COMMNR. OF CENTRAL EXCISE, HYDERABAD vs. M/S. DETERGENTS INDIA LTD.

REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NOS.9049-9051 OF 2003 COMMISSIONER OF CENTRAL EXCISE, HYDERABAD …APPELLANT VERSUS M/S. DETERGENTS INDIA LTD. & ANR. ...RESPONDENTS WITH CIVIL APPEAL NOS.4645-4646 OF 2004 CIVIL APPEAL NOS.6166-6168 OF 2004 CIVIL APPEAL NO.7495 OF 2004 JUDGMENT J U D G M E N T R.F. Nariman, J. 1. These four sets of appeals relate to the correct construction of Section 4(1)(a) proviso (iii) and Section 4(4)(c) of the Central Excise and Salt Act as they stood prior to the 2000 amendment of Section 4. In short, these appeals deal 1 Page 1 with the definition of “related person” and the price at which valuation is to take place if sales are made to “related persons” in the course of wholesale trade.

India Limited, is the same in all the appeals, which arise out of different show cause notices for periods ranging from 1.3.1992 to September 1997. Detergents India Limited later changed its name to Henkel Marketing India Limited. 3. The facts of Civil Appeal Nos.9049-9051 of 2003 are as follows: A show cause notice dated 8.12.1995 was issued demanding an amount of Rs.3,21,450/- for the period 20.7.1995 to 30.7.1995. The demand made under this notice was JUDGMENT dropped vide order dated 11.3.1997 by the Deputy Commissioner, Hyderabad. An appeal against this order was dismissed by the Commissioner (Appeals), Hyderabad, by an order dated 5.1.2000. The appeal filed before CEGAT was also dismissed by the impugned judgment dated 22.4.2003. 2 Page 2 4. By a separate show cause notice dated 26.3.1997 for the period 1.3.1992 to 31.3.1995, the Commissioner by an order dated 31.8.1999 confirmed a demand of Rs.1,12,42,499/- and

further ordered redemption of the same in lieu of confiscation on payment of a fine of Rs.5,00,000/-. Penalties of Rs.5,00,000/- each were imposed on the assessee, namely, DIL and on its holding company Shaw Wallace Company Limited. An appeal was filed against the order dated 31.8.1999 by the assessee and by its holding company Shaw Wallace. Three judgments were delivered by CEGAT in the aforesaid appeals. The learned Technical Member on a consideration of the facts came to the conclusion that during search operations JUDGMENT goods from the subsidiary company were cleared from the factory premises to the depot of Shaw Wallace at a much lower price as compared to the price at which these goods were sold by the assessee in the market to wholesale purchaser Hindustan Lever and another. The Technical Member, therefore, remanded the matter for a proper adjudication on facts. The Legal Member, on the other hand, found in favour of 3 Page 3 the assessee finding that the issue in the present appeals was covered by the judgment of Union of India v. Atic, (1984) 3 SCC 575 and Raliwolf Limited v. Union of India, 59 ELT 220

the members, the points of difference were placed before a third Member, who then decided in favour of the assessee in the following terms: “6. Having thoroughly compared the facts of the present case with that of the above case, I am of the view that the ratio of the Apex Court’s decision can squarely be followed in the instant case. Accordingly, it has to be held that the price at which the goods were sold by DIL to SWCL should be the basis for determination of the assessable value of the goods, and not the price charged by the latter to their dealers. SWCL cannot be said to be “related” to DIL within the meaning of this expression as used in Section 4(1)(a) as no “mutuality of interest” between the two companies has been established in this case. None of the “commonalities” suggested by the Ld. SDR in his bid to set up a “relation” between the two companies would, individually or collectively, amount to “mutuality of interest” expounded by the Apex Court. The decisions cited by him are easily distinguishable. On the other hand, the decisions cited by the counsel are largely supportive of the assessee’s stand in this case. I do not think it necessary to elaborate this aspect as a detailed discussion has already been made in this behalf by Ld. Member (J). I am in full agreement with him on the issue. JUDGMENT 4 Page 4

