TMI Blog1981 (1) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... ctricals Ltd. and declaring as the assessable value the price which the Company was to charge to Bajaj Electricals Ltd. On 25th October, 1971, the 2nd respondent passed his impugned order returning the price-list to the Company stating that- "... M/s. Bajaj Electricals Ltd. are the exclusive buyers of the goods manufactured by you with 'Bajaj' Name plates. In view of this, M/s. Bajaj Electricals Ltd., become the sole-selling Agent of the goods under reference and accordingly the prices charged by M/s. Bajaj Electricals Ltd. have already been approved as assessable values from time and again (Sic). Your plea to accept the prices charged by you to M/s. Bajaj Electricals Ltd., as assessable value under the circumstances cannot be accepted." 2. This order resulted in the Company filing an appeal to the Appellate Collector (namely the 3rd respondent) who by his order dated 3rd September, 1973 allowed the Company's appeal on the ground that the transaction between the Company and Bajaj Electricals Ltd. was on principal to principal basis and that the relations between the two were at arms, length. The 3rd respondent further held that in view of the judgment of the Supreme Court in Vo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the manufacturer of the appliances sold to Bajaj Electricals Ltd. as urged by Mr. Bhatt, the learned Counsel appearing on behalf of the Company, or whether the manufacturer can be said to be Bajaj Electricals Ltd., as urged by Mr. Mehta, the learned Counsel appearing on behalf of the respondents. Mr. Bhatt elaborated that the transaction between the Company and Bajaj Electricals Ltd. was a transaction purely of sale and purchase on principal to principal basis at arms, length and that Bajaj Electricals Ltd. could not be said to be the manufacturer because the brand name of the purchaser, namely "Bajaj", was affixed to the goods. The contrary was urged by Mr. Mehta on behalf of the respondents. 5. In order to appreciate these rival contentions it would be pertinent to refer to the terms and conditions contained in the agreement which is in the form of a letter dated 19th November, 1971 from Bajaj Electricals Ltd. to the Company. Both learned Counsels relied upon that letter in support of their respective contentions. This letter opens with the discussions which the Company had with Bajaj Electricals Ltd. and records the confirmation of Bajaj Electricals Ltd. of its accepting the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd clause 10 provides for the termination of the agreement by either party by giving 6 months notice in writing. 6. These terms and conditions unmistakably reveal that the relationship between the Company and Bajaj Electricals Ltd was that of manufacturer-seller and purchaser and that the dealings between them were on principal to principal basis. It is plainly manifest that in the manufacture of the goods by the Company, no control, direction or supervision was exercised by Bajaj Electricals Ltd. nor did the latter have any financial involvement in the manufacture of the goods. It is also not even the Department's case that Bajaj Electricals Ltd. had any control over the labour employed by the Company for the purpose of manufacturing the goods. Indisputably the raw materials used in the manufacture of the goods were purchased by and belonged to the company as also the machinery with which the goods were manufactured. Admittedly the sales tax and income-tax were paid by the Company and not by Bajaj Electricals Ltd. Indisputably the goods were produced by a process, mode and method of manufacture entirely of the Company and according to its own schedule and in the Company's factor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the customer on the manufactured goods cannot be helpful in determining whether the goods were manufactured by the buyer or on his behalf and that by affixing the brand name any new product comes into existence. It was further held where goods are manufactured with the customer's brand name, the raw materials not supplied by the customer, and where the goods are manufactured in the plant of the manufacturer who pays sales-tax over the goods, it cannot be said that the goods were manufactured on behalf of the customer and accordingly the customer's sale prices cannot form basis for assessment. In Philips India Ltd. and others v. Union of India and others - 1980 E.L.T. 263 (All.), it was held by the Division Bench of the Allahabad High Court that where a person simply places an order with a Company for getting certain goods manufactured according to his specifications, details and trade mark, without incurring any financial involvement needed for manufacturing or producing the goods or without having any control or supervision over the manufacturing process, such a person cannot be treated as a manufacturer of those goods because in such cases the transaction is on principal to pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufactured goods are supplied with the brand name are not sufficient. 7. These decisions with which I am in respectful agreement are on all fours with the facts of the matter before me and are sufficient to uphold the contentions of Mr. Bhatt and to negate the contentions of Mr. Mehta to the contrary. 8. Great reliance was placed by Mr. Mehta on behalf of the respondents on clauses 4, 5, 6 and 8 of the agreement in an attempt to show that the Bajaj Electricals Ltd. had control and supervision over the manufacture of the goods and hence were the manufacturers within the meaning of section 2(f) of the Act. It may be recalled that clause 4 provides for random inspection or even 100 inspection of the goods by Bajaj Electricals Ltd. Clause 5 provides for satisfactory performance guarantee and clause 6 provides for the return to the Company of goods broken or damaged in transit, and clause 8 provides for the Company's responsibility for loss, injury or damage caused to Bajaj Electricals Ltd. on account of loss, injury or damage suffered or caused to any 3rd party by reason of its using or handling the goods sold by the Company to Bajaj Electricals Ltd. None of these clauses can be o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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