Unison Electronics
Pvt. Ltd. & ANR. Vs. Commissioner, Central Excise, Noida [2009] INSC 331
(13 February 2009)
Judgment
IN THE SUPREME COURT
OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NOS 6788-6789 OF 2005 Unison
Electronics Pvt. Ltd. and Anr. ....Appellants Versus Commissioner, Central
Excise, Noida ....Respondent
Dr. ARIJIT PASAYAT,
J.
1.
In
these appeals challenge is to the order passed by the Customs, Excise &
Service Tax Appellate Tribunal, New Delhi (in short `CESTAT').
The basic issue is
whether the appellants are clearing excisable goods manufactured by them
bearing the brand name of another person.
2.
Background
facts in a nutshell are as follows:
The SSI Exemption
Notification which provides exemption to the excisable goods manufactured by a
SSI unit provides that the exemption shall not apply to goods bearing the brand
name or trade name, whether registered or not, of another persons. Explanation
to Notification defines the brand name as a name or mark, such as a symbol,
monogram, label, signature or invented word or writing which is used in
relation to the specified goods for the purpose of indicating a connection in
the course of a trade between specified goods and some person using such name
or mark with or without any indication of the identity of that person.
According to the
appellants they manufacture ice-cream makers cooler and Popcorn makers and
avail of the benefit of SSI Exemption Notification and sell ice cream maker in
their own brand name "CREMICA"
and sell the same to
different customers including United Tele Shopping (in short `UTS') and Tele
Shopping Network (in short `TSN') and that in respect of sale to UTS & TSN
the goods were being examined by the Supervisors of these customers before
dispatch from their factory and stickers bearing UTS/TSN were being affixed and
these sticker bear the words "Checked Sl. No. Do not remove this sticker"
and that the Department has treated the words UTS and TSN as brand name
belonging to other and has disallowed the benefit of small scale exemption
notification. It was submitted that the words UTS and TSN are not brand names
but are the abbreviations of the name of the marketing companies which does not
amount to use of the brand name.
Stand of the
department was as follows:
It has not been
controverted by the appellants that the excisable goods before clearance from
their factory premises bear stickers of UTS/TSN and as per definition of the
brand name given in SSI Exemption Notification, "brand name" means
any name, symbol, monogram, label, signature or invented word or writing which
indicates connection in the course of trade between excisable goods and same
person using such name and that the words UTS/TSN mentioned on the packaging of
the products indicate the connection in the course of trade with UTS and TSN.
After considering the
rival stands the CESTAT concluded as follows:
"A perusal of
the sample shown by the learned consultant at the time of hearing revealed that
the sticker mentions that it has been put after checking the quality 3 of the
product manufactured by the appellants. In fact the sticker reads as under:
TSN Tele Shopping Network
UTS United Teleshopping Quality at your doorstep Accordingly, the CESTAT upheld
the demand of duty and penalty imposed on the appellant-company, but the
separate penalty imposed on the Director of the company was set aside.
3.
In
support of the appeals, learned counsel for the appellants submitted that the
brand names do not apply to the same goods. It essentially is the brand name of
another person.
4.
Learned
counsel for the respondent on the other hand supported the judgment and
submitted that even if it is conceded for the sake of arguments that brand
names related to other person, that is really of no consequence.
5.
The
Notification in question reads as follows:
"In exercise of
the powers conferred by sub-section (1) of Section 5A of the Central Excise
Act, 1944 (1 of 1944), the Central Government, being satisfied that it is
necessary in the public interest so to do, and in super session of the
notification of the Government of India in the Ministry of Finance (Department
of Revenue) No.7/97-Central Excise dated the 1st March, 1997, hereby exempts
clearances, specified in column (2) of the Table below, for home consumption,
of the excisable goods of the description specified in the Annexure appended to
this notification (hereinafter referred to \"the specified goods"),
from so much of the duty of excise leviable thereon which is specified in the
Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), as is in excess of
the amount calculated at the rate specified in column (3) of the said Table
against such clearances.
3. For the purpose of
determining the aggregate value of clearances, the following clearances shall
not be taken into account, namely :- (a) any clearances, which are exempt from
the whole of the excise duty leviable thereon (other than an exemption based on
quantity or value of clearances) under any other notification or on which no
excise duty is payable for any other reason;
(b) any clearances
bearing the brand name or trade name of another person, which are ineligible
for the grant of this exemption in terms of paragraph 4 below :
(c) any clearances of
the specified goods which are used as inputs for further manufacture of any
specified goods within the factory of production of specified goods. Such
clearances of specified goods used as inputs shall be deemed to be exempt from
the whole of the duty of excise leviable thereon:
(d) any clearances of
strips of plastics used within the factory of production for weaving of fabrics
or for manufacture of sacks or bags made of polymers of ethylene or propylene.
