The appellant herein was engaged in the manufacture of
certain articles from vulcanized rubber as bushes for use in
the motor vehicles. Indubitably, the appellant is a Small
Scale Industrial unit (hereinafter referred to as 'SSI' for
short). The appellant has its own brand name “VIR” and has
been manufacturing these products under the said brand name
and supplying the same to various customers. In addition, JUDGMENT the appellant was also having job orders from some automobile
companies like Hindustan Motors, Kinetic Honda, etc.
Insofar as orders for manufacture of spare parts placed
by these automobile companies are concerned, on the said
goods, the appellant had been putting the identification mark
such as “HM”, “PAL”, “KH”, etc. The goods which were
supplied to these automobile companies used to be cleared by
the appellant on payment of excise duty. However, in respect
of manufacture of its own goods under the brand name “VIR”,
the appellant claimed SSI benefit in terms of Notification
No. 1/93 which provides for exemption from payment of excise
duty on fulfillment of certain conditions. It is admitted
case that the appellant fulfils all the conditions mentioned
in the aforesaid notification except one, in respect of which
the dispute has arisen. This condition under the
notification stipulates that the aggregate value of
clearances in the preceding financial year should be less
than Rs.3 crores. There is a lis as to whether the appellant
fulfils this condition or not.
While interpreting this notification, the Department
included the value of goods supplied to the automobile
companies under the brand name 'HM” “PAL”, “KH”, etc. and on
that basis, came to the conclusion that the total value of
goods cleared by the assessee in the previous financial year was much more than Rs.3 crores. The contention of the appellant, on the other hand, was that since the appellant
had been using the brand name of the automobile industries
while carrying out their job work and even clearing those
goods on payment of excise duty, the turnover in respect of
these goods should not be included while arriving at the
figure of Rs.3 crores. To put it otherwise, submission was
that it is only in respect of “VIR” brand goods, which is the
proprietory brand of the appellant, the value of clearances
in the preceding year should be taken into consideration and
if, that is done, the total value of clearances was much less
than Rs. 3 cores. This contention of the appellant, however,
has not been accepted by the authorities below including
Customs, Excise & Gold (Control) Appellate Tribunal
(hereinafter referred to as 'CEGAT'). Rejecting the
aforesaid contention of the assessee and accepting the plea
of the Department, the CEGAT has gone by the definition of
“brand name” or “trade name” contained in para 4 of the
aforesaid Notification and reads as under: -
“4. The exemption contained in this notification
shall not apply to the specified goods bearing a brand
name or trade name, whether registered or not, of
another person, except in the following cases: -
(a) where such specified goods, being in the nature
of components or parts of any machinery or equipment or
appliances, are cleared for use as original equipment
in the manufacture of the said machinery or equipment
or appliances by following the procedure laid down in
Chapter X of the Central Excise Rules, 1944. Provided
that manufacturers, whose aggregate value of clearances
for home consumption of such specified goods for use as
original equipment does not exceed rupees fifty lakhs
in a financial year as calculated in the manner
specified in the said Table, may submit a declaration
regarding such use instead of following the procedure JUDGMENT laid down in Chapter X of the said rules;
(b) where the specified goods bear a brand name or
trade name of -
(i) the Khadi and Village Industries Commission; or
(ii) a State Khadi and Village Industry Board; or
(iii) the National Small Industries Corporation; or
(iv) a State Small Industries Development
Corporation; or
(v) A State Small Industries Corporation.
5.This notification shall come into force on the 1st day
of April, 1999.
