TMI Blog1994 (5) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... of Central Excise Tariff Act, 1985 and they had contravened Rules 9(1), 52A, 53 read with Rule 226, 173B, 173G and 174 of Central Excise Rules, 1944, and further committed the offences specified in Rule 173Q(1)(a), 173Q(1)(c) and 173Q(1)(d) ibid, inasmuch as, they had suppressed the fact of manufacture of the said goods with brand name Festo which is owned by their collaborators M/s. FESTO KG (Festo Pneumatic), Germany, who are not eligible for exemption under Notification No. 175/86, dated 1-3-1986 as amended and cleared the same during the period 1987-88 to 1989-90, without following Central Excise procedures and without payment of Central Excise duty, by wrongly availing exemption/concession under the said Notification, in contravention of the said rules with an intention to evade payment of Central Excise duty. Thus, duty evaded has been worked out to the amount already stated above. They have also been asked to explain as to why the benefit of the exemption/concession under the said notification should not be denied to them and penalty also imposed for the said contraventions. 2. In the Annexure to the show cause notice, it is stated that the Central Excise Officers attach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e different units of the collaborators in different countries bear the name `FESTO and the identification and advertising of the product is by the word `FESTO which is universal among them. This fact is also supported from the advertisement where the word `FESTO is printed on the world map as `FESTO WORLD WIDE . The statement of Shri K. Kneile, Project Manager of Festo, Bangalore was recorded on 21-6-1990. He admitted that they were affixing the brand name FESTO on their product and that FESTO is part of their company s name and as such it is used as a brand name. Further statement dt. 25-7-1990, they have submitted that foreign brand name is not allowed to be used for their products for internal sales although there is no objection to their use on the products to be exported and referred to a letter No. F.C. (II) 287(85) 253(85) dated 15-5-1986 issued by Government of India. Therefore, on the basis of these facts and circumstances, it has been alleged that the appellants have failed to declare in their declaration dt. 11-4-1988 filed on 12-4-1988 and the classification list, they are manufacturing branded goods and by suppressing the above facts deliberately wrongly availed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on their own either the fact of their using/affixing markings `FESTO on the goods or the collaboration agreement and project report. The Defence claim is that the Department had not proved that the markings FESTO" is related to the brand name of M/s. FESTO KG West Germany. The defence claim is not acceptable in view of the fact that the collaboration agreement cited in support of the Deptt s case lands evidence in favour of the department. As per the said collaboration agreement particularly para 11.2, the goods are made by M/s. Festo Controls according to the designs and quality laid down in the corresponding technical information and improvements furnished by their collaborators M/s. Festo KG. M/s. Festo are also permitted to mark on the goods with the designation indicating that the goods are made under the licence of M/s. Festo KG. On being questioned about these Shri H. Kneile, the Project Manager of M/s. Festo has stated that for using the brand name of M/s. Festo KG Germany, they have to get permission in writing from their collaborators which had not been obtained. If that is so, I fail to understand under what circumstances M/s. Festo Controls have incurred expenses to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in his statement dated 21-6-1990 wherein he has clearly admitted that they were affixing the label `Festo on certain goods, while on certian goods the said markings were cast and certain times were placed in the pouches bearing markings `Festo . The defence claim that they had put all the goods in pouches containing markings `Festo is, therefore, not based on fact. Similarly, the defence plea that some of the goods indicated in the show-cause notice for bought out items and items got manufactured on job work basis, cannot also be accepted, in view of the fact that they were not disclosed to the department. Further, M/s. Festo Controls being C. Ex. licencees should have also indicated the fact of dealing with excisable goods which are brought out and also the goods got manufactured on job work basis, in the classification lists filed by them from time to time, if what they have now claimed is really a fact. Moreover, being C. Ex. licencees, they should also have observed certain procedures in respect of goods got manufactured on job work basis, which has not been followed by them for the well known reason that what they claim now is just an after-thought, made after such consultat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that the view expressd by the Karnataka High Court in the case of Nectar Beverages Pvt. Ltd. v. Union of India as reported in 1994 (70) E.L.T. 172 are to the contrary. However, he submitted that as para 7 of the Notification has been struck down the question of applying the same does not arise. As regards the extension of larger period, the ld. Advocate submitted that the collaboration agreement and the catalogue had been furnished to the department and that the classification list had been approved only thereafter. He sumitted that in Form V, they had mentioned the word `Festo as brand name and these forms had been countersigned by the Inspector. He submitted that there is no deliberate attempt to evade the payment of duty and also any positive attempt to withhold any information in this regard. He relied on the ruling rendered by the Tribunal in the following cases : 1. Ajit Metal Industries v. Collector of Central Excise - 1993 (66) E.L.T. 81 2. Byco International Others v. Collector of Central Excise - 1993 (49) ECR. 126 3. Agarwal Brothers Steel Rolling Mills v. Collector of Central Excise - 1987 (27) E.L.T. 334 (para 4) He further submitted that there are som ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orator has been registered as Festo Pneumatic . The mere fact that this trade name Festo Pnuematic is being not used on the appellant s product but only a word `Festo is not the only criteria for the consideration of the para 7 of the notification. The definition of the brand name given in the notification is very wide and it clearly spells out that the brand name and 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 in 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 name goods and some other person using such name or mark with or without any indication of the indentity of that person . There is no dispute in this matter that the common name of both the appellant and the collaborator is Festo. The goods are manufactured as per the entire design and specifications of their collaborator. Their collaborator `Festo K.G. Germany are having substantial interest in the appellant s company. The word `Festo has assumed a recognisable trade and brand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the period this Agreement, grants to the Licensee under its Technical Information and Improvements furnished by the Licensor to the Licensee pursuant to this Agreement as well as under relevant patents of the Licensor which the Licensor has filed or will file for said Technical Information, non-exclusive, non-transferable rights to manufacture Contract Products in India and to sell Contract Products in accordance with Article 7.2. 7.2 The Licensee shall make arrangements for the marketing of Contract Products in consultation with the Licensor. In the same way, the offer for export of Contract Products may be arranged to other countries all over the world, except where the Licensor has manufacturing or contractual relationship (e.g. licensing) regarding Contract Products, from time to time. Currently, the Licensor has licensing arrangements in the following countries :- Egypt, South Africa, Argentina, Brazil, Canada, Mexico, Peru, USA, Hong Kong, Korea, Kuwait, Lebanon, Malasia, Philippines, Singapore, Taiwan, United Arab Emirates, New Zealand, Austria, Belgium, Bulgaria, Czechoslovakia, Denmark, Finland, France, Federal Republic of Germany, Great Britain, Greece, Hungary, Ire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it because of the brand name and not because of the name of the manufacturer . In para 9.3, the Court has held as follows : 9.3 SSI Units using brand names of others are class by themselves, because the goods produced by them have certain advantages in the market. Therefore, it cannot be held that the classification is arbitrary and based on irrelevant considerations. Concession is granted obviously to SSI Units who have to struggle hard to earn a good market for their goods and to prevent brand name holders adopting the device of manufacturing those goods through SSI Units - Contention is accordinly rejected. Further contentions raised in W.P. No. 7204 and 3805 of 1989 require to be considered . The Hon ble Karnataka High Court has gone in detail on the plea pertaining to the denial of benefit of exemption to petitioners being arbitrary and violative of Article 14 of the constitution. The Hon ble Court in para 9 has rejected the said plea and the findings given in para 9 and 9.1 are reproduced herein below : x x x x 10. In the light of the ratio laid down in the case of Thio Pharma and on the basis of our findings given above, we uphold ..... X X X X Extracts X X X X X X X X Extracts X X X X
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