4. The exemption
contained in this notification shall not apply to goods bearing a brand name or
trade name, whether registered or not, of another person, except in the
following case:- (a) where the specified goods, being in the nature of
components or parts of any machinery or equipment or appliances, are cleared
for use as original equipment in the manufacture of the said machinery or
equipment or appliances by following the procedure laid down in Chapter X of the
Central Excise Rules, 1944. Manufacturers, whose aggregate value of clearances
of the specified goods for use as original equipment does not exceed rupees
thirty lakhs in a financial year, may submit a declaration regarding such use
instead of following the procedure laid down in Chapter X of the said rules;
(b) where the goods
bear a brand name or trade name of Khadi and Village Industries Commission or
of the State Khadi and Village Industry Board or the National Small Industries
Corporation or the State Small Industries Development Corporation or the State Small
Industries Corporation;
5. Explanation -- For
the purpose of this notification :- (a) "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;
(b) where the
specified goods manufactured by a manufacturer bear a brand name or trade name,
whether registered or not, of another manufacturer or trader, such specified
goods shall not, merely by reason of that fact be denied to have been
manufactured by such other manufacturer or trader."
6.
In
Commissioner of Central Excise, Trichy v. Rukmani Pakkwell Traders (2004 (11)
SCC 801) it was noted as follows:
"5. The Tribunal
then proceeds on the basis that the exemption can be denied only if the trade
mark or brand name is used in respect of the same goods for which the trade
mark is registered. In coming to this conclusion we are afraid that the
Tribunal has done something which is not permissible to be done in law. It is
settled law that exemption notifications have to be strictly construed. They
must be interpreted on their own wording. Wordings of some other notification
are of no benefit in construing a particular notification. Clause 4 of this notification
and the Explanation (set out hereinabove) make it clear that the exemption will
not apply if the specified goods (i.e. scented supari) bear a brand or trade
name of another person. Neither in clause 4 of the notification nor in
Explanation IX is it provided that the specified goods must be the same or
similar to the goods for which the brand name or trade name is registered. The
Tribunal has, in adopting the above reasoning, effectively added to the
notification words to the effect "brand name or trade name in respect of
the same goods". This is clearly impermissible. It is to be seen that
there may be an unregistered brand name or an unregistered trade name. These
might not be in respect of any particular goods.
Even if an
unregistered brand name or trade name is used, the exemption is lost. This
makes it very clear that the exemption would be lost so long as the brand name
or trade name is used irrespective of whether the use is on same goods as those
for which the mark is registered.
6. The Tribunal had
also held that under the notification the use must be of "such brand
name". The Tribunal has held that the words "such brand name"
show that the very same brand name or trade name must be used. The Tribunal has
held that if there are any differences then the exemption would not be lost. We
are afraid that in coming to this conclusion the Tribunal has ignored
Explanation IX. Explanation IX makes it clear that the 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, code number, design number, drawing number, symbol,
monogram, label, signature or invented word or writing. This makes it very
clear that even a use of part of a brand name or trade name, so long as it
indicates a connection in the course of trade would be sufficient to disentitle
the person from getting exemption under the notification. In this case,
admittedly, the brand name or trade name is the word "ARR" with the
photograph of the founder of the group. Merely because the registered trade
mark is not entirely reproduced does not take the respondents out of clause 4
and make them eligible to the benefit of the notification."
7.
Similarly,
in Commissioner of Central Excise, Chandigarh-I v. Mahaan Dairies (2004 (11)
SCC 798) in paras 6 and 8 it was noted as follows:
"6. We have
today delivered a judgment in CCE v. Rukmani Pakkwell Traders (2004 (11) SCC
801) 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 the notification.
8.
It
is settled law that in order to claim benefit of a notification, a party must
strictly comply with the terms of the notification. If on wording of the
notification the benefit is not available then by stretching the words of the
notification or by adding words to the notification benefit cannot be conferred.
The Tribunal has
based its decision on a decision delivered by it in Rukmani Pakkwell Traders v.
CCE (1999 (109) ELT 204 (CEGAT). We have already overruled the decision in that
case.
In this case also we
hold that the decision of the Tribunal is unsustainable. It is accordingly set
aside."
