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REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 3594    OF 2005

Kali Aerated Water Works, Salem Appellant(s) VERSUS

Commnr. Of Central Excise, Madurai Respondent(s)

WITH

CIVIL APPEAL NO. 3611  AND 4387-4392  OF 2005

J U D G M E N T A.K.SIKRI,J.

It is not in dispute that the appellant herein is a Small  Scale  Industrial  Unit  (hereinafter  referred  to  SSI Unit) and is manufacturing Aerated Water under various brand names using the trade mark with the “Kalimark” / M/s.Kali Aerated Water Works”  It sought exemption from payment of excise duty in terms of Notification 1/93-CE dated 28.2.1993 (as  amended  vide  Notification  No.59/94-CE  dated  1.3.1994) for the aforesaid goods manufactured in its factory.  This has, however, been denied to the assessee by the Department on the ground that the brand name “Kalimark” has been used on the goods which belong to M/s. Shri K.P.R.Shakthivel  and since the assessee is using the aforesaid brand name of the third  party,  by  virtue  of  para  4  of  the  aforesaid

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Notification  the  exemption  would  not  be  allowed  to  the respondent. This stand taken by the respondent department has been accepted by the CESTAT in its impugned judgment.

The  Tribunal  has  noted  the  fact  that  business  of manufacture and sale of Aerated water was started in the name of `Kalimark Aerated Water Works' by the HUF of which M/s. Shri P.V.S. K.Palaniappa Nadar was the Karta.  Later on it  was  converted  into  a  joint  family  business  of  Sh. Palaniappa Nadar and his three sons and a daughter.  At some point of time the parties/partners fell apart and entered into  a  family  settlement  which  is  contained  in  Deed  of Mutual Agreement dated 12.3.1993. The Tribunal has recorded that in terms of this Mutual Agreement signed between the parties the ownership of the aforesaid trademark/brand name `Kalimark'  no longer remained with the appellant assessee and it belongs to the other party. On this basis it arrived at the finding that the appellant has been using the trade mark/brand name of the third party.   

We find that the aforesaid observation is against the record and contrary to  the Deed of Mutual Agreement which has been entered into between the earstwhile partners. Para 9 of the recital to this family arrangement is as under:

“Since all the parties herein have mutually  intend  to  carry  forward  the reputation and well established Trade Mark `KALI MARK' in future also thus carrying out to the future generations, a meeting was held among the parties herein, who are the direct male lineal decedents and users

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of established abovesaid Trade marks and who at present have interest in various factories being run in the name of Kali Aerated Water Works in various parts of Tamil Nadu and discussed the pros and cons and also to preserve the established Trade Name and Trade Marks throughout the future generation and agreed on certain terms and conditions and all the parties herein have agreed  to  abide  by  them  and  hence  this Deed of Mutual Agreement.

Thereafter, this aspect is dealt with in Paras  L.M.  and  N thereof, which read as under:

L)  If  any  party  comes  to  know  about  any infringement  and  passing  of  use  of  any deceptively similar mark on any imitation by any person in the market, then the party in  whose  area  the  said  imitation, infringement  or  passing  off  takes  place shall  take  immediate  legal  steps  against such erring persons at his cost, under the provisions  of  Trade  and  Merchandise  Mark Act, 1958 or any other common law in which suitable  an  effective  remedies  are provided.

M)  In  any  party  falls  to  initiate  legal action against such erring persons in order to protect the Trade Mark and Trade name, then   any  other  party  can  take  action against such defaulting parties as well as against  the  person  committing  such infringement, passing off or imitation for suitable remedy. N) For removal of doubts, it is clarified specifically  that  the  right  to  use  the Trade  name  M/s.  Kali  Aerated  Water  Works and Trade Marks mentioned above are solely vested with the parties 2 to 10 herein who are the direct male lineal descendents and subject  to  clause  `G'  herein  the  parties herein cannot and shall not permit or give their  existing  rights  to  any  female descendents  or  any  third  person,  nor  the parties  2  to  10  herein  have  right  to

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transfer/sell for consideration or without consideration  to  third  parties.  If  any party  herein  or  their  respective  male descendents  wants  to  close  down  the business  they  shall  have  to  either  sell their rights of Trade name and Trade Marks to other remaining parties or to their male lineal  descendents  only.    Such  parties shall  acquire  the  rights  subject  to  the terms and conditions of this Agreement and are liable to exercise their rights within the terms of this Mutual Agreement.

