Availability of SSI exemption

PJ/Case Laws/2010-11/1058

Case: Commissioner of C. Ex., Delhi v/s ACE Auto Comp. Ltd.

Citation: 2011 (263) ELT 3 (S.C)

Issue:- Whether SSI exemption is available under Notification No. 1/93- C.E or 16/97- C.E in case of use of brand name of other person in the name of our product?

Brief Facts: - Respondent-assessee was a small scale industrial unit (SSI) engaged in the manufacture of clutch plates, clutch cover assemblies and pressure plates. They were using the symbol and Logo “TATA” along with their own Brand Name “ACE” on cover assembly manufactured for TATA 310 vehicle. Respondent had filed declarations claiming benefit of SSI Notification No. 1/93 and 16/97. After a raid of their premises, show cause notice was issued for demanding duty wand for levying penalty for clearing branded goods of another person.

The Adjudicating Authority confirmed the duty and imposed penalty and observed that the TATA brand name pre-fixed with the logo of the appellant would catch the eye of the buyer first as it is a well known and established brand name. That there was no necessity to actually sell the product to TATA companies to establish the connection between the product and the brand name owner. Benefit of exemption couldn’t be extended to the products of the respondent.

In appeal, the Commissioner (Appeal) held that the two conflicting brand names are TATA and TATA ACE and the sole reason for this usage of the name TATA is that it stands earmarked for a particular vehicle. They are also manufacturing auto parts for use in the other vehicles of different manufacturers for which they do not use this logo. Thus, it was held that TATA ACE brand name is different from the popular name TATA.

Against this order, Revenue filed appeal before the Tribunal. The Tribunal dismissed the appeal by holding that it is not Revenue’s case that TATA ACE is a brand name of another person. It was held that usage of the name Tata in the brand name was with a view to indicate that the part is for a particular vehicle manufactured by Tata.

Hence, Revenue has filed present appeal before the Apex Court.

Appellant’s Contentions:- Revenue submitted that in the light of the judgment given in Commissioner of Central Excise, Calcutta v/s Emkay Investments (P) Ltd & Anr [2004-TIOL-97-SC-CX-LB] and Commissioner of Central Excise, Chandigarh-I v/s Mahaan Dairies [2004-TIOL-52-SC-CX], it is settled that whenever the assessee affixes the brand name of another person on its goods with the intention to indicate some connection between the goods and the said brand name, the assessee is barred from availing the benefit of the Notifications. In view of the fact that indubitably the brand name TATA which did not belong to the assessee but to another identified company, had been affixed by the assessee on their product, although in conjunction with the word ACE the Tribunal’s conclusion that there was no material to prove that the brand name TATA ACE belonged to another person, is clearly a misconstruction of Para 4 of the SSI Notification and therefore the impugned order is to be set aside.

Amicus Curiae’s Submissions:- The conclusion reached by the Tribunal is correct and the finding of fact should be affirmed as it has not been specifically challenged by the Revenue. It was submitted that the prerequisite for invoking para 4 of Notification No. 1/93 is not satisfied as the revenue has not been able to establish that the brand name ”TATA ACE” belongs to some other person. The burden to prove the same is on the Revenue. Reliance was placed on Commissioner of Trade Tax, UP & Anr v/s Kajaria Ceramics Ltd [2005-TIOL-95-SC-CT].

Relying upon judgment in Pappu Sweets and Biscuits & Anr v/s Commissioner of Trade Tax, UP, Lucknow [(1998) 7 SCC 228] it was submitted that Para 4 of said Notification being an exclusionary clause, the same has to be strictly construed. Since both the Tribunal as well as the Commissioner (Appeals) have concluded that the use of the word TATA was merely to denote that the product was meant for use in a particular vehicle, the affixation of TATA was merely descriptive of the assessee’s product and not as if the goods had been marketed with another brand name. Reliance was placed on Nirlex Spares (P) Ltd v/s Commissioner of Central Excise [2008-TIOL-05-SC-CX]; Commissioner of Central Excise, Jamshedpur v/s Superex Industries, Bihar [2004-TIOL-100-SC-CX] andEmkay Investments (P) Ltd it was submitted that mere use of the word TATA should not disentitle the assessee from the benefit of the 2 Notifications.

It was submitted that Revenue’s argument that use of the word TATA would confuse the buyers is misplaced in as much as no such test was envisaged under the Notification. Moreover, no such allegations are made in the Show cause notice. In the light of decisions in Commissioner of Customs, Mumbai v/s Toyo Engineering India Ltd [2006-TIOL-111-SC-CUS] and Commissioner of Central Excise, Nagpur v/s Ballarpur Industries Ltd [2007-TIOL-153-SC-CX], it is trite that the foundation of the Revenue’s case is laid in the show cause notice, and the same must be confined to the allegations contained therein.

Reasoning of the Judgment:- The Apex Court perused the provisions of the Notification Nos. 1/93-C.E and 16/97-C.E and the definition of Brand name given therein. It was observed that both the Notifications contain the same definition of brand name and also provide that the exemption contained therein shall not be available to goods bearing the brand name of another person.

It was held that it is manifest from a bare reading of Clause 4 of the Notification read with Explanation IX that it clearly debars an assessee from the benefit of exemption under the notification, if he uses another person’s brandname or trade name with the intention of indicating a connection between the assessee’s goods to those industries which otherwise do not have the advantage of brand or trade name. Reliance was placed on Kohinoor Elastics (P) Ltd v/s Commissioner of Central Excise, Indore [2005-TIOL-120-SC-CX] and on Commissioner of Central Excise, Trichy v/s Grasim Industries Ltd [2005-TIOL-69-SC-CX-LB].

In light of the explanations and cited case laws, the Apex court came to the conclusion that in order to avail the benefit of exemption notification the assessee must establish that his product was not associated with some other person. Differently put, if it is shown that the assessee has affixed the brand name of another person on his goods with intention of indicating a connection between the assessee’s goods and the goods of another person, using such name or mark, then the assessee is able to satisfy the Adjudicating Authority that there was no such intention, or that the user of the brand name was entirely fortuitous, it would be entitled to the benefit of the exemption.

In respondent’s case, the Apex Court noted that the brand name TATA did not belong to the assessee. By using the said brand name, the assessee had not only intended to indicate a connection between the goods manufactured by them and a Tata Company; but also the quality of their product as that of a product of Tata company as they were supplying their goods to the said company. Thus, the bar created in Clause 4 read with Explanation IX of the Notification was clearly attracted in respondent’s case. Thus, respondent-assessee was disentitled from the benefit of the exemption Notifications under consideration. The decision of the Tribunal was clearly erroneous and is therefore set aside.

Further the Apex court contended that in this case the brand name “TATA” did not belong to the assessee and it was used intentionally to indicate a connection between the assessee and Tata Company. Hence the appeal was allowed and the impugned order was set aside. Order passed by the Adjudicating Authority restored.

Decision:- Appeal allowed.

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PJ/Case Laws/2010-11/1058

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