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'REPORTABLE' IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 2609 OF 2004

M/S. VIR RUBBER PRODUCTS P. LTD.               ... Appellant VERSUS

COMMISSIONER OF CENTRAL EXCISE, MUMBAI-III     ... Respondent

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

The appellant  herein was engaged in the manufacture of  certain articles from vulcanized rubber as bushes for use in  the motor vehicles.  Indubitably, the appellant is a Small  Scale Industrial unit (hereinafter referred to as 'SSI' for  short).  The appellant has its own brand name “VIR” and has  been manufacturing these products under the said brand name  and supplying the same to various customers.  In addition,  the appellant was also having job orders from some automobile  companies like Hindustan Motors, Kinetic Honda, etc.   

Insofar as orders for manufacture of spare parts placed  by  these  automobile  companies  are  concerned,  on  the  said  goods, the appellant had been putting the identification mark  such  as  “HM”,  “PAL”,  “KH”,  etc.   The  goods  which  were  supplied to these automobile companies used to be cleared by  the appellant on payment of excise duty.  However, in respect

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of manufacture of its own goods under the brand name “VIR”,  the appellant claimed SSI benefit in terms of Notification  No. 1/93 which provides for exemption from payment of excise  duty on fulfillment of certain conditions.  It is admitted  case that the appellant fulfils all the conditions mentioned  in the aforesaid notification except one, in respect of which  the  dispute  has  arisen.   This  condition  under  the  notification  stipulates  that  the  aggregate  value  of  clearances in the preceding financial year should be less  than Rs.3 crores.  There is a lis as to whether the appellant  fulfils this condition or not.   

While  interpreting  this  notification,  the  Department  included  the  value  of  goods  supplied  to  the  automobile  companies under the brand name 'HM” “PAL”, “KH”, etc. and on  that basis, came to the conclusion that the total value of  goods cleared by the assessee in the previous financial year  was  much  more  than  Rs.3  crores.   The  contention  of  the  appellant, on the other hand, was that since the appellant  had been using the brand name of the automobile industries  while carrying out their job work and even clearing those  goods on payment of excise duty, the turnover in respect of  these goods should not be included while arriving at the  figure of Rs.3 crores.  To put it otherwise, submission was  that it is only in respect of “VIR” brand goods, which is the  proprietory brand of the appellant, the value of clearances  in the preceding year should be taken into consideration and

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if, that is done, the total value of clearances was much less  than Rs. 3 cores.  This contention of the appellant, however,  has  not  been  accepted  by  the  authorities  below  including  Customs,  Excise  &  Gold  (Control)  Appellate  Tribunal  (hereinafter  referred  to  as  'CEGAT').   Rejecting  the  aforesaid contention of the assessee and accepting the plea  of the Department, the CEGAT has gone by the definition of  “brand  name” or  “trade name”  contained in  para 4  of the  aforesaid Notification and reads as under: -

“4. The exemption contained in this notification  shall not apply to the specified goods bearing a brand  name  or  trade  name,  whether  registered  or  not,  of  another person, except in the following cases: -

(a) where such specified goods, being in the nature  of components or parts of any machinery or equipment or  appliances, are cleared for use as original equipment  in the manufacture of the said machinery or equipment  or appliances by following the procedure laid down in  Chapter X of the Central Excise Rules, 1944.  Provided  that manufacturers, whose aggregate value of clearances  for home consumption of such specified goods for use as  original equipment does not exceed rupees fifty lakhs  in  a  financial  year  as  calculated  in  the  manner  specified in the said Table, may submit a declaration  regarding such use instead of following the procedure  laid down in Chapter X of the said rules; (b) where the specified goods bear a brand name or  trade name of - (i) the Khadi and Village Industries Commission; or (ii) a State Khadi and Village Industry Board; or (iii) the National Small Industries Corporation; or (iv) a  State  Small  Industries  Development  Corporation; or (v) A State Small Industries Corporation. 5.This notification shall come into force on the 1st day  of April, 1999. Explanation.- For the purposes of this notification,- (A) “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,

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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;”  

The  aforesaid  para  of  the  Notification  specifically  mentions that the exemption contained in that Notification is  not to apply to those goods bearing brand name or trade name  whether  registered  or  not  of  another  person,  except  in  certain cases which are mentioned therein.  The brand name or  trade name is defined to mean a brand name or trade name  whether registered or not, that is to say, a name or a mark  such  as  a  symbol,  monogram,  label,  signature  or  invented  word,  etc.,  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.  

