REPORTABLE
|IN THE SUPREME COURT OF INDIA |
|CIVIL APPELLATE JURISDICTION |
|CIVIL APPEAL NO. 2826 OF 2006 |
| |
|COMMISSIONER OF CENTRAL EXCISE, |— | APPELLANT |
|CHENNAI-II COMMISSIONERATE, | | |
|CHENNAI | | |
| |
|VERSUS |
|M/S AUSTRALIAN FOODS INDIA (P) |— |RESPONDENT |
|LTD., CHENNAI | | |
J U D G M E N T
D.K. JAIN, J.
1. The short question of law which arises for consideration in this appeal
is,
whether the manufacture and sale of specified goods that do not
physically bear a brand name, from branded sale outlets, would disentitle
an assessee from the benefit of S.S.I. Notification No. 1/93-C.E., dated
28th February, 1993, as amended from time to time.
2. Briefly stated, the material facts giving rise to the appeal, are as
follows:
Pursuant to an inspection by the officials of the enforcement
Commissionerate, Chennai-II at the sales outlet of the respondent
(hereinafter referred as “the assessee”), revealed that the assessee was
engaged in the manufacture and sale of cookies from branded retail outlets
of “Cookie Man”. The assessee had acquired this brand name from M/s Cookie
Man Pvt. Ltd, Australia (which in turn acquired it from M/s Auto- bake Pvt.
Ltd., Australia). The brand name used the words “Cookie Man” accompanied
with a logo depicting the smiling face of a mustachioed chef. The assessee
was selling some of these cookies in plastic pouches/containers on which
the brand name described above was printed. No brand name was affixed or
inscribed on the cookies. Excise duty was duly paid, on the cookies sold
in the said pouches/containers. However, on the cookies sold loosely from
the counter of the same retail outlet, with plain plates and tissue paper,
duty was not paid.
3. The retail outlets did not receive any loose cookies nor did they
manufacture them. They received all cookies in sealed pouches/containers.
Those sold loosely were taken out of the containers and displayed for
sale separately. Even though no separate register was maintained to
account for the sale of the cookies sold loosely, their numbers were
calculated from the number of empty pouches/containers left behind at the
end of day.
4. On scrutiny of the documents recovered from the said outlet and on the
basis of the statement of the Executive Director, a notice dated 20th
December, 2012 was issued to the assessee by the Commissioner to show
cause as to why (i) the cookies sold by the assessee at its outlets be
not classified under Chapter sub-heading 1905.11 as biscuits and (ii) in
view of their use of brand name “Cookie Man” on sale of cookies in
plastic pouches/containers, S.S.I. exemption should not be disallowed.
5. Upon consideration of the explanation furnished by the assessee, the
Commissioner inter-alia came to the conclusion (relevant for the
controversy at hand) that unless the specified goods or the packaging in
which these are sold, bear the brand name or the logo, prescribed S.S.I.
exemption cannot be denied. Thus, the Commissioner held that since there
was neither any material evidence nor averment to prove that the brand
name was embossed on the cookies, the assessee was eligible to avail of
the benefit of small scale exemption in respect of cookies sold loosely
from the counter of the retail outlet. Being aggrieved by the order, both
the Department and the assessee filed cross appeals before the Customs,
Excise and Service Tax Appellate Tribunal, South Zonal Bench at Chennai
(hereinafter referred to as “the Tribunal).
6. The decision of the Commissioner having been affirmed by the Tribunal,
the revenue is before us in this appeal under Section 35L(b) of the
Central Excise Act, 1944 (for short “the Act”).
7. There is no dispute that the specified good is to be classified under
sub-heading 1905.11 as Biscuits, manufactured with the aid of power. The
controversy revolves around para 4 of S.S.I. notification No. 1/93-C.E.
dated 28th February, 1993, which, in its erstwhile form, read as follows:
-
“4. 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
another person who is not eligible for the grant of exemption under
this notification…”
8. The meaning of a “brand name” or “trade name” is enunciated in
Explanation IX of the said notification which says: -
“Explanation IX- ‘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. Para 4 of the said notification that deals with exemption for certain
goods “affixed” with a brand name was amended vide notification No. 59/94-
C.E. dated 1st March, 1994, to read:-
“4. The exemption contained in this notification shall not apply to
the specified goods, bearing a brand name or trade name (registered
or not) of another person…”
10. Part (iii) of para J of the Budget Changes-1994-95 dealt with “Changes
in the SSI schemes” explains the purpose of the amendment in the
following words:
“(iii) Brand name provision has been amended so as to provide that
SSI concession shall not apply to the goods bearing the brand name
or trade name of another person. The effect of this amendment is
that if an SSI unit manufactures the branded goods for another
person irrespective of whether the brand name owner himself is SSI
unit or not, such goods shall not be eligible for the concession.
