P.C. Borooah, J.
1. The Petitioner No. 1 Remington Rand of India Ltd. (hereinafter referred to as the Company) having their registered and head office at 3, Council House Street, Calcutta, carries on business inter alia in the manufacture and sale of typewriters and typewriter ribbons and other office equipments. The Company has a factory at 493/C, G.T. Road (South), Howrah. Apart from manufacturing typewriter ribbons in their own factory, the Company also purchases typewriter ribbons and other items from other manufacturers and sells the same in the market through their own selling organisations.
2. On or about August 17, 1978, M/s. Rainbow Ribbon Industries, (Respondent No. 4) offered the Company for sale various types of ribbons manufactured by them as per their specification, a copy whereof is annexed to the petition, and marked with the letter 'A'. The Company by their letter dated August 29, 1978 a copy of which is annexure 'B' to the petition, informed the respondent No. 4 that their offer of sale of ribbons manufactured as per their specification was acceptable to the Company except that instead of the brand name 'Rainbow' the plastic containers should bear the nami of 'Remington' on the top lid, the price tag inside the containers should bear the patented brand name of the Company and the plastic containers should be packed in card board boxes bearing the Company's name. This was agreed to by the respondent No. 4. Thereafter the respondent No. 4 manufactured ribbons as per their own specification and sold the same to the Company at a price mutually agreed upon with the brand name of the Company embossed on the plastic containers as well as the price tags put inside as aforesaid.
3. After the purchase the Company sent the goods to their various sales depots throughout India to be marketed through their selling organisations. The ribbons-were sold by the Company at a price fixed by them after adding the selling cost and profit on the price at which the Company had purchased the ribbons from the respondent No. 4. The Company has also been assessed on the trading profit earned by them as well as on the sale price of the ribbons by the appropriate sales tax and income-tax authorities.
4. On or about April 7, 1980, the Superintendent of Central Excise Range-7 Calcutta VI Division issued a show cause notice purportedly under Rule 10(l)(b) of the Central Excise Rules, alleging that a sum of Rs. 1,64,308.95 P. was not paid as Central Excise duty in respect of diverse quantities of ribbons cleared during the period from November, 1978 to November, 1979. It was further alleged that the said ribbons mentioned in the notice were supplied by M/s. Rainbow Ribbon Industries of 8, Wards Institution Street, Calcutta-6, during the said period and said goods were manufactured on the basis of the orders of the Company as per their specifications by marking their brand name. It was also alleged that the Company stood in the position analogous to that of loan licensee. A copy of the said show cause notice is annexed to the petition and marked with the letter 'C
5. Pursuant to the aforesaid notice the petitioners along with their representatives appeared before the Assistant Collector of Central Excise and M/s. Rainbow Ribbon Industries also produced before the said officer the relevant documents relating to the manufacture and sale of the typewriter ribbons in question and also other documents relating to the income-tax and sales tax assessments
6. On October 12, 1980, the petitioner received a purported order passed by the Assistant Collector dated October 1, 1980 and despatched on October 6, 1980, wherein it was held inter alia that the petitioner company stood on a position analogous to a loan licensee as the respondent No. 4 manufactured the goods according to the specification and with the technical guidance and brand name of the Company. The officer confirmed the demand raised by the Superintendent of Central Excise under his notice dated April 7, 1980. A copy of this order, which is annexure 'E' of this petition, is the subject matter of challenge in this Writ Petition.
7. Mr. Subrata Roy Chowdhury appearing on behalf of the petitioners has contended that the Company has merely marketed the typewriter ribbons which were manufactured by M/s. Rainbow Ribbon Industries as per their own specification with only the brand name of the Company embossed on the containers and the price tags and no part of the manufacturing process took place in the factory of the Company and as such, according to Mr. Roy Chowdhury the Company cannot be deemed to be a manufacturer within the meaning of Sec. 2(f) of the Central Excises and Salt Act, 1944 (hereinafter 'the Act') and the Respondent No. 3 by holding that the Company should be treated as manufacturer, has acted illegally and without jurisdiction. In support of this argument, Mr. Roy Chowdhury has referred to some decisions, to which I shall presently refer.
