http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 9  

CASE NO.: Appeal (civil)  5204 of 2001

PETITIONER: NIRLEX SPARES PVT. LTD.

RESPONDENT: COMMISSIONER OF CENTRAL EXCISE

DATE OF JUDGMENT: 04/01/2008

BENCH: Tarun Chatterjee & Dalveer Bhandari

JUDGMENT: J U D G M E N T

TARUN CHATTERJEE, J       1.      The pivotal question that needs to be adjudicated upon in  this appeal is whether the appellant company is entitled to  exemption from payment of central excise duty under  Notification No. 175/1986-CE dated 1st of March, 1986 (in  short \023the notification\024).

2.      Before deciding this question, it would indeed be  worthwhile to briefly highlight the facts of the present appeal.  

3.      The appellant i.e. Nirlex Spares Pvt. Ltd. was and/or is  engaged in the business of manufacture and sale of Riderless  Steel Healds and Flat Steel Healds. It is important to note that  these goods were manufactured and sold by the company under  its own brand names/trade names viz. \021Intatex\022 and \021Intaco\022  which were affixed/ printed on its corrugated boxes. However,  since it is a company registered as a Small Scale Industrial  Unit, it was availing the benefit of exemption from payment of  central excise duty under the notification, which grants such  exemption to Small Scale Industrial Units.  

4.      The appellant, however, from 1st of April, 1990 started  printing a hexagonal artistic design (alleged monogram) along  with its brand names/trade names \021Intatex\022 and \021 Intaco\022 on its  corrugated boxes. On 30th of September, 1992, an investigation  was carried out in the factory of the appellant. The investigating  officers came to the conclusion that the appellant was making  use of a monogram of a related person, namely, L.M.S.  Marketing Company (in short \021the Marketing Company\022) as a  brand name for the goods manufactured and cleared by it and  therefore, the appellant was not entitled to exemption in view of  paragraph 7 read with Explanation VIII of the notification for  the period from 1st of April, 1988 and 30th of September, 1992.  The investigating officers had also found that the Marketing  Company to which the appellant sold its goods was a related  person and therefore, the correct assessable value was the price  at which the goods were sold by the Marketing Company and  not the price at which the goods were sold to the Marketing  Company by the appellant. Accordingly, a show cause notice  dated 26th of March, 1993 was issued to the appellant under  which the following demands were raised:

i.      Central excise duty amounting to Rs. 13, 43, 264/-  on Riderless Steel Healds manufactured during the  period 1.4.1988 to 30.9.1992.  ii.     Value difference of Rs. 10, 835/- between the value

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 9  

of the appellant and the Marketing Company.

5.      The appellant filed its reply dated 22nd of November,  1993 denying and disputing the allegations made in the show  cause notice. The Commissioner of Central Excise, however, by  his order dated 8th of April, 1994 confirmed the entire demand  for duty and the value difference to be paid, as was arrived at by  the investigating officers. Thereafter, the appellant preferred an  appeal under S.35 of the Central Excise Tariff Act, 1985 to  Customs, Excise and Gold (Control) Appellate Tribunal  (in  short \023the CEGAT\024). The CEGAT also confirmed the decision  of the Commissioner of Central Excise by the impugned order  except that it had dropped the demand for excise duty for the  period before 1st of April, 1990 since it accepted the contention  of the appellant that the monogram was used by it only from 1st  of April, 1990 onwards. Aggrieved by the impugned order  passed by the CEGAT, the appellant has approached this court  by filing this appeal, which was heard in presence of the learned  counsel for the parties.   

6.      The CEGAT in its order observed that the hexagonal  design, i.e. the monogram/logo must be held within the ambit of  Explanation VIII of Paragraph 7 of the notification as it  belonged to the Marketing Company and was used by the  appellant on the goods manufactured by it. While coming to  this conclusion, the CEGAT rejected the contention of the  appellant that the conclusion that the alleged monogram was a  brand name of the Marketing Company could not be arrived at  by placing sole reliance on the visiting cards of the executives  of the Marketing Company and some of the drawings of the  same company. It further held that the said monogram cannot  be printed on these documents merely for the sake of printing  and had the same not been a brand, there was no reason to print  it on the visiting cards of the executives of the Marketing  Company. Accordingly, the CEGAT, in essence, held that the  hexagonal design was a brand name of the Marketing Company  on a finding that although the said design was printed on the  corrugated boxes and not on the goods in question, but since  these goods were sold in the very same corrugated boxes, it  could not be said that the goods did not bear the design merely  because it did not appear on the goods. The CEGAT, however,  as noted herein earlier, held that the excise duty would have to  be paid from 1st of April, 1990 onwards from which date the  appellant had started using the monogram on the goods  manufactured by it. This was so observed by placing reliance  on the fact that the revenue had not brought on record any  evidence to show that the monogram was used even before 1st  of April, 1990 and therefore, the amount of duty was reduced to  Rs. 6,59,724/- along with the value difference of Rs. 10, 835/-.  The CEGAT also approved the reasoning of the Commissioner  in holding that the appellant and the Marketing Company were  related persons.

