TaxTMI 
TaxTMI 
1999 (12) TMI 145
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....lable in terms of para 7 of Notification No. 175/86-C.E. and para 4 of Notification No. 1/93-C.E. when the specified excisable goods were affixed with a brand name or trade name of a person who was not Indian, or the brand name or trade name of a person who was not a manufacturer. 2. Under Stay Order No. 126/95, dated 12-7-1995 in the case of Sharp Business Machines (P) Ltd. v. C.C.E., Bangalore, 1995 (61) ECR 637 (Tribunal), the South Regional Bench at Madras while disposing of the Stay Applications had referred the matter to the Hon'ble President for constituting a Larger Bench for the purpose of deciding whether the benefit of small scale exemption under Notification No. 1/93-C.E., dated 28-2-1993 was available to a manufacturer who was affixing his goods with the brand name of a foreign manufacturer. M/s Sharp Business Machines Pvt. Ltd. were engaged in the manufacture of plain paper copier and were affixing them with the brand names 'Canon', 'Richo' and 'Nashua' which belonged to foreign manufacturers. Under Notification No. 1/93-C.E. the exemption contained in that notification was not available to the specified goods bearing a brand name or trade name (registered ....
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....ligible person - manufacturer in U.K. While disposing of the stay application filed by the appellants, the Bench took note of their earlier stay order - Stay Order No. E/Stay/495/92 in Appeal No. E/371/92 in the case of Ceramed Engineers Pvt. Ltd. v. C.C.E., Bangalore, and following the said interim orders had granted waiver of pre-deposit of the duty amount and the penalty amount. In Ceramed Engineers Pvt. Ltd. v C.C.E., Bangalore, Appeal No. E/371/92, the brand name used by the appellants was a foreign brand and the brand name owner was not in India. The Bench observed that unless the brand name owner himself was in India and was himself not entitled to the benefit of Notification No. 175/86-C.E., the benefit of the said exemption Notification No. 175/86-C.E. could not be denied to the Indian manufacturer using such foreign brand name. 3. In the other referring order in the case of Namtech Systems Ltd. v. C.C.E., Bangalore, Appeal No. R/510/95 Madras, Order No. 436/97, dated 4-2-1997 reference was made to the above decision in the case of Sharp Business Machines, and the matter was similarly referred to the Larger Bench. 4. In the case of Bentex Motor Control I....
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....x Indus. Rajdoot Paints, Architect Paints, UK Paints, Spred Coating, Kanwar Paints, Harman Paints, Ideal Coatings, Punjab Tele Printers, Switchgear and Ref Co. and Wessamit Appliances Pvt. Ltd. Shri Jitender Singh, Advocate, appeared for M/s Maini Materials Movement. No one appeared for the other manufacturers. The Revenue was represented by Shri M.P. Singh, DR, and Shri R.D. Negi, DR. Shri A.K. Jain, Advocate, appeared as intervener. 6. We have carefully considered the submissions made by both the sides. We have also given due thought and consideration to the points raised by the intervener. We have also gone through the facts on record and have analysed the matter in detail. 7. To begin with let us have a look at the legal provisions whose interpretation we are called upon to settle. Under exemption Notification No. 175/86-C.E., dated 1-3-1986, the specified excisable goods cleared for home consumption on or after the first day of April in any financial year, by a manufacturer from one or more factories, upto the given limits in terms of value, were exempted from full or part payment of central excise duty subject to the various conditions and limitations as provi....
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....anufacturer or trader. Under Notification No. 1/93-C.E., dated 28-2-1993, the same provisions were incorporated in para 4. The explanation of the expression 'brand name' and 'trade name' was given in explanation IX and the Explanation IV of Notification No. 175/86-C.E. (with regard to the fact that the brand name owner or the trade name owner will not be deemed to be the manufacturer merely by reason of the fact that the specified goods bear his brand name or trade name), was incorporated in Notification No. 1/93-C.E. by way of Explanation X. By Notification No. 59/94-C.E., dated 1-3-1994, the expression "who is not eligible for the grant of exemption under this notification" was omitted, and the amended para 4 w.e.f. 1-3-1994 read as under : "4. The exemption contained in this notification shall not apply to the specified goods, bearing a brand name or trade name (registered or not) of another person." 9. Under the provisions which are the subject matter of the present study, the small scale manufacturers otherwise eligible for the benefit of small scale exemption, in terms of Notification No. 175/86-C.E., or Notification No. 1/93-C.E., become ineligible when they af....
