Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 7
CASE NO.:
Appeal (civil) 7449 of 2003
PETITIONER:
M/s Reiz Electrocontrols Pvt. Ltd
RESPONDENT:
Commr. of Central Excise, Delhi-I
DATE OF JUDGMENT: 31/07/2006
BENCH:
ARIJIT PASAYAT & LOKESHWAR SINGH PANTA
JUDGMENT:
J U D G M E N T
ARIJIT PASAYAT, J.
Challenge in this appeal is to the decision of the Central
Excise and Gold Control Appellate Tribunal, New Delhi (in
short ’the Tribunal’) holding that the authorities had rightly
denied small scale exemption to Reiz Electrocontrols Pvt. Ltd.
(in short the ’REPL’) and Reiz Enterprises (in short the ’RE’). It
was further held that the demands of duty from them and
imposition of penalty as well as interest levied under Central
Excise Act, 1944 (in short the ’Act’) and Central Excise Rules,
1944 (in short the ’Rules’) do not suffer from any infirmity.
However, the case was remanded to the jurisdictional
Commissioner for re-computing the duty demands and re-
determining penalty. However, in the light of observations
made, penalties imposed on Shri Atul Agarwal and Sh.
Siddarth Agarwal under Rule 209A were set aside.
The back ground facts in a nutshell are as follows:
M/s RE is a proprietary concern of Shri Atul Agarwal and
is engaged in the manufacture of Electronic Fan Regulators,
Dimmers and Remote Control Switches under the brand name
’RE1Z since 1988. In the year 1993, M/s REPL was
constituted with Shri Atul Agarwal and his two brothers Shri
Siddarth Agarwal and Shri Ravindra Agarwal as its Directors.
M/s REPL was engaged in the manufacture of Electronic
transformers. Both the units manufacture their goods under
a common brand name of ’REIZ’. The Commissioner, Central
Excise-I, New Delhi by his order dated 31.10.2001 held that
since the brand name ’REIZ’ belonged to M/s RE till its
transfer to REPL in 2000, the Electronic transformers
manufactured under brand name ’RETZ’ by REPL till the
transfer were ineligible for small scale exemption, inasmuch as
under the Notification no.1/93 a manufacturer affixing the
brand name of another person was ineligible for the
exemption. Similarly, it was held that M/s RE became
ineligible for exemption once the brand name REIZ was
transferred on 30.3.2000 to REPL. Appeals were preferred
before the Tribunal questioning duty, penalty and interest
levied. Tribunal disposed of the appeals as aforenoted.
Tribunal noted the position as follows:
"It is a specific condition under
Notification No. 1/93 that the goods
manufactured under the brand name of
another person is not eligible for exemption
under the notification. Investigations have
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 7
established that Shri Atul Agarwal on behalf of
M/s. RE had applied on 12.1.1993 for
registration of brand name of ’REIZ’ in respect
of goods including electronic transformer. This
registration application was allowed in his
favour in 2000. It is well settled that
registration of trade mark/brand name once
granted relates back to the date of application.
Thus, in respect of electronic transformer also
Mr. Atul Agarwal, proprietor of RE became
owner of the brand name ’REIZ’ w.e.f 1993.
Therefore, the electronic transformers
manufactured by M/s. REPL with the brand
name REIZ impugned in the present
proceeding being manufactured subsequent to
1993 became ineligible for small exemption on
account of the use of brand name ’REIZ’ which
belonged to another person (RE). On account
of the subsequent transfer of the brand name
of REPL, RE has also become ineligible for
exemption in respect of the goods produced
under that brand name subsequent to the
transfer."
Stand of the appellants before the Tribunal was that M/s
RE never manufactured electronic transformer and therefore,
in respect of that item, the brand name REIZ belonged to M/s
REPL. It was also submitted that REPL had applied for
registration of that brand name in their favour for electronic
transformer in 1995. In these circumstances, it has to be held
that electronic transformers manufactured by the REPL were
not manufactured under the brand name of another person.
The demands in the present case were raised under
extended period permitted in the proviso 11A of the Act, on the
ground that, the non-levy in the result of suppression of facts
with intention to evade payment of duty. It was contended that
there was no suppression of facts in as much as both the
manufacturers had filed declaration before the Central Excise
authorities that goods are manufactured under the brand
name belonging to them and brand name of another person is
not used It is also stressed that both the units are located in
the same building in the jurisdiction of same Central Excise
Superintendent and therefore, the facts of the cases were
known to the Central Excise authorities and a change of
suppression of facts is not maintainable.
The respondents pointed out that in view of the specific
prescriptions in the Notification the demands have been
rightly raised.
As noted above the contentions did not find acceptance
by Tribunal and, therefore, the impugned order was passed.
