Customs, Excise and Gold Tribunal - Delhi
Cheryl Laboratories vs Collector Of Central Excise on 11 November, 1992
Equivalent citations: 1993(65)ELT596(TRI-DEL)
JUDGMENT S.L. Peeran, Member (J)
1. The appellants are aggrieved with the order-in-original dated 23-4-1987 passed by the learned Collector of Central Excise, Hyderabad. By this order, the learned Collector has confirmed the duty under Rule 9(2) of Central Excise Rules, 1944 of an amount of Rs. 1,57,423.57 P. B.E.D. plus Rs. 1.48 Ps. S.E.D. in respect of Candid cream cleared by the appellants.
2. The facts of the case are that the appellants are holder of L-4 No. 1/83 manufacturing medicines falling under T.I. No. 14-E of Central Excise Tariff (prior to 28-2-1986). They manufacture one product namely Clotrimazole Candid Cream. They filed classification list on 21-3-1985 claiming exemption from payment of duty under Notification No. 85/85 dated 17-3-1985 declaring the aggregate value of clearance for the year 1984-85 as less than Rs. 7.5 lakhs. They had filed a price list dated 21-3-1985 in proforma II claiming the assessable value of the above product (15 gms tubes) as Rs. 2.05 per tube on the basis of the sale agreement dated 12-4-1982 executed by them with M/s. Glenmark Pharmaceuticals (P) Ltd. (for short M/s. Glenmark Bombay). As per the terms of this sale agreement, M/s. Glenmark are said to have exclusive right to market 'candid cream' manufactured by the appellants. The agreement is said to contain a clause that the appellants will not market any of its production anywhere in India or abroad without prior permission from the said M/s. Glenmark who have absolute control over the pattern of packing, colouring etc. relating to the sale of the product. The aluminium tube in which the cream is packed and the outer carton bore the monogram of M/s. Glenmark in a conspicuous manner alongwith their name 'Glen mark' printed in bold red letters under the words 'marketed in India by'. The name of the appellants is said to be printed in smaller print compared to the name of M/s. Glenmark. The tube and the carton did not bear the monogram of the appellants. Therefore, the department made investigation regarding the relationship between them. The appellants had also filed a fresh price list vide letter dated 8-5-1985 declaring the assessable value at Rs. 6.59 per tube on the basis of maximum retail price printed on the label in supersession of their earlier price list dated 21-3-1985 and had for provisional approval of the classification list. Accordingly it was so done. They, by their letter dated 3-1-1986, declared that they shall adopt the price approved under protest. By letter dated 16-8-1985 they informed the department that they will pay duty @ 13% ad valorem under protest from 1-4-1985 to 16-8-1985. They cleared the goods on the basis of exemption claimed by them under the said notification.
3. The department carried out the investigation during which the appellants produced the deed of partnership dated 20-1-1985 and the latest available balance sheet of M/s. Glenmark for the period 1982-83 and also the names of their directors alongwith the labels of the product 'Supri Kort' skin lotion and 'Furakal' suspension manufactured by them. It was gathered by the department that -
(i) the monogram appearing on labels of 'Supri kort' and 'Furakal' suspension on the letter head of M/s. Glenmark and on their annual report was same i.e. 'G' as appearing on the tube and cartons of the 'Candid cream' manufactured by the appellants;
(ii) the directors of M/s. Glenmark and partners of the appellants are as follows:
M/s. Glenmark M/s. Cheryl Laboratories
1) Mr. G. Saldhana, Managing Direc- Mrs. Blanche Saldhana, W/o
tor Mr. G. Saldhana
2) Mr. J.N. Mazumdar, Director Mrs. Mazumdar, W/o. J.N.
Mazumdar
3) Mrs. Blanche Saldhana, W/o Mr. Miss Cheryl Saldhana, D/o
G. Saldhana, Director Saldhana
(iii) As per the annual report of M/s. Glenmark for the year 1982-83, it was seen that under the trading activities, purchase of candid cream valued at Rs. 6,99,012.85 P. had been indicated and the directors' report at Page 7 had indicated about these purchases from the appellants.
