REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL  APPEAL NO. 3051 OF 2003

COMMISSIONER CENTRAL EXCISE,  DELHI

— APPELLANT  

VERSUS

M/S. ACE AUTO COMP. LTD. — RESPONDENT

J U D G M E N T

D.K. JAIN, J.:

1. The  present  civil  appeal,  filed  under  Section  35(L)(b)  of  the  Central  

Excise Act, 1944 (for short “the Act”) by the Revenue, is directed against  

order dated 10th October, 2002 passed by the Customs, Excise & Gold  

(Control)  Appellate  Tribunal  (for  short  “the Tribunal”)  wherein it  has  

been held that the respondent was entitled to the benefit of Notifications  

Nos. 1/93-CE and 16/97-CE.

2. Shorn of unnecessary details, the facts material for the adjudication of the  

present appeal may be stated as under:

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The respondent  (hereinafter  referred  to  as  “the  assessee”),  a  small  

scale  industrial  unit  (for  short  “SSI”),  is  engaged  in  the  manufacture  of  

clutch plates, clutch cover assemblies and pressure plates, falling under sub-

heading No. 8708.00 of the Schedule to the Central Excise Tariff Act, 1985.  

Admittedly, the assessee prefixed the symbol and logo “TATA” along with  

their own brand name “ACE” on cover assembly manufactured for TATA  

310 vehicle. The assessee filed declaration Nos. 545/96 w.e.f 4th November  

1996; 104/97 w.e.f.  25th March,  1997; 105/97 and 106/97 w.e.f.  1st April  

1997, claiming the benefit of SSI Notification Nos. 1/93 and 16/97.  

3. A raid was conducted at the premises of the assessee, which resulted in  

issuance of a show cause notice dated 13th May, 1998 to the assessee  

asking them to explain as to why duty amounting to     `1,46,151/-; and  

penalty under Rules 9(2),  173Q and 226 of the Central  Excise  Rules,  

1944 (for short “the Rules”) together with penalty under Section 11 AC  

of the Act may not  be levied on them, for clearing branded goods of  

another person.

4. The  Additional  Commissioner  of  Central  Excise  (for  short  “the  

Adjudicating Authority”),  vide Order-in-Original No.06 dated 3rd June,  

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1999, while confirming the duty and penalty as contained in the show  

cause notice, observed that:

“Any person who buys the product, it is the TATA brand name  which will strike the eyes of the buyer first as it is a well known  and established brand name rather than the other logo ACE. As  such going by the Tribunal decision cited by the party the case  has to be decided against them………………………………… ……................

14. The other point raised by the party is that since they do not  sell  the  product  to  TATA’s,  the  owner  of  the  brand  name  TATA, there is no connection between the branded product and  the brand name owner. I fail to see the logic in this contention.  The  explanation  IX to  notification  no.  1/93  dated  28.2.1993  merely  means  that  by looking at  a  particular  brand name or  trade name an association between the brand name owner and  the  product  should  get  established.  In  fact  this  is  the  very  purpose of using a brand name. In the instant case any person  buying the product will naturally assume the product to have  the quality, specification etc. associated with products of TATA  group. It is not necessary to actually sell the product to TATA  companies to establish any connection between the product and  the brand name owner.

15. Thus once it is held that the cover assembly was branded  with the TATA logo which did not belong to the party, and no  evidence was produced that the TATA group of companies was  themselves  eligible  for  the  excise  exemption,  benefit  of  notification  1/93  and  16/97  cannot  be  extended  to  these  products  manufactured  by  the  party  but  carrying  the  TATA  brand name or logo.”

