2004 (12) TMI 87 - SC - Central Excise

Whether the respondents who are manufacturers of plywood under their own brand name Pelicon have made themselves disentitled to the benefit of small scale exemption Notification No. 175/86-C.E. by using a logo indicating MERINO on their products along with their brand name? 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? Held that - Allow the appeals and set aside the order dated 9-6-1998 passed by the CEGAT impugned in these appeals and answer the issues involved in favour of the appellant and hold that the respondents who are the manufacturers of plywood under their own brand name M/s. Pelican are disentitled to the benefit of small scale exemption Notification No. 175/86-C.E., dated 1-3-1986 by using logo indicating MERINO on their product along with their brand name.

Issues Involved:
1. Eligibility for small scale exemption Notification No. 175/86-C.E.
2. Use of the "MERINO" logo and its implications under Clause 7 and Explanation VIII of the Notification.
3. Interpretation of "brand name" or "trade name" under the Notification.
4. Application of legal precedents and statutory interpretation principles.

Issue-wise Detailed Analysis:

1. Eligibility for Small Scale Exemption Notification No. 175/86-C.E.:
The central issue was whether the respondents, manufacturers of plywood under the brand name "Pelican," were entitled to the small scale exemption Notification No. 175/86-C.E. The respondents used the "MERINO" logo on their products, which was owned by M/s. Merinoply and Chemicals Ltd., a large-scale manufacturer not eligible for the exemption. The Commissioner of Central Excise denied the exemption, citing Clause 7 of the Notification, which disallows exemption if the goods bear a brand name or trade name of another ineligible person.

2. Use of the "MERINO" Logo and Its Implications:
The respondents argued that the use of "MERINO" did not imply any relation to M/s. Merinoply and Chemicals Ltd. and that their primary brand name was "Pelican." However, the Department contended that the presence of the "MERINO" logo disentitled the respondents from the exemption. The Supreme Court held that the use of the "MERINO" logo indicated a connection in the course of trade between the products and M/s. Merinoply and Chemicals Ltd., fulfilling the conditions of Clause 7 and Explanation VIII, thus making the respondents ineligible for the exemption.

3. Interpretation of "Brand Name" or "Trade Name" under the Notification:
Clause 7 of the Notification states that the exemption does not apply if the goods are affixed with a brand name or trade name of another person who is not eligible for the exemption. Explanation VIII defines a "brand name" or "trade name" as any name or mark used to indicate a connection in trade between the specified goods and the person using such name or mark. The Supreme Court found that the use of the "MERINO" logo by the respondents met this definition, thereby disqualifying them from the exemption.

4. Application of Legal Precedents and Statutory Interpretation Principles:
The Solicitor General argued that exemption provisions in taxing statutes should be construed strictly. The Supreme Court agreed, referencing several precedents, including:
- Commissioner of Central Excise, Trichy v. Rukmani Pakkwell Traders: Held that the exemption is lost if the goods bear a brand name or trade name of another person, regardless of whether the goods are the same as those for which the brand name is registered.
- Commissioner of Central Excise, Chandigarh-I v. Mahaan Dairies: Confirmed that the use of another company's trade name or brand name disqualifies the goods from exemption, even if additional words are used.
- B.H.E.L. Ancillary Association v. Collector of Central Excise: Emphasized that markings or inscriptions must indicate a connection in the course of trade to fall within the exception to the exemption.

The Supreme Court concluded that the Tribunal erred in its interpretation and that the respondents' use of the "MERINO" logo indeed indicated a trade connection with M/s. Merinoply and Chemicals Ltd., making them ineligible for the exemption. The appeals were allowed, and the Tribunal's order was set aside, affirming the Department's position that the respondents were not entitled to the small scale exemption.

Conclusion:
The Supreme Court held that the respondents, by using the "MERINO" logo, were disentitled to the benefit of small scale exemption Notification No. 175/86-C.E. The judgment emphasized strict interpretation of exemption provisions and upheld the Department's view that the use of another's brand name or logo disqualifies the goods from the exemption. The appeals were allowed, and the Tribunal's order was set aside.

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