CHARMINAR BOTTLING CO. (P) LTD. Vs. CCE

JUDGEMENT

(1.) These three appeals have been filed as under: (i) Appeal Nos. 3089 -90/02 -NB(A) have been filed by M/s. Charminar Bottling Co. Pvt. Ltd. (M/s. Charminar in short) against Order -in -Original No. 9/2001 dated 4.4.2002 and Order -in -original No. 35/2002 dated 6.9.2002. (ii) Appeal No. 4123/03 -NB(A) has been filed by the Revenue against Order -in -original No. 35/2002 dated 6.9.2002 by which the Commissioner has confirmed the duty and penalty after treating the sale price as cum -duty price.

(2.) 1 Shri K.K. Anand, learned Advocate, mentioned that M/s. Charminar manufacture aerated waters as a franchise of M/s. Pepsi Foods Ltd.; that they get concentrate from M/s. Pepsi Foods Ltd. for the manufacture of aerated waters in bottles and in Bag -in -Box; that Bag -in -Boxes are sold on ex -factory basis to M/s. Hyderabad Beverages for further distribution to the vendors in the State of Andhra Pradesh whereas outside Andhra Pradesh the goods are sold to M/s. Nagpur Frozen Foods P. Ltd., Nagpur; that the demand of duty has been confirmed and penalty has been imposed vide Order -in -original No. 9/2001 on the ground that M/s. Hyderabad Beverages were preparing and submitting monthly PMX reports showing the particulars of primary sales, secondary sales and other services particulars and on comparison of those reports, the Department has alleged that the quantity purchased as shown in the reports was higher than the quantity received as per Invoices by M/s. Hyderabad Beverages and has alleged clandestine clearance of 5241 bags -in -box without payment of duty of the period 1994 -95 to July 1996; that the second ground is that the sales made to Hyderabad Beverages was not in the ordinary course of trade and the price was not the sole consideration inasmuch as Hyderabad Beverages were undertaking all activities such as collection of rental charges, cost of transportation and other market discount and schemes on behalf of M/s. Charminar and thus assessable value cannot be determined under Section 4(1)(a) of the Central Excise Act. He further mentioned that it has also been alleged that Hyderanbad Beverages was a frontal organization and, therefore, their sale price has to be adopted for arriving at the assessable value. 2.2 In respect of second appeal against Order -in -Original No. 35/2002, the learned Advocate mentioned that the demand has been confirmed for the period from November, 1998 to February, 2001 on the ground that M/s. Hyderabad Beverages was a frontal agency of M/s. Charminar and has been abatements only of sales tax and central excise duty; that the Commissioner has not given the deduction on account of transportation charges, which was given in Order -in -original No. 9/2001, in view of amendment of Section 4 of the Central Excise Act with effect from 28.9.96.

(3.) 1 The learned Advocate submitted that there is absolutely no evidence on record to show that M/s. Charminar had cleared 5241 Bags -in -Box without payment of duty which has been confirmed merely on presumption and assumption on the basis of PMX Reports which were prepared by M/s. Hyderabad Beverages; that it has clearly come on record through the various statements that the figures mentioned in the PMX reports were inflated to achieve the target sales figures and were being submitted to M/s. Pepsi Foods Ltd. by M/s. Hyderabad Beverages; that Shri P.R. Rama Rao, General Manager, has deposed that he had directed the Hyderabad Beverage staff to inflate figures so as to show M/s. Pepsi Foods that Charminar had reached targeted sales figures; that Managing Director of M/s. Charminar was not questioned about these reports; that PMX Reports on the basis of which duty is being demanded were not prepared by M/s. Charminar and, therefore, duty cannot be demanded on the alleged figures shown in PMX Reports which had been prepared by another person. He also contended that the Department has wrongly calculated the percentage of yield; that for the year 1995 -96, the variation of production of Pepsi brand had been shown to be 24% in the show cause notice which is actually 0.24% and therefore, the entire case of the Department falls to the ground; that there is absolute no corroborative and independent evidence on record to show that they had cleared 5241 bags without payment of duty. He relied upon the judgment in the case of Oudh Sugar Mills Ltd. v. UOI, 1978 ELT (J -172) wherein the Supreme Court has held that average production cannot be made basis for issue of show cause notice and the findings based on such show cause notice are without any tangible evidence and are based on inferences involving unwarranted assumptions and are vitiated by an error of law. He relied upon the decision in the case of CCE, Meerut v. Moon Beverages Ltd., 2002 (150) ELT 976 (Tri) wherein it has been held by the Tribunal that corroborative evidence such as evidence of other inputs required for manufacture of aerated water, namely, sugar, carbon dioxide being purchased and utilised in the manufacture of final product during the period in disputes is required and as there is no such corroborative evidence, the charge of clandestine removal is not sustainable. Reliance has also been placed on the following decisions: - (i) Park Beverages Ltd. v. CCE, Mumbai, 1999 (114) ELT 872 (Tri) (ii) CCE, Hyderabad v. Annapurna Industries Ltd. 2003 (153) ELT 586 (Tri) 3.2 The learned Advocate contended that even if M/s. Hyderabad Beverages had inflated the figures of sale, no liability can be fastened on the Appellants; that M/s. Hyderabad Beverages have not been made party to the show cause notice in spite of the allegation leveled against them in show cause notice dated 23.6.98 to the effect that "HB is abetting CBC in the duty evasion inasmuch as they received BIBs without payment of duty...." He relied upon the decision in the case of Rama Shyama Papers Ltd. v. CCE, Lucknow, 2004 (95) ECC 86 (Tri) : 2004 (168) ELT 494 (Tri) wherein it has been held that the onus of proof that the goods were removed by the Appellants without payment of duty is upon Revenue which cannot be discharged merely on the strength of the entries made in the records of a third party without linking the removal of goods from the premises of the Appellants.