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TMI Blog1995 (2) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... with the specifications and quality prescribed by M/s. TOMCO. Samples were drawn by M/s. TOMCO and analysed in their labs and the products were accepted by M/s. TOMCO only after they were cleared by the quality control Deptt. of TOMCO. The right to reject the batch also vested with M/s. TOMCO, if samples were found to be not in accordance with the specifications of M/s. TOMCO. Rejected goods had to be replaced by the respondents at no extra cost of charge. Goods bearing M/s. TOMCO s trade mark, copyright or design, whether packed or rejected, were not to be sold by the appellants to any one else. M/s. TOMCO authorised the respondents to use the above brand name only in the capacity of an agent for and on behalf of M/s. TOMCO and the respondents (M/s. Naga) did not acquire any right or title or interest over the brand name, design, etc. or the product manufactured for M/s. TOMCO. The product made as per TOMCO s formulations/specifications and quality and wrapped and packed in wrappers and card board boxes bearing M/s. TOMCO S trade mark were supplied to M/s. TOMCO on an outright sales basis at an all inclusive price. In addition, service charge at Rs. 150/- PMT was also paid by M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at although the raw-material was not supplied by M/s. TOMCO to the respondents, they do have effective control over the purchase and utilisation of raw-material because clause 2.1 of the Agreement says that NAGA shall purchase all the raw-materials including chemicals, perfume and packing materials in accordance with the specifications and quality prescribed by TOMCO from time to time and have to maintain necessary records of analytical data of raw-materials of every consignment purchased/received which record should be made available to TOMCO s personnel as and when required. Further clause 5.2, according to the ld. S.D.R., clearly shows that the relationship of the respondents to the TOMCO is as an agent. That clause says that TOMCO is recognised as the absolute owner of the use of trade mark, the wrappers and card board box relating thereto bearing the said trade mark and TOMCO authorises NAGA to affix the trade mark on the product and wrappers, etc. and that such use of the trade mark copyright, design and/or artistic work by NAGA will be in the capacity of an agent for and on behalf of TOMCO. Another aspect, according to the ld. S.D.R., which would show that there is no sale o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case are similar to the decision of the Tribunal in the case of Pawan Biscuit Co. v. Collector of Central Excise - 1991 (53) E.L.T. 595. The Tribunal found, on consideration of the clauses of the Agreement between Britannia Industries Ltd. (BIL) and the appellants therein, that it was a case where BIL was having control over the raw-material and finished product and also that the delivery of the finished product by the appellants therein as per the directions of BIL to their depot will not constitute sale in the course of business and the BIL was not to be considered as a wholesale dealer under Section 4 (4)(e). Here also, the sale of the goods by respondents to TOMCO is not a sale in the course of wholesale trade as the goods do not enter the wholesale trade at that point and as TOMCO is also not a wholesale dealer. In these circumstances, the Assistant Collector has rightly held that the price charged by TOMCO should constitute the assessable value of the goods. Therefore, it was pleaded that the order of the Collector (Appeals) is not sustainable and should be set aside. 4. The ld. Consultant, Sh. C.T.A. Pillai, appearing for the respondents, submitted that the testing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of the term `dealer according to the Websters Lexicon Vol. I is one who buys and sells the goods without processing them. In this case, TOMCO does precisely that. The ld. Consultant also referred to wholesale trade in Section 4 meaning those who purchase the requirements otherwise than in retail. Therefore, it was urged that any bulk purchaser would be a wholesale dealer either for further sale or own use. The ld. Consultant also contended that the ratio of the Pawan Biscuits Co. decision of the Tribunal (supra) is not applicable to the facts of the present case because the ld. Consultant emphasised that in that case there was a lot of difference in that, the raw-material was supplied by BIL to the appellants therein and also it was noticed that there was a tight control over the manufacturing activity of Pawan Biscuits Co. by the BIL from the stage of reciept of raw-material to the finished product. Right to the disposal of the wastes was conditional. Sales proceeds of wastes was to be remitted to BIL. Further, there was technical assistance as well as certain equipments like cutting tools provided by BIL whose officers were posted in Pawan Biscuits Co. to supervise