8. Mr. N.C. Roy Choudhury appearing on behalf of Respondent Nos. 1, 2 and 3 does not seriously dispute Mr. Subrata Roy Chowdhury's contention that the Assistant Collector erred in coming to the conclusion that the petitioner Company was a manufacturer within the meaning of Sec. 2(f) of the Act. Mr. Roy Chowdhury, however submitted that the Central Govt. in exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules exempted the Respondert No. 4 from the payment of Central Excise duty on typewriter ribbons manufactured by them subject to the conditions laid down in the notification. According to Mr. Roy Chowdhury, the said respondent should not get the benefit of this exemption in view of the fact that they manufactured a substantial quantity of the goods, for which they claimed exemption under the aforesaid notification, for one particular company. Mr. Roy Chowdhury .craved for a direction from this court to realise the requisite excise duty from the actual manufacturer of the typewriter ribbons, namely, the Respondent No. 4.
9. Section 2(f) of the Central Excises and Salt Act, 1944 defines 'manufacture' and 'manufacturer' as follows :
'Manufacture' includes any process incidental or ancillary to the completion of a manufactured product...and the word 'Manufacturer' shall be construed accordingly and 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.
Therefore, the question that arises for consideration in the instant rule is whether the petitioner company by placing the order with the respondent No. 4 for the typewriter ribbons, manufactured to the specification of the said respondent, but only having their brand name embossed on the containers and price tags, can be deemed to have been engaged in the production or manufacture of the goods on their own account.
10. The relevant portion of the impugned order, wherein the Company has been sought to be brought in within the mischief of said Sec. 2(f) of the Act, reads as follows :
'I have carefully gone through the case records. I have also gone through the written submission made by M/s. Remington Rand of India Ltd. on 18-8-80 and the submission made by them on 2-9-80 at the time of personal hearing. It is a matter on record that M/s. Rainbow Ribbon Industries manufactured the goods according to the specification, tochnical guidance and with the brand name of M/s. Remington Rand of India Ltd. In the instant case, the position of M/s. Remington Rand of India Ltd. is analogous to that of a loan licensee, who got manufactured the typewriter ribbon from the factory of M/s. Rainbow Industries, 8, Wards Institution Street, Calcutta-6. In case of loan licensee the loan licensee retains exclusive right to sell the products to independent buyers in open market condition, which does not lie with the manufacturer who manufacture the products on behalf of the loan licensee. In this connection M/s. Remington Rand of India Ltd. being of the same position of the loan licensee should be treated as manufacturer within the meaning of Sec. 2(f) of C.E. & Salt Act, 1944.'
11. In Civil Rule No. 8755(W) of 1976 which was disposed of on 10th June, 1980 S.C. Deb, J. was dealing with a similar question, which arose out of an application preferred by M/s. Mazda Lamps Company Ltd, which was .sought to be made liable for payment of excise duty because they had purchased electric bulbs from Hind Lamps Ltd. with their brand name embossed on the manufactured bulbs. The learned Judge made the rule absolute and quashed the impugned show cause notice and held that the petitioner company was not to be treated as a manufacturer in view of the fact that they did not participate in the manufacture of lamps and also did not employ any. hired labour in the production and manufacture of the said goods.
12. Similar question also arose for consideration before the Allahabad High Court in the case of Philips India Ltd. and Ors. v. Union of India and Ors. reported in 1980 E.L.T. 263. The court was dealing with a case where the petitioners besides manufacturing electric lamps at their own factories also purchased lamps and tubes from Hind Lamps Ltd. and the manufacturing company supplied the goods to the petitioners on principal to principal basis in the ordinary course of business. Hind Lamps Ltd. manufactured the lamps according to their own schedule, budget, capacity, availability of raw materials and supplied the same to the petitioners and others against their orders. Question1 arose whether the petitioners would be deemed to be manufacturers in respect of the lamps, supplied by Hind Lamps Ltd. in view of the fact that the trade marks of the petitioners were embossed on the lamps, 'the Allahabad High Court observed as follows :
'In order to bring a person within the ambit of this clause, it is necessary that a person gets the goods manufactured by others under his direction and control. If a person simply places orders with a company for getting certain goods manufactured according to his specifications and details, such person would not be considered a manufacturer inasmuch as the owner of a factory alone could be said to be engaged in the manufacturing activity 'on his own' within the meaning of Sec. 2(f) of the Act.'
It was further held :
'In a case where a Company requiring certain goods places orders for manufacturing articles according to its requirements, such a company cannot be said to have hired any labour and also does not have any control over the working of the manufacturing concern, hence such a company will not be considered to be a 'manufacturer' within the definition of the term given in Section 2(f) of the Act. A person placing orders for manufacturing of articles would only be a buyer and thus cannot be the manufacturer, simply because the goods manufactured in accordance with the requirements of the buyer, complying with his standard, the same would not make him a manufacturer inasmuch as such a person does not engage himself either in manufacture or production of goods on his own account. He does not incur any financial involvement needed for manufacturing or producing the goods and also does not have any control or supervision over the manufacturing process.'
