(B.V. Nagarathna and Ujjal Bhuyan, JJ.)
Hisaria Electronics Through its Proprietor Mr. Devki Nandan Aggarwal and another _____________________________________ Appellant(s);
v.
Commissioner of Central Excise _____________________ Respondent.
Civil Appeal Nos. 6230-6231 of 2009, decided on August 3, 2023
The Order of the court was delivered by
Order
Being aggrieved by final order No.765-767/08-Ex (DB) dated 07.10.2008 passed by the Customs, Excise & Service Tax Appellate Tribunal, Principal Bench, New Delhi (hereinafter referred to as the ‘CESTAT’, for the sake of convenience) in Excise Appeal Nos.2116-2118/2005 arising out of Order-in-Original No.89/2005 dated 16.03.2005 passed by the Commissioner of Central Excise, Delhi, the Assessees have preferred these appeals.
The relevant facts of the case are that on 30.05.2002, the Officers of the Department visited the factory premises of Appellant No.1 and conducted search operations and found emergency lights of SUNCA brand, torches and other electronic items with brand name of SANYO and SUNNY and seized the said goods valued at Rs. 51,220/- involving duty of Rs.8,195/-. In addition, certain documents were also seized with regard to removal of emergency lights, torches etc. The proprietor of the appellant firm in his statement recorded on the same day inter alia admitted that they were clearing emergency lights, torches etc. with the brand name of SUNCA and they had imported moulds from a Hongkong based company in the year 1996, namely, from M/s. Mikura Impex. The appellant(s) deposited Rs.1,00,000/- towards duty and thereafter the turnover of the firm was assessed. In respect of the seized goods, a separate show cause notice was issued and the original Authority confirmed the demand of duty of Rs.8,195/-; confiscated the goods with an option to redeem the goods on payment of fine of Rs.2,000/- and imposed penalty of Rs.2,000/-.
Being aggrieved, the appellant(s) herein filed an appeal before the Commissioner (Appeals), who upheld the confiscation and the redemption fine and penalty imposed by the Authority. However, it was held that the names of SUNCA and SUNNY did not fall under the category of brand names and held that the appellant(s) were entitled to exemption under Notification No.8/2002 and, therefore, directed for redoing of the duty payable by the appellant(s)for the goods seized under ‘SANYO’ brand name.
Thereafter, certain investigations were carried out and show cause notice was issued demanding duty on total value realised amounting to Rs.9,22,58,414/- and proposing penal action. Reply was given to the show cause notice. The Commissioner confirmed the duty demand of Rs.49,78,841/- along with interest and imposed penalty of like amount on the appellant(s). A further penalty of Rs.15 lacs was imposed on the proprietor of the firm and Rs.2 lacs on Shri Rakesh Aggarwal, son of the proprietor of the firm.
This order was thereafter impugned before CESTAT.
During the course of submissions before CESTAT and while hearing the matter finally, the Department contended that the brand name SUNCA, which was also the name of the products of the appellant(s) herein, though may not belong to M/s. Mikura Impex., was registered in the name of M/s. Sun Fat (Holding) Co. Ltd., a manufacturer of re-chargeable lamps and batteries; that the said brand name did not belong to the appellant firm and it belongs to a third party and the appellant(s) was using the SUNCA brand name and, therefore, the appellant(s) was not entitled to the benefit of exemption under Notification dated 01.03.2002 bearing No.8/2002 – Central Excise. In this regard, reliance was placed on Clause 4 of the exemption Notification and particularly to the explanation to Clause 4 of the said Notification. It was contended that since the brand name SUNCA has been registered with M/s. Sun Fat (Holding) Co. Ltd., which is evident from the printouts obtained from the web-sites and M/s. Sun Fat (Holding) Co. Ltd. being a manufacturer of re-chargeable lamps and batteries, the appellant(s) was not entitled to the benefit of exemption.
