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TMI Blog1993 (1) TMI 151X X X X Extracts X X X X X X X X Extracts X X X X ..... acts are indicated briefly. The three parties concerned in the appeal are :- (a) M/s Anand Food, Flavours Fragrances Pvt. Ltd. a Partnership firmengaged in manufacturing (i) All Seasons Thirst Quencher Musambe, Mango, Lemon and Pineapple. (ii) All Seasons Hi Tech Soup Powder Tomato, vegetable, Masala Soup etc. and selling the products to M/s. All Seasons Foods under an ageement. (b) M/s. Nutri Foods - a Private Ltd. Company engaged in packing the products manufactured by Anand Foods. (c) M/s. All Seasons Foods Ltd. - a Public Ltd. Company is the purchaser of the products and the party whose Brand Name All Seasons is used on the products. 3. M/s. Anand Foods have given an authorisation to M/s. Nutri Foods to manufacture the products on their behalf and to comply with the procedural formalities under the Central Excises and Salt Act and the rules made thereunder in respect of the goods manufactured on their behalf and also to furnish information relating to the price at which they would sell the goods in order to enable determination of value of the goods under Section 4 of the said Act. This authorisation has been given in pursuance of Ministry of Finance (Depa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacturer normally decides the price either inclusive of all duties or taxes and charges the buyer accordingly, or recovers at the point of sale duties and levies and sales tax. The realisation of duties and taxes from the buyer is not postponed to the date when the manufacturer pays the taxes to the government." 4. It has also been held by the Assistant Collector that the stipulation in the Agreement that All Seasons shall be responsible for payment charges on account of the freight, insurance etc. for the transportation of the bulk products from Nasik (where the factory of Anand Foods is located) to Bombay (where they are packed by the packers Nutri Foods) runs counter to the concept of principal to principal dealings because the products, when in bulk, are chargeable to Nil rate of duty under sub-heading 2104.90. The value of the goods to be considered for levy of duty is the value when the goods are packed and put up in unit containers in the factory of Nutri Foods which is located at Bombay. All the elements of cost incurred by Anand Foods/All Seasons/and the assessee (Nutri Foods) in the manufacture of the excisable goods at the point of delivery at the factory gate p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has concluded in the following words :- Right from the manufacture of bulk food, their transport, storage in Bombay, packing in containers and delivery from Bombay, All Seasons" are involved in all these operations and they are, therefore, involved in the manufacture and delivery. Therefore, the prices charged by All Seasons in the course of wholesale trade are required to be taken for determining the assessable value under Section 4 for the purpose of assessment of Central Excise duty." 8. When the matter went up in appeal to Collector (Appeals), he held that the condition of the agreement that the price at which the goods could be sold by Anand Foods to All Seasons will be determined jointly from time to time and for this purpose, Anand Foods will provide all information to All Seasons , is a condition which militates against the stipulation that the transactions are on principal to principal basis. Collector (Appeals) has held that this itself shows Mutuality of interest in the business of each other. He has also held that in the absence of a condition in the agreement that the buyer has option to buy the goods from elsewhere, mutuality of interest is created ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e price at which the products will be sold to All Seasons will be determined from time to time jointly by the two parties does not create any mutuality of interest and therefore, this price should be accepted for purpose of assessment of duty under Section 4. In the absence of any stipulation in the agreement to the contrary, the buyer was free to buy the products from other sources and this has been wrongly held against them. He elaborated his statement by explaining that joint determination of price only amounted to negotiation because of the change in the cost of inputs from time to time which made it necessary to revise the prices. It was his contention that the only interest between two parties was the commercial interest and no evidence of Mutuality of interest in the business of each other has been adduced by the authorities. He placed reliance on the judgment of the Supreme Court in the case of Union of India v. Cibatul Limited [1985 (22) E.L.T. 302] and in the case of Union of India v. Atic Industrial Ltd. [1984 (17) E.L.T. 323] and also in the case of Government of India v. Foods Specialities Ltd. [1985 (22) E.L.T. 324]. 10. Smt. C.G. Lal, learned Sr. Departmental R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all information as may be required (for) determining such prices. Among the other terms stipulated, the following is significant :- (a) Anand Foods ..... shall be responsible for loading the goods manufactured for All Seasons at Anand Foods.......... factory at Nasik. Excise duty at the prevalent rates will be charged on the prices agreed upon as per Clause 4 herein above by Anand Foods from All Seasons . All Seasons will be further liable to pay all taxes, levies etc. such as Central Sales Tax, State Sales Tax etc. The said Sales Tax will be reimbursable by All Seasons to Anand Foods as and when paid to Sales Tax Department. (b) The delivery by Anand Foods ..... to All Seasons is ex-factory and All Seasons shall be responsible for freight, insurance etc. for the goods once the goods leave Anand Foods factory. 14. In this agreement, there is no mention that the goods manufactured by Anand Foods would be sent for the purpose of packing to M/s. Nutri Foods at Bombay. But in actual fact, by a letter dated 5-10-1988 from Anand Foods to Nutri Foods , certain arrangement has been formalized for the Contract Filling of our Powder based products namely, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ordinary sale in the course of wholesale trade. In the arrangement under consideration, the manufacturer/seller is manufacturing the goods according to the specification of the buyer and, in order to ensure quality of the goods, the manufacturer is to provide full quality control. This stipulates the buyer deputing their food technologists during the time the goods are being manufactured as per their recipes for ensuring the quality of the products to their standard. There are certain other conditions about how the defective goods are to be dealt with before despatch and the provision for some kind of a warranty period of 2 months. While these conditions have been upheld by the Supreme Court in their judgment in the Cibatul s case (supra), the stipulation about joint determination of prices goes well beyond the normal concept of ordinary sale of goods in the course of wholesale trade. This, in other words, means that the manufacturer is not even free to fix his own prices and quote them for the purchaser to negotiate or accept. The manufacturer in the present case cannot fix the price until there has been joint determination and, even for that purpose, they have to supply all in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant Collector has rightly, therefore, taken this circumstance into consideration in rejecting the price declared by the assessee. 17. The next question is about the packing charges. While the agreement is totally silent on this question, it is mentioned in the letter dated 15-10-1988 from Anand Foods to Nutri Foods that Anand Foods will supply the product in bulk quantities alongwith all packing material is such as ....... . The Assistant Collector has referred to a letter dated 15-9-1988 requesting All Seasons to supply the packing materials required for packing the said products in unit containers, and further noting that All Seasons have agreed to charge Anand Foods for the packing material at cost price. He has also referred to the stipulation that the packing materials should show the name of the consignee as All Seasons A/c Nutri Foods and the denial of this part by a letter dated 9-4-1989 from them. He has drawn the conclusion that the question of supply/cost of packing material was not considered at the time of fixing the price and, therefore, the price fixed was exclusive of the packing cost. It appears to us that the Assistant Collector s conclusions are j ..... X X X X Extracts X X X X X X X X Extracts X X X X
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