Case: Commr.Of Central Excise, Goa Vs. M/S Cosme Farma Laboratories Ltd

be considered and not the market value at which the respondent was selling the medicaments. 14. It had been further submitted by the learned counsel appearing for the respondent that the respondent-company was a loan licensee as per the provisions of the Drugs and Cosmetics Act, 1940 and the Rules made thereunder. He had submitted that the manufacturer of drugs/medicaments is having certain responsibilities with regard to quality 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 should not have looked into the provisions of the Drugs and Cosmetics Act, 1940 for the purpose of determining duty payable under the provisions of the Central Excise Act, 1944. 15. In view of the aforestated legal position, the learned counsel appearing for the respondent had submitted that the appeals should be dismissed as the Tribunal has rightly decided all the relevant issues. 16. We have heard the learned senior counsel for the parties at length and have also considered the order passed 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 would not mean that the respondent is the manufacturer. 18. At the outset, we would like to clarify that the term ‘manufacturer? or the loan licensee used under the provisions of the Drugs and Cosmetics Act, 1940 has nothing to do with the manufacturing activity or term ‘manufacture? under the provisions of the Central Excise Act, 1944. Both the Acts referred to hereinabove have been enacted for different purposes. The provisions of the Drugs and Cosmetics Act, 1940 pertain to manufacture of drugs and 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 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 manufactured by the one who is a licensee and the actual manufacturer is guilty of manufacturing substandard drugs, the licensee becomes responsible and liable under the provisions in the said Act. 19. On the other hand, the provisions of the Central Excise Act, 1944 are for the purpose of imposing duty on the 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 agreements entered into between the respondent and the job workers. Upon going through the said agreement, we find that the said agreement shows that the job workers were not assigned the work as agents of the respondent. The said agreement shows that the relationship between the parties is that of the principal and the principal and not that of the principal and the agent. Thus, it is clear that the job workers were not manufacturing the drugs as agents of the respondent or on behalf of the respondent, but they were carrying out the manufacturing activity independently and therefore, they were manufacturers of the drugs as per the provisions of the Central Excise Act, 1944. 22. In the light of the above factual position, it is also pertinent to find out whether the respondent is a manufacturer under the provisions of the Central Excise Act, 1944. Whether a person has manufactured a particular item or whether a person is a manufacturer is a question of fact. Once the Tribunal, after appreciating relevant evidence, has come to a conclusion that the job workers were the manufacturers and the respondent – the loan licensee, was not the manufacturer, we see no reason to interfere with the said findings of fact, especially when the same is correct and not perverse. We are, therefore, in agreement with the findings arrived at by the Tribunal that the job workers are the manufacturers. 23. 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 (supra) and other cases. In such a case, the price at which the respondent brand owner sells its goods would not be the assessable value because the duty is to be paid at the stage at which the goods are manufactured and not at the stage when the goods are sold.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]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 would not mean that the respondent is the manufacturer22. In the light of the above factual position, it is also pertinent to find out whether the respondent is a manufacturer under the provisions of the Central Excise Act, 1944. Whether a person has manufactured a particular item or whether a person is a manufacturer is a question of fact. Once the Tribunal, after appreciating relevant evidence, has come to a conclusion that the job workers were the manufacturers and the respondent – the loan licensee, was not the manufacturer, we see no reason to interfere with the said findings of fact, especially when the same is correct and not perverse. We are, therefore, in agreement with the findings arrived at by the Tribunal that the job workers are the manufacturers23. 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 (supra) and other cases. In such a case, the price at which the respondent brand owner sells its goods would not be the assessable value because the duty is to be paid at the stage at which the goods are manufactured and not at the stage when the goods are sold.