M/S
Reiz Electrocontrols Pvt. Ltd Vs. Commr. of Central Excise, Delhi-I [2006] Insc 460 (31 July 2006)
Arijit
Pasayat & Lokeshwar Singh Panta 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 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 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 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:
-
"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 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 eventsself-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 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."
-
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 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 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:
-
"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:
-
"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- 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.
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