Sangko Pharmaceuticals and Vs. Commissioner of Central Excise - Court Judgment

Excerpt:
1. the above appeals arise out of the order of the commissioner of central excise, mumbai who has confirmed duty demand of rs. 22,00,566.31 against m/s. sangko pharmaceuticals and imposed penalty of rs. 10,00,000/- upon them and also a penalty of rs. 5,00,000/- on m/s.guardian health care pvt. ltd., (formerly known as crossland health care pvt. ltd.). both appeals involve a common issue and are hence heard together and disposed of by this common order.2. the duty demand has been confirmed on the ground that sangko pharmaceuticals were manufacturing p&p medicines on behalf of m/s.guardian health care pvt. ltd. (ghcpl) on job work basis and using the brand names 'xtragesic' and 'mobinak' owned by ghcpl, who were not entitled to ssi exemption and therefore m/s. sangko pharmaceuticals were not entitled to the benefit of exemption under notification 175/86.3. m/s. sangko pharmaceuticals have filed a miscellaneous application seeking to raise additional grounds of appeal, namely, that the goods in question were manufactured by m/s. ghcpl as loan licensee, governed by the provisions of rule 174 and rule 174a of the central excise rules and therefore, if any duty has to be paid it is to be paid by ghcpl and not by m/s. sangko pharmaceuticals. in this contention they rely upon the decision of the hon'ble gujarat high court in the case of indica laboratories pvt. ltd. v. uoi 1990 (50) elt 210. m/s. ghcpl contend that even if it is held that they were the manufacturers of the goods on which the demand has been confirmed the brand names in question were assigned to them by m/s. crosslands research laboratories ltd., and therefore after assignment the brand names belong to ghcpl and not to crosslands research laboratories and they (ghcpl) have obtained registration as ssi unit and therefore they are entitled to the benefit of exemption under the notification and hence looking it from any angle, duty demand and penalty are not sustainable.4. the learned dr reiterates the findings of the adjudicating authority, highlighting the aspect that although ghcpl obtained provisional registration as ssi unit, their turnover exceeded rs. 2 crore for the relevant financial year and therefore they cannot be considered as a ssi unit entitled to the benefit of exemption.5. we have considered the rival submissions. we find that the gujarat high court decision cited supra was not placed before the commissioner during the hearing and therefore he didn't have the opportunity to consider the same. we also note that the plea regarding assignment of the brand names is required to be considered in the light of the tribunal's decisions in the cases of cce, ahmedabad v. vikshara trading & investment pvt. ltd.cce, mumbai v. bigen industriessurginova industries v. cce, baroda 1999 (114) elt 349 and in the light of the hon'ble supreme court decision in the case of p&b pharmaceuticals (p) ltd. v. cce 2003 (153) elt 14 wherein the court held that where the mark is assigned, even if the assignor has been using the brand name after assignment the assignee will been entitled to small scale exemption under notification 175/86.plea of limitation based upon the argument that the question as to whether goods affixed with brand name of the trader will be eligible to ssi exemption was subject matter of dispute and during the period in question, the issue was not free from doubt and therefore the allegation of suppression of fact is not sustainable, is also to be considered. in the light of the above, interest of justice require that the matter be reconsidered by the jurisdictional commissioner to whom we remand the case for fresh decision on all aspects set out above; after extending a reasonable opportunity to the appellants of being heard in person.6. in the result we set aside the impugned order and allow the appeals by remand, after allowing the miscellaneous application.

Judgment:
1. The above appeals arise out of the order of the Commissioner of Central Excise, Mumbai who has confirmed duty demand of Rs. 22,00,566.31 against M/s. Sangko Pharmaceuticals and imposed penalty of Rs. 10,00,000/- upon them and also a penalty of Rs. 5,00,000/- on M/s.

Guardian Health Care Pvt. Ltd., (formerly known as Crossland Health Care Pvt. Ltd.). Both appeals involve a common issue and are hence heard together and disposed of by this common order.

2. The duty demand has been confirmed on the ground that Sangko Pharmaceuticals were manufacturing P&P medicines on behalf of M/s.

Guardian Health Care Pvt. Ltd. (GHCPL) on job work basis and using the brand names 'Xtragesic' and 'Mobinak' owned by GHCPL, who were not entitled to SSI exemption and therefore M/s. Sangko Pharmaceuticals were not entitled to the benefit of exemption under Notification 175/86.

3. M/s. Sangko Pharmaceuticals have filed a miscellaneous application seeking to raise additional grounds of appeal, namely, that the goods in question were manufactured by M/s. GHCPL as loan licensee, governed by the provisions of Rule 174 and Rule 174A of the Central Excise Rules and therefore, if any duty has to be paid it is to be paid by GHCPL and not by M/s. Sangko Pharmaceuticals. In this contention they rely upon the decision of the Hon'ble Gujarat High Court in the case of Indica Laboratories Pvt. Ltd. v. UOI 1990 (50) ELT 210. M/s. GHCPL contend that even if it is held that they were the manufacturers of the goods on which the demand has been confirmed the brand names in question were assigned to them by M/s. Crosslands Research Laboratories Ltd., and therefore after assignment the brand names belong to GHCPL and not to Crosslands Research Laboratories and they (GHCPL) have obtained registration as SSI unit and therefore they are entitled to the benefit of exemption under the Notification and hence looking it from any angle, duty demand and penalty are not sustainable.

4. The learned DR reiterates the findings of the adjudicating authority, highlighting the aspect that although GHCPL obtained provisional registration as SSI unit, their turnover exceeded Rs. 2 crore for the relevant financial year and therefore they cannot be considered as a SSI unit entitled to the benefit of exemption.

5. We have considered the rival submissions. We find that the Gujarat High Court decision cited supra was not placed before the Commissioner during the hearing and therefore he didn't have the opportunity to consider the same. We also note that the plea regarding assignment of the brand names is required to be considered in the light of the Tribunal's decisions in the cases of CCE, Ahmedabad v. Vikshara Trading & Investment Pvt. Ltd.CCE, Mumbai v. Bigen IndustriesSurginova Industries v. CCE, Baroda 1999 (114) ELT 349 and in the light of the Hon'ble Supreme Court decision in the case of P&B Pharmaceuticals (P) Ltd. v. CCE 2003 (153) ELT 14 wherein the Court held that where the mark is assigned, even if the assignor has been using the brand name after assignment the assignee will been entitled to small scale exemption under Notification 175/86.

Plea of limitation based upon the argument that the question as to whether goods affixed with brand name of the trader will be eligible to SSI exemption was subject matter of dispute and during the period in question, the issue was not free from doubt and therefore the allegation of suppression of fact is not sustainable, is also to be considered. In the light of the above, interest of justice require that the matter be reconsidered by the jurisdictional Commissioner to whom we remand the case for fresh decision on all aspects set out above; after extending a reasonable opportunity to the appellants of being heard in person.

6. In the result we set aside the impugned order and allow the appeals by remand, after allowing the Miscellaneous Application.