4. The department therefore, recorded the statement of Shri K. Jagan Nadha Swamy, Manager of the appellants' firm; Mr. G. Saldhana, Mrs. B. Saldhana, Mr. Kanekar, General Manager, A.F. Alwares, Assistant Stores In-charge, both of the appellants' firm. On the basis of these investigations, it was alleged in the show cause notice dated 12-8-1986 issued by the learned Collector, briefly as follows -
(i) The monogram appearing on the container and labels of the candid cream were clearly a trade mark of M/s. Glenmark as also evident from their products, as well as, as can be seen from the letter heads, balance sheets. Therefore, it was inferred and alleged that the product Candid cream is a product of M/s. Glenmark, who got the same manufactured on their behalf from the appellants.
(ii) Since M/s. Glenmark were not eligible for the exemption under Notification No. 85/85 by virtue of their turnover being Rs. 3,31,90,759.11 P. the Candid cream is not eligible for exemption under the Notification No. 85/85 as claimed by the appellants in the classification list dated 21-3-1985.
(iii) as also on account of the fact that the main raw materials as well as other printing and packing materials were supplied by M/s. Glenmark under their own delivery challans including the supply of weighing machinery. Both M/s. Glenmark and the appellants had common registered office and by phone all the sale and purchases were being controlled from Bombay office; the partners of the appellants being family members i.e., wives and/or daughters of the Directors of M/s. Glenmark, indicating both the firms to be family concerns having separate names for the purpose of tax avoidance only in as much as the director of M/s. Glenmark is interested. The packing as per Section 2(f) of the Central Excises and Salt Act, 1944 and the sale of the entire production of the appellants is controlled by M/s. Glenmark. The products are patent and proprietary medicines owned by M/s. Glenmark and not by the appellants. Therefore, it was alleged that Candid cream is a product of M/s. Glenmark and as they are not entitled to the exemption of Notification No. 85/85, the same is liable to duty at full rate under TI 14E of the Tariff.
5. The appellants by their letter dated 21-3-1985 claimed assessable value of the product at Rs. 205 per tube of 15 gms. and Rs. 0.85 per tube of 5 gms. on the basis of the contract dated 12-4-1982 entered between them. It was alleged that this contract price was not acceptable and the assessable value was to be arrived at on the basis of the maximum retail price printed on the labels as per the provisions of Drug Control Order and as this has been accepted by the appellants by filing a revised PL dated 8-5-1985, the appellants were called upon to explain as to why a duty amount of Rs. 1,57,423.57 P. should not be confirmed for clearances of candid cream made during the period 1-2-1985 to 16-8-1985. There is an allegation of suppression of vital facts and wilful mis-statement relating to its connection and relationship with M/s. Glenmark and the duty was demanded under Rule 9(2) of Central Excise Rules, 1944.
