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PETITIONER: JOINT SECRETARY TO THE GOVT. OF INDIA AND OTHERS

       Vs.

RESPONDENT: FOOD SPECIALITIES LTD.

DATE OF JUDGMENT30/09/1985

BENCH: PATHAK, R.S. BENCH: PATHAK, R.S. BHAGWATI, P.N. (CJ) SEN, AMARENDRA NATH (J)

CITATION:  1986 AIR  685            1985 SCR  Supl. (3) 165  1985 SCC  (4) 516        1985 SCALE  (2)667  CITATOR INFO :  F          1987 SC  61  (1)  R          1989 SC 516  (3)  R          1990 SC 202  (8)

ACT:      Central Excise  & Salt  Act, 1944  - Goods manufactured for and  on behalf  of buyer with buyer’s trade mark - Goods sold to  buyer at  wholesale price  - Determination  of  the value of  goods for  the purpose  of levy  of excise  duty - Trade marks  - Whether  value of trade marks can be added to the wholesale price for such determination.

HEADNOTE:      The respondent  used to  manufacture certain  goods for sale in  India by  Messers Nestle’s  Products India  Limited (for short Nestle’s) under certain trade marks in respect of which the  latter was registered as the sole registered user in India.  The goods  were supplied to Nestle’s at wholesale price on  rail at  Moga or  free on  lorry at  factory.  The respondent disputed the value of the goods determined by the excise authorities  for the  purpose of  the levy  under the Central Excises  and  Salt  Act,  1944  and  ultimately  the respondent filed  writ petitions in the High Court. The High Court allowed  the writ  petitions holding that the value of the trade  marks cannot form a component of the value of the goods for the purpose of assessment of excise duty.      In appeal to the Supreme Court, the appellant contended that the  value of  the goods  sold  by  the  respondent  to Nestle’s should,  for the  purpose of  levy of  excise duty, include the  value of  the trade marks under which the goods are sold  in the  market and  that the  value of  such trade marks should  be added  to the wholesale price for which the goods are sold by the respondent to Nestle’s.      Dismissing the appeal. ^      HELD: The value of Nestle’s trade marks cannot be added to the wholesale price charged by the respondent to Nestle’s for  the  purpose  of  computing  the  value  of  the  goods manufactured by  the respondent  in the assessment to excise duty. [168 C-D]      In the  instant case, what are sold and supplied by the

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respondent are goods manufactured by it with the trade marks 166 affixed to them and it is the whole sale price of goods that must determine  the value  for the  purpose of assessment of excise duty. It is immaterial that the trade marks belong to Nestle’s. What  is material is that Nestle’s have authorised the respondent  to  affix  the  trade  marks  on  the  goods manufactured by  it and it is the goods with the trade marks affixed to  them that  are so  sold  by  the  respondent  to Nestle’s. There can therefore be no doubt that the wholesale price at  which the  goods with  the trade  marks affixed to them are  sold by  the respondent  to Nestle’s as stipulated under the agreements would be the value of the goods for the purpose of  excise duty.  That is  the price  at  which  the respondent sells  the goods  to Nestle’s  in the  course  of wholesale trade. [167 H; 168 A-BI