13. The Bombay High Court in the case of Ceramics and Electrical Industries Pvt. Ltd. and Anr. v. Union of India and Ors. reported in 1981 E.L.T. 358 observed inter alia that merely because the petitioner company put the label Bajaj1 on the goods before delivery to the Bajaj Elcctricals would not make them the manufacturer, nor can it be said that the goods were manufactured on behalf of the customer because by affixation of the label the goods did not change their identity nor did they become some new or different product.
14. Similar view was expressed on a Revision petition filed by Surat Bottling Co. Ltd. before the Government of India, Ministry of Finance. The order is reported in 1980 E.L.T. 333. It is inter alia stated to the effect that merely because the goods are produced with the third party's brand name under a franchise agreement with such third party, the actual manufacturer cannot be said to be producing the goods for or on behalf of such third party especially when they were themselves Central Excise Licensees and were being assessed to Income-tax and sales tax independently.
15. Coming back to the instant writ petition, in paragraph 11 thereof, the petitioners have craved for leave to refer to an affidavit affirmed by Shiv Kumar Agarwal, Proprietor of M/s. Rainbow Ribbon Industries, copy whereof is annexure 'F' to the petition. It appears from paragraph 3 of the said affidavit that M/s. Rainbow Ribbon Industries were exempted under Rule 8(1) of the Central Excise Rules by the Central Govt. from paying any excise duty on typewriter ribbons under certain conditions. It is also stated that the deponent gave the relevant declaration for availing of the said exemption by two letters dated 22-9-78 and 2-11-78. In paragraph 4 it is stated that Remington Rand agreed to purchase the deponent's goods manufactured as per his specification excepting that he was required to emboss Remington Rand's patented trade mark on the containers as well as on the price tag. Reference is also necessary to paragraph 11 of the said affidavit wherein it has been stated as follows :
'On or about 2-9-80 the hearing took place and I myself along with all my papers and documents went to the said Assistant Collector along with the representative of M/s. Remington Rand. I told the said Assistant Collector that in fact and in law I was the only manufacturer in respect of all the goods manufactured in my factory and sold to different wholesalers including Remington Rand which the Superintendent was fully aware because he has inspected all the vouchers and/or bills. I offered for inspection all the records brought with me.'
An affidavit-in-opposition has been affirmed by Sri Dilip Kumar Roy, Assistant Collector of Central Excise, Calcutta VI Division, on June 22, 1981 and paragraph 11 of the writ petition has been sought to be dealt with in paragraph 17 of the said affidavit. Leave alone a denial, there is no reference whatsoever to the affidavit filed by the proprietor of Rainbow Ribbon Industries. As such the statements made in the said affidavit go unchallenged.
16. In view of what has been stated above, it becomes an accepted position that the manufacture of the typewriter ribbons was complete in the factory of M/s. Rainbow Ribbon Industries and they were merely marketed by the peii-tioner company without the ribbons going through any furtherrnanufacturing process. It cannot also be disputed, as would appear from Anncxures A and B of the petition, that the ribbons were manufactured to the specification of M/s Rainbow Ribbon Industries without the company givng any technical guidance or supplying any part of the raw materials or labour, only the brand name of the Company was put on the plastic containers and the price tags.
17. Therefore, the Assistant Collector erred in coming to a finding ihat the company was in the same position as a loan licensee and should be treated as a manufacturer within the meaning of Sec. 2(f) of the act and there was no basis or material whatsoever for such finding. From the impugned order it is also apparent that the officer concerned completely overlooked the fact that M/s. Rainbow Ribbon Industries were the actual manufacturers and they had filed the necessary return before the Excise authorities and had also paid the sales tax and income-tax in respect of the typewriter ribbons which formed the subject matter of the present case. Therefore, by passing the impugned order the same goods would have been subjected to double taxation had the goods not have been covered by the exemption under the notification issued under Rule 8 (i) of the Central Excise Rules. As such, the impugned order has to_ be set aside.
18. I, accordingly, make the rule absolute and quash the order passed by the Assistant Collector of Central Excise, copy of which is Annexure 'E' to the petition. There will also be a declaration in terms of prayer (a) of the petition. Interim orders, if any, are vacated. There will be no order as to costs. As regards the submission of Mr. N.C. Roy Chowdhury that M/s. Rainbow Industries should not get the benefit of the exemption by the notification issued by the Central Govt. will speak for itself and I do not wish to give any liberty to the Excise authorities or to put any fetters in their way from proceeding in accordance with law.