CENTRON INDUSTRIAL ALLIANCE LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) The petitioners carry on business as manufacturers of Razor Blades. The petitioners entered into an agreement on May 29, 1970 with a Company known as "Union Carbide India LImited" for the supply of sale of certain quantities of razor blades for a period of 5 years from January 1, 1970. The agreement, inter alia, provides that the petitioners would manufacture and supply certain quantities of razor blades in accordance with the specifications set out in the agreement. The Company had agreed to pay to the petitioners an amount of Rs. 10.50 per hundred blades inclusive of cost of packaging and transportation to the destinations mentioned by the Company.

(2.) It is required to be stated that under Sec. 6 of the Central Excises and Salt Act, 1944 (hereinafter referred to as the "Act"), no person is permitted to engage in the production or manufacture of excisable goods except under the authority of a license granted under the Act. Under the provisions of the said Act, the petitioners submitted the price-list to the respondents on July 23, 1970 and in the said price-list, the value of the blades manufactured and supplied by their under the agreements was shown. The price list was approved by the appropriate authorities and the goods were cleared by the petitioners on the basis of the said price-list and upon payment of excise duty.

(3.) The petitioners received a show cause notice dated March 14, 1971 from the 3rd respondent stating that the correct assessable value of the blades sold by the petitioners to the Union Carbide was Rs. 21.73 per box of hundred blades, being the price at which the said blades were sold by the Union Carbide. The 3rd respondent called upon the petitioners to show cause why the differential excise duty amounting to Rs. 49,402.00 should not be recovered from the petitioners. The petitioners gave their reply setting out various reasons to indicate that they are not agents for the Union Carbide and the agreement between the parties was at arms length. The reply given by the petitioners was not accepted and by an order dated July 3, 1971. the 3rd respondent held that the petitioners are manufacturing the blades for and on behalf of M/s. Union Carbide and the excise duty is recoverable on the selling price of the said Company. The Superintendent of Customs relied upon the letter dated July 23, 1970 addressed by the petitioners to the Excise authorities to come to that conclusion. The petitioners carried an appeal before the Appellate Collector, Central Excise, Bombay, but the same ended in dismissal by an order dated June 27, 1974. The Appellate Collector held that since the entire production is sold to the Company and the Company was entitled to supervise on the quality control of the blades, it cannot be held that the sales are independent, in normal course of business or at an arms length. The orders passed by the two authorities are under challenge in this petition filed under Article 226 of the Constitution of India.