Customs, Excise and Gold Tribunal - Delhi
Goodyear India Ltd. vs Collector Of Central Excise on 28 January, 1998
Equivalent citations: 1998(59)ECC637, 1999(112)ELT617(TRI-DEL)
ORDER
U.L. Bhat, J. (President)
1. This appeal is directed against the Order-in-Appeal No. 252/89, dated 30-11-1989 passed by the Collector of Central Excise (Appeals), Calcutta confirming Order-in-Original No. 1/89, dated 10-4-1989 passed by the Assistant Collector of Central Excise, Chandernagore, holding the appellant to be the manufacturer of V Beltings produced in the premises of M/s. Dunlop India Ltd. (for short, DIL). It was held consequently that the appellant shall pay duty on the assessable value determined on the basis of retail price charged by the appellant to independent buyers at the point of their several sale depots less trade discount.
2. There are certain facts admitted in the case. The brand name "Goodyear" belongs to appellant. Manufacture was at the premises of DIL under the terms of agreement entered into between the appellant and DIL. DIL was conforming to the central excise procedures and paying Central Excise duty on assessable value determined on the basis of the price agreed between the appellant and DIL. Appellant was not conforming to Central Excise procedure's and was not paying duty. Construing the provisions of the agreement and the admitted facts, the lower authorities held that the appellant was engaged in the manufacture of V Beltings on their own account in the premises of DIL as contemplated in the inclusive definition of "manufacture" under Section 2(f) of the Central Excises Act, 1944.
3. It is brought to our notice that in respect of the goods manufactured by Serampore Belting Works Ltd., also manufacturing V Beltings under the agreement with the appellant, the Calcutta High Court in the decision reported in 1990 (45) E.L.T. 546 (Cal.) held that the appellant cannot be regarded as the manufacturer of the goods and duty was liable to be paid on the prices charged by Serampore Belting Works Ltd. to the appellant.
4. In the decisions in Sidhosons, 1986 (26) E.L.T 881 (S.C.) and Hind Lamp Ltd. -1989 (43) E.L.T. 161 (S.C.), the Supreme Court held, in more or less similar circumstances., that duty was to be paid on the assessable value determined on the basis of the prices charged by the actual manufacturer to the buyer. In Remington Rand of India, 1993 (63) E.L.T. 685 (Tribunal), it was held that Remington Rand, the brand name owner of typewriter ribbons, manufactured by another person using the brand name cannot be regarded as the manufacturer.
5. In Cihittil Limited, 1985 (22) E.L.T. 302 (S.C.), respondent had entered into an agreement with Ciba Geigy of India Ltd. under which certain specified products were to be manufactured by the respondent in accordance with the manufacturing programme drawn up jointly and in accordance with the restrictions and specifications constituting the buyer's standard and to be supplied to the respondent at agreed prices. The buyer was entitled to test sample of each batch of the goods and the goods were to be released only after approval of the sample. The brand name used was "Ciba Geigy Basle" under the terms of tripartite agreement permitting the appellant to affix the trade mark on the products covered by the agreement. Where the buyer rejects the goods on non-approval, the goods were to be reprocessed to bring them upto the requisite quality, or if that was not possible, the goods were to be sold to the buyer for a different purpose if compatible with the specifications of some other products or the goods were to be sold to others in the market as substandard goods at a lower price and if that was not feasible, the goods were to be destroyed. The buyer was not obliged to purchase the goods irrespective of quality. The Supreme Court held that the respondent cannot be said to be the manufacturer of the goods on behalf of the buyer. Referring to the trademark aspect, the court held that the trade mark of the buyer was to be affixed only on those goods which were found to conform to the specifications or standard stipulated by the buyer, that goods not approved could not bear the trade mark and were to be disposed without the advantage of tradeinark. The respondent owned the plant, machinery, raw material and labour and manufactured the goods affixing the trademarks under the agreement. In these circumstances, the goods were to be regarded as being manufactured by the respondent and not on behalf of the buyer. The court upheld the view taken by the High Court that the wholesale price of goods manufactured by the respondent was the wholesale price at which the respondent sold the goods to the buyer and not the wholesale price at which the buyer sold the goods to independent dealers.
6. The circumstances pointed out in this case are more or less similar to the circumstances dealt with in Cibatul Ltd. -1985 (22) E.L.T. 302 (S.C.). Production by DIL is carried on under the agreement with the appellant. DIL has its own factory, plant, machinery, labour, expertise, raw materials and other elements necessary for the purpose of manufacture and manufactures the goods under the agreement with the appellant and sells the goods to the appellant at agreed prices. Appellant is not obliged to buy goods irrespective of the quality and is obliged to buy only those goods which specify their specifications and quality. Price was to be fixed on the basis of the cost of manufacture plus specified percentages. The goods which are so defective as to be unsalable as first class but which are suitable for sale as "seconds" are to be purchased by the buyer up to a maximum of 1% of the total of each product during any quarterly period. It is open to the buyer to purchase upto 5%. The price would be equal to the cost of manufacture without the addition of the specified percentage as in the case of goods of first class. Any product except the seconds supplied to the buyer and which are defective in workmanship or materials and is not in accordance with the specifications may, within six months from the date of the manufacture, be returned to DIL and the buyer shall be credited therefor at the current price on the date of return and the manufacturer may dispose of such products as seconds subject to the conditions agreed to. This would mean that DIL bears the risk of the defective goods by getting less price for such goods. The terms and conditions of the agreement between the parties are similar to the terms of the agreement in Cibatul Ltd. case.
7. In these circumstances, we have to hold that the appellant cannot be regarded as the person who engages in production on its own account through DIL. In this view, the appellant cannot be treated as the manufacturer and the demand must fail. Accordingly, the impugned orders are set aside and the appeal is allowed.