Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 3051 OF 2003
COMMISSIONER CENTRAL EXCISE,
DELHI
— APPELLANT
VERSUS
M/S. ACE AUTO COMP. LTD. — RESPONDENT
J U D G M E N T
D.K. JAIN, J.:
1. The present civil appeal, filed under Section 35(L)(b) of the Central
Excise Act, 1944 (for short “the Act”) by the Revenue, is directed against
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order dated 10 October, 2002 passed by the Customs, Excise & Gold
(Control) Appellate Tribunal (for short “the Tribunal”) wherein it has
been held that the respondent was entitled to the benefit of Notifications
Nos. 1/93-CE and 16/97-CE.
2. Shorn of unnecessary details, the facts material for the adjudication of the
present appeal may be stated as under:
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The respondent (hereinafter referred to as “the assessee”), a small
scale industrial unit (for short “SSI”), is engaged in the manufacture of
clutch plates, clutch cover assemblies and pressure plates, falling under sub-
heading No. 8708.00 of the Schedule to the Central Excise Tariff Act, 1985.
Admittedly, the assessee prefixed the symbol and logo “TATA” along with
their own brand name “ACE” on cover assembly manufactured for TATA
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310 vehicle. The assessee filed declaration Nos. 545/96 w.e.f 4 November
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1996; 104/97 w.e.f. 25 March, 1997; 105/97 and 106/97 w.e.f. 1 April
1997, claiming the benefit of SSI Notification Nos. 1/93 and 16/97.
3. A raid was conducted at the premises of the assessee, which resulted in
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issuance of a show cause notice dated 13 May, 1998 to the assessee
asking them to explain as to why duty amounting to ` 1,46,151/-; and
penalty under Rules 9(2), 173Q and 226 of the Central Excise Rules,
1944 (for short “the Rules”) together with penalty under Section 11 AC
of the Act may not be levied on them, for clearing branded goods of
another person.
4.
The Additional Commissioner of Central Excise (for short “the
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Adjudicating Authority”), vide Order-in-Original No.06 dated 3 June,
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1999, while confirming the duty and penalty as contained in the show
cause notice, observed that:
“Any person who buys the product, it is the TATA brand name
which will strike the eyes of the buyer first as it is a well known
and established brand name rather than the other logo ACE. As
such going by the Tribunal decision cited by the party the case
has to be decided against them…………………………………
……................
14. The other point raised by the party is that since they do not
sell the product to TATA’s, the owner of the brand name
TATA, there is no connection between the branded product and
the brand name owner. I fail to see the logic in this contention.
The explanation IX to notification no. 1/93 dated 28.2.1993
merely means that by looking at a particular brand name or
trade name an association between the brand name owner and
the product should get established. In fact this is the very
purpose of using a brand name. In the instant case any person
buying the product will naturally assume the product to have
the quality, specification etc. associated with products of TATA
group. It is not necessary to actually sell the product to TATA
companies to establish any connection between the product and
the brand name owner.
15. Thus once it is held that the cover assembly was branded
with the TATA logo which did not belong to the party, and no
evidence was produced that the TATA group of companies was
themselves eligible for the excise exemption, benefit of
notification 1/93 and 16/97 cannot be extended to these
products manufactured by the party but carrying the TATA
brand name or logo.”
5.
Being aggrieved, the assessee preferred an appeal before the
Commissioner of Central Excise (Appeals). The Commissioner
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(Appeals), vide order dated 10 February, 2002, allowed the appeal,
observing thus:
“5.4 Thus, we find that the appellate bodies are treating any
slight variation in the brand names as different entities as in
“Mahaan” and “Mahaan Tastemaker” or “AGI” and “AGI
Switches”. Here, the two conflicting brand names are “TATA”
and “TATA ACE” and the sole reason for this usage of the
name “TATA” is that it stands earmarked for a particular
vehicle. They are also manufacturing auto parts for use in the
other vehicles of different manufacturers for which they do not
use this logo.
5.5. In the light of the above decisions of the Hon’ble CEGAT,
I have no alternative but to follow the judicial precedent. I thus
hold that ‘TATA ACE’ brand name is different from the
popular brand name “TATA”.”
6. Aggrieved, the revenue took the matter further in appeal to the Tribunal.
As stated above, vide the impugned order, the Tribunal has dismissed the
appeal. The Tribunal has come to the conclusion that:
“According to the Notification, exemption shall not apply if the
specified goods are bearing the brand name of another person.
It is not the case of the Revenue that ‘Tata Ace’ is the brand
name of another person. The very fact that there is no material
to prove that the brand name, which the excisable goods
manufactured by the respondents bear, belongs to another
person, the mischief of Para 4 of the Notification No. 1/93 will
not be attracted. …………………………………………………
………………..
