Customs, Excise and Gold Tribunal - Delhi
Commissioner Of Central Excise vs Varco Sara India (P) Ltd. on 16 September, 2003
Equivalent citations: 2004(171)ELT79(TRI-DEL)
ORDER K.D. Mankar, Member (T)
1. This is revenue's appeal against the order passed by Commissioner (Appeals). The dispute relates to respondent's claim for small scale exemption Brand name and clubbing of clearances are the two main issues.
2. Facts in brief are :-
Sara Services and Engineers (P) Ltd. (hereinafter referred as SSAE) are incorporated as company since 27-3-1980 and are holder of Central Excise Registration for manufacture of various "oil field equipments". One Varco B. J. Oil Tools BV, owned by Varco International, U.S.A., (hereinafter referred to as Varco BJ) who are pioneers in the manufacture of oil field equipments in the world, entered into a Memorandum of Understanding on 6-10-1990 with SSAE to promote and incorporate a joint venture company in the name and style of Varco Sara India Pvt. Ltd. for the manufacture of equipments used in oil drilling viz. elevators, manual tongs, slips and their spares classified under Heading No. 84.77 of the Central Excise Tariff Act, 1985. Varco Sara are registered with Central Excise Range-II, Dehradun under Registration No. 2/Ch.84/R-II/DDN/92.
3. The Central Excise Officers of Dehradun gathered an intelligence that the appellant are affixing the brand name "Varco" on their products. This brand name "Varco" is of their foreign collaborator viz. Varco B.J., Therefore, the respondents were not entitled for benefit of SSI exemption under Notification No. 1/93-C.E. Therefore, the officers visited the factory of the respondents on 20-5-1998. Shri V.K. Dhawan, Chairman of the respondent in his statement dated 20-5-1998 recorded under Section 14, of the said Act stated that, "Varco" is the monogram of Varco B.J., their joint venture partners.
4. On the respondent's invoices, the brand name of product has been given as "Varco Sara", where Varco is written in the same style and lettering as registered trade mark of "Varco" group.
5. The department has alleged that the respondents are using the brand name "Varco" in the same format and style, as of Verco B.J. in their invoices and letter heads. The limited licence agreement provides for payment of Rs. 8 Million by the respondent to Varco B.J. for technology transfer. It also provides for the termination of the said agreement.
6. The respondents had successfully argued before the Commissioner (Appeals) that they have never used "Varco" on their products, instead a metal punch "Varco Sara .(I) Pvt. Ltd.", was used on their products. They have not paid any premium to Varco B.J for royalty nor Varco B.J. have billed them for royalty.
7. The ld. Commissioner (Appeals) after examining the facts came to the conclusion that the inscription "Varco Sara (I) Pvt. Ltd" does not disentitle them for the benefit of small scale exemption contained in Notification No. 1/93-CE. After relying on the several decisions of the Hon'ble Tribunal as well as those of High Court, the respondents' appeal was allowed by the ld. Commissioner (Appeals). The Revenue challenges the impugned order of the Commissioner (Appeals). It is stated that affixation of the name "Varco Sara (I) Pvt. Ltd" through metal punching, was ignored by Commissioner (Appeals). The Explanation X defining the scope of brand name as appearing in the Notification, is an integral part of Notification No. 1/93-CE. Use of metal punch on products with name "Varco Sara (I) Pvt. Ltd" on the products and name "Varco" in its original style and lettering on invoices, letter heads, literature and catalogue of the products definitely and squarely establishes indication of connection of brand name "Varco" in the course of trade. Besides, these main grounds, it is also alleged that there is an agreement of technology transfer, financial assistance and infrastructure support. These purportedly support the fact that the respondents' unit is not independent, and the courts have held that the clubbing of clearances of units sharing common facilities is justified.
8. Heard Shri Kumar Santosh, SDR for the appellants/Revenue and Shri B.L. Narsimhan, Advocate for the respondents.
9. In the Revenue's appeal against the impugned Order-in-Appeal, it has been pleaded that:-
(1) The respondent's clearances be clubbed with those of SSAE.
(2) The goods cleared by the respondents be treated as bearing brand name of SSAE and benefit of small scale exemption under Notification No. 1/93-C.E. be denied.
10. On perusal of these two grounds, we note that the grounds are self contradictory.
11. In case the first ground is accepted it would be obvious that the respondents would cease to be an independent unit and would get merged with the unit of SSAE. In that situation duty needs to be demanded from SSAE. Though in the order-in-original duty has also been confirmed against SSAE, apart from confirming the same duty against the respondents, before the Commissioner (Appeals), the demand raised against SASE got quashed. There is no challenge in the instant appeal of the revenue to the effect that, Commissioner (Appeals) ought to have confirmed the demand against SSAE as against the demand confirmed against the respondents. In fact, the prayer is to confirm liability against the respondents.
12. It must be remembered that the liability to pay duty is on the manufacturer. While the SCN proposed to demand duty from two different noticees, it was incumbent on the adjudicating authority to determine as to who was liable to pay the duty. The adjudicating authority ended up in confirming duty against both the noticees. The duty liability can be fastened only on one person in respect of goods manufactured. While the respondents challenged the said demand order by filing an appeal before the Commissioner (Appeals), there was no cross appeal against the Order-in-Appeal, praying for confirmation of demand against SSAE. In the circumstances the ground No. (1) above of the appeal is liable to be rejected and is therefore rejected
13. Once the claim for duty against SSAE stands abandoned, there is no escape from treating the respondents as independent manufacturer and therefore brand name issue has to be examined. In the appeal, great stress has been placed on the facts that, the manufactured goods under reference are precision engineering equipments, requiring elaborate technical know skill and other support which a small manufacturer like the respondents could not have accomplished without the active support from SSAE. It is claimed that, it is SSAE who are the real operators behind the issue. Therefore, the logo "Varco" appearing in conjunction with other letter in the full text namely, "Varco Sara India (P) Ltd.", be considered as a brand belonging SSAE or Varco V.J. the foreign company.
14. We are unable to accept this proposition. Once it is an admitted position that the respondents are an independent manufacturer, the revenue has to establish that the name "Varco Sara India (P) Ltd.", which is figuring on the equipments actually belongs to another person. Even if it were to be assumed that the word "Varco" in the entire text is similar to the text of "Varco" brand of a foreign company, even in that situation the text "Varco Sara India (P) Ltd.", can not be considered as the same as "Varco". On this specific point of law Tribunal in their order in the case of J. Prasad Polymers and Ors. v. C.C.E., Meerut reported at 2003 (155) E.L.T. 486 (T) = 2003 (58) RLT 17 (CEGAT-Delhi) held that suffixing of words like "Mastana", "Parwana" after the words "Sunder" does not amount to use of brand name "Sunder". This case is squarely covered by the above judgment.
15. Accordingly we hold that, the respondent's affixing the name "Varco Sara (I) Pvt. Ltd. "would not render them ineligible to small scale exemption on the ground that the brand name belongs to another person Therefore, the ground No. (2) is also rejected.
16. Accordingly, we reject the appeal filed by the Revenue.
17. Under these circumstances, we hold that the impugned order-in-appeal passed by the ld. Commissioner (Appeals) is correct in law and does not call for interference.
18. Accordingly, the Revenue's appeal is rejected.