Customs, Excise and Gold Tribunal - Delhi
Sah Machine Tools (P) Ltd. vs Collector Of C. Ex. on 15 October, 1993
Equivalent citations: 1994(69)ELT101(TRI-DEL)
ORDER P.K. Kapoor, Member (T)
1. This is an appeal against the order passed by the Collector of Central Excise (Appeals), Allahabad. Briefly stated the facts of the case are that the appellants who are engaged in the manufacture of grinders, polishers and presses falling under Chapter 85 of the Central Excise Tariff Act, 1985 were clearing their products after affixing the brand name "CINNI" which belonged to M/s. Raj Kumar Sah & Sons, a registered partnership firm who were not engaged in any manufacturing activity. The appellants had acquired exclusive right to use the aforesaid brand name on the goods manufactured by them on payment of royalty to M/s. Raj Kumar Sah & Sons. The appellants filed two classification lists on 15-11-1990 with effect from 12-11-1990 wherein they inter alia claimed the benefit of exemption under Notification No. 175/86-C.E., dated 1-3-1986 in respect of their products. The appellants received a show cause notice dated 21-11-1990 from the Assistant Collector proposing to deny the exemption under Notification No. 175/86. However, in his order dated 21-11-1990 the Assistant Collector observed that the appellants had acquired the exclusive right to use the brand name "CINNI" and the owner of the brand name had undertaken not to permit any other manufacturer of machine tools and electric motors to use the said brand name. Relying upon the Tribunal's decision in the case of Precise Electronics v. CCE - 1993 (65) E.L.T. 69 (Tri.) the Assistant Collector held that the appellants were eligible for exemption under Notification No. 175/86. The order passed by the Assistant Collector was reviewed by the Collector of Central Excise, Allahabad Under Section 35E of the Central Excises & Salt Act, 1944 and he directed the proper officer to file an appeal against the order passed by the Assistant Collector Varanasi on the grounds that the owner of the brand name namely M/s. Raj Kumar Sah & Sons not being a manufacturer were not entitled to the exemption under Notification No. 175/86 and accordingly in terms of para 7 of the Notification the appellants who had acquired the right to use the trade mark on payment of royalty would also not be eligible for the exemption under the said notification. The Collector (Appeals) allowed the appeal filed by the Department on the grounds that the appellants were affixing on their goods the brand name of another person who was not eligible for exemption under Notification 175/86 and hence the appellants were also not entitled to the benefit under the said notification.
2. On behalf of the appellants, Shri A.K. Jain, the Ld. Advocate appeared before us. He stated that the Collector (Appeals) had erred in holding that the brand name owner was not eligible for exemption under Notification No. 175/86 since he was not a manufacturer. He contended that the Collector (Appeals) had also erred in proceeding on the basis that the term "another person" mentioned in para 7 of Notification No. 175/86 refers only to a manufacturer. He submitted that even according to Explanation IV to the said notification, the brand name owner can be either manufacturer or trader. He added that in Explanation IV it had been clarified that where specific goods manufactured by a manufacturer are affixed with a brand name or trade name of another manufacturer or trader such specified goods shall not merely by reason of that fact be deemed to have been manufactured by the said other manufacturer or trader. He pointed out that paras l(a)(i) and 3(a) of the notification refer to "a manufacturer" whereas in the proviso to para 3 and para 7 refer to "another person". He stated that on the other hand the expression used in Explanation 7 is 'some person'. He submitted that use of different words as in these provisions was indicative of the differing intention of the legislature in respect of the various provisions. He contended that the word "person" in Explanation VIII has to be given its ordinary meaning. In support of his contention he cited the decision of the Supreme Court reported in AIR 1956 SC 35 and the Tribunal's decision reported in 1992 (60) E.L.T. 395. He reiterated his stand that from a combined reading of para 7 and Explanation IV it follows that the brand name owner can also be a person who is not a manufacturer. He argued that the impugned order denying the exemption to the appellants who is neither a manufacturer nor a trader on the ground that brand name owner was not a manufacturer is not legal. He stated that in para 14 of the Tribunal's decision in the case of Thio Pharma v. Collector of Central Excise reported in 1992 (60) E.L.T. 395 it has been held S.S.I. exemption under Notification 175/86 does not apply to goods affixed with a brand name or trade name of another person who is not eligible for the grant of S.S.I. exemption, irrespective of the fact whether such person is a manufacturer or a trader. He contended that in view of this finding of the Tribunal M/s. Raj Kumar Sah who owned the brand name and who were neither a manufacturer nor a trader in the specified goods would be eligible to the exemption of duty on goods valued upto Rs. 7.5 lakhs under Notification No. 175/86. He argued that under these circumstances the use of the brand name "CINNI" by the appellants on their goods would not disentitle them of the exemption under Notification No. 175/86 in terms of para 7 read with Explanation VIE since the brand name owner M/s. Raj Kumar Sah being neither a manufacturer nor a trader were eligible for exemption under the said notification. He argued that having referred to the definition of "manufacturer" Under Section 2(f) of the Act M/s. Raj Kumar Sah would be entitled to the exemption under Notification No. 175/86 as long as they are not found to be disentitled to the exemption under the Notification in terms of the provisions of para 3 or para 4 of notification. On these grounds he pleaded that the impugned order may be set aside.
