JOINT SECRETARY TO THE GOVT, OF INDIA AND OTHERSversusFOOD SPECIALITIES LTD.

                                                                165


        JOINT SECRETARY TO THE GOVT, OF INDIA AND OTHERS
                                 v.                                   A
                     FOOD SPECIALITIES LTD.

                       SEPIJ;;i18ER 30, 1985

  [P.N. llHAG'WATI, C.J., R.S. PATHAK AND AMARENDRA NATH SEN, JJ.]
                                                                      B
     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
detennination.                                                        C

     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         D
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      E
the goods for the purpose of aasesSDlellt 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      F
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      G
the wholesale price charged by the resporident 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
respondent are goods manufactured by it with the trade marks
                                                                      H
    166               SUPREME COURT REPORTS      [1985] SUPP.3 s.c.R.

A   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 imnaterial 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
B   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 tiie 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-BJ
c
          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.
D
          K. Parasaran, Attorney General of India , R.N. Poddar and
    Miss A. Subhashini for the Appellants.

          N.A. Palkhivala, Soli J. Sorabjee, Ravinder Narain, T.M.
    Ansari and Miss Rainu Walia for the Respondent.
E
          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
F   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,
G   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
H   India. The agreement s ti pula ted that the respooden t would
     JT. ~ECY. GOVT. OF INDIA v. FOOD SPECIALITIES [PATHAK, J.]    167


    manufacture the goods and supply them to Nestle's in such             A
    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     B
    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            c
    respondent disputed the value of the goods determined by the
    excise auth9rities for the purpose of the levy, and a number of

-   questions were raised in that context. The controversy was
    processed through the statutory channels 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      D
    orders of the Excise authorities and the Government of India
    impugned in the writ petitions.
                            ' only question pressed before us by· the
          In these appeals 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     E
    the purpose of levy of excise duty, include the vlaue of the
    trade marks under which the goods are sold in the market and that
    the vlaue 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 learned Attorney General that the High Court
    erred in holding that the value of the trade marks cannot form a
    component of the vlaue of the goods for the purpose of assessment     F
    of excise duty. We are of opinion that the High Court was right
    in the view it took and the appeal must fail.

          It may be noticed that the respondent manufactures the
    goods according to the specificatj.ons supplied· by Nestle's and
    affixes the trade marks of Nestle's on the goods and supplies         G
    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 i. t 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 dutye It is immaterial
    that the trade marks belong to Nestle's· What is material is that     H
    168               SUPREME COURT REPORTS       [1985] SUPP.3 s.c.R.

A   l'<estle' s have anthorised 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 agree-
    ments 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 purpos~ of determining the value of the goods for
    the purpose of levy of excise duty.
c
           We nre sai:.isfied upon the particular facts of this case
    that the valu~ of Nestle's trade marks cannot be added to the



D
    wholesale price charged by the respondent to Nestle's for the
    purp•)Se of computing the value of the goods manufactured by the
    respondeat in the assessment to excise duty.
                                                                          -
          The appeals are dismissed with costs.




                                                    Appeals dismissed.