MONSANTO MANUFACTURERS PVT. LTD. Vs. CCE

JUDGEMENT

(1.) THESE appeals arise out of an order passed by the Commissioner of Central Excise, Meerut dated 22.2.2001. When in Appeal No. E/1157/2001 -A the assessee challenges the demand of Central Excise duty to extent of Rs. 42,24,113, imposition of penalty of Rs. 21 lakhs under Rule 173 -Q and confiscation of land, building, machinery etc., in Appeal No. E/1457/2002 -A the Revenue seeks enhancement of the quantum of the penalty.

(2.) THE appellant company was engaged in manufacturing ice cream in its factory situated at Sahibabad since 1981. It was clearing the ice cream on payment of Central Excise duty. On 14.10.94 the appellant alongwith certain other companies (which are collectively referred to as 'K -North') entered into an agreement with Brooke Bond Lipton India Ltd. (hereinafter referred to as BBLIL) and Unlever Industry Pvt. Ltd. known as the sourcing agreements. Under the said agreement BBLIL was to place orders on K -North, including the appellant for manufacturing ice cream etc. Such products were to be sold by the appellant to BBLIL, at prices which were to be calculated as per a formula agreed between the parties and referred in the agreement. This agreement came into force w.e.f. 1.1.95. From that date onwards, the appellant stopped its own manufacturing activity. The ice cream so manufactured was marked with the brand name 'Kwality Walls'. On the basis of the above agreement, the appellant filed price list w.e.f. 1.1.95 in respect of product manufactured by it with the Excise Department. Prices declared were on the basis of its manufacturing cost plus manufacturing profits. Duty was paid on the basis of price so declared.

(3.) SHOW cause notice dated 27.3.2000 was issued to the appellant directing it to show cause why differential duty amounting to Rs. 42,24,113 should not be demanded under Rule 9(2) of the Central Excise Rules, 1944 read with Section 11A of the Central Excise Act, 1944. The show cause notice contained proposal for imposing penalty and confiscation. There was demand of interest also. The allegation in the show cause notice was that the appellant received additional consideration over and above the assessable value declared by it and the additional consideration flowed to it from BBLIL and/or Hindustan Lever Ltd. (hereinafter referred to as HLL) in several forms like non -competence reserve, interest free deposit, consideration for sale of marketing undertaking, interest shown in the balance sheet under the head Misc. -Income, interest on deposits as security, advances received by the appellant, value of the brand name 'Kwality -Walls' etc. The appellant filed detailed reply to the show cause notice raising objections both on merits as well as on the ground of limitation. According to the appellant, the transaction between appellant and BBLIL/HLL was on a principal to principal basis with price as the sole consideration for the sale of the products. Other contentions were also raised on the merits. Apart from the above, the assessee contended that the sourcing agreement dated 14.10.94 on the basis of which the entire transaction is carried on was made available to the Excise Department in March -April 1995. Therefore, there was no suppression or mis -declaration on the part of the assessee. Thus, the show cause notice issued on 20.3.2000 in respect of a period from February 1995 to February 1999 is barred by limitation.