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.... to which the excisable goods were to be exempted from the whole or any part of the duty leviable thereon. The condition imposed in Notification No. 175/86-C.E. and Notification No. 1/93-C.E. in terms of para 7 and para 4 respectively in these notifications, was qua-manufacturer to whom the exemption was to be granted or was not to be granted. It in no way brought within the excise net the foreign brand owner or the non-manufacturing trader as already indicated above. It did not impose any liability on the non-manufacturer. In the case of Bata India Ltd. v. Asstt. Collector of Central Excise, Patna, 1978 (2) E.L.T. J-211 (Patna), the Patna High Court in para 24 of the judgment had observed that the condition, which the Central Government could impose while granting exemption must be qua-manufacturer to whom the exemption is being granted. In the present provisions, this has been done so. In the course of trade and commerce, the brand name or trade name exist independently of the registration which affords further protection under the Statute (refer Bombay High Court decision in the case of Consolidated Foods Corpn. v. Brandon & Co. Pvt. Ltd., AIR 1965 Bom. 35). The foreign brand....
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.... of the word 'person' occurring in Section 3(42) of the General Clauses Act, 1897 into Section 4 of the Partnership Act will be totally repugnant to the subject of Partnership Law. Further we find that the Indian merchants can secure registration of their brand names in foreign countries and similarly in certain circumstances foreign merchants could secure registration of their brand names in India. Section 131 and 132 of the Trade and Merchandise Act, 1958 are extracted below :- 131. Special provisions relating to applications for registration from citizens of convention countries. - (1) With a view to the fulfilment of a treaty convention or arrangement with any country outside India which affords to citizens of India similar privileges as granted to its own citizens, the Central Government may by notification in the Official Gazette, declare such country to be a convention country for the purposes of this Act. (2) Where a person has made an application for the registration of a trade mark in a convention country and that person, or his legal representative or assignee, makes an application for the registration of the trade mark in India within six months after th....
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....mitted that there were only interim orders to that effect, and on the other hand there were a number of final orders taking the contrary view which had not been referred to by the South Regional Bench when the matter was referred to the Hon'ble President for constituting the Larger Bench on the subject. 13. We find that prior to 12-7-1995 when the South Regional Bench referred the matter to the Hon'ble President for constituting the Larger Bench, there were a number of decisions taking a view that when the specified goods were affixed with the brand name of a foreigner or the brand name of a trader, then the benefit of small scale exemption under Notification No. 175/86-C.E. was not available. In the case of Thio Pharma v. C.C.E., 1992 (60) E.L.T. 395 (T), decided on 21-2-1992 the appellants were engaged in the manufacture of medicines. They were affixing the medicines manufactured by them with the brand name 'Synthico' which did not belong to them. The brand name 'Synthico' belonged to M/s Synthico Formulations who were a marketing concern. They were not engaged in the manufacture of excisable goods. The Collector of Central Excise (Appeals), New Delhi, had held that th....
