SEARLE INDIA LTD. Vs. CC &. CE, VADODARA

JUDGEMENT

(1.) THE appellant is manufacturing P & P medicines as a loan licensee to SIL Pharmaceuticals Ltd. The licensee, SIL Pharmaceuticals Ltd., had given necessary declaration for complying with the excise procedure. It is an admitted fact that the products manufactured by the appellant attracts duty and it was availing modvat credit facilities. The loan licensee, SIL Pharmaceuticals Ltd. did not own a factory and therefore it gave instructions to suppliers of the raw material to directly send the same to the appellant before us. The supplier's invoice bears the name of SIL Pharmaceuticals Ltd. a/c Searle India Ltd. The appellant sought to obtain modvat credit on such types of invoices. The department did not agree for granting modvat credit and therefore it issued four show cause notices dated 29.1.1996, 29.3.1996, 24.4.1996 and 30.9.1996. In all notices duty was demanded amounting to Rs. 32,66,990/ - for the period from July 1995 to July 1996, denying the modvat credit. The ground on which the modvat credit was denied was that the modvat credit taken on the basis of invoices issued in the name of loan licensee was not correct in terms of Rule 57G of the Central Excise Rules. After hearing the parties and after perusing the replies, the impugned order was passed denying the modvat credit and imposing a penalty of Rs. 1 lakh. The learned Chartered Accountant, who appeared for the appellant, argues that as long as the input has been used in or in relation to the manufacture of the final product, the modvat credit cannot be denied. He states that the fact that it has been loan licensee has been informed to the department and such a loan licence has been taken in terms of Drugs and Cosmetics Act and that since the loan licensee did not have factory of its own, the appellant was manufacturing the goods. When the duty is being levied, naturally the appellant is entitled to modvat credit in respect of inputs procured by them. He relies on several decisions one of which is Beepee Coatings Ltd. v. CCE : 1997 (92) ELT 223 where under similar circumstances the Tribunal has granted modvat credit. As against this, the learned DR reiterates the reasoning of the adjudicating authority.

(2.) WE have considered the rival submissions and the facts. The facts are in dispute and it has been held by several decisions one of which is Beepee Coatings Ltd. v. CCE : 1997 (92) ELT 223 where under similar circumstances we have allowed the modvat credit. We are therefore of the view that the adjudicating order cannot be supported. We hereby set aside the same and allow the appeal, granting consequential relief, if any, according to law. Appeal stands allowed.