TMI Blog2004 (12) TMI 675X X X X Extracts X X X X X X X X Extracts X X X X ..... to DCPL on payment of fine of Rs. l5 Lakhs; 44 cans of CRC Acryform found at the premises of M/s. Tri-Techno Services were ordered to be confiscated under rule 173Q(1) with an option given to redeem the same on a fine of ₹ 10 Lakhs; 15 cans seized to M/s. Nelco Dawane unit were ordered to be confiscated under rule 173Q(1) and be redeemed to them on a fine of ₹ 40,000/-. Penalties under rule 209A were imposed on Shri. N.J. Danani, Managing Director and Shri Herman Pinto, an employee of M/s. DCPL. Hence these appeal. 2.2 DCPL since 1983-87 were manufacturing products viz CRC 2-26 Aerosol and CR @ Acrylform Aerosol under notfn. 120/84-CE for CRC 2-26 vide declaration notfn. 174/86 for the year 1987-88 to 1990-91 exemption were claimed under Notfn. 175/86 for CRC - Acryform; CRC 2-26 exemption was claimed CRC 2-26 was classified under 2710.99 and CRC Acryform under 3203.40. It appears that during a Transit check, at lower Parel, Mumbai, on 14-12-1991 a lorry was intercepted with CRC 2-26 CRC Acryform cans and delivery challan Nos. 602, 603 654 all dated 14-12-1991 accompanying the goods. On scrutiny, the officers noticed the consignment to be consigned to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reated a fa ade , dummy in the name and style of M/s. DCPL and exercised overall control over it for the purpose of evasion of duties of Central Excise; (ii) the duty amounting to ₹ 51,49,222.19 (Basic), ₹ 5,20,605.61 (Special) for the period from 26-2-1988 to 24-10-1992 should not he demanded and recovered from them under Rule 221 of the Central Excise Rules, 1944. Shri N.J. Danani, Director of M/s. DCPL and Director of M/s. BBL, Suit. R.N. Danani, Director of M/s. DCPL, Shri G. Narasimhan, Company Secretary of M/s. BBL, Shri Herman Pinto, incharge of M/s. DCPL, M/s. Mistair home Products were called upon to show cause to the Collector -II, Central Excise, Bombay-I as to why a penalty under Rule 209A of the Central Excise Rules, 1944 should not be imposed. M/s. Tri-Techno Services and M/s. Nelco were also required to show cause to the Collector-II, Central Excise, Bombay-I as to why the goods seized under Panchanama dated 14-12-1992 and 15-12-1992 respectively should not be confiscated under the provisions of Rule 173Q and Rule 226 of the Central Excise Rules, as the same had been manufactured and cleared without payment of Central Excise duly. And the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y invoking the proviso to section 11A(1) as the Show Cause Notice is admittedly issued for the period beyond six months from the date of the Show Cause Notice? (f) Whether the penalty can be imposed? (g) Assuming that all the issues on merit are decided against the DCPL, whether the duty demanded has been properly computed? 3.2 On whether CRC 2-26 is exempt under Notification No. 120/84 it is found - (a) It is on record that, CRC 2 - 26 as a blended lubricating oil it is sold and used as a penetrating lubricating oil by various companies including Government Companies, who use the same for lubricating ball and roller bearings, circuit breakers, connectors, contacts, switches, false, push buttons, solenoids, potentiometers etc. The product is filled in aerosol containers into which a propellant is injected, so as to create a spray of CRC 2.2 onto hard-to-reach surfaces. The product is found to mainly contains Petroleum Base Oil 25%, Mineral Oil - 72% and Rust Preventives - 3%. It is submitted, these ingredients are blended together with a stirrer until thoroughly mixed. The petroleum base oil, which is mineral oil has lubricating properties, it is the most i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... product reduces friction, is, that the product in question is a lubricant. There is no dispute on this aspect. (iii) The Government of India has in its order in the case of Geoffrey Manners and Co., India Ltd. - 1982 (10) E.L.T. 549A (GOI) has held that the product would be classifiable under the erstwhile, Tariff Item 11B, which specifically covered blended lubricating oils. The Government of India held that the product consists of mixing of mineral oils with a variety of materials ranging from animal, vegetable and fish or oils to sulphur soap and chemical compounds to improve the lubricating properties of the oil and is therefore classifiable under Tariff Item 11B. 3-in-1 Oil , a world famous oil and was at one time manufactured in India by Geoffrey manners and Co. Ltd. The product literature of that product specifically states that it lubricates, cleans and prevents rust. That product also contained rust preventives chemicals. It is therefore to be held that merely because rust preventives are added, that would not detract from the product being a lubricating oil. (iv) From the copies of material, on various products that merely prevent rust, placed before us, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous Testimonials/Certificates/Letters of Users showing that CRC 2-26 is used, by such users, as a lubricant for lubricating the moving parts of their equipment. The test report on CRC 2-26, carried out by Professor M.C. Dwivedi, Professor of the IIT categorically opines that CRC 2-26 is a blended lubricant and that the lubricating oil used in the formulation conforms with the requirements of the Bureau of Indian Standards requirements as per IS-493 (Part II) 1981, General-purpose Machinery and Spindle Oils-Light Grade VG 10. The department has not produced any