Restriction to use trade mark beyond a physical area limit does not automatically make it usable within the allowed area if same belongs to other person- SC

Brief of the case:

The Hon’ble Supreme court in the case of Kali Aerated Water Works held that the restricted right to use of any trade mark and trade name does not make it use as use of brand name belonging to others since the assessee has right to use though restricted as mutually agreed between some parties.

Thus, the use of trade name and mark by the assessee within his own marketing area is use of brand name belonging to his and not others

Facts of the case:

• The assessee is a Small Scale Industrial Unit ( SSI Unit) engaged in manufacturing Aerated Water under various brand names using the trade mark with the “Kalimark” / M/s.Kali Aerated Water Works” .

• It sought exemption from payment of excise duty in terms of Notification 1/93-CE dated 28.2.1993 (as amended vide Notification No.59/94-CE dated 1.3.1994) for the aforesaid goods manufactured in its factory.

• The exemption was denied by the department on the ground that trademarks (brand name) “Kalimark” has been used on the goods which belong to M/s. Shri K.P.R.Shakthivel. Since the goods are manufactured under the brand name of some other person the exemption is not available as this is one of the condition for availing exemption under the aforesaid notification.

• The tribunal decided the case in favour of department by concluding that in view of agreement signed by the parties to family business after partition the ownership of the aforesaid trademark/brand name `Kalimark’ no longer remained with the appellant assessee and it belongs to the other party. Thus, the assessee has been using the trade mark/brand name of the third party. , aggrieved by the same the assessee is in appeal before the Hon’ble Supreme Court.

Contention of the Assessee:

• The mutual agreement signed at the time of partition between the parties to family business stated that the right to use the Trade name M/s. Kali Aerated Water Works and Trade Marks are solely vested with the direct male lineal descendants of Karta (i.e. male descendants of Shri P.V.S. K.Palaniappa Nadar who was Karta of HUF which was carrying the business earlier).

• Such right was however, restricted to a particular area for every party in which such party is carrying out his operations.
• Thus, the assessee also has the right to use the brand name in its own marketing area.
  

Contention of the Revenue:

• The learned counsel for department supported the order of tribunal that the assessee was using the brand belonging to Mr. Shri K.P.R.Shakthivel, thus exemption under notification no. 1/1993 not available.

Decision of the Hon’ble Supreme Court:

• It is clearly stated in the mutual agreement between the parties to partitioned family business that the trade name `Kalimark Aerated Water Works’ and trade mark mentioned in the said agreement would remain vested in all the parties including the appellant.
• The agreement further provided that every party in whom the trade name and mark so vest shall have right to use the same within a particular market area. It also provided that user of this trade mark, therefore, shall not make any payment of royalty or remuneration to any other party.
• Even further, it is not the case of the Revenue that the assessee is marketing his products outside his marketing area. Thus, the above findings make it very clear that the assessee has the right to use the trade name and trade mark within his marketing area.
• In result the appeal of the assessee is allowed.