2017 (3) TMI 372 - AT - Central Excise

Tribunal rules in favor of appellants for using brand names, emphasizing case-by-case assessment

Poonam Perfect, Cannon Trade Link Charms Creation, And Ankit Apparels Versus Commissioner of Central Excise, Mumbai – IV

The Tribunal found that the use of brand names by the appellants did not indicate any intent to mislead or derive undue advantage. The impugned order ... Denial of benefit of exemption - Notification no. 8/2001-CE - There is no dispute that the impugned brand names are registered with various individuals - Held that: - the notification does not restrict the exception to registered brands and, hence, it would only be reasonable to conclude that such a touchstone was not intended by the Central Government when it issued the exemption notification - The exception accorded in the exemption notification to certain branded goods has a different objective. No uniform rule can be promulgated for admitting to the benefit or for denial of the exception. A small unit that balances on the edge of survival can hardly be expected to find the resources to do so and we would be condemning the small units to stagnate by denying them the opportunity to grow through brand building - The use of the brands by appellants cannot be considered to have intended to communicate a connection in the course of trade with the person who purportedly owns the brand name - Appeal allowed. Issues Involved:1. Eligibility for exemption under Notification No. 8/2001-CE dated 1st March 2001.2. Use of brand names belonging to other entities.3. Interpretation of relevant Supreme Court decisions.4. Examination of intent and connection in the use of brand names.5. Validity of the appellate authority's decision.Issue-wise Detailed Analysis:1. Eligibility for Exemption under Notification No. 8/2001-CE dated 1st March 2001:The appellants, manufacturers of ready-made garments, claimed exemption from duty under Notification No. 8/2001-CE, which is applicable to small-scale units fulfilling specific conditions. The central issue was whether the appellants violated the conditions of this notification by using brand names that did not belong to them, thus making them ineligible for the exemption.2. Use of Brand Names Belonging to Other Entities:The appellants marketed their products under brand names such as 'CANNON,' 'CHARMS,' and 'CHOCKLATE,' which were registered to other entities. The original authority initially dropped the proceedings, but the first appellate authority reversed this decision, leading to the current appeal. The core of the dispute was whether the use of these brand names disqualified the appellants from the exemption.3. Interpretation of Relevant Supreme Court Decisions:The appellants cited the Supreme Court ruling in Commissioner of Central Excise, Chandigarh-II v. Bhalla Enterprises [2004 (173) ELT 225 (SC)], which stated that exemption could be denied only if the brand name indicated a connection with the goods of another entity. The appellants argued that the show cause notice did not allege such a connection, and thus, their claim for exemption should not be denied. The decision in Commissioner of Central Excise v. Rukmani Pakkwell Traders [2004 (165) ELT 481 (SC)] was also considered, which held that exemption is not available if the goods manufactured by the brand owner and the user are different.4. Examination of Intent and Connection in the Use of Brand Names:The Tribunal examined whether there was any intent to indicate a connection between the appellants' goods and those of the brand owners. The appellants contended that the brand names were assigned to them by known persons and that there was no financial relationship suggesting an intent to take advantage of the brands. The Tribunal found no evidence of any connection or intent to mislead, as required by the Supreme Court's interpretation in Bhalla Enterprises.5. Validity of the Appellate Authority's Decision:The Tribunal noted that the original authority had relied on the decision in Commissioner of Central Excise, Chandigarh v. Fine Industries [20012 (53) RLT 398 (T-LB)], which was valid at the time. The appellate authority's decision to deny the exemption was based on a later interpretation of the Trade and Merchandise Marks Rules, 1999, which was not invoked in the show cause notice. The Tribunal concluded that the exemption notification did not restrict the exception to registered brands and that the appellants' use of the brands did not indicate any intent to derive undue advantage.Conclusion:The Tribunal found that the use of the brand names by the appellants did not indicate any intent to mislead or derive undue advantage. The impugned order denying the exemption was set aside, and the appeals were allowed. The Tribunal emphasized the need for a case-by-case examination of the circumstances and intent behind the use of brand names, rather than a blanket denial of exemption based on brand ownership.