7.      We have heard the learned senior counsel for the parties  and examined the impugned order as well the order of the  Commissioner and the other materials on record. The question,  as noted herein earlier, which needs to be answered by us is  whether the appellant is entitled to avail the exemption under  the notification and whether the monogram was qualified to be  the brand name/trade name of the Marketing Company. But  before we take up this question, it would be appropriate at this  stage to reproduce paragraph 7 and Explanation VIII of  paragraph 7 of the notification which run as under: -

\023The exemption contained in this notification shall

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 9  

not apply to the specified goods where a  manufacturer affixes 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. 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."

8.      Before we deal with Paragraph 7 read with Explanation  VIII of the notification, we may reiterate that in the show cause  notice issued by the Commissioner of Central Excise, it was  alleged that the hexagonal shape/design printed on the packings  of the goods of the appellant was a brand name/trade name of  the Marketing Company by placing reliance on the following: - a.      Visiting Card of Shri Nilesh Doshi and Shri  Paresh Shukla of the Marketing Company. b.      One drawing prepared by LMS Industrial  Group.

9.      We now turn to paragraph 7 of the notification. From a  bare reading of the same, we cannot doubt that the exemption  notification shall not apply if a manufacturer affixes the  specified goods with a brand name or trade name of another  person who is not eligible for grant of exemption under the said  notification. Such being the position, the first requirement for  non-availability of the benefit of exemption under this  notification is that the brand name or the trade name must be of  another person.  

10.     We find that the said hexagonal shape/design was not at  all a brand name/trade name of the Marketing Company. After  examining the Hexagonal shape/design affixed on the  corrugated boxes of the appellant, we are unable to agree with  the findings of the Tribunal that the said design was the brand  name or trade name of the Marketing Company, which would  be clear from the following admitted facts : a.      The said hexagonal shape/design was not at  all owned by or belonged to the Marketing  Company. The Marketing Company had no  proprietary or other right over the said  shape/design. b.      The Director of the Marketing Company was  examined by the authorities with regard to the  shape and design and in his statement, the  Director of the Marketing Company has  categorically stated as under : a.      \023In reply, I have to state that M/s.L.M.S.  Marketing Pvt. Ltd. does not have any brand name  or symbol of its own.\024 b.      \023As stated earlier, M/s.L.M.S. Marketing  Pvt. Ltd. does not have any brand name/symbol.  The symbol referred is only a geometrical design  and, therefore, question of our allowing use of this  does not arise.\024 c.      \023We do not get any royalty and as stated

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 9  

earlier, we do not claim any proprietary rights on  the design referred above.\024 (Emphasis supplied)

11.     Thus, according to the Marketing Company itself, the  said shape/design did not belong to it nor it had any proprietary  or other right over the same. The executive of the appellant Shri  Nileshbhai R.Doshi also deposed and he stated in his statement  as under : \023On being asked about the monogram and brand  name used by Nirlex Spares Private Limted, I have  to state that so far as monogram is concerned, I  have to state that this is not the monogram in sense  of ourselves with reference to our trade mark or  anything else but this is simply a design which is  selected out of 6/7 designs given by designers. In  connection with brand names \021INTATEX\022 and  \021INTACO\022, I have to state that these are our own  brand names.\024

12.     From a bare reading of the aforesaid statement of Shri  Nileshbhai R.Doshi, which we do not find any ground to  disbelieve, it appears that there is nothing on record to show  that the said hexagonal shape/design belonged to or was owned  by the Marketing Company and thus they had permitted the  appellant to use the same on their corrugated boxes. That apart,  there was no agreement or letters showing that the said  hexagonal shape/design belonged to or was owned by the  Marketing Company or that it had permitted the appellant to  use the same. In fact this position was specifically admitted  during the cross-examination of the Assistant Collector of  Central Excise. In any view of the matter, the printing of the  said design on the visiting cards of the executives of the  Marketing Company and a drawing of the same company  cannot, in our view, confer any right or ownership of the  Marketing Company over the said hexagonal shape/design.  Therefore, it is difficult for us to agree with the findings of the  Tribunal to the extent that the hexagonal design affixed on the  corrugated boxes of the appellant had in fact reflected the nexus  between the concerned goods namely, Riderless Steel Healds  and the Marketing Company. At the same time, the fact that the  said hexagonal design appears on the visiting cards of the  Executives of the Marketing Company and some of the  drawings of the same Marketing Company cannot by itself  mean that the design had any association with the Marketing  Company.