Stands before the Tribunal were reiterated by learned
counsel for the appellant. Additionally, it was submitted that
the appellant had in the meantime obtained a certificate under
the Trade Marks Act, 1999 (in short the ’Trade Marks Act’) and
the certificate of registration of trade mark covered the period
in question. Therefore, even if it is conceded that the
Tribunal’s view is correct no duty, penalty or interest can be
levied.
So far as the views regarding non-eligibility are
concerned view expressed by this Court in several cases needs
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 7
to be noted.
In Commissioner of Central Excise, Chandigar-I v.
Mahaan Dairies [2004 (166) ELT 23 (SC)] it was noted (in para
6) as follows:
"We have today delivered a judgment in
Commissioner of Central Excise, Trichy v.
Rukmani Pakkwell Traders \026 2004 (165) E.L.T.
481 (S.C.) (Civil Appeal Nos. 3227-3228/1998)
wherein we have held in respect of another
Notification containing identical words that it
makes no difference whether the goods on
which the trade name or mark is used are the
same in respect of which the trade mark is
registered. Even if the goods are different so
long as the trade name or brand name of some
other Company is used the benefit of the
Notification would not be available. Further,
in our view, once a trade name or brand name
is used then mere use of additional words
would not enable the party to claim the benefit
of Notification."
In Union of India v. Paliwal Electricals (P) Ltd. and
Another [(1996) 3 SCC 407] it was noted (in paras 10 and 11)
as follows:
"10. We are of the opinion that while
examining the challenge to an exemption
notification under the Central Excise Act, the
observations in the decisions aforesaid should
be kept in mind. It should also be remembered
that generally speaking the exemption
notification and the terms and conditions
prescribed therein represent the policies of the
Government evolved to subserve public
interest and public revenue. A very heavy
burden lies upon the person who challenges
them on. the ground of Article 14. Unless
otherwise established, the court must presume
that the said amendment was found by the
Central Government to be necessary for giving
effect to its policy (underlying the notification)
on the basis of the working of the said
notification and that such an amendment was
found necessary to prevent persons from
taking unfair advantage of the concession. In
fact, in this case, the explanatory note
appended to amending notification says so in
so many words. If necessary, the Court could
have called upon the Central Government to
establish the reasons behind the amendment.
(It did not think it fit to do so.) It is equally
necessary to bear in mind, as pointed out
repeatedly by this Court, that in economic and
taxation sphere, a large latitude should be
allowed to the legislature. The courts should
bear in mind the following observations made
by a Constitution Bench of this Court in R.K.
Garg v. Union of India [1981 (4) SCC 675]:
(SCC pp. 690-91, para 8)
"Another rule of equal importance
is that laws relating to economic
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 7
activities should be viewed with greater
latitude than laws touching civil rights
such as freedom of speech, religion etc.
It has been said by no less a person
than Holmes, J. that the legislature
should be allowed some play in the
joints, because it has to deal with
complex problems which do not admit
of solution through any doctrinaire or
strait-jacket formula and this is
particularly true in case of legislation
dealing with economic matters, where,
having regard to the nature of the
problems required to be dealt with,
greater play in the joints has to be
allowed to the legislature. The Court
should feel more inclined to give
judicial deference to legislative
judgment in the field of economic
regulation than in other areas where
fundamental human rights are
involved. Nowhere has this admonition
been more felicitously expressed than
in Morey v. Doud [354 US 457 (1957)]
where Frankfurter, J. said in his
inimitable style:
’In the utilities, tax and
economic regulation cases, there
are good reasons for judicial self-
restraint if not judicial deference to
legislative judgment. The
legislature after all has the
affirmative responsibility. The
courts have only the power to
destroy not to reconstruct. When
these are added to the complexity
of economic regulation, the
uncertainty, the liability to error,
the bewildering a conflict of the
experts, and the number of times
the Judges have been overruled by
events\027self-limitation can be seen
to be the path of judicial wisdom
and institutional prestige and
stability.’
The court must always remember that
’legislation is directed to practical problems,
that the economic mechanism is highly
sensitive and complex, that many problems are
singular and contingent, that laws are b not
abstract propositions and do not relate to
abstract units and are not to be measured by
abstract symmetry’ that exact wisdom and nice
adaptation of remedy are not always possible
and that judgment is largely a prophecy based
on meagre and uninterpreted experience’.
Every legislation particularly in economic
matters is essentially empiric and it is based
on experimentation or what one may call trial
and error C method and therefore it cannot
provide for all possible situations or anticipate
all possible abuses. There may be crudities
and inequities in complicated experimental
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 7
economic legislation but on that account alone
it cannot be struck down as invalid. The courts
cannot, as pointed out by the United States
Supreme Court in Secy. of Agriculture v.
Central Roig Refining Co. [ 94 L Ed 381 : 338
US 604 (1950)] be converted into tribunals for
relief from such crudities d and inequities.
