Godrej Industries Li... v. Commissioner Of Cent..., Supreme Court Of India, Judgment, Law, casemine.com

Citation Codes

Equivalent Citations

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Case Number

Civil Appeals Nos. 3630-31 of 2002 with Nos. 3761-62 and 7638-46 of 2002, decided on July 30, 2008

Disposition

remanded

Attorney(S)

Atul Setalvad and D.B Shroff, Senior Advocates, for the Appellants;
Vikas Singh, Additional Solicitor General, S. Ganesh and V. Shekhar, Senior Advocates [Ms Rajni Divkar, Sangeeta Mandal, Ms Shruti Chaudhary, Ms Swati Sinha, Ms Jayasree Singh (for M/s Fox Mandal & Co.), Jai Singh Barar, Ms Simran Brar (for Ms Manik Karanjawala), Aarohi Bhalla, Ms Sujata Kurdukar, Ashok Bhan, Ms Aruna Gupta and Vikas Sharma (for B. Krishna Prasad), Advocates] for the Respondents.

Judges

Justice Ashok Bhan
Justice V.S. Sirpurkar

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Smart Summary

Factual and Procedural Background

The assessee received two show-cause notices, one from the Commissioner (Bombay) and another from the Commissioner (Indore). The proceedings concerned an impugned order of the Customs, Excise and Gold (Control) Appellate Tribunal, West Regional Bench at Mumbai. The Bombay assessment remained provisional, while the Indore notice concerned the Malanpur factory. [1][2][3]

The Tribunal had found that Godrej Soap Ltd. (GSL) and Procter & Gamble Godrej Ltd. (PGG) were related persons and had included advertisement charges incurred by PGG in the assessable value of soaps manufactured by GSL. Those findings were challenged as exceeding the scope of the show-cause notice. [4][5]

Legal Issues Presented

Whether the Tribunal could sustain a finding that GSL and PGG were related persons when that ground fell outside the show-cause notice. [4][5]
Whether advertisement charges incurred by PGG, payments under the non-competition agreement, and payments by PGG to Godrej & Boyce for trade marks could be included in the assessable value. These questions were directed to be decided afresh. [6]
Whether the Indore show-cause notice concerning the Malanpur factory was affected by limitation. [3]
How the provisional Bombay assessment, the premature Bombay show-cause notice, and the penalties should be dealt with. [2][7][8]

Arguments of the Parties

Joint Submissions

Counsel jointly requested that the Tribunal’s order be set aside except for its finding that the Bombay show-cause notice was premature because the assessment was provisional. They also submitted that, while that assessment remained provisional, the question of penalty did not arise. [2]
In Civil Appeals Nos. 3761-62 of 2002, counsel agreed that the appeals should be allowed and the penalty set aside. [9][10]

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The Court accepted the parties’ joint request concerning the Bombay notice, preserving the finding that it was premature because the assessment remained provisional. It also accepted their submission that the question of penalty did not arise at that stage. [2]

After examining the show-cause notice itself, the Court concluded that the Tribunal’s finding that GSL and PGG were related persons exceeded the notice’s scope. The Tribunal had therefore exceeded its jurisdiction, and that finding could not stand. [4]

The inclusion of PGG’s advertisement charges in the assessable value rested on that same unnotified related-person ground. Consequently, the Court set aside the Tribunal’s order concerning the Indore notice and remitted the matter. It also set aside the determinations on the other valuation issues so that all three specified issues could be reconsidered in accordance with law. [5][6]

The Tribunal was required to record a separate finding on limitation concerning the Malanpur notice after considering all relevant facts, with all contentions left open. Finalisation of the Bombay assessment was deferred until after the Tribunal decided the three Malanpur valuation issues. [3][7]

Holding and Implications

The principal appeals were DISPOSED OF WITH REMAND DIRECTIONS. The finding that the Bombay show-cause notice was premature was preserved; the related-person finding and the Tribunal’s determinations on the remitted issues were set aside. [2][4][5][6][11]

The Tribunal must reconsider the three valuation issues and separately determine limitation. The jurisdictional officer at Bombay must finalise the assessment only after those valuation issues are decided. [6][3][7]

All penalties levied in the impugned order were SET ASIDE, with penalties to be reconsidered by the Tribunal when passing its fresh order. Given the prolonged litigation, the Court requested an expeditious decision, preferably within six months. [8]

Civil Appeals Nos. 3761-62 of 2002 were separately ALLOWED, and the penalty was set aside by agreement of counsel. [9][10]

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Godrej Industries Limited And Another (Formerly Known As Godrej Soaps Limited) v. Commissioner Of Central Excise, Mumbai And Another

Order

1. The assessee was served with two show-cause notices, one by the Commissioner (Bombay) and the other by the Commissioner (Indore).

2. Learned counsel appearing for the parties jointly pray that the impugned order of the Customs, Excise and Gold (Control) Appellate Tribunal, West Regional Bench at Mumbai (for short “the Tribunal”) be set aside except insofar as it holds that the Bombay show-cause notice is premature because the assessment in Bombay is provisional and therefore, the same be sustained. They also state that as the assessment in Bombay is provisional, the question of penalty does not arise. We order accordingly.

3. The Tribunal in its impugned order has exceeded its jurisdiction by recording a finding to the effect that Godrej Soap Ltd. (GSL) is a “related person” vis-à-vis Procter & Gamble Godrej Ltd. (PGG) which is beyond the scope of the show-cause notice. We ourselves have gone through the show-cause notice and we are satisfied that the finding recorded by the Tribunal insofar as it relates to a “related person” is beyond the scope of show-cause notice and therefore, the same cannot be sustained and is accordingly set aside.

4. Insofar as show-cause notice issued by the Commissioner (Indore) is concerned, the appeals are allowed and the order of the Tribunal is set aside and the matter is remitted to the Tribunal as the finding of the Tribunal that the advertisement charges incurred by PGG can be loaded to the assessable value of the soaps manufactured by GSL is based on grounds not taken in the show-cause notice, namely, that GSL and PGG are related persons.

5. In view of the same, the order of the Tribunal on other issues are also set aside and the Tribunal is directed to decide afresh on three issues, in accordance with law, namely, (a) advertisement charges incurred by PGG; (b) amounts paid under the non-competition agreement; and (c) amounts paid by PGG to Godrej & Boyce for the trade marks can be loaded on to the assessable value.

6. The question of limitation regarding the show-cause notice issued by the Commissioner (Indore) related to Malanpur factory shall be decided by the Tribunal by recording a separate finding after considering all the relevant facts. All contentions are left open to both the parties.

7. Insofar as the Bombay show-cause notice is concerned, the case is remitted to the jurisdictional officer for finalising the assessment, as held by the Tribunal. The finalisation of the assessment by the jurisdictional officer at Bombay shall take place after the decision of the Tribunal on the aforesaid three issues relating to Malanpur.

8. As the litigation in the present case is going on for the last so many years, we would request the Tribunal to decide the matter as expeditiously as possible, preferably within a period of six months from today. All penalties levied in the impugned order are also set aside and the same shall be decided by the Tribunal at the time of passing a fresh order.

9. The appeals are disposed of in the above terms.

Civil Appeals Nos. 3761-62 of 2002

10. Learned counsel for the parties are agreed that these appeals be allowed and the penalty be set aside. We order accordingly.

Godrej Industries Li... v. Commissioner Of Cent...