9911796707
TMI Blog1986 (8) TMI 437X X X X Extracts X X X X X X X X Extracts X X X X ..... Industries, Government of West Bengal. The certificate of permanent registration as small-scale industrial unit was issued to the petitioner by the District Industries Centre, Howrah, on 17th February, 1979. The petitioner sells fans and components thereof manufactured by it at its said factory to various independent buyers and one of the buyers is Orient General Industries Ltd. (hereinafter referred to as the Orient Industries). The Orient Industries is the principal buyer of the petitioner's said products. On 29th March, 1979, an agreement was entered into by and between the petitioner and the said Orient Industries whereby and whereunder the Orient Industries agreed to purchase from the petitioner 5,000 fans for a term of 3 years on the terms and conditions mentioned in the said agreement. One of the terms and conditions of the said agreement was that before the delivery of the fans would be effected to the Orient Industries by the petitioner, the petitioner shall affix thereon the trade mark of Orient Industries, viz., "Orient". Pursuant to and in terms of the said agreement the petitioner has been selling fans to Orient Industries after affixing trade mark "Orient" on the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for issue of the eligibility certificate. But the said respondent failed and neglected to issue the eligibility certificate to the petitioner. The Assistant Commissioner required the petitioner to produce various certificates, documents and other informations which were produced by the petitioner before him. The Assistant Commissioner also enquired from the petitioner about its relationship with the Orient Industries and all informations were given by the petitioner. Even after production of the relevant documents, paper books, etc., the respondent No. 2, the Assistant Commissioner, did not issue the eligibility certificate to the petitioner. While the matter was pending before the Assistant Commissioner for grant of eligibility certificate the Commercial Tax Officer, Howrah Charge, issued a notice dated 14th November, 1980, to the petitioner inter alia to the effect that the petitioner was liable to pay tax under the said Act and the said Commercial Tax Officer proposed to make an assessment under section 9(3) of the said Act. The petitioner informed the Commercial Tax Officer that the application for eligibility certificate was pending before the Assistant Commissioner. On 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t up by him and that no amount by way of tax under the Act has been realised by him in respect of such sales." The amendment which was effected in 1980 imposed further conditions as follows: "(1) The dealer claiming the benefit of the said notification will be so eligible, if he possesses a certificate of eligibility in the prescribed form granted by the appropriate Assistant Commissioner in this behalf, for such period as mentioned in the said certificate. (2) The certificate of eligibility shall be granted on application and shall be valid for a period not exceeding twelve months from such date as may be specified therein, but may, at the discretion of the authority granting the certificate, be renewed from time to time for a period not exceeding twelve months at a time: Provided that the certificate of eligibility shall not be granted or renewed if the dealer changes the constitution of the business, sells any capital assets otherwise than in the ordinary course of business violates any condition or does anything which adversely affects the economic viability of the newly set up industry. (3) The authority granting the certificate of eligibility may, for good and suf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a branch or extension or ancillary concern to M/s. Orient General Industries Ltd. Besides, the patent is a capital asset. If the petitioner is an extension or branch or ancillary concern, using capital asset of M/s. Orient General Industries Limited, the petitioner cannot be said to be a newly set up small-scale industrial unit under Notification No. 1809-F.T. dated 1st April, 1976. The facts and circumstances of the case revealed that the entire process of manufacturing of the fans and component parts thereof, was controlled by Orient General Industries Ltd. and that it was evident that the petitionerconcern was nothing but a joint venture of the said Orient General Industries Limited. Although M/s. Orient General Industries Ltd. had the patent-right in respect of "Orient" fan, the said fan was sold in huge quantities by the petitioner not only to the said M/s. Orient General Industries Ltd. but also to others. On the plea of newly set up small-scale industrial unit the huge sales of Orient fans are made without realising sales tax and it is apparent that for the purpose of this evasion of tax, the petitioner-company is being used as a canalising agent of M/s. Orient General Indu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nothing but an expansion of the established manufacturing industrial unit M/s. Orient General Industries Ltd., I reject the application of the dealer dated 26th April, 1986, for issue of eligibility certificate under section 4AA of the West Bengal Sales Tax Act, 1954." In the impugned order, the first ground given is that the petitioner obtained loan from private sources to the extent of Rs. one lakh ten thousand. According to the Assistant Commissioner it is unlikely that such huge loan would be taken from private sources instead of raising funds from some nationalised bank on term loan and cash credit. This view is not supported by any authority nor such condition is imposed by the notification. Where the legislature intends that loan should not be obtained from private sources it makes provision therefor. As for example rule 19A of the Income-tax Rules, 1962, provided that for the purpose of computation of capital in industrial undertaking money borrowed from approved sources only would get the benefit of the said rules. The approved source has also been defined as Government or Industrial Finance Corporation of India or Industrial Credit and Investment Corporation Limited or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because if the petitioner manufactured on behalf of the Orient Industries then there cannot be any sale by the petitioner to Orient Industries. The respondents are treating the sales by the petitioner to Orient Industries of the goods manufactured by it as sales within the meaning of the West Bengal Sales Tax Act, 1954. Therefore it cannot be contended by the respondents that product is manufactured on behalf of the Orient Industries. In the case of Hind Lamps Ltd. v. Union of India reported in 1978 ELT 78, the Allahabad High Court was of the view that the manufacturing of goods with customer's brand names cannot be said to be manufacturing the goods on behalf of the customer as he pays income-tax on income derived from their sales and also pays sales tax on their sale. In that case, the Hind Lamps Ltd. under agreements with six companies were manufacturing bulbs and tubes, etc., with the trade mark like "Philips", "Osaram", "Mazda", "Crompton", "Bajaj" and "Kleerton". Hind Lamps Ltd. sells those goods under their brand names to what it calls is customer companies. The customer companies in turn sell the goods to the public. The Allahabad High Court observed: "Since its very i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifications, details and trade mark, without incurring any financial involvement needed for manufacturing or producing the goods or without having any control or supervision over the manufacturing process, such person cannot be treated as a manufacturer for those goods because in such cases the transaction is on principal to principal basis in the ordinary course of business. In such cases it can be said that actual manufacturer was engaged in the manufacturing activity 'on his own', as he manufactures goods according to his own schedule, budget, capacity, availability of raw materials. Moreover, if buyer is also to be treated as a manufacturer, the same would result in making two persons as manufacturer of the same commodity whereas under the law there cannot be more than one." It was further held: "A trade mark is only a sign, device or mark by which the articles produced are dealt with by a particular person or organisation. Thus use of a trade mark does not necessarily mean or as a matter of law import that the articles on which it is used are manufactured by the trade mark owner even if such goods are manufactured for him and may pass through his hands in the course of the tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the buyer is obliged to purchase the manufactured product from the seller only if it conforms to the buyer's standard. For this purpose the buyer is entitled to test a sample of each batch of the manufactured product and it is only on approval by him that the product is released for sale by the seller to the buyer. In other words, the buyer has the right to reject the goods if he does not approve of them. If the manufactured goods are not in accordance with the buyer's standard, they are either reprocessed to bring them up to the requisite quality, or if that is not possible the goods are sold to the buyer for a different purpose if they are compatible with the specifications of some other product and provided that the buyer has a need for that product, or the goods are sold to others in the market as sub-standard goods at a lower price or the goods are destroyed. It is significant to note that the buyer is not obliged to purchase the goods manufactured by the seller regardless of their quality, and that in the event of rejection by the buyer the alternatives present before the seller extend to the sale of the manufactured goods to others or even to the very destruction of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
