2015 (4) TMI 353 - SC - Central Excise

SSI Exemption - Determination of turnover - Exclusion of goods manufactured under the brand name of others - Use of words such as HM, PAL, KH - Held that - Once in respect of those goods where brand name of other party is used on manufactured goods and that other party is not a SSI unit, exemption is not available, it would lead to inevitable result that the value of such goods cannot be added as well, while considering the value of the goods cleared by the assessee in the previous year. CEGAT has given two other reasons to deny the relief to the appellant. In its order it has observed that letters such as HM and PAL , no doubt, were initials of the buyers of the goods and they constitute the brand name as well, however, what was indicated was only initials with the sole purpose to identify the goods for particular automobile company. After the supply of these goods, the said automobile companies were affixing their proper trade mark/ brand name thereupon. On this basis, it is mentioned that the Notification in question would not apply - This reasoning of the CEGAT is contrary to the law laid down by this court in Kohinoor Elastics (P) Ltd. v. Commissioner of Central Excise, Indore 2005 (8) TMI 115 - SUPREME COURT OF INDIA . Value of the goods meant for HM , PAL , KH , etc. could not have been included while considering as to whether the appellant is entitled to the benefit of the aforesaid Notification or not. Once that is excluded and the case is confined to the brand name VIR which is the appellant s own brand name and in respect of which the appellant had claimed exemption, the value of goods cleared in the previous year was less than ₹ 3 crores. Therefore, the appellant shall be entitled to the exemption under the said Notification. - Decided in favoru of assessee.

Issues Involved:
1. Interpretation of Notification No. 1/93 regarding SSI exemption.
2. Inclusion of value of goods supplied under other brand names in the aggregate value of clearances.
3. Definition and applicability of "brand name" or "trade name" under the Notification.
4. Legal precedents regarding the use of brand names by SSI units.

Issue-wise Analysis:

1. Interpretation of Notification No. 1/93 regarding SSI exemption:
The appellant, a Small Scale Industrial unit (SSI), claimed exemption from excise duty under Notification No. 1/93 for goods manufactured under its own brand name "VIR". The dispute arose over whether the appellant met the condition that the aggregate value of clearances in the preceding financial year should be less than Rs. 3 crores. The Department included the value of goods supplied to automobile companies under their brand names, concluding that the total value exceeded Rs. 3 crores. The appellant contended that only the value of "VIR" brand goods should be considered, which was less than Rs. 3 crores.

2. Inclusion of value of goods supplied under other brand names in the aggregate value of clearances:
The Department's interpretation included the value of goods supplied under brand names like "HM", "PAL", and "KH", which were used for job orders from automobile companies. The appellant argued that these goods, cleared on payment of excise duty under the automobile companies' brand names, should not be included in the aggregate value for SSI exemption. The authorities and the Customs, Excise & Gold (Control) Appellate Tribunal (CEGAT) rejected this contention, adhering to the definition of "brand name" or "trade name" in the Notification.

3. Definition and applicability of "brand name" or "trade name" under the Notification:
The Notification specified that exemption does not apply to goods bearing a brand name or trade name of another person, except in certain cases. The definition included any name or mark indicating a connection between the goods and the person using the name or mark. The court noted that the appellant used brand names of automobile companies on the goods manufactured for them, thus no exemption was applicable for these goods. The court referenced the case of 'Commissioner of Central Excise, Jamshedpur v. M/s. Tubes & Structurals and Another', affirming that goods bearing another's brand name are not eligible for SSI exemption.

4. Legal precedents regarding the use of brand names by SSI units:
The court cited previous judgments, including 'Commissioner of Central Excise, Chennai-II v. Australian Foods India (P) Ltd.' and 'Kohinoor Elastics (P) Ltd. v. Commissioner of Central Excise, Indore', to support its conclusion. These cases clarified that the use of another's brand name on goods disqualifies them from SSI exemption, regardless of whether the brand name is affixed by the SSI unit or pre-exists on the input materials. The court also referenced 'Commissioner of Central Excise, Trichy v. M/s. Grasim Industries Ltd.', which emphasized that even initials or symbols used to indicate a connection with another person qualify as a brand name or trade name under the Notification.

Conclusion:
The court concluded that the value of goods supplied under other brand names ("HM", "PAL", "KH") should not be included in the aggregate value of clearances for SSI exemption. Excluding these values, the appellant's clearances under its own brand "VIR" were less than Rs. 3 crores, entitling the appellant to the exemption under Notification No. 1/93. The appeal was allowed, overturning the CEGAT's order and directing the authorities to grant the exemption for the year in question.

← Previous Next →