From the aforesaid definition of brand name, it becomes  apparent that on the goods manufactured by the appellant for  the aforesaid automobile companies, the appellant had been  using brand name or trade name on those goods.  In such  cases, in respect of those goods which are manufactured for  the other person, obviously no exemption is to be given as  the aforesaid Notification does not apply to those specified  goods.  To put it pithily, what would be the position if the  appellant was doing job work only for other companies and  using their brand name on the goods manufactured?  Was it

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permissible  to  seek  exemption  of  notification  in  such  circumstances? This issue has been considered time and again  by this court in number of judgments.   

In  a  recent  judgment  dated  11.03.2015  pronounced  by  this  very  Bench  in  the  case  of  'Commissioner  of  Central  Excise, Jamshedpur v. M/s. Tubes & Structurals and Another'  [Civil Appeal Nos. 7955-7956 of 2003], after taking note of  two earlier judgments of this court, the issue was dealt with  as under: -

“This issue, on the facts of the present case as  noted above, is no more res integra and has been settled  by few judgments of this Court.  It is not necessary to  refer to all those judgments.  Our purpose would be  served in mentioning the judgment titled Commissioner of  Central Excise, Chennai-II v. Australian Foods India (P)  Ltd. (2013) 287 E.L.T. 385 (SC).  In the said case the  Court took note of the original para 4 in Notification  No. 1/93 dated 28.2.1993 where the words mentioned are  “the exemption contained in this Notification shall not  apply to the specified goods, bearing a brand name or  trade name (registered or not) of another person.”

This para 4 was amended vide Notification No.  59/94-CE  dated  1.3.1994  and  the  word  “affixes”  was  substituted by the word “bearing”.  The reason for this  substitution is explained in para (iii) of para J of the  changes 1994-95 dealt with “changes in the SSI scheme”.  This is so stated in para 10 of the said judgment which  we reproduce below for the sake of clarification:   

Part (iii) of Para J of the Budget Changes 1994- 95 dealt with “Changes in the SSI schemes” explains the  purpose of the amendment in the following words:

“(iii) Brand name provision has been  amended so as to provide that SSI concession  shall not apply to the goods bearing the brand  name  or  trade  name  of  another  person.   The  effect of this amendment is that if an SSI unit  manufactures  the  branded  goods  for  another  person irrespective of whether the brand name  owner himself is SSI unit or not, such goods

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shall  not  be  eligible  for  the  concession.  Another implication of this amendment is that  the requirement of affixation or brand name by  the SSI unit has been changed and now the only  condition is that the goods cleared by SSI unit  bearing a brand name of another person shall  not be eligible for the concession irrespective  of the fact whether the brand name was affixed  by the SSI unit or that, the input material  used by the SSI unit was already affixed with  brand name.”

It becomes clear from the reading of the aforesaid  paras that amendment in para 4 in the manner mentioned  above was brought to deny the benefit of Notification  to  those  SSI  units  which  have  been  making  use  of  branded good for another person irrespective of whether  the brand name owner himself is SSI unit or not.  It  was  also  made  abundantly  clear  here  that  the  requirement of affixation or brand name by the SSI unit  was immaterial.  That was the purpose for substituting  the word “affixing” by the word “bearing”.  Going by  the  aforesaid  consideration  this  Court  held  in  Australian Foods (India) (P) Ltd. case that after this  amendment in para 4 it was not necessary that there has  to be affixation of the name or mark on the goods.

Applying the ratio of this case to the facts of  the  present  case,  the  irresistible  conclusion  is  to  hold that the impugned order of the CEGAT is untenable  and not in accordance with law.  We may mention that  while giving its decision the CEGAT has gone by the  unamended para 4 without taking into consideration the  amended para and the implication thereof.”   

