CESTAT Mumbai held that unless a Trade Mark/ Brand Name is registered in the name of the assessee, the assessee is not entitled to the benefit of SSI exemption notification.
Facts- This appeal of M/s Kalki Industries lies against order of Commissioner of Central Excise (Appeals) for having dismissed their challenge to order of original authority holding them liable to duties of central excise amounting to ₹9,73,258 on excisable goods cleared between 1st April 2011 and 16th October 2011 u/s. 11A of Central Excise Act, 1944, along with interest as applicable u/s. 11AA of Central Excise Act, 1944, besides imposing penalty of like amount u/s. 11AC of Central Excise Act, 1944.
It was alleged that the appellant, a manufacturer of ‘electrical accessories’ and ‘lighting accessories’, and availing the benefit of notification no 8/2003-CE dated 1st March 2003 intended for ‘small scale industry’, was found to be ineligible thereto as ‘(b) clearances of the specified goods which are used as inputs for further manufacture of any specified goods within the factory of production of the specified goods.’ Among the conditions enumerated in paragraph 3 of the notification was breached by branding the goods as ‘KALKI belonging to one Mohanlal Gosaria and one Hemlata Gosrani whereas the appellant is a sole proprietorship of Shri Chandrakant G Gosaria.
Conclusion- It is a settled law that unless a Trade Mark or Brand Name was registered in the name of the assessee, he was not entitled to the benefit of SSI exemption notification.
Held that as the very basis of the finding of non-eligibility by the original authority, endorsed in the impugned order, has thus been discarded by the Tribunal and it is not the case of the central excise authorities that the appellant had crossed the exemption threshold, nothing remains of the demand. Accordingly, the impugned order is set aside and appeal allowed.
FULL TEXT OF THE CESTAT MUMBAI ORDER
This appeal of M/s Kalki Industries lies against order1 of Commissioner of Central Excise (Appeals), Mumbai Zone-I for having dismissed their challenge to order of original authority holding them liable to duties of central excise amounting to ₹9,73,258 on excisable goods cleared between 1st April 2011 and 16th October 2011 under section 11A of Central Excise Act, 1944, along with interest as applicable under section 11AA of Central Excise Act, 1944, besides imposing penalty of like amount under section 11AC of Central Excise Act, 1944.
2. It was alleged that the appellant, a manufacturer of ‘electrical accessories’ and ‘lighting accessories’, and availing the benefit of notification no 8/2003-CE dated 1st March 2003 intended for ‘small scale industry’, was found to be ineligible thereto as
‘(b) clearances of the specified goods which are used as inputs for further manufacture of any specified goods within the factory of production of the specified goods.’
among the conditions enumerated in paragraph 3 of the notification was breached by branding the goods as ‘KALKI belonging to one Mohanlal Gosaria and one Hemlata Gosrani whereas the appellant is a sole proprietorship of Shri Chandrakant G Gosaria. The original authority has held that
15. The notice is specific, whereas, the shown cause is peripheral. The Order-in-Original 21.03.2012 and the present notice is based on the decision of the Supreme court in Meyer Health, supra. The noticee speaks volume. But then, there is not a whisper about the Meyer Health or its inapplicability. By not speaking, they accept its applicability, since, the shown cause herein is much after communication of the Order-in-Original 21.03.2012.
16. The noticee cites many precedents. They list themselves out. However, they do not discuss the facts therein or submit that Meyer Health is per incuriam or is bad in the light of these precedents. They are aware that Meyer Health applies all four to the facts herein, as has been found in Order-in-Original 21.03.2012.
17. The submissions, made herein have been discussed, analyzed and found against in the Order-in-Original 03.2012. There would be no point in speaking them again.’
lending credence to the fact that it had merely followed an existing adjudication order. No fault, too, was found by the first appellate authority either for this or for having based a finding on lack of response to counter a decision of theresponse to counter a decision of the Hon’ble Supreme Court that had been cited in the show cause notice.
3. Indeed, it is astonishing that the lower authorities have taken it for granted that a judicial decision can be the ground for issuing notice for recovery against another assessee. Notices should be all about breach of law, as legislated and notified, set forth in a notice for it is far-fetched to consider any decision to be precedent for anything other than itself.