Explanation.- For the purposes of this notification,-
(A) “brand name” or “trade name” shall mean a brand
name or trade name, whether registered or not, that is
to say a name or a mark, such as symbol, monogram,
label, signature or invented word or writing which is
used in relation to such specified goods for the
purpose of indicating, or so as to indicate a
connection in the course of trade between such
specified goods and some person using such name or mark
with or without any indication of the identity of that
person;”
The aforesaid para of the Notification specifically
mentions that the exemption contained in that Notification is
not to apply to those goods bearing brand name or trade name
whether registered or not of another person, except in
certain cases which are mentioned therein. The brand name or
trade name is defined to mean a brand name or trade name
whether registered or not, that is to say, a name or a mark
such as a symbol, monogram, label, signature or invented
word, etc., for the purpose of indicating or so as to
indicate a connection in the course of trade between such
specified goods and some person using such name or mark with
or without any indication of the identity of that person.
From the aforesaid definition of brand name, it becomes JUDGMENT apparent that on the goods manufactured by the appellant for
the aforesaid automobile companies, the appellant had been
using brand name or trade name on those goods. In such
cases, in respect of those goods which are manufactured for
the other person, obviously no exemption is to be given as
the aforesaid Notification does not apply to those specified
goods. To put it pithily, what would be the position if the
appellant was doing job work only for other companies and
using their brand name on the goods manufactured? Was it
permissible to seek exemption of notification in such
circumstances? This issue has been considered time and again
by this court in number of judgments.
In a recent judgment dated 11.03.2015 pronounced by
this very Bench in the case of 'Commissioner of Central
Excise, Jamshedpur v. M/s. Tubes & Structurals and Another'
[Civil Appeal Nos. 7955-7956 of 2003], after taking note of
two earlier judgments of this court, the issue was dealt with
as under: -
“This issue, on the facts of the present case as
noted above, is no more res integra and has been settled
by few judgments of this Court. It is not necessary to
refer to all those judgments. Our purpose would be
served in mentioning the judgment titled Commissioner of
Central Excise, Chennai-II v. Australian Foods India (P)
Ltd. (2013) 287 E.L.T. 385 (SC). In the said case the
Court took note of the original para 4 in Notification
No. 1/93 dated 28.2.1993 where the words mentioned are
“the exemption contained in this Notification shall not
apply to the specified goods, bearing a brand name or
trade name (registered or not) of another person.”
This para 4 was amended vide Notification No.
59/94-CE dated 1.3.1994 and the word “affixes” was
substituted by the word “bearing”. The reason for this JUDGMENT substitution is explained in para (iii) of para J of the
changes 1994-95 dealt with “changes in the SSI scheme”.
This is so stated in para 10 of the said judgment which
we reproduce below for the sake of clarification:
Part (iii) of Para J of the Budget Changes 1994-
95 dealt with “Changes in the SSI schemes” explains the
purpose of the amendment in the following words:
“(iii) Brand name provision has been
amended so as to provide that SSI concession
shall not apply to the goods bearing the brand
name or trade name of another person. The
effect of this amendment is that if an SSI unit
manufactures the branded goods for another
person irrespective of whether the brand name
owner himself is SSI unit or not, such goods
shall not be eligible for the concession.
Another implication of this amendment is that
the requirement of affixation or brand name by
the SSI unit has been changed and now the only
condition is that the goods cleared by SSI unit
bearing a brand name of another person shall
not be eligible for the concession irrespective
of the fact whether the brand name was affixed
by the SSI unit or that, the input material
used by the SSI unit was already affixed with
brand name.”
It becomes clear from the reading of the aforesaid
paras that amendment in para 4 in the manner mentioned
above was brought to deny the benefit of Notification
to those SSI units which have been making use of
branded good for another person irrespective of whether
the brand name owner himself is SSI unit or not. It
was also made abundantly clear here that the
requirement of affixation or brand name by the SSI unit
was immaterial. That was the purpose for substituting
the word “affixing” by the word “bearing”. Going by
the aforesaid consideration this Court held in
Australian Foods (India) (P) Ltd. case that after this
amendment in para 4 it was not necessary that there has
to be affixation of the name or mark on the goods.
Applying the ratio of this case to the facts of
the present case, the irresistible conclusion is to
hold that the impugned order of the CEGAT is untenable
and not in accordance with law. We may mention that
while giving its decision the CEGAT has gone by the
unamended para 4 without taking into consideration the
amended para and the implication thereof.”
