2015 (6) TMI 155 - SC - Central Excise

Benefit of exemption/concessional rate of duty under Notification No.175/86-CE dated 1.3.1986 - Exemption or concessional rate of excise duty to the SSI units - Use of third party brand name - Held that - Benefit of exemption would not apply to the specified goods where a manufacturer affixes the specified goods with brand name or trade name (registered or not) of another person who is not eligible for grant of exemption under this Notification. As per this, in order to deny the exemption under this Notification, the Department has to show that on the goods which are manufactured by the manufacturer i.e. the SSI, the brand under or trade name of another person is affixed and that another person is not eligible for grant of exemption in this Notification. In other words, when that other person whose brand name or trade name is used by the SSI is not itself a SSI, then the user is not entitled to exemption under the said Notification. On the packing of goods, brand names of the assessee INTATEX and INTACO were clearly and prominently printed. In between these two brand names, a hexagonal shape/design, which was claimed by the Department to be the brand of the Marketing Company, was also printed. In this backdrop, the question was as to whether the assessee company was using the said hexagonal shape/design of other person. On the facts of that case, the Court found that there was nothing on record to show that the said hexagonal shape/design belonged to or was owned by the Marketing Company and thus they had permitted the assessee to use the same on the corrugated boxes. The Court also found that the hexagonal design/shape could not be said to be descriptive enough to serve as an indicator of nexus between the goods of the assessee and the Marketing Company. On this basis, it was concluded that the alleged monogram could not be the brand name or trade name of the Marketing Company. Matter is not examined by the authorities below in the right perspective. The factual aspects can be established only before the adjudicating authority. Matter remanded back - Decided in favour of revenue

Issues Involved:
1. Entitlement to exemption under Notification No.175/86-CE.
2. Use of brand name 'Stangen' by the respondent.
3. Interpretation of 'brand name' or 'trade name' under Explanation VIII of the Notification.
4. Connection between the goods and the manufacturer using the brand name.
5. Legal precedents regarding the use of brand names.
6. Plea of limitation by the respondent.

Detailed Analysis:

1. Entitlement to Exemption under Notification No.175/86-CE:
The respondent, a manufacturer of composite diagnostics, laboratory reagents, and pharmaceutical goods, claimed the benefit of exemption/concessional rate of duty under Notification No.175/86-CE dated 1.3.1986. The Excise Department issued a show cause notice in 1997, arguing that the respondent was not entitled to this benefit because the brand name 'Stangen' and its logo were owned by Dr. K. Anji Reddy, Chairman of Dr. Reddy's Laboratories (DRL), which was not eligible for the exemption.

2. Use of Brand Name 'Stangen' by the Respondent:
The respondent admitted that Dr. K. Anji Reddy was the Chairman of both the respondent Company and DRL. However, the respondent argued that Dr. Reddy had not assigned the trademark to any manufacturer. The respondent and DRL were separate legal entities with different products, and Dr. Reddy, in his individual capacity, was not a manufacturer under the Central Excise Act. The Adjudicating Authority accepted this argument and dropped the proceedings.

3. Interpretation of 'Brand Name' or 'Trade Name' under Explanation VIII of the Notification:
Explanation VIII defines 'brand name' or 'trade name' as a name or mark used to indicate a connection in the course of trade between specified goods and the person using the name or mark. The Supreme Court noted that the use of a brand name by an SSI unit would disqualify it from the exemption if the brand name belonged to a non-SSI entity, regardless of whether the goods were the same or different.

4. Connection between the Goods and the Manufacturer Using the Brand Name:
The Court emphasized that the brand name must indicate a connection between the goods and the person using the name or mark. It is not necessary for the goods to be the same; the crucial factor is the association of the brand name with the manufacturer. The Court found that the CEGAT erred in dismissing the Department's appeal based on the difference in goods.

5. Legal Precedents Regarding the Use of Brand Names:
The Court referred to several judgments, including Commissioner of Central Excise, Chandigarh-I Vs. Mahaan Dairies and Commissioner of Central Excise, Chandigarh-II vs. Bhalla Enterprises, which established that the use of a brand name of another company disqualifies an SSI unit from exemption, even if the goods are different. The Court also cited Tarai Food Ltd. v. CCE and CCE Vs. Grasim Industries Ltd., which clarified that a brand name must establish a connection between the product and the manufacturer.

6. Plea of Limitation by the Respondent:
The respondent argued that it had been using the brand name 'Stangen' since 1986, while Dr. Reddy registered the brand name only in 1989. The respondent claimed independent ownership of the brand name, asserting that it was not using DRL's brand name. The Court acknowledged that if the respondent could prove independent ownership, it might still be entitled to the exemption.

Conclusion:
The Supreme Court set aside the judgments of the lower authorities and remitted the case back to the Commissioner, Central Excise, for a fresh hearing. The Commissioner was directed to consider the law laid down in the cited judgments and allow the respondent to present evidence supporting its claim of independent ownership of the brand name. The respondent was also permitted to raise the plea of limitation. The appeal was allowed with no order as to costs.

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