Once we come to the conclusion that in respect of those  goods where brand name of other party is used on manufactured  goods and that other party is not a SSI unit, exemption is  not available, it would lead to inevitable result that the  value  of  such  goods  cannot  be  added  as  well,  while  considering the value of the goods cleared by the assessee in  the previous year.

We, however, find that the CEGAT has given two other

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reasons to deny the relief to the appellant.  In its order it  has observed that letters such as “HM” and “PAL”, no doubt,  were initials of the buyers of the goods and they constitute  the brand name as well, however, what was indicated was only  initials with the sole purpose to identify the goods for  particular automobile company.  After the supply of these  goods,  the  said  automobile  companies  were  affixing  their  proper trade mark/ brand name thereupon.  On this basis, it  is  mentioned  that  the  Notification  in  question  would  not  apply.  This reasoning of the CEGAT is contrary to the law  laid down by this court in 'Kohinoor Elastics (P) Ltd.  v.  Commissioner of Central Excise, Indore' [(2005) 7 SCC 528].  This very argument was repelled by the court in the following  words:  

“However, the words “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 trade between such   specified goods and  some person using such name or mark” cannot be read  dehors clause 4.  They have to be read in the context  of clause 4.  The word “used” indicates use by the  manufacturer.  It is the manufacturer, in this case  the  appellant,  who  is  applying/affixing  the  brand/trade name on the goods.  Thus, the words “for  the purpose of indicating” refers to the purpose of  the manufacturer (appellant).  The “course of trade”  is of that manufacturer and not the general course of  trade.  Even if a manufacturer only manufactures as  per  orders  of  customer  and  delivers  only  to  that  customer,  the  course  of  trade,  for  him  is  such  manufacture and sale.  In such cases it can hardly be  argued that there was no trade.  Such a manufacturer  stated that it was not argued that here was no trade.  Such  a  manufacturer  may,  as  per  the  order  of  his  customer, affix the brand/trade name of the customer  on the “goods” manufactured by him.  This will be for

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the  purpose  of  indicating  a  connection  between  the  “goods” manufactured by him and his customer.”    

The other reason given by the CEGAT is that “HM” and  “PAL” are not the brand names.  Here again, it has fell into  legal error.  Similar contention was rejected by this Court  in  'Commissioner of Central Excise, Trichy  v.  M/s. Grasim  Industries Ltd.'[2005 (3) SCR 466] in the following words: -

“In  our  view,  the  Tribunal  has  completely  misdirected itself.  The term “brand name or trade name”  is qualified by the words “that is to say”.  Thus, even  though  under  normal  circumstances  a  brand  name  or  a  trade  name  may  have  the  meaning  as  suggested  by  the  Tribunal, for the purposes of such a Notification the  terms “brand name or trade name” get qualified by the  words which follow.  The words which follow  are “a name  or a mark”.  Thus even an ordinary name or an ordinary  mark  is  sufficient.   It  is  then  elaborated  that  the  “name or mark” such as a “symbol” or a “monogram” or a  “label”  or  even  a  “signature  of  invented  word”  is  a  brand name or trade name.  However, the contention is  that they must be used in relation to the product and  for the purposes of indicating a connection with the  other person.  This is further made clear by the words  “any writing”.  

The upshoot of the aforesaid discussion would be to  hold that value of the goods meant for “HM”, “PAL”, “KH”,  etc. could not have been included while considering as to  whether  the  appellant  is  entitled  to  the  benefit  of  the  aforesaid Notification or not.  Once that is excluded and the  case  is  confined  to  the  brand  name  'VIR'  which  is  the  appellant's  own  brand  name  and  in  respect  of  which  the  appellant had claimed exemption, the value of goods cleared  in the previous year was less than Rs.3 crores.  Therefore,

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the appellant shall be entitled to the exemption under the  said Notification.   

This  appeal  is,  accordingly,  allowed,  upsetting  the  order of CEGAT and the authorities below, with direction to  give the appellant exemption of the aforesaid Notification  for the year in question.    

.........................., J. [ A.K. SIKRI ]

.........................., J. [ ROHINTON FALI NARIMAN ]

New Delhi; March 27, 2015