MARC PHARMACEUTICALS Vs. COMMISSIONER OF C. EX.

JUDGEMENT

(1.) These two appeals - one filed by M/s. Marc Pharmaceuticals and the other filed by Revenue - have arisen out of the one common Order -in -Original No. 35 -36/C.E./2003, dated 27 -5 -2003 by which the Commissioner has confirmed the demand of duty against, and imposed penalty upon the assessee, after allowing the deduction of duty from the price of the goods charged by the related person.

(2.) Sh. B. L. Narasimhan, learned Advocate, mentioned that M/s. Marc Pharmaceuticals, manufactures for P or P medicaments (including veterinary medicaments under the House -Mark "MARC"; that they are a partnership firm consisting of the following partners - S/Shri Prem Kishore, Nitin Kishore, Vibhash Anand and Mrs. Suraj Devi; that they had sold their entire production to M/s. Marc Laboratories Pvt. Ltd. of which Shri Prem Kishore is one of the directors; that two show cause notices were issued to them for demanding differential duty on the grounds that they are not eligible for small scale exemption since they were using the brand name 'MARC' belonging to another person, their clearances are to be clubbed with the clearances of Marc India and Marc Lab and that Marc Lab are related person within the meaning of Section 4(4)(c) of the Central Excise Act and the price at which Marc Lab sells the goods is to be taken as the basis for payment of duty by M/s. Marc Pharmaceuticals; that the Commissioner, under the impugned Order, has held that they are entitled for the small scale exemption during the relevant period; that the Commissioner also dropped the proposal to club their clearances with that of other companies; that, however, the Commissioner has held that they and Marc Lab are related person.

(3.) 1 The learned Advocate submitted that Marc Lab and Marc Pharmaceuticals are not related persons within the meaning of Section 4(4)(c) of the Central Excise Act; that the Commissioner has concluded that mutuality of interest exists between both of them as Marc group of companies are controlled by Prem Kishore and members of his family; in the Central Excise Registration of Marc Pharmaceuticals, the name of Sh. Ashutosh Asthana, who is also the authorised signatory of Marc Lab, was shown; the goods sold by them have been sold by Marc Lab at higher price and the Marc Group has a common pool of some employees who are working for and on behalf of the group units. He contended that none of these factors either individually or cumulatively can lead to the conclusion that Marc Lab and the assessee have mutuality of interest in the business of each other; that it is settled legal position that two units - one partnership firm and the other limited company cannot be said to have mutuality of interest in the business of each other merely on account of the fact that some of the directors/partners are common, some common employees are working, etc.; that the mutuality of interest has to be established by means of financial flow back between the two units; that there is neither an averment in the show cause notice nor in the impugned Order to the effect that there is any flow back between them and Marc Lab; that merely because the price at which Marc Lab sold goods is higher than the price charged by them, it cannot be claimed that there is mutuality of interest; that, further, the fact that entire production is sold to Marc Lab would not establish mutuality of interest. He relied upon the decision in the case of CCE and Cus. v. Besta Cosmetics Ltd., 2000 (116) E.L.T. 293 (T) wherein the Tribunal has held that units are not related persons even if the assessee company's Chairman is also director in buyer's company and the two are having a common registered office; that the Tribunal has also held that "the transaction of purchase and sale of the entire quantity produced between the two persons would not render their transaction as not between principal to principal. This ground, pressed into service to establish the relationship of both the companies also fails." 3.2 The learned Advocate has also relied upon the decisions in - (i) CCE, Belgaom v. Akay Cosmetics (P) Ltd., 2004 (167) E.L.T. 253 (T) = 2004 (62) R.L.T. 31 (CESTAT); (ii) Plus Cosmetics Pvt. Ltd. v. CCE, Kanpur, 1999 (108) E.L.T. 71 (T); and (iii) Beco Chemicals (P) Ltd. v. CCE, Raipur, 2003 (156) E.L.T. 668 (T). 3.3 Finally, the learned Advocate submitted that the finding that Marc Group of Companies is controlled by Shri Prem Kishore and members of his family, is factually incorrect; that it is evident from the composition of the firm and the directors of company that there are also independent and outside persons; that M/s. Marc Pharmaceuticals had earned big profits during the material period which goes to show that the price was not suppressed.