REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS  6788-6789  OF 2005

Unison Electronics Pvt. Ltd. and Anr.  ….Appellants

Versus

Commissioner, Central Excise, Noida ….Respondent

J U D G M E N T  

Dr. ARIJIT PASAYAT, J.

1. In these  appeals  challenge  is  to  the  order  passed  by the  Customs,

Excise & Service Tax Appellate Tribunal, New Delhi (in short ‘CESTAT’).

The  basic  issue  is  whether  the  appellants  are  clearing  excisable  goods

manufactured by them bearing the brand name of another person.  

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2. Background facts in a nutshell are as follows:

The  SSI  Exemption  Notification  which  provides  exemption  to  the

excisable  goods  manufactured by a SSI unit  provides  that  the exemption

shall  not apply to  goods bearing the brand name or trade name, whether

registered or not, of another persons. Explanation to Notification defines the

brand  name  as  a  name  or  mark,  such  as  a  symbol,  monogram,  label,

signature  or  invented  word  or  writing  which  is  used  in  relation  to  the

specified goods for the purpose of indicating a connection in the course of a

trade between specified goods and some person using such name or mark

with or without any indication of the identity of that person.

According  to  the  appellants  they  manufacture  ice-cream  makers

cooler  and  Popcorn  makers  and  avail  of  the  benefit  of  SSI  Exemption

Notification and sell ice cream maker in their own brand name “CREMICA”

and sell the same to different customers including United Tele Shopping (in

short  ‘UTS’)  and  Tele  Shopping  Network  (in  short  ‘TSN’)  and  that  in

respect  of  sale  to  UTS & TSN the  goods  were  being  examined  by the

Supervisors  of  these  customers  before  dispatch  from  their  factory  and

stickers  bearing  UTS/TSN were being  affixed  and these  sticker  bear  the

words  “Checked  Sl.  No.  Do  not  remove  this  sticker”  and  that  the

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Department has treated the words UTS and TSN as brand name belonging

to  other  and  has  disallowed  the  benefit  of  small  scale  exemption

notification. It was submitted that the words UTS and TSN are not brand

names but are the abbreviations of the name of the marketing companies

which does not amount to use of the brand name.

Stand of the department was as follows:

It has not been controverted by the appellants that the excisable goods

before clearance from their factory premises bear stickers of UTS/TSN and

as per definition of the brand name given in SSI Exemption  Notification,

“brand  name”  means  any  name,  symbol,  monogram,  label,  signature  or

invented word or writing which indicates connection in the course of trade

between excisable  goods  and same person  using such name and that  the

words UTS/TSN mentioned on the packaging of the products indicate the

connection in the course of trade with UTS and TSN.  

After considering the rival stands the CESTAT concluded as follows:

“A perusal  of  the  sample  shown  by the  learned consultant at the time of hearing revealed that the sticker mentions that it has been put after checking the quality

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of the product manufactured by the appellants. In fact the sticker reads as under:

Tele Shopping Network

UTS  United Teleshopping

Quality at your doorstep

Accordingly, the  CESTAT upheld  the demand of  duty and penalty

imposed on the appellant-company, but the separate penalty imposed on the

Director of the company was set aside.  

3. In support of the appeals, learned counsel for the appellants submitted

that the brand names do not apply to the same goods. It essentially is the

brand name of another person.  

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TSN

4. Learned counsel for the respondent on the other hand supported the

judgment and submitted that even if it is conceded for the sake of arguments

that brand names related to other person, that is really of no consequence.  

5. The Notification in question reads as follows:

“In  exercise  of  the  powers  conferred  by  sub-section  (1)  of Section 5A of the Central Excise Act,  1944 (1 of 1944),  the Central Government, being satisfied that it is necessary in the public interest so to do, and in super session of the notification of  the  Government  of  India  in  the  Ministry  of  Finance (Department of Revenue) No.7/97-Central Excise dated the 1st March, 1997, hereby exempts clearances, specified in column (2) of the Table below, for home consumption, of the excisable goods of the description specified in the Annexure appended to this notification (hereinafter referred to  \“the specified  goods”),  from so  much of  the duty of  excise leviable  thereon  which  is  specified  in  the  Schedule  to  the Central Excise Tariff Act, 1985 (5 of 1986), as is in excess of the amount calculated at the rate specified in column (3) of the said Table against such clearances.

