2017 (3) TMI 1495 - AT - Central Excise

Appellant granted exemption as 'TIDLAND' not on goods, only on docs. Brand name invoicing not disqualifying.

The Tribunal held that the appellant was eligible for the small-scale exemption under the relevant notifications as the brand name 'TIDLAND' was not ... Exemption to small-scale units - brand name or trade name of another person - affixation of brand name on specified goods - original equipment clearances for use as OEM components - part or serial number as indicia of origin - exclusive right to use trademark by assignment or licence - strict construction of fiscal exemption notificationsAffixation of brand name on specified goods - part or serial number as indicia of origin - strict construction of fiscal exemption notifications - Whether denial of small-scale exemption was justified because the impugned brand name or part number appeared only on documents and on the original part/serial number on finished components. - HELD THAT: - The Tribunal held that the exclusion in the notification applies only where the specified goods themselves are affixed with the brand name or trade name of another person. The adjudicating authority's conclusion that mere printing of the brand on sale documents or use of the collaborator's part/serial number on finished components attracts the exclusion was rejected. Reliance on the reasoning in Superex and Trimurti Weldmesh supports the plain-language approach: the manufacturer must affix the brand on the goods to be excluded. The definition of 'brand name or trade name' does not reasonably extend to a part/serial number used as an aid to manufacture or assembly, and fiscal notifications must be construed according to their clear terms rather than by importing extraneous purposive inferences. [Paras 8, 9, 11, 12]The exclusion could not be invoked on the basis of brand references in documents or on part/serial numbers; denial of exemption on those grounds was unsustainable.Exclusive right to use trademark by assignment or licence - brand name or trade name of another person - Whether an exclusive right conferred by agreement to use the trade mark in the territory precludes the mark being treated as the brand of another person for the purposes of the notification. - HELD THAT: - The Tribunal accepted that where a foreign collaborator has assigned or conferred on the manufacturer an exclusive right to use the trade mark in India, the manufacturer uses the mark in its own right and therefore is not using the trade mark of 'another person' as envisaged by the exclusion. The decision in Otto Bilz was applied to hold that assignment or exclusive licence converts the mark into the assessee's own mark for the relevant territory and thus does not disentitle the assessee from claiming the exemption. [Paras 13, 14]An exclusive right to use the trade mark precludes treating the mark as that of another person; exemption could not be denied on that ground.Final Conclusion: The impugned order denying small-scale exemption was set aside and the appeals allowed: the exclusion applies only where the goods themselves bear the brand/trade name of another person and not where the mark appears only on documents or as an original part/serial number, and an exclusive right to use the trade mark in the territory means the assessee is not using the mark of another person. Issues Involved:1. Eligibility for small-scale exemption under various notifications.2. Use of ineligible brand name on products.3. Interpretation of exemption notification clauses.4. Limitation period for raising the demand.Detailed Analysis:1. Eligibility for Small-Scale Exemption:The primary issue revolves around the eligibility of the appellant to avail the small-scale exemption under notification no. 8/1998-CE and its successors. The appellant had been availing this exemption for their products, 'air shaft' and 'air chucks', which were manufactured under an exclusive license from M/s Tidland Corporation, USA. The dispute arose when the Commissioner of Central Excise & Customs Belapur denied this exemption, alleging that the appellant used an ineligible brand name on their products.2. Use of Ineligible Brand Name:The adjudicating authority's main contention was that the appellant used the brand name 'TIDLAND' on their products, making them ineligible for the small-scale exemption. The Commissioner argued that the brand name was affixed on sale documents, and the original product number of the overseas collaborator was used on the finished product, which was sufficient to deny the exemption. However, the appellant contended that the brand 'TIDLAND' was not affixed on the products themselves but only appeared on letter-heads, clearance invoices, and catalogues, which should not disqualify them from the exemption.3. Interpretation of Exemption Notification Clauses:The Tribunal examined the relevant clauses of the exemption notifications. The fourth paragraph of one such notification explicitly states that the exemption does not apply to goods bearing a brand name or trade name of another person. However, it provides an exception for goods used as components or parts of machinery or equipment, provided specific procedures are followed. The Tribunal found no allegation that the ineligible brand name was affixed on the goods themselves. Citing the Supreme Court's decision in Commissioner of Central Excise, Jamshedpur v. Superex Industries, the Tribunal emphasized that mere invoicing under another's brand name does not disqualify the goods from the exemption if the brand name is not affixed on the goods.4. Limitation Period for Raising the Demand:The appellant also argued that a substantial portion of the demand was time-barred. The Tribunal did not explicitly address this issue in the judgment, focusing instead on the primary contention regarding the use of the brand name and the interpretation of the exemption notification.Conclusion:The Tribunal concluded that the exemption notification's intent was not to govern the use of the ineligible brand name on documentation but on the goods themselves. The Tribunal also noted that the appellant had exclusive rights to use the 'TIDLAND' trademark in India, making it their brand name rather than that of another person. Therefore, the impugned order denying the exemption was flawed. The appeals were allowed, and the impugned order was set aside.