13.     There is another aspect of this matter. It is an admitted  position that the said hexagonal shape/design was only printed  on the visiting cards of the two executives of the Marketing  Company and the same was not even printed on the commercial  documents like letterheads and sales invoices of the Marketing  Company. It also appears from the record that the design  printed on the letterheads and sales invoices of the Marketing  Company was totally different. In any view of the matter, in  view of the admitted position that the Marketing Company  never came forward to say that the hexagonal design in fact  belonged to them and they had permitted the appellant to use  the same on their corrugated boxes, we are unable to agree with  the findings arrived at by the Tribunal on the aforesaid  question. Accordingly, we hold that the hexagonal design  cannot be said to be descriptive enough to serve as an indicator  of nexus between the goods of the appellant and the Marketing  Company. Therefore, we hold that the alleged monogram  cannot be said to be the brand name or trade name of the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 9  

Marketing Company and such being the position and in view of  the discussions made herein above, we hold that the benefit of  exemption provided by the notification is available to the  appellant.

14.      That apart, in our view, the nexus between the hexagonal  design and the Marketing Company cannot be found when the  Marketing Company itself had categorically disowned the title  to the said design and admitted that the said design did not  belong to them. That being the position, it cannot be held that  the appellant was using the brand name of the Marketing  Company when the Marketing Company has itself disowned  the brand name, more so, since it is unusual that the person who  is owning a brand name would come forward to disown the  same when such disowning would deprive the said person of a  valuable asset. In Commissioner of Central Excise Vs. Bhalla  Enterprises [(2005) 8 SCC 308], this Court, while considering  similar provisions of a subsequent notification NO.1/93-CE, in  paragraph 6, observed as under: - \023The notification clearly indicates that the  assessee will 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 assesses\022 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.\024                      

As noted hereinabove, we have already indicated that the brand  name used on the corrugated boxes would not show any  intention of indicating a connection between the goods  manufactured by the appellant and the Marketing Company.  Again, in Commissioner of Central Excise Vs. Grasim  Industries Ltd. [(2005) 4 SCC 194], this court, while  considering similar provisions of the Notification No. 5/98-CE,  observed in paragraphs 15 and 16 as under: -

\023In our view, the Tribunal has completely  misdirected itself. The term \023brand name or trade  name\024 is qualified by the words \023that is to say\024.  Thus, even though under normal circumstances a  brand name or a trade name may have the  meaning as suggested by the Tribunal, for the  purposes of such a notification the term \023brand  name or trade name\024 gets qualified by the words  which follow. The words which follow are \023a name  or a mark\024. Thus even an ordinary name or an  ordinary mark is sufficient. It is then elaborated  that the \023name or mark\024 such as a \023symbol\024 or a  \023monogram\024 or a \023label\024 or even a \023signature of  invented word\024 is a brand name or trade name.  However, the contention is that they must be used  in relation to the product and for the purposes of  indicating a connection with the other person. This  is further made clear by the words \023any writing\024.  These words are wide enough to include the name

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 9  

of a company. The reasoning given by the Tribunal  based on a dictionary meaning of the words  \023write\024 and \023writing\024 is clearly erroneous. Even  the name of some other company, if it is used for  the purposes of indicating a connection between  the product and that company, would be sufficient.  It is not necessary that the name or the writing  must always be a brand name or a trade name in  the sense that it is normally understood. The  exemption is only to such parties who do not  associate their products with some other person.  Of course this being a notification under the  Excise Act, the connection must be of such a  nature that it reflects on the aspect of manufacture  and deal with quality of the products. No hard- and-fast rule can be laid down however it is  possible that words which merely indicate the  party who is marketing the product may not be  sufficient. As we are not dealing with such a case  we do not express any opinion on this aspect. 16.      This court has, in the case of Royal  Hatcheries (P) Ltd. V. State of A.P. already held  that words to the effect \023that is to say\024 qualify the  words which precede them. In this case also the  words \023that is to say\024 qualify the words \023brand  name or trade name\024 by indicating that these  terms must therefore be understood in the context  of the words which follow. The words which follow  are of wide amplitude and include any word, mark,  symbol, monogram or label. Even a signature of  an invented word or any writing would be  sufficient if it is used in relation to the product for  purpose of indicating a connection between the  product and the other person/company.\024  