3. On behalf of the respondents Shri B.K. Singh, Ld. SDR stated that the Ld. Counsel on behalf of the appellant had laid a great deal of stress on the point that the brand name owner was neither a manufacturer nor a trader but he had not produced any evidence to establish that the brand name owner was in fact not engaged in any manufacturing or trading activity. He contended that even if it is assumed that the 'brand name' owner was not trading in any goods he would be treatable as a trader since the term 'trader' would include even persons who licence or assign to other persons for a consideration 'trade marks' owned by them. He stated that in the case of Precise Electronics v. Collector of Central Excise reported in 1993 (65) E.L.T. 69 the Tribunal has held that in para 7 of the Notification the intention is to actually disentitle such of the manufacturers who use the brand name of other persons to which other persons have a right for use on the product manufactured by the manufacturer claiming the benefit of the notification. He stated that from the letter dated 21-6-1985 at page (3) of the paper book, in which M/s. Raj Kumar Sah and Sons, the owners of brand name "CINNI" had confirmed that they were allowing the appellants the exclusive use of their brand name on machine tools and electric motors for a period of 3 years, it was evident that the ownership of the 'brand name' in question continued to vest in the owner of the brand name and the manufacturer had only acquired the right to use it for a certain period. He submitted that for these reasons the use of the name "CINNI" by the appellants on their products was clearly treatable as a "brand name" or "trade name" in terms of Explanation VIII of Notification No. 175/86. He argued that under these circumstances the appellant was not entitled to the exemption in terms of para 7 of the notification. He stated that even from the decision of the Tribunal in the case of Thio Pharma v. Collector of Central Excise which was cited by the Counsel for the appellants it follows that "another person" referred to in para 7 of the notification need not necessarily be a manufacturer and would include even non-manufacturers. He reiterated his stand that in terms of Tribunal's decision in the case of Precise Electronics v. Collector of Central Excise the appellants were not entitled to exemption in terms of para 7 of the Notification 175/86 since they were using the brand name of which the right of ownership vested in M/s. Raj Kumar Sah and Sons. He argued that for this purpose whether the brand name owner was himself manufacturing any specified goods was not relevant.
4. In his rejoinder, Shri A.K. Jain, the Ld. Advocate contended that under the Trade and Merchandise Marks Act, 1986 a 'trade mark' can be assigned or permanently transferred by the owner to any other person or the right to its use can be licensed for a specified period. He submitted that interpretation of the term 'another person' in para 7 so as to include even persons who are neither manufacturing anything nor engaging themselves in any trading activity would not be permissible in view of the provisions of Explanation VIII to the notification.
5. We have examined the records of the case and considered the submissions made on behalf of both sides. It is seen that the only question that arises for consideration in this case is whether a manufacturer who acquires the right to use on his products the brand name or trade name belonging to another person who is neither a manufacturer nor a trader would not be entitled to the exemption under Notification 175/86 in terms of para 7 and Explanation VIII of the said notification.
