2017 (4) TMI 849 - HC - Central Excise

SSI exemption - N/N. 8/2003, dated 01-3-2003 - use of brand name of others - It was alleged by the officials that the appellants are engaged in the manufacture and sale of the branded items, not entitled to the benefit of the Exemption Notification and that therefore the appellants ought to have registered themselves under the CEA, 1944. Whether the purchase of standard moulds containing certain names as inscriptions and the manufacture of products out of those moulds with the same names, would tantamount to the manufacture of goods bearing a brand name or trade name so as to be deprived of the benefit of exemption in terms of paragraph-4 read with Explanation (A) under para-5 of the Exemption N/N. 8/2003, dated 01-3-2003? - Held that - The mere fact that the specified goods manufactured by a person bear a brand name or trade name of another manufacturer, is not sufficient to conclude that those goods are manufactured by such other manufacturer or trader - If the use of the brand name or trade name is not intended for the purpose of indicating a connection in the course of trade between such specified goods and the person using such name or mark, then the same may not fall within the definition of the expression brand name or trade name under the Explanation under paragraph 5 of the Exemption Notification - It is this essential requirement of establishment or existence of a connection in the course of trade between the specified goods and their manufacturer that has been overlooked by the Department as well as by the CESTAT. Hence, we are of the considered view that the first question of law is to be answered in favor of the appellants. Whether the Tribunal and the respondents were right in denying the benefit of the CBEC Circular bearing No.52/52/94, dated 01-9-1994 to the appellants? - Held that - if a brand name is not owned by any particular person, the use thereof will not deprive a unit of the benefit of the small scale exemption scheme. This applies not only to locks but to all other goods specified in N/N. 1/93-C.E - if certain names are available in the market freehold for anyone to use, the industry cannot be taken to be manufacturing goods under the brand name of some other manufacturer - benefit of circular allowed - decided in favor of assessee. Appeal allowed - decided in favor of assessee.

Summary

Issues Involved:
1. Denial of the benefit of Exemption Notification No.8/2003.
2. Imposition of penalty.
3. Interpretation of the brand name or trade name under the Exemption Notification.
4. Applicability of CBEC Circular No.52/52/94.

Issue-wise Detailed Analysis:

1. Denial of the Benefit of Exemption Notification No.8/2003:
The appellants, small-scale industrial units manufacturing plastic moulded chairs, claimed the benefit of Exemption Notification No.8/2003, which exempts first clearances up to an aggregate value not exceeding Rs.One Crore from excise duty. The Department denied this benefit, arguing that the appellants' products bore brand names or trade names of other persons, thus falling under the exclusion in paragraph 4 of the Notification. The court emphasized that for goods to be excluded from the exemption, they must bear a brand name or trade name of another person, indicating a connection in the course of trade between the goods and the person using the name or mark. The court found that the Department failed to establish such a connection between the names on the moulds (Rosekamal, Lalkamal, Maniyar) and any specific person or entity, thus the appellants were entitled to the exemption.

2. Imposition of Penalty:
The Additional Commissioner of Customs had imposed penalties on the appellants, which were later reduced by the Commissioner (Appeals). The court held that since the demands for excise duty were not sustainable, the penalties imposed consequently also could not stand. Therefore, the penalties were set aside.

3. Interpretation of the Brand Name or Trade Name Under the Exemption Notification:
The court analyzed the definitions of "brand name" and "trade name" in the Exemption Notification, which require a name or mark to indicate a connection in the course of trade between the goods and the person using the name or mark. The court noted that the Department did not prove that the names inscribed on the moulds indicated such a trade connection. The court referenced several Supreme Court decisions to support its interpretation, including cases where the use of a brand name did not preclude exemption if the name did not establish a trade connection with another entity.

4. Applicability of CBEC Circular No.52/52/94:
The court considered the CBEC Circular No.52/52/94, which clarifies that if a brand name is not owned by any particular person, its use does not deprive a unit of the small-scale exemption. The court found that the names used by the appellants were not owned by any specific person and were freely available for use, thus the Circular supported the appellants' claim for exemption.

Conclusion:
The court concluded that the appellants were entitled to the benefit of the Exemption Notification No.8/2003, and the demands and penalties imposed by the Department were not justified. Both questions of law were answered in favor of the appellants, and all appeals were allowed, with no costs.