TaxTMI 
TaxTMI 
TaxTMI 
1998 (2) TMI 323
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....s and manufactured the ABAs. The parts were sold by the appellant to DIPL who in turn sold the product to the appellant. The ABAs had a label showing the appellant's brand name and their marketing by the appellant. The ABAs were cleared by DIPL on payment of duty. Show cause notice was issued to the appellant initially by the Superintendent and later on by the Collector. After appellant's reply and grant of personal hearing, the impugned order was passed holding that the appellant was the manufacturer of ABAs and duty liability was on them. The duty demand was worked out by applying the price at which appellant was selling the goods while duty had been paid by DIPL on the basis of the value at which they sold the goods to appellant. The Collector had arrived at the said finding on the ground that appellant owned the brand name and had provided the specifications for the ABAs and also supplied the essential and important components to DIPL who manufactured the ABAs according to the dictates of the appellant and sold the entire quantity of goods manufactured to appellant only, it being not open to them to sell the ABAs to any other buyer. The agreement entered into by appellant DIPL ....
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....as competent to issue the notice. For this proposition he cited Tribunal decision in Piya Pharma Works v. Collector of Central Excise, Meerut - 1985 (19) E.L.T. 212. In the alternative, he submitted that the second notice was applicable for a period of five years prior to its issue. There was clandestine removal in the sense that proper duty was not paid and that the proper person had not paid the duty. Proper duty had not been paid as the full cost of materials supplied by the appellant was not reflected in their purported sale to DIPL as the value of such material was Rs. 19 lakhs but only Rs. 11 lakhs was charged. The cost of dies developed by the appellant for certain items was not included. The goods were sold by the appellant at much higher prices as compared to the prices at which DIPL had allegedly supplied to them. The agreement was only on paper and in many respects was not acted upon. Thus, though the charging of interest was provided for in the case of delayed payment by the appellant to DIPL no interest was actually charged by DIPL. Accordingly, he supported the Collector's order. 5. We have considered the submissions. We have perused the record. The Collector ha....
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....ed to exist after the issue of the second one and has no effect. The matter has to be dealt with only with reference to the second notice. The notice, in any case, cannot affect any alleged short levy beyond even the extended period of five years prior to the date of its service. 6. The short payment of duty or rather the non-payment is held by the Collector to have arisen on account of the appellant not having paid the duty due thereon. The full duty leviable on the goods has been demanded from the appellant who has been treated as the manufacturer of the goods. The Collector has also held that duty had been wrongly collected from DIPL and that the same should be refunded to them in accordance with the provisions of law.The Collector had considered the plea advanced before him that factors like supply of raw material, ownership of the brand name on the goods, furnishing specification of the goods, purchase of the entire output do not make such supplier of raw materials or brand name owner or purchaser the manufacturer of the goods. He has accepted such a position. He has, however, distinguished the present matter from the cases cited by the appellant in support of such a ple....
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....the inclusive part of the definition in Section 2(f) of the Act which would include a person who does not himself employ labour but employs himself in the production or manufacture of goods through an independent contractor. In the third case, it was held by the High Court of Bombay that the agreement between the petitioner company and Bata Shoe Company was not at arm's length as it provided that Bata should provide not merely advice, assistance, technical know-how and supervision to Pilky but would also provide necessary working capital by way of interest-free advances required for operation of the plant and other working expenses and for procurement of moulds and equipment required for manufacture of footwear. Pilky was debarred from enlarging the capacity or installing fresh machinery without the consent of Bata. The entire stock was to be sold with the brand name of Bata. It was held that the two were not different units but Pilky was the agent of Bata. 8. Per contra, appellant's counsel has, inter alia, relied upon the Supreme Court decisions in Britannia Biscuits Co. Ltd. v. Collector of Central Excise - 1997 (89) E.L.T. 22 (S.C.) and Collector of Central Excise, Barod....
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.... case was cited before the Collector who however, distinguished it from the present case on the ground that the terms of the agreement for the manufacture and sale of the goods were different in the two cases. Thus, the Collector has stated that while in the Cibatul case the buyer and brand name owner was not obliged to buy the manufactured goods regardless of their quality and there was provision for reprocessing of the defective goods to bring them upon the requisite quality or if that was not possible to sell the goods to the buyer at a lower price if it was suitable for an alternative purpose or sold to others as substandard goods or to destroy the goods. As against such provisions in the Cibatul case the Collector has stated that the agreement in the present case only required that defective material will be repaired or replaced. The agreement did not provide that if the quality of the product was not approved by the appellant, DIPL was at liberty to sell the goods to any other party or to destroy them and that not a single instance had been shown of substandard ABAs having been allowed to be sold to any other party or dealt with in any manner suited to DIPL. In these circumst....