JUDGMENT:      CIVIL APPELLATE  JURISDICTION : Civil Appeal Nos. 1723- 1736 of 1981      From, the  Judgment and  Order dated  31.8.1976 of  the Punjab and  Haryana High Court in Writ Nos. 1969, 4420, 4422 to 4424, 4429 to 4436. 4497 of 1975.      K. Parasaran,  Attorney General  of India , R.N. Poddar and Miss A. Subhashini for the Appellants.      N.A. PaIkhivala,  Soli J.  Sorabjee,  Ravinder  Narain, T.M. Ansari and Miss Rainu Walia for the Respondent.      The Judgment of the Court was delivered by      PATHAK J.  This appeal  by special  leave  is  directed against the  judgment and order dated August 31, 1976 of the High Court  of Punjab  and haryana  allowing a Group of writ petitions filed by the respondent against the levy of excise duty.      The respondent, Messrs. Food Specialities Limited, Moga is a  company registered  under the  Indian  Companies  Act, 1956. It  entered into  a number  of agreements with Messrs. Nestle’s Products (India) Limited, a subsidiary of a foreign company, Messrs.  Nestle’s holdings  Limited, to manufacture for and  on behalf  of  Messrs.  Nestle’s  Products  (India) Limited (hereinafter  referred to  as Nestle’s  )  sweetened condensed milk, soluble coffee, baby milk food, milk powders and infant  cereal foods for sale in India by Nestle’s under certain trade-marks  in respect  of  which  the  latter  was registered  as  the  sole  registered  user  in  India.  The agreement stipulated that the respondent would 167 manufacture the  goods and  supply them  to Nestle’s in such quantities as  Nestle’s might  specify  from  time  to  time subject to  a prescribed  minimum and  maximum, and Nestle’s was obliged  to buy  the products  so  manufactured  by  the respondent. The products were manufactured by the respondent in accordance  with detailed quality specifications supplied by Nestle’s,  and the  price of  the products was determined under the agreements free on rail at Moga or free on lory at factory. The  respondent enjoyed  no interest  in the  trade marks and  labels and  undertook not  to sell  any of  those products to any person other than Nestle’s.      The  products   manufactured  by  the  respondent  were subject to  excise duty under the said Excises and Salt Act, 1944.  The  respondent  disputed  the  value  of  the  goods determined by  the excise authorities for the purpose of the levy, and a number of questions were raised in that context. The controversy was processed through the statutory channels

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provided by the Act and ultimately the respondent filed writ petitions in  the High Court. The High Court found in favour of the  respondent and  quashed the  orders  of  the  Excise authorities and the Government of India impugned in the writ petitions.      In these appeals the only question pressed before us by the learned  Attorney General  on behalf of the appellant is that the  value of  the goods  sold  by  the  respondent  to Nestle’s should,  for the  purpose on  levy of  excise duty, include the  value of  the trade marks under which the goods are sold  in the  market and  that the  value of  such trade marks should  be added  to the wholesale price for which the goods are sold by the respondent to Nestle’s. It is urged by the lea  med Attorney  General that  the High Court erred in holding that  the value  of the  trade marks  cannot form  a component of  the value  of the  goods for  the  purpose  of assessment of  excise duty.  We are of opinion that the High Court was  right in  the view  it took  and the  appeal must rail.      It may  be noticed that the respondent manufactures the goods according  to the  specifications supplied by Nestle’s and affixes  the trade  marks of  Nestle’s on  the goods and supplies the  same to  Nestle’s at a wholesale price free on rail at  Moga or  free on  lorry at factory stipulated under the agreements  with Nestle’s. What are sold and supplied by the respondent  are goods  manufactured by it with the trade marks affixed to them and it is the whole sale price of such goods that  must determine  the value  for  the  purpose  of assessment of  excise duty.  It is immaterial that the trade marks belong to Nestle’s. What is material is that 168 Nestle’s have  authorised the respondent to affix the  trade marks on  the goods  manufactured by  it and it is the goods with the  trade marks  affixed to  them that are sold by the respondent to Nestle’s. There can therefore be no doubt that the wholesale  price at which the goods with the trade marks affixed to  them are  sold by  the respondent to Nestle’s as stipulted under  the agreements  would be  the value  of the goods for  the purpose  of excise duty. That is the price at which the  respondent sells  the goods  to Nestle’s  in  the course of  wholesale trade  and we fail to see how the value of the trade marks could be added to the wholesale price for the purpose  of determining  the value  of the goods for the purpose of levy of excise duty.      We are satisfied upon the particular facts of this case that the  value of  Nestle’s trade  marks cannot be added to the wholesale  price charged  by the  respondent to Nestle’s for  the  purpose  of  computing  the  value  of  the  goods manufactured by  the respondent  in the assessment to excise duty.      The appeals are dismissed with costs. M.L.A.                                    Appeals dismissed. 169