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TMI Blog1987 (7) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... e to time the models have been changed. The petitioners say that they started manufacturing the aforesaid two-band transistor radios for the third respondent and the latter used to supply to the first petitioner certain components on consignment basis for the manufacture of the said transistor radios ordered by them from time to time. The quantity and value of these components supplied by the third respondent to the first petitioner diminished and as on the date of the petition only a few components of approximately Rs. 14/- per radio in value were being sent by the third respondent to the first petitioner for the manufacture of the said two-band transistor radios. In the case of the single-band transistor radios, no components whatsoever were received from the third respondent. 2. The petitioners further say that the said factory at Thane is owned entirely by the first petitioner company and the workmen employed by them are the servants of the first petitioner company. They further say that the land and factory and the entire plant and machinery belongs to the first petitioner company. The manufacturing activity in the said factory is controlled and supervised entirely by the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for classification and assessment of excise duty under Item No. 33-A(2) of the first schedule to the said Act. In exercise of its powers under Rule 8(1) of the Central Excise Rules, 1944, the first respondent issued Notification No. 208/77 dated July 2, 1977 exempting radios, including transistor sets, falling under Item No. 33-A(2) of the first schedule to the said Act of a value of not exceeding Rs. 165/- per set from the whole of the duty of excise leviable thereon, provided that the sets are manufactured in an industrial unit in respect of which a Central Excise Officer is satisfied that the sum total of the value of the capital investment made from time to time on plant and machinery is not more than Rs. 10 lakhs. 6. The petitioners say that the said transistor radios manufactured by them were being sold to the third respondent at Rs. 28.80 per set. As stated above, some of the components were supplied by the third respondent. However, the value of each set always remained well below Rs. 165/-. Further, the capital investment of the first petitioner on plant and machinery was under Rs. 10 lakhs. The petitioners, therefore, submit that the said transistor radios manufactured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioners immediately by a letter dated September 23, 1979, with a view to avoid misunderstanding and with a view to clarify, informed the Assistant Collector of Central Excise that it is not quite correct to say that the petitioners manufacture on behalf of M/s. Peico Electronics Electricals Ltd. They also stated that they themselves are the manufacturers of those items some of which are sold to M/s. Peico Electronics and Electricals Ltd. and that they only affix their brand name thereon. Thereupon a show cause notice dated October 8, 1980 was issued to the petitioners. The said notice pointed out that the petitioners have contravened the provisions of Rule 9(1)(a) and 9(1)(c) of the Central Excise Rules, 1944 inasmuch as the petitioners have availed of exemption in terms of Notification No. 208/77 C.E. dated July 2, 1977 by filing wrong declaration and furnishing false information in respect of Philips two band radio Model No. 15 RL 254 and two band radio Model No. 15 AL 262. The notice further stated that the petitioners "undertake the jobwork of manufacturing" of the said two band transistor radios under the brand name of Philips. Then they issued a show cause notice which reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'PHILLIPS' trade mark which is registered in the name of M/s. Peico Electronics. 2) The product comes into market as if it is manufactured by M/s. Peico Electronics Electricals Ltd. 3) The entire production of two band radio models are exclusively supplied by M/s. Peico Electronics Electricals Ltd. 4) M/s. Asha Pavro have no interest in the commercial sale of the products in question. The above facts necessarily lead to the inescapable inference that M/s. Peico Electronics Electricals Ltd. have engaged in the production of two band radio models through M/s. Asha Pavro Electronics Pvt. Ltd. on their own account." It is this order which is under challenge in this petition under Article 226 of the Constitution of India. 9. Mr. Setalvad, appearing for the petitioners has submitted that the reasons given by the Assistant Collector when he passed the said order are all patently wrong and contrary to well established principles. He submitted that the order indicates five reasons as to how the department holds that the petitioner-company and the third respondent are one and the same and he submits that each of these reasons is not maintainable. In this c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not bear those trade marks and are disposed of by the sellers without the advantage of those trade marks. The trade marks are affixed only after the goods have been approved by the buyer for sale by the seller to the buyer. The seller owns the plant and machinery, the raw material and the labour and manufactures the goods and under the agreements, affixes the trade marks on the goods. The goods are manufactured by the seller on its own account and the seller sells the goods with the trade marks affixed on them to the buyer." 10. Mr. Setalvad also drew my attention to another case of the Supreme Court being the case of Jt. Secretary to Govt. of India v. Food Specialities Ltd., reported in (1985) 4 Supreme Courts cases 516 = 1985 (22)-E.L.T. 324 (S.C.), wherein the Supreme Court was considering a contention that the goods were manufactured by the respondents therein according to the specifications supplied by another concern M/s. Nestles and trade mark was affixed on the goods so supplied and the Supreme Court said as follows : "What are sold and supplied by the respondent are goods manufactured by it with the trade marks affixed to them and it is the wholesale price of such good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pendent concern and they sell the material to the third respondents and if that is so, the entire basis of the order must necessarily be held to be bad in law. 13. Mr. R.V. Desai, appearing for the respondents, drew my attention to the case of Shree Agency v. S.K. Bhattacharjee, reported in 1977 E.L.T. (J 168), to contend that if raw material was supplied by the third respondent that should be considered as a criterion for the purpose of holding that the petitioners were manufacturing for and on behalf of the third respondent. In the case referred to above and relied on by Mr. Desai, the Court had clearly come to the conclusion that there was no actual sale of cloth at all by the weavers to the appellant and the cloth was woven by the weavers at the instance of the appellant. The Court as also the excise department came to the conclusion that the yarns were issued to the powerloom weavers not on credit, but for getting the same back duly woven by them into cloth and weekly payments were made by the appellants. In these circumstances, the Court held that the appellants were the real manufacturers. I do not understand as to how the respondents can rely on this authority which is to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e time of the admission of this petition which was in the year 1981. I presume that the respondents had raised such a. contention and yet the learned judge entertained this petition. If that is so, it is neither fair nor proper for me after a period of six years to say that the petitioners must go, back to the Collector of Customs and exhaust all statutory remedy and perhaps come back to this Court after another five or six years. It is high time such technical objections are not resorted to particularly after a number of years during which time the petition remains in this Court and even interim orders by consent are obtained. In the present case, I find a certain minutes of the order at the interim stage which obviously must have been passed after hearing both the advocates and the respondents found no fault with the order at any stage. 16. I may also mention that in the present case, the petitioners have pleaded that ex facie, the impugned order is without jurisdiction and ultra vires and, therefore, they are entitled to approach this Court at the present stage. 17. In the result, the petitioners must succeed and I, therefore, pass the following order : The rule is made ab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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