manufacturi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recorded that nothing herein contained in any manner will be deemed to create any liability on TOMCO relating to the excise duty payable on the product to be supplied by NAGA to TOMCO it being the clear intention of the parties that the excise duty liability, sales tax liability and compliance with the central excise and sales tax laws in respect of this agreement shall be the exclusive responsibility of NAGA. 7. The replacement provision in clause 4.2 may also be seen which lays as follows : NAGA shall take back at its own cost and risk the product which is not bound to be in accordance with TOMCO S specifications and shall forthwith replace the rejected product with equivalent quantity of proper tender at no extra cost or charge whatsoever to TOMCO. It is clearly understood that all charges, duties, taxes, cesses and any other expenses for return and replacement of the rejected product will be borne by NAGA and TOMCO will not bear any expenses of whatsoever nature in this connection. 8. From a reading of other provisions, it is evident that there is a sale of the detergent produced by respondents, herein, to TOMCO for consideration which the agreed price in terms of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. case (supra) is not appropriate because of the significant variations in factual background of that case when compared with the present one now for consideration. In Pawan Biscuits Co. case (supra) after examining the various clauses of the Agreement, the Tribunal found that it is manifest from the clauses of the Agreement that in the manufacture of goods by the appellants, therein, BIL has exercised control, direction and supervision and the raw-material belong to BIL. Paras 18 and 19 of the Tribunal decision are reproduced below : From the clauses of the agreement referred to above, it is clear that the BIL exercises not only the quality control, but having control over the manufacture of goods by the appellant. BIL also supervises the manufacture of goods by posting their own man in the factory premises. Further BIL has the right to adjust/recover from the conversion charges payable to the appellant in respect of goods which were defective, or not upto the specification of BIL. The appellant does not have any ownership right in the manufactured goods. In the case of biscuits manufactured using excess material or in the case of wastage BIL has the right to deduct and adjus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Pawan Biscuits Co. decision from the Cibatul Ltd. decision of the Supreme Court by observing that in the Pawan Biscuit Co. case, under the Agreement, the appellants, therein, cannot destroy the goods which are not up to the specification without meeting the cost of the defective goods. In other words, the appellants, therein, are liable to pay the cost of raw-material supplied for the goods which are found defective which shows that they have no title to the goods manufactured. We have seen that in the present case, the agreement between the respondents and TOMCO is quite different and there is no stipulation binding the respondents in the Agreement of the nature noticed in the Pawan Biscuits Co. case (supra). It may also be relevant to note a decision of the Bombay High Court in the case of Central Industrial Alliance Ltd. v. Union of India Others - 1980 (6) E.L.T. 622 (Bom.). That was also a case of manufacture by one party as per the Agreement in this behalf and supply of the finished product to the buyer. Paras 5 7 of the High Court decision are reproduced below : The agreement between the petitioners and the Union Carbide is produced on record at Ex. A to the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the products are sold by the Company at a higher rate because of the reputation of their brand and that would not necessarily reflect the true value of the articles. In Voltas case, the Supreme Court observed : If a manufacturer were to enter into agreements with dealers for wholesale sales of the articles manufactured on certain terms and conditions, it would not follow from that alone that the price for those sales would not be the `wholesale cash price for the purpose of Section 4(a) of the Act if the agreements were made at arms length and in the usual course of business. The agreement in the present case clearly establishes that it is at arms length and is entered into in the usual course of business. 10. In the present case also, it can be reasonably concluded having regard to the nature of the clause in the Agreement that it is at arms length and entered into in the usual course of business. Further, it may also be relevant to consider the definition of wholesale dealer occurring in Section 2(k) of the Central Excises Salt Act, 1944. This definition is as follows : `Wholesale dealer means a person who buys or sells excisable goods wholesale for the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X
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