We also find substance in the finding of the Commissioner
(Appeals) that the usage of the name ‘Tata’ in the brand name
is with a view to indicate that the part is for a particular vehicle
manufactured by Tata.”
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7. Hence, the present civil appeal.
8. Mr. B. Bhattacharya, learned Additional Solicitor General appearing on
behalf of the Revenue, while assailing the impugned order, urged that in
light of the decisions of this Court in Commissioner of Central Excise,
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Calcutta Vs. Emkay Investments (P) Ltd. & Anr. and Commissioner of
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Central Excise, Chandigarh-I Vs. Mahaan Dairies , it is settled that
whenever the assessee affixes the brand name of another person on its
goods with the intention to indicate some connection between the goods
and the said brand name, the assessee is barred from availing the benefit
of the Notifications. It was asserted that in view of the fact that
indubitably the brand name “TATA”, which did not belong to the
assessee but to another identified company, had been affixed by the
assessee on their product, although in conjunction with the word “ACE”
the Tribunal’s conclusion that there was no material to prove that the
brand name “TATA ACE” belonged to another person, is clearly a
misconstruction of para 4 of the notifications in question and therefore,
its decision deserves to be set aside.
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(2005) 1 SCC 526
2
(2004) 11 SCC 798
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9. Mr. S.K. Bagaria, learned senior counsel, appearing as Amicus Curiae ,
submitted that the Tribunal has rightly concluded that there was no
evidence to prove that the brand name “TATA ACE” belonged to another
person, and the said finding of fact deserves to be affirmed as it has not
been specifically challenged by the Revenue. Learned counsel argued
that in the present case the pre-requisite for invoking paragraph 4 of
Notification No. 1/93 is not satisfied in as much as the Revenue has not
been able to establish that the brand name “TATA ACE” belongs to
another person. In support of the submission that the burden to prove
that the brand name belongs to another person is on the Revenue, learned
counsel placed reliance upon the decision of this Court in Commissioner
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of Trade Tax, U.P. & Anr. Vs. Kajaria Ceramics Ltd. . Commending us
to the decision of this Court in Pappu Sweets and Biscuits & Anr. Vs.
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Commissioner of Trade Tax, U.P., Lucknow , learned counsel argued
that paragraph 4 of Notification No.1/93 being an exclusionary clause,
the same has to be strictly construed. Learned counsel contended that
since both the Tribunal as also the Commissioner (Appeals) have
concluded that the use of the word “TATA” was merely to denote that
the product was meant for use in a particular vehicle, the affixation of
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(2005) 11 SCC 149
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(1998) 7 SCC 228
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“TATA” was merely descriptive of the assessee’s product and not as if
the goods had been marketed with another brand name. Relying on the
decisions of this Court in Nirlex Spares (P) Ltd. Vs. Commissioner of
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Central Excise ; Commissioner of Central Excise, Jamshedpur Vs.
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Superex Industries, Bihar and Emkay Investments (P) Ltd. (supra),
learned counsel submitted that mere use of the word “TATA” should not
disentitle the assessee from the benefit of the two Notifications. Learned
counsel further urged that the Revenue’s argument that the use of the
word “TATA” would create an impression in the minds of the consumer
that the said product was manufactured by one of the Tata companies was
misplaced in as much as no such test was envisaged under the
Notifications. Moreover, the Revenue had not made any such allegation
in the show cause notice, and in light of the decisions of this Court in
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Commissioner of Customs, Mumbai Vs. Toyo Engineering India Ltd.
and Commissioner of Central Excise, Nagpur Vs. Ballarpur Industries
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Ltd. , it is trite that the foundation of the Revenue’s case is laid in the
show cause notice, and the same must be confined to the allegations
contained therein.
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(2008) 2 SCC 628
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(2005) 4 SCC 207
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(2006) 7 SCC 592
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(2007) 8 SCC 89
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10. Before adverting to the rival submissions, it would be useful to extract
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relevant portions of Notification No. 1/93-CE dated 28 February, 1993
as amended, which grants exemption from payment of Central Excise
duty to small scale industrial units. It read as:
“4. The exemption contained in this notification shall not apply
to the specified goods, bearing brand name or trade name
(registered or not) of another person:
…………………………………………………………………
…………………………………………………………………
Explanation IX.- “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.”
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Notification No. 16/97- CE dated 1 April, 1997 contains the same definition
of “brand name” as Notification No. 1/93-CE, and also provides that the
exemption contained therein shall not be available to goods bearing the
brand name of another person.
11.
It is manifest from a bare reading of Clause 4 of the Notification, read
with Explanation IX that it clearly debars an assessee from the benefit of
exemption under the notification, if he uses another person’s brand or
trade name with the intention of indicating a connection between the
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assessee’s goods and such other person. It is evident that the object of
the exemption notification is to grant benefits only to those industries
which otherwise do not have the advantage of brand or trade name. (See:
Commissioner of Central Excise, Chandigarh-II Vs. Bhalla
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Enterprises ; Nirlex Spares (P) Ltd. (supra); Commissioner of Central
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Excise, Raipur Vs. Hira Cement .)