Once we come to the conclusion that in respect of those
goods where brand name of other party is used on manufactured
goods and that other party is not a SSI unit, exemption is
not available, it would lead to inevitable result that the
value of such goods cannot be added as well, while
considering the value of the goods cleared by the assessee in
the previous year.
We, however, find that the CEGAT has given two other
reasons to deny the relief to the appellant. In its order it
has observed that letters such as “HM” and “PAL”, no doubt,
were initials of the buyers of the goods and they constitute
the brand name as well, however, what was indicated was only
initials with the sole purpose to identify the goods for
particular automobile company. After the supply of these
goods, the said automobile companies were affixing their
proper trade mark/ brand name thereupon. On this basis, it
is mentioned that the Notification in question would not
apply. This reasoning of the CEGAT is contrary to the law
laid down by this court in 'Kohinoor Elastics (P) Ltd. v.
Commissioner of Central Excise, Indore' [(2005) 7 SCC 528].
This very argument was repelled by the court in the following
words:
“However, the words “used in relation to such
specified goods for the purpose of indicating or so as
to indicate a connection in the course of trade
between such specified goods and some person using
such name or trade between such specified goods and
some person using such name or mark” cannot be read JUDGMENT dehors clause 4. They have to be read in the context
of clause 4. The word “used” indicates use by the
manufacturer. It is the manufacturer, in this case
the appellant, who is applying/affixing the
brand/trade name on the goods. Thus, the words “for
the purpose of indicating” refers to the purpose of
the manufacturer (appellant). The “course of trade”
is of that manufacturer and not the general course of
trade. Even if a manufacturer only manufactures as
per orders of customer and delivers only to that
customer, the course of trade, for him is such
manufacture and sale. In such cases it can hardly be
argued that there was no trade. Such a manufacturer
stated that it was not argued that here was no trade.
Such a manufacturer may, as per the order of his
customer, affix the brand/trade name of the customer
on the “goods” manufactured by him. This will be for
the purpose of indicating a connection between the
“goods” manufactured by him and his customer.”
The other reason given by the CEGAT is that “HM” and
“PAL” are not the brand names. Here again, it has fell into
legal error. Similar contention was rejected by this Court
in 'Commissioner of Central Excise, Trichy v. M/s. Grasim
Industries Ltd.'[2005 (3) SCR 466] in the following words: -
“In our view, the Tribunal has completely
misdirected itself. The term “brand name or trade name”
is qualified by the words “that is to say”. Thus, even
though under normal circumstances a brand name or a
trade name may have the meaning as suggested by the
Tribunal, for the purposes of such a Notification the
terms “brand name or trade name” get qualified by the
words which follow. The words which follow are “a name
or a mark”. Thus even an ordinary name or an ordinary
mark is sufficient. It is then elaborated that the
“name or mark” such as a “symbol” or a “monogram” or a
“label” or even a “signature of invented word” is a
brand name or trade name. However, the contention is
that they must be used in relation to the product and
for the purposes of indicating a connection with the
other person. This is further made clear by the words
“any writing”.
The upshoot of the aforesaid discussion would be to
hold that value of the goods meant for “HM”, “PAL”, “KH”,
etc. could not have been included while considering as to
whether the appellant is entitled to the benefit of the
aforesaid Notification or not. Once that is excluded and the
case is confined to the brand name 'VIR' which is the
appellant's own brand name and in respect of which the
appellant had claimed exemption, the value of goods cleared
in the previous year was less than Rs.3 crores. Therefore,
the appellant shall be entitled to the exemption under the
said Notification.
This appeal is, accordingly, allowed, upsetting the
order of CEGAT and the authorities below, with direction to
give the appellant exemption of the aforesaid Notification
for the year in question.
[ A.K. SIKRI ]
[ ROHINTON FALI NARIMAN ] New Delhi; March 27, 2015