B. Lentin, J.
1. The petitioner (originally known as 'Ciba of India Ltd.') is a public limited company incorporated under the Indian Companies Act, carrying on business inter alia of selling synthetic resins, hardeners and other ancillary products. The petitioner-company is a subsidiary of Ciba Geigy Ltd. referred to hereafter as 'the foreign Company') organised under the laws of Switzerland and having its registered office at Basle, Switzerland. The foreign Company is the registered proprietor in India of certain trade marks, namely, Aerolite, Melocol, Melolam, Resicart and Araldite.
2. By an agreement dated 24th March, 1971 (referred to hereafter as the 'first main agreement') entered into between one Cibatul Ltd. and the petitioner-company (then known as 'Ciba of India Ltd.'), the latter agreed to purchase from Cibatul Ltd. two types of resins known as 'Urea Formaldehyde' and 'Melamine Formaldehyde' on certain terms and conditions. By a tripartite agreement dated 7th December 1971 (referred to hereafter as the 'subsequent agreement') entered into between the petitioner-company (then known as 'Ciba of India Ltd.') Cibatul Ltd. and the foreign Company, Cibatul was authorised to affix on the products agreed to be sold by it to the petitioner-company under the main agreement, the trade marks, namely, Aerolite, Melocol, Melolam and Resicart owned by the foreign Company.
3. By an agreement dated 1st June 1973 (referred to hereafter as 'the second main agreement') entered into between Cibatu Ltd. and the petitioner-company (then known as 'Ciba of India Ltd.), the petitioner-company agreed to purchase from Cibatul Ltd. Epoxy Resins, formulations and hardeners. By a tripartite agreement dated 1st December 1973 (referred to hereafter as the 'subsequent agreement') entered into between Cibatul Ltd., the petitioner-Company (then known as 'Ciba of India Ltd.') and the foreign Company Cibatul Ltd. was authorised to affix on the product agreed to be sold by Cibatul Ltd. to the petitioner-company under the 2nd main agreement the trade mark 'Araldite' owned by the foreign Company.
These agreements were carried out by the companies concerned.
4. On 3rd March 1976, the Superintendent of Central Excise addressed a letter to the petitioner-Company drawing its attention to the definition of 'manufacturer' under Section 2(f) of the Central Excises and Salt Act. By this letter it was stated that even a person who engages himself in the production or manufacture of excisable goods through an independent contractor would be covered by the definition of the word 'manufacturer'. It was further stated that it had been decided by Government that a person or persons, firms or companies who have no factory of their own and who got excisable goods manufactured by duly licensed factories of other manufacturers according to their own specifications or under their own brand or trade names were required to be licensed under the Central Excise Law. By this letter the petitioner-company was informed that it was required to take out a licence under Rule 174 of the Central Excise Rules, 1944. In reply, by its letter dated 10th March 1976, the petitioner-Company requested the Superintendent of Central Excise to let the petitioner have a copy of the decision of the Union of India referred to in the Superintendent's letter dated 3rd March 1976. After some correspondence, by his letter dated 30th June 1976, the Superintendent forwarded to the petitioner-Company a copy of the Trade Notice dated 9th June 1976 and advised the petitioner-Company to apply for the requisite licence within ten days. In reply, by its letter dated 15th July 1976 addressed to the Superintendent, the petitioner-company denied its liability to take out the licence for the reasons stated in that letter. Thereafter, the petitioner-Company filed the present petition for an appropriate writ for setting aside the Trade Notice dated 9th June 1976 and the Superintendent's letters dated 3rd March 1976 and 30th June 1976.
5. The only point that arises for consideration in this petition, is whether the first and second main agreements entered into between Cibatul Ltd. and the petitioner-company were agreements of sale as is the case of the petitioner-company or whether the petitioner-company can be said to be the manufacturer of the five products, namely, Aerolite, Melocol, Melolam, Resicart and Araldite as contended by the respondents. It was urged by Mr, Dada, the learned Counsel appearing on behalf of the petitioner-company, that it was Cibatul Ltd. and not the petitioner that was the manufacturer of the products and that under the first and second main agreements, all that the petitioner-company did was to purchase the products manufactured by Cibatul Ltd. On the other hand, it was urged by Mr. Mehta, the learned Counsel appearing on behalf of the respondents, that the petitioner-company was the manufacturer of the products within the meaning of Section 2(f) of the Act, because the petitioner-company had control and direction over their manufacture by reason of certain clauses in the main agreements.
6. In order to adjudicate upon these rival contentions it would be necessary to analyse the main agreements. It may be stated that the terms and conditions contained in both the main agreements are identical with the only difference being the name of the product agreed to be sold by Cibatul Ltd. to the petitioner-company. It will, therefore, be sufficient to refer to the terms and conditions of the first main agreement, as a reference to the same terms and conditions contained in the second main agreement would merely be repetitive.