Accepting the said contention, CESTAT rejected the appeals filed by the appellant firm as well as the son of the appellant, however, insofar as the appeal filed by the proprietor of the appellant firm is concerned, the appeal was allowed and imposition of separate penalty on him was set aside.
Being aggrieved by the judgment of CESTAT, the appellant has preferred this appeal.
We have heard Mr. Rahul Narayan, learned counsel for the appellant(s) and Mr. Arijit Prasad, learned senior counsel for the respondent/Department and perused the material on record.
During the course of submissions, our attention has been drawn to Notification bearing No.8/2002-Central Excise dated 01.03.2002, the relevant portion of which reads as under:
“G.S.R. (E) In exercise of the powers conferred by subsection (1) of section 5A of the Central Excise Act, 1944 (1 of 1944) and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 8/2001-Central Excise, dated the 1st March, 2001, published in the Gazette of India vide number G.S.R. 133(E), dated the 1st March, 2001, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts clearances, specified in column (2) of the Table below (hereinafter referred to as the said Table) for home consumption of excisable goods of the description specified in the Annexure appended to this notification (hereinafter referred to as the specified goods), from so much of the aggregate of, —
(i) the duty of excise specified thereon in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986); and
(ii) the special duty of excise specified thereon in the Second Schedule to the said Central Excise Tariff Act,
as is in excess of the amount calculated at the rate specified in the corresponding entry in column (3) of the said Table:
Provided that nothing contained in this notification shall apply to a manufacturer who has availed the exemption under notification No. 39/2001-Central Excise, dated the 31st July, 2001, published in the Gazette of India vide number G.S.R. 565 (E), dated the 31st July, 2001, in the same financial year.
Table
| Sl No | Value of clearances | Rate of duty |
| (1) | (2) | (3) |
| 1 | First clearances upto an aggregate value not exceeding one hundred lakh rupees made on or after the 1st day of April in any financial year. | Nil |
| 2. | All clearances of the specified goods which are used as inputs for further manufacture of any specified goods within the factory of production of the specified goods. | Nil |
2. xxx
3. xxx
4. The exemption contained in this notification shall not apply to specified goods bearing a brand name or trade name, whether registered or not, of another person, except in the following cases:—
(a) where the 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 the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001:
Provided that manufacturers, whose aggregate value of clearances of the specified goods for use as original equipment does not exceed rupees one hundred lakhs in the financial year 2001-2002 as calculated in the manner specified in paragraph 1, may submit a declaration regarding such use instead of following the procedure laid down in the said Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001;
(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;
(c) where the specified goods are manufactured in a factory located in a rural area.
5. This notification shall come into force on the 1st day of April, 2002.
Explanation.- For the purposes of this notification,—
(A) “brand name” or “trade name” means a brand name or a 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;
(B) where the specified goods manufactured by a manufacturer bear a brand name or trade name, whether registered or not, of another manufacturer or trader, such specified goods shall not, merely by reason of that fact, be deemed to have been manufactured by such other manufacturer or trader;”
A similar notification had come up for consideration before this Court in the case of Commissioner of Central Excise, Delhi v. ACE Auto Company Limited, (2011) 1 SCC 666, wherein this Court considered whether the Assessee therein, being a small scale industrial unit was entitled to the benefit of the exemption granted under the Notification, as it had prefixed the symbol and logo “TATA” along with its own brand name “ACE” on cover assembly manufactured for TATA 310 vehicles. In the said case, adverting to Notification No.1 of 1993-CE dated 28.02.1993, which is in pari materia with the Notification under consideration, it was held in paragraph 13 thereof that Clause 4 of the said Notification, read with Explanation IX, clearly debars an Assessee from the benefit of exemption under the said Notification, if he uses another person’s brand or trade name with an intention of indicating a connection between the Assessee’s goods and such other person and 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 (vide CCE v. Bhalla Enterprises, (2005) 8 SCC 308; Nirlex Spares (P) Limited v. CCE, (2008) 2 SCC 628 and CCE v. Hira Cement, (2006) 2 SCC 439). In the said decision, it was observed in para 16 as under:
“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.”
