Tax Officer & Ors Vs. Emkay Investments Pvt. Ltd.  INSC 311 (23 February 1996)
Reddy, B.P. (J) Jeevan Reddy, B.P. (J) Paripoornan, K.S.(J)
1996 AIR 1622 1996 SCC (7) 540 JT 1996 (3) 402 1996 SCALE (2)729
O R D
counsel for the parties.
appeal is preferred against the judgment of the West Bengal Taxation Tribunal.
The respondent is a new unit engaged in the manufacture of plywood. It is
entitled to exemption from payment of sales tax, being a new industry as
contemplated by Rule 3(66a) of the West Bengal Sales Tax Rules, 1941. It,
however, appears that in respect of a portion of its products, it is using the
brand name "M/s. Merinoply" which brand name belongs to another
company called "M/s.Marinoply and Chemicals Limited".
upon the Explanation to Rule 3(66a), the sales tax authorities denied the
certificate enabling the respondent to claim exemption from sales tax. Their
case was that since the respondent is using the brand name of another unit,
which is not entitled to the said exemption, the respondent is disentitled from
claiming any exemption.
when the matter reached the Tribunal, it held in favour of the respondent by a
majority of 2:1. It found that the Marinoply brand name is not applied to all
the products manufactured by the respondent but only to a certain portion of
its products. Notwithstanding this finding, it allowed the respondent's appeal
in full and declared it to be entitled to exemption in respect of all the
products manufactured by it. Rule 3(66) insofar as it is relevant reads thus:
3. (66a)(i) Sales by a newly set up small scale industry of goods or class of
goods, other than those included in Schedule X appended to this clause, manufactured
by it during the period of three years, if the said industry is situated within
the area of the Calcutta Metropolitan Planning Area as described in the first
Schedule to the West Bengal Town and Country (Planning and Development) Act,
1979 [West Bengal Act XIII of 1979] or five years, if it is situated elsewhere
in West Bengal, since the date of its first sale of such manufactured goods:
that the dealer claiming the benefit of this clause will be so eligible only if
he keeps separate accounts in respect of such newly set up small scale
industry, issues serially numbered cash/credit memos for sales of goods
manufactured in such industry, keeps vouchers and other documents for purposes
of plant and machinery for establishment of such industry and maintains other
records to prove that sales claimed exempt under this clause were of goods
manufactured in such industry set up by him.
further that the dealer claiming the benefit of this clause will be eligible,
if he possesses a valid certificate of eligibility in Form No. XXXVIA granted
by the appropriate Assistant Commissioner in this behalf, for such period as
mentioned in the said certificate:
also that............... section 4AA of that Act.
For the purpose of this clause 'newly set up small scale industry' means a new
industrial unit,- (i)................
does not use the trade mark of the brand name of any product of an existing
industrial units, (vii)............................." [Extract from the
Paper Book] Clause (vi) of the Explanation is very clear and unambiguous. It
says that the said benefit of exemption from sales tax is available only to
such newly set up small scale industry which does not use the trade mark or the
brand name of any product of an exiting industrial unit. In this view of the
matter, the respondent-industry cannot claim the benefit of exemption. But the
question is whether it would be reasonable to read the said Explanation
literally which would mean that if a manufacturer uses the brand name or trade
mark of an existing industrial unit even in respect of a small portion of its
productions it would be totally deprived of the benefit of the benefit of the
exemption. We are of the opinion that having regard to the object and purpose
underlying the said Rule, it would be reasonable to say that the respondent
shall not be entitled to the benefit of the said exemption in respect of the
goods, for which the trade mark or brand name of an existing industrial unit is
used. But insofar as other products for which the brand name is not used are
concerned, it will be entitled to claim the benefit of the aforesaid sub-rule.
The burden of clearly establishing that in respect of certain of its goods
manufactured by it, the trade mark or brand name of an existing industrial unit
is not being used, shall be squarely upon the manufacturer.
appeal is allowed accordingly and the Order of the Tribunal is set aside. No