Bombay High Court
Batliboi & Co. Pvt. Ltd. vs Union Of India And Others on 1 January, 1800
Equivalent citations: 1980CENCUS425D, 1980(6)ELT1(BOM)
ORDER
1. The Petitioners are carrying on business as manufacturers and sellers of diverse machine tools machinery and other items. The Petitioners have factory situate at Udha in Surat District in the State of Gujarat, where the Petitioners manufacture machinery tools. The Petitioners as a part of their business placed its orders with several individual manufacturers under which such individual manufacturers manufacture certain products and sold the same to the petitioners. The petitioners have entered into agreement with M/s. Hindustan Koloener Switchgear Ltd. on Feb. 13, 1973, with M/s. Precision Industries on September 20, 1973 and with Harhari Engineering Works on January, 21, 1974. By these agreements the individual manufacturers supplied the products like starters and electric motors to the petitioners. These agreements provided that after the manufacture of the goods the said individual manufacturers would affix the labels of the trade name of the petitioners 'Batliboi' to the articles. The Petitioners have produced on record the agreements and so also the specimen of labels used by these individual manufacturers.
2. The Petitioners complain that by letter dated July 20, 1974 addressed by the Superintendent, Central Excise, Hange Thana, the Petitioners were called upon to fill in a specimen form of A.L IV for the purpose of making an application for central excise licence. The Petitioners were called upon by this letter to make such an application as the Superintendent Excise felt that the individual Manufacturers like M/s. Precision Industries are manufacturing the electrical motors in their factory and are affixing the name plates on those motors with the printed name of the Petitioners. This letter further stated that these motors are supplied to the petitioners as per the contract. The further contents of the letter are required to be quoted in exact words:-
"These motors are supplied to you as per contract. So far as the orders stand any brand name owner is considered as a manufacturer."
3. The Petitioners' grievance is that the action of the Superintendent, Central Excise, treating the Petitioners as manufacturers solely on the ground that their brand name is affixed to the product by the manufacturers, is entirely illegal and erroneous. The Petitioners have filed the present petition to challenge the legality of the action of the Superintendent, Central Excise, by serving this letter dated July 20, 1974.
4. Mr. Joshi the learned counsel appearing for the Petitioners contended that the Superintendent, Central Excise, by treating the petitioners as manufacturers, has extended the scope of definition of 'manufacturers' as given in Section 2(f) of the Central Excises and Salt Act, 1944 (hereinafter referred to as the said Act). Mr. Joshi submitted that the action of the Superintendent in assuming that the petitioners were manufactures only because their brand name is affixed to the products manufactured by M/s. Precision Industries is entirely illegal and unjust. I find merit in this submission of the learned counsel. In support of his submission, Mr. Joshi relied upon two decisions one of the Gujarat High Court in 1978 Excise Law Times, page (J 68) Cibatul Ltd. vs. Union of India and others and the decision of the Patna High Court in 1978 Excise Law Times in the case of Bata India Ltd. vs. The Assistant Collector of central Excise, Patna page, (J 211). These two decisions undoubtedly support the contention raised by the learned counsel. In these two cases the question which was considered by the Gujarat and Patna High Court respectively was whether by terms of agreement between the individual manufacturers and Petitioners, who were termed as sellers and buyers, it is possible to hold that the buyer was manufacturer only because brand name of manufacturer was affixed to the goods. While considering this question the Gujarat and Patna High Court did come to a conclusion that the fixation of the brand names of purchasers by the manufacturers of the goods would not enable the excise authorities to treat the purchaser as manufacturer.
5. On behalf of the respondents return has been filed sworn by Mr. V. H. Desai, the Assistant Collector of Central Excise on November 10, 1976. In this affidavit it is inter alia contended that the items of the agreement between the petitioners and the individual manufacturers would lead to an inference that the Petitioners are the real manufacturers of the products. I need not express any opinion on the merits of this contention as I find that the letter dated July 20, 1974 annexed as Ex. A, to the Petition, do not refer to any such material or facts. The letter dated July 20, 1974 was issued solely on the basis that the petitioners were considered as manufacturers because their brand name was affixed to the manufactured goods. It is impossible to sustain this finding of the Superintending and, in my judgment, the letter issued and annexed at Ex. K was out of clear misconception of the provisions of law. It is not possible to treat the Petitioners as manufacturers under the provisions of section 2(f) of the said Act only on the ground that the Petitioners' brand name is affixed to the goods manufactured by M/s. Precision Industries. I wish to make it clear that it is open for the department to take into consideration other factors including the agreements between the Petitioners and individual manufacturers and then come to a decision whether individual manufacturers are really agents under the control of the Petitioners. But the respondents cannot proceed against the petitioners holding them as the manufacturers only because of use of their brand name. It is required to be stated that use of the brand name is one of the factors which the department may take into consideration to decide whether the petitioners are really the manufacturers. But in any event, that cannot be sole factors holding the petitioners as manufacturers.
6. The Petitioners, therefore, are entitled to succeed in this petition. In the result the petition succeeds and the letter dated July 20, 1974 annexed at Ex. K addressed by the Superintendent, Central Excise, Thana, to the Petitioners is quashed and the Superintendent is restrained from taking any action in pursuance of this letter.
7. In the circumstances of this case, there will be no order as to costs.