Holding

The show‑cause notice was vague and non‑specific, and no material was placed on record to substantiate the revenue’s allegations; therefore, the Commissioner’s order and the CEGAT’s affirmation stand.

Summary

The Central Excise Department issued a show‑cause notice to Mis Brindavan Beverages Pvt. Ltd. (BBPL) alleging fraudulent availing of Small Scale Industry (SSI) exemption under Notification Nos. 175/86 and 1/93 in conspiracy with AMPL and PEL. The Commissioner of Central Excise dropped the proceedings, a decision upheld by the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT). The revenue appealed, contending that the corporate veil should be lifted to identify the true owners of the brand names and that BBPL had no right to the exemption. The Supreme Court held that the show‑cause notice was vague and did not specifically allege any role of the respondents, nor was any material placed on record to substantiate the revenue’s claim. Consequently, the Court found no basis to lift the corporate veil and affirmed the Commissioner’s and CEGAT’s orders, dismissing the appeals.

Issues considered

Whether the show‑cause notice was sufficiently specific to give the noticee a fair opportunity to meet the allegations.
Whether the revenue can lift the corporate veil in the absence of specific allegations against the respondents.
Whether the Commissioner’s order dropping the proceedings can be set aside.

Legislation cited

Central Excise Act, 1944

Subjects

Central Exciseshow cause noticecorporate veilSSI exemptionfraudprocedural fairnessspecific notice

Judgment

·-+
COMMISSIONER OF CENTRAL EXCISE, BANGALORE A
v.
MIS. BRINDA VAN BEVERAGES (P) LTD. AND ORS.

JUNE 15, 2007

[DR. ARIJIT PASAYAT AND S.H. KAPADIA, JJ.] B

Central Excises Act, 1944:

Show cause notice-Allegations in, not specific-Moreover, noticee C
not given proper opportunity to meet a/legations indicated in the notice-
Hence cannot be proceeded against.

Central Excise Department initiated proceedings against respondent-
assessee relating to availability of exemption under Notification No.175/86
and 1/93. Commissioner dropped the proceedings holding that respondents D
were entitled to the benefits under the said exemption notifications. CEGA T
upheld the order of Commissioner. Hence these appeals.

Appellant contended that assessee availed the excise exemption
fraudulently in conspiracy with AMPL and PEL by willfully making a mis-
statement and suppressing correct facts and that since assessee could not E
have availed the benefits, they created dummy concerns to avail the benefits
and that in the circumstances there was necessity to lift the corporate veil to
find out the true owners.

Dismissing the appeals, the Court
F
)
HELD: I. In the show cause notice there was nothing specific as to the
role of the respondents, if any. The arrangements as alleged have not been
shown to be within the knowledge or at the behest or with the connivance of
the respondents. Independent arrangements were entered into by the
respondents with the franchise holder. On a perusal of the show cause notice G
the stand of the respondents clearly gets established. (Para 9) (l037-F)

2. There is no allegation of the respondents being parties to any
r arrangement. In any event, no material in that regard was placed on record.
The show cause notice is the foundation on which the department has to build
H
1033
+--
1034 SUPREME COURT REPORTS (2007) 7 S.C.R.

A up its case. If the allegations in the show cause notice are not specific and
are on the contrary vague, lack details and/or unintelligible that is sufficient
to hold that the noticee was not given proper opportunity to meet the allegations
indicated in the show cause notice. In the instant case, what the appellant has
tried to highlight is the alleged connection between the various concerns. That
B is not sufficient to proceed against the respondents unless it is shown that
they were parties to the arrangements, if any. As no sufficient material much
less any material has been placed on record to substantiate the stand of the
appellant, the conclusions of the Commissioner as affirmed by the CEGAT
cannot be faulted. (Para 10111037-G-H; 1038-A-DI -r
C CIVIL APPELLATE JURISDICTION : Civil Appeal no. 3417-3425 of2002.

From the Final Order Nos. 868-876 of 2000 dated 04.05.2001 of the
Customs Excise, Gold (Control Appellate Tribunal, South Zonal Bench at
Bangalore in appeal No. /1565-1573/98.

D WITH

C.A. No. 4398 of2003.

A. Subba Rao, T.A. Khan, Ajy Sharma and B. Krishna Prasad for the
. ..
appellant.
E
Joseph Vellapally, Sr. Adv., Tarun Gulati, Ankit Goyal, R. Chandrachud,
K.R. Sasiprabhu, M.S. Nagaraja, Praveena Gautam and Pramod B. Agrawal for
the Respondents.

