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TMI Blog2017 (4) TMI 849X X X X Extracts X X X X X X X X Extracts X X X X ..... dustries purchased moulds containing the inscription Maniyar for the manufacture of chairs, the other appellant Annapurna Industries purchased moulds with the inscription Rose Kamal, Lal Kamal etc. Admittedly, the turnover of each of the appellants was less than Rs.One Crore. Therefore, the appellants claimed the benefit of Exemption Notification No.8/2003, dated 01-3-2003. 4. On 06-10-2005, a search of the premises of the appellants was conducted. It was alleged by the officials that the appellants are engaged in the manufacture and sale of the branded items, not entitled to the benefit of the Exemption Notification and that therefore the appellants ought to have registered themselves under the Central Excise Act, 1944. 5. According to the appellants, they deposited an amount of Rs. 10 lakhs each under pressure, after the search. Thereafter, a show cause notice No.107/2005, dated 26-05-2005, was issued to the appellant Annapurna Industries. Similarly, a show cause notice No.4/2006, dated 05-4-2006, was issued to the other appellant Maheswari Industries. 6. The appellants submitted their detailed replies. In the replies, the appellants pointed out that they merely purchased moul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing common substantial questions of law: (i) Whether the purchase of standard moulds containing certain names as inscriptions and the manufacture of products out of those moulds with the same names, would tantamount to the manufacture of goods bearing a brand name or trade name so as to be deprived of the benefit of exemption in terms of paragraph-4 read with Explanation (A) under para-5 of the Exemption Notification No.8/2003, dated 01-3-2003? (ii) Whether the Tribunal and the respondents were right in denying the benefit of the CBEC Circular bearing No.52/52/94, dated 01-9-1994 to the appellants? QUESTION No.(i): 14. By a Notification No.8/2003-CE, dated 01-03-2003, the Government of India granted exemption from payment of duty of excise, to first clearances up to an aggregate value not exceeding Rs.One Crore made on or after the first day of April in any financial year. This exemption was granted in exercise of the power conferred by sub-section (1) of Section 5A of the Central Excise Act, 1944, with a view to grant a reprieve to small scale industries. The fact that the appellants herein are small scale industries and the fact that they made clearances within the ceili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd National brands and the moulds (including mould designs), with which the said branded chairs were manufactured, belong to Shri S.Rahmatullah, Proprietor of Rosekamal Moulded Furniture, Bangalore. This fact is confirmed as the stock of goods, available during the course of search and seizure of the same vide panchanamas dated 06.10.2005 and 14.10.2005, bear the brand name of Lalkamal, Rosekamal, Ceilo and National etc., embossed and affixed on them. The officers also found moulds and mould designs of the said brands in the factory of AI during the search on 06.10.2005 as seen from the Panchanama. Further the concerned persons in their respective statements confirmed that AI manufactured the said goods with the said brand names from June 2003 onwards. The dealers/buyers of the said goods also confirmed in their respective statements that they received moulded plastic chairs with the said brands from AI from June 2003 onwards. Shri S. Rahmatullah of M/s. Rosekamal Moulded Furniture has procured the said moulds and supplied to AI as seen from the documents available in private records. He has stated in his statements dated 07.10.2005 and 03.04.2006 that Lalkamal, Rosekamal, Ceilo, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said plastic moulded chairs, baby chairs and stools manufactured and cleared by them. 18. A careful look at paragraph 4 of the Exemption Notification shows that to be deprived of the benefit of the Exemption Notification, two preconditions are to be satisfied namely (a) that the specified goods should bear a brand name or trade name; and (b) that the brand name or trade name should be that of another person. As to what constitutes a brand name or trade name is indicated in the Explanation under para-5 of the Exemption Notification. A combined reading of clauses (A) and (B) would show that to be a brand name or trade name, the following criteria should be satisfied: (1) It must be a name or mark such as symbol, monogram, label, signature or invented word or writing; (2) It must be used in relation to such specified goods, for the purpose of indicating a connection in the course of trade between such goods and some person using such name or mark, with or without any indication of the identity of that person; and (3) The mere fact that the specified goods manufactured by a person bear a brand name or trade name of another manufacturer, is not sufficient to conclude that those good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssions brand name and trade name under Explanation (A) of the Exemption Notification cover both registered and unregistered marks, the Explanation (A) also uses the words connection in the course of trade. 23. Therefore, if the revenue wants to deny the benefit of the Exemption Notification to the appellants herein, the revenue was obliged to establish that in the eyes of the public, there was a connection in the course of trade (1) between Rosekamal and Lalkamal Chairs with Rahmatullah and (2) between Maniyar Chairs and Maniyar Plast Limited. The consumers of the plastic moulded chairs, should be in a position to link Rosekamal and Lalkamal chairs with Rahmatullah and Maniyar with Maniyar Plast Limited. If in the minds of the consuming public such a connection in the course of trade, does not exist, then what was sold under these names cannot be treated to have been sold under a brand name or a trade name within the meaning of Explanation (A) under Para 5 of the Exemption Notification. 24. In the cases on hand, all that the revenue has alleged is that Rahmatullah sold plastic moulds imported by him containing these names. In fact Rahmatullah was not even the creator of the names ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther company filed an affidavit stating that they had no objection to the use of the trade mark by the asseessee, the Tribunal held the issue in favour of the asseessee. The same was upheld by the Supreme Court. 29. However, relying upon the decision of the Supreme Court in Commissioner of Central Excise, Trichy v. Grasim Industries Ltd. (2005) 4 SCC 194 , it is contended by Ms. Sundari R. Pisupati, learned standing counsel for the Department that the expressions brand name and trade name are qualified by the words that is to say. Therefore, it is contended by the learned standing counsel that any symbol or monogram or mark could also be a brand name or trade name. 30. We have no quarrel with the above proposition. But what is important, as emphasized by the Supreme Court in Grasim Industries Ltd itself is that the use of the name must indicate a connection in the course of trade between the product and the company. It is this essential requirement that is not satisfied in these cases. 31. In the next decision namely Commissioner of Central Excise, Delhi v. Ace Auto Comp. Ltd. Manu/SC/1066/2010, relied upon by the learned standing counsel for the Department, the small scale indu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rahmatullah nor Maniyar Plast Limited can be said to have established such a reputation in the market that a connection in the course of trade between them and their products is established through the brand name. Hence, the view taken by the authorities including the Tribunal is contrary to the object and purpose of the Exemption Notification. 35. Therefore, the first question of law is to be answered in favour of the appellants. QUESTION No.(ii): 37. The second question of law revolves around the circular bearing Circular No.52/52/94, dated 1-9-1994 and it does not require great elaboration. The said Circular was as a result of a clarification sought by the Ministry in respect of a practice prevalent in the lock industry. In the lock industry, there was a practice to use a name or mark, even though such mark or name is not owned by any particular person. Such marks are freely available and any manufacturer can use them. Therefore, the opinion of the Law Ministry was sought in this regard and the same was extracted in the Circular dated 01-9-1994. Paragraphs-3 and 4 of the Circular dated 01-9-1994 read as follows: 3. In this connection, the relevant extracts of the opinion of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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