In Tarai Foods Ltd. Vs. Commissioner of Central Excise  [2006 (198) ELT 323], this court, while considering a similar  definition of the expression \023brand name\024, in paragraphs 7 and  9, held as under: - \0237. The words brand name connotes such a mark,  symbol, design or name which is unique to the  particular manufacturer which when used on a  particular product would establish a connection  between the product and the manufacturer.\024 \0239. Furthermore the definition of the words \021brand  name\022 shows that it has to be a name or a mark or  a monogram etc. which is used in relation to a  particular product and which establishes a  connection between the product and the person.  This name or mark etc. cannot, therefore, be the  identity of a person itself. It has to be something  else which is appended to the product and which  establishes the link.\024  

In Commissioner of Central Excise Vs. Superex Industries  [2004 (174) ELT 4], in the context of the Notification No.  175/86-CE, this court in paragraph 3 held as under: - \0233. CEGAT has held that the benefit of the  Notification would be lost only if the manufacturer  affixes the specified goods with a brand name or  trade name of the another who is not eligible to the  exemption under the notification. It could not be  denied that the name Kirloskar is not affixed to the  generating sets. CEGAT has held that merely  because, in the invoices, the set is passed off as a

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 9  

Kirloskar generating set, the benefit of the  Notification would not be lost. We see no infirmity  in this reasoning. We, therefore, see no reason to  interfere.\024

15.     It is an admitted position that the goods in question were  manufactured by the appellant and the Marketing Company was  its marketing agent. There is also no dispute that on the  packings of the goods, the brand names of the appellant  \021Intatex\022 and \021Intaco\022 were clearly and prominently printed. In  between these two brand names, the hexagonal shape/design  was also printed. Therefore, if the said hexagonal shape/design  was also printed as the design of the appellant\022s marketing  agent, it could not be taken as a ground to deny the exemption  to the appellant under the notification. In this connection,  reliance can be placed on a judgment of this court in the case of  P&B Pharmaceuticals Pvt. Ltd. Vs. Commissioner of Central  Excise [(2003) 3 SCC 599] wherein this court in paragraph 15  held as under:-

\023From a perusal of para 7 of Notification No.  175/86-CE, it is clear that the exemption granted  by the notification is not applicable to the specified  goods where a manufacturer affixes 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 the said  notification\005\005\005..It is only when a manufacturer  of the specified goods affixes them with a logo- brand name or trade name - of another person  who is not eligible for the exemption that he  becomes ineligible to avail the benefit under the  notification. Use of the logo of the manufacturer  by other person, whether an assignor or a third  party, has no relevance for purposes of para 7.  That is not the import of Explanation VIII.\024   

At this stage, the relevant extracts of the opinion of the Law  Ministry, Union of India contained in paragraph 3 of the  Circular No. 52/52/94-CX, dated 1/9/1994 issued by the  Ministry of Finance (Department of Revenue) may also be  reproduced as under:

\023Perusal of the said explanation (Explanation IX  to the Notification NO.1/93-C.E.) will show that to  satisfy the requirement of brand name or trade  name, it is necessary that the trade name must  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 or identity of that person. Unless  connection between the trade name and the person  with whom that trade name is to be identified can  be established, the requirement of brand name or  trade name as provided for in the said notification  will not be satisfied. It is an admitted case of the  department that in respect of locks, the units are  making locks bearing the same name or mark even  though there is no person who claims ownership to  that mark or name. The names being used in the  manufacture of locks by these small scale units do  not belong to any particular manufacturer and any  unit is free to use any name. Therefore, in our  view, even without the issue of Notification of 4th

