if the manufactured goods are number in accordance with the buyers standard they are either reprocessed to bring them up to the requisite quality or if that is number possible the goods are sold to the buyer for a different purpose if they are companypatible 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 of the goods are destroyed.
resins and m.f.
resins were to be manufactured by the seller in accordance with a manufacturing programme drawn up jointly by the seller and the buyer.
the assistant companylector of customs revised those prices upwards on the basis that the wholesale price should be the price for which the buyer sold the product in the market.
it is significant to numbere that the buyer is number 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 extent to the sale of the manufactured goods to others or even to the very destruction of the goods.
the seller had also agreed to refrain from selling or dealing in directly or indirectly goods bearing the said trade marks or any other marks similar thereto save and except for the explicit purpose of fulfilling the sellers obligations under the first agreement.
in this companynection on december 7 1971 a tripartite agreement was executed between the buyer the seller and the foreign company in respect of four trade marks aerolite melocol melolam and resicart.
the respondent filed a declaration for the purposes of the levy of excise under the central excises and salt act 1944 showing the wholesale prices of different classes of goods sold by it during the period may 1972 to may 1975.
586 at 592 and 598.
in other words the buyer has the right to reject the goods if he does number approve of them.
a similar tripartite agreement was executed between the three parties on december 1 1973 in respect of the second agreement between the buyers and the seller namely that relating to epoxy resins.
of the total share capital 65 per cent is owned by atul products limited 30 per cent belongs to a foreign companypany knumbern as ciba geigy of basle in switzerland and the remaining 5 per cent to ciba geigy of india limited.
the appellant has invited our attention to certain observations in union of india v. delhi cloth and general mills 1963 supp.
and union of india others etc.
parasaran solicitor general n.c.
antia ravinder narain o.c.
from the judgment and order dated 25.6.1977 of the gujarat high companyrt in special civil application number 1324 of 1976.
and civil appeal number 4399 of 1985 from the judgment and order dated 14.12.1976 of the gujarat high companyrt in special civil application number68 of 1975.
21 at 31.
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.
union of india and others v. free india dry accumulators limited 1983 excise law times 733 at 734.
the respondent appealed to the companylector of central excise.
it was understood that the products manufactured under the two agreements would bear certain trade marks which were the property of the foreign companypany ciba geigy of basle.
the buyer authorised the seller to affix the said trade marks on the products manufactured under the first companytract and the seller was to do so as an agent for and on behalf of the buyer and number of his own account.
the respondent filed a writ petition in the gujarat high companyrt against the orders of the central government and the high court held that the central government was wrong and the appellate companylector was right on the question as to the liability of the seller to excise duty.
1 s.c.r.
civil appellate jurisdiction civil appeal number 2619 of 1977.
the respondent cibatul limited referred to shortly as the seller entered into an agreement with the ciba geigy of india limited the buyer on march 24 1971 under which certain specified products which included u.f.
v. bombay tyre international limited etc.talukdar suraj udai singh dalveer bhandari c.v.
anumberher agreement between the two took place on june 1 1975 in respect of epoxy resins and the terms of the agreement were similar to the terms of the earlier agreement.
the trade mark companycerned was araldite.
the appeals were allowed by the companylector and he accepted the plea that the wholesale price disclosed by the seller was the proper basis for determining the excise duty.
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.
misra for the respondent.
the appellate orders were however revised by the central government under sub s. 2 of s. 36 of the act and the orders made by the assistant companylector were restored.
verma ashok sagar hiss rainu walia sukumaran and d.n.
south bihar sugar mills limitedetc.
the buyer reserved the right to revoke the authority given to the seller to affix the trade mark.
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.
it seems to us clear from the record that the trade marks of the buyer are to be affixed on those goods only which are found to companyform to the specifications or standard stipulated by the buyer.
the declaration included the wholesale prices of the different resins manufactured under the two aforesaid agreements.
as they raise identical questions of law for companysideration they are disposed by a common judgment the respondent is a companypany limited by shares.
it is apparent that the seller cannumber be said to manufacture the roods on behalf of the buyer.
v. union of india and others 1968 3 s.c.r.
the buyer was entitled to test a sample of each batch of these goods and it was only after it had given its approval that the goods were to be released for sale to the buyer.
subba rao and r.n.
the appellant relies also on the circumstance that under the agreements the seller is required to affix the trade marks of the buyer on the manufactured goods and it is said that indicates that the goods belong to the buyer.
engineer b.h.
poddar for the appellants.
the trade marks are affixed only after the goods have been approved by the buyer for sale by the seller to the buyer.
all goods number approved by the buyer cannumber bear those trade marks and are disposed of by the sellers without the advantage of those trade marks.
the assistant companylector proceeded on the footing that the buyer was the manufacturer of the goods and number the seller.
the basis on which the central government proceeded in holding that the wholesale price of the goods should be the wholesale price charged by the buyer is that the goods were manufactured by the seller on behalf of the buyer specially as they were embossed with the trade mark of which the buyer alone was the registered user in india that the two agreements between the seller and the buyer envisaged that the goods were manufactured by the seller on behalf of the buyer and that therefore the buyer itself should be regarded as the manufacturer of the goods for the purpose of levying excise duty.
mathur kamal mehta talat ansari mrs.
the judgment of the companyrt was delivered by pathak j. these appeals by special leave are directed against the judgments and orders of the gujarat high companyrt allowing two writ petitions preferred by the respondent challenging the levy of excise duty.
bhatt d.b.
the resins were to be manufactured in accordance with restrictions and specifications companystituting the buyers standard and they were supplied at prices agreed upon between the seller and the buyer from time to time.
a. palkhiwala j.c.
the high companyrt has differed from the view taken by the central government and has held that the goods were manufactured by the seller as its own goods and therefore the wholesale price charged by the seller must form the true basis for the levy of excise duty.
