LexCOMMISSIONER OF CENTRAL EXCISE, GOA versus M/S. COSME FARMA LABORATORIES LTD.
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[2015] 4 S.C.R. 360 A COMMISSIONER OF CENTRAL EXCISE, GOA 8 v. M/S. COSME FARMA LABORATORIES LTD. (Civil Appeal No. 1761 of 2007 etc.) APRIL 07, 2015 [ANIL R. DAVE AND DIPAK MISRA, JJ.] C Drugs and Cosmetics Act, 1940 - Central Excise Act, 1944 - Drug manufacturing firm-loan licensee getting its medicaments manufactured through the job workers - Loan licensee, whether manufacturer - Payment of excise duty on goods - Liability of - Assessable value of goods - 0 Determination of - Held: Manufacturing activity was done only by the job workers in their premises and with the help of their labour force and machinery - Job workers were not manufacturing the drugs as agents of the loan licensee or on behalf of the loan licensee, but were carrying out the E manufacturing activity independently and thus, were manufacturers of the drugs as per the provisions of the Central Excise Act - Merely because the job workers had to adhere to the quality control or the specification with regard to the quality prescribed by the loan licensee, loan F licensee would not be manufacturer and would not be liable to pay duty under the provisions of the Excise Act - Further, since 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. G Dismissing the appeals, the Court HELD: 1.1 Even if a manufacturer gets the drugs/ H 360 COMMNR. OF CENTRAL EXCISE, GOA v. COSME 361 FARMA LABORATORIES LTD. medicaments manufactured by another person and A 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 stated B 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 C under the provisions of the Central Excise Act, 1944. [Para 14] [368-H; 369-A-C] 1.2 The term 'manufacturer' or the loan licensee used under the provisions of the Drugs and Cosmetics D 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 have been enacted for different purposes. The provisions of the 1940 Act pertain to manufacture of drugs and quality of E the drugs etc. [Para 18] [369-G-H; 370-A-B] 1.3 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 F certain duty as per the provisions of the said Act. Thus, the term 'loan licensee' is not much relevant as the concern is not with the quality or standard of the drugs/medicaments manufactured by the loan licensee or anybody else manufacturing medicaments for him. G [Para 19, 20] [370-E-G] 1.4 Upon going through the said agreement entered into between the respondent and the job workers, it is found that the job workers were not H 362 SUPREME COURT REPORTS [2015] 4 S.C.R. A 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 B as agents of the respondent or on behalf of the respondent, but they were carrying out the manufacturing activity independently in their premises and with the help of their labour force and machinery. Therefore, they were manufacturers of the drugs as C per the provisions of the Central Excise Act, 1944. 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 0 mean that the respondent is the manufacturer. Therefore, the findings arrived at by the tribunal that the job workers are the manufacturers is concurred with. [Para 17, 21, 22) [370-H; 371-A-C,E] 1.5 The assessable value is to be determined by E adding the value of raw material to the cost of labour work and profit of the job workers. Thus, for the purpose of determining the assessable value, only the said factors can be considered and not the market F value at which the
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