Another implication of this amendment is that the requirement of
affixation or brand name by the SSI unit has been changed and now
the only condition is that the goods cleared by SSI unit bearing a
brand name of another person shall not be eligible for the
concession irrespective of the fact whether the brand name was
affixed by the SSI unit or that, the input material used by the SSI
unit was already affixed with brand name.”
11. Mr. N.Venkataraman, learned senior counsel appearing on behalf of the
assessee argued that a combined reading of Para 4 and Explanation IX of
the notification, along with Para J of the Budget Changes, would lead to
the conclusion that only specified goods bearing an affixed brand name,
or in other words, those goods that physically display the brand name,
are not covered by the exemption. Learned counsel relied on the decision
of this Court in the case of Commissioner of Central Excise, Jamshedpur
Vs. Superex Industries, Bihar[1] for the proposition that a physical
manifestation of a brand name on a good is a necessary requirement for
disqualification from the exemption granted by the concerned
notification. Learned counsel also relied on the same decision to urge
that this Court cannot look into the surrounding circumstances of a good,
especially the specific outlet from which it is sold, to construe if it
is branded or not; scrutiny, in his opinion, must be limited to the
specified good itself. The relevant paragraph of the order on which
emphasis was laid, reads as follows:
“3. 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 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.”
12. We are unable to appreciate as to how a compulsory requirement of
physical manifestation of a brand name on the specified good, for it to
be construed as a branded good, can be derived from the above passage.
The decision in the above case simply recognizes that the benefit would
be lost only if a manufacturer affixes the specified goods with a brand
or trade name of another who is not eligible for the exemption under the
notification. It does not state that the specified good must itself bear
or be physically affixed with the brand or trade name. Such an
interpretation would lead to absurd results in case of goods, which are
incapable of physically bearing brand names. For instance, the goods,
which, due to their very nature and structure, are incapable of bearing
brand names, would always be deemed unbranded. Liquids, soft drinks,
milk, dairy products, powders, edible products, salt, pepper, sweets,
gaseous products, perfumes, deodorants etc., to name a few, are either
liquids, gases or amorphous/brittle solids, making it impossible for the
good to be affixed with a brand name. In some situations, such an
affixation may be impossible, in which case, it would be permissible for
the specified good to continue being a branded good, as long as its
environment conveys that it is branded. By environment we mean packaging
and wrapping of the good, accessories it is served with, uniform of
vendors, invoices, menu cards, hoardings and display boards of outlet,
furniture and props used, the specific outlet itself in its entirety and
other such factors, all of which together or individually or in parts,
may convey that a good is a branded one, notwithstanding that there is no
physical inscription of the brand or trade name on the good itself.
Further, a specific, dedicated and exclusive outlet from which a good is
sold is often the most crucial and conclusive factor to hold a good as
branded. The decision referred to above only made a limited point that
invoices alone cannot be the sole basis of construing whether a good is a
branded good or not; it does not hold that a specified good itself must
be stamped with a brand name. It is therefore, permissible to look
into the environment of the good. However, like in the case of Kirloskar
generators [Superex Industries (supra)], invoices bearing brand name
could not be the sole basis of construing whether goods are branded or
not. That decision would depend on the facts and circumstances of the
case. There can be no precise formula for such a determination; in some
cases certain factors may carry more weight than in other situations.
However, in most circumstances, an exclusive branded outlet from which
the good is sold, would be a crucial factor in determining the question.
13. Learned counsel strongly relied on another decision of this Court in
Kohinoor Elastics (P) Ltd. Vs. Commissioner of Central Excise, Indore[2],
for the proposition that only the “specified good” in question must be
scrutinized and the expression cannot be expanded to mean “specified
outlets” or other surrounding circumstances. To bring home his point,
reliance was placed on the following paragraphs from the said decision:
“5. Clause 4 of the notification is unambiguous and clear. It
specifically states that the exemption contained in the notification
shall not apply to specific goods which bear a brand name or trade
name (registered or not) of another person. It is settled law that to
claim exemption under a notification one must strictly comply with the
terms of the notification. It is not permissible to imply words into
the notification which the legislature has purposely not used. The
framers were aware that use of a brand/trade name is generally to show
to a consumer a connection between the goods and a person. The framers
were aware that goods may be manufactured on order for captive
consumption by that customer and bear the brand/trade name of that
customer. The framers were aware that such goods may not reach the
market in the form in which they were supplied to the customer. The
framers were aware that the customer may merely use such goods as an
input for the goods manufactured by him. Yet clause 4 provides in
categoric terms that the exemption is lost if the goods bear the
brand/trade name of another. Clause 4 does not state that the
exemption is lost only in respect of such goods as reach the market.
