am, therefore, of the view that the matter is fully covered by the Larger Bench decision of the Tribunal in the Lupin Laboratories case [ 1996 (9) TMI 559 - CEGAT, NEW DELHI] and followed in subsequent judgments by the Tribunal. I am therefore in agreement with the views expressed by learned Mem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he selling price of the said medicament by such loan licensee. 2. 25 Show Cause Notices which were issued against the different noticees by the Commissioner of Central Excise, Goa and 7 notices were issued by Directorate General of Central Excise Intelligence, Bangalore Zone Unit and they were disposed by a common order, as it was found that the issues in the notices and the defence replies submitted was similar. The Commissioner, after considering the submissions found : (a) The loan licensees possess a loan license under the Drugs and Cosmetics Act, which authorizes them to manufacture for sale and distribution at other location. (b) The application made for loan license, proposal by the loan licensee to the job worker and consent letters by the job workers indicate that medicaments are to be manufactured by loan licensee with their own raw-materials and packing materials at the factory of the job worker by taking on loan the premises, equipment, staff and testing facilities of the job worker. (c) The job workers, per the agreement and authorization from loan licensee, discharged Central Excise formalities like filing classification and price declaration, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacture under Section 2(f) of the Central Excise Act, 1944 that the loan licensee was to be treated as manufacturer by the licensing authority under the Drugs and Cosmetics Act, 1940 in terms of the definition and the responsibility in respect of quality etc. lies with the loan licensee and accordingly, the labels/packing of the medicaments, the name of such loan licensee at the job workers premises without indicating the name of the job worker and therefore the terms of manufacture in terms of the definition under the Central Excise Act would be covering the loan licensee as the manufacture under the Central Excise Act, 1944. He also relied on the decision of the Gujarat High Court in the case of Indica Laboratories Pvt Ltd v. UOI - 1990 (509) E.L.T. 210 and Shree Agency vs S.K. Bhattacharjee - 1997 (1) E.L.T. (J-168) (SC). (b) The Commissioner did not accept the plea of the noticees and relied upon the Supreme Court s judgement in the case of Empire Industries, Ujjagar Prints and Pawan Biscuits as well as the plea that the ownership of the raw material was not determinative in deciding as to who was the manufacturer under the Central Excise law. The reliance placed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d therefore he rejected the plea that the valuation of such medicament which was the subject matter of dispute culminating in adjudication vide the order of the Assistant Commissioner of Central Excise dated 25-7-2002/31-7-2002 on valuation disputes on medicament manufactured by the job worker and the related correspondences made by the job works with the department would not alter the position, as the dispute raised in that matter was on the basis of difference in the selling price of the medicament to the loan licensee and the transfer price of the said medicament. Thereafter in para 37, he concluded as follows: I however do not agree with the reasoning that the period for which issue was already adjudicated by the jurisdictional Assistant Commissioner and the order was not reviewed and therefore attained finality, and it cannot be reopened by present Show Cause Notice, for the reason that the present Show Cause Notices are based on different facts revealed on investigation. As the grounds of willful mis-statement and suppression of facts are not proved, the question of penalty under Section 11AC and Rule 209A does not arise. And did not give the deductions which were o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluded on the ratio of Ujjagar Print case, is any profit of Britannia or expenses which are incurred after the manufacture of the biscuits by the appellant. Despite repeated attempts made by the learned counsel for the respondent, we are unable to distinguish this case from the ratio laid down by this Court in the aforesaid two decisions of Ujagar Prints case. (Underlining supplied). In this case while we cannot differ from the finality of the position of holding the actual processor of the goods as the manufacturer, as held by the Apex Court, we are also in full agreement with the emphasized portion hereinabove, that we are not able to distinguish the facts in this case from the ratio laid down in the decisions of Ujagar Prints and others of the Constitutional Bench of the Apex Court as also in the ratio of Pawan Biscuits Co. Pvt. Ltd. v. CCE - 2000 (120) E.L.T. 24 (S.C.) to hold that the valuation has to be arrived at on any formula other than as upheld by the Apex Court. (b) In this view, we cannot apply the values as arrived at for the purpose of determining the duty payable based on the price of the sale price of the raw material supplier/supervisor/loan l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicaments, should be treated as manufacturer of the goods and the valuation of such goods should be arrived at in terms of the law declared by the Hon ble Supreme Court in the case of Ujagar Prints or Pawan Biscuits. 