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Commissioner of Central Excise, Goa Versus M/s. Cosme Farma Laboratories Ltd.

2015 (4) TMI 355 - SUPREME COURT

Valuation - Scope of the term Manufacturer - Job worker - Manufacture of medicaments - whether the respondent, who was getting its medicaments manufactured through the job workers, can be considered to be an independent manufacturer and another question is about the assessable value of the medicaments manufactured by the job workers for the purpose of assessment under the Central Excise Act, 1944. - Held that:- term ‘manufacturer’ or the loan licensee used under the provisions of the Drugs and C .....

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nufactured by him or someone working under him, he becomes responsible or liable under the said Act. There is also a provision in the said Act with regard to getting the drugs manufactured by someone else. So a manufacturer, who is having a license to manufacture, can get the drugs/medicaments manufactured by another person under his supervision and he would be liable if the drugs manufactured by someone else are not as per the prescribed quality. Though the drugs/medicaments might not have been .....

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and not perverse. We are, therefore, in agreement with the findings arrived at by the Tribunal that the job workers are the manufacturers.

Once it has been determined that the job workers are the manufacturers, the assessable value of the goods would be a sum total of cost of raw material, labour charges and profit of the job workers, as per circular No.619/10/2002-CX dated 19th February, 2002 and the law laid down by this Court in the case of Pawan Biscuits (2000 (7) TMI 78 - SUPREME .....

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or the Respondent : M/s. K. J. John & Co. JUDGMENT Anil R. Dave, J. 1. A common order No.A/1559 to 1563/WZB/2006 (EB) dated 14th August, 2006 in Appeal Nos. E/3292 to 3295 of 2004 passed by the Customs Excise and Service Tax Appellate Tribunal, West Zonal Bench, Mumbai, has been challenged in these appeals. The facts giving rise to the present appeals in a nut-shell are as under: 2. The respondent is a manufacturer of medicaments having license under the provisions of the Drugs and Cosmetics .....

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job workers and as per the instructions of the respondent loan licensee, the job workers manufacture the medicaments under the supervision of the loan licensee, i.e. the respondent so as to see that the quality of the medicaments manufactured by the job workers is as prescribed by the loan licensee. 3. Several notices had been given to the respondent as well as to the job workers by the Commissioner of Customs and Central Excise calling upon them to show cause as to why the respondent, the loan .....

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medicaments manufactured at the premises of its job workers within the meaning of the provisions of the Central Excise and Salt Act, 1944 and the Rules made thereunder. 5. Being aggrieved by the aforesaid decision of the Commissioner dated 6th August, 2004, the respondent filed the appeals before the CESTAT, Mumbai. The Division Bench of the CESTAT heard the appeals but both the Members of the Bench recorded separate judgments. The Member (Technical) allowed the appeals and set aside the order .....

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e appeals filed by the respondent. 6. Against the said order passed by the CESTAT, the appellant has filed the present appeals before this Court. 7. In all these cases, we are concerned with the period commencing from 1998 to 2003 and the issues involved in the appeals are whether the respondent, who was getting its medicaments manufactured through the job workers, can be considered to be an independent manufacturer and another question is about the assessable value of the medicaments manufactur .....

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pervision over the manufacturing activity though the said activity was being carried out at different places, where the job workers were working. 9. The learned counsel had taken us through the provisions of Rule 69-A and Form No.24A of the Drugs and Cosmetic Rules, 1945. They pertain to the provisions with regard to the manufacturer of medicaments, who gets medicaments manufactured at different places and by different persons. He had drawn our attention to the fact that as per the provisions of .....

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refore, in fact the respondent loan licensee was the manufacturer. Even in Form No.24A referred to hereinabove, the respondent used to give details of the places where the job workers were carrying out manufacturing process under the supervision of the respondent. It had been further submitted that as the loan licensee was the manufacturer of medicaments under its own brand name, the price at which the goods, i.e. the medicaments were being sold was the assessable value in respect of the medicam .....

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w expressed by the Tribunal was incorrect and the respondent should have been treated as a manufacturer and the value at which the goods had been sold in the market by the respondent should be treated as assessable value. 11. On the other hand, the learned counsel appearing for the respondent had submitted that the view expressed by the Tribunal was just, legal and proper and had further submitted that the appeals deserved to be dismissed. He had taken us through the provisions of the agreements .....

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had also been submitted on behalf of the respondent that the job workers were the manufacturers for the reason that the entire activity with regard to manufacturing was carried out in their premises. Supply of raw material as well as packing material to them by the respondent was not relevant. It was duty of the job workers to manufacture medicaments as per the quality prescribed by the respondent and, in fact, the manufacturing activity was done by the job workers and therefore, the Tribunal, b .....

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in the market and therefore, the value at which the goods were transferred to the respondent by the job workers would become assessable value and for determining the said value, the principles laid down by this Court in the case of Pawan Biscuits (supra) are to be followed. 13. Looking at the law laid down in the aforesaid judgment by this Court, the assessable value is to be determined by adding the value of raw material to the cost of labour work and profit of the job workers. Thus, for the pu .....

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uality of the drugs manufactured. Even if a manufacturer gets the drugs/medicaments manufactured by another person and sells the same under his brand name, the manufacturer, who has been given license to manufacture the drugs/medicaments, is responsible and is liable under the provisions of the Drugs and Cosmetics Act, 1940. A manufacturer, under the aforestated Act, has nothing to do with payment of duty under the provisions of the Central Excise Act, 1944 and therefore, the revenue authorities .....

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by the Tribunal as well as the judgments referred to by the learned counsel. 17. In our opinion, the submissions made on behalf of the respondent are correct and the appeals deserve to be dismissed for the reason that the manufacturing activity was done only by the job workers in their premises and with the help of their labour force and machinery. Simply because the job workers had to adhere to the quality control or the specification with regard to the quality prescribed by the respondent, it .....

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nd quality of the drugs etc. The manufacturer of the drugs has to see that the quality of the drugs manufactured by him is as per certain standards and if there is any defect in the drugs manufactured by him or someone working under him, he becomes responsible or liable under the said Act. There is also a provision in the said Act with regard to getting the drugs manufactured by someone else. So a manufacturer, who is having a license to manufacture, can get the drugs/medicaments manufactured by .....

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he goods manufactured. The manufacturer becomes liable to pay certain duty as per the provisions of the said Act. 20. Thus, the term loan licensee used by the learned counsel appearing for the appellant is not much relevant as we are not concerned with the quality or standard of the drugs/medicaments manufactured by the loan licensee or anybody else manufacturing medicaments for him. 21. The learned counsel appearing for the respondent had also drawn our attention to a copy of one of the agreeme .....

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