6. One of the points raised by the appellants is that the name "CINNI" cannot be deemed as a 'brand name' or 'trade name' in terms of Notification No. 175/86-C.E., dated 1-3-1986. They have contended that in terms of the Explanation VIII a brand name must indicate connection in the course of trade between the specified goods and the person using that brand name. On the grounds that the word "CINNI" used on their machine tools and electric motors indicates connection only with the owners of the brand name M/s. Raj Kumar Sah and Sons and not with them, the appellants have contended that they would not be hit by para 7 of the Notification. In order to appreciate the appellants contention we refer to Explanation VIII of Notification 175/86 which is reproduced below:
"Explanation VIII. - "Brand name" or "trade name" shall mean a brand name or trade name, whether registered or not, that is to say a name or a mark, such as symbol, monogram, label, signature or invented word or writing which is used in relation to such specified goods for the purpose of indicating, or so as to indicate a connection in the course of trade between such specified goods and some person using such name or mark with or without any indication of the identity of that person."
In our view, the words "using such name" in Explanation VIII are significant since they clearly imply that any name or mark when used on any specified goods shall be treatable as "Brand name" or "trade name" when it is used with the purpose of indicating a connection in the course of trade between such specified goods and the person using such name or mark. It is seen that in terms of the letter dated 21-6-1985 of M/s. Raj Kumar Sah and Sons, the owners of the brand name "CINNI", the appellants had acquired the exclusive right to use the said brand name on their machine tools and electric motors.
7. Evidently, the use of the brand name "CINNI" by the appellants in their capacity as its exclusive users for a specified period in terms of a contract with the owner was with the purpose of indicating a connection in the course of trade between their products and themselves as users of the brand name. It does not stand to reason that the appellants had acquired the exclusive right to use of the particular brand name on their products with the intention of showing a connection between their product and the owner of the brand name. Under these circumstances we do not find any force in the appellants contention that the word "CINNI" could not be deemed as a "Brand name" or a "trade name" in terms of Explanation VIII of the Notification No. 175/86. For the same reasons we reject the appellants contention that they were not hit by para 7 since the use of the word "some" before the expression "person" and also the use of the expression "such" at two places before the expression 'specified goods' suggests that there should be another person using the same brand name on the same specified goods.
8. The appellants have also challenged the finding of the Collector (Appeals) that they were not eligible to the exemption under Notification 175/86 since they were hit by the provisions of para 7 on account of the use on their products the brand name of M/s. Raj Kumar Sah & Sons who not being a manufacturer were not eligible for exemption under the notification. In this regard we find from the impugned order that during the proceedings before the Collector (Appeals) the stand taken by the appellants was that M/s. Raj Kumar Sah & Sons, who owned the brand name "CINNI" were only a trading firm and they were not engaged in any manufacturing activity. However, while making his submissions before the Tribunal the Ld. Advocate for the appellants had insisted that the owner of the brand name was neither manufacturing any goods nor was he engaged in any trading activity. On this basis, and placing reliance on the Tribunal's decision in the case of Thio Pharma v. Collector of Central Excise (supra), it has been contended on behalf of the appellants that they could not be denied the exemption under the Notification No. 175/86 on the grounds that the brand owner not being a manufacturer was not eligible to the exemption under the said notification. They have argued that M/s. Raj Kumar Sah & Sons, who owned the brand name "CINNI" would have to be deemed as eligible for exemption of duty on goods valued upto Rs. 7.5 lakhs under Notification No. 175/86 even if they were not engaged in any manufacturing or trading activity as long as they were not found to be ineligible to the said exemption in terms of either para 3 or para 4 of the notification. In this regard we find that in the case of Thio Pharma v. Collector of Central Excise (supra), the Tribunal has held that person who is not a manufacturer cannot avail of the benefit of Notification No. 175/86. Para 19 of the said order being relevant is reproduced below :
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9. Since M/s. Raj Kumar Sah and Sons who owned the brand name "CINNI" which was being used by the appellants on their products were not engaged in any manufacturing activity, on the ratio of the decision quoted above we hold that they were not eligible for exemption under Notification No. 175/86 and for this reason in terms of Para 7 of the Notification the exemption under the notification could also not be availed by the appellants.
10. On a plain reading of Notification No. 175/86 we find that eligibility of a manufacturer who affixes the specified goods with a brand name or trade name of another person, to the exemption under the notification has to be decided only in terms of Para 7 and Explanation VIII. In our view, for this purpose, the provisions of paras 3 and 4 and also Explanation TV of the notification to which the Ld. Counsel had referred in his submissions are not relevant.
11. In view of the above discussion, we confirm the order appealed against and reject the appeal.