COMMISSIONER CENTRAL EXCISE Vs. KWALITY ICE CREAM CO

JUDGEMENT

(1.) The short question that arises for our consideration in these appeals is whether M/s. Kwality Ice Cream Company on the one hand and Brooke Bond Lipton India Limited -(BBLIL) on the other (which later merged with Hindustan Lever Limited -HLL) are treated to be related persons in the matter of computing assessable value of ice cream manufactured by M/s. Kwality Ice Cream and as to whether duty should be demanded from M/s. Kwality Ice Cream on the basis of the price at which BBLIL sold the said product from its depot.

(2.) M/s. Kwality Ice Cream (respondent-assessee) is engaged in the manufacture of ice cream falling under the Schedule to the Central Excise Tariff Act, 1985 (for short the Act). It entered into an agreement for the sale of the entire production to BBLIL, which later merged with HLL, for marketing. It has entered into agreement with BBLIL for a period ending on March 21, 1997. Later an agreement was entered into with M/s. HLL with effect from March 22, 1997. The terms and conditions of this agreement are the same as those with BBLIL.

(3.) The contention raised by M/s. Kwality Ice Cream that the entire transaction between the parties covered by the agreement was on principal to principal basis and that the price was sole consideration for the sale of the goods was not accepted by the departmental authorities. The demand under show cause notices covering the period from February, 1996 to November, 1997 was confirmed by the Assistant Commissioner under Section 11 of the Central Excise Act, 1944. Appeals preferred by M/s. Kwality Ice Cream against the said order were rejected on the ground that the agreement between M/s. Kwality Ice Cream and BBLIL/HLL does not leave any scope but to indicate that M/s. Kwality Ice Cream has no autonomy to run its unit. Starting from the procurement/purchase of raw material to the manufacture of final product, all the activities of M/s. Kwality Ice Cream were fully controlled by BBLIL/HLL. The nature and type of machinery to be put in use was in terms of the directions of BBLIL/HLL. M/s. Kwality Ice Cream did not have any liberty to market its goods. The appellate authority took the view that the transactions between the parties were not on principal to principal basis. Interest accrued on interest free deposit with M/s. Kwality Ice Cream, read with other terms and conditions of the agreement, reveal that it was clearly an extra commercial consideration.