5. Being  aggrieved,  the  assessee  preferred  an  appeal  before  the  

Commissioner  of  Central  Excise  (Appeals).  The  Commissioner  

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(Appeals),  vide  order  dated  10th February,  2002,  allowed  the  appeal,  

observing thus:

“5.4 Thus,  we find that  the appellate  bodies are treating any  slight  variation in the brand names as different entities  as in  “Mahaan”  and  “Mahaan  Tastemaker”  or  “AGI”  and  “AGI  Switches”. Here, the two conflicting brand names are “TATA”  and “TATA ACE” and the sole  reason for  this  usage of  the  name  “TATA”  is  that  it  stands  earmarked  for  a  particular  vehicle. They are also manufacturing auto parts for use in the  other vehicles of different manufacturers for which they do not  use this logo. 5.5. In the light of the above decisions of the Hon’ble CEGAT,  I have no alternative but to follow the judicial precedent. I thus  hold  that  ‘TATA  ACE’  brand  name  is  different  from  the  popular brand name “TATA”.”  

6. Aggrieved, the revenue took the matter further in appeal to the Tribunal.  

As stated above, vide the impugned order, the Tribunal has dismissed the  

appeal.  The Tribunal has come to the conclusion that:

“According to the Notification, exemption shall not apply if the  specified goods are bearing the brand name of another person.  It is not the case of the Revenue that ‘Tata Ace’ is the brand  name of another person. The very fact that there is no material  to  prove  that  the  brand  name,  which  the  excisable  goods  manufactured  by  the  respondents  bear,  belongs  to  another  person, the mischief of Para 4 of the Notification No. 1/93 will  not be attracted. ………………………………………………… ……………….. We  also  find  substance  in  the  finding  of  the  Commissioner  (Appeals) that the usage of the name ‘Tata’ in the brand name  is with a view to indicate that the part is for a particular vehicle  manufactured by Tata.”

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7. Hence, the present civil appeal.  

8. Mr. B. Bhattacharya, learned Additional Solicitor General appearing on  

behalf of the Revenue, while assailing the impugned order, urged that in  

light of the decisions of this Court in Commissioner of Central Excise,   

Calcutta Vs. Emkay Investments (P) Ltd. & Anr.1 and Commissioner of   

Central  Excise,  Chandigarh-I  Vs.  Mahaan Dairies2,  it  is  settled  that  

whenever the assessee affixes the brand name of another person on its  

goods with the intention to indicate some connection between the goods  

and the said brand name, the assessee is barred from availing the benefit  

of  the  Notifications.   It  was  asserted  that  in  view  of  the  fact  that  

indubitably  the  brand  name  “TATA”,  which  did  not  belong  to  the  

assessee  but  to  another  identified  company,  had  been  affixed  by  the  

assessee on their product, although in conjunction with the word “ACE”  

the Tribunal’s  conclusion that  there was no material  to prove that  the  

brand  name  “TATA  ACE”  belonged  to  another  person,  is  clearly  a  

misconstruction of para 4 of the notifications in question and therefore,  

its decision deserves to be set aside.   

1 (2005) 1 SCC 526 2 (2004) 11 SCC 798

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9. Mr. S.K. Bagaria, learned senior counsel, appearing as  Amicus Curiae,  

submitted  that  the  Tribunal  has  rightly  concluded  that  there  was  no  

evidence to prove that the brand name “TATA ACE” belonged to another  

person, and the said finding of fact deserves to be affirmed as it has not  

been specifically challenged by the Revenue.  Learned counsel argued  

that  in  the  present  case  the  pre-requisite  for  invoking  paragraph  4  of  

Notification No. 1/93 is not satisfied in as much as the Revenue has not  

been  able  to  establish  that  the  brand  name “TATA ACE” belongs  to  

another person.  In support of the submission that the burden to prove  

that the brand name belongs to another person is on the Revenue, learned  

counsel placed reliance upon the decision of this Court in Commissioner   

of Trade Tax, U.P. & Anr. Vs. Kajaria Ceramics Ltd.3.  Commending us  

to the decision of this Court in  Pappu Sweets and Biscuits & Anr.  Vs.   

