TMI Blog1992 (11) TMI 182X X X X Extracts X X X X X X X X Extracts X X X X ..... aggregate value of clearance for the year 1984-85 as less than Rs. 7.5 lakhs. They had filed a price list dated 21-3-1985 in proforma II claiming the assessable value of the above product (15 gms tubes) as Rs. 2.05 per tube on the basis of the sale agreement dated 12-4-1982 executed by them with M/s. Glenmark Pharmaceuticals (P) Ltd. (for short M/s. Glenmark Bombay). As per the terms of this sale agreement, M/s. Glenmark are said to have exclusive right to market candid cream manufactured by the appellants. The agreement is said to contain a clause that the appellants will not market any of its production anywhere in India or abroad without prior permission from the said M/s. Glenmark who have absolute control over the pattern of packing, colouring etc. relating to the sale of the product. The aluminium tube in which the cream is packed and the outer carton bore the monogram of M/s. Glenmark in a conspicuous manner along with their name Glen mark printed in bold red letters under the words marketed in India by . The name of the appellants is said to be printed in smaller print compared to the name of M/s. Glenmark. The tube and the carton did not bear the monogram of the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firm. On the basis of these investigations, it was alleged in the show cause notice dated 12-8-1986 issued by the learned Collector, briefly as follows - (i) The monogram appearing on the container and labels of the candid cream were clearly a trade mark of M/s. Glenmark as also evident from their products, as well as, as can be seen from the letter heads, balance sheets. Therefore, it was inferred and alleged that the product Candid cream is a product of M/s. Glenmark, who got the same manufactured on their behalf from the appellants. (ii) Since M/s. Glenmark were not eligible for the exemption under Notification No. 85/85 by virtue of their turnover being Rs. 3,31,90,759.11 P. the Candid cream is not eligible for exemption under the Notification No. 85/85 as claimed by the appellants in the classification list dated 21-3-1985. (iii) as also on account of the fact that the main raw materials as well as other printing and packing materials were supplied by M/s. Glenmark under their own delivery challans including the supply of weighing machinery. Both M/s. Glenmark and the appellants had common registered office and by phone all the sale and purchases were being controlled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Supreme Court as rendered in the case of Union of India v. Cibatul Ltd. as reported in [1985 (22) E.L.T. 302]. They contended that it is well settled law that the brand owner or trade mark owner is not a manufacturer. They contended that definition of P P medicines decides the dutiability and not the responsibility of the manufacturer and relied on the ruling of Philips India v. Govt. of India as reported in [1980 (6) E.L.T. 263]. They contended that the turnover of M/s. Glenmark had no relation to their turnover as they were the actual manufacturers and are rightly entitled to the benefit of the notification as independent manufacturer as the transaction had been principal to principal basis and relied on the ruling of the Spencer Co. v. Assistant Collector as reported in [1983 (14) E.L.T. 2098]. They submitted that even supplier of raw material would not become manufacturer. They contended that the main raw material i.e. Clotrimazole was imported by them and not supplied by M/s. Glenmark including the packaging material. As they were not owning a godown, the materials were sometimes stored in the godowon of M/s. Glenmark pending transit facilities. The purchase orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts and there was no admission on their part. 6. The learned Collector after a careful examination of their pleas, rejected the same and confirmed the demand. He has held that both the concerns are creations of the members of a family and they are closely related. The registered office of both the companies are located in Bombay in the same premises. The learned Collector has noted a clause from the agreement that M/s. Glenmark will have exclusive right to Candid cream manufactured by the appellants and also about the appellants not having any right to market any part of their production without prior permission of M/s. Glenmark. The learned Collector has also noted about M/s. Glenmark s absolute control over the pattern of packing colour or any other matters relating to the sale of the product. Their right to reject a product which is not of a standard quality and the loss arising on account of the defective nature of the product to be borne by the appellants. On the basis of these clauses in the agreement, the learned Collector has held that the transaction of the partners cannot be considered as principal to principal basis and at arm s length as claimed by the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax and Sales-tax. They purchase raw materials and they also import the raw material and pay customs duty on them. The imported goods were received in Bombay and till they were shipped to the unit at Hyderabad, they were kept in the godown of M/s. Glenmark as they did not have any godown of their own. This itself is not a ground to hold against them. He contended that the clause of control of pattern of colours, packing material and also quality of the product by M/s. Glenmark would not by itself make the appellants having manufactured for and on behalf of M/s. Glenmark. The clause that M/s. Glenmark had