Glenmark Pharmaceuticals Ltd. Vs. Commissioner of Central Excise

Glenmark Pharmaceuticals Ltd. vs Commissioner of Central Excise

Type Court Judgment Court Customs Excise and Service Tax Appellate Tribunal CESTAT Mumbai Decided Nov 28, 2007

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Citation: sooperkanoon.com/46547
Court: Customs Excise and Service Tax Appellate Tribunal CESTAT Mumbai
Judge: J Balasundaram, Vice, A T K.K.
Decided On: Nov 28, 2007
Subject: Land Acquisition

Case Summary

AI-generated summary - not the official court judgment text.

Land Acquisition

Key legal issue: Land Acquisition

Parties & Advocates

Appellant / Petitioner

Glenmark Pharmaceuticals Ltd.

Respondent

Commissioner of Central Excise

Excerpt

1. the brief facts of the case are that m/s glenmark pharmaceuticals ltd. are engaged in the manufacture of pharmaceutical products in their own factories situated at different locations. they also get medicines manufactured on job work basis from various job workers who have their own manufacturing facility approved by fda. they supplied raw materials and packing materials to the job workers who manufactured medicines in accordance with specifications given by them. the job workers availed credit of duty paid on raw materials and packing material. medicines so manufactured are cleared by the job workers on payment of duty on the basis of cost of raw materials plus manufacturing expenses including manufacturing profit as per the supreme court decision in ujagar print's case. the present case pertains to medicines manufactured on job work basis by m/s niramay pharma (nppl) having its factory at nashik. they were however issued show cause notices alleging that m/s glenmark pharmaceutical only is the manufacturer of the said medicines at the premises of m/s niramay pharma and that duty was required to be paid at a price at which m/s glenmark pharmaceuticals -sells the medicines to its own customer. the show cause notices were adjudicated by the commissioner who held that m/s glenmark pharmaceuticals are to be treated as a manufacturer of the medicines at the premises of m/s niramay pharma and demanded duty amounting to rs. 1,26,82,811/-, education cess of rs. 32,604/-alongwith interest and imposed a penalty of equivalent amount on m/s glenmark pharmaceuticals. a penalty of rs. 1 lakh was also imposed on m/s niramay pharma.we find that the issue as to whether the loan licensee is required to pay duty at the price at which the goods are sold by the principal manufacturer i.e. to person who supplied the raw materials etc. and gets the goods manufactured on loan basis by utilizing spare capacity of another manufacturer or at the price determined on the basis of cost of.....

Full Judgment

1. The brief facts of the case are that M/s Glenmark Pharmaceuticals Ltd. are engaged in the manufacture of pharmaceutical products in their own factories situated at different locations. They also get medicines manufactured on job work basis from various job workers who have their own manufacturing facility approved by FDA. They supplied raw materials and packing materials to the job workers who manufactured medicines in accordance with specifications given by them. The job workers availed credit of duty paid on raw materials and packing material. Medicines so manufactured are cleared by the job workers on payment of duty on the basis of cost of raw materials plus manufacturing expenses including manufacturing profit as per the Supreme Court decision in Ujagar Print's case. The present case pertains to medicines manufactured on job work basis by M/s Niramay Pharma (NPPL) having its factory at Nashik. They were however issued show cause notices alleging that M/s Glenmark Pharmaceutical only is the manufacturer of the said medicines at the premises of M/s Niramay Pharma and that duty was required to be paid at a price at which M/s Glenmark Pharmaceuticals -sells the medicines to its own customer. The show cause notices were adjudicated by the Commissioner who held that M/s Glenmark Pharmaceuticals are to be treated as a manufacturer of the medicines at the premises of M/s Niramay Pharma and demanded duty amounting to Rs. 1,26,82,811/-, Education Cess of Rs. 32,604/-alongwith interest and imposed a penalty of equivalent amount on M/s Glenmark Pharmaceuticals. A penalty of Rs. 1 Lakh was also imposed on M/s Niramay Pharma.

We find that the issue as to whether the loan licensee is required to pay duty at the price at which the goods are sold by the principal manufacturer i.e. to person who supplied the raw materials etc. and gets the goods manufactured on loan basis by utilizing spare capacity of another manufacturer or at the price determined on the basis of cost of raw material plus manufacturing expenses including manufacturing profit as held by the Supreme Court in the case of Ujagar Prints has been decided in a number of decisions more particularly by the Gujarat High Court in the case of Indica Laboratories which was and subsequently followed by the Tribunal in the case of C.C.E. v.Lupin Laboratories (P) Ltd. , Dolphin Laboratories Excise, Goa . In all these cases the test laid down is whether the premises have been hired shiftwise or otherwise by the loan licensee which in the present case is M/s Glenmark Pharmaceuticals and whether the goods are manufactured under the supervision and control of raw material supplied. If it is found that the goods are manufactured under the control and supervision of the raw material supplier who hired the premises shiftwise and otherwise, then the raw material supplier is to be treated as manufacture and not otherwise.

