Customs, Excise and Gold Tribunal - Delhi
M/S. Nirlex Spares Private Ltd. vs Cce, Rajkot on 23 March, 2000
Equivalent citations: 2001(133)ELT161(TRI-DEL)
ORDER
V.K.Agrawal:
1. In this appeal, filed by M/s. Nirlex (sic) Ltd., the issue involved is whether they are (sic) the brand name of another person on the exc (sic) goods manufactured by them, whether exemption from (sic) of central excise duty under Notification No (sic) is available to such goods and whether M/s. (sic) Pvt. Ltd. are their related person.
2. Shri Uday Joshi, learned Advacate (sic) with S/Shri Jitendra Singh and Sandeep Choks(sic) advocates, submitted that the Appellants (sic) Riderless Steel Healds and Flat Steel Healds (sic) their own brand name called 'INTATEX' and 'INTACO' (sic) being affixed/printed in corrugated boxed (sic) with hexagonal artitistical design (allegeo monogram (sic) to the marketing/company M/s. L.M.S Marketing Pvt. Ltd. (sic) this alleged Mongram was used only from 1.4.1990; that the goods manufactured by them were, however, not affixed with any brand name; that only the corrugated boxes in which the impugned goods were packed were printed with the artistical design; that prior to 1.4.1990, the Appellants were placing orders for simple corrugated boxes with a printing thereon of its brand name either 'Intatex' or 'Intaco' for which price being paid by them was relatively low as compared to the price paid by them for such boxes after 1.4.1990 in as much as after 1.4.1990 they started getting the Hexagonal monogram printed on the boxes; that the duty liability would be to the extent of Rs. 6,59,724/- for the period from 1.4.1990 to 30.9.1992 instead of Rs. 13,43,264/- for the period from 1.4.1988 to 30.9.92; that Shri Surenderbhai, Director, in his statement dated 25.1.1993 had stated that the said Hexagonal design came to be printed on the boxes only after 1.4.1990; that this fact has been admitted by Shri N.J. Davda, Superintendent, in his cross examination. The learned Advocate, further, submitted that the Adjudicating Authority had treated the said design belonging to M/s. LMS Marketing Pvt. Ltd. on the basis of
(i) visiting card of Shri Nilesh Desai, Executive of M/s. LMS Marketing pvt. Ltd.,
(ii) visiting card of Dr. Paresh Shukla, Production Engineer of M/s. Sunaren Industries, and
(iii) Some drawings prepared by M/s. LMS Industrial Group.
3. He continued to argue that these evidence had not conclusively proved that the Hexagonal Monogram is a brand name of M/s. LMS Marketing Pvt. Ltd.; that is this was really a brand name/trade name belonging to Marketing company, the same would have appeared on various documents of the Marketing Company which was not so; that in fact a squral design with 5 squares therein and expression "LMS" written thereunder appearing on all documents from the date of inception of the marketing company could be treated as a trade mark or symbol belonging to it, at the best. He also emphasised that as the design was not affixed on the goods manufactured by them, mischief of Para 7 of Notification no. 175/86 will not be attracted. He relied upon the decision in DCI Pharmaceutical P. Ltd. vs. CCE, Goa, 1999 (112) ELT 222 (T); Palsons Drugs & Chemicals Industries vs. CCE, Calcutta-1, 1998 (98) ELT 665 (T); Srinisan Cables (P) Ltd. vs. CCE, Hyderabad, 1999 (32) RLT 418 (CEGAT) and CCE, Madras vs. Technical Engineering Products Co., 1999 (106) ELT 535 (T) wherein it was held that as tools manufactured by the respondents were not affixed with the brand name of TVS Lucas and the Pouch containing the marking of Lucas Indian Services was purchased from outside, para 7 of the notification was not attracted. The learned Advocate also mentioned that Para 7 was inserted in Notification No. 175/86 with a view to safeguard the big organised units availing of he exemption from duty meant for small scale industry. He also relied upon the decision in the case of Devkinandan & Sons Vs. CCE, Chandigarh, 2000 (115) ELT 67 (T) wherein the exemption under Notification No. 175/86 was allowed though the Meter Boxes were affixed with the name of Rajasthan State Electricity Board. Reliance was also placed on the decision in the case of Om Enterprises vs. CCE, Pune, 2000 (118) ELT 27 (T) where again exemption was held to be available though the fans manufactured with own brand name also carried a metal plate indicating their marketing and service by Rallis India Ltd.
4. The learned Advocate also submitted that M/s. LMS Marketing Pvt. Ltd. was not the related person of the Appellant. However, he did not press this plea this plea in view of this decision in the case of M/s. Naraendra Machine Works P. Ltd. vs. CCE, Rajkot, Final Order NO. 15/2001-B dated 11.1.221. Finally he mentioned that the extended period of limitation is not invokable as the hexagonal design was to treated by them as a brand name; that there was no malafide intent on the part of the Appellants to evade payment of duty.
5. Countering the arguments, Shri R.c. Sankhla, Jearned D.R., reiterated the finding as contained in the impugned Order and emphasised that Surendra L. Shah, Director, in his statement dated 11/12.1.93 did not answer the question as to why the Hexagonal design was printed on the visiting cards and why the three concerns were using the same. He relied upon the decision of the a Larger Bench in the case of Namtech Systems Ltd. vs. CCE, New Delhi, 2000 (115) ELT 238 (T) wherein it was held that benefit of Notification No. 175/86 was not available if the goods were affixed with the brand name or trade name of a trader who is not a manufacturer. He also submitted that the decisions relied upon by the learned Advocate for the Appellants are not relevant to the present matter as the facts are different. As the corrugated boxes, in which the impugned goods are packed and marketed, were affixed with the brand name, mischief of Para 7 is attracted as the Hexagonal design created a relationship in the course of trade between the goods and the owner of the brand name; that the extended period of limitation is invokable as the facts of using the brand name of an ineligible person was not disclosed to the Department; that M/s. LMS Marketing Pvt. Ltd. is a related person of the Appellants and reliance was placed on the decision in the case of M/s. Narendra Machine Works P. Ltd., supra.
