COMMISSIONER CENTRAL EXCISE Vs. MONSANTO MANUFACTURES PVT LTD

JUDGEMENT

(1.) M/s Monsanto Manufacturers (P) Ltd. was the manufacturer of ice-cream falling under Sub-Heading 2105.00. During the period for 1994-1995 to 1998-1999 (up to 2/1999) the manufactured item was leviable to central excise duty at ad valorem rates. On 14-10-1994, M/s Monsanto along with other companies (which are collectively referred to as "K-NORTH") entered into an agreement with Brooke Bond Lipton India Ltd. (for short "BBLIL") and Unilever Industry (P) Ltd. known as the sourcing agreement. Under the said agreement BBLIL was to place an order on K-NORTH which included M/s Monsanto for manufacture of the ice-cream. The products were to be sold by M/s Monsanto as per a formula agreed between the parties expressly incorporated in the said agreement. The agreement came into force w.e.f. 1-1-1995.

(2.) Ever since the agreement came into force M/s Monsanto stopped marketing their products through their dealers and started selling their production of ice-cream to BBLIL which subsequently merged with M/s Hindustan Lever Ltd. (for short "HLL"). The ice-cream so manufactured was marked with the brand name "Kwality Walls". On the basis of the said agreement, M/s Monsanto filed the price list w.e.f. 1-1-1995 in respect of the manufactured product with the Department. Price declared was on the basis of its manufacturing cost plus manufacturing profits. Duty was paid on the basis of the price so declared.

(3.) The Department vide a show-cause notice dated 27-3-2000 required M/s Monsanto to show as to why differential duty should not be demanded under Rule 9-A of the Central Excise Rules, 1944 read with Section 11-A of the Central Excise Act, 1944 (for short "the Rules and the Act") together with penalty and interest. The allegation in the show-cause notice was that M/s Monsanto received additional consideration over and above the assessable value declared by it and additional consideration flowing to it from BBLIL and/or HLL in several forms like non-competition reserve, interest-free deposit, consideration for sale of marketing undertaking, interest on deposits as security advances received by it, value of the brand name, etc.