It does not carve out an exception for goods manufactured for captive
consumption. The framers meant what they provided. The exemption was
to be available only to goods which did not bear a brand/trade name of
another. The reason for this is obvious. If use of brand/trade names
were to be permitted on goods manufactured as per the orders of
customers or which are to be captively consumed then manufacturers,
who are otherwise not entitled to exemption, would get their goods or
some inputs manufactured on job-work basis or through some small
party, freely use their brand/trade name on the goods and avail of the
exemption. It is to foreclose such a thing that clause 4 provides, in
unambiguous terms, that the exemption is lost if the “goods” bear a
brand/trade name of another.”
xxxxx xxxxx xxxxx
“7. ….Now in this case there is no dispute on facts. The “course of
trade” of the appellants is making elastics for specified customers.
It is an admitted position that the appellants are affixing the
brand/trade name of their customers on the elastics. They are being so
affixed because the appellants and/or the customer wants to indicate
that the “goods (elastic)” have a connection with that customer. This
is clear from the fact that the elastics on which brand/trade name of
‘A’ is affixed will not and cannot be used by any person other
than the person using that brand/trade name. As set out hereinabove
once a brand/trade name is used in the course of trade of the
manufacturer, who is indicating a connection between the “goods”
manufactured by him and the person using the brand/trade name, the
exemption is lost. In any case it cannot be forgotten that the
customer wants his brand/trade name affixed on the product not for his
own knowledge or interest. The elastic supplied by the appellants is
becoming part and parcel of the undergarment. The customer is getting
the brand/trade name affixed because he wants the ultimate customer to
know that there is a connection between the product and him…”
14. We feel that to hold from the above passages that every good must be
physically stamped with a brand or trade name to be considered a branded
good in terms of the notification, and that, one is forbidden to look
beyond the specified good into the surrounding environment of the good in
construing if it is a branded good or not, would be a complete
misunderstanding of the above judgment and a distortion of the concept of
a brand or trade name. The above judgment makes no such observation and
was delivered on a completely different set of facts and circumstances.
It involved a case of undergarments manufactured by a producer P2, which
used branded elastics produced by P1, and retained the brand name of P1
in the final product. P2 was denied exemption under the same notification
involved in the present case because of the appearance of brand name of
another i.e. P1, not covered by the same notice. P2 argued that the
presence of P1’s brand name should not be taken as a basis for
disqualification from the benefits of the exemption since the customer
buying the good would continue to associate the good with P2 and not P1,
thus making it a branded good of only P2. This Court rejected the
contention and held that P1 is providing a stamped input for captive
consumption to P2 “because he wants the ultimate customer to know that
there is a connection between the product and him”. The Court further
observed that the term “specified goods” is used without any caveats and
hence rejected the contention that some consideration should be given to
the fact that P1 was used only as an input in the making of the final
product of P2. It is in this background that this Court observed that
the requirement of the notifications must be adhered to strictly and
cannot be diluted by substituting the term “specified goods” with the
nature of goods or the manner of disposal. In case the specified good
clearly exhibits a brand name of another not covered by the notification,
it would squarely fall within the confines of Para 4 of the notification;
looking beyond the specified good to consider whether it is an input or
not is not necessary in case of a conspicuous brand name. However, to
apply this principle to the scenario of a specified good that does not
contain a brand name at all would be equivalent to fitting a square peg
in a round hole. If a final product is marked or stamped with a brand
name, it is clearly a branded good; to stretch this principle to imply
that one not marked by any brand is an unbranded good, is untenable. In
case a scrutiny of the good itself fails to reveal a brand name then the
search must not end there; one ought to look into the surrounding
circumstances of the good to decipher, if it is in fact branded or not.