7. The opening part of the first main agreement describes Cibatul Ltd. as 'seller' and the petitioner-company (then known as 'Ciba of India Ltd.') as 'buyer'. It recites that the seller, namely, Cibatul Ltd., is the manufacturer of Urea Formaldehyde and Melamine Formaldehyde Resins and that the seller has agreed with the buyer for the sale of these products which the buyer has agreed to purchase from the seller on the terms and conditions set out in that agreement. In that agreement, the phraseology 'buyer's standard' has been defined to mean and include 'the standard of quality prescribed by the buyer for the contract products.' Clause 2 states that before the commencement of each semi-annual planning period, the seller and the buyer shall draw out a manufacturing programme according to which the seller shall manufacture the contract products. Clause 3 provides that the seller shall sell to the buyer the contract products to be manufactured by the seller in accordance with the aforesaid manufacturing programme and the purchaser shall purchase the contract products provided the products so manufacture are of the buyer's standard. Clause 5. states that the buyer shall be entitled to test a sample of each batch of the contract products which shall be released for sale to the buyer only on the approval by the buyer. The remaining terms and conditions in the agreement are not germane for the present con roversy between the parties.
8. Reading this agreement in its entirety and particularly the clauses paraphrased earlier, there can hardly be any room for doubt that an agreement pure and simple of the sale to the petitioner-company of the products manufactured by the seller, viz. Cibatul Ltd., and that the status of the contracting parties, namely, Cibatul Ltd. and the petitioner-company, is that of seller and purchaser. All that Cibatul Ltd. did was, in fact, to manufacture the contract goods which it agreed to sell to the petitioner-company on the terms and conditions contained in that agreement. That such was the status and relationship of the contracting parties, is also brought to the forefront by the later agreements. Furthermore, indisputably the raw materials used in the manufacture belonged not to the petitioner-Company but to Cibatul Ltd. and the goods were produced by a process of manufacture in the plant of Cibatul Ltd. and not the petitioner-company. It is not even the Department's case that all taxes on the manufactured goods were not paid by Cibatul Ltd. or that they were paid by the petitioner-company. Thus the relationship between them was clearly that of seller and purchaser, viz. that it was Cibatul Ltd. and not the petitioner-company that was the manufacturer of the contract products and that the petitioner-Company was merely the purchaser.
9. However, Mr. Mehta relied on the definition of 'manufacture' as contained in Section 2(f) of the Excise Act. Section 2(f) reads as under:
2. (f) 'manufacture' includes any process incidental or ancillary to the completion of a manufactured product;...
x x x xand the word 'manufacture'...shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account.
Relying on this definition Mr. Mehta urged that the petitioner-company fell within this definition of 'manufacturer', because the petitioner-company had the control and direction over the manufacture of the goods inasmuch as the main contracts provided that (i) the goods were manufactured by Cibatul Ltd. according to the quality prescribed by the petitioner-company; (ii) the goods manufactured Cibatul Ltd. had to be of the buyer's standard; (iii) the buyer was entitled to test a sample of each batch of the contract products manufactured by the seller; and (iv) each batch would be released by the seller to the buyer only on the latter's approval. It is not difficult to repel this contention urged by Mr. Mehta. Merely because a buyer stipulates that the goods which he has agreed to purchase from the manufacturer must be of the quality required by the buyer, and merely because in order to ensure that the seller does, in fact, manufacture the goods of the requisite quality, and merely because the buyer insists on testing the sample for this purpose, it cannot be said to be considerations which would relegate the buyer to the status of a manufacturer. These precautions and safeguards are meant to ensure that the manufacturer does not dump on the buyer products which are worthless or not be upto the standard required by the buyer. The mode and method of manufacture would be entirely for the seller, viz., Cibatul Ltd., who would use its own plant and machinery for the purchase without any dictation by the petitioner-company. None of the clauses relied on by Mr. Mehta in the agreements can conceivably be of any assistance to the respondents in their attempt to elevate the petitioner-Company from a buyer to a manufacturer of the products contracted to be purchased from Cibatul Ltd.
10. In holding against the respondents, I am fortified by the decision of the Division Bench of the Gujarat High Court in Cibatul Ltd. v. Union of India and Ors. 1978 E.L.T. J. 68, where the very name agreement and the very same question had come up for consideration which was answered by the Division Bench of the Gujarat High Court against the Department. However, Mr. Mehta relied on certain observations in an earlier decision of the Gujarat High Court in Jumunadas v. C.L. Nagia 6 G.L.R. 137. Those observations can be of no assistance to the respondents inasmuch as they were referred to and disapproved by the Gujarat High Court in its later decision in Cibatul case where at page 75 of the report it was observed as under:
Those observations do not advance the case of the department in any way, because these observations also clearly show that the manufacturer would include not only a person who employs hired labour in the production or manufacture of goods, but also any who engages in the production or manufacture of goods on his own account if the goods are intended for sale....
11. Mr. Mehta finally urged that the products entered the stream of trade as the products of the petitioner company and hence the petitioner-Company must be deemed to be the manufacturer. This contention is fallacious. The products manufactured by the seller, namely, Cibatul Ltd., did not change when they entered the stream of trade merely because the foreign Company's trade marks were affixed on them. The products remained the same. They did not become new or different products merely by the affixation of the trade mark. Hence this contention of Mr. Mehta must also be repelled.
12. In the result, the ground of challenge of the petitioner-company that it is not the manufacturer but merely the buyer of the goods manufactured by the seller, namely, Cibatul Ltd., is valid and must be accepted.
13. The petition is, therefore, allowed in terms of prayer (a)(i) and (ii) There will be no order as to costs. Rule is made absolute accordingly,