(1.) IN adjudication of three show -cause notices covering a total period from 15.4.2000 to 31.3.2002, the Commissioner of Central Excise, Chennai - II demanded duty of over Rs. 8.5 crores from M/s. Sai Mirra Innopharm Pvt. Ltd. [for short, SMIL - appellants in Appeal No. E/629/2003] under Section 11A(2) of the Central Excise Act and imposed on them penalty of equal amount under Section 11AC of the Act. She also imposed penalties of Rs. 50.00 lakhs, Rs. 5.00 crores and Rs. 2.00 crores on (i) Shri V.S. Raaman [appellant in E/628/2003], Chairman and Managing Director, Sai Mirra Group of Companies (ii) Dr. Reddy's Laboratories Ltd., [for short, M/s. DRL - appellants in E/627/2003] and (iii) M/s. American Remedies Ltd. [for short, M/s. ARL - appellants in E/627/2003], respectively, all these penalties under Rule 209A of the Central Excise Rules, 1944 / Rule 26 of the Central Excise (No. 2) Rules, 2001. Some of the present applications are by the said appellants seeking waiver of predeposit and stay of recovery in respect of the duty and penalty amounts.
(2.) IN adjudication of a show -cause notice dated 16.8.2002, the Commissioner of Central Excise, Chennai - IV demanded duty of over Rs. 4.11 crores under Section 11A(2) of the Central Excise Act from M/s. Sai Mirra Pharmaceuticals Pvt. Ltd. [for short, SMPL - appellants in E/1134/2004] and imposed on them a penalty of equal amount under Section 11AC of the Act. Penalties of Rs. 25.00 lakhs, Rs. 40.00 lakhs and Rs. 25.00 lakhs were also imposed respectively on (i) Shri V.S. Raaman [appellants in E/1135/2004], (ii) M/s. DRL [appellants in E/1133/2004] and (iii) M/s. ARL [appellants in E/1133/2004] under Rule 209A/Rule 26 ibid. The remaining applications are by these appellants praying for waiver of predeposit and stay of recovery in respect of the duty and penalty amounts.
(3.) PRIOR to 15.4.2000, M/s. ARL, a public limited company, were manufacturing P or P medicines and ayurvedic medicines at No. 288, SIDCO Industrial Estate, Ambattur, Chennai - 98 and were themselves marketing the products. Their corporate office was at No. 124, L.B. Road, Adyar, Chennai - 28. S/Shri R.K. Ramanathan, S.R. Ramaswamy Iyer, G.K. Ramani, V.S. Raaman and K.S. Ramanathan were the Directors of the company. The first four directors and their family members held nearly 45% of the total shares of the company. M/s. DRL, with their corporate office at Hyderabad and a leading manufacturer of medicines in the country, acquired control over M/s. ARL by the end of 1999 by purchasing the shares of the four directors and their family members @ Rs. 175/ -per share as also by purchasing shares from the market. Eventually, the two companies were amalgamated by the duty process of law. Another company by name M/s. Soft Caps (P) Ltd. [for short, SCPL] had two units at Keelkattalai, Chennai - 117, manufacturing P or P medicines and marketing the goods through M/s. ARL. The subscribed capital of SCPL was held by ten shareholders who were close relatives of the erstwhile four directors of ARL. M/s. ARL acquired the entire shareholding of SCPL for a total consideration of Rs. 27.45 crores, whereby the latter became a 100% subsidy of M/s. DRL, who had already become a holding company of M/s. ARL. M/s. DRL decided to dispose of the factories at Ambattur and Keelkattalai and Shri V.S. Raaman, Chairman and Managing Director of the Sai Mirra Group of Companies and erstwhile director of ARL, agreed to purchase the same. Accordingly, M/s. SMIL acquired the factory at Ambattur and M/s. SMPL acquired the two factories at Keelkattalai and, in this connection, a "manufacturing agreement" dated 14.4.2000 was entered into between ARL/SCPL and SMIL/SMPL. According to these agreements, SMIL/SMPL were to sell their products to ARL/ SCPL [both controlled by DRL] at a price referred to as "transfer price". According to another agreement viz. 'Trade Mark Assignment Agreement' dated 14.4.2000, SMIL/SMPL were entitled to use the brand names belonging to ARL/ SCPL. The sale, by ARL to SMIL, of the land, building, plant and machinery of the Ambattur unit was for a consideration of Rs. 3.94 crores including Rs. 76.00 lakhs as the cost of plant and machinery. M/s. SMIL started running the factory on 15.4.2000. Similarly, SMPL started running the factories at Keelkattalai on the same date.