15. We are of the opinion that such an approach is necessary to maintain
the essence of the concept of a brand name. A brand/ trade name must not
be reduced to a label or sticker that is affixed on a good. The test of
whether the good is branded or unbranded, must not be the physical
presence of the brand name on the good, but whether it, as Explanation IX
reads, “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 the person.” Therefore,
whether the brand name appears in entirety or in parts or does not appear
at all cannot be the chief criterion; primary focus has to be on whether
an indication of a connection is conveyed in the course of trade between
such specified goods and some person using the mark. Highlighting this
principle, this Court in Commissioner of Central Excise, Trichy Vs.
Rukmani Pakkwell Traders[3] observed thus: -
“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.”
16. Similarly, in Commissioner of Central Excise, Chandigarh-I, Vs.
Mahaan Dairies[4], 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.”
“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.”
17. As aforesaid, once it is established that a specified good is a branded
good, whether it is sold without any trade name on it, or by another
manufacturer, it does not cease to be a branded good of the first
manufacturer. Therefore, soft drinks of a certain company do not cease to
be manufactured branded goods of that company simply because they are
served in plain glasses, without any indication of the company, in a
private restaurant. The good will continue to be a branded good of the
company that manufactured it. The same principle would apply in the case
of potato chips, chocolates, biscuits, wafers, powders and other such
goods often sold from various locations.
18. In case of goods sold from exclusive single brand retail outlets or
restaurants or stores, the fact that a good is sold from such a store
ought to be a relevant fact in construing if the good is its branded good
or not. In the case of such goods, perhaps a rebuttable presumption
arises in favour of such goods being branded goods of the specified
store. Such a presumption can be rebutted if it is shown that the
specified good being sold is in fact a branded good of another
manufacturer. Thus, branded potato chips, soft drinks, chocolates etc.
though sold from such outlets, will not be considered to be goods of such
outlets. However, all other goods, sold without any appearance of a brand
or trade name on them, would not be deemed unbranded goods; to the
contrary, they may be deemed to be branded goods of that outlet unless a
different brand or trade name appears.
19. Hence, we hold that it is not necessary for goods to be stamped with a
trade or brand name to be considered as branded goods under the SSI
notification, discussed above. A scrutiny of the surrounding
circumstances is not only permissible, but necessary to decipher the
same; the most important of these factors being the specific outlet from
which the good is sold. However, such factors would carry different hues
in different scenarios. There can be no single formula to determine if a
good is branded or not; such determination would vary from case to case.
Also, our observations must be limited to this notification and not
supplanted to other laws with similar subject matter pertaining to trade
names and brand names.
20. Applying the said principles on the facts at hand,
we fail to see how
the same branded cookies, sold in containers, can transform to become
unbranded ones, when sold from the same counter, or even from an
adjoining counter, without packaging carrying the brand name.
Admittedly,
on the same cookies, physically bearing brand “Cookie Man” sold in
containers carrying brand name duty is paid.
It is interesting to note
that learned counsel appearing on behalf of the assessee first argued
that to determine if the cookies sold from the counter are branded or
not, scrutiny must be limited to the case of the cookies themselves
without looking at the surrounding circumstances; yet went on to argue
that the tissues and plates they were served on did not bear the brand of
the specified good. Either the environment of the goods can be looked
into, or cannot be taken into consideration at all.
Once it is
established, as in the instant case, that the environment of the goods
can be gone into to construe if it is branded or not, we do not see why
the environment of the goods should be limited to the plates and tissues,
on which they are served.
As aforesaid, in the instant case,
the cookies were sold from a dedicated outlet of “Cookie Man” where no other products but those of the assessee were sold.
The invoices carry the name of the company and the cookies were sold from a counter of the store.
In our
opinion, the store’s decision to sell some cookies without containers
that are stamped with its brand or trade name does not change the brand
of the cookies.
We are convinced that the cookies sold even without
inscription of the brand name, indicate a clear connection with the brand
name, in the course of assessee’s business of manufacture and sale of
cookies under the brand name “Cookie Man”.
They continue to be branded
cookies of “Cookie Man” and hence cannot claim exemption under the SSI
Notification.
21. In view of the aforegoing discussion, we are of the opinion that the
impugned decision of the Tribunal is erroneous and unsustainable.
Consequently, the appeal is allowed and the impugned order is set aside,
leaving the parties to bear their own costs.
| |……..…………………………………. |
| |(D.K. JAIN, J.) |
| | |
| | |
| |……..…………………………………. |
| |(JAGDISH SINGH KHEHAR, J.) |
| |
|NEW DELHI, | |
|JANUARY 14, 2013 | |
RS
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[1] (2005) 4 SCC 207
[2] (2005) 7 SCC 528
[3] (2004) 11 SCC 801
[4] (2004) 11 SCC 798
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