5A. The appellants seriously contested the demand notice by filing a detailed reply dated 3-11-1986. The sum and substance of this reply is that they were independent manufacturers and were entitled to the benefit of the notification in question. They contended that the term 'by and on behalf of a manufacturer' used in the notification is analogous to the said term used in the Notification No. 175/77 and therefore, the representation given by Hon'ble Madras High Court in the case of P.M. Latif v. Assistant Collector 1985 (22) E.L.T. 758 would squarely apply to the facts of their case. In this context, they have relied on a large number of decisions chiefly being that of the ruling of the Supreme Court as rendered in the case of Union of India v. Cibatul Ltd. as reported in 1985 (22) E.L.T. 302. They contended that it is well settled law that the brand owner or trade mark owner is not a manufacturer. They contended that definition of P & P medicines decides the dutiability and not the responsibility of the manufacturer and relied on the ruling of Phillips India v. Govt. of India as reported in 1980 (6) E.L.T. 263. They contended that the turnover of M/s. Glenmark had no relation to their turnover as they were the actual manufacturers and are rightly entitled to the benefit of the notification as independent manufacturer as the transaction had been principal to principal basis and relied on the ruling of the Spencer & Co. v. Assistant Collector as reported in 1983 (14) E.L.T. 2098. They submitted that even supplier of raw material would not become manufacturer. They contended that the main raw material i.e. Clotrimazole was imported by them and not supplied by M/s. Glenmark including the packaging material. As they were not owning a godown, the materials were sometimes stored in the godown of M/s. Glen-mark pending transit facilities. The purchase orders were signed by Mrs. Saldhana partner of the appellant's firm or by the officer appointed by them. They contended that even supply of old weighing machine does not amount to supply of manufacturing machine and it also does not indicate that the buyer has control over the production. They contended that the said machine was sent for repair only. They contended that the concept of 'related person' is applicable in regard to the determination of the assessable value of excisable goods and not in relation to 'manufacture' of excisable goods and relied on the ruling of the Supreme Court case of Union of India and Ors. v. Bombay Tyre International and Ors. They contended that the occasional visit of the Director of M/s. Glenmark was not for programming as alleged but it was for expeditious delivery of goods to be marketed or to verify the quality of the goods in relation to the specification and this by no means, could be termed as the controlling of the production of the manufacturing unit. They contended that the commonness of directors and both the concerns being a family affair would not make the establishment as a common entity and there is no legal bar to the same, as they were independently carrying the business, one being incorporated under the Companies Act and another being a partnership firm with separate directors and partners except Mrs. Blanche Saldhana, partner of appellant's firm being also one of the Directors of M/s. Glenmark. They submitted that even common use of phone, office would not make the two independent units as a single one and relied on several rulings in support of their contention. They denied having manufactured on behalf of M/s. Glenmark and asserted having manufactured on their account. They denied suppression and submitted that they supplied all the informations as called for before the approval of classification list by the proper officer on 11-10-1983 and subsequently classification lists were also approved on 25-2-1984, 4-5-1984, 8-6-1984 and 13-11-1984. They contended that the maximum retail price had been adopted by them as per the Drug Price Control Order. Later when they came to know that maximum retail price was not to be adopted, they again filed a P.L. in Part II on 21-3-1985. Later they had adopted the maximum retail price for expeditious approval of P.L. They state that the department had not correctly appreciated the facts and there was no admission on their part.
6. The learned Collector after a careful examination of their pleas, rejected the same and confirmed the demand. He has held that both the concerns are creations of the members of a family and they are closely related. The registered office of both the companies are located in Bombay in the same premises. The learned Collector has noted a clause from the agreement that M/s. Glenmark will have exclusive right to Candid cream manufactured by the appellants and also about the appellants not having any right to market any part of their production without prior permission of M/s. Glenmark. The learned Collector has also noted about M/s. Glenmark's absolute control over the pattern of packing colour or any other matters relating to the sale of the product. Their right to reject a product which is not of a standard quality and the loss arising on account of the defective nature of the product to be borne by the appellants. On the basis of these clauses in the agreement, the learned Collector has held that the transaction of the partners cannot be considered as principal to principal basis and at arm's length as claimed by the appellants. He has held that the agreement clearly establishes the ultimate control of M/s. Glenmark and the plea of independent indentity of the appellants is only on paper and is not so in reality, as M/s. Glenmark has acquired absolute control over the pattern of packing, colours and any other matters relating to the sale of the product. They had also supplied the materials required for packing and that they have an interest with regard to the nature and other details of packing required for marketing the goods and the appellants are bound by the specifications prescribed by M/s. Glenmark and that the appellants have no option of their own with regard to the manner and other details of packing of the product.