material to contrary. (ii) The Instruction Manual issued by Crompton Greaves, in respect of its Bulk Oil Circuit Breaker specifically states in paragraph 15(c) that all hinged joints of mechanism linkages should be regularly cleaned with rust preventive solution such as Molykote Supergliss and apply lubricants such as Racold Grease, CRC 2-26 or Molykote Spray . It is thus very clear that CRC 2-26 is not used as a rust preventive but is used as the lubricant. This manual also specifies, that the circuit breaker is first cleaned with the rust preventive solution and then lubricated with CRC 2-26. If CRC 2-26 was only a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he sample is in the form of pale yellow coloured liquid, contained in the original aerosol container, It is composed of Mineral Hydrocarbon Oil and additives. Mineral oil content is more than 70%. It is seen from the information printed of the container that CRC 2-26 penetrates and lubricates, prevents corrosion, displaces and seals out moisture and cleans releases rusted mechanism. Since it is recommended to be used for penetration and lubrication, it cannot be considered as speciality oil. In my opinion it is product primarily used as lubricant though it has anti corrosive properties also. Sample is used up. It is pertinent to note that the Department had requested the Chemical Examiner to test whether the product was exempt under Notification No. 120/84. It is also clear that the Department was fully aware that the product contained rust preventives and that was specifically mentioned on the cans when samples were drawn, as also in the declarations as well as in various letters as also in the classification lists. Pursuant to these reports of 1984 and 1991 the Assistant Collector accepted the Declarations filed under Notification No. 111/78 and finally approved the classific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact the Supreme Court in the case of Bombay Chemical Pvt. Ltd. - 1995 (77) E.L.T. 3 (S.C.) has held that the strict construction test applies at the entry that is whether a particular product is capable of falling in one or the other category but once it falls then the exemption notification has to be construed broadly and widely. The conclusion of the Commissioner, that the burden is on the claimant, is not applicable when the department is seeking to withdraw the benefit of the exemption Notification- see Naffar Chandra Jute Mills - 1993 (66) E.L.T. 574 (Cal). The attempt to pick words from labels and literature is to try and deny the benefit of the Notification without evidence to show that the product is not used, known or understood in the trade as a lubricating oil, which they have not been done. The findings of the Commissioner are to be therefore set aside. (e) Reliance on the parameters of lubricating oil as mentioned in the Concise Chemical and Technical Dictionary of McGraw Hill clearly travels beyond the scope of the Show Cause Notice, as no such parameters were relied upon in the show cause notice. Had DCPL been given an opportunity it would have been able to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for use as lubricant) and of which the lubrication function, if any, is only secondary nature. CBEC had issued a Circular No. 89/1/73-CX., dated 23-8-1978 giving a list of speciality oils which fell under the erstwhile Tariff item 11B. Item 27 of the list includes Corrosion preventive oil and compounds. The CBEC also stated that speciality oils are generally treated as non-lubricants and a primary function is other than lubrication and a lubrication function, if any, is only secondary. Collector (Appeals) in his order dated 18-5-1994 in this assessee s case specially held as under : From the definition of speciality oil contained in the explanation to the notification, the Appellant appears to me to have a strong case for the eligibility of the notification for the product, in case the Assistant Collector s view that the product is primarily anti corrosive and only secondarily use as a lubricant is correct. It is therefore to be held that the entity can be considered as a speciality oil, which is fully exempt under the Notification 287/86. Commissioner has repeatedly held that lubrication properties of the oil are only secondary nature. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RC. The trademark used was CRC Acryform . This is not a mark, trade name or brand name used by any other person including M/s. CRC Chemicals Europe. DCPL had been using this mark as its own since 1987. Further, DCPL had after long use, in 1992 applied to the Trademarks Registrar for Registering the Trademark. The Trademark Registrar has registered CRC Acryform as DCPL s trademark on 14-10-1992. This trademark is effective from 1987. This is clear from the Certificate given by De Penning De Penning, Trade Mark Attorneys. It is now well settled that the ownership of a brand name flows either from registration or use. DCPL is the only company entitled to use the brand name CRC Acryform in India and has become the owners of the brand name by continued use of the same. As the Trade Mark is registered in DCPL s name they are entitled to the benefit of the notification [see CCE v. Mahan Dairies - 2004 (166) E.L.T. 23 at 25 (SC)]. (c) Since the trademark has been registered by the Trademarks Authorities in the Appellants name, the Appellant has acquired an exclusive right to the use of the trade name in relation to the goods in respect of which the trademark is registered