3.  For  the  purpose  of  determining  the  aggregate  value  of clearances,  the  following  clearances  shall  not  be  taken  into account, namely :-

(a)  any clearances,  which are  exempt  from the whole  of  the excise duty leviable thereon (other than an exemption based on quantity or value of clearances) under any other notification or on which no excise duty is payable for any other reason;

(b)  any clearances  bearing  the brand name or  trade  name of another  person,  which  are  ineligible  for  the  grant  of  this exemption in terms of paragraph 4 below :

(c)  any clearances  of  the specified  goods  which  are  used  as inputs  for further  manufacture of any specified goods  within the factory of production of specified goods. Such clearances

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of specified goods used as inputs shall be deemed to be exempt from the whole of the duty of excise leviable thereon:

(d) any clearances of strips of plastics used within the factory of production for weaving of fabrics or for    manufacture of sacks or bags made of polymers of ethylene or propylene.

4. The exemption contained in this notification shall not apply to  goods  bearing  a  brand  name  or  trade  name,  whether registered  or  not,  of  another  person,  except  in  the following case:-

(a)  where  the  specified  goods,  being  in  the  nature  of components  or  parts  of  any  machinery  or  equipment  or appliances,  are  cleared  for  use  as  original  equipment  in  the manufacture of the said machinery or equipment or appliances by  following  the  procedure  laid  down  in  Chapter  X  of  the Central  Excise  Rules,  1944.  Manufacturers,  whose  aggregate value of clearances of the specified goods for use as original equipment does not  exceed rupees thirty lakhs in a financial year, may submit a declaration regarding such use instead of following  the procedure  laid  down in  Chapter  X of the said rules;

(b) where the goods bear a brand name or trade name of Khadi and Village Industries Commission or of the State Khadi and Village  Industry  Board  or  the  National  Small  Industries Corporation  or  the  State  Small  Industries  Development Corporation or the State Small Industries Corporation;

5. Explanation — For the purpose of this notification :-

(a) “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;

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(b) where the specified goods manufactured by a manufacturer bear a brand name or trade name, whether registered or not, of another manufacturer or trader, such specified goods shall not, merely  by  reason  of  that  fact  be  denied  to  have  been manufactured by such other manufacturer or trader.”

6. In  Commissioner  of  Central  Excise,  Trichy v.  Rukmani  Pakkwell

Traders  (2004 (11) SCC 801) it was noted as follows:

 “5. The Tribunal then proceeds on the basis that the exemption can be denied only if the trade mark or brand name is used in respect  of  the  same  goods  for  which  the  trade  mark  is registered. In coming to this conclusion we are afraid that the Tribunal  has  done  something which  is  not  permissible  to  be done in law. It is settled law that exemption notifications have to be strictly construed. They must be interpreted on their own wording. Wordings of some other notification are of no benefit in  construing  a  particular  notification.  Clause  4  of  this notification and the Explanation (set out hereinabove) make it clear that the exemption will not apply if the specified goods (i.e.  scented  supari)  bear  a  brand  or  trade  name of  another person.  Neither  in  clause  4  of  the  notification  nor  in Explanation IX is it provided that the specified goods must be the same or similar to the goods for which the brand name or trade  name is  registered.  The  Tribunal  has,  in  adopting  the above reasoning, effectively added to the notification words to the effect “brand name or trade name in respect of the same goods”. This is clearly impermissible. It is to be seen that there may be an unregistered  brand name or an unregistered trade name. These might not be in respect of any particular goods. Even if an unregistered brand name or trade name is used, the exemption is lost. This makes it very clear that the exemption would be lost so long as the brand name or trade name is used irrespective of whether the use is on same goods as those for which the mark is registered.

