• Nov
  • 19
  • 2009

Branded Goods & SSI Exemption

Under Central Excise law a Small Scale Industries (SSI) have been given some benefits in duty payments. However these benefits are not available when the SSI unit is manufacturing goods bearing Brand name or Trade name of another person. It has always been a question of great disputes as to what is the meaning of the Brand name or trade name, or when do we call goods as Branded goods and SSI benefit is not available. In absence of clear statutory guidelines, case law was developed by various pronouncements of the Tribunal. Recently, Hon’ble Supreme Court in case of CCE v/s Rukmani Pakkwell Traders [2004 (165) ELT 481 (SC)] decided the issue. The ruling was reaffirmed by the Supreme Court in CCE v/s Mahaan Dairies [2004 (166) ELT 23 (SC)], CCE v/s Bhalla Enterprises [2004 (1730 ELT 225 (SC)] and in CCE v/s Emkay Investments (P) Ltd.  [2004 (174) ELT 298 (SC).

These judgments of the Hon’ble Supreme Court have overruled numerous orders of the Tribunal. It is in variance with innumerable circulars of the Board and changes a position of law, which was hitherto considered to be a settled position of law. It is rightly said that the uncertainty of law is the greatest tyranny, and the saying is more correct in case of commercial laws dealing with indirect taxation where the burden of the duty has to be passed upon at the time of the clearance of the goods from the factory. Irrespective of these facts, on a pure legal basis, the author is of the view that the Hon’ble Supreme Court has interpreted the exemption notification erroneously. This paper is a humble attempt to examine the statutory validity of the interpretation given by the Hon’ble Court of the SSI exemption notification.

LAW LAID DOWN BY THE SUPREME COURT:

The Supreme Court laid down following laws:

(a). SSI exemption notification is not available if the brand or trade name belongs to other person, even when the brand name or trade name belongs to other person for a different category of goods.

(b). SSI exemption notification is not available even when the other person uses a brand name or a trade name, which consist of a “part” of the brand name or trade name of other person.

BRAND NAME UNDER CENTRAL EXCISE:

Brand name or trade name has been defined in the explanation A of the current SSI exemption notification (Notification 8/2003-C.E. dated 1-3-2003), which says,

“brand name” or “trade name” means a brand name or a 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;”

When we examine the contents of this definition, following points are evident: -

(a). Registration of brand name or trade name is not relevant.

(b). It can be a name or mark, such as symbol, monogram, label, signature or invented word or writing.

(c). It must be used in relation to such goods.

(d). The purpose of such trademark must be to indicate a connection in course of trade.

It may be noted that the definition of trademark in the Central Excise notification is much narrower to the definition of trademark in the Trade Marks Act, 1999. Under Section 2(zb) of the Trade Marks Act, even the shape of goods, packaging, combination of colors etc. can be a Trademark. Further even a collective trademark or a certification trademark is a trademark within the definition of trademark under section 2(a) of the Act. Certainly the certification trademark, like ISI of the Bureau of Indian Standard or ISO of International Standards Organisation does not come under the definition of brand name under Central Excise. If that is the case, an ISI marked product or a product bearing ISO mark will be denied exemption notification, as ISI is a trademark within the meaning of the Trade Marks Act, 1999.

The SSI exemption cannot be denied merely because there is a brand name or trade name on the product, but such brand name or trade name must be “of another person”(clause 4 of the notification).

OF ANOTHER PERSON:

What is the meaning of the term “of another person”? When do we say that a trade name or brand name is of another person?

In a simple scenario, when a trade mark is registered in the name of another person, it can certainly be said that the trade name is of another person. It may be noted that the trade mark is registered for specified group of products. Thus a trade name can be of another person only for that specified group of products and not for other products. We will return to this question when we will examine the first proposition laid don in case of Rukmini Packkwell.

It may be noted that SSI exemption can be denied even when trade name or brand name of another person is not registered. Thus the next question is, when can we say that an unregistered trade name is of another person? In cases of well-known trademarks like TATA or Rolls Royce, it can easily be said that the trade name belongs to other person. A well-known trade mark has been defined in Section 2(zg) of the Trade Marks Act, 1999.