8. In the result, the appeals filed by DIL and SWCL have to be allowed and the Revenue’s appeal to be rejected.” It is this impugned judgment that has merely been followed in the other appeals. 5. The facts further show that Detergents India Limited, now Henkel Marketing India Limited, was at the relevant time a JUDGMENT subsidiary of Shaw Wallace and Company Limited. Both were public limited companies. Shaw Wallace’s subsidiary companies held 57% of the paid up share capital of Detergents India Limited, making Detergents India Limited a subsidiary of Shaw Wallace as understood by the definition of “holding company” and “subsidiary company” contained in the 5 Page 5 Companies Act, 1956. 90% of the manufacturing capacity of Detergents India Limited was to manufacture various products for Hindustan Lever Limited which were then branded with

was paid by Hindustan Lever Limited for this job work, and it is clear that different processing charges were paid depending upon the size of the product and the product itself. The excess 10% capacity which was not mopped up by Hindustan Lever was sold to Shaw Wallace, its holding Company. Various other manufacturers/sellers also sold the same and similar products to Shaw Wallace and Company. A large number of these manufacturers were not subsidiary companies of Shaw Wallace and indeed had no business relationship with Shaw Wallace JUDGMENT other than the sale of these products. It was pleaded as a fact that the price paid by Shaw Wallace and Company for the purchase of the same/similar products from the other firms/companies was less than the price paid to Detergents India Limited. This can be found as a fact in the Commissioner’s order dated 7.11.2000 in Civil Appeal 6 Page 6 Nos.6166-6168 of 2004 in which the following fact was pleaded before the learned Commissioner:-

JUDGMENT 6. It was also pleaded that processing charges of different products were different. This is to be found in the very show cause notice dated 26.3.1997 with which we are concerned as follows:- “3.6 File bearing Nos. 45 and 71 seized from the factory at Kodur on 16.5.1995 were shown to him and he was asked to explain in detail about the 7 Page 7

JUDGMENT 8 Page 8 there was no mention about the size of the detergent cake or powder.” It is on these facts that the present appeals have to be decided.

there can be no doubt, in view of a number of factors, that Shaw Wallace and DIL are related persons within the meaning of Section 4(4)(c) of the Act and stated that some of these factors are that advertisement expenses of DIL brands had been borne by the holding Company Shaw Wallace; processing charges paid by Shaw Wallace to DIL is less than processing charges paid to Hindustan Lever; employees of Shaw Wallace and its subsidiaries were freely transferred from one company to another; depots of Shaw Wallace and DIL were in the same JUDGMENT premises; DIL sends monthly newsletters to Shaw Wallace showing production, despatches, purpose, technical problems, quality problems, details of power consumption etc. - and Shaw Wallace fixes the price of DIL products; and unsecured loans of approximately Rs.55 lakhs were given by Shaw Wallace to its subsidiary DIL. It is argued that all these facts would show that Shaw Wallace and DIL were related persons and that the price 9 Page 9 paid by Shaw Wallace to DIL was a depressed price and would, therefore fall within proviso (iii) of Section 4(1)(a) as it stood prior to 2000. Learned counsel for the Revenue also argued

relationship, the definition of “related person” under Section 4(4)(c) gets attracted and proviso (iii) to Section 4(1)(a) in turn gets attracted and therefore it is the price at which Shaw Wallace and Company sells the self same goods to its customers that is the price that is to be taken into account on the facts of the present case. 8. Shri Lakshmikumaran, learned counsel for the appellants has argued that even though Shaw Wallace and DIL may be holding and subsidiary companies, yet on a true construction of JUDGMENT Section 4(4)(c) they are not related persons within the meaning of the definition clause. Further, he argued that on a true construction of proviso (iii) to Section 4(1)(a), it is necessary that the assessee must first enter into an arrangement with the related person, which arrangement leads to a price being charged which is lower than the normal price. Further, the proviso only gets attracted when such arrangement is 10 Page 10 predominantly a sale to or through a related person. According to him, on the facts of the present case, there is no arrangement between Shaw Wallace and DIL which has led to

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10. Proviso (iii) then deals with the price that is to be taken JUDGMENT into consideration in case sales are made to related persons. Three basic ingredients are necessary before proviso (iii) gets attracted. The first ingredient is that the assessee must “arrange” that goods are sold by him in a particular manner. The second ingredient is that such arrangement must be such that the goods are “generally” sold by the assessee in the course of wholesale trade to or through a related person. And 15 Page 15 thirdly, such sale need not be to the related person – it can even be through the related person.

