1981 (10) TMI 43 - HC - Central Excise

Summary

Issues:
Interpretation of Franchise Agreement for determining the manufacturer of soft drinks.
Eligibility for Central Excise duty exemption under a Notification.
Validity of Excise Authorities' decision on manufacturer status.

Analysis:
1. The petitioners, a company bottling soft drinks under a Franchise Agreement with Parle (Exports) Pvt. Ltd., sought exemption from Central Excise duty under a Notification. The dispute arose regarding the manufacturer status of the soft drinks.
2. The Central Government issued a Notification exempting aerated waters from excise duty, subject to certain conditions. The petitioners filed for exemption based on their first 37 lac bottles cleared during a financial year. However, the Excise Authorities did not approve the price list, leading to a refund claim.
3. The Excise Authorities contended that Parle (Exports) Pvt. Ltd. were the manufacturers, not the petitioners, based on advice from the Law Ministry. The petitioners challenged this view in court, citing similar cases where bottling companies were recognized as manufacturers.
4. The Franchise Agreement between the petitioners and Parle (Exports) Pvt. Ltd. indicated that the petitioners had control over manufacturing processes, raw materials procurement, and plant operations. The agreement did not show financial assistance or control by Parle (Exports) Pvt. Ltd.
5. The court analyzed the terms of the Franchise Agreement, previous government decisions, and a Delhi High Court judgment. It concluded that the restrictions in the agreement were for quality control and trademark protection, not indicative of Parle (Exports) Pvt. Ltd. being the manufacturers.
6. The court disagreed with the Excise Authorities' decision, stating that the petitioners were the manufacturers based on the terms of the Franchise Agreement and the lack of control or financial assistance from Parle (Exports) Pvt. Ltd.
7. Consequently, the court ruled in favor of the petitioners, granting them relief sought in the petition and ordering the refund of the duty paid. The bank guarantee provided by the petitioners was discharged, and costs were not awarded to either party.