Madras High Court
B.H.E.L. Ancillary Association vs Collector Of C. Ex. on 5 April, 1990
Equivalent citations: 1991(32)ECC316, 1990(49)ELT33(MAD)
JUDGMENT Nainar Sundaram, J.
1. These writ appeals have been directed against the common order of the learned single Judge in W.P. Nos. 11871 and 11872 of 1989. The writ petitions were filed by the appellants, putting forth the following prayer:
"For the reasons stated in the accompanying affidavit it is prayed that this Hon'ble Court may be pleased to issue a Writ of Mandamus or any other appropriate writ, order or direction directing the respondents 1 to 3 to permit the petitioner's members to avail of the benefit of the Notification No. 175/86-C.E., dated 1-3-1986 and to clear their goods without payment of duty under the said Notification and render justice."
The respondents in the writ petitions are the respondents in these writ appeals. For the sake of convenience, we are referring to the parties as per their nomenclature in the writ petitions. We shall presently advert to the relevant portions of the Notification No. 175/86-C.E., dated 1-3-1986, which shall hereinafter be referred to as the Notification. Suffice it to state at this juncture that the Notification accords exemption to goods produced by small scale industrial undertakings. The Units of which the petitioners are the Associations, and which Units hereinafter shall be called the Units, are ancillary to Bharat Heavy Electricals Limited, briefly referred to as BHEL, the fourth respondent. They fabricate certain components required by BHEL. It is only in respect of such components, manufactured by the Units, exemption was asked for as per the Notification. The exemption was not accorded to the Units, on the ground that Clause (7) read with Explanation VIII of the Notification is attracted to the components manufactured by the Units. This contention put forth by respondents 1 to 3 has been accepted by the learned single Judge, and as a result, the writ petitions were dismissed. As already noted, these writ appeals are directed against the common order of the learned single Judge in the writ petitions.
2. The learned single Judge, in substance, opined that certain stencil marks on the components manufactured by the Units made by them would make the components, though manufactured by the Units, as having been affixed with a brand name or a trade name of BHEL, which is not eligible for the grant of exemption under the Notification within the meaning of Clause (7) read with Explanation VIII of the Notification. The learned single Judge accepted the position that the Units are the manufacturers of the components, though they may be doing job works for BHEL. As such, prima facie, the components manufactured by the Units must have the benefit of the Notification. Only by construing the stencil marks made by the Units on the components manufactured by them, as the brand name or trade of BHEL, the benefit of the exemption has been denied to the Units. This construction of the learned single Judge is the subject matter of challenge in these two writ appeals.
3. With reference to what exactly have been and are being marked or inscribed, by way of stencilling on the components, manufactured by the Units, they are delineated in the common order of the learned single Judge and they refer to quantity, weight, work order number, product number and ancillary Unit Firm code number allotted by BHEL. We find that in the grounds of these writ appeals and in particular Grounds (I) and (J) the very same details of the markings or inscriptions by way of stencilling, stated to have been made and are being made on the components, manufactured by the Units, except for one addition, namely, the destination of the goods have been given. There is no dispute raised before us over the factum of the details of such markings or inscriptions. The markings or inscriptions, as set out in the Grounds of Writ Appeals, are as follows :
"14 Nos.
872.36 kgs.
WO 0237.415.1.77 DU 001 R83 Mettur"
In fact, samples of the components manufactured by the Units were produced by Mr. P. Narasimhan, learned Senior Central Government Standing Counsel before us today and we find that there has not been any variation with regard to the details of the inscriptions or markings found on such components, from those given in the aforesaid Grounds of Writ Appeals. One thing must be clearly noted and that is there is no marking or inscription of the name of BHEL as such on the components manufactured by the Units. A bare reading or visual inspection of the markings or inscriptions does not convey anything, much less as to what headings or details they are referable. This is only a matter of explanation offered by the parties. It is stated that the first inscription relates to Quantity; second to Weight; third to BHEL Work Order Number; fourth to Product Number; fifth to the Code Number allotted to the individual ancillary Units of BHEL and sixth to the destination of the goods. We have not heard any submission from Mr. P. Narasimhan, learned Senior Central Government Standing Counsel, saying that the inscriptions by way of stencilling on the components manufactured by the Units, bore or bear any other marking or inscription. The learned single Judge proceeded only on the above factual basis and we are also obliged to proceed on the same factual basis.
4. Then the question is as to whether these markings or inscriptions will come within the mischief of Clause 7 read with Explanation VIII of the Notification as contended by respondents 1 to 3. Now the occasion comes for setting down those portions of the Notification, namely, Clause 7 and Explanation VIII. The relevant portion of Clause 7 reads as follows :
"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."