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6. The Tribunal had also held that under the notification the use must be of “such brand name”. The Tribunal has held that the words “such brand name” show that the very same brand name or trade name must be used. The Tribunal has held that if there are any differences then the exemption would not be lost. We are afraid that  in coming to this  conclusion the Tribunal  has ignored Explanation IX. Explanation IX makes it clear that the 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, code number, design number, drawing number, symbol, monogram, label, signature or invented word or writing. This makes it very clear that even a use of part of a brand name or trade name, so long as it indicates a connection in the course of trade would be sufficient to disentitle the person from getting exemption under the notification. In this case, admittedly, the brand  name  or  trade  name  is  the  word  “ARR”  with  the photograph of  the  founder  of  the  group.  Merely because  the registered trade mark is not entirely reproduced does not take the respondents out of clause 4 and make them eligible to the benefit of the notification.”  

7. Similarly,  in  Commissioner  of  Central  Excise,  Chandigarh-I v.

Mahaan Dairies (2004  (11)  SCC 798)  in  paras  6  and 8 it  was  noted  as

follows:

“6. We have today delivered a judgment in  CCE v.  Rukmani Pakkwell Traders (2004 (11) SCC 801) wherein we have held in  respect  of  another  notification  containing  identical  words that  it  makes  no difference whether  the goods  on which the trade name or mark is used are the same in respect of which the trade mark is registered. Even if the goods are different, so long as the  trade  name or brand name of some other  company is used  the  benefit  of  the  notification  would  not  be  available. Further, in our view, once a trade name or brand name is used then mere use of additional words would not enable the party to claim the benefit of the notification.

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8. It  is  settled  law  that  in  order  to  claim  benefit  of  a notification, a party must strictly comply with the terms of the notification. If on wording of the notification the benefit is not available then by stretching the words of the notification or by adding words to the notification benefit  cannot be conferred. The Tribunal has based its decision on a decision delivered by it in Rukmani Pakkwell Traders v. CCE (1999 (109) ELT 204 (CEGAT). We have already overruled the decision in that case. In this case also we hold that the decision of the Tribunal is unsustainable. It is accordingly set aside.”

8. Further  in  Commissioner  of  Central  Excise,  Calcutta v.  Emkay

Investments  (P)  Ltd.  and Anr. (2005 (1)  SCC 526)  this  Court  stated  the

position in law as follows:

“7. The  dispute,  in  the  instant  case,  is  as  to  whether  the respondents  who  are  manufacturers  of  plywood  under  their own brand name “Pelican” have made themselves disentitled to the benefit of small-scale exemption Notification No. 175/86- CE by using a logo indicating “MERINO” on their  products along with their brand name. The next question which arises is as to whether the markings or inscriptions should be considered as the brand name of M/s Merinoply and Chemicals Ltd. and will  come  within  the  mischief  of  clause  7  read  with Explanation  VIII  of  the  notification,  as  contended  by  the department. Clause 7 reads as follows:

“The  exemption  contained  in  this  notification shall  not  apply  to  the  specified  goods  where  a manufacturer  affixes  the  specified  goods  with  a brand name or trade  name (registered or  not)  of

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another person who is not eligible for the grant of exemption under this notification.”  

