2005 (8) TMI 115 - SC - Central Excise

Exemption under Notification No.1/93-C.E. limited to own-brand goods; trade mark principles irrelevant; referral for authoritative determination

SC held that exemption under Notification No.1/93-C.E. must be read in its own context and does not extend to goods bearing the brand or trade name of ... Exemption under Notification No. 1/93-C.E. - brand name or trade name of another person - strict compliance with a fiscal notification - use in the course of trade - Explanation IX - interpretation in context (not trade marks law) - Board Circular versus Supreme Court precedent - Constitution Bench referenceExemption under Notification No. 1/93-C.E. - brand name or trade name of another person - strict compliance with a fiscal notification - use in the course of trade - Explanation IX - Whether the assessee-manufacturer is entitled to exemption under Notification No. 1/93-C.E. where the goods manufactured bear the brand or trade name of another person - HELD THAT: - Clause 4 of the Notification unambiguously denies the exemption to specified goods bearing a brand name or trade name of another person. The Court applied the well-settled principle that fiscal notifications must be strictly complied with and that no words may be implied into the Notification. Explanation IX qualifies the meaning of 'brand name' or 'trade name' but must be read in the context of Clause 4: the words 'used in relation to such specified goods for the purpose of indicating, or so as to indicate a connection in the course of trade' refer to the use by the manufacturer in the manufacturer's course of trade. A manufacturer who, even pursuant to customer orders and for captive consumption, affixes the customer's brand/trade name on the goods is using that mark in the course of his trade to indicate a connection between those goods and the person whose name/mark is used. Such use falls squarely within Clause 4 and causes loss of the exemption. The Trade Marks Act or principles governing trade marks do not alter the interpretation of the Notification; the Notification must be interpreted in its own context. Applying these principles to the admitted facts (that the assessee affixed customers' brand/trade names on elastics manufactured by it), the Court concluded that the exemption is lost. [Paras 5, 6, 7, 8]Exemption under Notification No. 1/93-C.E. is not available where the goods (here, elastics) bear the brand or trade name of another person; the Full Bench judgment of the Tribunal to the contrary is overruled.Board Circular versus Supreme Court precedent - Constitution Bench reference - Whether a Board Circular (dated 27th October, 1994) giving an interpretation contrary to the Court's view prevails over judgments of this Court - HELD THAT: - The Court noted that a Board Circular had been produced which adopts the interpretation advanced by the assessee's counsel. A broader question of law exists as to the precedence of such Circulars vis-a -vis judgments of this Court. That question has been referred to a Constitution Bench in earlier proceedings and, in the present appeals, the Court has therefore tagged the matters with those before the Constitution Bench for determination of whether the Circular or the judgments of this Court will prevail. The present findings on the Notification were given subject to the ultimate conclusion of the Constitution Bench on this point. [Paras 9]Question of superiority of the Board Circular over Supreme Court judgments referred/tied to the Constitution Bench; outcome of the appeals is to follow the decision of that Bench.Final Conclusion: The Court held that under Clause 4 of Notification No. 1/93-C.E. the exemption is lost if the specified goods bear the brand or trade name of another (regardless of captive consumption or whether the goods reach the market in that form), overruled the contrary Full Bench Tribunal view, but has referred the question of whether a Board Circular can prevail over Supreme Court judgments to the Constitution Bench and has accordingly tagged these appeals to that reference; the ultimate outcome of the two appeals will follow the Constitution Bench's decision. 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.