1981 (9) TMI 111 - HC - Central Excise

Summary

Issues:
1. Interpretation of excise duty exemption notifications for small manufacturers.
2. Determination of whether goods were manufactured for and on behalf of another company based on brand name usage.
3. Validity of Assistant Collector's decision to deny exemption from duty.

Analysis:

Issue 1: Interpretation of excise duty exemption notifications for small manufacturers
The petitioners, a firm of small manufacturers of domestic electrical appliances, were entitled to exemption from excise duty as per notifications issued by the Government of India. The notifications set criteria related to capital investment and turnover for eligibility. The Assistant Collector initially denied the petitioners the advantage of the exemption, claiming the value of goods exceeded the prescribed limit. However, the petitioners contended that they met the conditions specified in the notifications, highlighting their turnover figures to support their claim.

Issue 2: Determination of whether goods were manufactured for and on behalf of another company based on brand name usage
The Assistant Collector alleged that the petitioners manufactured goods for and on behalf of a specific company due to the brand name under which the goods were sold. The petitioners argued against this assertion, emphasizing that the mere use of the company's brand name did not imply manufacturing on behalf of that company. The court agreed with the petitioners, citing precedents that selling goods under a purchaser's brand name does not establish manufacturing for and on behalf of that purchaser.

Issue 3: Validity of Assistant Collector's decision to deny exemption from duty
The Assistant Collector's decision to deny the petitioners the exemption was challenged in the petition under Article 226 of the Constitution of India. The court found the reasons provided by the Assistant Collector insufficient to support the denial of the exemption. The court ruled in favor of the petitioners, quashing the impugned order and directing the Department to process the refund applications promptly. The court also discharged the bank guarantee furnished by the petitioners.

In conclusion, the court held that the petitioners were entitled to the excise duty exemption as per the notifications, rejecting the claim that the goods were manufactured for and on behalf of another company solely based on brand name usage. The judgment favored the petitioners, emphasizing that the mere branding of goods under a purchaser's name does not establish manufacturing on behalf of that purchaser.