1981 (5) TMI 26 - HC - Central Excise

Manufacture for or on behalf of - Franchise agreement - Show Cause Notice - Alternative remedy - Jurisdiction

Summary

Issues Involved:
1. Territorial jurisdiction of the court.
2. Prematurity of the writ petitions.
3. Determination of the manufacturer under the Central Excises and Salt Act, 1944.
4. Validity of the show cause notices and directions issued by the Central Government.
5. Whether the demands were barred by time (specific to certain petitions).

Detailed Analysis:

1. Territorial Jurisdiction of the Court:
The court addressed the preliminary objection regarding its territorial jurisdiction. It was argued that the show cause notices were issued based on directions from the Central Government. The court found that the directions from the Central Government were the basis for the show cause notices, effectively amounting to directives. The court concluded that it had territorial jurisdiction because the impugned notices were issued pursuant to the Central Government's directions.

2. Prematurity of the Writ Petitions:
The respondents raised a preliminary objection that the petitions were premature since only show cause notices had been issued and no final decision had been made. The court acknowledged that while there are alternative remedies available under the Act, the existence of such remedies does not bar relief under Article 226 of the Constitution of India. The court emphasized that it could grant relief if there was a total lack of jurisdiction or non-application of mind. The court found that the present cases exhibited non-application of mind, justifying the exercise of its discretionary power under Article 226.

3. Determination of the Manufacturer:
The core issue was whether the petitioners were manufacturing soft drinks for and on behalf of M/s. Parle or Modern Bakeries under the franchise agreements. The court examined the terms of the franchise agreements and concluded that the petitioners were neither employees nor agents of M/s. Parle or Modern Bakeries. The petitioners had their own machinery, employed their own labor, and made investments themselves. The agreements did not grant the petitioners any authority to represent M/s. Parle or Modern Bakeries in dealings with third parties, which is essential for establishing an agency relationship. Consequently, the court held that the petitioners were independent manufacturers and not manufacturing on behalf of M/s. Parle or Modern Bakeries.

4. Validity of the Show Cause Notices and Directions:
The court found that the show cause notices were issued based on directions from the Central Government, which were communicated through a letter. The court concluded that these directions amounted to a pre-judgment of the matter, indicating a lack of independent consideration by the Assistant Collectors. The court held that the impugned directions and show cause notices were illegal and without jurisdiction due to non-application of mind and the improper assumption of M/s. Parle as the manufacturer without issuing a notice to them.

5. Barred by Time (Specific to Certain Petitions):
In Writ Petition Nos. 82 and 83 of 1979, an additional plea was raised that the demands were barred by time. However, the court did not delve into this issue as it had already concluded that the show cause notices were invalid.

Conclusion:
The court quashed the directions issued by the Central Government and the impugned show cause notices issued by the Assistant Collectors of Central Excise to the petitioner-companies. The court made the rule absolute and did not award any costs.