7. The learned Collector has observed that there is more than 300% difference between the price offered by M/s. Glenmark and the appellants' price at which they themselves sell the product in wholesale. He has observed that the appellants have agreed to sell the product at low price cannot be without consideration as no independent manufacturer can afford to sell its product at such a low price when he is aware that the product can fetch more higher price in the wholesale market. The learned Collector holds this aspect to establish the communication of ownership between the two units. The learned Collector has also noted about the delivery of main raw material clotrimazole to Bombay under the delivery challans of M/s. Glenmark and has observed that M/s. Glenmark have an active interest in the activities of the appellants. He has also noted about the monogram which is approved for M/s. Glenmark appearing on the product. The learned Collector has observed that in terms of Para 1 of Notification No. 85/85, the value of clearances by or on behalf of a manufacturer from one or more factories has to be considered for the purposes of determining the limits of exemption and taking this para and Para 2 of the notification, the benefit is not available to the appellants. He has also held that the appellants have suppressed the fact and hence the larger period of Rule 9(2) of rules is extendable in the present case.
8. We have heard Shri V. Jogayya Sharma, learned advocate for the appellants and Shri L.N. Murthy, learned DR for the respondents. Shri Sharma contended that the appellants' firm has a separate identity with separate partners having registration under Income-tax and Sales-tax. They purchase raw materials and they also import the raw material and pay customs duty on them. The imported goods were received in Bombay and till they were shipped to the unit at Hyderabad, they were kept in the godown of M/s. Glenmark as they did not have any godown of their own. This itself is not a ground to hold against them. He contended that the clause of control of pattern of colours, packing material and also quality of the product by M/s. Glenmark would not by itself make the appellants having manufactured for and on behalf of M/s. Glenmark. The clause that M/s. Glenmark had outrightly rejected the product for its defect and the cost was to be borne by the appellants, is a clear pointer that the transaction is on the basis of principal to principal. He contended that the value shown in the price list was of mixed price and the price list had been filed at the instance of the department itself. He contended that even going by the department's allegation, the duty cannot be confirmed on the appellants and that the allegations were being pointed towards M/s. Glenmark and the fact that they had not been issued with show cause notice, would vitiate the proceedings. He contended that the fact that one of the partners of appellants' firm is also Director of M/s. Glenmark and the relationship of other partners with the Directors of M/s. Glenmark would not by itself, bring any commonality of interest. He contended that there is no allegation of money being pumped in by M/s. Glenmark and there is no financial flow back in the case. It is also not a case of the appellants being a dummy unit of M/s. Glenmark. He pointed out to the statement of Mrs. Saldhana and showed that she and another partner Mrs. Mazumdar were earlier employed and they had started the firm with their own funds which they had earned from their previous employment. He pointed out that the appellants had been carrying on their business independently by their own efforts and by taking loans from the banks. The mere fact that the husband of the partner were guiding them in their business, could not by itself take away the appellants from the aspect of independent manufacturer. He submitted that the appellants' firm and M/s. Glenmark were geographically apart - one being at Hyderabad and other being at Bombay with totally different managements and mere fact of common use of telephone and registered office, would not make M/s. Glenmark as the manufacturers. He submitted that the firm was being looked after by a competent chemist also. He further submitted that there was no suppression or mis-representation of facts as the agreement was with the department from 1-9-1983 and had been given to the department subsequently. The department had approved the classification list from time and again and as such, there was no question of ignoring the larger period in the present case. Shri Sharma relied on the ruling of Supreme Court in the case of Cibatul (supra) and also a large number of authorities in his support viz. -
