ORDER
V.K. Agrawal, Member (T)
1. In this appeal filed by M/s. Vaicom Electronics (P) Ltd., the issue involved is whether the Review Order passed by the Commissioner of Central Excise was beyond the scope of the SCN and whether there was any mutuality of interest between the appellants and M/s. Baron International Ltd.
2. Shri R. Nambirajan, learned Advocate, submitted that the appellants manufactured Colour Television (for short CTVs) Audio and Video products out of their own raw materials and they sold their products entirely to M/s. Baron International Ltd. (for short BIL) after affixing with brand name AKAI. Show cause notice dated 16-10-1995 was issued to them demanding duty and imposing penalty on the ground that there was mutuality of interest between the appellants and BIL and the price for the purpose of Section 4 of the Central Excise Act, 1944 should be the price at which M/s. BIL were selling the impugned products; that the Deputy Commissioner under Order-in-Original dated 2-7-1999 vacated the SCN holding that there was no relationship between the appellants and M/s. BIL. The Commissioner reviewed the order on the ground that M/s. BIL were the real manufacturer of the impugned goods and the agreement between the appellants and M/s. BIL showed job work kind of arrangement and that the ratio of the decision of the Supreme Court in the case of Ujjagar Prints would apply. The Commissioner (Appeals) had set aside the Adjudication Order holding that there was mutuality of interest between the appellants and M/s. BIL, learned Advocate further submitted that the Review Order passed by the Commissioner under Section 35E(2) of the Central Excise Act was beyond the scope of the SCN inasmuch as the SCN was issued on the ground of mutuality of interest whereas the Order was passed treating M/s. BIL as the manufacturer; that it is settled law that the new plea cannot be taken in review as the review under Section 35E(2) has to be confined to the point arising out of the order under review. He also relied upon the decision in the case of C.C.E. v. Eastern Aeromatics (P) Ltd. – 1999 (107) E.L.T. 208 (Tribunal). Reliance was also placed on the following decisions :-
(a) J&J Ice Creams Pvt. Ltd. v. C.C.E, New Delhi, 1999 (114) E.L.T. 965 (Tribunal), (b) C. Cus. (P), Ahmedabad v. Afrique Trade Links Ltd., 2001 (129) E.L.T. 539 (Tri. - Mum.), and (c) CDC Carbo Line (I) Pvt. Ltd. v. C.C.Ex., Madras, 1998 (103) E.L.T. 359 (Tribunal).
3. The learned Advocate also submitted that there is no mutuality of interest between M/s. BIL and the appellants; that the SCN merely alleged the mutuality of interest without any evidence whatsoever; that neither there was any averment in the SCN nor any evidence has been brought on record to show that either BIL has interest in the business of the appellants or the appellant has interest in the business of M/s. BIL; that neither of them is having any share holding in the business of others; that merely because M/s. BIL purchased the entire goods manufactured by the appellants, they cannot be held to be related persons at all; that the price at which goods are sold to the brand owner buyer is the basis and not the price at which such goods are sold in the market by the brand owner buyer. He relied upon the following decisions :-
(a) Union of India v. Cibatul Ltd., 1985 (22) E.L.T. 302 (S.C.) (b) Sidhosons v. Union of India, 1986 (26) E.L.T. 881 (S.C.) (c) C.C.Ex., Vadodara v. Tide Industries, 1999 (111) E.L.T. 555 (Tribunal) = 1999 (32) R.L.T. 565 (CEGAT).
4. Finally the learned Advocate also referred to the agreement between M/s. BIL and the appellants according to which all raw materials, components, assemblies, sub-assembles, spares and packing materials would be procured by the appellants directly at its own account and PCB and remote control and speaker cabinets would be imported by M/s. BIL and sold to the appellants at price covering all costs and plus reasonable profit; that further according to Clause 4, both parties would meet their own expenses and in case of either party interested in advance from the other, it can take place subject to payment of interest at the agreed rate which would not be less than the prevailing bank rate of interest.