Explanation VIII of clause 7 reads as follows:  ‘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. Mr G.E. Vahanvati, learned Solicitor General, submitted that  the  impugned goods  admittedly contained  the  registered logo “MERINO” belonging to and owned by M/s Merinoply and  Chemicals  Ltd.  Thus  it  was  a  clear  case  where  the impugned  goods  were  admittedly  affixed  with  registered logo/trade  mark  of  the  other  person  not  eligible  to  SSI exemption. According to the learned Solicitor General, CEGAT erred in not appreciating that to attract provision of clause 7 of Notification  No.  175/86-CE,  it  is  sufficient  that  the  product contained a trade mark/logo of another ineligible person which was fully satisfied in the present case and whether the product also  contained  a  brand  name/trade  name/logo  of  the manufacturer  would  not  and  cannot  alter  such  position. Arguing further,  learned Solicitor  General  contended that  the interpretation of Explanation VIII as advanced by the Tribunal does not appear correct in law and fact. It was imperative that by  using  the  registered  logo  “MERINO”  belonging  to  M/s Merinoply and Chemicals Ltd. on their own products, the first respondent  herein,  M/s  Emkay Investments  Ltd.  fulfilled  the purpose of indicating a relation between the said products and the logo owner so as to influence the trade and, therefore, the provision of Explanation VIII were fully satisfied so far as the present  case  was  concerned.  Learned  Solicitor  General  also

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submitted that the exception or exempting provision in a taxing statute  should  be construed strictly and it  is  not  open to  the court or to the tribunal to ignore conditions prescribed in the exemption notification.

9. In  support  of  his  submissions,  learned  Solicitor  General, relied on the following judgments:

1. B.H.E.L. Ancillary Assn. v. CCE (1990 (49) ELT 33 (Mad) 2. CCE v.  Rukmani  Pakkwell Traders (2004 (11)  SCC 801 3. CCE v. Mahaan Dairies (2004 (11) SCC 798)  4. CCE v. Bhalla Enterprises (2004 (173) ELT  225

15. We have gone through the common order passed  by the Tribunal.  In  our  view,  the  Tribunal  has  erred  in  not appreciating that to attract provision of clause 7 of Notification No.  175/86-CE,  it  is  sufficient  that  the  product  contained  a trade mark/logo of another ineligible person which was fully satisfied  in  the  instant  case  and  whether  the  product  also contained the brand name/trade name/logo of the manufacturer would  not  and  cannot  alter  such  position.  Likewise,  the interpretation of Explanation VIII as advanced by the Tribunal does  not  appear  to  be  correct  in  law  and  in  fact.  It  was imperative  that  by  using  the  registered  logo  “MERINO” belonging to M/s Merinoply and Chemicals Ltd. on their own product  M/s Emkay Investments Ltd. fulfilled the purpose of indicating  a  relation between the  said  products  and the  logo owner so as to influence the trade and therefore, the provisions of Explanation VIII were fully satisfied so far as the case on hand  was  concerned.  The  finding  of  the  Tribunal  to  the contrary, in our opinion, is wrong and liable to be set aside.”

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9. Considering the position involved in Reiz Electrocontrols (P) Ltd. v.

Commissioner of Central Excise, Delhi-I (2006 (6) SCC 213)  the position

was re-iterated as follows:

“8. So far as the views regarding non-eligibility are concerned view  expressed  by  this  Court  in  several  cases  needs  to  be noted.

9. In Commissioner of Central Excise, Chandigar-I v. Mahaan Dairies [2004 (166) ELT 23 (SC)] it was noted (in para 6) as follows:

“We  have  today  delivered  a  judgment  in Commissioner  of  Central  Excise,  Trichy v. Rukmani  Pakkwell  Traders –  2004  (165)  E.L.T. 481  (S.C.)  (Civil  Appeal  Nos.  3227-3228/1998) wherein  we  have  held  in  respect  of  another Notification  containing  identical  words  that  it makes no difference whether the goods on which the trade  name or  mark is  used  are  the  same in respect  of  which  the  trade  mark  is  registered. Even if the goods are different so long as the trade name or  brand name of  some other  Company is used the benefit of the Notification would not be available.  Further, in our view, once a trade name or brand name is used then mere use of additional words  would  not  enable  the  party  to  claim  the benefit of Notification.”