The Judgment of the Court was delivered by
F
DR. ARIJIT PASAYA T, J .. 1. Challenge in these appeals is to the
judgment of the Customs, Excise and Gold (Control) Appellate Tribunal,
Bangalore (in short the 'CEGA T'). By the impugned judgment appeals filed
by the revenue against the common order of Commissioner of Central Excise,
G Bangalore (in short the 'Commissioner') was dismissed. The Commissioner 1-
had dropped tt~e proceedings initiated vide a show cause notice dated 4.5.1995 t

relating to availability of exemption under Notification Nos. 175/86 and 1/93.

2. Background facts, as projected by the appellant are as follows:-

H Vide the Show Cause notice, it was alleged that Mis Brindavan Beverages
Pvt. Ltd., (hereinafter referred to as 'BBPL') who were engaged in the
J
~-

COMMNR.OFCENTRALEXCISE.BANGALORE1-.BRINDAVANBEVERAGES(PlLID.(PASAYAT.J.J }QJ5

manufacture of aerated water and were the franchise holders to Mis. Parley A
Exports Ltd. (hereinafter referred to as PEL) in whose brand names they had
manufactured goods viz., Limca. Thums Up, Gold Spot, had also manufactured
aerated water in the name and style of Citra which was said to be brand name
of Mis. Limca Flavours and Fragrances Ltd., (hereinafter referred to as 'LFFL'),
a holding Company of Mis. PEL. They had also manufactured goods under B
the brand name of "Bisleri Club Soda" with the permission of M/s. Acqua
Minerale (P) Ltd. (hereinafter referred to 'AMPL'] and they had availed and
paid duty under exemption notification 175/86 and 1/93, for the said Citra and
Bisleri Club Soda bottles, claiming that the brand name owners, were registered
with the Directorate of Industries as a Small Scale Unit and, therefore, they
were also eligible for exemption under the said Notifications. C
On the basis of intelligence gathered that Mis Parley Exports Ltd., and
Parley International Ltd., (hereinafter referred to as 'PEL and PIL' respectively]
were under-valuing the concentrate and thereby evading central excise duty,
investigations were caused to be made by Officers of Directorate General of D
Anti-evasions and the Central Excise Jurisdictional Officers.

Enquiries were caused and statements were recorded and pursuant to
the said operations, according to Revenue, Mis BBPL availed the SSI exemption
fraudulently in the conspiracy with AMPL and PEL by willfully making a mis-
statement and suppressing correct facts and central excise duty amounting £
to Rs.39,51,028/- for the period from July 1993 to January 1994 was demandable
by invoking the longer period of limitation provided under the Central Excise
Act, 1944 (in short the 'Act'). It was also found that the Assistant Collector
had passed an order permitting BBPL, SSI exemption on "Bisleri Club Soda"
and "Citra". However, it was noticed that the facts disclosed in the enquiries F
conducted were not placed before the Assistant Collector in as much as the
investigations conducted revealed that PEL are the owners of brand name
J such as "Bisleri" for club soda and "Citra" and LFFL was under- evaluating
the goods to keep the tum-over below the exemption limits. It was also
alleged that LFFL who own "Citra" brand were engaged in the manufacture
of flavours in their factory at Ahmedabad had availed exemption of the SSI 0
Notifications as am~nded and had permitted franchise of small users the
"Citra" brand name on terms and conditions and consequently the franchise
also started availing the SSI benefit which was not eligible as the investigations
revealed that "Citra" was developed and launched by the R & D efforts of
PEL and was got registered as a brand name of LFFL. It was alleged that they H
have deliberately fragmented the manufacture of flavours to avail the benefit.
+--
1036 SUPREME COURT REPORTS [2007) 7 S.C.R.

A The Parle Group Management. cen.trally and commonly. controlled the
production including all aspects thereof were managed and controlled by the
executives of PEL. If the shelter of corporate veil was lifted and removed, then . ~,;

it was seen that for purposes of other taxes it was one, but for notifications
under Central Excise, they were shown as separate persons. Therefore, the
B value of clearance of all excisable goods removed from PEL. PIL and LFFL
were to be taken together to detennine the eligibility of LFFL. The benefits
which LFFL were availing of the SSI claimed by them were not available to
them and since there was a deliberate fragmentation of manufacture to avail
SSI exemption, the benefit of exemption on "Citra" was not eligible. Therefore,
excise duty amounting to Rs. 79,48,115/- for the period October 199() to January
C 1994 in respect of "Citra" was demandable by invoking the longer period of
limitation in view of the deliberate suppression of facts.

