IMPORTANT POINT
Where assessee manufactured biscuits out of raw material given to it by B and assessee delivered packages of manufactured biscuits under instruction of B assessable value for excise duty would be cost of raw material plus processing charge received but the profit of B or expenses which were incurred after the manufacture of the biscuit by assessee could not be taken into account.

JUDGMENT

Kirpal, J.-The appellant who is manufacturing biscuits is seeking to impugn the assessable value of the biscuits manufactured by it for M/s. Britannia Industries Limited (hereinafter referred to as Britannia ), pursuant to an agreement which had been entered into between the two Companies.

2. It is not in dispute that the appellant was incorporated on 30.12.1982 and after making arrangements for obtaining finance it started a Unit from 3.1.1985 wherein it commenced commercial production of its own brand of biscuits.

3. On 15.12.1986, an agreement was entered into between the appellant and Britannia which required the appellant to manufacture biscuits for Britannia. The terms of the agreement, broadly speaking, envisaged that the ingredients for the manufacture of biscuits as well as the recipe or method by which the biscuits were to be manufactured were to be supplied by Britannia. The ingredients so supplied were also to be regarded as belonging to Britannia for the manufacture of the biscuits. The appellant was required to make packages as directed by Britannia and then supply the same under Britannia s instructions. For the work done, the appellant was entitled to receive certain amount which was to be fixed from time to time. The agreement also contemplated that if the biscuits were not manufactured upto the required standard, then the same were to be destroyed and in respect of those biscuits no payment was to be made to the appellant and, on the contrary, the appellant would become liable to pay for the cost of the ingredients which had got spoiled.

4. What is material in this agreement is that there was a clause which specifically provided that "relationship between the parties shall always be that of principal and principal and not principal and agent". The agreement also gave liberty to the appellant to continue to manufacture biscuits under other brands and to sell the same.

5. It is nobody s case that the Unit in question was established by or at the behest of Britannia. The Unit had come into existence before the agreement dated 15.12.1986 entered into between the parties.

6. The trouble for appellant arose when it received a show cause notice dated 16.11.1987 from the Assistant Collector requiring the appellant to show cause as to why the assessable value should not be approved on the basis of Britannia s wholesale cash price. A reference in the said show cause notice was made to the agreement dated 15.12.1986.

7. The appellant showed cause but the Assistant Collector by his order dated 29.6.1988 came to the conclusion that the biscuits manufactured by the appellant were to be cleared and excise to be paid on the value of the said biscuits calculated after taking into consideration Britannia s wholesale price.

8. The appellant filed an appeal before the Collector (Appeals) and the Collector (Appeals) passed an order rejecting the said appeal and affirmed the order of the Assistant Collector dated 29.6.1988. In fact the Tribunal held that the appellant was an agent of Britannia and therefore it is the Britannia s wholesale price which is to be taken into consideration for arriving at the normal value for the purposes of computing the excise duty of the biscuits manufactured by the appellant.

9. After hearing the learned counsel for the parties, we are of the opinion that the point in issue is no longer res integra. This Court has time and again held that for the purpose of ascertaining assessable value post-manufacturing expenses have not to be taken into consideration. This Court in M/s. Ujagar Prints & Ors. (II) v. Union of India & Ors.1, was concerned with a number of issues raised by the appellant. The appellant was a processing house which inter alia processed the grey fabrics. Amongst other issues which were raised, one of the contentions urged on behalf of the appellant therein was that the grey fabric which was given for processing continued to belong to the customer and the processing house was only entit