TMI Blog2014 (7) TMI 974X X X X Extracts X X X X X X X X Extracts X X X X ..... Rethanre Bk., Post-Shivnagar, Tal-Karad, Dist. - Satara having Central Excise Registration No. AAAAKO946L XM-001 are engaged in the manufacture of sugar and molasses, and also having their Distillery Division operational since 1976. 2. The brief facts are that in the distillery, among other products like foreign liquor, etc., the Appellants are also manufacturing country liquor' under their own brand name Pahili Dhar which is approved by the State Excise Authority. The appellant had entered into selling agency agreement' dated 10.04.2002 with M/s Talreja Trade (HUF), Karad for a period of five years up to 31.03.2007 with intention to obtain higher returns on their investments in their country liquor plant by increasing the sale of country liquor of Pahili Dhar brand. The copy of the said agreement, is annexed in paper book. The said agreement was replaced by another selling agency agreement' dated 01.01.2006 which is valid for a period of five years i.e. up to 31.12.2011. The copy of the said agreement is annexed in paper-book. As per the said agreements, the packing material, essence, etc. (required for manufacture/packing of the country liquor bearing Pahil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recovered from it, in terms of the agreement stated above between the appellant and M/s Talreja Trade (HUF) along with interest and penalty. The show-cause notice alleges that the appellant have undertaken manufacture of country liquor; from spirit on job work basis for M/s Talreja Trade. This activity falls under the category Business Auxiliary Services'. Further, the appellant have allowed M/s Talreja Trade to use its brand name Pahili Dhar for marketing country liquor' and this activity falls under the category intellectual property services. 5. The appellant filed reply to the show-cause notice contesting the proposed demands mainly on the ground that there is only a selling agency agreement' between it and M/s Talreja Trade. Vide the impugned order the proposed demand towards Business Auxiliary Services' was dropped but the demand of ₹ 38,39,187/- under the category of Intellectual Property Service' was confirmed along with equal amount of penalty under Section 78 and under Section 76 @ ₹ 200/- per day. Finding was recorded that M/s Talreja Trade pays, the minimum guaranteed margin' for sale of 50,000 bottles to the appellant. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry liquor' and are not the agreements for allowing M/s Talreja Trade (HUF) to use the appellants brand name. Most importantly, in the said agreements, it is specifically provided that the brand names' will be the exclusive property of the appellants and M/s Talreja Trade (HUF) will have no claim, right, title, or interest in the said brand names. Thus, it is clear that the learned Commissioner of Central Excise, Pune-II had arrived at the above said conclusion merely because the Chief Accountant of the appellant has stated that the amount of ₹ 18 per case is royalty to be received from M/s Talreja Trade (HUF) for using its brand name Pahili Dhar (owned by the appellants) for marketing and sales of country liquor. 6.4 The appellants further submits that it is only possible to hold that the appellants allowed M/s Talreja Trade (HUF) to use the brand name Pahili Dhar (owned by the appellants) to sell the country liquor only if the country liquor would have been owned/manufactured by M/s Talreja Trade (HUF). However, it is not the case of the department, in fact in para 26 of show-cause cum demand notice itself it is clearly admitted that the country liquor (in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said brand name can not allow the other person to use the said brand name for country liquor. If the State Excise authority finds that a brand named owner has allowed other person to use the brand name without obtaining permission from the State Excise authority, the State Excise department can confiscate the liquor and also can prosecute both the brand owner as well as the brand user. 6.9 Thus in view of the facts in law the appellants submit that the demand is not sustainable on merits as well as part of the said demand is also not sustainable on the point of limitation. As the demand is not sustainable, the penalties imposed under Section 76 78 are also not sustainable. For the same reason, recovery of interest ordered under Section 75 also is not sustainable. 7. The learned A.R. relies on the findings in the impugned order and prays for confirmation. 8.1 We have considered the rival contentions and perused the documents on record. 8.2 For the packing material and essence supplied by M/s Talreja Trade to appellant, proper sale invoices have been issued charging Sales Tax/VAT as applicable. Appellant have also directly purchased packing material and essence from o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vii) M/s Talreja Trade is not responsible for making payment for unsold stock or loss in storage by appellant. viii) In response to query for repayable interest free deposit made with appellant by M/s Talreja Trade to facilitate, acquisition of Automatic belt conveyor' and storage tanks' it was stated that the same is in the business interest of both the parties and is on business like terms. 8.8 That on perusing the agreements dated 10.04.2002 and 01.01.2006, it is noticed that the agreements are more or less pari materia. The obligations of the parties are as under:- A) Of Y.M.K. (manufacturer/appellant) (i) Responsible for arranging raw materials like country liquor. (ii) Purchase essences and use as per directions of agent. (iii) Fix selling price of country liquor in consultation with M/s Talreja Trade. (iv) To deliver the finished goods to M/s Talreja Trade or its nominees after ensuing compliance with State Excise Law. B) Of M/s Talreja Trade (Agent) (i) Responsible to purchase or sell entire country liquor produced by appellant. (ii) To collect sale proceeds (iii) Ensure timely deposit of dutie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the production, storage and sale of country liquor At actual cost of Krishna f) Transport fee For the time being, Krishna has obtained a stay order from the High Court at Mumbai, against transport fees on rectified spirit and the Agent has agreed to deposit the amount equivalent to transport fee on rectified spirit consumed during the month or provide a Bank Guarantee on concurrent amount on a mutually acceptable Bank with effect from completion of the present investment made for fully automatic machinery by the Agent. The deposit will stay with Kirshna till the decision of the case of will be adjusted against investment payback of vacuum distillation column. g) a) Towards guaranteed minimum margin of ₹ 18/-. Per case for 60,000 cases (earlier 50,000 cases) per month. b) For 60,000 to 75,000 cases i.e. for 15,000 cases additional sale ₹ 17.00 per case c) For 75,000 to 1,00,000 cases i.e. for additional 25,000 cases sale ₹ 16.00 per case d) The rates of premium country liquor brands to be decided after discussions. (to be evaluated on regul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s stated above, shall attract levy of interest at the prevailing interest rate of Satara District Central Co-operative Bank Ltd. 8.9 Few other clauses of the agreement, relevant are as follows:- 14. The brands under which country liquor is presently being produced and shall be produced in future by Krishna will remain the exclusive property and trade mark of Krishna and the Agent shall have no claim, right, title or interest in the brand names or essences used by Krishna in producing the said country liquor. Notwithstanding anything to the contrary in Clause 2, the Agent shall not be unilaterally entitled to demand changes in the brands and essences without the concurrence of Krishna. 16. The Agent shall execute an Indemnity Bond indemnifying Krishna from all acts of commission or omission for any liability that may arise because of such acts or failure to perform such acts, including all civil and criminal liabilities that may fasten on Krishna. 17. Continued defaults of the Agent to pay it's dues on the due dates shall entitle Krishna to recover the same from the deposit of ₹ 10.00 lakhs and thereafter so long as the deposit has not been re-inst ..... X X X X Extracts X X X X X X X X Extracts X X X X
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