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....who has to struggle hard to earn a good market for their goods and to prevent brand name holders adopting the device of manufacturing those goods through SSI Units - Contention is accordingly rejected. Further contentions raised in W.P. No. 7204 and 3805 of 1989 require to be considered : Re. W.P. No. 7204/1989 : The High Court upheld the validity of para 7 of Notification No. 175/86-C.E. In the case of Indian Reprographic Systems Pvt. Ltd. v. C.C.E., New Delhi, 1995 (75) E.L.T. 112 (T), decided on 11-5-1994, the Tribunal had held that the small scale exemption was not applicable to specified goods affixed with the brand name of foreign company. In the case of Festo Controls Pvt. Ltd. v. C.C.E., Bangalore, 1994 (72) E.L.T. 919 (T), decided on 13-5-1994, the appellants were manufacturers of Pneumatic valves, cylinders, base plate, manifold and fillings and were affixing the said goods with the brand name 'Festo' which was owned by their collaborators 'M/s Festo K.G. (Festo Pneumatic) Germany'. The markings 'Festo' were relatable to the brand name of M/s Festo KG, Germany. The Tribunal on a very careful consideration of the matter came to a considered view that the app....
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....ed the goods by affixing the same with the brand name or trade name of another ineligible person they are also not eligible for the grant of exemption claimed by them (para 13). The Madras High Court in the case of Bell Products Co. v. U.O.I., 1995 (78) E.L.T. 404 (Madras) decided on 11-1-1995 had rejected the challenge made to the constitutional validity of similar provisions as contained in para 4 of Notification No. 1/93-C.E., dated 28-2-1993 as amended by Notification No. 59/94-C.E., dated 1-3-1994. The validity of para 7 of Notification No. 175/86-C.E. had also been upheld by the Gujarat High Court in Gandhi Nagar Bottling Pvt. Ltd. v. U.O.I., 1995 (75) E.L.T. 54 (Guj.). The High Court referred to the object of amendment by Notification No. 223/87-C.E., dated 22-2-1987 as to see that the concessional rate of excise duty protects the smaller units in the industry from the competition, by the larger ones (para 7). The Supreme Court had also upheld the validity of para 7 of Notification No. 175/86-C.E. in the case of U.O.I. v. Paliwal Electricals Pvt. Ltd., 1996 (83) E.L.T. 241 (S.C.). The Hon'ble Supreme Court observed that the object of the notification was to help the....
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.....L.T. 31 (T) = 1999 (32) RLT 354 (CEGAT)] decided on 31-3-1999 and Super Delicacies v. C.C.E., New Delhi, in Appeal Nos. E/407 and 5229/91-C and E/3097/93-C vide Final Order No. 672 to 674/99-C, dated 10-8-1999. 16. The main argument advanced on behalf of the manufacturers is that the Law of Central Excise is not applicable to foreign persons and the non-manufacturing traders. It is contended that when the Law of Central Excise was not applicable to foreign persons and to the non-manufacturing traders, the issue of their eligibility or non-eligibility to the benefit of small scale exemption under Central Excise Notifications was not relevant for extending the benefit to the manufacturers of excisable goods. We have already analysed the legal provisions above and have noted that by denying the benefit of small scale exemption to the manufacturers of the specified goods (who were affixing such specified goods with the brand name or trade name of ineligible persons), no levy was sought to be imposed on the ineligible persons. As the levy, so the exemption, was applicable and available to the tax payers under the Excise Law. The eligibility or non-eligibility of the brand name ....
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.... not eligible for small scale exemption, the use of his brand name on specified goods will make the specified goods ineligible to the benefit of small scale exemption. When such is the treatment given to the Indian manufacturers how it could be that the affixation of foreign brand, which will have consequences on the competing ability of the other goods not affixed with such foreign brand name, will have no effect on the liability to exemption of the specified goods. The appellants want to read the expression 'person' as 'excise manufacturer'. As we have already analysed above this is not borne out by the express language of the relevant provisions. 18. It was also argued that the Notifications had to be strictly construed and when strictly construed only those persons who were manufacturers of excisable goods but were not eligible for the grant of exemption under Notification No. 175/86-C.E. or Notification No. 1/93-C.E. would be in-eligible persons for the purposes of the para 7 and para 4 respectively of the aforesaid notifications. On plain reading, the ineligible person is one, who is not eligible for the grant of exemption under Notification No. 175/86-C.E. or Notific....
