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CASE NO.: Appeal (civil)  4192-4224 of 2001

PETITIONER: Commissioner of Central Excise,Chandigarh

RESPONDENT: M/s Khanna Industries & Ors

DATE OF JUDGMENT: 28/11/2006

BENCH: ARIJIT PASAYAT & S.H. KAPADIA

JUDGMENT: J U D G M E N T WITH

(Civil Appeal No.4375 of 2006 and Civil Appeal  Nos.7927-28 of 2001).

ARIJIT PASAYAT, J.

       In these appeals, Revenue questions correctness of the  judgment rendered by the Customs, Excise & Gold (Control)  Appellant Tribunal, New Delhi, (in short ’CEGAT’).  It was held  by the impugned judgment that the respondents were eligible  to avail benefit of the exemption notification No.175/86-CE  and para 7 thereof will not be attracted in the present case.  Appeals filed by the Revenue questioning correctness of the  decision rendered by the Commissioner (Appeals), Central  Excise & Customs, Chandigarh [in short ’Commissioner  (Appeals)], were dismissed.            

       The background facts in a nutshell are as follows:

Respondents manufacture Brass Sanitary Bathroom  fittings falling under Sub-heading 8481.80 and 8481.99 of the  Schedule to the Central Excise Tariff Act, 1985 (in short ’Tariff  Act’). The goods were packed in cardboard boxes on which  stylised brand name "ARK" was printed and labels affixed on  cardboard boxes also showed the brand name "ARK" in the  stylised script; name and address of M/s. Arkson Pvt. Ltd.,  Chandigarh was also printed on the label; in addition "ARK"  was put on the Sanitary fittings by pasting stickers and also  by affixing tickli on the body of the fittings. All the  respondents were availing exemption under Notification  No.175/86-CE. Proceedings were started against them for  demand of duty as brand name "ARK" in stylised script was  brand name of M/s. Arkson Pvt. Ltd. Initially the matter was  decided by the Collector, Central Excise who denied the  exemption under Notification No.175/86-CE holding that the  respondents were affixing specified goods with the brand  name of another person not eligible for the grant of exemption  and also there was suppression on the part of the  respondents. On appeal filed by the Assessees, the CEGAT  remanded the matter for de novo decision after arriving at a  finding in regard to the eligibility to exemption of M/s. Arkson  Pvt. Ltd. under Notification No.175/86-CE and to arrive at a  definite finding in regard to other pleas of use of trade mark  w.e.f. April, l992 and other related matters concerning time  bar. The CEGAT, however, gave specific finding that stylised

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"ARK" is a trade name of M/s. Arkson within the meaning of  relevant para of Notification No.175/86-CE.

On remand the matter has been decided by the  Additional Commissioner who confirmed the demand of duty  and imposed penalty on all the respondents holding that since  M/s. Arkson Pvt. Ltd. was not eligible for the benefit of  Notification No.l75/86-CE since it was not holding any L-4  licence; the casting of pig iron manufactured in their  proprietary concern M/s. Arkson Engg. Co. was exempted  from payment of duty under Notification No.208/83 dated  1.8.1983 and no declaration as required to be filed under Rule  174 of the Central Excise Rules, 1944 (in short the ’Rules’),  was filed by it; castings falling under Sub-heading 7325.10 of  the Tariff were specified in the Annexure to the Notification. In  addition the Additional Commissioner, relying upon decision  in the case of Mentha & Allied Products vs. Union of India  (1995 (77) ELT A-133(SC), concluded that aggregate sale  figure of M/s. Arkson Pvt. Ltd. was more than Rs.2 crores  during 1990-91 and 1991-92 and accordingly the benefit of  Notification was also not available to it.  The Additional  Commissioner gave findings to the effect that the respondents  had started affixing stylised brand name "ARK" w.e.f.  September, 1991 and not from April, 1992 as contended and  extended period of limitation was invokable as the fact  regarding manufacture of the goods affixed with brand name  another person was never brought to the knowledge the  Department.

       Respondents questioned correctness of the view  expressed by the adjudicating authority before the before the  Commissioner (Appeals). The said authority set aside the  adjudication orders holding that eligibility of M/s. Arkson Pvt.  Ltd. has to be considered in the light of the fact that Brass  sanitary bathroom fittings are classified under sub-headings  8481.80 and 8481.99 which are specified in Annexure to  Notification no.175/86-CE, Para 3 of Notification does not  stipulate that value of the trading goods is to be taken into  consideration for computing the aggregate value of clearance  and M/s. Arkson Pvt. Ltd. being registered as SSI unit have  made substantial compliance of conditions laid down in  Notification no.175/86-CE.  It was further held that non- fulfilment of requirement of Rule 174 was on account of the  fact "ARK" in simple form was regarded as brand name of  M/s.  Khanna Industries who had complied with Rule 174 and  it was the Tribunal’s decision that separate identity of "ARK"  and stylized "ARK" was established and, therefore, extended  period of limitation was not applicable.

       Revenue preferred appeals before the CEGAT which  endorsed view of the Commissioner (Appeals), but did not  record any finding on the question of extended period of  limitation.    

       Stand of the appellant is that the goods were cleared by  the respondents who are manufacturers and the brand owner  is a trader.  Even if the brand owner is a manufacturer he is  required to be manufacturer of specified goods.  CEGAT erred  in holding that if the brand owner is a manufacturer; it is not  required to be manufacturer of the specified goods.  The small  scale industry is not manufacturer of specified goods, and as  such is not entitled to any exemption.   