3. Learned D.R. has argued that since in this case as per agreement M/s Glenmark Pharmaceuticals was to supply the necessary raw materials including packing materials for the manufacture of medicines and job worker M/s NPPL was required to submit a monthly statement showing quantities of raw materials including packing material received from M/s Glenmark Pharmaceuticals and/or M/s NPPL suppliers during the preceding calendar month quantities and raw materials and packing materials actually used by M/s NPPL quantities of raw material and packing material, finished products in the stock at the beginning and end of month of calendar month and quantity in process raw material at beginning and end of English calendar month and was to manufacture the medicines in accordance with the manufacturing programme, manufacturing instructions and standard of operating procedure and the technical guidelines laid down by M/s Glenmark Pharmaceuticals from time to time, it has to be considered that the goods were manufactured under the supervision and control of M/s Glenmark Pharmaceuticals only and accordingly M/s Glenmark Pharmaceuticals have to be considered as manufacturer of the goods and not the job workers. He also submitted that the goods could not have been sold by the job worker as he has no licence under FD Act to sell the goods and therefore the goods cannot be considered as marketable and accordingly the job worker cannot be considered as manufacturer of the goods as held by the Tribunal in the case of B.P.L. Mobile Communications Ltd. v. Commissioner of Central Excise 2006 (198) E.L.T. 226 (Tri.-Mumbai). However, on query from the bench, learned D.R. agreed that the facts and circumstances of the cases and the agreement entered between the raw material supplier and job worker were same as in the case of Cosme Remedies (cited supra).

Learned D.R. however argued that the agreement is at variance with the application made to FDA authorities for grant of licence to manufacture medicines on loan basis as in the application M/s Glenmark Pharmaceuticals have given an undertaking that they shall be hiring the premises of M/s Niramay Pharma to manufacture the medicines and therefore M/s Glenmark Pharmaceuticals only have to be considered as manufacturer of the medicines and duty is required to be paid as the price at which the medicines are sold by M/s Glenmark Pharmaceuticals to its customer. The appellants however contended that they do not control and supervise the production process of M/s Niramay Pharma.

They regularly give their requirement and the time period over which the requirement should be fulfilled. M/s Niramay is free to adjust their production process so that the order placed by the appellants is fulfilled. The fact that M/s Niramay Pharma is simultaneously manufacturing medicines for other companies establishes that the appellants have no direction, control and supervision over the manufacturing process of M/s Niramay. The technical staffs of M/s NPPL are employees of M/s NPPL. They only pay their salaries or other remuneration to such technical staff. These technical staff never report to M/s Glenmark Pharmaceuticals. Such technical staffs are not accountable to them. They have not hired a single shift at NPPL nor any hiring charges are recorded in the books of account maintained in the regular course of business by M/s NPPL. There is no hiring of shift or staff or of manufacturing facilities which belong to M/s NPPL. In their application to FDA. M/s NPPL is being repeatedly referred to as the manufacturing concern. It also refers to the names, qualification and experience of the expert staff actually connected with the manufacture and testing of the specified products in the manufacturing premises.

These staffs were never in control and supervision of the appellants and no evidence to this effect has been brought on record by the adjudicating authority. In view of this they cannot be considered as a manufacturer of goods and in support thereof they referred to the decision of the Tribunal in the case of Cosme Remedies and Gujarat High Court decision in the case of Indica Laboratories and Ors.

4. We find that it has been admitted that facts and circumstances of the case including the terms of agreement are similar to the one to involving in the case of Cosme Remedies wherein after analyzing several decision it was clearly held that unless there is an evidence to the effect that the premises of the job worker has been hired shiftwise or otherwise by the raw material supplier and the goods are manufactured under the control and supervision of the raw material supplier, the raw material supplier cannot be considered as a manufacturer. In the present case no evidence has been brought out on record to show that the premises of the job workers were so hired nor there is any evidence to show that the goods were manufactured under the complete control and supervision of the raw material supplier. Merely giving manufacturing instructions, manufacturing programme and specifications of the medicines does not mean that the goods were manufactured under the control and supervision of M/s Glenmark Pharmaceuticals unless there is evidence to show that the staff was completely lent to M/s Glenmark Pharmaceuticals and their salaries wore paid by M/s Glenmark Pharmaceuticals and they were accountable to M/s Glenmark Pharmaceuticals and not to M/s Niramay Pharma. In the absence of any such evidence we follow the decision of Gujarat High Court in the case of Indica Laboratories, Lupin Laboratories (P) Ltd., Dolphin Laboratories Ltd., Remidex Pharma Ltd. and Cosme Remedies Ltd. and hold that M/s Glenmark Pharmaceuticals cannot be considered as the manufacturer and duty has been rightly paid on the basis of cost of production plus manufacturing expenses including manufacturer profit as held by the Hon'ble Supreme Court in the case of Ujagar prints. The other plea that medicines were not marketable at the premises of M/s NPPL as they do not have license to sell is not maintainable as this was neither a ground in the show cause notice nor is there any finding on that.

5. Commissioner's order is accordingly set aside and appeals are allowed.

Same Court & Year Customs Excise and Service Tax Appellate Tribunal CESTAT Mumb... Same Parties Glenmark Pharmaceuticals Ltd. vs Commissioner of Central Excise Same Subject Land Acquisition Same Judge J Balasundaram, Vice, A T K.K.