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....ct makes it undesirable, objectionable or punishable for an employee to participate in elections to a legal authority, it is a distortion even an exaggeration out of proportion of that provision to extract out of its a prohibition of a citizen franchise to be member in the shape of a dis-qualification from becoming a member of a local authority." As will be seen in the facts and circumstances of that case that there were distinctly two separate provisions and two separate disciplines. Under the LIC of India (Staff) Regulations 1960 the terms and conditions of service of the staff of the LIC, code of conduct, discipline and appeals were laid-down whose violation called for disciplinary proceedings. It was not a Law dealing with elections. These provisions defined and controlled the conduct of the employees in order to ensure efficiency and discipline in the Corporation and providing for penalties against erring employees. There was another distinct and separate enactment - City of Nagpur Corporation Act, 1948 that concerned elections of Councillors to the Corporation and to other allied subjects. The election to the post of Councillors was determined by the provisions of the Corp....
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.... specified goods. The exemption is not unconditional. It is subject to the conditions specified therein . When it comes to the affixation of brand name on the specified goods, no liability is being fastened on the person, whose brand name was being affixed. It is specifically made clear in the Notification itself. Another decision referred to by the appellants' Counsel is Collector of Central Excise, v. Bengal Chemicals and Pharmaceutical Works Ltd. - 1989 (43) E.L.T. 591 (Tribunal). The pilfer proof caps fixed to the containers of the medicines in question had on them the legend "Bengal Chemicals". The Tribunal observed that it did not constitute a brand name or mark used in relation to the medicines for indicating or to indicate a connection between the medicines and M/s. Bengal Chemicals and Pharmaceutical Works Ltd., the manufacturers. After referring to the Madras High Court's decision in the case of Indo French Pharmaceutical Co., Madras v. Union of India - 1978 (2) E.L.T. (J 478) (Madras), the Tribunal held that only on this ground the medicines in question could not be considered as patent or proprietary medicine and were not covered by Item No.14 E of the erstwhile Cent....
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.... Notification No. 175/86-C.E., dated 1-3-1986 (as amended) and Notification No. 1/93-C.E., dated 28-2-1993 (as amended) was not available to the specified goods where the manufacturer affixes the said specified goods with the brand name or trade name of a foreign person and of a non-manufacturing trader. The reference is answered accordingly. The matter be now placed before the respective benches for disposal of individual cases. Sd/- (Lajja Ram) Member (T) Sd/- (S.S. Kang) Member (J) Sd/- (P.S. Bajaj) Member (J) 24. [Order per : G.A. Brahma Deva, Member (J)]. - I have gone through the proposed order written by my learned brother Shri Lajja Ram, Member (Technical). With respects, I am unable to agree with his views on the issue referred to the larger bench, particularly with reference to the expression 'of another person who is not eligible' as incorporated in the amending Notification No. 223/87 by inserting para 7 in the Notification No. 175/86. Hence, this separate order. 25. The issue for our consideration in this reference is whether the benefit of small scale exemption was available in terms of para 7 of the Notification No. 175/86-C....
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....to 1-3-1994. It is true that some of the decisions of the Tribunal held that benefit of small scale exemption under Notification No. 175/86-C.E. and Notification No. 1/93-C.E. was not available when the goods were affixed with the brand name of foreign person or of a trader who is not manufacturer observing that latter was not eligible to the benefit of small scale exemption under the aforesaid exemption notification. There are contrary views also on this issue. There is a line of decisions taking the view that a person in order to fall under the purview of clause 7 must be a person manufacturing excisable goods in India and governed by the excise law of India and where a brand name of a foreign manufacturer is used, Clause 7 is not attracted. The decisions which have taken this view have expressed serious doubts with reference to the earlier decisions of the Tribunal and accordingly matter was referred to the larger bench to resolve the issue. While referring the matters in the subsequent decisions it was observed that "A reading of the notification, prima-facie, would show that the provision regarding the use of the brand name and disentitlement of the benefit of Notification No.....