related person “arrange” that the goods are sold at something below the normal price, so that tax is either avoided or evaded by such arrangement. Secondly, the expression “generally” also shows that such goods must predominantly be sold by the assessee to or through the related person – in mathematical terms, sales that are to or through a related person must consist of at least 50% of the goods that are manufactured and sold. The expression “to or through a related person” again goes back to the “arrangement” and is another way of saying JUDGMENT that such sale can be effected directly to or indirectly through such related person. It is only when all three considerations are cumulatively met that proviso (iii) can be said to be attracted. 12. When we come to the definition of “related person” the legislature has used a well known technique. It first employs the expression “means” and states that persons who are associated with the assessee so that they have a direct or 16 Page 16 indirect interest in the business of each other would get covered. The definition then goes on to use the expression “and includes” thereby indicating that the legislature intends to

not otherwise have so been included. These include a holding company, a subsidiary company, a relative and a distributor of the assessee and any sub-distributor of such distributor. The necessity for including holding and subsidiary companies as defined under the Companies Act, 1956 is to lift the corporate veil in order to get to the economic realities of the transaction. 13. Now to the case law. In Union of India v. Bombay Tyre International Ltd. , (1984) 1 SCC 467, Section 4 as amended by the 1973 Amendment Act was challenged before this Court. JUDGMENT This Court repelled the challenge. It held that even under Section 4 prior to the 1973 Amendment, the wholesale cash price would consist of a sale by a manufacturer in the course of wholesale trade to a wholesale dealer, which sale would have to be at arm’s length and in the usual course of business. The court held: 17 Page 17

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14. These observations have a vital bearing on the construction of Section 4(1)(a). Section 4, before the JUDGMENT amendment of 1973, did not contain the expression “where the buyer is not a related person and the price is the sole consideration for the sale”. The pre-amended Section 4 was understood in Voltas’s case by this Court to mean that the wholesale cash price can only be ascertained on the basis of arm’s length transactions. If there is a special or favoured buyer like a relative of the manufacturer to whom a specially low price 19 Page 19 is charged because of extra commercial considerations, such price cannot be the price referred to in Section 4(1)(a). Taking a cue from the fact that the post-amendment Section 4 makes

length transactions are concerned, it is clear that where the price is the sole consideration for the sale and is not a specially low price because of extra commercial considerations, even where a buyer is a related person, the normal price mentioned in Section 4(1)(a) post the 1973 amendment would apply. Read in accordance with the object of the pre-amended Section 4 as explained in Voltas’s case it is clear that the expression “where the buyer is not a related person and the price is the sole consideration for the sale” is to be read conjunctively as JUDGMENT meaning that because the buyer is a related person, the price usually ceases to be the sole consideration for the sale. This merely raises a rebuttable presumption. Once the presumption is rebutted and it is shown that even in the case of a buyer who is a related person, the price is the sole consideration for the sale and is not a specially low price because of extra commercial considerations, such price would fall within Section 20 Page 20 4(1)(a) as the price of the taxable goods to be taken into consideration for arriving at “normal price”. Of course, where the three pre-requisites for the application of proviso (iii) to

so that it is not necessary thereafter to go to any other facts. 15. On a reading of the aforesaid judgment, it becomes clear that the object of enacting Section 4 is that transactions at arm’s length between manufacturer and wholesale purchaser which yield the price which is the sole consideration for the sale alone is contemplated. Any concessional or manipulative considerations which depress price below the normal price are, therefore, not to be taken into consideration. Judged at from this premise, it is clear that arrangements with related persons JUDGMENT which yield a price below the normal price because of concessional or manipulative considerations cannot ever be equated to normal price. But at the same time, it must be remembered that absent concessional or manipulative considerations, where a sale is between a manufacturer and a related person in the course of wholesale trade, the transaction being a transaction where it is proved by evidence that price is 21 Page 21 the sole consideration for the sale, then such price must form the basis for valuation as the “normal price” of the goods. A literal reading of the Section would otherwise lead to an

