165
JOINT SECRETARY TO THE GOVT, OF INDIA AND OTHERS
v.
FOOD SPECIALITIES LTD.
SEPIJ;;i18ER 30, 1985
[P.N. llHAG'WATI, C.J., R.S. PATHAK AND AMARENDRA NATH SEN, JJ.]
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
A
B
**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
E
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.
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
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
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
#### c
D
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
A
#### c
D
168 SUPREME COURT REPORTS [1985] SUPP.3 s.c.R.
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 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 purpos~ of determining the value of the goods for
the purpose of levy of excise duty.
**We** **nre sai:.isfied** **upon** **the** **particular** **facts** **of** **this** **case**
that the valu~ of Nestle's trade marks cannot be added to the
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.
#
