COMMISSIONER, CENTRAL EXCISE, MEERUTversusM/S. MONSANTO MANUFACTURE PVT. LTD.

              (2010] 14 (ADDL.) S.C.R. 403

     COMMISSIONER, CENTRAL EXCISE, MEERUT                     A
                             V.

       M/S. MONSANTO MANUFACTURE PVT. LTD.
            (Civil Appeal Nos. 5216-17 of 2003)
                                                              B
                   NOVEMBER 26, 2010
   [B. SUDERSHAN REDDY AND SURINDER SINGH
                  NIJJAR, JJ.)
     Central Excise Rules, 1944-r. 9(A) I Central Excise Act, c
1944 - s. 11 A - Manufacturer-assessee entering into sourcing
agreement with a company - Assessee declaring the price of
manufactured product on the basis of the agreement - Duty
paid on the declared price - Department alleging suppression
of material facts against the assessee and demanding
additional duty with penalty and interest - Held: The assessee D
had not suppressed material facts as the source agreement
was within the knowledge of the Department -;- Assessee had
not received any direct and indirect consideration over and
above as was agreed under the agreement- The show-cause
notice was also time-barred.                                   E
     The respondent-assessee company along with other
companies, collectively entered into a sourcing agreement
with a company. On the basis of the said agreement, the
assessee declared the price of its manufactured product       F
to the Department. The excise duty was paid on the basis
of the price so declared.
    The Department alleged that the assessee received
additional consideration over and above the assessable
value declared by it and issued show-cause notice for G
demand u/r. 9(A) of Central Excise Rules, 1944 r/w s. 11A
of Central Excise Act, 1944. The assessee replied that
there was no suppression of material facts as the sourcing
agreement, on which the entire transaction was being
                            403                               H
    404    SUPREME COURT REPORTS (2010) 14 (ADDL.) S.C.R.


A   carried on, was made available to the Department; and that
    the show-cause notice issued in respect of the period from
    February, 1995 to February, 1999 was barred by limitation.
    The Commissioner held that the show cause notice was
    not barred by limitation and that there was suppression
s   of material facts on the part of the assessee. In appeal, the
    Tribunal, relying on its own decision passed in Kwality Ice-
    Cream case, held that there was no direct and indirect
    consideration received by the assessee as alleged by the
    Department; and that the show~cause notice was barred
c   by limitation. Therefore, the instant appeals were filed.
          Dismissing the appeals, the Court
       HELD: The Department was not justified in invoking
  the extended period u/s. 11A of the Central Excise Act,
  1944. The entire transaction between the parties was on
D 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 received any direct and indirect consideration
  over and above as to what has been agreed under the
E agreement. The Court has noticed in the connected matter
  (*Mis. 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 the source agreement
F was filed by the assessee and was within the knowledge
  of the Department from March-April, 1995 is not in dispute.
  Thus, the show-cause notice issued on 27.3.2000 was
  barred by limitation. On the facts of the instant case, the
  Tribunal has taken the correct view in the matter. [Para 9)
G [408-D-G]
         *Kwality Ice Cream Co. vs. CCE, Chandigarh Judgment
    datedNovember 26, 2010 passed by Supreme Court -
    relied on.
      CIVIL APPELLATE JURISDICTION : Civil Appeal No.
H 5216-17 of 2003.
COMMNR., CENTRAL EXCISE, MEERUT v. MONSANTO 405
           MANUFACTURE PVT. LTD.

     From the Judgment & Order dated 08.01.2003 of the            A
Customs Excise &Gold (Control) Appellate Tribunal, New Delhi
in Final Order No. 14-15/2003-NB (A), in Appeal No. E/1157/
201-A & E/1457/2002/A.
                             WITH
                                                                  B
C.A. Nos. 8456-63 of 2002.
     K. Swami, B.J. Prasad, B. Sunita, Priya Bhatnagar, Anil
Katiyar for the Appellant.
    Ravinder Narain, Sonu Bhatnagar, Ajay Aggarwal, Mallika
Joshi, Ranjan Narain for the Respondent.                         C
    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 D
to 1998-99 (upto 2/99) manufactured item was leviable to
Central Excise Duty at advalorem rates. On 14.10.1~94, 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 E
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 F
agreement. The agreement came into force w.e.f. 1st January,
1995. Ever since the agreement came into force Mis. Monsanto
stopped marketing their products through their d~alers and
started selling their production of ice-cream to BBLIL
subsequently merged with Mis. Hindustan Lever Ltd. (for short
'HLL'). The ice-cream so manufactured was marked with the G
brand name "Kwality Walls". On the basis of the said agreement,
Mis. 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.                   H
    406    SUPREME COURT REPORTS [2010] 14 (ADDL.) S.C.R.


A        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 11 A of the Central Excise Act, 1944 (
    for short 'the Rules and Act') together with penalty and interest.
B   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
c   of marketing undertaking, interest on deposits as security
    advances received by it, value of the brand name etcetera. Mis.
    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
D   transaction between M/s. Monsanto and BBLIUHLL 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
E   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
F   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
G   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

H
COMMNR., CENTRAL EXCISE, MEERUT v. MONSANTO 407
MANUFACTURE PVT. LTD. [B. SUDERSHAN REDDY, J.]

[2002(145) ELT 584] in its favour. The Tribunal in the said case        A
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          B
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 C
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 D
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 E
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 ·F
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   G
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        H
    408    SUPREME COURT REPORTS [2010] 14 (ADDL.) S.C.R.


A   the submission of the learned counsel forthe 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.
B        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
c   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 11 A of the Act. The
   entire transaction between the parties was on the basis of the
D 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.
E 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
F' 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
G matter.
        10. For the aforesaid reasons, we do not find any merit,
    whatsoever, in these appeals preferred by the Department. The
    appeal~ are, accordingly, dismissed.

H K.K.T.                                          Appeal dismissed.