Commnr. Of Central Excise, Meerut vs M/S. Monsanto Mfg. (P) Ltd

[B. Sudershan Reddy and Surinder Singh Nijjar, JJ.]

[2010] 14 (ADDL.) SCR 403

The Judgment of the Court was delivered by

B. SUDERSHAN REDDY, J. 1. M/s. Monsanto Manufactures Pvt. Ltd. was the

manufacturer of ice-cream falling under sub-heading no. 2105.00. During the period for 1994-

95 to 1998-99 (upto 2/99) manufactured item was leviable to Central Excise Duty at advalorem

rates. On 14.10.1994, M/s. Monsanto along with other companies (which are collectively

referred to as "K-NORTH") entered into an agreement with Brooke Bond Lipton India Ltd. (for

short `BBLIL') and Unilever Industry Pvt. Ltd. known as the sourcing agreement. Under the

said agreement BBLIL was to place an order on K-NORTH which including M/s. Monsanto for

manufacture of the ice-cream. The products were to be sold by M/s. Monsanto as per a

formula agreed between the parties expressly incorporated in the said agreement. The

agreement came into force w.e.f. 1st January, 1995. Ever since the agreement came into force

M/s. Monsanto stopped marketing their products through their dealers and started selling their

production of ice-cream to BBLIL subsequently merged with M/s. Hindustan Lever Ltd. (for

short `HLL'). The ice-cream so manufactured was marked with the brand name "Kwality Walls".

On the basis of the said agreement, M/s. Monsanto filed price list w.e.f. 1.1.1995 in respect of

the manufactured product with the Department. Price declared was on the basis of its

manufacturing cost plus manufacturing profits. Duty was paid on the basis of price so

declared.

2. The Department vide show cause notice dated 27.3.2000 required M/s. Monsanto as to

why differential duty should not be demanded under Rule 9(A) of Central Excise Rules 1944

read with Section 11A of the Central Excise Act, 1944 ( for short `the Rules and Act') together

with penalty and interest. The allegation in the show cause notice was that M/s. Monsanto

received additional consideration over and above the assessable value declared by it and

additional consideration flowing to it from BBLIL and/or HLL in several forms like non-

competition reserve, interest free deposit, consideration for sale of marketing undertaking,

interest on deposits as security advances received by it, value of the brand name etcetera.

M/s. Monsanto raised its objections to the allegations and averments made in the show cause

notice both on the merits and as well as on the ground of limitation inter alia contending that

the transaction between M/s. Monsanto and BBLIL/HLL was on a principal to principal basis

with price as a sole consideration for the sale of the manufactured products. It was also

contended that the sourcing agreement dated 14th October, 1994, on which the entire

transaction was being carried on, was made available to the Department in March-April, 1995.

There was no suppression of facts on the part of the assessee. The contention was the show

cause notice issued in respect of a period from February, 1995 to February, 1999 was barred

by limitation.

3. The Commissioner rejected all the contentions raised by M/s. Monsanto on the issue of

limitation. The Commissioner took the view that full details of settlement between the parties to

the source agreement was not made available to the Department and merely furnishing a copy

of the agreement was not enough. The Commissioner thus concluded that there was

suppression of material facts.

4. M/s. Monsanto carried the matter in appeal inter alia contending that the issue on

merits was covered by the Tribunal's decision in Kwality Ice Cream Co. vs. CCE, Chandigarh

[2002(145) ELT 584] in its favour. The Tribunal in the said case after considering the terms of

the very same agreement dated 14.10.1998 held that the pricing in terms of the agreement

may not lead to conclusion that the transaction was not one between a principal to another

principal. It was however, contended by the Department that the price declared by the

assessee was not rejected on the ground that parties were related persons and its case was

that there was direct and indirect consideration flowing to the assessee from BBLIL/HLL.

5. The Tribunal after elaborate consideration of the matter, relying on its own decision

referred to (supra), held that there was no direct and indirect considerations received by M/s.

Monsanto as alleged by the Department. Each of the items was the subject matter of debate in

the decision referred to (supra) and the same was applicable to the facts on hand. The

Tribunal, accordingly, proceeded to consider whether the Department was justified, in the

given facts and circumstances, in invoking the extended period of limitation under Section 11A

of the Act. The Tribunal found that the show cause notice issued on 27.3.2000 was hopelessly

barred by limitation. The Tribunal found that the agreement entered into by and between the

parties was made available to the Department and all transactions between the parties thereto

were on the basis of the agreement which were within the knowledge of the Department from

March-April, 1995. The Tribunal found that there was no material available on record that the

assessee has received either directly or indirectly any consideration from any source outside

the agreement. Hence, these appeals under Section 35-L(b) of the Act.

6. The learned counsel for the appellant submitted that mere filing of the agreement by

the assessee was not enough as it had failed to disclose the full and complete particulars of its

receiving direct and indirect consideration in several forms such as interest free deposit,

consideration for sale of marketing undertaking, interest on deposits as security advances

received by it, value of the brand name etcetera. Therefore, show cause notice issued was not

barred by limitation. This was the main thrust of the submission of the learned counsel for the

appellant. Learned counsel for the respondent supported the impugned judgment.

7. We have carefully considered the submissions made by the learned counsel for the

parties.

8. That so far as the question of receiving direct or indirect consideration, it is squarely

covered by the Tribunal's decision in Kwality Ice Cream Co. (supra) as has been held by the

Tribunal itself. We have by a separate order upheld the view taken by the Tribunal, therefore,

this issue need not detain us any further.

9. We do not find any merit in the submission of the learned counsel for the appellant that

the Department was justified in invoking the extended period under Section 11A of the Act.

The entire transaction between the parties was on the basis of the agreement which was

within the knowledge of the Department from March-April, 1995. It is not the allegation in the

show cause notice that the assessee has received any direct and indirect consideration over

and above as to what has been agreed under the agreement. We have noticed in the

connected matter (M/s. Kwality Ice Cream) that the price fixation was in accordance with the

formula agreed to between the parties which has been specifically incorporated in the source

agreement. The factum that source agreement was filed by the assessee and was within the

knowledge of the Department from March-April, 1995 is not in dispute. In such view of the

matter, we find no difficulty, whatsoever, to accept the contention of the assessee and the view

taken by the Tribunal that the show cause notice issued on 27.3.2000 was barred by limitation.

On the facts of this case, we are satisfied that the Tribunal has taken the correct view in the

matter.

10. For the aforesaid reasons, we do not find any merit, whatsoever, in these appeals preferred by

the Department. The appeals are, accordingly, dismissed.