Court rules in favor of beverage manufacturers on excise duty exemption eligibility under Notification No. 211/77.

The court determined that Messrs Spencer and Co. Ltd. were the manufacturers of the beverage and thus entitled to the excise duty exemption under Notification No. 211/77. It held that the franchise agreement did not make them agents of Messrs Modern Bakeries India Ltd. The court also found that seeking revision from the Central Board of Excise was not a viable alternative remedy. Consequently, the court quashed the Assistant Collector's order and granted relief to Messrs Spencer and Co. Ltd., without costs.

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Issues Involved:
1. Determination of the 'manufacturer' for the purpose of excise duty exemption under Notification No. 211/77.
2. Applicability of the exemption under Notification No. 211/77 to Messrs Spencer and Co. Ltd.
3. Jurisdiction of the court under Article 226 of the Constitution of India.

Summary:

1. Determination of the 'manufacturer' for the purpose of excise duty exemption under Notification No. 211/77:

The Assistant Collector of Central Excise, Madras IV Division, treated Messrs Spencer and Co. Ltd. as 'bottlers' for Messrs Modern Bakeries India Ltd., and held that the exemption in Notification No. 211/77 was not applicable to them. The court examined the definition of 'manufacturer' u/s 2(f) of the Central Excises and Salt Act, which includes any person who engages in the production or manufacture of excisable goods on his own account. The court found that Messrs Spencer and Co. Ltd. purchased raw materials, including the composition from Messrs Modern Bakeries India Ltd., and manufactured the drink &8377; 77' independently. The agreement between the two companies indicated that Messrs Spencer and Co. Ltd. were the sole manufacturers of the bottled beverage &8377; 77', and Messrs Modern Bakeries India Ltd. had no role in the manufacturing process or profit realization.

2. Applicability of the exemption under Notification No. 211/77 to Messrs Spencer and Co. Ltd.:

The court referred to previous decisions, including Poona Bottling Co. v. Union of India and In re: Punjab Beverages Ltd., which established that restrictions imposed by a franchise agreement to safeguard trade mark interests do not make the franchisee an agent or employee of the franchisor. The court concluded that Messrs Spencer and Co. Ltd. were the manufacturers of &8377; 77' and thus entitled to the exemption under Notification No. 211/77. The court also noted a letter from Messrs Modern Bakeries India Ltd. confirming that Messrs Spencer and Co. Ltd. were given the franchise to manufacture and market the drink, and their role was limited to supplying components.

3. Jurisdiction of the court under Article 226 of the Constitution of India:

The respondents contended that the petitioner could not invoke the jurisdiction of the court under Article 226 since there was an alternative remedy by way of revision to the Board of Central Excise and Central Government. However, the court found that the Central Government and the Law Ministry had already decided against the petitioner, making any approach to the Central Board of Revenue or the Central Government illusory and not a remedy in the eye of law.

Conclusion:

The court quashed the impugned order dated 25-8-1978 passed by the Assistant Collector of Central Excise, Madras IV Division, and held that Messrs Spencer and Co. Ltd. were entitled to the exemption under Notification No. 211/77. The rule nisi was made absolute, and there was no order as to costs.

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