COMMISSIONER OF C. EX., BANGALORE-III Vs. CAMPCO

JUDGEMENT

(1.) BOTH these appeals raise a common question of law and facts. They arise from OIO No. 09/98, dated 22 -10 -1998 and OIO No. 3/99, dated 15 -3 -1999. The Revenue proceeded by issue of respective Show Cause Notice on the same issue calling upon the Respondent M/s. Nestle India Ltd. to show cause as to why M/s. Nestle India Ltd. should not be held to be the manufacturer, under Section 2(f) of CE Act, of Nestle Chocolates manufactured at the Chocolate factory of M/s. Campco at Puttur and why M/s. Campco Ltd. should not be held to be the agents of M/s. Nestle India Ltd. The second ground was that the assessable value of Nestle brand chocolates should not be re -determined by taking challan price of M/s. Nestle as the correct value after allowing the permissible deductions and differential duty amounts as shown in the respective Show Cause Notice for the period September, 1990 to July, 1993 (OIO No. 9/98, dated 22 -10 -98 in E/1686/1999) and from 4/90 to 8/90 (OIO No. 3/99, dated 15 -3 -99 in E/176/2000). As the issue is common in both these appeals, the appeals are taken up together for disposal as per law.

(2.) THE respondent M/s. Campco contended that they had entered into an Agreement to manufacture the goods in terms laid down in the Agreement. Both are independent factories. M/s. Campco is a Cooperative Society and also engaged in the manufacture of goods independently in their own name as well as a job worker on behalf of M/s. Nestle India Ltd. They had their own factory with independent registration under the Factories Act and Sales Tax Act. The factory had a licenced capacity of 8800 MT per annum and investment of nearly Rs. 14 crores. M/s. Nestle India Ltd. is a multi -national company who had given on job work raw materials to M/s. Campco for manufacture and supply of Nestle Chocolates. Both are independent units and are not related. There is no flow back of funds and there is no mutuality of interest between each other. The relationship is on principal -to -principal basis and, therefore, it was contended by both the persons that the price of M/s. Nestle India Ltd. cannot be adopted. The ground for proceeding against the assessee for rejecting their price and for adopting the price of M/s. Nestle India Ltd. was loan furnished by M/s. Nestle India for purchase of certain machineries. This was denied by the respondents that the loan granted for purchase of machinery had any effect on the pricing of the goods. There was no extra consideration given by M/s. Campco to M/s. Nestle on that basis. The Commissioner was satisfied with the submissions made by both units of being independent units and working at arms length and on principal -to -principal basis. He accepted the contention of the respondents that they were job workers and the price adopted for the job work should be accepted and not the selling price of M/s. Nestle India Ltd. The relevant portion of his finding in Paras 9.2 to 9.5 in OIO No. 9/98, dated 22 -10 -1998 (E/1686/99) is reproduced herein below : -

(3.) THE findings recorded by the Commissioner in Paras 10 to 11 in O -I -O No. 3/99, dated 15 -3 -1999 (E/176/2000) is also reproduced herein below : -