related persons as well as arm’s length purchasers (who are unrelated) for the same goods, in the case of the former the higher price paid by purchasers from the related person would be the price on which excise duty would be calculated which would be more than the “normal price” under Section 4(1)(a). Such a result is not contemplated by the amended Section 4(1) (a), which must therefore be read in the manner indicated above. 16. So far as “related persons” are concerned, the Court in JUDGMENT the Bombay Tyre International Limited case stated: “43. Learned counsel for the assessees contends that the provisions regarding related persons are wholly unnecessary because to counteract evasion or avoidance any artificially arranged price between the manufacturer and his wholesale buyer can be rejected in any case under Section 4, and we are referred to the observations of this Court in Voltas Limited [(1973) 3 SCC 503 : 1973 SCC (Tax) 261 : AIR 1973 SC 225 : (1973) 2 SCR 1089] and Atic Industries Ltd. [(1975) 1 SCC 499 : 1975 SCC (Tax) 135 : AIR 1975 SC 960 : (1975) 3 SCR 563] It is 22 Page 22

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25 Page 25 where the companies shared the relationship of a holding company and a subsidiary company, and to Juggi Lal Kamlapat v. C.I.T. [AIR 1969 SC 932 : (1969) 1 SCR 988 : (1969) 73 ITR 702] where this Court held that the veil of corporate entity could be lifted to pay regard to the economic realities behind the legal facade, for example, where the corporate entity was used for tax evasion or to circumvent tax obligation.” 17. On a reading of the aforesaid paragraphs, it is clear that proviso (iii) would be referable only to tainted transactions. Only such cases would raise an irrebuttable presumption which will then be governed by the said proviso. It is also interesting to note that the definition of “related person” was read down by this Court to make the distributor covered by it to be a relative of the assessee. When “holding company” and “subsidiary company” was spoken of, the Court held again that the idea of JUDGMENT including these two types of companies within the definition of related person is only so that the corporate veil of such companies can be lifted so that economic realities behind the legal façade can be looked at so that tax is not evaded or avoided. 26 Page 26 18. Some other decisions may be taken note of at this stage. In Flash Laboratories Limited v. Collector of Central Excise, New Delhi, (2003) 2 SCC 86, the appellant was a subsidiary

Limited is also a subsidiary company of M/s Parle Products Limited. What was in question in that case was the relationship between two subsidiary companies. It is clear that the relationship between a subsidiary company and another subsidiary company would not be governed by the second part of Section 4(4)(c). In order that the second part of Section 4(4) (c) be attracted, it must be shown that the related person must either be a holding company or a subsidiary company of the assessee. In the facts of that case, the related person, namely, JUDGMENT M/s Parle Biscuits Limited was neither a holding company nor a subsidiary company of the assessee i.e. M/s Flash Laboratories Limited. This being the case, this Court held:

27 Page 27 and Messrs Parle Biscuits Limited, though indirect, they have mutual interest in the business of each other. The facts and circumstances of the case show that there is mutuality of interest between the three companies as sixty per cent of the products of the appellant are sold to Messrs Parle Products Limited and the remaining forty per cent of the total product of toothpaste is being sold to Messrs Parle Biscuits Limited. Moreover, Messrs Parle Products Limited are incurring the expenses for sales promotion and advertisement for the sale of the appellant's product, namely, “Prudent toothpaste”.” This judgment, therefore, is an authority only for the application of the first part of Section 4(4)(c). It is in this context that the Court held in paragraph 5 that there must be mutuality of interest between two persons who are both subsidiaries of a particular holding company. 19. In Commissioner of Central Excise Bombay v. JUDGMENT Universal Luggage Manufacturing Company Limited , (2005)190 ELT 3, this Court found as a matter of fact that the assessee (holding company) was selling its products through its wholly owned subsidiary at the same price at which it was selling the same goods to other buyers at arm’s length, in which the subsidiary company had no role to play. This being the case, this Court agreed with the Tribunal that the price at which 28 Page 28 sales have been effected through the subsidiary, not being a depressed price, would be the price that would be taken into consideration for valuation under Section 4(1)(a).

