Customs, Excise and Gold Tribunal - Delhi
Byco International And Ors. vs Collector Of Central Excise on 3 March, 1993
Equivalent citations: 1993(49)ECR126(TRI.-DELHI)
ORDER Jyoti Balasundaram, Member (J)
1. The interpretation of the expression "another person" occurring in para 7 of Notification 175/86-CE dated 1.3.1988 (sic) as amended by Notification 223/87-CE dated 22.9.1987, arises for determination in all the above 4 appeals preferred against the order dated 28.4.1989 of the Additional Collector of Central Excise, New Delhi, confirming duty demands on clearances of oil seals bearing brand names of a trader, manufactured and cleared by the appellants during different periods and imposing a penalty of Rs. 20,000/- on all 4 appellants. Details of the demands are set out below:
____________________________________________________________ S. No. Name of assessee Date of SCN Period Duty _____________________________________________________________
1. Byco International 7.10.1988 1.10.1987 72673.82 to 30.4.1988
2. Bee Engg. Works 13.10.1988 66336.85
3. Bharat Seals 13.10.1988 66043.16
4. Sito Exports 30.9.1988 74543.57 ______________________________________________________________
2. The eligibility to the benefit of exemption under the notification has been denied for the reason that the goods in dispute were affixed with the brand names BYCO and FAYEMS which were the registered trade marks of M/s. Bedi Industrial Corporation and the adjudicating authority has held as follows:
It has been further pleaded by the parties in their defence that after amendment of notification No. 175/86 vide notification No. 223/87 the word "another person" appearing in para 7 of notification should be read as a manufacturer only. This cannot be a trader. This plea of the parties is also not correct because the para 7 of notification No. 175/86 as amended vide notification No. 223/87 reads as under:
The exemption contained in this notification shall not apply to the specified goods where a manufacturer affixes the specified goods with a brand name or trade name (registered or not) of another person who is not eligible for the grant of exemption under this notification.
From the wording of para 7, it is very clear that the expression 'another person1 has not been used only for a manufacturer. If its meaning would have been a manufacturer, the Government could have put the word manufacturer instead of 'another person1, therefore, the word another person1 has a wider meaning than a restricted meaning of a manufacturer. This amendment was carried out to prevent the misuse of notification by getting their goods manufactured in small scale sector by big manufacturers as well as by big trading concerns who are having their own registered trade marks and who sell the goods under their brand or registered trade names. Therefore, the expression "another person" covers both a manufacturer as well as a trading concern. This interpretation cannot lead to any absurdity or allow another person to circumvent the law. Therefore, the pleadings on behalf of the parties regarding scope of expression "another person" is rejected.
M/s. Bedi Industrial Corpn., owner of the brand name BYCO & FAYEMS is a trading concern. They are not a manufacturer, therefore, they are not eligible for exemption contained in notification No. 175/86 for the rubber seals which are manufactured by small scale units in their brand name BYCO & FAYEMS. Therefore, the goods (Oil seals) manufactured by M/s. Sito Exports, M/s. Bharat Seals, M/s. Bee Engineering and M/s. Byco International in the brand name of BYCO & FAYEMS are not eligible for exemption contained in notification No. 175/86 w.e.f. 1.10.1987.
3. We find that the issue is covered on merits against the assessees, by the order of the Tribunal in the case of Thio Pharma v. Collector of Central Excise . There was a difference of opinion between the two Members constituting the Bench on the interpretation of the expression "another person who is not eligible for the grant of exemption under this notification". The ld. Member (Judicial) held that the prohibition in para 7 of the Notification 175186 will apply only if specified goods are affixed with a brand or trade name (registered or not) of another manufacturer holding in para 6 that para 7 of the notification spells out that if the manufacturer affixes on the specified goods with a brand name or trade name of another person who is not eligible for grant of exemption, then the benefit under the notification will not be applicable. In this case, the marketing agency M/s. Synthiko Formulations are not "another person who is not eligible for grant of exemption" under this notification as per para 7 of the notification. The marketing agency in this case are not holding any L-4 licence nor they are manufacturers of specified goods with a brand name or trade name and who are not eligible for grant of exemption under the notification as laid down in para 7 of the notification. If the appellants had used the brand name or trade name of another person who is a manufacturer then in that event, para 7 of the notification would be attracted for interpretation.
