Judgment:
1. All the three appeals are being disposed of by a common Order as they arise out of the same impugned Order of the Commissioner of Central Excise, Calcutta-I, vide which, he has confirmed a demand of duty of Rs.2,40,29,153.76 against M/s. The Calcutta Chemical Limited and has imposed a personal penalty of Rs.20.00 lakh upon them. Apart from that, personal penalty of Rs.10.00 lakh has been imposed upon M/s.
Shaw Wallace & Company Limited and Rs.2.00 lakh on M/s. A M Marketing Ltd. 2. Arguing on the appeals Dr. Samir Chakraborty submitted that the demand has been confirmed against M/s. The Calcutta Chemical Company Limited on the alleged finding that they had sold a portion of their final product to M/s. Shaw Wallace & Company Ltd. It's holding company at a price much lower than the whole-sale price at which such goods were oridinarily sold by them to their whole-sale dealers and that the appellants had not included Advertisement Expenses incurred by its another distributor, M/s. A M Marketing Ltd. Dr. Chakraborty has very strongly assailed the above on the ground that the impugned Order of the Commissioner as regards under-valuation of the product is based upon the incorrect appreciation of the relevant facts/materials on record and non-appreciation of law in question, as laid down by the various decisions of the Honourable Supreme Court and the Tribunal.
3. Arguing on the first issue that the appellants, M/s. The Calcutta Chemical Company Ltd. (here-in-after referred to as CCCo) and M/s. Shaw Wallace & Company Ltd. (here-in-after to as SWC) are related persons within the meaning of Central Excise Act and the assessable value at which M/s. CCCo cleared their goods to SWC, has to be determined taking the price at which SWC sold the goods to its customers, Dr. Chakraborty submitted that the entire findings of the Commissioner are based on the fact that the two Companies being holding and subsidiary companies, have to be treated as related persons within the meaning of Section 4(4)(c) of the Act. He further submitted that the said Section, for treating the two persons as related persons, requires mutuality of interest in the business of each other, as one of the preconditions.
Merely because a company is the subsidiary of holding company, the same, ipso facto, does not label the two as related persons under the said Section. It is required to be established by the Revenue that the transaction in question is not based on principal to principal basis and that extra commercial considerations have lowered the price. In this connection, he makes a reference to a number of decisions of the various High Courts and the Honourable Supreme Court. He also submitted that there is not a single instance dislosed in the impugned Order or in the show cause notice evidencing that profits of SWC flowed back to CCCo and there is nothing on record to show that both have interest in the business of each other. He also submitted that they drew attention of the adjudicating authority to the various documents and facts on record in their reply field on 16.2.98, which would conclusively demonstrate that the sale of goods by CCCo to SWC and AMM, were on principal to principal basis and on the same price as contained in the All India Price List published by the appellants from time to time, on which the appellants sell its products to other dealers/stockists. He also submitted that although a large part of the goods manufactured by CCCo were sold to SWC, admittedly there were other dealers/stockists to whom the appellants sold their goods. No special concession of any kind, whatsoever, was given to SWC. He also submitted that in their reply, they had dealt with each of the allegations made in the show cause notice, but none of them have been considered and dealt with the Commissioner. Even the case-law relied upon by the appellants, have been perfunctorily dealt with by making a one-line observation ("In the facts and circumstances of the instant case, the case-laws sought are not applicable as discussed supra"). By drawing attention to the following decisions, learned Advocate submitted that the issue as regards establishing the mutuality of interest in the business of each other before giving a finding of related persons, is well-settled:-(ii) Kerala Electric Lamp Works 1988(33)ELT-771(T) vs.(iii) Brakes India Ltd. 1988(33)ELT-654(Mad.) vs.(iv) Rosemount(India)Ltd. 2000(36)RLT-583(T) vs.(vii) Spencer Consumer Products & Service Ltd. vs.
2000(39)RLT-992(T)Para 5(b) Commissioner of Central Excise,Madras 4. As regards the issue of inclusion of Advertisement Expenses incurred by AMM in the assessable value of CCCo, he submitted that the findings arrived at by the Commissioner, are contrary to the law laid down by the Honourable Supreme Court as well as by this Tribunal, and are, therefore, illegal, invalid and bad in law. In this connection, he referred to the following decisions:-(i) Philips India Ltd. 1997(91)ELT-540(SC) vs.(ii) Mahindra & Mahindra Ltd. 1998(103)ELT-06(T) vs.(iii) Somany Pilkington's Ltd. 1998(99)ELT-99(T) vs.(iv) Punjab Tractors Ltd. 2000(36)ELT-99(T) vs.(v) Commissioner of Central 2000(37)RLT-786(T) Excise(vi) Havmor Ice Cream Company 1997(89)ELT-65(T) vs.
