1994 (12) TMI 79 - HC - Central Excise

Court upholds tax notification barring joint brand use exemption, citing prevention of tax evasion

The court dismissed the writ petitions challenging paragraph 4 of Notification No. 59/94-C.E., ruling that manufacturing goods with another person's brand ... SSI exemption - Brand name Issues Involved:1. Validity of paragraph 4 of Notification No. 59/94-C.E.2. Interpretation of 'brand name' or 'trade name' in the context of small scale industry exemptions.3. Alleged violation of Articles 14 and 19(1)(g) of the Constitution of India.Summary:1. Validity of paragraph 4 of Notification No. 59/94-C.E.:The petitioners challenged the notification dated 1-3-1994, particularly paragraph 4, which stipulates that if a person manufactures excisable goods bearing the brand names of another person, they will not be entitled to claim the minimum exemption. The court held that the trade or brand name, although originally belonging to the joint family, was registered in the name of K.P.R. Sakthivel. Other petitioners used the trade name with his permission, subject to a mutual agreement. The court concluded that the petitioners manufacture goods by affixing them with a brand or trade name of another person, making them ineligible for the exemption.2. Interpretation of 'brand name' or 'trade name' in the context of small scale industry exemptions:The petitioners argued that the provision should apply only to exclude manufacturers who affix goods with brand names of another person, not those who use a brand name jointly. The court noted that the authorities under the Act could not adjudicate disputes relating to the right to ownership of a brand name. The court emphasized that the notification must be construed strictly against the subject, and the petitioners' use of a trade name registered in the name of K.P.R. Sakthivel disqualified them from the exemption.3. Alleged violation of Articles 14 and 19(1)(g) of the Constitution of India:The petitioners claimed that paragraph 4 of the notification was arbitrary, vague, and unreasonable, constituting discrimination among small scale industries. The court rejected this claim, stating that any exemption from tax is a concession, not a right. The legislature or government has discretion in choosing subjects for taxation or exemption. The stipulation in paragraph 4 aimed to prevent tax evasion through manipulation or fragmentation of units. The court found no violation of Articles 14 and 19(1)(g) and upheld the notification.Conclusion:The writ petitions were dismissed, and the claims of the petitioners were rejected as devoid of merit. The court upheld the validity of paragraph 4 of Notification No. 59/94-C.E., interpreting the provisions strictly and finding no constitutional violations.