       In response, learned counsel for the respondent  submitted that CEGAT’s view is correct.  In any event it is

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pleaded that the extended period of limitation is not applicable  and that question has not been decided by the CEGAT.   

In order to appreciate the rival submissions, the relevant  notifications need to be noted.  Notification No.175/86-C.E.  dated 1.3.1986 reads as follows:

"EXEMPTION TO SMALL SCALE UNITS In the exercise  of the powers conferred by  sub rule (1) of rule 8 of the Central Excise  Rules, 1944 and in supersession of the  notification of the Government of India, in the  Ministry of  Finance (Department of Revenue)  No. 85/85-Central Excises dated the 17th  March, 1985 the Central Government hereby  exempts the excisable goods of the description  specified in annexure below and falling under  the Schedule to the Central Excise  Tariff  Act,  1985 (5 of 1986) (hereinafter referred to as the  "specified goods’), and cleared for home  consumption on or after the 1st day of April in  any financial year, by a manufacturer from  one or more factories.\027 xxx                              xxx                            xxx- ANNEXURE Xxx                             xxx                             xxx  4. All other goods specified in the said  Schedule other than the following, namely :-\027  . (i) all goods failing under Chapters 9, 24, 31,  51, 52, 53. .54, 55, 56, 57, 58, 59, 60, 61, 62,  71, 73 and 74;

(ii) all goods falling under heading Nos. 21.06,  25.04, 36.03, 40.11, 40:12, 40.13, 87.01,  87.02, 87.03, 81.04, 81.05, 87.06, 87.11,  91.01, 91.02 and 96.13;

(iii) all goods fallings under sub-heading Nos.  2101.10, 2101.20, 3304.00, 3305.90,  3307.00, 4005.00, 4006.10, 4008.21 and  9505.10 and

(iv) Sandalwood oil strips of plastic intended  for weaving of fabric or sacks, polyurethane  foam and articles of polyurethane loam  broadcast television receiver sets refrigerating  and air-conditioning appliances and  machinery, and parts and accessories thereof.

       The said notification was amended by Notification  No.223/87-C.E. dated 22.9.1987.  The amendment reads as  follows:

"In exercise of the powers conferred by  sub-rule (1) of Rule 8 of the Central Excise  Rules, 1944, the Central Government hereby  makes the following further amendments in  the notification of the Government of India in  the Ministry of Finance (Department of  Revenue) No. 175/86- Central Excise, dated  the 1st March, 1986, namely: In the said notification, \027  (I) after paragraph, 6, the following paragraph  shall be inserted, namely:-

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"7. The exemption contained in this  notification shall not apply to the  specified goods with a brand name  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:

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 o the identity  of that person."

       Clause 7 of the notification after amendment deals with  exemption of specified goods and circumstances where the  exemption is not available.  Stand of the respondent is that if  manufacturer need not be a manufacturer of specified goods,  and brand name as used is entitled to exemption contained in  the notification, it is really of no consequence whether he is  manufacturer of goods. The stand is clearly untenable.  The  notification is ’goods specific’. What is required is that a  person, who may be a manufacturer, must be eligible for  exemption under the notification in respect of the specified  goods.  Any other interpretation would render the purpose for  which the notification has been issued redundant.   

As noted above, the notification is ’goods specific’. The  emphasis is on ’specified goods’. That being so, the impugned  judgment of the CEGAT is indefensible.

Undisputedly, M/s Arkson Pvt. Ltd. is different from M/s  Arkson Engg. Co. In the present case, the issue relates to  manufacture of "brass sanitary bathroom fittings". M/s  Arkson Engg. Co. manufactures C.I. castings while M/s  Arkson Pvt. Ltd. are the owners of the stylized brand name  "ARK". However, the said company is engaged in trading of  "brass sanitary fittings".  Thus, they are traders. Assessees  cannot take the benefit of the registration certificate of M/s  Arkson Engg. Co. as both are separate legal entities. Therefore,  when M/s Khanna Industries and others i.e. the assesses use  the brand name/trade name of "ARK" in the context of "brass  sanitary fittings" the assessees are not entitled to claim the  benefit as the stylized brand name "ARK"  belongs to M/s  Arkson Pvt. Ltd. and not to M/s Arkson Engg. Co. However, as

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noted above, M/s Arkson Pvt. Ltd. is a trader and not the  manufacturer of "sanitary bath fittings". This is clearly  accepted by Ms. Aarti Khanna, Executive Director of M/s  Arkson Pvt. Ltd. in her statements on 22.1.1993 and  18.3.1993.          In the case of Namtech Systems Ltd. v. Commissioner of  Central Excise, New Delhi (2000 (115) E.L.T. 238 (Tribunal),  the larger Bench of CEGAT has held that affixation of specified  good with a brand name of ineligible Indian manufacturer will  entail disqualification from exemption. It is further held that  the benefit of small scale exemption under Notification  No.175/86-CE, as amended, is not available to the specified  goods if they are affixed with the brand name or trade name of  a trader who is not a manufacturer. The judgment of the larger  Bench in Namtech Systems Ltd. (supra) has not been  considered by the CEGAT in the present case.  The intention is crystal clear that at the relevant time,  the unit should be eligible for exemption under the  Notification in respect of the ’specified goods’.     

       However, as rightly contended by learned counsel for the  respondents, the plea relating to non-applicability of extended  period of limitation has not been considered by the CEGAT.  Therefore, the matter is remanded and the above issue alone  will now be considered by the CEGAT.   

       The appeals are allowed to the aforesaid extent without  any order as to costs.