2006(193) ELT 16, this Court in a short two paragraph order held: “1. Assuming that the assessee was related to its subsidiary company i.e. M/s Best & Crompton Ltd. (BCL), this by itself would not be sufficient for the purpose of invoking the Central Excise (Valuation) Rules, 1975 read with Section 4(1)( a ) of the Central Excise Act, 1944. The Department would have to go further and show that the relationship has introduced an element other than purely commercial consideration in effecting the sale by the assessee to BCL. No such evidence has been produced by the Revenue. 2. In the circumstances, the appeal is dismissed.” JUDGMENT 21. In Commissioner Central Excise, New Delhi v. India Thervit Corporation, Ltd., (2008) 17 SCC 374, ATL a subsidiary of ITCL, sold all goods manufactured by it to ITCL. Despite the fact that on facts ATL and ITCL may be taken to be related persons, (though this Court did not hold so), since there is no under valuation as the price paid by the Railways (an 29 Page 29 arm’s length purchaser) was the same as the price paid by ITCL, the price paid by the holding company to its subsidiary was taken to be a price on which excise duty would be calculated. 22. Since the Tribunal in the judgment under appeal has referred to and relied upon Raliwolf v. UOI, 59 ELT 220 Bombay (1992), we must refer to the same. The Bombay High Court in that judgment construed Section 4(4)(c) as follows: “31. We are not inclined to accept the contention of the Department as submitted by Mr. Sethna, the learned counsel appearing for the respondents for the following reasons :- (a) that Section 4(4)(c) is a defining section of the expression "related person" and the said section must be read and seen in the context of third proviso to Section 4(1)(a). If one, therefore, reads the entire section, it is clear that three conditions are required to be satisfied before invoking the third proviso : JUDGMENT Firstly, there should be mutuality of interest. Secondly, the price charged should not be normal price but the price lower to the normal price, and that extra-commercial considerations have reduced the normal price. Thirdly, the alleged related person should be related to the assessed as defined in Section 4(4)(c) of the said Act. It is only if the above three conditions are 30 Page 30 satisfied, then alone it can be said that the third proviso to Section 4(1)(a) is applicable.

JUDGMENT 23. We find it difficult to agree with some of the conclusions reached in the aforesaid paragraph. As has been stated by us above, “means” “and includes” is a legislative device by which 31 Page 31 the “includes” part brings by way of extension various persons, categories, or things which would not otherwise have been included in the “means” part. If this is so, obviously both parts

relatable only to the subject that is to be defined and takes within its sweep persons, objects, or things which are not included in the first part. We have already pointed out that the reason for including holding and subsidiary companies in the “includes” part is so that the authorities may look behind the corporate veil. To say that the holding and subsidiary companies must in addition have a mutual interest in the business of each other is wholly incorrect. Further, the word “and” which joins the two parts of the definition is not rendered JUDGMENT meaningless. It is necessary because it precedes the word “includes” and brings in to the definition clause persons, objects, or things that would not otherwise be included within the “means” part. 24. The High Court is also wrong in saying that its view is supported by the judgment of this Court in Union of India v. Atic Industries Ltd., (1984) 3 SCC 575. On facts, Atic’s case 32 Page 32 did not deal with holding and subsidiary companies. Atul Products Limited held 50% of the share capital of Atic Industries which would not enable Atul products to be called the

“5. The second ground on which the assessee assailed the validity of the demand made by the Assistant Collector for differential duty related to the applicability of the definition of “related person” in clause ( c ) of sub-section (4) of Section 4 of the amended Act. The Assistant Collector took the view that the assessee on the one hand and Atul Products Limited and Crescent Dyes and Chemicals Limited on the other were related persons within the meaning of the first part of the definition of the term “related person” and the assessable value of the dyes manufactured by the assessee for the purpose of excise duty was, therefore, liable to be determined with reference to the price at which the dyes were ordinarily sold by Atul Products Limited and Crescent Dyes and Chemicals Limited. This view taken by the Assistant Collector was set aside by the High Court on the ground that the assessee on the one hand and Atul Products Limited and Crescent Dyes and Chemicals Limited on the other were not ‘related persons’ and the wholesale cash price charged by the assessee to Atul Products Limited and Crescent Dyes and Chemicals Limited and not the price at which the latter sold the dyes to the dealers or the consumers, represented the true measure of the value of the dyes for the purpose of chargeability to excise duty. This conclusion reached by the High Court was assailed before us by the learned Attorney-General appearing on behalf of the Revenue. He fairly conceded that the only part of the definition of “related person” in JUDGMENT 33 Page 33 clause ( c ) of sub-section (4) of Section 4 on which he could rely was the first part which defines “related person” to mean “a person who is so associated with the assessee that they have interest directly or indirectly in the business of each other”. The second part of the definition which adds an inclusive clause was admittedly not applicable, because neither Atul Products Limited nor Crescent Dyes and Chemicals Limited was a holding company or a subsidiary company nor was either of them a relative of the assessee, so as to fall within the second part of the definition.” 25. It is clear therefore that the Bombay High Court judgment does not lay down the law correctly insofar as the correct construction of Section 4(4)(c) of the Act is concerned. 26. Section 4(4)(c) is in two parts. The first part requires the department to apply a de facto test, whereas the second part requires the application of a de jure test. “Relative” in the JUDGMENT Companies Act, 1956 is defined as follows:- “6. Meaning of “relative” .—A person shall be deemed to be a relative of another if, and only if,— ( a ) they are members of a Hindu undivided family; or ( b ) they are husband and wife; or ( c ) the one is related to the other in the manner indicated in Schedule I-A.” “Schedule I-A. 34 Page 34

