Procter amp; Gamble issued show cause for excise duty evasion

MUMBAI, OCT 26: The Directorate of Anti-Evasion, Mumbai unit, of Central Excise department, last week issued a show cause notice to Proct...

MUMBAI, OCT 26: The Directorate of Anti-Evasion, Mumbai unit, of Central Excise department, last week issued a show cause notice to Procter and Gamble India Limited Pamp;G for alleged duty evasion to the tune of Rs 11.52 crore. In the culmination of a year-old investigation against the company, the anti-evasion unit unravelled the whole subterfuge of Pamp;G, manufacturers of popular brand of sanitary napkins, Whisper8217;.

Pamp;G allegedly manufactured sanitary napkins through two contract manufacturers, M/s Modern Hygiene Products P Ltd, Goa MHP and MBS Hygiene P Ltd, Taloja. The latter was a ball/roller bearing manufacturing unit and MHP is merely a shell company, the department has alleged.

Sanitary napkins are an item reserved for manufacture by only small scale units. Investigations by the department revealed that the units were, in fact, shadow companies of the multinational Pamp;G, which were projected as independent SSIs. The financial investments in the units were depressed so as to meet the ceilings imposed by the government on SSIs.

In fact, Pamp;G was controlling the two contract manufacturers by holding 90 per cent stake in these companies through another investment company, M/s Temple Tree Impex and Investment Pvt Ltd, Mumbai. Temple Tree Impex is also controlled by Pamp;G.

In the case of Modern Hygiene, Goa, even the project report for the unit was prepared by Pamp;G. The facade of trade advances and unsecured loans from Pamp;G were used to help MHP Goa to purchase plant and machinery, and inputs including patented inputs and technology. Even the articles and memorandum of association of the unit, drawings, designing of the plant, etc was done by Pamp;G.

According to the department, neither of the contract manufacturers were licensed by Pamp;G to make sanitary napkins. Further, neither of them paid any royalty to Pamp;G, though the product involved the use of patent technology and inputs.

Even daily functions of manufacture and despatch, with their schedules, were controlled by Pamp;G. Common C and F agents were used, and even godown rents and other distribution expenses were borne by Pamp;G. During clearance, the assessable value of the product was deflated since it was supposed to be an SSI, and sold in the market with 300 per cent margins. In documents of MHP, the name of Pamp;G as been meticulously avoided.

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Several documents were collected during the raids on factory premises and residential premises of the companies8217; directors.