12.
In Kohinoor Elastics (P) Ltd. Vs. Commissioner of Central Excise,
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Indore , while construing an identical notification (No.1 of 1993-CE),
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dated 28 February 1993, this Court had observed that:
“ Clause 4 of the notification is unambiguous and clear. It
specifically states that the exemption contained in the
notification shall not apply to specific goods which bear a brand
name or trade name (registered or not) of another person. It is
settled law that to claim exemption under a notification one
must strictly comply with the terms of the notification. It is not
permissible to imply words into the notification which the
legislature has purposely not used. The framers were aware that
use of a brand/trade name is generally to show to a consumer a
connection between the goods and a person. The framers were
aware that goods may be manufactured on order for captive
consumption by that customer and bear the brand/trade name of
that customer. The framers were aware that such goods may not
reach the market in the form in which they were supplied to the
customer. The framers were aware that the customer may
merely use such goods as an input for the goods manufactured
by him. Yet clause 4 provides in categoric terms that the
9
(2005) 8 SCC 308
10
(2006) 2 SCC 439
11
(2005) 7 SCC 528
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exemption is lost if the goods bear the brand/trade name of
another. Clause 4 does not state that the exemption is lost only
in respect of such goods as reach the market. It does not carve
out an exception for goods manufactured for captive
consumption. The framers meant what they provided. The
exemption was to be available only to goods which did not bear
a brand/trade name of another. The reason for this is obvious. If
use of brand/trade names were to be permitted on goods
manufactured as per the orders of customers or which are to be
captively consumed then manufacturers, who are otherwise not
entitled to exemption, would get their goods or some inputs
manufactured on job-work basis or through some small party,
freely use their brand/trade name on the goods and avail of the
exemption. It is to foreclose such a thing that clause 4 provides,
in unambiguous terms, that the exemption is lost if the “goods”
bear a brand/trade name of another.”
We are in respectful agreement with the reasoning in the afore-extracted
paragraph.
13. In Commissioner of Central Excise, Trichy Vs. Grasim Industries
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Ltd. , a Bench of three judges of this Court, while construing
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Notification No. 5/98-CE, dated 2 June 1998, which was similar to the
one under consideration by us, had observed that:
“….Even the name of some other company, if it is used for the
purposes of indicating a connection between the product and
that company, would be sufficient. It is not necessary that the
name or the writing must always be a brand name or a trade
name in the sense that it is normally understood. The exemption
is only to such parties who do not associate their products with
some other person. Of course this being a notification under the
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(2005) 4 SCC 194
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Excise Act, the connection must be of such a nature that it
reflects on the aspect of manufacture and deal with quality of
the products. No hard-and-fast rule can be laid down however it
is possible that words which merely indicate the party who is
marketing the product may not be sufficient. As we are not
dealing with such a case we do not express any opinion on this
aspect.”
(Emphasis supplied by us)
14.Therefore, in order to avail of the benefit of the exemption notification,
the assessee must establish that his product is not associated with some
other person. To put it differently, if it is shown that the assessee has
affixed the brand name of another person on his goods with the intention
of indicating a connection between the assessee’s goods and the goods of
another person, using such name or mark, then the assessee would not be
entitled to the benefit of exemption notification. We may hasten to
clarify that if the assessee is able to satisfy the Adjudicating Authority
that there was no such intention, or that the user of the brand name was
entirely fortuitous, it would be entitled to the benefit of the exemption.
15.In the instant case, admittedly, the brand name “TATA” did not belong to
the assessee. It is also evident that by using the said brand name, the
assessee had not only intended to indicate a connection between the
goods manufactured by them and a Tata Company; but also the quality of
their product as that of a product of Tata Company, as they were
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supplying their goods to the said company. Thus, the bar created in
Clause 4 read with Explanation IX of the Notification is clearly attracted
in the present case, disentitling the assessee from the benefit of the
exemption notifications under consideration. We are of the opinion that
the decision of the Tribunal is clearly erroneous and deserves to be set
aside.
16.Consequently, for the foregoing reasons, the appeal is allowed; the
impugned order is set aside and the order passed by the Adjudicating
Authority is restored.
17.Before parting with the case, we place on record our deep appreciation
for the valuable assistance rendered by Shri S.K. Bagaria, the learned
Amicus Curiae.
18.There will be no order as to costs.
.……………………………………
(D.K. JAIN, J.)
.…………………………………….
(H.L. DATTU, J.)
NEW DELHI;
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DECEMBER 16, 2010.
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