Commnr. Of Central Excise, Hyderabad vs M/S. Detergents India Ltd. & Anr

3. The facts of Civil Appeal Nos.9049-9051 of 2003 are as follows:

4. By a separate show cause notice dated 26.3.1997 for the period 1.3.1992 to 31.3.1995, the Commissioner by an order dated 31.8.1999 confirmed a demand of Rs.1,12,42,499/- and also confiscated land, building, plant and machinery, and further ordered redemption of the same in lieu of confiscation on payment of a fine of Rs.5,00,000/-. Penalties of Rs.5,00,000/- each were imposed on the assessee, namely, DIL and on its holding company Shaw Wallace Company Limited. An appeal was filed against the order dated 31.8.1999 by the assessee and by its holding company Shaw Wallace. Three judgments were delivered by CEGAT in the aforesaid appeals. The learned Technical Member on a consideration of the facts came to the conclusion that during search operations goods from the subsidiary company were cleared from the factory premises to the depot of Shaw Wallace at a much lower price as compared to the price at which these goods were sold by the assessee in the market to wholesale purchaser Hindustan Lever and another. The Technical Member, therefore, remanded the matter for a proper adjudication on facts. The Legal Member, on the other hand, found in favour of the assessee finding that the issue in the present appeals was covered by the judgment of Union of India v. Atic, (1984) 3 SCC 575 and Raliwolf Limited v. Union of India, 59 ELT 220 Bombay (1992). In view of the difference of opinion between the members, the points of difference were placed before a third Member, who then decided in favour of the assessee in the following terms:

7. As DIL and SWCL have already been found not to be "related persons", it cannot be said that the former suppressed (in their price lists filed with the department) any "relationship" before the department with an intent to evade payment of duty. The fact is that there was no mutuality of interest between DIL and SWCL and hence they were not "related persons" within the meaning of Section 4(1)(a) of the Act. The fact alleged by the department in the show cause notice did not exist at all to be suppressed by the notice. Therefore, the extended period of limitation was not invocable in this case. I agree with Ld. Member (J) on this score also.

8. In the result, the appeals filed by DIL and SWCL have to be allowed and the Revenue's appeal to be rejected."

5. The facts further show that Detergents India Limited, now Henkel Marketing India Limited, was at the relevant time a subsidiary of Shaw Wallace and Company Limited. Both were public limited companies. Shaw Wallace's subsidiary companies held 57% of the paid up share capital of Detergents India Limited, making Detergents India Limited a subsidiary of Shaw Wallace as understood by the definition of "holding company" and "subsidiary company" contained in the Companies Act, 1956. 90% of the manufacturing capacity of Detergents India Limited was to manufacture various products for Hindustan Lever Limited which were then branded with Hindustan Lever names in small packs. A processing charge was paid by Hindustan Lever Limited for this job work, and it is clear that different processing charges were paid depending upon the size of the product and the product itself. The excess 10% capacity which was not mopped up by Hindustan Lever was sold to Shaw Wallace, its holding Company. Various other manufacturers/sellers also sold the same and similar products to Shaw Wallace and Company. A large number of these manufacturers were not subsidiary companies of Shaw Wallace and indeed had no business relationship with Shaw Wallace other than the sale of these products. It was pleaded as a fact that the price paid by Shaw Wallace and Company for the purchase of the same/similar products from the other firms/companies was less than the price paid to Detergents India Limited. This can be found as a fact in the Commissioner's order dated 7.11.2000 in Civil Appeal Nos.6166-6168 of 2004 in which the following fact was pleaded before the learned Commissioner:-

It is on these facts that the present appeals have to be decided.

(i) where the goods are delivered at the time of removal in a packed condition, includes the cost of such packing except the cost of the packing which is of a durable nature and is returnable by the buyer to the assessee.

29. Mr. Bagaria, learned counsel appearing on behalf of Shaw Wallace, is aggrieved by penalties levied upon Shaw Wallace by the orders of the Commissioner. These penalties have been set aside by CEGAT. He pointed out to us that the ingredients necessary to attract Rule 209A were not mentioned in any show cause notice against Shaw Wallace and that the Commissioner's finding as a result thereof would have to be held to be beyond the show cause notice. He cited a number of judgments in support of this proposition. In view of the judgment delivered by us on merits, we do not think it necessary to go into the contention raised by Shri Bagaria. Suffice it to say that we are dismissing Revenue's appeals. CEGAT's judgment itself set aside all penalties imposed on Shaw Wallace as well as DIL. That part of CEGAT's judgment will remain undisturbed.

30. The appeals by Revenue are devoid of merit and are accordingly dismissed. There shall be no order as to costs.