Another decision which was brought to our notice during the course of submissions was in the case of Commissioner of Central Excise, Hyderabad IV v. Stangen Immuno Diagnostics, (2015) 11 SCC 761, wherein this Court while considering an earlier judgment in Bhalla Enterprises (supra) has noted the observations made therein, as under:
“The apprehension of the assessees that they may be denied the exemption merely because some other traders even in a remote area of the country had used the trade mark earlier is unfounded. The notification clearly indicates that the assessee will be debarred only if it is uses on the goods in respect of which exemption is sought, the same/similar brand name with the intention of indicating a connection with the assessees goods and such other person or uses the name in such a manner that it would indicate such connection. Therefore, if the assessee is able to satisfy the assessing authorities that there was no such intention or that the user of the brand name was entirely fortuitous and could not on a fair appraisal of the marks indicate any such connection, it would be entitled to the benefit of exemption. An assessee would also be entitled to the benefit of the exemption if the brand name belongs to the assessee himself although someone else may be equally entitled to such name.”
On noting the aforesaid observations, this Court has prescribed the test to be followed in order to debar an Assessee (which is a small scale industry) from the benefit of exemption under the relevant Notification. Paragraph 17 of the said judgment is of relevance to the case at hand and the same reads as under:
“These observations bring out two significant aspects namely:—
(1) As per the Notification, the assessee would be debarred only if it uses on the goods in respect of which exemption is sought, the same/similar brand name with the intention of indicating a connection with the assessees goods and such other person or uses the name in such a manner that it would indicate such connection. If there is no such intention or that the user of the brand name was entirely fortuitous and could not on a fair appraisal of the marks indicate any such connection, it would be entitled to the benefit of exemption.
(2) The assessee would also be entitled to the benefit of exemption if the brand name belongs to the assessee himself although someone else may be equally entitled to such name.”
Learned counsel for the appellant(s) submitted that although the proprietor of the appellant(s) had admitted that the appellant was importing moulds from M/s Mikura Impex, it was nevertheless evident that the brand name SUNCA did not belong to M/s Mikura Impex and such a brand name was being used by the appellant(s) only because the moulds were being imported from M/s Mikura Impex. The fact that SUNCA as a brand name did not belong to M/s Mikura Impex was evident. But the show cause notice was premised on the fact that since the appellant(s) herein was utilising the brand name SUNCA which was relatable to M/s Mikura Impex, the appellant was not entitled to the said benefit of exemption.
However, interestingly, before the CESTAT, the Revenue did not proceed on the aforesaid line of argument. The Departmental representative during the course of his submissions produced printouts from website indicating that brand name SUNCA was a registered brand name of M/s Sun Fat (Holding) Co. Ltd., which is a manufacturer of rechargeable lamps and batteries and therefore, the appellant(s) herein was using the very same brand name of SUNCA and hence, it was not entitled to the benefit of exemption as the brand name SUNCA is a well known brand name of M/s Sun Fat (Holding) Co. Ltd. Therefore, in the light of the submissions made by the Department representative before the CESTAT, the controversy between the parties would now have to be examined.
As already noted, the show cause notice proceeded on the basis that the appellant(s) herein was using the brand name of SUNCA as it had imported moulds from M/s. Mikura Impex, which had a brand name of SUNCA, but the said line of argument was given up by the Department representative before CESTAT. It was contended that the brand name SUNCA, in fact, was a registered brand name of M/s. Sun Fat (Holding) Co. Ltd., which was a manufacturer of re-chargeable lamps and batteries and in the instant case the appellant was also in the same line of manufacturing, namely, the manufacturing of emergency lamps. Therefore, there was a usage of a well known brand name SUNCA by the appellant(s), although it was registered by M/s. Sun Fat (Holding) Co. Ltd., which did not make a difference to the denial of the benefit of exemption to the appellant(s). The said contention of the Department representative found favour with the CESTAT and on that basis the appellant(s) herein was denied exemption under the Notification in question.