Now we are left with other trade names or brand names which are not registered and which are not well known trade marks. When can we say that these trade name or brand name is of another person? Say there is a manufacturer using a laudatory word “best” as a brand name for its product. Certainly the word “best” cannot be allowed to be monopolized by any person and every manufacturer has a right to describe its product as “best”. We cannot say that the mark “best” is of other person. Similarly when the other manufacturer using a descriptive word as its brand name, say “fair” for beauty cosmetics, it is not fair to disallow this brand to any other person. It cannot be said that the word “fair” is of another person. The Trade Marks Act, 1999 makes various provisions for disallowing these words for registration as trademark. Thus a word, which cannot be registered as a trademark, cannot be said to be falling under the definition of brand name or trade name under the Central Excise provisions particularly when it is clearly seen that the definition of brand name or trade name is much narrower in the Central Excise provisions. Similarly a word like “Shimala” or “Goa” or “New Delhi” can never be of another person, these words are of everyone. It may be noted that all these words are big brands. Merely because these are brand name or trade name used by some person, it cannot be said that they are of another person.

Let us examine it differently. A brand name or trade name is not “of other person” merely because that other person is using it as his brand name. Can we say the word “New Delhi” is of NDTV? The answer is an emphatic “No”.

Here comes the examination of purpose of putting the brand name or trade name. The definition of brand name in the explanation of exemption notification is emphasizing the “purposive” aspect of the brand name or trade name. It must be put on the product so as to indicate a connection in the course of trade. Say for example “fair & lovely”, a brand name used by Hindustan Lever Limited. It cannot be said that the name “fair & lovely” is of another person. Yes, the particular style of writing can belong to other person and it may be copyrighted under the relevant law. Thus a manufacturer who is using the mark “fair & lovely” on the product in the same style and with same color combination so as to indicate a connection in course of trade is not eligible for SSI exemption. But if the manufacturer is using the same word in a different style and in a different color combination, distinct from the used by other person cannot be denied SSI exemption, as the word simplicitor cannot be said to be of other person.

ONUS OF PROOF:

From the basic rule of evidence, the person who asserts must prove. Thus, if the department wants to deny the exemption notification on the ground that the brand name or trade name is of other person, must prove the case. The assessee cannot be asked to prove that the trade name doesn’t belong to any other person. In any case this negative fact cannot be proved. Under evidence law also, no person can be asked to prove a negative fact. There doesn’t appear to be any disagreement on this point.

SHOULD SSI EXEMPTION IS DENIED IF THE TRADEMARK BELONG TO OTHER PERSON FOR SOME OTHER CATEGORY OF GOODS.

If a person is using a trademark for some specified category of goods, can it be said that the trade name is for all category of goods. It can certainly be said that the trade name belongs to him for that category of goods. Say, ACC is the trade name of some person for cement. Can it be said that the name ACC belongs to him for al category of goods, i.e. for gunny bags also. This concept is entirely different from the concept of trademark as understood by general parlance.

SSI exemption can be denied only when it is established that the trade name or brand name is of another person. The brand name ACC is of another person only for cement and not for say, motorcars. Similarly “Maruti” is a brand name for motorcar, it belongs to some person for motorcar but it doesn’t belong to that person say for edible oil.

The concept is also not in conformity with various circulars issued by the Board. This author is of the view that rulings of Hon’ble Supreme Court on this point is erroneous and needs to be reviewed.

WHETHER PART OF A TRADE NAME IS A TRADE NAME:

In view of this author part of a trade name is not trade name. The concept is same in the trademark law also. Say, for example “Excise Law Times” is a trade name of a reputed law journal. Can we say that the journal is using the part trade name of “Times of India”, for the word “Times” is common. Can it said that the word “Times” is there in the trade name “Times of India” hence the trade name “Excise Law Times” if a trade name of “Times of India” as the part “Times” is common to both. Or can it be said that “India TV” is using the part of the trade name “Times of India”. It may be emphasized that reasonableness is heart and soul of law.

SSI exemption can be denied only when it can be said that the brand name, put on the goods, seen as a whole is of another person.

A trademark has to be seen as a whole. It has to be seen as to what impression it creates in the ordinary course of trade. Part of a trade name is not a trade name, even when a trade name is registered. The judgment needs to be reviewed on this point.

CONCLUSION:

In view of this author, the Supreme Court judgment in case of Rukmini Packkwell is erroneous and needs to be reviewed.

Written by:- Advocate Rajesh Kumar. The author can be contacted on The author can be contacted on custom.excise@gmail.com , Web: www.rajeshkumar.co.in


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