TMI Blog1993 (12) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... n No. 223/87-C.E., dated 22nd September, 1987 (referred to hereafter as the impugned Notification). By the impugned Notification an earlier Notification No. 175/86-C.E., dated 1st March, 1986 was sought to be amended by denying an exemption of Excise duty granted under the earlier notification, to Small Scale Industries which manufactured specified goods for persons not eligible for the exemption and which also affixed the brand name of such persons on the specified goods. 3. The petitioners have submitted that the Small Scale Industries were normally ancillary to Large Scale Units and exemption of Excise Duty was given to Small Scale Industries with the object of encouraging the setting up of such industries. It is submitted by the petitioners, that the avowed object of the impugned notification was not to allow large industrial houses or Large Scale Units to benefit from the exemption granted to Small Scale Industries. It is submitted that the impugned notification did not achieve the object. It is argued that the putting of the brand name could not be a relevant factor in seeking to restrain Large Scale Units from availing of the benefit of the exemption under the earlier noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot sit in appeal or substitute its own wisdom for what was essentially a question of policy. Several decisions have been cited by the parties which will be considered at a subsequent stage of this judgment. 5. Notification No. 175/86-C.E. (referred to as the earlier notification) was issued by the Central Government on 1st March 1986 in exercise of powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944 (hereinafter referred to as the said Rules). By this notification exemption was granted in respect of goods specified in the annexure to the notification. There is no dispute that each of the petitioners manufactures the goods specified in the annexure to the earlier notification or the specified goods. 6. The earlier notification provided for the rate of exemption and also provided as follows : "3. Nothing contained in this notification shall apply if the aggregate value of clearances of all excisable goods for home consumptions, - (a) by a manufacturer, from one or more factories, or (b) from any factory, by one or more manufacturers, had exceeded rupees one hundred and fifty lakh in the preceding financial year. 4. The exemption contained in thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rer affixed the specified goods with a brand name or trade name (registered or not) of another person who is not eligible for the grant of exemption under this notification : Provided that nothing contained in this paragraph shall be applicable in respect of the specified goods cleared for home consumption before the 1st day of October, 1987; ii.. after Explanation VII, the following Explanation shall be inserted, namely: Explanation VIII. - 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, 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"." 9. There is an explanatory note to the impugned notification which says that the amendment sought to deny Small Scale Industries exemption in respect of specified goods affixed with the brand name/trade name of a person not eligible for exemption under the earlier notification. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nion of India and Others: 1980 (6) E.L.T. 521 (Del.); Smt. S. Panna Devi v. Government of India: 1991 (52) E.L.T. 347; Subhash Photographies v. Union of India: 1993 (66) E.L.T. 3 (S.C.);Maharashtra State Board Secondary and High Secondary Education v. Paritosh Bhupesh Kurmarsheth: AIR 1984 SC 1543; Western India Plywood Ltd. v. Union of India and Ors.: 1993 Tax L.R. 2081 (Ker.) (DB). 14. Thus in every case where the legislative instrument seeks to make a distinction between groups of persons, the distinction will have to be justified taking into consideration the object sought to be achieved by the legislation. The object sought to be achieved would be a matter of policy and may not be open to judicial review, but the method by which the object is sought to be achieved can be subjected to judicial scrutiny. 15. In this case the object of issuing the impugned notification has been set out in the affidavit filed on behalf of the respondents. It has been stated by the respondents that it was noticed that the big industrial houses were availing of the benefit of duty exemption granted under the earlier notification "where the goods were sold by Small Scale Manufacturers with the br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Small Scale Industry like the petitioner, the Large Scale Units like Bajaj Electrical have been compelled to pay excise duty. 21. A Large Scale Industry facing the choice of purchasing specified goods from a Small Scale Industry which puts the brand name on at a price inclusive of excise duty and a small scale industry not putting the brand name on, at a price exclusive of excise duty would certainly choose the latter. 22. It would be open to the large scale unit to purchase the specified goods without its brand name, and then subsequently, put on its brand name on the goods so purchased without being subjected to the incidence of excise duty either directly or indirectly. This is because by putting on its brand name the large scale unit would still not be manufacturing the specified goods purchased from the small scale industry. 23. It does not need the citation of any authority to hold that excise duty is payable on manufacture and a process is not manufacture if it does not change the character of the goods manufactured. Putting the brand name on specified goods does not change the goods and cannot amount to manufacture. With respect I adopt the reasoning of the Divisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s specification or service to be rendered by the small scale industry to the large scale unit, would not stop the small scale industry from manufacturing and selling the specified goods in the open market. There would be no question of competition with "big industries" as the big industry, far from being a competitor would be the small scale industry's largest creditor and customer. The argument, appears to be that a small scale unit selling its product with its own brand name and a big large scale unit selling goods purchased from the petitioner under its own brand name would result in the small scale industry not being able to sell its own product under its own brand name. This stand is indefensible. The distinction under the impugned notification is not based upon the supply of goods to Large Scale Units and others but on the fixing of the Trade mark brand name alone. So under the impugned notification a large scale unit could purchase the specified goods from a small scale unit without its brand name, and without bearing the burden of Excise duty and subsequently put on its own brand name and sell the product of the small scale industry under its brand name. Thus under the impu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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