10.  In  Union  of  India v.  Paliwal  Electricals  (P)  Ltd.  and Another  [(1996) 3 SCC 407] it was noted (in paras 10 and 11) as follows:

“10. We are of the opinion that while examining the challenge to  an exemption notification under the  Central  Excise  Act,  the  observations  in  the

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decisions  aforesaid  should  be  kept  in  mind.  It should  also  be  remembered  that  generally speaking the exemption notification and the terms and  conditions  prescribed  therein  represent  the policies  of  the  Government  evolved  to  subserve public interest and public revenue. A very heavy burden lies upon the person who challenges them on.  the  ground  of  Article  14.  Unless  otherwise established,  the court  must presume that the said amendment was found by the Central Government to  be  necessary  for  giving  effect  to  its  policy (underlying  the  notification)  on  the  basis  of  the working of the said notification and that such an amendment  was  found  necessary  to  prevent persons  from  taking  unfair  advantage  of  the concession.  In fact,  in  this  case,  the  explanatory note appended to amending notification says so in so many words. If necessary, the Court could have called upon the Central  Government  to  establish the  reasons  behind  the  amendment.  (It  did  not think it fit to do so.) It is equally necessary to bear in mind, as pointed out repeatedly by this Court, that  in  economic  and  taxation  sphere,  a  large latitude should be allowed to the legislature. The courts  should  bear  in  mind  the  following observations made by a Constitution Bench of this Court  in  R.K. Garg v.  Union of India  [1981 (4) SCC 675]: (SCC pp. 690-91, para 8)

“Another rule of equal importance is that laws relating  to  economic  activities  should  be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion etc. It has been said by no less a person than Holmes,  J.  that  the  legislature  should  be allowed some play in the joints, because it has to  deal  with  complex problems which do  not admit  of  solution  through  any  doctrinaire  or strait-jacket formula and this is particularly true in  case  of  legislation  dealing  with  economic

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matters, where, having regard to the nature of the problems required to be dealt with, greater play  in  the  joints  has  to  be  allowed  to  the legislature.  The  Court  should  feel  more inclined to give judicial deference to legislative judgment  in  the  field  of  economic  regulation than in other areas where fundamental human rights  are  involved.  Nowhere  has  this admonition  been  more  felicitously  expressed than in  Morey v.  Doud [354 US 457 (1957)] where  Frankfurter,  J.  said  in  his  inimitable style:

‘In  the  utilities,  tax  and  economic regulation cases, there are good reasons for  judicial  self-restraint  if  not  judicial deference  to  legislative  judgment.  The legislature  after  all  has  the  affirmative responsibility.  The courts have only the power  to  destroy  not  to  reconstruct. When these are added to the complexity of economic regulation,  the uncertainty, the  liability  to  error,  the  bewildering  a conflict of the experts, and the number of times the Judges have been overruled by events—self-limitation can be seen to be the  path  of  judicial  wisdom  and institutional prestige and stability.’

The court must always remember that ‘legislation is directed to practical problems, that the economic mechanism is  highly sensitive  and complex,  that many problems are  singular  and contingent,  that laws  are   not  abstract  propositions  and  do  not relate to abstract units and are not to be measured by abstract symmetry’ that exact wisdom and nice adaptation of remedy are not always possible and that  judgment  is  largely  a  prophecy  based  on meagre  and  uninterpreted  experience’.  Every legislation  particularly  in  economic  matters  is