and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .T. 292 (Cal.). Commissioner has disbelieved the Affidavit of Mr. Basile Repapis as according to him under the license agreement dated 30-9-1986 DCPL were given the exclusive licence to manufacture CRC Acryform and were also permitted to use the logo according to the relevant conditions. These contentions are ex facie untenable as : (i) No multinational company or responsible officer would just gift away its valuable trademark or brand-name by filing a false affidavit and giving a worldwide disclaimer that the company does not own the trademark or brand-name. (ii) In any case he cannot disregard it without cross-examination. (iii) The aforesaid letter merely grants an extension to the license agreement dated 1-10-1983 for CRC 2-26 and in addition permits the manufacture of CRC Acryform staring from the concentrate on to label it is such. The original License agreement for CRC 2-26 specifically states that CRC 2-26 is the trademark of CRC Chemicals Europe. Neither the original License agreement nor the extensions as that CRC Acryform is the trade mark or brand-name of M/s CRC Chemicals Europe. The extension letter merely says that whatever was applicable from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nship between the market and the contents this Tribunal and the Supreme Court have noted the difference between an house mark and a trademark in the following judgements. CCE v. Aarem Enterprises - 2003 (153) E.L.T. 111 (T); Astra Pharmaceuticals Pvt. Ltd v. CCE - 1995 (75) E.L.T. 214 (S.C.) followed in Weigand India Pvt. Ltd. - 1997 (94) E.L.T. 124 (T) and Rajdoot Paints Ltd. v. CCE - 2001 (134) E.L.T. 281. It is well settled that an SSI exemption is not deniable merely by fixation of a portion of a symbol or monogram or logo and something more is required, these items must create an impression in the mind of the purchaser that the product is that of another person. By using the monogram B of a marketing company or distributor who does not manufacture the goods cannot indicate any indication or connection in the course of trade between CRC Acryform and the marketing company. It is therefore to be held that merely because there is a connection in the course of trade between the aforesaid house mark B and BBL cannot disentitled DCPL from the benefit of the Notification as it does not indicate a connection in the course of trade between the specified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nies Act, 1956 on 21-5-1983 having two directors, namely Mr. N.J. Danani and his wife. (ii) That DCPL was a registered small-scale unit. (iii) Thai it has its own investment of capital, machinery and labour. (iv) It has its own financial resources and credit facilities. It has no borrowings or loans from either BBL or any other manufacturing unit. All loans and borrowings are from banks. (v) It has purchased all machineries owned by them as also all of raw materials and packing materials required for manufacturing and packing the products from their own resources (copies of invoices for purchase etc. are at Vol. 1, pp. 141-216). (vi) That all salaries and wages are paid by DCPL from its own sources of finance. (vii) That DCPL had their own import licences to import raw materials used in the manufacture of the products. (viii) That DCPL looks after its own business and that there is no supervision or managerial control by BBL. (ix) That DCPL has total control and supervision over their own manufacturing operations. Mr. H. Pinto and before him Mr. Mehta, both employees of DCPL looked after and supervised all manufacturin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Danani was only an employee of BBL and the fact that N.J. Danani only became a Director of BBL in June, 1988 and was one, out of seven directors. For this purpose, the Appellant produced the Annual Report of BBL Ltd. for the years 1983-84 and in 1987-88. Further, DCPL first started manufacturing CRC 2-26 in the year 1984. For the manufacture of this product the Appellants had not claimed the benefit of Notification No. 175/86. This Notification was only claimed for the product CRC Acryform . DCPL commenced the manufacture of CRC Acryform after September, 1986, but well before Mr. N.J. Danani became Director of BBL Ltd. Mr. N.J. Danani could never therefore have created DCPL merely to enable BBL to get the benefit of Notification No. 175/86. 3.4 The parties were related persons or that there was mutuality of interest between DCPL and Bharat Bijlee Ltd. (a) Commissioner has arrived at the following reasons to hold. (i) That transactions were not a principal-to-principal basis because DCPL did not pay for security and because the keys to the gala were kept with the security staff and that the security staff opened and closed the gala. This ground is m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all security is carried out by them. DCPL pays a market rent to BBL. Whilst fixing the rent, various aspects were taken into consideration including providing for security, for keeping the keys etc. (v) DCPL had a list price beyond which BBL could not sell and the arrangement between the parties was that BBL would be billed at 60% of the list price and that the difference in the prices would recover the cost incurred by BBL for providing security services, for opening/closing their factory and for expenses incurred by DCPL for putting the logo and name of BBL as also the cost of printing the leaflets, brochures and literature and advertising material provided