1981 (7) TMI 73 - HC - Central Excise

Summary

Issues Involved:
1. Whether the petitioner company can be deemed a manufacturer under Section 2(f) of the Central Excises and Salt Act, 1944.
2. Whether the Assistant Collector of Central Excise erred in treating the petitioner company as a manufacturer.
3. Whether the goods manufactured by M/s. Rainbow Ribbon Industries should be subjected to excise duty.

Issue-Wise Detailed Analysis:

1. Whether the petitioner company can be deemed a manufacturer under Section 2(f) of the Central Excises and Salt Act, 1944:

The petitioner company, Remington Rand of India Ltd., purchased typewriter ribbons from M/s. Rainbow Ribbon Industries, which were manufactured as per the latter's specifications but bore the brand name "Remington." The Assistant Collector of Central Excise alleged that the petitioner company stood in a position analogous to a loan licensee and thus should be treated as a manufacturer under Section 2(f) of the Central Excises and Salt Act, 1944. However, the court noted that the term "manufacture" includes any process incidental or ancillary to the completion of a manufactured product and that the word "manufacturer" includes a person who employs hired labor in the production or manufacture of excisable goods or engages in their production or manufacture on his own account. The court found that the petitioner company did not participate in the manufacturing process, did not employ hired labor, and merely marketed the finished products with their brand name embossed on the containers and price tags.

2. Whether the Assistant Collector of Central Excise erred in treating the petitioner company as a manufacturer:

The court examined the impugned order, which held that the petitioner company was in a position analogous to a loan licensee. The court referred to several precedents, including the judgments of the Allahabad High Court in the case of Philips India Ltd. and the Bombay High Court in the case of Ceramics and Electrical Industries Pvt. Ltd., which held that merely placing orders for goods manufactured according to specifications does not make a company a manufacturer. The court concluded that the Assistant Collector erred in treating the petitioner company as a manufacturer, as the company did not engage in the manufacturing process, nor did it employ any hired labor or have control over the manufacturing process.

3. Whether the goods manufactured by M/s. Rainbow Ribbon Industries should be subjected to excise duty:

The court noted that M/s. Rainbow Ribbon Industries were the actual manufacturers of the typewriter ribbons and were exempted from paying excise duty under Rule 8(1) of the Central Excise Rules, subject to certain conditions. The court found that the ribbons were manufactured to the specifications of M/s. Rainbow Ribbon Industries without any technical guidance or raw materials supplied by the petitioner company. The court held that the Assistant Collector's finding that the petitioner company should be treated as a manufacturer was without basis or material. Consequently, the impugned order would have resulted in double taxation had the goods not been covered by the exemption under the notification issued under Rule 8(1) of the Central Excise Rules.

Conclusion:

The court made the rule absolute and quashed the order passed by the Assistant Collector of Central Excise. The court declared that the petitioner company should not be treated as a manufacturer within the meaning of Section 2(f) of the Central Excises and Salt Act, 1944. The court also noted that the exemption notification issued by the Central Government would speak for itself and did not wish to give any liberty to the Excise authorities or put any fetters in their way from proceeding in accordance with the law.