2000 (8) TMI 132 - AT - Central Excise

Summary

Issues:
1. Whether the sale of products by a limited company to another company can be treated as sales in the normal course of wholesale trade for the purpose of central excise duty assessment.
2. Whether the relationship between the manufacturer and the buyer constitutes mutuality of interest justifying the adoption of the buyer's sale price as the assessable value for central excise duty assessment.

Issue 1: The case involved a limited company manufacturing hair oil and lal dant manjan exclusively for supply to another company, Dabur India Ltd. A show cause notice was issued alleging that the manufacturer existed entirely for the benefit of Dabur and that duty should be payable on the assessable value based on the price at which Dabur sells the products. The appellant contended that the commercial relationship was purely independent, and the price in such transactions should form the assessable value for central excise purposes. The adjudicating authority confirmed the duty demand, stating that the noticee company was created to avoid tax liability. However, the Tribunal found no basis for treating Dabur as the manufacturer or adopting Dabur's sale price as the assessable value, allowing the appeal and setting aside the impugned order.

Issue 2: The agreement between the parties and the conditions therein were analyzed to determine whether there was mutuality of interest justifying the adoption of the buyer's sale price as the assessable value. The Tribunal noted that the conditions in the agreement did not establish the brand name owner as the manufacturer of the goods, as they were normal commercial terms. Referring to a similar case before the Supreme Court, it was held that such terms in the contract between the manufacturer and the buyer do not warrant treating the buyer as the manufacturer for central excise duty assessment. The Tribunal concluded that there was no mutuality of interest between the parties based on the agreement's terms, setting aside the impugned order and allowing the appeal with consequential relief to the appellants.

In conclusion, the Tribunal found no justification for treating Dabur as the manufacturer or adopting Dabur's sale price as the assessable value for central excise duty assessment. The judgment highlighted the misunderstanding of legal precedents by the Department's officers and emphasized the importance of interpreting judgments correctly to avoid errors in legal interpretations.