Commissioner of Trade Tax, U.P., Lucknow4,  learned counsel argued  

that paragraph 4 of Notification No.1/93 being an exclusionary clause,  

the same has to be strictly construed.  Learned counsel contended that  

since  both  the  Tribunal  as  also  the  Commissioner  (Appeals)  have  

concluded that the use of the word “TATA” was merely to denote that  

the product was meant for use in a particular vehicle, the affixation of  

3 (2005) 11 SCC 149 4 (1998) 7 SCC 228

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“TATA” was merely descriptive of the assessee’s product and not as if  

the goods had been marketed with another brand name. Relying on the  

decisions of this Court in  Nirlex Spares (P) Ltd.  Vs. Commissioner of   

Central  Excise5; Commissioner  of  Central  Excise,  Jamshedpur  Vs.   

Superex  Industries,  Bihar6 and  Emkay  Investments  (P)  Ltd.  (supra),  

learned counsel submitted that mere use of the word “TATA” should not  

disentitle the assessee from the benefit of the two Notifications. Learned  

counsel further urged that the Revenue’s argument that the use of the  

word “TATA” would create an impression in the minds of the consumer  

that the said product was manufactured by one of the Tata companies was  

misplaced  in  as  much  as  no  such  test  was  envisaged  under  the  

Notifications.  Moreover, the Revenue had not made any such allegation  

in the show cause notice, and in light of the decisions of this Court in  

Commissioner of Customs, Mumbai  Vs.  Toyo Engineering India Ltd.7  

and Commissioner of Central Excise, Nagpur Vs. Ballarpur Industries   

Ltd.8, it is trite that the foundation of the Revenue’s case is laid in the  

show cause  notice,  and the  same must  be  confined to  the  allegations  

contained therein.  

5 (2008) 2 SCC 628 6 (2005) 4 SCC 207 7 (2006) 7 SCC 592 8 (2007) 8 SCC 89

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10. Before adverting to the rival submissions, it would be useful to extract  

relevant portions of Notification No. 1/93-CE dated 28th February, 1993  

as amended,  which grants  exemption from payment  of  Central  Excise  

duty to small scale industrial units. It read as:

“4. The exemption contained in this notification shall not apply  to  the  specified  goods,  bearing  brand  name  or  trade  name  (registered or not) of another person: ………………………………………………………………… ………………………………………………………………… Explanation IX.-  “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.”

Notification No. 16/97- CE dated 1st April, 1997 contains the same definition  

of “brand name” as Notification No. 1/93-CE, and also provides that the  

exemption  contained  therein  shall  not  be  available  to  goods  bearing  the  

brand name of another person.  

11. It is manifest from a bare reading of Clause 4 of the Notification, read  

with Explanation IX that it clearly debars an assessee from the benefit of  

exemption under the notification,  if he uses another person’s brand or  

trade  name with  the  intention  of  indicating  a  connection  between the  

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assessee’s goods and such other person.  It is evident that the object of  

the exemption notification is  to grant benefits  only to those industries  

which otherwise do not have the advantage of brand or trade name. (See:  

Commissioner  of  Central  Excise,  Chandigarh-II  Vs.  Bhalla  

Enterprises9; Nirlex Spares (P) Ltd.  (supra);  Commissioner of Central   

Excise, Raipur Vs. Hira Cement10.)

12. In  Kohinoor  Elastics  (P)  Ltd.  Vs.  Commissioner  of  Central  Excise,   

Indore11, while construing an identical notification (No.1 of 1993-CE),  

dated 28th February 1993, this Court had observed that:

“Clause  4  of  the  notification  is  unambiguous  and  clear.  It  specifically  states  that  the  exemption  contained  in  the  notification shall not apply to specific goods which bear a brand  name or trade name (registered or not) of another person. It is  settled  law that  to  claim exemption under  a  notification  one  must strictly comply with the terms of the notification. It is not  permissible  to  imply  words  into  the  notification  which  the  legislature has purposely not used. The framers were aware that  use of a brand/trade name is generally to show to a consumer a  connection between the goods and a person. The framers were  aware  that  goods  may be  manufactured  on order  for  captive  consumption by that customer and bear the brand/trade name of  that customer. The framers were aware that such goods may not  reach the market in the form in which they were supplied to the  customer.  The  framers  were  aware  that  the  customer  may  merely use such goods as an input for the goods manufactured  by  him.  Yet  clause  4  provides  in  categoric  terms  that  the  

