Brand name use and tariff classification: caps and bags classified separately, with small scale exemption allowed for non-trading customer brands.

Caps were classified as headgear under Heading 6501.80 and bags under Heading 6305.00 as sacks and bags, rather than as clothing accessories under Chapters 61 or 62, so the Revenue's classification was upheld. For small scale exemption, clearances bearing customers' brand names were eligible where the customers were not trading in those goods, because such use was not in the course of trade. Nike-branded clearances did not qualify for exemption, but duty relief was required on the brand-name element. The note also records that confiscation and penalties were set aside.

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Issues: (i) classification of caps and bags manufactured by the assessee under the Central Excise Tariff; (ii) entitlement to small scale exemption in respect of goods cleared with customers' brand names, including goods cleared with the Nike brand.

Issue (i): classification of caps and bags manufactured by the assessee under the Central Excise Tariff.

Analysis: Caps were held to fall under Heading 6501.80 as headgear. Bags were held to fall under Heading 6305.00, which specifically covers sacks and bags, rather than under Chapters 61 or 62 as clothing accessories.

Conclusion: The classification adopted by the Revenue was upheld.

Issue (ii): entitlement to small scale exemption in respect of goods cleared with customers' brand names, including goods cleared with the Nike brand.

Analysis: The goods cleared with the brand names of customers who were not trading in such goods were treated as not bearing brand names used in the course of trade, and the benefit of small scale exemption was allowed for such clearances. In respect of clearances with the Nike brand, the assessee accepted that exemption was not available, but duty relief for the brand name element was required to be granted.

Conclusion: Small scale exemption was allowed for branded goods of non-trading customers, while duty was payable on Nike-branded goods with consequential abatement of duty element.

Final Conclusion: The appeal succeeded only to the extent that exemption and ancillary relief were granted for most clearances, while duty liability was sustained for the Nike-branded goods; confiscation and penalties were set aside.

Ratio Decidendi: Brand names used for customers who are not trading in the goods do not amount to use in the course of trade so as to deny small scale exemption.

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