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....No. 175/86, Notification No. 1/93 would not cover all the categories of persons. Small scale exemption under Notification No. 175/86, Notification No. 1/93 cannot be denied to manufacturer making use of brand name of a foreign manufacturer foreign trader or trader in India who do not manufacture excisable goods. It was the contention of the Revenue that 'person' has been used in a broader sense and accordingly benefit cannot be extended in view of the wordings of the aforesaid notifications. It was submitted on behalf of the assessees that para 7 of the Notification No. 175/86 as inserted by Notification No. 225/87 which was invoked by the department to deny the benefit of small scale notification to the manufacturers making use of brand name of a foreign manufacturer/trader and such categories of persons was struck down as unconstitutional by the Allahabad High Court and Calcutta High Court. While upholding the vires or para 7 of the Notification No. 175/86 the Apex Court in the case of Union of India v. Paliwal Electricals (P) Ltd., reported examined the scope of this para and the object underlying insertion of this paragraph and observed in para 4 of the said judgment as follows....
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....ion, and not the use of the brand name of a foreign manufacturer/trader who do not manufacture goods in India. 33. Although some decisions have denied the benefit of small scale exemption in view of the wordings in para 7 of Notification No. 175/86 and Clause 4 of Notification No. 1/93, none of the decisions has dealt with the specific issue with reference to the 'eligibility of another person'. In view of the conflicting views matter has been referred to the larger bench. Our endeavor is to resolve the issue. "A brand is not a product, not a service, but an experience. And as we look to the new millennium, developing and delivering a brand experience will be more important than ever to marketers"- By Allen Rosenshine, Chairman & CEO of BBDO Worldwide. Further, he said that a brand name is an understanding and appreciation by the users of how a product fits in their lives both rationally and emotionally". "Customers today are looking for not just functional benefits (appearance, quality, cost) or process benefits (easy access to product information, convenient transaction), but relationship benefits. That is, emotional bonds formed through a history of experiences"....
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.... the performance of the contract nor they can be benefited by the terms of contract. At the first instance they cannot enter into a contract because of their incapacity and even if they enter into a contract the transaction becomes "abinitio void" and such void transactions will confer no rights and obligations. By mere use of word 'person' in the notification it cannot be said that all persons are not eligible. Eligibility or ineligibility of a person is to be understood in the context and ineligibility must flow from statute as it was rightly argued on behalf of the manufacturers relying upon the decision of the Supreme Court in the case of Manohar Nathu Rao Samarth v. Marotrao Rao - 1979 (4) SCC 93 (S.C.). In that case it was held that eligibility must flow from specific provision of law design to deny eligibility or to lay down disqualification. This observation is very much relevant in the context particularly with reference to the para 7 of Notification No. 175/86 and 4 of Notification No. 1/93. 37. Accordingly, the eligibility criterion cannot be extended to a person who is not liable to pay any duty under excise law. In view of this position, benefit in terms of Not....
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....ion under this Notification." The argument advanced on behalf of the assessees (manufacturers) is that the expression "another person who is not eligible for the grant of exemption under this Notification" in the above paragraph 7/4 (vide underlined words) has to be strictly construed so as to give effect to the main purpose of the Notification and, when so construed, would only mean another manufacturer (in India) of excisable goods who is not eligible for the grant of exemption under the Notification (No. 175/86-C.E. or 1/93-C.E., as the case may be). In other words, the above expression cannot include any person (whether natural or juristic) who is not a manufacturer of excisable goods in this country. If this argument is accepted, the specified goods manufactured by an SSI unit in India and affixed with a brand name or trade name belonging to a foreign manufacturer/trader (not engaged in manufacture of any excisable goods in India) or to an Indian trader (not manufacturing any excisable goods in India) would not fall under the excluded category of specified goods referred to in the above para 7/4 and hence would merit consideration for exemption under the Notification (175/8....
