1979 (12) TMI 63 - HC - Central Excise

Court directs withdrawal of notices against petitioner for failure to obtain license under Central Excises and Salt Act

PHILIPS INDIA LIMITED AND OTHERS Versus UNION OF INDIA AND OTHERS

The court allowed the writ petition, directing the respondents to withdraw the notices and desist from taking any action against the petitioner for ... Manufacture on behalf - Licence - Trade Mark owner - Manufacturing on behalf - Effect of common directors Issues Involved:1. Whether the petitioner is a 'manufacturer' under Section 2(f) of the Central Excises and Salt Act, 1944.2. Whether the petitioner is required to obtain a Central Excise Licence under Rule 174 of the Central Excise Rules, 1944.3. The relevance of the trade mark and brand names in determining the status of the petitioner as a manufacturer.4. The impact of shared directorship between the petitioner and the supplier company on the determination of control and manufacturer status.Detailed Analysis:Issue 1: Whether the petitioner is a 'manufacturer' under Section 2(f) of the Central Excises and Salt Act, 1944The petitioner argued that it is not a manufacturer of the lamps purchased from the company, as it neither engaged the company as a contractor nor acted as its agent. The Central Excise Authorities contended that the petitioner controlled and managed the manufacturing process, and since the lamps bore the petitioner's trade name, the petitioner should be considered a manufacturer.The court examined the definition of 'manufacturer' under Section 2(f) of the Act, which includes any process incidental or ancillary to the completion of a manufactured product and any person who engages in their production or manufacture on his own account. The court concluded that a person who simply places orders with a company for goods manufactured according to his specifications does not fall within the definition of 'manufacturer.' The owner of the factory alone is engaged in the manufacturing activity 'on his own' within the meaning of Section 2(f).Issue 2: Whether the petitioner is required to obtain a Central Excise Licence under Rule 174 of the Central Excise Rules, 1944The petitioner received notices from the Superintendent of Central Excise, requiring it to obtain a licence under Rule 174 for the lamps purchased from the company. The court noted that Rule 174 mandates every manufacturer to obtain a licence. However, since the petitioner was not considered a manufacturer under Section 2(f), it was not required to obtain a licence under Rule 174.Issue 3: The relevance of the trade mark and brand names in determining the status of the petitioner as a manufacturerThe Central Excise Authorities argued that since the lamps bore the petitioner's trade name, the petitioner should be considered a manufacturer. The court rejected this argument, stating that a trade mark is merely a sign or device indicating the origin or ownership of the article. The use of a trade mark does not necessarily imply that the articles are manufactured by its user. The court emphasized that trade marks and the manufacture of goods are distinct concepts and should not be intermixed.Issue 4: The impact of shared directorship between the petitioner and the supplier company on the determination of control and manufacturer statusThe Central Excise Authorities suggested that since one of the directors of the supplier company was also a director of the petitioner company, the supplier company should be deemed a dummy company controlled by the petitioner. The court dismissed this argument, stating that shared directorship does not indicate that one company is a dummy for the other. The court referred to a previous decision where it was held that the supplier company was a separate legal entity carrying on business on its own account.Conclusion:The court allowed the writ petition, directing the respondents to withdraw the notices dated December 10, 1975, and June 7, 1976, and to desist from taking any action against the petitioner for failing to obtain a licence under the Central Excises and Salt Act. The court held that the petitioner was not a manufacturer under Section 2(f) of the Act and was not required to obtain a licence under Rule 174 of the Central Excise Rules, 1944.