Manufacturer's Use of Brand Names on Goods: Exemption Dispute & Compliance Requirements

KOHINOOR ELASTICS PVT. LTD. Versus COMMISSIONER OF CENTRAL EXCISE, INDORE

KOHINOOR ELASTICS PVT. LTD. Versus COMMISSIONER OF CENTRAL EXCISE, INDORE - 2005 (188) E.L.T. 3 (SC), 2005 (7) SCC 528 Issues:
- Entitlement to benefit of Notification No. 1/93-C.E., dated 28th February, 1993 for manufacturer of elastics affixing brand/trade names of customers.
- Interpretation of Clause 4 of the Notification regarding goods bearing brand/trade names of another person.
- Application of Explanation IX in determining the connection in the course of trade for brand/trade names on goods.
- Relevance of Circular of the Board in interpreting the Notification and its precedence over Court judgments.

Entitlement to Benefit of Notification:
The manufacturer, M/s. Kohinoor Elastics Private Limited, sought exemption under Notification No. 1/93-C.E., dated 28th February, 1993, claiming to be a small-scale industry. The issue arose when it was discovered that the manufacturer was using brand/trade names of other parties on the elastics produced, leading to denial of the exemption. The Tribunal's decisions for different assessment years varied, with one year denying the benefit and another following a Full Bench judgment granting the benefit based on the use of brand/trade names.

Interpretation of Clause 4 of the Notification:
Clause 4 of the Notification explicitly states that the exemption does not apply to goods bearing brand/trade names of another person. The Court emphasized strict compliance with the terms of the Notification, highlighting that the exemption is lost if goods bear such names, regardless of whether they reach the market or are used for captive consumption. The Court rejected arguments that the exemption should apply only to goods reaching customers, as the intention was to prevent misuse by manufacturers using brand/trade names to avail of the exemption.

Application of Explanation IX:
The manufacturer's counsel argued that Explanation IX clarified that brand/trade names must indicate a connection in the course of trade between the goods and a person. However, the Court held that the use of brand/trade names by the manufacturer, even if the goods are not sold in the market but used as inputs for other products, signifies a connection and results in the loss of exemption. The Court emphasized that the purpose of indicating a connection is fulfilled when the manufacturer affixes the brand/trade names on the goods.

Relevance of Circular of the Board:
While the Court was inclined to dismiss one appeal and allow the other based on the interpretation of the Notification, a Circular of the Board presented a conflicting interpretation. The Court decided to refer the matter to a Constitution Bench to determine whether Circulars prevail over Court judgments. Pending the decision, the Court tagged the cases with the Constitution Bench for clarity on the interpretation issue, indicating that the outcome would dictate the final disposition of the appeals.