It  is  clear  from  the  above  that  the  trade  name `Kalimark Aerated Water Works' and trade mark mentioned in the said agreement would remain vested in all the parties including the appellant and the appellant was also allowed to use the same.  The agreement further provides that the user  of  this  trade  mark,  therefore,  shall  not  make  any payment of royalty or remuneration to any other party. This very fact was correctly appreciated by the Commissioner who decided  the  appeal  in  favour  of  the  appellant.  The discussion in the order of the Commissioner, on this aspect, reads as under:

23: During the personal hearing Shri Rathina Asohan drew my attention to the certificates issued by the Trade Mark Registry from the year 1948 to 1985 which were filed before the lower authority.  I find the Appellant's name also  figures  in  the  certificates  issued  in the year 1962 and 1970 when he became one of the partner of the erstwhile HUF Firm.  The appellant  have  been  marketing  his  products only within his own marketing area. It is not the case of the Revenue that any other person is  using the  same Brand  names in  the same area. Similarly the appellant is not selling his goods outside his marketing area. So far his  business  is  concerned  the  appellant

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appears  to be  the only  legal owner  of the Trade Mark within his marketing area.  This has been clearly brought out in the Mutual Agreement dated 12.3.1993 which has been duly presented  on  12.3.1993  itself  for registration  whereas  the  impugned Notification No.59/94 came into effect only from  1.4.1994  and  hence  no  motive  can  be attributed against the appellant in respect of  the Mutual  Agreement.  I have  read the entie contents of Mutual Agreement.  I find that Mr. K.P.R. Sakthivel is also a party to the said Mutual Agreement and no royalty is also  payable  to  the  said  K.P.R.  Sakthivel. Even  Mr.  K.P.R.Sakthivel  has  specifically agreed that he cannot use the brand name in the  marketing  area  of  the  appellant.  Thus there seems to be recognition of individual proprietary  rights  over  the  brand  names within  the  respective  specified  marketing area.   The  nature  of  succession  of  the proprietary  rights  of  the  brand  names  have also  been  clearly  dealt  with.   It  clearly establishes that the appellant and the male descendants are alone are entitled to succeed over the ownership of the brand name within their marketing area.  It is not the case of the Revenue that the appellant is marketing his products outside his marketing area. 24. I find that the appellant is the legal owner of the trade Marks used in his product in  his  own  marketing  area,  the  Trade  Mark certificates  produced  before  me  clearly establish that the appellant had been having the right of ownership over the Brand names in the year 1962 itself when he became the coparcener in the HUF firm. The appellant has had his exclusive ownership rights even prior to the said impugned notification.  Hence the subsequent notification cannot take away the ownership  right  of  the  appellant  over  the brand  names  'KaliMark'  `Bovonto'  and `Frutang' and other brand names and applying the same to the specified goods manufactured by  the  appellant  and  marketing  the  same within his own marketing area in exclusion of others.   On  perusing  the  trade  mark certificates,  Decree  of  the  Civil  Court, Mutual  Agreement  dated  12.3.1993  and  also considering  the  above  contentions,  I  find that the appellant is the legal owner of the brand names within his marketing area.”

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It is thus manifest that the appellant has been using its  own  brand  name  `Kalimark'  and  it  belongs  to  the appellant. In view thereof, the case of the appellant is squarely covered in its favour by the judgment of this Court in Civil Appeal No.9157 of 2003 titled CCE, Hyderabad IV vs. Stangen Immuno Diagnostics decided on 19.3.2015.

All the appeals are disposed of accordingly.

….....................J. (A.K.SIKRI)

…......................J. (ROHINTON FALI NARIMAN)

New Delhi; Date: 13.5.2015.