5. Countering the argument Shri Moheb Ali for the Revenue submitted that the review order was passed on the basis of the proceedings before the Adjudicating Authority; that the central point in the SCN as well as in the review order was that the price charged by M/s. BIL should be the assessable value for the purpose of levying Central Excise duty; that accordingly it cannot be claimed by the appellants that the review order was beyond the scope of the proceedings. He also submitted that the Adjudicating Authority had given his findings to the effect that there is no evidence to establish that the appellants company was a dummy unit of M/s. BIL; that, therefore, the ground of appeal in the Review Order to the effect that M/s. BIL are real manufacturer, arises out of proceedings only. On merit he submitted that there was a mutuality of interest between M/s. BIL and the appellants as certain raw materials such as PCB, and remote control were to be supplied by M/s. BIL who had also the right to post their own quality control officers. Finally he submitted that as that the Commissioner (Appeals) has given specific findings to the effect that the cost towards insurance, testing and inspection charges and factory running expenses and depot maintenance expenses are to be included in the assessable value, such plea was taken in the review order where it was mentioned that the demand should have been worked out as per the ratio of the judgment in Ujjagar Prints Ltd.
6. We have considered the submissions of both the sides. On a perusal of the SCN reveals that after referring to the terms of the agreement entered between the appellants and M/s. BIL it was alleged that “there is a mutuality of interest between M/s. BIL and M/s. VEPL and hence the price for the purpose of Section 4(1)(a) is the price at which M/s. BIL is selling the goods”. We find substance in the submission of the learned Advocate that there was no allegation in the SCN to the effect that M/s. BIL are the real manufacturer of the impugned goods whereas in the Review Order, passed by the Commissioner, the grounds of appeal clearly reflects that the Adjudication Order passed by the Deputy Commissioner was reviewed treating M/s. BIL as the real manufacturer and the price charged by them was to be treated as assessable value without any deduction. We also observe from the Adjudication Order that the Adjudicating Authority has given his specific findings that the agreement casts contractual obligation on each other and it cannot be constituted mutuality of interest as understood within the meaning given in Section 4(4)(c) of the Central Excise Act, 1944. The Adjudicating Authority, after referring to various judgments of the Supreme Court and the Tribunal on the aspect of the mutuality of interest, came to the conclusion that mutuality of interest in the business of each other must be in the nature of financial or manageable interest and such interest does not exist in the present matter. We also agree with the learned Advocate that these findings of holding non-existence of mutuality of interest between the appellants and M/s. BIL were not challenged in the Review Order filed before the Commissioner (Appeals). Accordingly we are of the opinion that the Review Order was passed by the Commissioner on the basis of charges which was not mentioned in the SCN. As held by the Tribunal in Eastern Aeromatics (P) Ltd., no new point can be taken in review as the review under Section 35E of Central Excise Act, 1944 has to be confined to points arising out of order under review. On this aspect alone, the appeal filed by the appellants is to be allowed. On merit also we find that there is no evidence brought on record by the Revenue to prove mutuality of interest. As observed by the Deputy Commissioner in the Adjudication Order, there was no claim to the effect that M/s. BIL had funded the appellants and any extra commercial consideration flowed from one to another. Regarding submission made by the Revenue that the Adjudicating Authority had given his findings about appellant not being a dummy unit of M/s. BIL, we observe that the Adjudicating Authority in fact had not given any findings to such effect. In fact he only observed that “there is nothing in the SCN either by way of allegation or by way of any evidence which would establish that the noticee-company is a dummy unit of M/s. BIL”. The learned Advocate has rightly relied on the decision in Tide Industries wherein it was held that on the basis of the agreement for sale of the entire production it cannot be said that the price at which goods were sold by the buyer should be the assessable value. The decision in the case of Tide Industries is applicable on all four to the present matter. Thus even on merit the impugned order deserves to be set aside. We order accordingly.
7. The appeal is thus allowed.