Clarification regarding brand name provision in the general SSI Scheme under Notification No. 1/93 - Central Excise - 71/71/94-CX

Clarification regarding brand name provision in the general SSI Scheme under Notification No. 1/93 Circular No. 71/71/94-CX Dated 27-10-1994 [From F.No. 341/45/94-TRU] Government of India Ministry of Finance (Department of Revenue) Tax Research Unit Subject : Clarification regarding brand name provision in the general SSI Scheme under Notification No. 1/93 . I am directed to refer to paragraph 4 of Notification No. 1/93 which provides that under this notification, exemption would not apply if the goods in question bear a brand name or trade name of another person. In this context certain doubts have been raised following examples have been cited and clarifications have been sought whether the benefit of notification No. 1/93 would be available under such circumstances. Illustration I 2. It has been represented that in the case of castings, there is a trade practice under which the SSI units produce the castings as per the design supplied by the customers and such castings may bear the brand name/design/logo as required by the users of castings. Such castings are finally used in the manufacture of other machinery like diesel engines. It has been represented that such castings are not traded as such in the open market and they are made for use by specific users. In such cases, the brand name which is put on the castings is the brand name of the machinery manufacturer, and thus putting the brand name is only to suit the manufacturing needs of the customer. Consequently, in such cases, the benefit of SSI exemption should not be denied. Illustration II 3. There are certain SSI units which produce goods on behalf of another person and names of both the manufacturer and the person on whose behalf the goods are manufactured are reflected in the finished goods. For example, in the case of electricity meter covers, the name of the manufacturer as well as the name of the electric company who supplies such electricity meter covers to the consumers are both indicated. Here also it is represented that the use of the brand name is not in the 'course of trade". 4. The matter has been examined in the Board. The scope of brand name and trade name has already been clarified vide Ministry's letter F.No. B. 40/12/94-TRU, dated the 1st September, 1994 (Circular No. 52/52/94-CX. ) 5. As explained in paragraph 3 of the letter, to attract the mischief of the provisions relating to brand name, two conditions have to be satisfied. (1) Such brand name must indicate a connection between the branded goods and some person using such brand name. (2) Such connection should be in the course of trade. 6. Consequently if there is no "trade" of such goods, the brand name provision would not apply. 7. Coming to the first illustration, castings are manufactured as per the specific requirement of the customers and the brand name which the small scale unit puts on such castings is meant for use of the customer only for further manufacture. Castings having such brand name are not sold in the market as castings as such, because it will be of no use to another person. It is felt that when such castings are not "traded" but only sold to a particular manufacturer for his own use, the embossing of the brand name of the customer on the castings would not amount to using brand name so as to deny the benefit of Notification No. 1/93. Of course if it is found that such branded castings are traded in the market as such, it will amount to use of such castings in the course of trade and the benefit of exemption notification will not be available. In other words, so long as the branded castings are being supplied to the customer for further manufacture, and are not otherwise "traded", the benefit of small scale exemption in such cases should not be denied merely on the ground that it contains brand name of another unit. Whether such supply is in the course of trade or not, of course, will be a matter of fact and has to be ascertained from the nature of transaction between the small scale unit and the brand name owner. So long as they are made to order as per the design and specification of a particular manufacturer and sold to that manufacturer for his own use, the benefit of Notification No. 1/93 cannot be denied. 8. As regards the second illustration, the Collectors Conference held at Chandigarh on 17th June, 1994 had already taken a view that in such cases the use of names of the user like electricity boards etc. are embossed on the goods to guard against theft or misuse of public property and are not meant for sale by State Electricity Boards. Use of the brand name in such cases will not attract the mischief of para 4 of Notification No. 1/93, and the benefit of notification No. 1/93 cannot be denied under such circumstances. The Board agrees with the view taken in the Conference as here also the element "in the course of trade" is absent. 9. In this context your attention is also invited to the clarification contained in Board's letter F.No. 345/35/87-TRU, dated the 29th October 1987.