8. Further in
Commissioner of Central Excise, Calcutta v. Emkay Investments (P) Ltd. and Anr.
(2005 (1) SCC 526) this Court stated the position in law as follows:
"7. The dispute,
in the instant case, is as to whether the respondents who are manufacturers of
plywood under their own brand name "Pelican" have made themselves
disentitled to the benefit of small-scale exemption Notification No. 175/86- CE
by using a logo indicating "MERINO" on their products along with their
brand name. The next question which arises is as to whether the markings or
inscriptions should be considered as the brand name of M/s Merinoply and
Chemicals Ltd. and will come within the mischief of clause 7 read with
Explanation VIII of the notification, as contended by the department. Clause 7
reads as follows:
"The exemption
contained in this notification shall not apply to the specified goods where a
manufacturer affixes the specified goods with a brand name or trade name
(registered or not) of 9 another person who is not eligible for the grant of
exemption under this notification."
Explanation VIII of
clause 7 reads as follows:
`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.'
8. Mr G.E. Vahanvati,
learned Solicitor General, submitted that the impugned goods admittedly
contained the registered logo "MERINO" belonging to and owned by M/s
Merinoply and Chemicals Ltd. Thus it was a clear case where the impugned goods
were admittedly affixed with registered logo/trade mark of the other person not
eligible to SSI exemption. According to the learned Solicitor General, CEGAT
erred in not appreciating that to attract provision of clause 7 of Notification
No. 175/86-CE, it is sufficient that the product contained a trade mark/logo of
another ineligible person which was fully satisfied in the present case and
whether the product also contained a brand name/trade name/logo of the
manufacturer would not and cannot alter such position.
Arguing further,
learned Solicitor General contended that the interpretation of Explanation VIII
as advanced by the Tribunal does not appear correct in law and fact. It was
imperative that by using the registered logo "MERINO" belonging to
M/s Merinoply and Chemicals Ltd. on their own products, the first respondent
herein, M/s Emkay Investments Ltd. fulfilled the purpose of indicating a
relation between the said products and the logo owner so as to influence the
trade and, therefore, the provision of Explanation VIII were fully satisfied so
far as the present case was concerned. Learned Solicitor General also submitted
that the exception or exempting provision in a taxing statute should be
construed strictly and it is not open to the court or to the tribunal to ignore
conditions prescribed in the exemption notification.
9.
In
support of his submissions, learned Solicitor General, relied on the following
judgments:
1. B.H.E.L. Ancillary
Assn. v. CCE (1990 (49) ELT 33 (Mad)
2. CCE v. Rukmani
Pakkwell Traders (2004 (11) SCC 801
3. CCE v. Mahaan
Dairies (2004 (11) SCC 798)
4. CCE v. Bhalla
Enterprises (2004 (173) ELT 225
15. We have gone
through the common order passed by the Tribunal. In our view, the Tribunal has
erred in not appreciating that to attract provision of clause 7 of Notification
No. 175/86-CE, it is sufficient that the product contained a trade mark/logo of
another ineligible person which was fully satisfied in the instant case and
whether the product also contained the brand name/trade name/logo of the
manufacturer would not and cannot alter such position. Likewise, the
interpretation of Explanation VIII as advanced by the Tribunal does not appear
to be correct in law and in fact. It was imperative that by using the
registered logo "MERINO"
belonging to M/s
Merinoply and Chemicals Ltd. on their own product M/s Emkay Investments Ltd.
fulfilled the purpose of indicating a relation between the said products and
the logo owner so as to influence the trade and therefore, the provisions of
Explanation VIII were fully satisfied so far as the case on hand was concerned.
The finding of the Tribunal to the contrary, in our opinion, is wrong and
liable to be set aside."
9. Considering the
position involved in Reiz Electrocontrols (P) Ltd. v. Commissioner of Central
Excise, Delhi-I (2006 (6) SCC 213) the position was re-iterated as follows:
"8. So far as
the views regarding non-eligibility are concerned view expressed by this Court
in several cases needs to be noted.
9. 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."
10. 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.
"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 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--self-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 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 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 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 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 -- 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]".
11. 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. Rukhmani 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."
13. 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."
10. The conclusions
of CESTAT are essentially factual and, therefore, there is no scope for
interference. In view of the factual position noted by CESTAT and the position
in law indicated above, the appeals are dismissed.
No costs.
..........................................J.
(Dr. ARIJIT PASAYAT)
..........................................J.
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