SUPREME COURT OF INDIA
Commissioner of Central Excise, Chandigarh
Vs
Messrs Khanna Industries and Others
Appeal (Civil) 4192-4224 of 2001 (Civil Appeal No.4375 of 2006 and Civil Appeal Nos.7927-28 of 2001)
(Arijit Pasayat and S. H. Kapadia, JJ)
28.11.2006
ARIJIT PASAYAT, J.
In these appeals, Revenue questions correctness of the judgment rendered by
the Customs, Excise & Gold (Control) Appellant Tribunal, New Delhi, (in
short 'CEGAT'). It was held by the impugned judgment that the respondents were
eligible to avail benefit of the exemption notification No.175/86-CE and para 7
thereof will not be attracted in the present case. Appeals filed by the Revenue
questioning correctness of the decision rendered by the Commissioner (Appeals),
Central Excise & Customs, Chandigarh [in short 'Commissioner (Appeals)],
were dismissed.
The background facts in a nutshell are as follows:
Respondents manufacture Brass Sanitary Bathroom fittings falling under
Sub-heading 8481.80 and 8481.99 of the Schedule to the Central
Excise Tariff Act, 1985 (in short 'Tariff Act'). The goods were packed
in cardboard boxes on which stylised brand name "ARK" was printed and
labels affixed on cardboard boxes also showed the brand name "ARK" in
the stylised script; name and address of M/s. Arkson Pvt. Ltd., Chandigarh was
also printed on the label; in addition "ARK" was put on the Sanitary
fittings by pasting stickers and also by affixing tickli on the body of the
fittings. All the respondents were availing exemption under Notification
No.175/86-CE. Proceedings were started against them for demand of duty as brand
name "ARK" in stylised script was brand name of M/s. Arkson Pvt. Ltd.
Initially the matter was decided by the Collector, Central Excise who denied
the exemption under Notification No.175/86-CE holding that the respondents were
affixing specified goods with the brand name of another person not eligible for
the grant of exemption and also there was suppression on the part of the
respondents. On appeal filed by the Assessees, the CEGAT remanded the matter
for de novo decision after arriving at a finding in regard to the eligibility
to exemption of M/s. Arkson Pvt. Ltd. under Notification No.175/86-CE and to
arrive at a definite finding in regard to other pleas of use of trade mark
w.e.f. April, l992 and other related matters concerning time bar. The CEGAT,
however, gave specific finding that stylised "ARK" is a trade name of
M/s. Arkson within the meaning of relevant para of Notification No.175/86-CE.
On remand the matter has been decided by the Additional Commissioner who
confirmed the demand of duty and imposed penalty on all the respondents holding
that since M/s. Arkson Pvt. Ltd. was not eligible for the benefit of
Notification No.l75/86-CE since it was not holding any L-4 licence; the casting
of pig iron manufactured in their proprietary concern M/s. Arkson Engg. Co. was
exempted from payment of duty under Notification No.208/83 dated 1.8.1983 and
no declaration as required to be filed under Rule 174 of the Central Excise
Rules, 1944 (in short the 'Rules'), was filed by it; castings falling under
Sub-heading 7325.10 of the Tariff were specified in the Annexure to the
Notification. In addition the Additional Commissioner, relying upon decision in
the case of Mentha & Allied Products vs. Union of India (1995 (77) ELT
A-133(SC), concluded that aggregate sale figure of M/s. Arkson Pvt. Ltd. was
more than Rs.2 crores during 1990-91 and 1991-92 and accordingly the benefit of
Notification was also not available to it. The Additional Commissioner gave
findings to the effect that the respondents had started affixing stylised brand
name "ARK" w.e.f. September, 1991 and not from April, 1992 as
contended and extended period of limitation was invokable as the fact regarding
manufacture of the goods affixed with brand name another person was never
brought to the knowledge the Department.
Respondents questioned correctness of the view expressed by the adjudicating
authority before the before the Commissioner (Appeals). The said authority set
aside the adjudication orders holding that eligibility of M/s. Arkson Pvt. Ltd.
has to be considered in the light of the fact that Brass sanitary bathroom
fittings are classified under sub-headings 8481.80 and 8481.99 which are
specified in Annexure to Notification no.175/86-CE, Para 3 of Notification does
not stipulate that value of the trading goods is to be taken into consideration
for computing the aggregate value of clearance and M/s. Arkson Pvt. Ltd. being
registered as SSI unit have made substantial compliance of conditions laid down
in Notification no.175/86-CE. It was further held that non- fulfilment of
requirement of Rule 174 was on account of the fact "ARK" in simple
form was regarded as brand name of M/s. Khanna Industries who had complied with
Rule 174 and it was the Tribunal's decision that separate identity of
"ARK" and stylized "ARK" was established and, therefore,
extended period of limitation was not applicable.
Revenue preferred appeals before the CEGAT which endorsed view of the
Commissioner (Appeals), but did not record any finding on the question of
extended period of limitation.
Stand of the appellant is that the goods were cleared by the respondents who
are manufacturers and the brand owner is a trader. Even if the brand owner is a
manufacturer he is required to be manufacturer of specified goods. CEGAT erred
in holding that if the brand owner is a manufacturer; it is not required to be
manufacturer of the specified goods. The small scale industry is not
manufacturer of specified goods, and as such is not entitled to any exemption.
In response, learned counsel for the respondent submitted that CEGAT's view is
correct. In any event it is pleaded that the extended period of limitation is
not applicable and that question has not been decided by the CEGAT.