He also submitted that it is now well-settled that the Advertisement Cost incurred by a dealer as per its obligation under an Agreement, is not includiable in determining the assessable value of the goods manufactured and sold by the manufacturers. As such, the finding of the Commissioner that there was an agreement between AMM and CCCo for incurring expenses towards advertisement, by itself cannot enhance the assessable value by inclusion of such Advertisement Expenses.
5. The above Order has also been assailed by the learned Advocate on the point of limitation. He also submitted that the learned Commissioner has invoked the extended period of limitation by alleging suppression of facts with an intent to evade payment of duty. However, the instances referred to by the learned Advocate, are incorrect as is evident from the relevant submitted before the Commissioner, during the course of adjudication, to which he has chosen to ignore. It is the contention of the learned Advocate that the Commissioner has deliberately omitted to take into consideration the relevant materials, as it would have been impossible for him to give adverse finding if the same were referred to. He submitted that the show cause notice issued on 3.7.96 for the period from June, 1991 to March, 1995, it, on the face of it, barred by limitation.
6. Dr. Chakraborty, learned Advocate for the appellants, has also drawn our attention to an identical issue decided by the South Regional Bench in the case of M/s. The Calcutta Chemical Company Ltd. Itself. We find that after taking note of the various submission made by the appellants in that case, the Tribunal vide its Final Order No.2323 and 2343/99, has remanded the matter to the Commissioner for looking into the above facts and the case-law and then decide the matter.
7. We have also heard Shri N.C.Roychowdhury, learned Senior Advocate for the Revenue who has drawn our attention to the impugned Order and submitted that the Commissioner has taken into account number of evidences and instances in support of his finding that M/s. SWC were a related person of CCCo. In this regard, he referred to para 10.4 of the impugned Order. Some of the instances are that M/s. CCCo are a subsidiary company of SWC; that the senior and managerial personnel of SWC and CCCo are transferable from one company to another; that a major portion of CCCo's products are sold to SWC and SWC in turn sells those goods to the wholesale dealers at a price much higher than their purchase price; that SWC has strandarised the wrapper and supply thereof, and pays for supply of wrapper; that major expenses towards advertisement and sales promotion are incurred by SWC for the product of CCCo; that product launching expenses for the products of CCCo are also borne by SWC; that job workers of CCCo are shown as creditors and lenders without interest in the books of SWC; that depot personnel work commonly for all the three companies; and internal audit of CCCo is conducted by officers of SWC.From all these evidences, submitted the learned Advocate, the findings arrived at by the learned Commissioners, are just findings and should not be interfered with.
8. We have given our careful consideration to the submissions made from both the sides. It is the contention of the appellants that the various facts, documents and records referred to by them in their replies to the show cause notice, have not been properly considered by the adjudicating and there is no finding of mutuality of interest between CCCo and SWC. The appellants have submitted that they have been selling to their independent whole-sale buyers at the same price at which they were selling to SWC, which price in turn was based on All India Price List issued by M/s. CCCo. We find force in the above submission of the learned Advocate, Dr.Chakraborty. A detailed reply has been filed by them on 16.2.98, putting forward their pleas and submissions, which had not been appreciated by the adjudicating authority by taking all the relevant points into consideration. We also agree with the learned Advocate, Dr. Chakraborty that the case-law relied upon by them in support of their submissions, have been dismissed lightly by the adjudicating authority, by observing that the same are not applicable to the facts and circumstances of the case. Nothing has been discussed as to how the law laid down by the Apex Court, is distinguishable in the present facts and circumstances of the case. We also note that the Sough Regional Bench of the Tribunal in the appeal filed by M/s. The Calcutta Chemical Company Ltd. against Order confirming demand of duty against them, based upon the same allegations of M/s. SWC being their related person, has set aside the same, vide their Order referred supra, and the matter has been remitted to the Commissioner for de-novo consideration, in view of the case-law cited by appellants.
9. In view of the foregoing discussions, we are of the view that the impugned Order is required to be set aside and the various issues need to be re-considered based upon the appellants' pleas relatable to the factual position the relevant case-law cited by the appellants, are also required to be taken into consideration by the Commissioner, who before deciding the case afresh, would grant a proper opportunity of hearing to the appellants for placing their cases before him.
Similarly, the point of limitation urged by the appellants, would also be considered by the Commissioner with reference to the facts and documents on record. Accordingly, we set aside the impugned Order and allow all the three appeals by way of remand.