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....rds, eligibility to duty has to pre-exist if any question as to eligibility/ineligibility for exemption from duty should arise at all. Only a person who is eligible under Section 3 of the Act can be held to be eligible or not eligible for the grant of exemption under any Notification issued or deemed to have been issued under Section 5A of the Act. Therefore, in the underlined expression "another person who is not eligible for the grant of exemption under this Notification", "another person" must denote a person who is eligible to Central Excise duty i.e., a person who is a 'manufacturer' [within the meaning of this term under Section 2(f) of the Act] of 'excisable goods' [within the meaning of this expression under Section 2(d) of the Act]. It is also pertinent to note that a "person who is not eligible for the grant of exemption under this notification" can possibly be one eligible for the grant of exemption under another notification (issued under Section 5A of the Act). Such a person can by no stretch of imagination be anybody other than a manufacturer of excisable goods in India. 43. In order that any specified goods manufactured and affixed with any brand name/trade n....
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.... the fact that those small manufacturers who affixed their products with the brand names or trade names of big manufacturers were doing so well in the market (by virtue of the popularity of such brand names/trade names) that they did not deserve any governmental support for survival in the market. Government, therefore, sought to exclude such small scale manufacturers from the purview of exemption granted to SSIs under Notification Nos. 175/86-C.E. and 1/93-C.E.. Thus para 7/4 came to be incorporated in Notification No. 175/86-C.E./No. 1/93-C.E.. 45. In Union of India v. Paliwal Electricals (P) Limited reported in 1996 (83) E.L.T. 241 (S.C.), the Hon'ble Supreme Court, while upholding the constitutional validity of para 7 of Notification No. 175/86-C.E., spelt out the object of the Notification thus :- "The object of the notification is self-evident. It is to help the small manufacturers to survive in the market which is dominated by brand-names/trade-names. It is a matter of common knowledge that people prefer well-known brand-names. They buy them under an implicit faith that they are of reliable quality. In such a situation, a small manufacturer faces an uphill task in....
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.... and owns, or is entitled to use, brand or trade name. It is noteworthy that such a manufacturer is seen as one who is outside the purview of the Notification and not as one who is outside the purview of the Act. It is also pertinent to note the court's observation, ".......... But if he (i.e., small scale manufacturer) joins, or identifies himself with, the ineligible manufacturer (i.e. large scale manufacturer outside the purview of the Notification), his goods become one with the goods of such ineligible manufacturer." The Hon'ble Supreme Court has thus clearly explained the expression, "another person who is not eligible for the grant of exemption under this Notification." Accordingly, such person [whom the apex court conveniently called "ineligible manufacturer"] is a manufacturer of excisable goods in India. Any person (whether foreign or Indian) who is not engaged in the manufacture of excisable goods in India will be a misfit in the above concept of "ineligible manufacturer" because such person is not a manufacturer and the question whether he is eligible or ineligible under the Notification does not arise. 47. To include such a non-manufacturer of excisable goods (....
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....supra), which has been successfully relied on by learned Advocate, Shri V. Lakshmikumaran appearing on behalf of the appellants in some of these appeals. It may be noted that Paliwal Electricals has been followed with approval by another coordinate Bench of the Supreme Court, later on, in the case of Union of India v. J.J. Electricals [1999 (106) E.L.T. 15 (S.C.) = 1999 (81) ECR 176 (S.C.)]. The submission of learned JDR, Shri M.P. Singh that the Apex Court has not held that "person", in para 7 of Notification No. 175/86-C.E. meant only "manufacturer" cannot be accepted inasmuch as the court had categorically held the person to be an "ineligible manufacturer". The DR's reliance on the Tribunal decisions in Sah Machine Tools v. C.C.E. [1994 (69) E.L.T. 101 (T)], Harts Cocoa Products v. C.C.E. [1996 (88) E.L.T. 714 (T)] and a few other cases also has not advanced the Revenue's position any further since such decisions were based, by and large, on the incorrect premises that brand name/trade name-owners not engaged in any manufacturing activity in India were also covered by the expression "another person who is not eligible ............ this Notification" in para 7/4 inasmuch as the q....