Trade mark assignment must be credibly proved before small scale exemption can apply to branded goods

A claimed assignment of a trade mark must be supported by contemporaneous conduct and disclosure before it can displace the original brand owner's rights for small scale exemption purposes. On the facts, the alleged January 1994 transfer was not accepted as genuine because it was not reflected in the proprietor's statement at search, and the application for registration in the respondents' name was made only after seizure proceedings began. Exemption was therefore unavailable for clearances under another concern's brand name up to 18-4-1996, while eligibility for the later period was remanded for fresh decision. Confiscation of unaccounted branded goods was upheld, but the redemption fine was reduced.

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Issues: (i) Whether the respondents were entitled to the benefit of small scale exemption in respect of goods cleared under the brand name of another concern, and whether the alleged sale deed/assignment of the brand name could be accepted for the period up to 18-4-1996; (ii) whether confiscation of the seized branded goods and the quantum of redemption fine were justified.

Issue (i): Whether the respondents were entitled to the benefit of small scale exemption in respect of goods cleared under the brand name of another concern, and whether the alleged sale deed/assignment of the brand name could be accepted for the period up to 18-4-1996.

Analysis: The respondents' claim that the brand name had been sold in January 1994 was not supported by their own conduct or contemporaneous disclosure. The proprietor's statement recorded on the date of search did not mention any prior sale, and the alleged assignment was referred to only later. The application for registration of the brand name in the respondents' name was also made only in April 1996 after the seizure proceedings had commenced. On these facts, the alleged transfer in January 1994 was not accepted as genuine. Since the goods were cleared under a brand name belonging to another person, the benefit of small scale exemption was not available for the relevant earlier period. As regards the later period, eligibility was made dependent on the outcome of the application for registration and the action taken by the competent authority, warranting reconsideration by the adjudicating authority.

Conclusion: The small scale exemption was rightly denied up to 18-4-1996. For the period from 19-4-1996 onwards, the question of eligibility was remanded for fresh decision.

Issue (ii): Whether confiscation of the seized branded goods and the quantum of redemption fine were justified.

Analysis: The seized goods were branded goods cleared without proper accounting in the statutory records, which justified confiscation. However, the original redemption fine was considered excessive in the facts of the case and required reduction.

Conclusion: Confiscation was upheld and the redemption fine was reduced to Rs. 30,000.

Final Conclusion: The revenue's challenge succeeded in part on the question of exemption, while the respondents obtained partial relief by way of remand for the later period and reduction of redemption fine.

Ratio Decidendi: A claimed assignment of a trade mark must be credibly established by contemporaneous conduct and disclosure, and goods cleared under another's brand name do not qualify for small scale exemption until the transfer or entitlement is properly evidenced and acted upon.

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