3. Noticees submitted their replies. On consideration of the submissions,
proceedings initiated on the basis of the show cause notice dated 4.5.1995.
D Revenue preferred appeals before the CEGAT.

4. After considering the rival submissions, the CEGA T held that the
order of the Commissioner dropping the proceedings did not suffer from any
infirmity.

E 5. The CEGAT did not find any substance in this plea as there was no
such brand name as "Bisleri Club. Soda" which has been registered by the
Trade Mark Authorities. What was registered for use under the Trade Marks
Act is the word "Bisleri" for goods "soda" being aerated water and words
"Bisleri for Bear and non-alcoholic beverages and syrups". The CEGAT found
that no evidence was brought on record to indicate the words as used exist
F as a trade mark or any other marks belonging to another person who is not
entitled to the benefits under the Notification.

6. In support of the appeals, learned counsel for the appellant submitted
that the CEGA T has lost sight of the fact that there was necessity to lift the
G corporate veil and find out as to who was the real owner of the brand name.
It was submitted that the supervision and the decision making power lay with
somebody else and not the respondents.

7. Mr. A. Subba Rao, learned counsel for the appellant has submitted
that respondent BBPL had the franchise of M/s Parley Exports Ltd. under
y.
H whose brand name they had manufactured aerated water in the brand names I

of Limca, Thums Up and Gold Spot. Respondent had also manufactured
COMMNR.OFCENffiALEXCISE.BANGALOREr.BRINDAVANBEVERAGES(P)LID.[PASAYAT.JJ JQ37

aerated water in the name and style of Citra said to be the brand name of Ml A
s. Limca Flavours and Fragrances Ltd., a holding company of PEL in which
50% shares are held each by Shri Ramesh J. Chauhan and Shri Prakash J
Chauhan both of whom happened to be brothers. Additionally. the
respondents also manufactured goods under the brand name of"Bisleri Club
Soda" with the pennission of M/s Acqua Minerals (P) Ltd., New Delhi. With B
reference to the various positions and as Directors in LFFL, PEL, AMPL, PIL,
Apex Traders, M/s Coolade Beverages (P) Ltd. And M/s Delhi Bottling Co.
Ltd. it is submitted that either Shri Ramesh J Chauhan or Prakash J Chauhan
or persons related to him or being members of the Board of Directors of
various companies had right to create facet to avail the benefits under the
Notification in question. Since these concerns could not have availed the C
benefits they have created dummy concerns to avail the benefits. It is submitted
that in the circumstances there was necessity to lift the corporate veil to find
out. the true owners.

8. Per contra, learned counsel for the respondents submitted that there D
is no material that the respondents had ever been parties to the so called
arrangement, even if it is accepted for the sake of arguments but not conceded,
that such arrangement was in reality made. There was no material brought on
record to show that the respondents had any role to play in such matters as
alleged. Even the show cause notice did not refer to any particular material
to come to such a conclusion. Therefore, the Commissioner and the CEGAT E
were justified in holding that the respondents were entitled to the benefits.

9. We find that in the show cause notice there was nothing specific as
to the role of the respondents, if any. The arrangements as alleged have not
been shown to be within the knowledge or at the behest or with the connivance '

of the respondents. Independent arrangements were entered into by the
F
respondents with the franchise holder. On a perusal of the show cause notice
the stand of the respondents clearly gets established.

10. There is no allegation of the respondents being parties to any
arrangement. In any event, no material in that regard was placed on record. G
The show cause notice is the foundation on which the department has to
build up it!> case. If the allegations in the show cause notice are not specific
and are on the contrary vague, lack details and/or unintelligible that is sufficient
'! to hold that the noticee was not given proper opportunity to meet the
allegations indicated in the show cause notice. In the instant case, what the H
appellant has tried to highlight is the alleged connection between the various
1038 SUPREME COURT REPORTS [2007) 7 S.C.R.

A concerns. That is not sufficient to proceed against the respondents unless ."'f
it is shown that they were parties to the arrangements, if any. As no sufficient
material much less any material has been placed on record to substantiate the
stand of the appellant, the conclusions of the Commissioner as affirmed by
the CEGA T cannot be faulted.

B 11. Therefore, on the facts noticed by the Commissioner and the CEGA T,
there is no scope for interference in these appeals which are accordingly
dismissed. There will be no order as to costs.

D.G. Appeals dismissed.
c