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essentially  empiric  and  it  is  based  on experimentation  or  what  one  may  call  trial  and error  method and therefore  it  cannot  provide for all  possible  situations  or  anticipate  all  possible abuses.  There may be crudities  and inequities  in complicated experimental economic legislation but on that account alone it cannot be struck down as invalid. The courts cannot, as pointed out by the United  States  Supreme  Court  in  Secy.  of Agriculture v.  Central  Roig Refining Co. [ 94 L Ed 381 :  338 US 604 (1950)]  be converted into tribunals  for  relief  from  such  crudities  and inequities.  There  may  even  be  possibilities  of abuse, but that too cannot of itself be a ground for invalidating  the  legislation,  because  it  is  not possible for any legislature to anticipate as if by some divine prescience, distortions and abuses of its legislation which may be made by those subject to  its  provisions  and  to  provide  against  such distortions  and  abuses.  Indeed,  howsoever  great may be the care bestowed on its  e framing, it  is difficult to conceive of a legislation which is not capable  of  being  abused  by  perverted  human ingenuity.  The Court  must  therefore  adjudge  the constitutionality  of  such  legislation  by  the generality of its provisions and not by its crudities or inequities or by the possibilities of abuse come to  light,  the  legislature  can  always  step  in  and enact suitable amendatory legislation. That is the essence of pragmatic approach which  must guide and inspire the legislature in dealing with complex economic issues.”

11. The same principle should hold good in the matter of exemption notifications as well,  for the said power is part and parcel of the enactment and is supposed to be employed to further the objects of  enactment  —  subject,  of  course,  to  the condition that the notification is not ultra vires the Act, and/or Article 14 of the Constitution of India.

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(See  P.J. Irani V.  State of Madras  [(1962) 2 SCR 169]”.

11. In Pahwa Chemicals Private Limited v. Commissioner of Central Excise, Delhi [2005 (189) ELT 257 (SC)] it was held as follows at para 3:    

“Paragraph 4 and Explanation IX of Notification have  been  construed  by  this  Court  in Commissioner  of  Central  Excise v.  Rukhmani Pakkwell Traders, 2004 (165) E.L.T. 481; as also in Commissioner of Central Excise, Chandigarh v. Mczhaan  Dairies,  2004  (166)  ELT.  23.  In  both these  decisions  this  Court  held  that  Paragraph  4 read with Explanation IX of the notification could not  be construed in the manner as contended by the assessees, namely, to make it necessary for the owner  of  the  trade  mark/trade  name  to  use  the goods  in  respect  of  the  specified  goods manufactured by the assessee. We see no reason to differ  with  the  reasoning  of  this  Court  in  the aforesaid  decisions.  Clause  4  of  the  Notification read  with  Explanation  IX  clearly  debars  those persons from the benefit of the exemption who use someone  else’s  name  in  connection  with  their goods either with the intention of indicating or in a manner so as to indicate a connection between the assessees goods and such other person. There is no requirement for the owner of the trade mark using the name or mark with reference to any particular goods.  The  object  of  the  exemption  notification was  neither  to  protect  the  owners  of  the  trade mark/trade  name  nor  the  consumers  from being misled.  These  are  considerations  which  are relevant in cases relating to disputes arising out of infringement/passing  off  actions  under  the Trade Marks  Act.  The  object  of  the  Notification  is clearly to  grant  benefits  only to  those  industries which otherwise do not  have the advantage of a brand name. The decisions  cited  by the  Counsel

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appearing  on  behalf  of  the  assessees  relate  to decisions involving Trade Mark disputes and are in the circumstances not apposite.”

13. It  appears  that  such  a  stand  was  not  taken  before  the Tribunal. In any event in view of what has been stated by this Court  in  Mahaan  Dairies’ case  (supra)  the  Tribunal  has  to consider  the  plea.   In  Mahaan  Diaries’ case  (supra)  it  was observed as follows:

“9. It was however, urged that the respondents have  applied  for  registration  of  the  Mark “Mahaan Taste Maker”.  We clarify that if and when  they  get  their  mark  registered  then  they would  become  entitle  to  the  benefit  of  the Notification in accordance with Board’s Circular No.88/88, dated 13.12.1988.”

10. The  conclusions  of  CESTAT are  essentially  factual  and,  therefore,

there is no scope for interference. In view of the factual position noted by

CESTAT and the position in law indicated above, the appeals are dismissed.

No costs.  

……………………………………J. (Dr. ARIJIT PASAYAT)

……………………………………J. (Dr. MUKUNDAKAM SHARMA)

New Delhi,

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February 13, 2009

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