TMI Blog1983 (3) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... d 4-7-1977 which grants exemption from excise duty, to certain commodity, reads as follows :- "In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts aerated waters not containing extracts of Cola (Kola) nuts, and falling under Sub-item (2) of Item No. 10 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944) from so much of the duty of excise leviable thereon as is in excess of twenty-five per cent ad valorem : Provided that the exemption containing in this notification shall apply only to the first clearance for home consumption not exceeding fifty lakh bottles, by or on behalf of a manufacturer from one or more factories during any financial year subsequent to 1977-78 and for such clearance not exceeding thirty-seven lakh bottles, during the period commencing on the 4th day of July, 1977 and ending on the 31st day of March, 1978." Item 1(d) of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944) reads as follows : Item No. Description of goods Rate of Duty 1D Aerated waters, whether or not flavoured or sweetened ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the raw material, namely, the composition, is sold, the supplier of the raw material ceases to have any proprietary interest in the same. The final product is out and out a product of Messrs Spencer and Co. Ltd., since they purchase the raw materials in an outright sale and since the profit, if any, made or the loss if any incurred, would belong to, or be borne by them, and not any of the suppliers of the raw materials. Except supplying one of the raw materials, the suppliers of raw materials have no part to play. Hence according to the petitioner, Messrs Spencer and Co. Ltd., the exemption contemplated in the above-said notification is applicable to them, and they are paying duty at 25 per cent ad valorem upto the production limit of 50 lakh bottles and on the excess of it, at the rate of 56 per cent ad valorem, in respect of all the drinks manufactured by them, including ₹ 77'. 7. By letter dated 5th February 1978, the petitioner submitted a revised apportionment list as well as a revised classification list to the first respondent. 8. However, the petitioners received a show-cause memo dated 2nd March 1978 from the first respondent alleging that Messrs Modern Bake ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e manufacturer of the final product. 11. In the counter affidavit filed on behalf of the respondents, they have admitted that Messrs Spencer and Co. Ltd., are using raw materials as set out in paragraph 2 of the affidavit for the purpose of manufacturing ₹ 77', but would contend that under the terms of the agreement between Messrs Modern Bakeries India Ltd., and the petitioner-company, it is clear that Messrs Spencer and Co. Ltd., are only `bottlers' for Messrs Modern Bakeries India Ltd., who are the real manufacturers of ₹ 77'. It is further contended that the petitioner cannot invoke the jurisdiction of this court under Article 226 of the Constitution since there is alternative remedy by way of revision to the Board of Central Excise and Central Government. They denied that any order of the Government of India regarding the manufacture of ₹ 77' was ever read out to the petitioner's representatives as claimed by them. In general, the respondents denied all the allegations contained in the affidavit and the supplemental affidavit filed by the petitioner. 12. Mr. K.K. Venugopal, learned Counsel arguing for the petitioner, took me through the relevant provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aft only. Messrs Modern bakeries India Ltd., reserve to themselves the right to produce and sell the beverages in the territory of the bottler either by themselves or may appoint one or more bottlers for the whole or part of the territory. Messrs Spencer and Co. Ltd., must abide by the conditions and directions of Messrs Modern Bakeries India Ltd., in respect of the composition, syrup and bottling the same under the trade name ₹ 77'. 15. Thus, on a reading of the whole agreement it is clear that Messrs Spencer and Co. Ltd., are the sole manufacturers of the bottled beverage ₹ 77' and that the composition, which is one of the ingredients, is supplied by Messrs Modern Bakeries India Ltd., subject to various restrictions and conditions, since Messrs Modern Bakeries India Ltd., want to preserve the trade name ₹ 77' to themselves and also reserve to themselves the right to distribute the same in the named territories. This will not mean that Messrs Spencer and Co. Ltd., are only bottlers for Messrs Modern Bakeries India Ltd., and that Messrs Modern Bakeries India Ltd., are the real manufacturers of the beverage ₹ 77'. On the other hand, the agreement clearly sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not Messrs Spencer and Co. Ltd. 21. The learned Counsel further submitted that the agreement is not a mere assignment of trade mark, but on a reading of the agreement as a whole it will be clear that Messrs Spencer and Co. Ltd., are the bottlers for Messrs Modern Bakeries India Ltd. As I have already observed, such an inference is not possible from the agreement in question. 22. The further argument of Mr. K.N. Balasubramaniam was to the effect that a mere financial responsibility on the part of Messrs Spencer and Co. Ltd., will not bring them within the definition of `manufacturer' under Section 2(f) on the basis that Messrs Spencer and Co. Ltd., are manufacturing the beverage ₹ 77' `on their own account'. I am not able to appreciate this contention. The argument, as such, and the preparation of the beverage called ₹ 77' by using the composition supplied by M/s. Modern Bakeries India Ltd., as one of the ingredients, cannot in any manner make Messrs Modern Bakeries India Ltd., as `manufacturers' of the drink ₹ 77'. 23. I have already set out the averments made in the affidavit in support of this writ petition showing that the drink ₹ 77' is made up of- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at it is Messrs Spencer and Co. Ltd., that are the manufacturers of the soft drink ₹ 77'. 26. Mr. K.K. Venugopal rightly pointed out the various documents filed by Messrs Spencer and Co. Ltd., as also Rules 175A, 175B and 173C under Chapter VIIA of the Central Excise Rules relating to the removal of excisable goods on determination of duty by producers, manufacturers of private warehouse licensees and submitted that the documents would amply establish that it is Messrs Spencer and Co. Ltd., who are the manufacturers of the beverage ₹ 77' and that they are entitled to the exemption granted under the Notification. 27. In Poona Bottling Co. Ltd. v. Union of India, 1981 ECR 380 = 1981 E.L.T. 389, the Delhi High Court had occasion to deal with the very same Notification No. 211/77, dated July 4, 1977 in the matter of Poona Bottling Company. The Poona Bottling Company carried on the business of manufacturing and bottling of soft drinks. They purchased essences from Messrs Parle under franchise agreement. The Union of India through its officers issued a show cause notice requiring the Poona Bottling Company to pay differential duty without claiming exemption under the afor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner companies while buying the essence for the beverage for manufacturing soft drinks such as approval of the plants by Messrs Parle, maintenance of the records of chemicals test, sale and distribution of beverage in particular area, types of bottles or to be used, control over retail sale price, company's right of inspection etc. All these terms relate to the safeguard of trade mark interests. In our view, these restrictions do not lead to the conclusion that the petitioners were manufacturing soft drinks for and on behalf of Messrs Parle or Modern Bakeries. The entire manufacturing activities are being carried on by the petitioners themselves. The soft drinks known as `Gold spot', `Limca', 'Thums up', 'Rimsin', ₹ 77' have acquired a specific popularity in the country. There are valuable trade marks and all the above mentioned terms are to safeguard the interests regarding trade mark. It cannot be said that the petitioners were not the manufacturers or that they were manufacturing the soft drinks on behalf of Messrs Parle or Modern Bakeries. As a matter of fact, the Government itself has taken a similar view in Surat Bottling Co. Ltd., 1980 E.L.T. 353 (Order-in-Review No. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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