8. The Hon ble Gujarat High Court in the case of Indica Laboratories Pvt. Ltd. v Union of India [1990 (50) E.L.T. 201] (the said judgement remains authoritative on the point of loan licences till date) has held that under the peculiar concept of loan licences under the Drugs and Cosmetics Act, such holders of licences are entitled to manufacture P P medicines and can utilize factory premises of other persons where they can get their goods manufactured under there own control and supervision and if they manufacture excisable goods, they would be treated as manufacturers (emphasis provided) within the meaning of Excise Act and the Rules. As such, the admitted position in law, as it stand declared by the Hon ble Court in the above referred decision is that loan licences are to be considered as independent manufacturers. However, in that case considering paras 2 and 3 of small scale notification No. 175/86, their lordship held that since the goods manufactured by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said judgment, there was a finding of fact by the Tribunal that persons holding loan licences were not exercising complete supervision and control over the manufacturing activities and were only supplying the major portion of the raw materials and packing material. It was in that scenario. Tribunal held that SSI unit who has actually carried out the manufacturing activity in their factory as job worker, have to be deemed as the manufacturer of the goods. The ratio of the above decision, as such, is not applicable to the facts of the present case. 13 Similarly appellants reliance on the Tribunal decision in the case of S.O.I. Pharmaceuticals Ltd. v. Collector of Central Excise [ 1992 (57) E.L.T. 290 (Tribunal)] is also not relevant as the same is in the context of availiability of exemption in terms of notification No. 85/85 is based upon the facts and finding that the manufacturing activity was not being carried on under the supervision and control of the loan licensee. Similarly appellants reference to another decision of the Tribunal in the case of Alcure Pharmaceuticals Pvt. Ltd. v. Commissioner of Central Excise, Goa - [2002 (148) E.L.T. 508 (Tri. - Mumbai)) arriving at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch needs to be decided is whether the job workers in the present case can be considered to be independent manufacturers or not based on the fact as to whether they are working under the supervision and control of the loan licensee or they are manufacturers in their own right. 20. The learned advocate Shri Barucha and Shri M.P. Baxi on behalf of the appellants submitted that a great reliance has been placed by Member (Technical) on the decision of the Gujarat High Court in the case of Indica Laboratories Pvt. Ltd. and therefore it would be useful to look into the ratio of this decision which reads as under: It has been held that loan licensees are also manufacturer, within the meaning of the term as envisaged by the said Act and the Rules and specially when they get their goods manufactured under their own control or supervision and out of their own raw material at the factory premises belonging to someone else also and such premises they might have hired for the time being, shift wise or otherwise. 21. This is the key test laid down by the Hon ble High Court as one of control and supervision. The agreement entered into by the appellants does clearly shows that there is h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shing the product and shall conform to the same. Clause 7 states that manufacturer shall allow duly authorized representative/representatives of the Marketing Company to inspect at any time manufacture of the product and the methods of manufacturing, processing and/or finishing the product at the place of manufacture, process and/or finish and shall supply at the request of the representative/representatives samples of the product. The manufacturer shall be primarily responsible to ensure that the batches of products so manufactured, processed...are in accordance with the process/processes, specification/ specifications of marketing company, since the control over production is entirely exercised by him. Clause 17 sates that the manufacturer will be entitled to charge towards processing and/or manufacturing charges which will include cost of production plus his profit for the services as here in provided at the rate/rates as mentioned in Schedules A. The Marketing Company will reimburse the manufacturer towards the duty payable on the product inclusive of all taxes levies of duties which may be or becomes payable subsequent to the clearance of the final product from the licensed p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pervision and control will be that of the job worker only and as in every job work, the manufacture has to be carried out as per the price indicated by the raw material supplier and as per the specifications laid down by the raw material supplier and the raw material supplier has a right to inspect and draw samples at each stage to ensure that the standards prescribed by him are being followed especially so in the case of drugs where he ultimately has to be held liable for any deficiency in quality where the human lives are involved. No evidence has been brought out to show that the premises had been hired on a shift basis or otherwise and on the contrary, the agreement clearly shows that the manufacturing charges will be paid at the rate specified in the Schedule on the basis of per unit and there is no reference to payment on the basis of any shift or any particular period. The agreement may be at variance with the undertaking given to the Drug Licensing Authorities but there is no evidence that the agreement has been departed with and that the payments were not being made as per the agreement or that the entire supervision was that of the raw material supplier. I am, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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