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 9  

/11th May, 1994 units which are using trade name  or brand name, which does not belong to any  person, were eligible for exemption under the said  notification because of explanation IX in the said  notification. Admittedly, the notification, dated 4th /  11th May, 1994 is clarificatory in nature and the  purpose could have been achieved by issuing a  clarification to the field formations.\024     From a bare reading of this opinion of the Law Ministry and in  view of the discussions made hereinabove and relying on the  decisions of this court, as noted hereinabove, it is, clear that if a  brand name was not owned by any particular person, the use  thereof shall not deprive a unit of the benefit of the small scale  exemption scheme. Such being the position, we are of the view  that the printing of the hexagonal design on the goods of the  appellant, where such hexagonal design is not owned by the  Marketing Company, would not disentitle the appellant from  the benefit of the exemption under the notification.         16. Before parting with this judgment, we may deal with the  submissions made on behalf of the learned senior counsel for  the respondent Mr. K. Radhakrishnan. The learned senior  counsel for the respondent Mr. K. Radhakrishnan contended  that the appellant was using the mark of the Marketing  Company with the purpose of indicating a connection between  the goods manufactured and cleared by the appellant and the  Marketing Company. The learned senior counsel for the  respondent Mr. K. Radhakrishnan cited various cases in support  of this contention. Having heard the learned senior counsel for  the respondent Mr. K. Radhakrishnan and the learned senior  counsel for the appellant Mr. Bagaria, we are of the view that  the authorities cited by Mr. K. Radhakrishnan would not help  the respondent as they do not apply to the facts of the present  case. Let us first take up the decision of this court in the case of  Commissioner of C.Ex., Calcutta Vs. Emkay Investments (P)  Ltd. [2004(174) E.L.T. 298 (S.C.)] on which Mr. K.  Radhakrishnan has placed strong reliance. In our view, this case  is of no help to the respondent as the same is distinguishable on  facts. In this case, unlike our case: - a)      Merino was registered brand name of Merinoply &  Chemicals; b)      Merinoply & Chemicals was a large scale manufacturer  of the same goods; c)      Merinoply & Chemicals never disputed that the brand  name \023Merino\024 does not belong to them; d)      The intention to indicate, if not connection, atleast the  fact that the quality was similar to a particular type of plywood  was there.  

It is true that in so far as the first point of difference in clause a)  is concerned, registration of the brand name is not a pre- requisite for the application of paragraph 7 read with  Explanation 8 of the notification. Nevertheless, the purpose  behind bringing the same to light is only to suggest that in that  case, the other company had a proprietary right over the brand  name by virtue of the registration whereas in the present case,  the Marketing Company is totally denying any association with  the brand name, much less any proprietary right by virtue of the  registration.   

The learned senior counsel for the respondent Mr.  Radhakrishnan has also placed reliance on the decision of this  court in Commissioner of Central Excise, Trichy Vs. Grasim  Industries Ltd. [2005 (183) E.L.T. 123 (S.C.)]. That case too is

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 9  

distinguishable on facts in as much as the intention to indicate a  connection was present in that case, unlike the case in hand.  Another decision relied upon by the learned senior counsel for  the respondent in Commissioner of Central Excise,  Chandigarh-I Vs. Mahaan Dairies [2004(166) E.L.T. 23  (S.C.)] is also, in our view, distinguishable on facts. In that  decision, it was an admitted position that a name was being  used, which was the registered trade mark of another company.  This fact was not disputed. Thus the court held, with which we  are in full agreement, that the mere use of additional words in  addition to the name of another person would not by itself  enable the party to claim the benefit of the Notification. We  have already stated that in that decision, admittedly, a registered  name of another person was used on the product of the  respondent of that case. That decision, therefore, would not  apply to the facts and circumstances of the present case.

17.  Before we close, we may also consider a short submission  of the learned senior counsel for the respondent. According to  the learned senior counsel for the respondent Mr. K.  Radhakrishnan, the question as to whether the brand name of  the Marketing Company was used by the appellant on the  corrugated boxes in which the goods were kept and supplied is  a question of fact and this court, therefore, is not entitled to  interfere with such a finding of fact. In our view, the Tribunal  as also the Commissioner, while coming to the conclusions as  arrived by them, failed to consider the admissions and the  material evidence on record and thereby came to a finding  which, on the face of it, was not tenable on facts. Under these  circumstances, it is open to this court to interfere with such a  finding of fact and accordingly, this argument of the learned  senior counsel for the respondent is not acceptable.   

18. For the reasons aforesaid, we are not in agreement with the  views expressed by the CEGAT and the Commissioner of  Central Excise and accordingly, we answer the question posed  by us, as noted herein earlier, by holding that the benefit of  exemption under the notification in question would be available  to the appellant.  

19.     Accordingly, the order of the CEGAT and that of the  Commissioner is set aside and we hold that the appellant shall  be permitted to get exemption under the notification No.  175/86-CE dated 1st of March, 1986.

20.      The appeal is thus allowed with no order as to costs.