Explanation VIII reads as follows :
"'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',
5. Clause 7, as we could see from the above extract, says that the exemption contained in the 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 the Notification. We can take it that the "another person who is not eligible for the grant of exemption under the Notification" in the present case is BHEL. Equally so we can take it that the manufacturers are the Units, and the specified goods are the components manufactured by the Units. Then as to what should constitute a brand name or trade name of BHEL has got to be gleaned by looking at Explanation VIII. The registration or otherwise of the brand name or trade name would not count. The name or mark is equated to symbol, monogram, label, signature or invented word or writing. But, a mere finding of symbol, monogram etc., on the goods would not bring the matter within Explanation VIII, so as to fall within the exception to the exemption set out in Clause 7 to the Notification. Something more is required by Explanation VIII and that is, the above markings must have been used in relation to the specified goods for the purpose of indicating or so as to indicate a connection in the course of trade between such specified goods and BHEL using such name or mark with or without any indication of the identity of BHEL. Here, there is no symbol, no monogram, no label and no signature of any nature much less of BHEL found on the components manufactured by the Units. The markings or inscriptions found on the components may amount to invented words or writings. But the markings or inscriptions have not been and are not being used by BHEL at all. They have been used and are being used by the Units and Units alone, may be pursuant to the contractual requirements between BHEL and the Units, even as per the averments in the counter-affidavit of respondents 1 to 3. The markings or inscriptions, individually or cumulatively do not go to constitute a name or a mark such as symbol, monogram etc., of BHEL, used by BHEL in relation to the components manufactured by the Units. They may have a purpose to serve. But certainly they do not by themselves constitute a name or mark used by BHEL. But the stress, which we could spell out cumulatively from the language used in Explanation VIII, is that the name or mark such as symbol, monogram, etc., should have been used by BHEL for the purpose of indicating or so as to indicate a connection in the course of trade between the components and BHEL using such name or mark. It is true that by a bare looking at the inscriptions or markings, or by a bare visual inspection, there need not be an indication of the identity of BHEL. But fundamentally these markings or inscriptions do not go to constitute a name or mark of BHEL; much less used by BHEL in relation to such components. There is a faltering with regard to the satisfaction of the primary ingredient required by Explanation VIIF.
6. From what has been noted as factual details of the inscriptions or markings found on the components manufactured by the Units, at the risk of repetition, it must be stated that it is quite impossible to spell out that they go to form any brand name or trade name of BHEL. The learned single Judge was led into a thinking that since from the markings or inscriptions used by the Units, the persons at the receiving end of the components, namely, A.C.C. - Wadi, will definitely know that the components are sent to them in terms of the contract, entered into between BHEL and ACC - Wadi, Clause 7 read with Explanation VIII is attracted. The possibility of such a knowledge is no criterion at all to be applied to invoke Clause 7 read with Explanation VIII. For that matter, it could be stated that the whole gamut of the contractual dealings should be delved into to find out the implications of the contract and the source and end of the dealings. That could not and should not be the intendment behind Clause 7 read with Explanation. We are concerned only with the markings or inscriptions found on the components manufactured by the Units and nothing more. We must find out as to whether these markings or inscriptions by themselves constitute a brand name or trade name that is to say, a name or a mark of BHEL. That it is possible for the persons at the receiving end, namely, ACC - Wadi to comprehend that delivery is being effected pursuant to contract between themselves and BHEL is not the decisive test or factor. If the intention was the other way about, certainly the exception to the exemption could have been worded or couched differently by merely stating that if the specified goods have been produced or are being produced by small scale industrial undertakings for another person, who is not eligible for grant of exemption, the exemption under the Notification shall not apply to the said goods. Such is not the language used in Clause7, which is an exception to the exemption. In our view, the learned single Judge has not assessed the question putting the proper construction on Clause 7 read with Explanation VIII to the Notification and we are not able to appreciate and accept the reasonings expressed by the learned single Judge for denying the exemption asked for by the petitioners under the Notification. It is true that Exemption is the creation of the statute and must be construed strictly and cannot be extended. But here apparently the Exemption under the Notification applies to the components manufactured by the Units. The endeavour on the part of respondents 1 to 3 is to deny that exemption by invoking the clause of exception to the Exemption. The Exemption certainly should not be whittled down by importing limitations not specifically inserted by the language used in Exception clause.
7. Mr. P. Narasimhan, learned Senior Central Government Standing Counsel appearing for the respondents, however would venture to suggest to us that the respondents should be allowed to deal with the matter factually, doing the assessment process, prosecuted in respect of the components manufactured by the Units and they are prepared to do it impartially. This suggestion is being counteracted by Mr. Sriram Panchu, learned counsel appearing for the petitioners, by pointing out that at no point of time earlier the respondents gave an indication of such an open mind and on the other hand they have been all along staunchly saying without mincing matters that the exemption Notification cannot be availed of at all by the Units in respect of the components manufactured by them, and it is too late in the day to make a suggestion on these lines which patently looks bona fides. We are in total agreement with the submission put forth by Mr. Sriram Panchu, learned counsel appearing for the petitioners. The stand of the respondents 1 to 3 having been expressed in unambiguous terms with reference to the claim for exemption under the Notification put forth by the Units and there having been an adjudication over the question, it is not possible to take note of the suggestion put forth by Mr. P. Narasimhan, learned Senior Central Government Standing Counsel, appearing for respondents 1 to 3 and implement it at this stage.
8. Accordingly, we are obliged to allow these writ appeals. We allow these writ appeals; set aside the common order of the learned single Judge in W.P. Nos. 11871 and 11872 of 1989 and the said writ petitions will stand allowed. We make it clear that only so far as the components already manufactured or being manufactured by the Units bear only the markings or inscriptions noted and referred to by us in this judgment, there could be the availing of the exemption under the Notification. We make no order as to costs.
9. We are told that by way of interim measure both at the stage of pendency of the writ petitions as well as of the writ appeals, the Units were obliged to pay one-third of the duty on the components manufactured by them, without reference to the Notification. Now the writ petitions have been allowed, the Units, who paid such duty, are en-titled for refund. Furthermore, we are told that as part of the interim measure, there was also furnishing of security for the balance of two-thirds in the form of personal bonds. Those bonds will now stand cancelled.
10. At this stage, Mr. P. Narasimhan, learned Senior Central Government Standing Counsel appearing for respondents 1 to 3 asks leave of us to appeal to the Supreme Court of India. We have decided the issues only keeping in mind the well-accepted norms of interpretation of an exemption Notification. We do not think that these matters involve any substantial question of law of general importance requiring decision at the hands of the Supreme Court of India. Hence, the oral leave asked for is refused.