Brand owner not treated as manufacturer when goods are made by an independent unit under its own control and risk.

Where goods are manufactured in an independent unit's factory under a supply agreement, the brand owner is not the manufacturer for excise purposes if that unit owns and controls the plant, machinery, labour and raw materials and bears the commercial risk of defects. On the stated facts, the V Beltings were produced by the other concern on its own account and sold to the appellant at agreed prices, with rejection and return terms showing no obligation on the appellant to accept all goods. Accordingly, the brand owner could not be treated as the manufacturer, and duty could not be computed on the appellant's retail sale price.

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Issues: Whether the appellant, as brand name owner, could be treated as the manufacturer of V Beltings produced in another concern's factory under the supply agreement and made liable to duty on the basis of the retail price charged by the appellant.

Analysis: The goods were manufactured in the premises of the other concern, which owned the factory, plant, machinery, labour and raw materials and supplied the goods to the appellant at agreed prices. The appellant was not obliged to purchase goods irrespective of quality, and the agreement provided for rejection, return, and treatment of defective goods as seconds on specified terms. On these facts, the production was by the other concern on its own account and not by the appellant on its own account through that concern. The situation was materially similar to the earlier authority relied upon, where the true manufacturer was the party actually carrying on the production and selling the goods to the buyer.

Conclusion: The appellant could not be regarded as the manufacturer, and the duty demand based on the appellant's retail sale price could not stand.

Ratio Decidendi: Where goods are manufactured by an independent unit under an agreement, with the unit owning and controlling the manufacturing apparatus and bearing the commercial risks of defective goods, the brand owner is not the manufacturer for excise purposes unless the arrangement shows production on the brand owner's own account.

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