2008 (1) TMI 16 - SC - Central Excise

Supreme Court: Appellant entitled to tax exemption, design not a brand. Incorrect assessment overturned.

The Supreme Court held that the appellant was entitled to exemption from central excise duty under Notification No. 175/1986-CE. It determined that the ... Printing of hexagonal design on the goods of appellant – If the impugned brand name or design is not owned by any particular person, the use thereof would not disentitle the appellant the benefit of the exemption under the Not. 175/86 Issues Involved:1. Entitlement to exemption from central excise duty under Notification No. 175/1986-CE.2. Determination of whether the hexagonal design used by the appellant constituted a brand name or trade name of another person.3. Relationship between the appellant and the Marketing Company.4. Assessment of the correct assessable value of the goods.Detailed Analysis:1. Entitlement to Exemption from Central Excise Duty:The core issue was whether the appellant company was entitled to exemption from central excise duty under Notification No. 175/1986-CE dated 1st March 1986. The notification provides exemption to Small Scale Industrial Units from payment of central excise duty.2. Hexagonal Design as a Brand Name or Trade Name:The appellant started using a hexagonal artistic design along with its brand names 'Intatex' and 'Intaco' on its corrugated boxes. The investigating officers concluded that this design was a brand name of the Marketing Company, thus disqualifying the appellant from the exemption under Paragraph 7 read with Explanation VIII of the notification. However, the Supreme Court found that the hexagonal shape/design was not a brand name or trade name of the Marketing Company. The court highlighted that the Marketing Company had no proprietary rights over the design and had explicitly disowned it. The court stated, 'The said hexagonal shape/design was not at all owned by or belonged to the Marketing Company.'3. Relationship Between the Appellant and the Marketing Company:The Commissioner and the CEGAT held that the appellant and the Marketing Company were related persons, impacting the assessable value of the goods. The Supreme Court disagreed, noting that the Marketing Company did not claim any proprietary rights over the hexagonal design, thus negating the argument that the design indicated a connection between the goods and the Marketing Company.4. Assessment of the Correct Assessable Value:The investigating officers had determined that the correct assessable value should be the price at which the Marketing Company sold the goods, not the price at which the appellant sold them to the Marketing Company. The Supreme Court found this assessment incorrect, as it was based on the erroneous conclusion that the hexagonal design was a brand name of the Marketing Company.Conclusion:The Supreme Court concluded that the appellant was entitled to the exemption under Notification No. 175/1986-CE. The court held that the hexagonal design did not constitute a brand name or trade name of the Marketing Company and that the appellant and the Marketing Company were not related persons in a manner that would affect the exemption. The court set aside the orders of the CEGAT and the Commissioner, allowing the appellant to get the exemption under the notification. The appeal was allowed with no order as to costs.