SARPIN PHARMACAL Vs. CCE

JUDGEMENT

(1.) These appeals are against the order dated 28.3.2001 which was passed by the Commissioner of Central Excise in de novo adjudication of a show -cause notice dated 28.6.1990 pursuant to an order of remand passed by the Hon'ble Supreme Court. The show -cause notice had invoked the larger period of limitation under Section 11 -A of the Central Excise Act 1944 to demand Central Excise duty of Rs. 12,29,511/ - from M/s. Sarpin Pharmacal (Appellants in appeal No. E/1310/2001) for the period April 1988 of July 1989. The demand was on two products viz. "Merizyme Elixir" and "Merizyme Drops" which had been cleared during the said period by the said appellants on payment of duty at the concessional rate of 5% ad valorem under SSI Exemption Notification No. 175/86 -CE dated 1.3.86 (as amended), to M/s. Mercury Laboratories Pvt. Ltd., Baroda (hereinafter referred to as 'M/s. MLL'). It was alleged that the benefit of SSI exemption was not admissible to the goods (which had allegedly been cleared under the brand -name of another person [M/s. MLL] not eligible for the benefit of the above Notification) on account of the bar contained in paragraph 7 of the Notification and therefore duty should have been paid on the goods at the normal rate of 15%. It was also alleged that the above goods cleared to M/s. MLL had been undervalued and that duty should have been paid by the appellants on the goods at the price at which M/s. MLL cleared the goods to their customers. It was on the basis of these allegations that the show -cause notice raised the above demand of differential duty. The SCN had also proposed to impose penalty on the partners of the appellant -firm, Sh. Nandkishore B. Desai (Appellant in appeal No. E1311/2001) and Sh. Kiranbhai D. Patel (appellant in appeal No. E/1311/2001) under Rule 209A of the Central Excise Rules 1944. The adjudicating authority rejected the Department's allegation of under valuation and held that M/s. MLL were not a "related person" for the appellant -firm and, therefore, the assessable value of the goods was the value at which the firm sold the goods to M/s. MLL. But the adjudicating authority held that the appellant -firm was not eligible for the benefit of exemption under the Notification In respect of the goods as alleged in the show -cause notice. Accordingly, that authority sustained the demand of duty to the extent of Rs. 5,59,348/ - against the firm and imposed on them a penalty of Rs. 50,000/ - under Rule 173Q of the Central Excise Rules, 1944. It also imposed penalties of Rs. 30,000/ - and Rs. 20,000/ - respectively on Sh. N.B. Desai and Sh. K.D. Patel under Rule 209A. Hence the appeals.

(2.) Heard both sides. Learned counsel submitted that the appellant -firm was registered as an SSI unit under the Industries (Development and Regulation) Act and was also registered as a manufacturing unit under the Drugs and Cosmetics Act; that, throughout the period of dispute, the medicines "Merizyme Elixir" and "Merizyme Drops" and their formulae had remained registered in the name of the firm under the Drugs and Cosmetics Act and stood recognized as the appellant's product in the trade; that the appellants had acquired the brand -names "Merizyme Elixir' and 'Merizyme Drops' from M/s. MLL for a royalty under agreement dated 6.1.1988 and had been using the brand -names since 19.4.88 and 27.5.88 respectively; that M/s. MLL had discontinued used of the brand -names since 1.1.88 as resolved by their Board of Directors on 28.11.87 and they never used the brand -names thereafter the during the period of dispute; that the appellants also filed application with the Trade Marks authority (under the Trade and Merchandise Marks Act) on 29.4.1992 for registration of the brand -names in their favour; that, on these facts, the Commissioner's finding that the brand -names belonged to M/s. MLL during the relevant period was not correct; that, as long as the brand -names were not registered in the name of M/s. MLL under the Trade and Merchandise Marks Act, the status of the medicines registred in the name of the appellant -firm under the Drugs and Cosmetics Act should have weighed with the adjudicating authority; and that, on the available evidence, the adjudicating authority should have held that the appellants had cleared their products under their own brand0names and were entitled to the SSI exemption. Ld. Counsel relied on the Supreme Court's decision in the case of P and B Pharmaceuticals (P) Ltd. Vs. CCE [2003(153) ELT 14 (SC)]. Counsel further submitted that the Commissioner had not considered the appellant's plea of time -bar against the demand of duty. The appellants had not suppressed any facts from, or mis -stated any facts to, the department with intent to evade payment of duty. They had filed classification lists from time to time an the same were approved by the proper officer of Central Excise. they had also filed price lists which were also approved. The RT 12 returns filed by them for the relevant period were also assessed finally by the proper officer without raising any objection. All queries of the department were satisfactorily answered. If the agreement dated 6.1.88 was not disclosed to the department, it was only because the said agreement was never implemented. Therefore, there was no justification in invoking the larger period of limitation. Counsel submitted that, in the absence of means rea, penalty was also not warranted in the case. It was also contended that, when the firm was penalized, its partners were not liable to be penalized separately for the same offence.

(3.) Ld. DR submitted that as per the agreement between the appellant -firm and M/s. MLL the medicines had to be manufactured according to the formulae/specifications supplied by the latter and,admittedly, the entire production was liable to the sold to them. The agreement provided for sale of the brand -names by M/s. MLL to the appellant -firm for a royalty and stipulated that the firm should not sell them to any other party without the written consent of M/s. MLL. For these reasons, DR submitted, the brand -names were owned by M/s. MLL. who were undisputedly not eligible for the SSI exemption under Notification No.175/86 -CE. Ld. DR also sought to distinguish the case of P and B Pharmaceuticals (supra) by submitting that the case involved no brand -name but only a logo. Referring to registration of the subject products under the Drugs and Cosmetics Act, DR submitted that such registration was meant for the Drugs authority's permission for production of the goods and had nothing to do with the brand -names. With regard to penalty, DR reiterated the finding of the adjudicating authority. In his rejoinder, counsel submitted that, under the Notification, logo was also covered within the meaning of 'brand -name'.