9 (2005) 8 SCC 308 10 (2006) 2 SCC 439 11 (2005) 7 SCC 528

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exemption is  lost  if  the  goods  bear  the  brand/trade  name of  another. Clause 4 does not state that the exemption is lost only  in respect of such goods as reach the market. It does not carve  out  an  exception  for  goods  manufactured  for  captive  consumption.  The  framers  meant  what  they  provided.  The  exemption was to be available only to goods which did not bear  a brand/trade name of another. The reason for this is obvious. If  use  of  brand/trade  names  were  to  be  permitted  on  goods  manufactured as per the orders of customers or which are to be  captively consumed then manufacturers, who are otherwise not  entitled  to  exemption,  would  get  their  goods  or  some inputs  manufactured on job-work basis or through some small party,  freely use their brand/trade name on the goods and avail of the  exemption. It is to foreclose such a thing that clause 4 provides,  in unambiguous terms, that the exemption is lost if the “goods”  bear a brand/trade name of another.”

We are in respectful  agreement with the  reasoning in the afore-extracted  

paragraph.

13. In  Commissioner  of  Central  Excise,  Trichy  Vs.  Grasim  Industries   

Ltd.12, a  Bench  of  three  judges  of  this  Court,  while  construing  

Notification No. 5/98-CE, dated 2nd June 1998, which was similar to the  

one under consideration by us, had observed that:

“….Even the name of some other company, if it is used for the  purposes of indicating a connection between the product  and  that company, would be sufficient. It is not necessary that the  name or the writing must always be a brand name or a trade  name in the sense that it is normally understood. The exemption  is only to such parties who do not associate their products with  some other person. Of course this being a notification under the  

12 (2005) 4 SCC 194

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Excise  Act,  the  connection  must  be  of  such  a  nature  that  it  reflects on the aspect of manufacture and deal with quality of  the products. No hard-and-fast rule can be laid down however it  is possible that words which merely indicate the party who is  marketing  the  product  may  not  be  sufficient.  As we are  not  dealing with such a case we do not express any opinion on this  aspect.”

(Emphasis supplied by us)

14.Therefore, in order to avail of the benefit of the exemption notification,  

the assessee must establish that his product is not associated with some  

other person.  To put it differently, if it is shown that the assessee has  

affixed the brand name of another person on his goods with the intention  

of indicating a connection between the assessee’s goods and the goods of  

another person, using such name or mark, then the assessee would not be  

entitled  to  the  benefit  of  exemption  notification.   We  may  hasten  to  

clarify that if the assessee is able to satisfy the Adjudicating Authority  

that there was no such intention, or that the user of the brand name was  

entirely fortuitous, it would be entitled to the benefit of the exemption.  

15.In the instant case, admittedly, the brand name “TATA” did not belong to  

the assessee.  It  is also evident that by using the said brand name, the  

assessee  had  not  only  intended  to  indicate  a  connection  between  the  

goods manufactured by them and a Tata Company; but also the quality of  

their  product  as  that  of  a  product  of  Tata  Company,  as  they  were  

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supplying their  goods  to  the  said  company.   Thus,  the  bar  created in  

Clause 4 read with Explanation IX of the Notification is clearly attracted  

in  the  present  case,  disentitling  the  assessee  from  the  benefit  of  the  

exemption notifications under consideration.  We are of the opinion that  

the decision of the Tribunal is clearly erroneous and deserves to be set  

aside.

16.Consequently,  for  the  foregoing  reasons,  the  appeal  is  allowed;  the  

impugned order is  set  aside and the order passed by the Adjudicating  

Authority is restored.  

17.Before parting with the case, we place on record our deep appreciation  

for the valuable assistance rendered by Shri  S.K. Bagaria,  the learned  

Amicus Curiae.

18.There will be no order as to costs.

.……………………………………              (D.K. JAIN, J.)  

                             .…………………………………….             (H.L. DATTU, J.)

NEW DELHI;

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DECEMBER 16, 2010.

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