VADILAL DAIRY INTERNATIONAL LTD. Vs. COMMISSIONER CENTRAL EXCISE

JUDGEMENT

(1.) THE appellant M/s. Vadilal Dairy International Ltd. (formerly known as M/s. Super Milk Makers Pvt. Ltd.) were engaged in the manufacturing of Ice -cream (Ice -Candy) falling under Chapter heading 21 -05 of Central Terrific Act, 1985. On verification of their sale pattern it appear that M/s. Vadilal Dairy International Ltd. had entered into an agreement dated 13 -12 -1992 with M/s. Vadilal Milk Products Pvt. Ltd. (formerly known as Nematic Marketing Pvt. Ltd.) for sale of marketing rights of the ice cream and all other products. In terms of this agreement the marketing rights were acquired by M/s. Vadilal Milk Products Pvt. Ltd. for a consideration of Rs. 80,00,000/ - for a period of 5 years. Relevant terms of the agreement for the period of 1 -4 -1993 to 30 -3 -998 were as under:

(2.) IT appeared to the department that as the entire goods were being sold by M/s. V.D.I.L. and M/s. V.P.M.L. and since the goods were being delivered by M/s. V.D.I.L. to different outlets by M/s. V.P.M.L. as per the agreement, there was no sale in the normal course of trade as goods were not available to any other wholesaler dealer for purchase at the factory gate of M/s. V.D.I.L. The goods were not available for purchase to any other person excepting the M/s. V.P.M.L. and therefore the sale was not at arm's length. It was felt that prices at which the goods were sold by M/s. V.D.I.L. to M/s. V.P.M.L. did not represent the normal price within the meaning of Section 4(1)(a) of the Central Excise Act, 1944 and under these circumstances the valuation of the goods was required to be done under the provisions of Section 4(1)(b) of the Central Excise Act, 1944 read with Rule 5 of the Central Valuation Rules, 1975.

(3.) THE investigation revealed that an amount of Rs. 4,72,48,433.00 was incurred on account of advertisement and publicity by M/s. V.D.I.L. on the products of M/s. V.P.M.L. during the period 1993 -94 to 1997 -98. This advertisement and publicity expenses and Rs. 80 lacs paid by the marketing agent M/s. V.P.M.L. were considered as additional consideration received by M/s. V.D.I.L. and therefore a show cause notice was issued on 12 -2 -1999 seeking to add the above two amounts while determining the price under Section 4 and consequently demanded duty amounting to Rs. 46,32,392/ - along with interest etc. The show cause notice was for extended period alleging suppression of the facts and sought to impose penalty and proposed confiscation of plant building machinery etc. This show cause notice was confirmed by the Commissioner who also imposed a penalty of Rs. 16,49,097 on M/s. Vadilal under Section 11(AC) and Rs. 29,00,000.00 under Rule 173Q.