There may even be possibilities of abuse, but
that too cannot of itself be a ground for
invalidating the legislation, because it is not
possible for any legislature to anticipate as if
by some divine prescience, distortions and
abuses of its legislation which may be made by
those subject to its provisions and to provide
against such distortions and abuses. Indeed,
howsoever great may be the care bestowed on
its e framing, it is difficult to conceive of a
legislation which is not capable of being
abused by perverted human ingenuity. The
Court must therefore adjudge the
constitutionality of such legislation by the
generality of its provisions and not by its
crudities or inequities or by the possibilities of
abuse come to light, the legislature can always
step in and enact suitable amendatory
legislation. That is the essence of pragmatic
approach which f must guide and inspire the
legislature in dealing with complex economic
issues."
11. The same principle should hold good in
the matter of exemption notifications as well,
for the said power is part and parcel of the
enactment and is supposed to be employed to
further the objects of enactment \027 subject, of
course, to the condition that the notification is
not ultra vires the Act, and/or Article 14 of the
Constitution of India. (See P.J. Irani V. State of
Madras [(1962) 2 SCR 169]".
In Pahwa Chemicals Private Limited v. Commissioner of
Central Excise, Delhi [2005 (189) ELT 257 (SC)] it was held as
follows at para 3:
"Paragraph 4 and Explanation IX of
Notification have been construed by this Court
in Commissioner of Central Excise v.
Rukhmarii Pakkwell Traders, 2004 (165) E.L.T.
481; as also in Commissioner of Central
Excise, Chandigarh v. Mczhaan Dairies, 2004
(166) ELT. 23. In both these decisions this
Court held that Paragraph 4 read with
Explanation IX of the notification could not be
construed in the manner as contended by the
assessees, namely, to make it necessary for the
owner of the trade mark/trade name to use the
goods in respect of the specified goods
manufactured by the assessee. We see no
reason to differ with the reasoning of this
Court in the aforesaid decisions. Clause 4 of
the Notification read with Explanation IX
clearly debars those persons from the benefit
of the exemption who use someone else’s name
in connection with their goods either with the
intention of indicating or in a manner so as to
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 7
indicate a connection between the assessees
goods and such other person. There is no
requirement for the owner of the trade mark
using the name or mark with reference to any
particular goods. The object of the exemption
notification was neither to protect the owners
of the trade mark/trade name nor the
consumers from being misled. These are
considerations which are relevant in cases
relating to disputes arising out of
infringement/passing off actions under the
Trade Marks Act. The object of the Notification
is clearly to grant benefits only to those
industries which otherwise do not have the
advantage of a brand name. The decisions
cited by the Counsel appearing on behalf of the
assessees relate to decisions involving Trade
Mark disputes and are in the circumstances
not apposite."
Therefore, the main contention of the learned counsel for
the appellant about eligibility for exemption is sans merit.
However, the alternative plea raised needs to be considered. It
is accepted by learned counsel for the parties that this plea
needs factual adjudication which has not been done.
It appears that such a stand was not taken before the
Tribunal. In any event in view of what has been stated by this
Court in Mahaan Dairies’ case (supra) the Tribunal has to
consider the plea. In Mahaan Diaries’ case (supra) it was
observed as follows:
"9. It was however, urged that the
respondents have applied for registration of
the Mark "Mahaan Taste Maker". We clarify
that if and when they get their mark registered
then they would become entitle to the benefit
of the Notification in accordance with Board’s
Circular No.88/88, dated 13.12.1988."
Similarly in Bhalla’s case (supra) it was observed as
follows:
"17. According to the learned Counsel
appearing on behalf of the respondents the
documents on the basis of which the
impugned demand has been raised against the
respondent were available with the
Department as on the date of the seizure.
There was as such no question of holding any
further investigation into any further fact for
the issue of the demand on the allegation that
the assessees had wrongly availed of the
exemption. The only investigation which was
held related to the question whether the
respondent was a dummy unit of Corona Plus
Industries. It is submitted that the Department
cannot take advantage of the investigation held
in such connection to justify a time- barred
claim relating to the first issue. In any event it
is submitted that the respondent-firm had all
along contended that it was also the owner of
the brand name/trade mark in question. In
fact, the application made by the respondent
for registration of the trade mark in question,
namely, "Saving Plus" had been made on 16-
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 7
10-97. This application had been allowed by
the trade mark authorities under the Trade
Mark Act on 22-12-2003 with retrospective
effect i.e. 6-10-97. It is, therefore, submitted
that in any event, the respondent would be
entitled to the benefit of the exemption
Notification. We are of the view that having
regard to the contention of the parties, the
matter should be reheard by the Tribunal on
both the issue of limitation as well as the issue
of ownership. The decision of the Tribunal is,
accordingly, set aside and the matter is
remanded back for the aforesaid purpose."
If the Tribunal holds that the trade mark registration has
any relevance, then question of limitation is really of academic
interest. But if it is held that the same has no relevance the
question of limitation has to be decided in the background of
the factual scenario.
The appeal is accordingly disposed of with no orders as to
costs.