to BBL. The Commissioner has apparently contradicted himself. In the earlier paragraphs, Commissioner has concluded that the printing of leaflets, brochures etc. by DCPL was an indirect flow back for the security provided and marketing expenses incurred. If that is so, the difference in the prices cannot also be for the same thing. These printing charges are borne by DCPL and not by BBL as is admitted in the earlier paragraphs by the Commissioner. It is therefore beyond comprehension as to how the bulk disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut to the Commissioner as well as his predecessor. However, both Commissioners have blindly repeated this allegation that was made in the show cause notice. This exhibits a biased approach if not non application of mind. Such orders cannot be upheld. (f) The list price indicated the price is beyond which BBL could not sell the goods. DCPL gave BBL a discount from this list price and the difference between the price at which DCPL sold the goods to BBL and the price at which BBL resold the goods, was the income of BBL. The Appellants received nothing other than the price charged to BBL. Whatever profit was made by BBL did not flow to DCPL. It is therefore beyond comprehension as to what flow back the Commissioner is referring to. The Appellants did not fix the price at which BBL could did sell the goods but fixed the maximum price at beyond which it cannot sell. There is no notice material to controvert this submissions. As a manufacturer, Department it was perfectly it was reasonable to do so. These are commercial decisions, they cannot ipso facto result in mutuality of interest in the business of each other. (g) It is submitted that merely because th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irs of the Appellant company but did not show any interest of the Appellant company in the business of the buyers. It was held therefore that even if a company has interest in the business of another that would not suffice, as it must be showing that the other also has interest in the business of the company. In other words there has to be mutuality of interest and one-sided interest is not enough. Therefore, assuming whilst denying that BBL had created DCPL it would only show that BBL has an interest in the DCPL s business. No evidence is produced showing DCPL s interest in BBL. In Alembic Glass Industries Ltd. v. CCE - 2002 (143) E.L.T. 244 (S.C.) the Supreme Court held that merely holding shares in each other and having a common Chairman and some common Directors cannot mean that one company has an interest in the business of the other. It is pertinent to note that in this judgment they have disagreed with an earlier judgment of the Supreme Court in the case of Calcutta Chromotype Ltd. v. CCE - 1998 (99) E.L.T. 202 (S.C.). The Tribunal has also held the same in Mahalaxmi Glassworks Ltd v. CCE - 1991 (53) E.L.T. 120 (T). Union of India v. Playworld Electronics Private Ltd. - 1989 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng out that the product contained 3% of rust preventives. In the Annexure to the Declarations filed from time to time, it was specifically mentioned under the Process of Manufacture as under : Blending of various Anti Corrosive chemicals and solvents were minimal turpentine (see page 46 of the SCN). A mere perusal of the classification list filed in 1991 would show that DCPL disclosed that CRC 2-26 was a blended lubricating oil manufactured by blending mineral turpentine oil with anti-corrosive agents in a base of petroleum oil. The chemical test reports obtained by the department are unequivocal. On the basis of these test reports the Declarations claiming the benefit of Notification 120/84 and subsequently the classification lists themselves were approved. At no stage did the department asked for retest or dispute the same. As the department was fully aware that the product, inter alia, prevents rust and has anti-corrosive properties and as this fact was never suppressed from the department, it cannot now alleged that there was any suppression of facts with intent to evade duty. The entire demand therefore in respect of CRC 2-26 must be considered to be wholly time-barred. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and classification lists right from September, 1986 onwards. The labels of CRC 2-26 also contained the same information and the department had taken samples of these cans with the aforesaid information thereon on several occasions. The Department was therefore fully aware that CRC Acryform was being manufactured under license from CRC Chemicals Europe. (f) Non mentioning of the license agreement in the classification lists cannot lead to the conclusion that there has been suppression as it is now well settled that Rule 173B does not require the disclosure regarding a brand-name. Queen Electrical Industries v. CCE - 2002 (150) E.L.T. 284 SPM Instrument India Pvt. Ltd. v. CCE - 2003 (152) E.L.T. 115 (T) (g) It has also been held in of Vora Products - 2002 (143) E.L.T. 84 that the approval of the classification list granting the benefit of the small-scale Notification presumes the necessary inquiries were conducted by the department as would entitle the assessee to exemption and therefore the larger period of limitation can be invoked. (h) In any case there has to be something positive i.e. a conscious or deliberate withholding of information when the manu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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