In order to appreciate the rival submissions, the relevant notifications need
to be noted. Notification No.175/86-C.E. dated 1.3.1986 reads as follows:
"EXEMPTION TO SMALL SCALE UNITS In the exercise of the powers conferred
by sub rule (1) of rule 8 of the Central Excise Rules, 1944 and in supersession
of the notification of the Government of India, in the Ministry of Finance
(Department of Revenue) No. 85/85-Central Excises dated the 17th March, 1985
the Central Government hereby exempts the excisable goods of the description
specified in annexure below and falling under the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) (hereinafter
referred to as the "specified goods'), and cleared for home consumption on
or after the 1st day of April in any financial year, by a manufacturer from one
or more factories"
ANNEXURE
4. All other goods specified in the said Schedule other than the following,
namely :-
(i) All goods failing under Chapters 9, 24, 31, 51, 52, 53. .54, 55, 56, 57,
58, 59, 60, 61, 62, 71, 73 and 74;
(ii) all goods falling under heading Nos. 21.06, 25.04, 36.03, 40.11, 40:12,
40.13, 87.01, 87.02, 87.03, 81.04, 81.05, 87.06, 87.11, 91.01, 91.02 and 96.13;
(iii) all goods fallings under sub-heading Nos. 2101.10, 2101.20, 3304.00,
3305.90, 3307.00, 4005.00, 4006.10, 4008.21 and 9505.10 and
(iv) Sandalwood oil strips of plastic intended for weaving of fabric or sacks,
polyurethane foam and articles of polyurethane loam broadcast television
receiver sets refrigerating and air-conditioning appliances and machinery, and
parts and accessories thereof.
The said notification was amended by Notification No.223/87-C.E. dated
22.9.1987. The amendment reads as follows:
"In exercise of the powers conferred by sub-rule (1) of Rule 8 of the
Central Excise Rules, 1944, the Central Government hereby makes the following
further amendments in the notification of the Government of India in the
Ministry of Finance (Department of Revenue) No. 175/86- Central Excise, dated
the 1st March, 1986, namely: In the said notification, "
(I) after paragraph, 6, the following paragraph shall be inserted, namely:-
"7. The exemption contained in this notification shall not apply to the
specified goods with a brand name where a manufacturer affixes the specified
goods with a brand name or trade name (registered or not) of another person who
is not eligible for the grant of exemption under this notification:
Provided that nothing contained in this paragraph shall be applicable in
respect of the specified goods cleared for home consumption before the 1st day
of October, 1987".
(ii) after Explanation VII, the following Explanation shall be inserted, namely
:-
"Explanation VIII - "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 o the identity of that person."
Clause 7 of the notification after amendment deals with exemption of specified
goods and circumstances where the exemption is not available. Stand of the
respondent is that if manufacturer need not be a manufacturer of specified
goods, and brand name as used is entitled to exemption contained in the notification,
it is really of no consequence whether he is manufacturer of goods. The stand
is clearly untenable. The notification is 'goods specific'. What is required is
that a person, who may be a manufacturer, must be eligible for exemption under
the notification in respect of the specified goods. Any other interpretation
would render the purpose for which the notification has been issued redundant.
As noted above, the notification is 'goods specific'. The emphasis is on
'specified goods'. That being so, the impugned judgment of the CEGAT is
indefensible.
Undisputedly, M/s Arkson Pvt. Ltd. is different from M/s Arkson Engg. Co. In
the present case, the issue relates to manufacture of "brass sanitary
bathroom fittings". M/s Arkson Engg. Co. manufactures C.I. castings while
M/s Arkson Pvt. Ltd. are the owners of the stylized brand name "ARK".
However, the said company is engaged in trading of "brass sanitary
fittings". Thus, they are traders. Assessees cannot take the benefit of
the registration certificate of M/s Arkson Engg. Co. as both are separate legal
entities. Therefore, when M/s Khanna Industries and others i.e. the assesses
use the brand name/trade name of "ARK" in the context of "brass
sanitary fittings" the assessees are not entitled to claim the benefit as
the stylized brand name "ARK" belongs to M/s Arkson Pvt. Ltd. and not
to M/s Arkson Engg. Co. However, as noted above, M/s Arkson Pvt. Ltd. is a
trader and not the manufacturer of "sanitary bath fittings". This is
clearly accepted by Ms. Aarti Khanna, Executive Director of M/s Arkson Pvt.
Ltd. in her statements on 22.1.1993 and 18.3.1993.
In the case of Namtech Systems Ltd. v. Commissioner of Central Excise, New
Delhi 1999 Indlaw CEGAT 132 (Tribunal), the
larger Bench of CEGAT has held that affixation of specified good with a brand
name of ineligible Indian manufacturer will entail disqualification from
exemption. It is further held that the benefit of small scale exemption under
Notification No.175/86-CE, as amended, is not available to the specified goods
if they are affixed with the brand name or trade name of a trader who is not a
manufacturer. The judgment of the larger Bench in Namtech Systems Ltd. (supra)
has not been considered by the CEGAT in the present case. The intention is
crystal clear that at the relevant time, the unit should be eligible for
exemption under the Notification in respect of the 'specified goods'.
However, as rightly contended by learned counsel for the respondents, the plea
relating to non-applicability of extended period of limitation has not been
considered by the CEGAT. Therefore, the matter is remanded and the above issue
alone will now be considered by the CEGAT.
The appeals are allowed to the aforesaid extent without any order as to costs.