Hind Lamps Ltd. v. Union of India, New Delhi and Ors. 1977 (1) E.L.T. G 53 Cibatul Ltd. v. Union of India and Ors. 1978 (2) E.L.T. (J 68) Hind Lamps Ltd. v. Union of India and Ors. 1978 (2) E.L.T. (J 78) Bata India Ltd. v. Assistant Collector of Central Excise, Patna 1978 (2) E.L.T. (J 211) Gangadhar Ram Chandra, Belanganj, Agra v. Collector of Central Excise, Allahabad 1979 (4) E.L.T. (J 597) Two Star and Ors. v. Union of India and Ors. 1980 (6) E.L.T. 166 (Bom.) Philips India Limited and Ors. v. Union of India and Ors. 1980 (6) E.L.T. 263 (All.) Ceramics and Electrical Industries Pvt. Ltd. and Anr. v. Union of India and Ors. 1981 (8) E.L.T. 358 (Bom.) Poona Bottling Co. Ltd. and Anr. v. Union of India and Ors. 1981 (8) E.L.T. 389 (Del.) Remington Rand of India Ltd. and Anr. v. Collector of Central Excise, Calcutta and Ors. 1981 (8) E.L.T. 874 (Cal.) Lucas Indian Service Ltd., Madras v. Collector of Central Excise, Madras 1984 (16) E.L.T. 415 (Tribunal) Joint Secretary to Govt. of India v. Food Specialities Ltd. 1985 (22) E.L.T. 324 (SC)' Metal Box India Ltd., Calcutta v. Collector of Central Excise, Calcutta 1986 (23) E.L.T. 187 (Tribunal) Shakti Udyog Jallandhar v. Collector of Central Excise, Chandigarh 1986 (8) ETR 507 Super Printers v. Collector of Central Excise, Hyderabad 1987 (30) E.L.T. 745 (Tribunal) Shree Packaging Corporation, Hyderabad v. Collector of Central Excise, Hyderabad 1987 (32) E.L.T. 94 Spring Fresh Drinks v. Collector of Central Excise 1991 (54) E.L.T. 333 (Tribunal)
9. Shri Murthy, learned DR on the other hand, submitted that both the units were closely knit units and the daughter of the Director of M/s. Glen-mark is a silent partner of the appellants firm. The active partners being wives of Directors, they are only Director. He relied on the ruling rendered by this Tribunal in the case of Lotus Chemicals v. C.C.E. (Order No. 458-459/91-C, dated 25-9-1991). He contended that the parent company not eligible to exemption and as M/s. Glenmark were holding all the interest of the firm, the exemption under the notification will not be available. He relied on the findings given by the learned Collector. Shri Sharma, advocate in reply submitted that the ruling of Lotus Chemicals is not applicable as the facts are not the same. He pointed out that in the case of Lotus Chemicals, the husband was carrying out the business of wife holding a power of attorney. The facts were different in the present case. He pointed out that use of common godown or office will not make both the units same and relied on the ruling of Spring Fresh Drinks and that of Shree Packaging Corp. (supra).
10. We have carefully considered the submissions made by both the sides, perused the records and the citations referred to by both the sides. We have in detail brought out the facts of this case, the stand of the appellants and the findings of the learned Collector. The learned Collector has confirmed the demand on the basis of the terms of the agreements and according to him, M/s. Glenmark are having actual control over the appellants and they are getting the goods manufactured from the appellants on their account and the appellants cannot be considered as independent manufacturers and as a result, the benefit of the exemption of the notification cannot be extended to the appellants. We do not agree with the findings of the learned Collector. In the first instance, the department ought to have made M/s. Glenmark also as a party to the adjudication and confirmed the duty, if in the eye of the adjudicating authorities, it is M/s, Glenmark who are the real manufacturers. This has not been done. The proceedings get vitiated on this sole ground itself. However, there are other reasons as well to set aside the impugned order. The learned Collector has found the terms of the agreement, the commonness of directors and partners, godown, office and price to be the factors to draw his conclusion. But unfortunately, these grounds have not met the test of law before the highest Court in the case of Union of India v. Cibatul Ltd., (supra). It is but proper to set out the findings given in Paras 6 and 7 -
"The entire question before us is whether the goods are manufactured by the seller or are manufactured by the seller on behalf of the buyer. The relevant provisions of the agreements and the other material on the record show that the manufacturing programme is drawn up jointly by the buyer and the seller and not merely by the buyer, and that the buyer is obliged to purchase the manufactured product from the seller only if it conforms to the buyer's standard. For this purpose the buyer is entitled to test a sample of each batch of the manufactured product and it is only on approval by him that the product is released for sale by the seller to the buyer. In other words, the buyer has the right to reject the goods if he does not approve of them. If the manufactured goods-are not in accordance with the buyer's standard, they are either reprocessed to bring them up to the requisite quality, or if that is not possible the goods are sold to the buyer for a different purpose if they are compatible with the specifications of some other product and provided that the buyer has a need for that product, or the goods are sold to others in the market as sub-standard goods at a lower price or the goods are destroyed. It is significant to note that the buyer is not obliged to purchase the goods manufactured by the seller regardless of their quality and that in the event of rejection by the buyer the alternatives present before the seller extend to the sale of the manufactured goods to others or even to the very destruction of the goods. It is apparent that the seller cannot be said to manufacture the goods on behalf of the buyer.
