- (1.) The period involved in the present appeals for which the purported differential duty is demanded is August, 1996 to May, 1998. It so happened that the Respondent M/s. Gillette Diversified Operations Limited (hereinafter referred to as 'Gillette') entered into an agreement with another company incorporated under the Indian Companies Act and known as M/s. Rialto Enterprises (P) Limited (hereinafter referred to as 'Rialto'). As per the said agreement, an arrangement was agreed to between Gillette and Rialto whereby Rialto was to manufacture electric hair removers and electric dyers for Gillette. Rialto was a Small Scale Industrial unit (SSI unit) and in order to undertake this job, Rialto needed requisite machinery that was leased to it by M/s. Braun India Pvt. Limited (hereinafter referred to as 'Braun'). It is not in dispute that Rialto had been paying excise duty on the goods manufactured and cleared by it which were supplied to Gillette.
(2.) A Show Cause Notice dated 31 -8 -2001 was issued by the Revenue/Appellant to Gillette alleging therein that it had connived with Rialto for evading central excise duty by indulging in undervaluation of the excisable goods. The case set up in the Show Cause Notice was that at the relevant time, manufacturing of electric hair removers and dyers was reserved for SSI unit, hence, Gillette could not have directly manufactured the said goods. Therefore, in connivance with Braun, which is a group company of Gillette and Rialto, it got the same manufactured in the premises of Rialto. It was alleged that Rialto was a shadow/dummy company which was created by Gillette in order to facilitate the aforesaid operations and pay the excise duty at a much lesser rate inasmuch as after getting those goods manufactured from Rialto, Gillette was selling these goods in the market at a much higher rate.
(3.) To buttress the stand taken in the Show Cause Notice that Rialto was a shadow company, following facts were stated in the Show Cause Notice: (i) Machinery worth crores of rupees was supplied by M/s. Braun India Ltd. to M/s. Rialto Enterprises (P) Ltd. on lease. (ii) Machinery imported by M/s. Rialto Enterprises (P) Ltd. was purchased by M/s. Braun India (P) Ltd. (iii) The Respondent provided "interest free advances" to M/s. Rialto Enterprises (P) Ltd. obviously for purchasing raw materials and other expenses incurred in manufacturing. (iv) Employees of the Respondent were posted at the plant of M/s. Rialto Enterprises (P) Ltd. (v) The goods manufactured by M/s. Rialto Enterprises (P) Ltd. were sold to the Respondent at cost price, which were then sold by the Respondent at a much higher price as second sale, thus, evading central excise duty running into crores of rupees.;