4. We have heard Learned Counsel for appellant and Learned Authorized Representative at length. Interestingly, as pointed out by Learned Counsel, the order2 referred to in the adjudication proceedings as sufficient to hold against the appellant in the matter now before us had disposed off by order3 of the Tribunal in Kalki Industries v. Commissioner of Central Excise, Mumbai-V thus
‘4.3 Commissioner in the impugned order does not deny that the benefit of SSI exemption would be admissible to the appellant, but he mentions the date of registration of the brand name in the name of Shri Chandrakant Gosrani as the date from which SSI exemption admissible to them. As per the impugned order, the only reason which he has cited for doing so is that the earlier partners have executed another notarized registered deed of assignment on 06.05.2011 and the actual assignment could have occurred only on that date.
4.4 We refer to the various deeds which have been executed from 1st June 2005 onwards, which are reproduced below:-
4.5 From the perusal of the above deeds, it is very clear that trade mark No. 622155 KALKI registered in the name of Shri Mohanlal Gosar Gosrani and Smt. Hemlata Gosrani has been assigned in the name of Shri Chandrakant Gosrani and this fact has been duly intimated in the affidavit filed before Registrar of Trade Marks, Mumbai. Affidavit of 11.05.2011 also refers to the earlier deed and says that it was assigned on 06.05.2011. Reliance by Commissioner on the affidavit of 2011 to deny the fact of assignment of the trade mark in the name of the appellant on 06.05.2011 is contrary to the above facts.
4.6 Further, even the Trade Marks authorities have issued the registration certificate in the name of the appellant which is reproduced below:-
From the perusal of the above certificate of registration it is clear that the brand name KALKI was registered in the name of the appellant from 01.07.2009.
4.7 Commissioner has given no plausible reason for denying SSI exemption.
4.8 Appellant has relied upon the following decisions in his support:
A. Arco Whitney Ltd. [2006 (193) ELT 217 (Tri-Mum)]
“4. We do not find much force in the above reasoning. Scrutiny of the purchase deed show that the unit ‘ARCO WHITNEY’ was sold along with all its assets and properties which included trademarks, designs etc. The words A/W was not being used by M/s. American Refrigerators Co. Ltd. which was using the brand name ARCO in respect of the air conditioners being manufactured by it at other place. Arco- Whitney was manufacturing hydraulic equipments, which were not being manufactured by M/s. American Refrigerator. The appellant having purchased the going concern M/s. Arco-Whitney was entitled to use the brand name as its own and it cannot be said that they were using somebody else’s brand name.
5. The Hon’ble Supreme Court in the case of CCEx., Ahmedabad v. Vikshara Trading and Invest. Pvt. Ltd. reported in 2003 (157) E.L.T. 4 (S.C.) has held that when there was an assignment of Trade mark in favour of other person, the benefit of small scale notification cannot be denied and the trade mark need not necessarily be in respect of all the goods and it is permissible in law to have same brand name for different classes of goods owned by different persons. In the instant case, it cannot be said that the brand name of M/s. Arco-Whitney was also being used by M/s. American Refrigerators Co. In fact clause 13 refers to the purchaser’s sanction to the appellants for using the brand name and strengthens the appellant’s case that after the day of the deed date, the trade name belongs to the appellant. Further, clause 12 of the agreement stipulates that after the date of completion, purchaser would be entitled to carry on the business under the name and style of M/s. Arco-Whitney and to refer themselves as vendor’s, successor in that business and will have availed full liberty to run the said business in the manner as may be decided by the purchaser. As such, it is clear that entire assets of the running units along with trademark were purchased by the appellant. In such case it cannot be said that the same belongs to the seller. Use of the same will not disentitle the appellant from the benefit of small scale exemption of the notification.”
