DIPAK MISRA,J. - (1.) The respondent is a manufacturer of Indian Made Foreign Liquor (IMFL) and is a registered owner of several known brands of IMFL. The respondent, as the facts have been unfolded, also "manufactures" food flavours at its unit at Shayura Orchards, Kumbalagodu, Bangalore and the present appeal pertains only to food flavours.
(2.) The respondent has got its own distillery units at various places. In addition, it has entered into agreements with various manufacturers of liquor who had their bottling plants and also appropriate licences to manufacture liquor. With these liquor manufacturers the respondent had entered into Usership Agreement whereby they were permitted to use the trademark of the respondent on IMFL manufactured by them on the terms and conditions mentioned in the agreement. The respondent had also entered into another agreement with the liquor manufacturers called the manufacturing agreement which provides for manufacture and sale by liquor manufacturers of IMFL under the respondent's brand names or its purchase by the respondent on the terms and conditions mentioned in the agreement. It is stipulated in the agreement that sale and purchase of IMFL under the agreement shall be on principal to principal basis. These liquor manufacturers were to purchase raw materials such as rectified spirit, extra neutral alcohol and blending and packing materials in accordance with the standards and specifications set forth in the agreement and from the approved suppliers. It was also provided in the manufacturing agreement that modalities of price payable by the respondent to the liquor manufacturers for sale of IMFL and the price was to be the aggregate of cost of rectified spirit, extra neutral alcohol, blending and packing materials,storage,insurance premium and all manufacturing costs and expenses as mentioned in the agreement. In addition, the liquor manufacturers were entitled to the margin of profit called service charges in the agreement. The total price so paid to the liquor manufacturers was the sole consideration for the sales and such price is known as Ex-Distillery Price (EDP), which includes all costs, charges and expenses incurred by the liquor manufacturers for manufacture of IMFL as well as their margin described as service charges. The IMFL manufactured by liquor manufacturers was affixed with the brand names owned by the respondent. It provided the manufacturing logo, quality control, product research,etc.The Respondent provided technical know-how/expertise to liquor manufacturers for manufacture of IMFL.
(3.) The liquor manufacturers sell IMFL manufactured by them either to the respondent or to the customers identified by the respondent or to the government-owned corporations.The sales personnel of the respondent contact the customers, book orders, collect outstanding amounts from the market, collect statutory forms like C-Forms, Excise Verification Certificates, Permits, etc. and forward the same to the liquor manufacturers. The respondent would promote its brands through marketing teams and operation of various promotional schemes and advertisements and all expenses with regard to the same are incurred by the respondent. The liquor manufacturers were entitled to receive EDP which include the actual cost of IMFL manufactured by them plus the profit margin. The prices were negotiated by the respondent even when the goods were sold by the liquor manufacturers to such buyers and they would bill by such buyers at the rates negotiated and determined by the respondent.;