By TIOL News Service

NEW DELHI, MARCH 28, 2015: THE appellants are manufacturers of P&P medicines. During the period01.04.2003 to 31.10.2003 the appellant were availing of the SSI Exemption under Notification No. 9/03-CE. In addition to manufacturing the goods on their own account which were being cleared by affixing their own brand name, they were also manufacturing the goods of other persons called "loan licensees" under job work agreement and those goods were being cleared by affixing the loan licensee's brand name and in respect of those clearances, the duty at the normal rate was being paid.

Besides this, the appellant also as loan licensee, were getting their goods manufactured through other manufacturers under job work agreements and those manufacturers were clearing the goods by affixing the appellant's brand name and were paying duty at the normal rate on the same.

The Department's case against the appellant is that their eligibility for SSI exemption during each financial year must be determined by clubbing the clearances of the goods manufactured by them on their own account on which their own brand name is affixed, with the clearances of the goods manufactured by them for loan licensees and also with the clearances of the goods which were got manufactured by them as a loan licensee through other manufacturers.

Based on the above understanding the Department seeks to deny the benefit of SSI exemption notification to the appellant for the impugned period and on this basis, the Jt. Commr. confirmed the duty demand of Rs. 6,39,190/- against the appellant along with interest and penalty.

The Commissioner (Appeals) dismissed the appeal and, therefore, the appellant is before the CESTAT.

After hearing both sides and adverting to the decision in Indica Laboratories Pvt. Ltd - 2003-TIOL-422-HC-AHM-MISC, the CESTAT observed -

+ The point of dispute is as to whether the loan licensee are to be treated as independent manufacturer and accordingly, in accordance with the provisions of clause 2(v), the value of the goods manufactured by the appellant for loan licensee on which loan licensee brand name had been affixed, is to be included for determining the aggregate value of the clearances of the excisable goods for home consumption by the appellant.

+ Similarly, another point of dispute is as to whether the value of the goods got manufactured by the appellant as a loan licensee through other manufacturers is also to be included in the aggregate value of the clearances of the excisable goods for home consumption by the appellant.

+ The basic point of dispute in this case is as to whether in respect of the goods manufactured in the appellant's factory for the loan licensees, the loan licensees are to be treated as manufacturer or the appellant are to be treated as manufacturer.

+ In this case, admittedly, the Loan Licensee had not hired any shift or any part of the factory premises of the appellant and similarly the appellant as a Loan Licensee, had not hired any shift or any part of the factory of the other manufacturers. In view of this, it has to be held the appellant had manufactured the goods for Loan Licensees as a job worker only and, therefore, it is the appellant who have to be treated as the manufacturer and since, the goods manufactured for Loan Licensees had been affixed with the Brand Name belonging to the Loan Licensees, and for this reason the same had been cleared on payment of normal duty, in terms of clause 3(a) of the exemption notification, the value of the clearances to Loan Licensees would not be includible for determining the aggregate value of clearances for home consumption.

+ Similarly, in respect of the goods got manufactured by the appellant as a Loan Licensee through other manufacturers, it is the other manufactures, who have to be treated as manufacturer and not the appellant more so, when there is no dispute that the duty liability in respect of those goods had been discharged by those manufacturers.

Holding that the value of the impugned clearances cannot be included for determining the aggregate value of clearances of the appellant for home consumption for determining their SSI exemption, the order of the Commissioner(A) was set aside and the appeal was allowed.

(See 2015-TIOL-572-CESTAT-DEL)