We have quoted in detail the observations made by this Court in the aforesaid three decisions. There is a golden thread of observations in all the three decisions, which state that the Assessee must satisfy the Authorities that there was no intention to disclose any business connection or that the user of the brand name was entirely fortuitous and on a fair appraisal of the marks if there was no such connection, the small scale industry will be entitled to the benefit of exemption. The observations of this Court in Bhalla Enterprises (supra) has been culled out in the form of a test laid down in Stangen Immuno Diagnostics (supra). A reading of paragraph 17 extracted above clearly indicates that in order to deny the benefit of exemption under the Notification, it must be established by the Department that (1) the goods in respect of which the exemption is sought use the same or similar brand name; (2) the said brand name is used with an intention of indicating a connection with the Assessees goods and such other person; and (3) use of such a brand name is to indicate such a connection.
It has also been noted that if there was no such intention or that the use of the brand name was entirely co-incidental or fortuitous and on a fair appraisal of marks no connection could be established, then the Assessee would be entitled to the benefit of exemption. On an application of the aforesaid test to the present case, it is established that M/s. Mikura Impex, which was stated to have the brand name SUNCA did not own that particular brand name but M/s. Sun Fat (Holding) Company Ltd., which according to the Revenue has the brand name registered for the products of rechargeable lamps and batteries, had no business connection whatsoever with the Assessee herein. Further, the Assessee had also not used the SUNCA brand name in order to establish an intention or to indicate a connection with M/s. Sun Fat (Holding) Co. Ltd., though the said company is also a manufacturer of rechargeable lamps and batteries. However, the appellant(s) in the instant case is manufacturing emergency lamps and, therefore, the use of brand name SUNCA in the instant case is only fortuitous, being no intention on the part of the appellant(s) to use the said brand name to show a connection with M/s. Sun Fat (Holding) Co. Ltd.
In the circumstances, by applying the aforesaid test to the case at hand, we find that CESTAT erroneously denied the benefit of exemption to the appellant(s) herein. In the circumstances, we hold that the show cause notices were issued on an erroneous premise inasmuch as the Department itself had changed its line of arguments before CESTAT. Therefore, the show cause notices are quashed, the order of the CESTAT is set aside and the order of the Appellate Commissioner is restored.
The Appeals are allowed in the aforesaid terms. No costs.
Pending application(s) shall stand disposed of.
RECORD OF PROCEEDINGS
Civil Appeal No(s). 6230-6231/2009
M/S. HISARIA ELECTRONICS THROUGH ITS PROPRIETOR MR. DEVKI NANDAN AGGARWAL & ANR. Appellant(s)
VERSUS
COMMISSIONER OF CENTRAL EXCISE Respondent(s)
Date : 03-08-2023 These appeals were called on for hearing today.
Hon’ble Mrs. Justice B.V. Nagarathna
Hon’ble Mr. Justice Ujjal Bhuyan
For Appellant(s) Mr. Rahul Narayan, AOR
Ms. Palak Vasishtah, Adv.
Mr. Adil Vasudeva, Adv.
For Respondent(s) Mr. Arijit Prasad, Sr. Adv.
Mr. Mukesh Kumar Maroria, AOR
Mr. Sanjay Kumar Visen, Adv.
Mr. V.C. Bharathi, Adv.
Ms. Sristi Mishra, Adv.
UPON hearing the counsel the Court made the following
ORDER
The Appeals are allowed in terms of the signed order.
Pending application(s) shall stand disposed of.
(NEETU SACHDEVA) (MALEKAR NAGARAJ)
ASTT. REGISTRAR-cum-PS COURT MASTER (NSH)
(signed order is placed on the file)
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