7. The appellant relies also on the circumstance that under the agreements the seller is required to affix the trade marks of the buyer on the manufactured goods and, it is said, that indicates that the goods belong to the buyer. It seems to us clear from the record that the trade marks of the buyer are to be affixed on those goods only which are found to conform to the specifications or standard stipulated by the buyers. All goods not approved by the buyer cannot bear those trade marks and are disposed of by the sellers without the advantage of those trademarks. The trade marks are affixed only after the goods have been approved by the buyer for sale by the seller to the buyer. The seller owns the plant and machinery, the raw material and the labour and manufactures the goods and under the agreements, affixes the trade marks on the goods. The goods are manufactured by the seller on its own account and the seller sells the goods with the trade marks affixed on them to the buyer."
11. The same view has been reaffirmed by the Hon'ble Supreme Court in the case of Joint Secretary to Government of India v. Food Specialities Ltd. (supra); See also the rulings of High Courts in Hind Lamps Ltd. v. Union of India (supra); Bata India Ltd. v. Assistant Collector of Central Excise (supra). The learned Collector has held that there is supply of materials from M/s. Glenmark. But this by itself is not a sufficient factor to confirm the demand. (Ganga Dhar Ram Chandra (supra) of the Allahabad High Court) Andhra Rerolling Works (supra) Andhra Pradesh High Court). The Allahabad High Court has also gone into detail on the term 'manufacture on his own account' in the case of Philips India Ltd. and Ors. (supra) and held that -
"But if a person simply places order with a company for getting certain goods manufactured according to his specifications, details and trade marks, without incurring any financial involvement needed for manufacturing and producing the goods or without having any control or supervision over the manufacturing process. Such a person cannot be treated as manufacturer for those goods because in such cases the transaction is on principal to principal basis in the ordinary course of business. In such cases, it cannot be said that actual manufacturer was engaged in the manufacturing activity 'on his own', as he manufactures goods according to his own schedule, budget, capacity availability of raw materials. Moreover if buyer is also to be treated as manufacturer, the same would result in making two persons as manufacturers of the same commodity whereas under the law there cannot be more than one.
(underlined by us)
12. Again at Para 15, the Court has held that -
"A person being a Director of two companies is not indicative of the fact that one company is dummy of the other. They are two distinct entities carrying on business on their own account and cannot be held to be controlled by the other".
This view is reiterated in many other citations of Tribunal also. The aspect pertaining to restriction of sale, distribution by itself will not amount to 'manufacture for or on behalf of has been held in Poona Bottling Co. Ltd. and Anr. (supra) by Delhi High Court.
13. In the case of V. Devaraj and Anr. v. Collector of Central Excise, Coimbatore as reported in 1992 (42) E.C.R. 562, the Tribunal has also gone on this aspect and has given the finding that two units cannot be clubbed, when the two units have two separate geographical existence and have been periodically filing declarations before the authorities and the authorities have also visited the two units and have accepted the declarations filed by the units and have accepted their claims and that they have separate assessments under State Acts and Central Acts viz. Sales-tax, Professional-tax, Income-tax.
