TMI Blog2002 (4) TMI 155X X X X Extracts X X X X X X X X Extracts X X X X ..... ated persons in the matter of computing assessable value of ice cream manufactured by the appellant and whether duty should be demanded from the appellant on the basis of price at which BBLIL sold the said product from its depot. The contention raised by the appellant that the transaction between them and BBLIL was on principal to principal basis and that the price is the sole consideration for the sale of the goods was not accepted by the departmental authorities. The demand under ten show cause notices dated 28-8-95, 25-10-95, 31-1-96, 30-4-96, 2-9-96, 3-1-97, 21-4-97, 1-8-97, 20-10-97 and 6-1-98 covering the period from February, 1995 to November, 1997 was confirmed by the Assistant Commissioner by Order-in-Original dated 14-7-98. A penalty of Rs. 20 lakhs was also imposed. The demand under the show cause notices dated 17-4-98, 5-6-98, 15-7-98 and 30-9-98 for the period December, 1997 to August, 1998 was confirmed by orders dated 10-8-98, 4-9-98, 16-9-98 and 6-11-98. A penalty to the extent of Rs. 20,000/- under order dated 10-8-98 and an amount of Rs. 1,50,000/- each under the other three orders were imposed. Demand under show cause notices dated 25-11-98 and 10-5-99 for the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Interest accrued on the interest free deposit with the appellant read with other terms and conditions of the agreement is clearly an extra commercial consideration. The above finding is challenged in this appeal on different grounds. 5. It is contended by the appellant that the Revenue has in the impugned order wrongly held that the price of the product was determined by BBLIL/HLL and the appellant has no say in the matter. On the other hand as per terms of the sourcing agreement dated 14-10-94 entered between the parties there are definite terms as to pricing. Clause 9 provides that with regard to BBLIL's obligation to sourcing the product from the existing factory/manufacturing facility of (K-North) as per Appendix I, the price per litre of such sourced production will be as per the formula given in Appendix 4 to the agreement. It is on the basis of this agreed formula which is part of the sourcing agreement, the price is fixed. There is also a provision for pricing after upgradation of the existing factories/manufacturing facilities or at the new factories/manufacturing location. The pricing has to be on the basis of the formula set out in Appendix 5 attached to the sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion taken by BBLIL. Price is being fixed on the basis of the formula agreed between the parties. Sub-clause (iii) of Clause 6 provides that pending commencement of production by JVC, appellant shall make necessary investments for upgradation, modification or alteration in the existing factory/manufacturing facility as per requirement of BBLIL subject to necessary statutory approval and pending such investments appellant shall not be responsible for any deficiency that such investment is intended to rectify. On the appellant making such investment for upgradation or modification the pricing agreed upon is on a formula which took into consideration the investment made by the appellant for upgradation, modification etc. Therefore in terms of Clause 6(iii) the pricing would not lead to the conclusion that the transaction was not one between principal to principal. So also the appellant is fully justified in contending that the exclusive nature of sourcing is applicable to both the appellant as well as BBLIL and there is no undue advantage provided in favour of BBLIL as per this clause. So also we cannot find any merit in the contention of the Revenue that the appellant is totally under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate of BBLIL/HLL. 6(i)(a) provides that the product will be manufactured by the appellant in accordance with the specifications set out in Appendix 2 of the agreement that the appellant will purchase and use edible and packaging material only from suppliers approved by BBLIL and that reasons for change in the raw material will be intimated by the appellant to BBLIL. Clause 6(viii) provides that every batch of production must pass through the laboratory test which will be processed by the representatives of BBLIL. In case of any defect/rejection the said quantity will be destroyed under the supervision of BBLIL. These conditions are only appropriate for ensuring quality of a sensitive product like Ice Cream. We do not find any reason to hold that these conditions are unreasonable restrictions on the appellant running its unit. 11. Now we come to two other important allegations on the basis of which the Commissioner (Appeals) has found that there was mutuality of interest between the parties and that the transactions, if any, was not on principal to principal basis. Clause 6(i)(c) of the sourcing agreement provides that BBLIL would make an interest free deposit of Rs. 2.75 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rket with BBLIL as per terms of the sourcing agreement. 14. In the light of the above fact, we will examine whether the finding in the impugned order that there is a mutuality of interest between the appellant and the buyer is justified. This Tribunal had occasion to consider similar terms in an agreement between the manufacturer and buyer in LVT Products Ltd. v. CCE, Belgaum - 1997 (93) E.L.T. 134. In the above case dispute arose regarding assessable value of the biscuits manufactured by the appellant with the brand name 'Horlicks' and sold to M/s. HMM Ltd. in terms of an agreement entered into between the parties. The assessing authority took the view that the appellant was manufacturing biscuits on behalf of M/s. HMM Ltd. and relied on the following features of the agreement : (a) HMM Ltd. was supplying one of the main raw materials, namely, Horlicks malted milk food to the appellant; (b) HMM Ltd. had interest in the activities of the appellant at various stages like the place for storing raw materials, quality control, requirement in regard to the ingredients of the biscuits, control over the plant and machinery; (c) Packing materials to be us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pharmaceuticals in the present case. 16. The third decision relied on by the Revenue is Narendra Industries v. CCE, Rajkot - 2001 (132) E.L.T. 141. In this case the facts are entirely different. 100% of the production of the appellants was supplied to M/s. L.M.S. Marketing Pvt. Ltd. The Directors of both the appellant as well as the buyer-were common, office of both the companies was situated at the same place and the appellant was under the management of the buyer company which looked after the sales promotion activities in respect of the product manufactured by the appellant and also incurred expenses towards advertisement, sales promotion, etc. Interest free advance was being given to the appellant against supply of goods and there was substantial financial transaction between the two. It was in this background the Tribunal came to the conclusion that they are related persons. In the present case the terms of the agreement would not justify a similar conclusion. Therefore, this decision is also of no help to the Revenue. 17. In the light of above discussion we hold that the appellant and M/s. BBLIL are not related persons, the transaction between them is one of p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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