6. We have considered the submissions of both the sides. Para 7 of Notification No. 175/86-CE provides that "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." Brand name/trade name, as per Explanation VIII of the said Notification means a name, or a mark, such a symbol, monogram, label, signature or invented word which is used in relation to such specified goods for the purpose of indicating a connection in the course of trade between the goods and the person using such name or mark.
It is not in dispute that the goods manufactured by the Appellants were packed in corrugated boxes which were admittedly printed with the Hexagonal design, As she impugned goods were sold in the corrugated boxes which bear the Hexagonal design, it cannot be said that the goods are not affixed with the brand name merely because the said design does not appear on the goods itself. If the view is accepted, a very large number of products, particularly medicaments, will become non branded. As the goods in the present matter are packed and marketed in corrugated boxes affixed with Hexagonal design, it is to be held that the goods were affixed with brand name. All the decisions relied upon by the learned Advocate are not applicable in the present matter. In Technical Engineering Products case, the pouch which bears the name of TVS Lucas was purchased from the market and the manufacturer was not affixing any brand name either on the goods or pouch. In Srinisan Cables (P) Ltd., the Wire harness was supplied to M/s. Maruti Udyog Ltd. and the name 'Maruthi" written on a tag attached to the goods was for the purpose of identification that the goods were meant for Maruti Udyog Ltd. In Devkinandan & Sons case, there was no trading in meter boxes by the Rajasthan State Electricity Board, mentioning of RSEB on the meter boxes was held not amounting of affixing of brand name. In the present case, the impugned goods are marketed by M/s. LMS Marketing Pvt. Ltd.
7. The second question which arises for decision is whether the Hexagonal Design belongs to M/s. LMS Marketing Pvt. Ltd. The finding of the Commissioner on this point in impugned Order is as under:-
"I also find that the visiting card of Shri Nilesh Doshi contains the same monogram alongwith the name and address of the marketing company in Bombay. Visiting card of Shri Paresh Shukla also contain the same monogram alongwith the words 'LMS Industrial Group' and address is also that of marketing company. The said logo has also has found on the drawings prepared by L.M.S. Industrial Group. I cannot believe that the said monogram was printed in all these documents for the sake of printing. The said monogram was also found on the boxes containing the Riderless Healds. Had it not been a brand, there was no reason to print these on the visiting card of different persons. I, therefore, hold that it is a brand/trade name following within the definition given in Explanation VIII of the notification NO. 175/86-CE as amended. The visiting cards containing address and name of the marketing company were printed with the said monogram and there is therefore no reason to believe that the said brand name did not belong to the marketing company. It is also not believable that the marketing company connot have different brands."
8. Further, as emphasised by the learned D.R., Shri Surendra L. Shah did not answer the query as to why the Hexagonal design was printed on the visiting card. We do not find any substance in the submissions of the learned Advocate that as the said design was not printed on all documents of M/s. LMS Marketing Pvt. Ltd., it is not their brand name. It is not necessary that the brand name should be printed on each and every document used by the brand name owner. We thus uphold the findings in the impugned Order that the Hexagonal design is the brand name of M/s. LMS Marketing Pvt. Ltd. and as they are not eligible for the exemption under Notification No. 175/86-CE, the impugned goods manufactured by the Appellants are not eligible for exemption under the said Notification in terms of Para 7 of the Notification. We, however, agree with the learned Advocate that the mischief of Para 7 will be attracted only with effect from 1.4.1990 as they have since beginning asserted that they had starting using the impugned Hexagonal design only from that date. The Revenue has not brought on record any evidence to show that the said design was used even prior to 1.4.1990. However, the extended period of limitation for demanding duty is invokable as the Appellants never declared the use of Hexagonal design along with their won brand names.
9. The last question that remains to be considered is whether the Appellants and M/s. LMS Marketing Pvt. Ltd. are related persons. The Commissioner has given his findings in the impugned Order that some of the directors are common in both the units and entire production of the Appellants is supplied to the marketing company; one of the directors of the Marketing Company supervised making of all drawings connected with new products; Marketing Co. looks after the sales promotion activities and incurs expenses towards advertisement; there are several financial transaction between the Marketing Co. and the Appellants; the office expenses of the Appellant company are borne by the Marketing company. On the basis of more or less the same facts, Tribunal held in Nerendra Machine Works case, Final Order NO. 15/2001-B dated 11.1.2001 that "A'' these facts together will lead to only one conclusion that there is mutuality of interest between the two units and as held by the Supreme Court in Calcutta Chromotype Ltd., 1998 (99) ELT 202 (SC) the corporate veil can be lifted. The person behind manufacturer and buyer are same and the financial flow back is also there in the from of interest free advances and meeting of all the expenses for sales promotions as well as after sale services." Thus we hold that M/s. LMS Marketing Pvt. Ltd. are related person of the Appellants.
10. Accordingly we uphold the demand of Central Excise duty from 1.4.1990. However, amount of duty is reduced to Rs. 6,59,724/-. We also uphold the demand of duty amounting to Rs.10,835/-. The redemption fine of Rs.15,000/- is not on the higher side as such is confirmed. However, taking into consideration all facts, we reduce the amount of penalty to Rs.60,000/-.
The Appeal is disposed of in the above terms.