3.2 The ld. Member (Technical) expressed a contrary opinion in para 14 of the order which is reproduced below:
Next submission of the appellants' ld. Advocate is that para 7 of the notification which has been relied upon for not extending the benefit of the notification speaks of a person who is not eligible for grant of exemption under this notification. Therefore, according to the ld. Advocate the person should be one who is a manufacturer of specified goods and eligible for grant of exemption under this notification and should not be a person who is merely a trader because question of extending an excise exemption notification can arise for a manufacturer only. In the instant case, submits the ld. advocate for the appellants, the person namely M/s. Synthiko Formulation Pvt. Ltd. is not a manufacturer of P or P medicines; that company is merely a trading company and therefore, para 7 of the notification does not place a bar on use of trade name or brand name of such a person by the manufacturer, of the specified goods. This reasoning of the appellants' ld. advocate in my view narrows down the scope of the term "person1 to one who is a manufacturer of excisable goods; there is no reason to cut down the scope of the word "person1 to the above extent. The golden rule of construction is that the words in a statute should be given their ordinary meaning. The word 'person' in its ordinary connotation would include any person whether he is a "manufacturer or a "non-manufacturer. The only condition which qualifies the term "person in para 7 of the notification is that he should not be eligible for the grant of exemption under this notification. A non-manufacturer i.e. a trader having a brand name or trade name in respect of goods with a huge turnover far exceeding the exemption limit and getting his goods manufactured from small scale manufacturers would be at the same pedestal as a manufacturer of specified excisable goods would be who is not eligible for grant of exemption under this notification. Ultimately a person manufactures goods for the purpose of selling them. For this reason, I do not agree with the appellants' contention that ordinary meaning of the word person1 should not be adapted for construing this para. It is also seen that wherever the subordinate legislative authority intended to use 'manufacturer' it has used that word accordingly in the Notification 175/86-CE. For example Explanation IV of the notification refers to brand name or trade name of other manufacturer.
3.3 The following point of difference was referred to Hon'ble Vice President as he then was:
Whether the benefit of Notification 175/86-C.E. dated 1.3.1986 would be available to the goods under consideration and he has concurred with the view expressed by ld. Member (Technical). We are not able to accept the contention of Smt. Archana Wadhwa, ld. Counsel, that the 3rd Member has not given any finding on the connotation of the expression "another person" and that the issue is still open to decision, in view of the 3rd Member's finding in para 19 that marketing/selling agents cannot obtain the benefit of Notification 175186.
3.4. We, therefore, see no ground to discuss the arguments of ld. Counsel that contextual interpretation of its adoption would lead to absurd results. Following the ratio of the Thio Pharma Order (supra), we hold that the appellants are not eligible to the benefit of exemption in terms of para 7 of Notification 175186 as amended.
4. However, we see force in the submissions of the ld. Counsel that the extended period of limitation is not applicable and that the demand is to be restricted to a period of 6 months prior to the issue of the show-cause notices. The appellants were under a bona fide belief that the embargo in para 7 of Notification 175186 would be attracted only if goods were affixed with the brand name of another manufacturer (and not of a trader) and there was scope for doubt as the legal position was not clear during the relevant period and the interpretation was crystallized only with the order of the Tribunal in Thio Pharma's case. In the light of this background, non-declaration that the goods manufactured by them bore the brand name of Mis. Bedi Industrial Corporation, non-application for L-4 licence, non-filing of classification lists and clearance without payment of duty pales into insignificance. The judgment of the Hon'ble Supreme Court in the case of Padmini Products v. Collector of Central Excise wherein the extended period of 5 years was held to be inapplicable for mere failure or negligence of the manufacturer to take out licence or pay duty when there was scope for doubt that goods were not dutiable, is relevant in this regardin that case the durability of goods was in doubt due to Trade Notices, while in the present appeal, there was bona fide belief that disclosure in declaration of use of brand name of trader was not required. The case law cited by the ld. DR, namely the decisions in Vishwakarma Steel Industries and Tata Iron & Steel Co. Ltd. arc distinguishable on facts, as in both, wilful suppression was established by the Department. We, therefore, hold that the extended period of limitation is not applicable on the facts of this case and that the duty demand is to be restricted to the normal period of 6 months. Penal action is, therefore, not justified.
5. We also uphold the contention of ld. Counsel that the demand of duty should be calculated on the cum-duty price i.e. after deducting the duty element from the gross sale price of the goods and not on the basis of invoice value without duty element, as held by the Hon'ble Supreme Court in the Bata Shoe Co. (P) Ltd. case
6. We also hold that the benefit of modvat credit is to be extended to the inputs used in the manufacture of the final products i.e. oil seals, if otherwise found eligible, from the records of the appellants which have been relied upon by the Department for computation of duty, following the ratio of the Tribunal's order in the case of Haryana State Electricity Board v. Collector of Central Excise .
7. To sum up, our findings are as follows:
1) The benefit of exemption in terms of para 7 of Notification 175/86 as amended by Notification 223/87 is not available to the oil seals manufactured by the appellants.
2) The demand of duty is to be restricted to a period of six months prior to the issue of the show cause notices.
3) Cum-duty price forms the basis for computation of duty.
4) Modvat credit on inputs used in manufacture of oil seals is to be extended, if otherwise due.
5) Confiscation of goods with option to redeem is upheld.
6) Penalties are set aside.
8. The appeals are disposed of in the above terms.