A reading of the definition of “relative” would show that the relative need not be a person who is so associated with the 35 Page 35 assessee that they have mutual interest in each other’s businesses. If that were the case, the expression “relative” in the second part would be otiose inasmuch as a relative would

would also be “persons” who are so associated with the assessee that they have a mutual interest in each other’s businesses. The legislature by application of a de jure test has extended the meaning of “related persons” to include the entire list of relatives per se without more as related persons. Similarly, holding companies and subsidiary companies by virtue of the exercise of control by a holding company over a subsidiary company are similarly included by application of a de jure test. JUDGMENT 27. We have indicated that the assessee argued that the price paid by Shaw Wallace and Company for the same/similar products as was sold by unrelated entities to it was even lower than the price paid by Shaw Wallace to Detergents India Ltd. This being the case, it is clear that on facts here there is no “arrangement” between Shaw Wallace and Detergents India Limited to depress a price which is otherwise at arm’s length. 36 Page 36 Though this fact is pleaded expressly before the Commissioner as pointed out above, the Commissioner’s order does not contain any finding based on this fact. On the other hand, there

India Limited are related persons because of a multitude of factors pointed out in the Commissioner’s order. 28. That Shaw Wallace and Detergents India Limited are “related persons” is made out by their holding/subsidiary relationship. However, from this, it does not follow that there is any arrangement of tax avoidance or tax evasion on the facts of this case. This being the case, proviso (iii) to Section 4(1)(a) would not be applicable. Further, it would also not be applicable for the reason that there is no predominance of sales JUDGMENT by Detergents India Limited to Shaw Wallace. As has been pointed out above, only 10% of its manufacturing capacity has been sold to Shaw Wallace, 90% being sold to Hindustan Lever Limited. For this reason also, proviso (iii) does not get attracted. This being the case, on facts here Section 4(1)(a) and not proviso (iii) is attracted inasmuch as on facts the presumption of a transaction not being at arm’s length has been 37 Page 37 rebutted. Revenue’s comparison of price paid by Hindustan Lever to DIL with price paid by Shaw Wallace to DIL is unwarranted as the products sold and processing charges are

goes. Further, the single most relevant fact, namely, that Shaw Wallace paid for the same/similar goods to unrelated suppliers at a price lower than the price paid by Shaw Wallace to DIL, has not been adverted to at all by the Commissioner. 29. Mr. Bagaria, learned counsel appearing on behalf of Shaw Wallace, is aggrieved by penalties levied upon Shaw Wallace by the orders of the Commissioner. These penalties have been set aside by CEGAT. He pointed out to us that the ingredients necessary to attract Rule 209A were not mentioned JUDGMENT in any show cause notice against Shaw Wallace and that the Commissioner’s finding as a result thereof would have to be held to be beyond the show cause notice. He cited a number of judgments in support of this proposition. In view of the judgment delivered by us on merits, we do not think it necessary to go into the contention raised by Shri Bagaria. Suffice it to say that we are dismissing Revenue’s appeals. CEGAT’s judgment 38 Page 38 itself set aside all penalties imposed on Shaw Wallace as well as DIL. That part of CEGAT’s judgment will remain undisturbed.

accordingly dismissed. There shall be no order as to costs. …...…………………...J. (A.K. Sikri) ………………………...J. (R.F. Nariman) New Delhi, April 8, 2015 JUDGMENT 39 Page 39