out rightly rejected the product for its defect and the cost was to be borne by the appellants, is a clear pointer that the transaction is on the basis of principal to principal. He contended that the value shown in the price list was of mixed price and the price list had been filed at the instance of the department itself. He contended that even going by the department s allegation, the duty cannot be confirmed on the appellants and that the allegations were being pointed towards M/s. Glenmark and the fact that they had not been issued with show cause notice, would vitiate the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Others [1980 (6) E.L.T. 263 (All.)] Ceramics and Electrical Industries Pvt. Ltd. Another v. Union of India Others [1981 (8) E.L.T. 358 (Bom.)] Poona Bottling Co. Ltd. Another v. Union of India and Others [1981 (8) E.L.T. 389 (Del.)} Remington Rand of India Ltd. Another v. Collector of Central Excise, Calcutta Others 1981 (8) E.L.T. 874 (Cal.)] Lucas Indian Service Ltd., Madras v. Collector of Central Excise, Madras [1984 (16) E.L.T. 415 (Tribunal)] Joint Secretary to Govt. of India v. Food Specialities Ltd. [1985 (22) E.L.T. 324 (S.C.)] Metal Box India Ltd., Calcutta v. Collector of Central Excise, Calcutta [1986 (23) E.L.T. 187 (Tribunal)] Shakti Udyog Jallandhar v. Collector of Central Excise, Chandigarh [1986 (8) ETR 507] - [1986 (25) E.L.T. 423] Super Printers v. Collector of Central Excise, Hyderabad [1987 (30) E.L.T. 745 (Tribunal)] Shree Packaging Corporation, Hyderabad v. Collector of Central Excise, Hyderabad [1987 (32) E.L.T. 94] Spring Fresh Drinks v. Collector of Central Excise [1991 (54) E.L.T. 333 (Tribunal)] 9. Shri Murthy, learned DR on the other hand, submitted that both the units were closely knit units and the daughter of the Dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of Union of India v. Cibatul Ltd. (supra). It is but proper to set out the findings given in Paras 6 and 7 - The entire question before us is whether the goods are manufactured by the seller or are manufactured by the seller on behalf of the buyer. The relevant provisions of the agreements and the other material on the record show that the manufacturing programme is drawn up jointly by the buyer and the seller and not merely by the buyer, and that the buyer is obliged to purchase the manufactured product from the seller only if it conforms to the buyer s standard. For this purpose the buyer is entitled to test a sample of each batch of the manufactured product and it is only on approval by him that the product is released for sale by the seller to the buyer. In other words, the buyer has the right to reject the goods if he does not approve of them. If the manufactured goods are not in accordance with the buyer s standard, they are either reprocessed to bring them up to the requisite quality, or if that is not possible the goods are sold to the buyer for a .different purpose if they are compatible with the specifications of some other product and provided that the buyer has a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to his specifications, details and trade marks, without incurring any financial involvement needed for manufacturing and producing the goods or without having any control or supervision over the manufacturing process. Such a person cannot be treated as manufacturer for those goods because in such cases the transaction is on principal to principal basis in the ordinary course of business. In such cases, it cannot be said that actual manufacturer was engaged in the manufacturing activity on his own , as he manufactures goods according to his own schedule, budget, capacity availability of raw materials. Moreover if buyer is also to be treated as manufacturer, the same would result in making two persons as manufacturers of the same commodity whereas under the law there cannot be mere than one. (underlined by us) 12. Again at Para 15, the Court has held that - A person being a Director of two companies is not indicative of the fact that one company is dummy of the other. They are two distinct entities carrying on business on their own account and cannot be held to be controlled by the other . This view is reiterated in many other citations of Tribunal also. The aspect pertaining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and explained also at the time of recording the statement, hence there is no reason to disbelieve the same. As regards that the ground of M/s. Muller and Phipps supplying the raw materials and controlling the quality of the manufacturer. This by itself cannot be the circumstances to hold M/s. Muller and Phipps to be the manufacturer so long as the manufacture is principal to principal basis and the appellant being a job worker with independent ownership. The learned Collector has held that the agreement is a bogus one. But this was not alleged. The learned Collector has drawn such an inference on the basis of the Clause 12 of the agreement and the alleged violation in M/s. Muller and Phipps directing the appellant to purchase from M/s. R.K. Aromatics. This has been explained by the appellant. There does not appear to be anything in criminating in it. Merely because M/s. Muller and Phipps suggests the appellant to make purchase from common seller of raw materials of M/s. R.K. Aromatics to maintain the quality of the product, it cannot be inferred that the agreement is a bogus one. Even if so, that by itself the transaction cannot be said to be a dummy one. The law is now well settl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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