14. In a similar case of National Products v. Collector of Central Excise, Bombay in final order No. 248/92-C, dated 28-8-1992, the Tribunal considered a similar plea of the Revenue and has negated the same by allowing the appeal, by applying the ratio of the Supreme Court ruling in the case of Cibatul (supra). The findings given in Para 8 are noted below -
"Now it is well established that supplier of raw material will not become a manufacturer. It is also well settled that by merely affixing the brand name of another manufacturer, it cannot be said to have manufactured on behalf of the owner of the brand name, so long as they are independent manufacturer. In this case, the department did not allege that the appellant is a dummy of M/s. Muller and Phipps. The learned Collector has given a finding to the effect but there is no evidence to that effect. It is now equally well settled that there has to be a clear evidence to the effect. As per the case made out, no such allegation was brought in. It is only on the nature of agreement and the other surrounding circumstances as brought out it was alleged that the appellant was manufacturing on behalf of M/s. Muller and Phipps. But the circumstances brought out are not of such a nature as to uphold the charge. The appellant has explained at the first instance itself about the inadvertence in printing on the tins and it is supported with letters dated 10-7-1985 from Zenit Tin Works. It is not the case of the department that these letters are all forged ones. Therefore, this evidence having been produced at the time of raid itself and explained also at the time of recording the statement, hence there is no reason to disbelieve the same. As regards that the ground of M/s. Muller and Phipps supplying the raw materials and controlling the quality of the manufacturer. This by itself cannot be the circumstances to hold M/s. Muller and Phipps to be the manufacturer so long as the manufacture is principal to principal basis and the appellant being a job worker with independent ownership. The learned Collector has held that the agreement is a bogus one. But this was not alleged. The learned Collector has drawn such an inference on the basis of the Clause 12 of the agreement and the alleged violation in M/s. Muller and Phipps directing the appellant to purchase from M/s. R.K. Aroma tics. This has been explained by the appellant. There does not appear to be anything incriminating in it. Merely because M/s. Muller and Phipps suggests the appellant to make purchase from common seller of raw materials of M/s. R.K. Aroma tics to maintain the quality of the product, it cannot be inferred that the agreement is a bogus one. Even if so, that by itself the transaction cannot be said to be a dummy one. The law is now well settled as to how a dummy concern is to be construed. There has to be financial flow back and that the dummy must be a mere farce one without the owner having ownership in the plant, machinery and date of running of the concern. This is not the position here. Admittedly, the appellant is an independent person with full rights and ownership over the plant, machinery and having his own labour force. The appellant is in a nature of job worker and merely because he is using the brand name of another, he does not seize to be an independent manufacturer (see Union of India and other v. Cibatul Limited 1985 (22) E.L.T. 302 (SC) and Chetan B Thandani v. Union of India and Ors. (supra) and Prasad Engineering Works and Ors. v. C.C.E. Hyderabad (supra). In the circumstances, the first issue has to be answered in favour of the appellant and against the department.
As regards the second issue, it has to be held that the duty demand is not sustainable. Even for arguments sake if it were to be held that the appellant is a dummy of M/s. Muller and Phipps even then the demand of duty on appellant is not sustainable, as the duty demand should have been made on M/s. Muller and Phipps. In this case no such demand was made on M/s. Muller & Phipps nor they were served with show cause notice. In the circumstances, the demand of duty made on the appellant is not sustainable and it requires to be set aside".
15. The learned JDR cited an unreported case of Lotus Chemical (supra). In this case, the facts are different. The Bench found the unit owned by the manufacturer was in total control of the unit and owned by her husband and he held power of attorney of the wife. There were not a separate unit also. This ruling is distinguishable on facts.
16. In this case, there is nothing in the statement of the partners or directors to show such a link. The partners had been employed before starting the firm. They may have pooled their resources and also taken bank loans and put up an independent unit at Hyderabad which is geographically away from the factory of M/s. Glenmark at Bombay. There is separate staff, machinery and the inputs are separately imported and also purchased. The mere fact of common registered office, use of telephone and godown is not sufficient to go against the appellant (See Spring Fresh Drinks case, Shree Packaging Corporation case and Shakti Udyog case (supra)).
17. The other aspects of the learned Collector's finding on the price or maximum retail price being declared by the appellant is also not of such a consequence to confirm the demand. The learned Collector has only drawn presumption on this aspect. The demands are also timebarred as well. These were within the knowledge of the department. The appellants having furnished the agreement and other details at the time of approval of the classification list on various dates, is not disputed by the department. In the result, the appellants succeed in this appeal and the same is allowed.