B. Vankatesh Yedidha [2016 (332) ELT 860 (Tri-Mum)]
“7.1 After considering the submissions made by both sides and on perusal of the records, we find that as regards the issue No. 1 the entire arguments of the learned Consultant is Venky & Co. is sole proprietorship firm while ICPL is a Private Limited Company hence, clearances cannot be clubbed as also for the reason that both the entities are geographically located at different places, while it is the findings of the adjudicating authority that Shri Venkatesh was sole proprietor of Venky & Co. and held 90% shares of ICPL hence the clubbing of clearances needs to be done, we do not agree with the findings recorded by the adjudicating authority on this point. It is undisputed that Venky & Co. is a sole proprietorship firm and ICPL is a Private Ltd. firm. C.B.E. & C. vide Circular No. 6/92, dated 29-5-1992 referred the issue and a direction under Section 37B was issued by the Board which reads as under :-
“2. The Board had then felt the position as mentioned above including in respect of Notification No. CER-8(5)-C.E., dated 1-3- 1956 was sufficient to deal with the interpretation under Notification No. 176/77, dated 18-6-1977.
Now in exercise of the powers conferred under Section 37B of the Central Excise Act, 1944 for the purpose of ensuring uniformity of levy of duties of excise, the Central Board of Excise and Customs have ordered that the general principles as mentioned above in the context of Notification No. 176/77, dated 18-6-1977 will be applicable to Notification No. 175/86 also. The Board have issued the above order on 29-5- 1992.
Sub : – The text of the Direction issued under Section is as follows :-
“In exercise of the powers conferred under Section 37B of the Central Excise Act, 1944 for the purpose of ensuring uniformity of levy of duties of excise the Central Board of Excise & Customs has ordered that the following general principles will be applicable to Notification No. 175/86-C.E. :-
(i) The question whether different partnerships having common partners are treatable as separate manufacturers or the same manufacturer, would be a question of fact in each case to be determined on the basis of such factors among other, like composition of the partnership, existence of the factory, licence, nature of goods manufactured, etc.
(ii) Different firms will be treated as different manufacturers for the purpose of exemption limit. But if a firm consisting of certain partners say A, B & C has got more than one factory, all these factories should of course be Limited Companies whether public or private are separate entities distinct from the shareholders composing it. Hence each limited company is a manufacturer by itself and will be entitled to a separate exemption limit.
(iii) If there are two firms with only some of the partners in common, each firm is entitled to separate exemption limit and hence the question of distributing the exemption may not If one firm or individual owns several factories, he or it gets exemption only in respect of one individual owns several factories, he or it gets exemption only in respect of one lot and the manufacturer being only one entity there will be no question of distributing the exemption.
(iv) Whether or not in the expression ‘by or on behalf of a manufacturer the expression ‘from one or more factorie’s is added, the effect would be the same if the manufacturer is also the same. The expression ‘one or more factorie’s only further clarifies that whether the factory is one or more, it is the clearances by or on behalf of the same manufacturer which is to be taken into consideration for purposes of interpreting the exemption notification”. (emphasis supplied)
7.2 It can be seen from the above reproduced portion at point No. (ii), the Board has specifically stated and clarified that Limited Companies whether public or private are separate entities and partnership firm is separate entity than the Ltd. Company. In the case in hand, the Limited Co. being separate entity and distinct from share holders, it cannot be said that Shri Venkatesh having 90% of shares in ICPL by virtue of being proprietor of Venky & Co., the clearances could be clubbed. In our view Revenue is arguing against their own circular which is incorrect. This view was taken by the Hon ble High Court of Madras in the case of Campion Plastic Industries Ltd. – 1996 (84) E.L. T. 189. Accordingly, we hold that the clearances effected by the sole proprietorship firm Vinky & Co. and ICPL cannot be clubbed for arriving at the total clearances of ICPL. This view of ours is also from the fact that both the entities are located at different places and registered with authorities under whose jurisdiction they fall.
7.3 As regards the using of Brand name “Irony” and “Terminator”, w hold that the Brand name “Irony” was assigned to the appellant ICPL by Venky & Co. by an assigned deed. We find that the adjudicating authority in the impugned order in unnumbered paragraph at internal page No. 15 of order-in original has recorded as under :-
“So far as the Brand n me is concerned, the assessee has submitted a proof that the Brand name “Irony” had since been registered in their name in the Certificate No. 300446, dated 31- 5-2004 with effect from 24-11-1997. The Certificate was sent for verification and the Trade Marks Authority had certified the same as true ………………………… It is a settled law that un ess a Trade Mark or Brand Name was registered in the name of the assessee, he was not entitled to the benefit of SSI exemption notification……………”
It can be seen from the reproduced portion of the findings it is undisputed that the Brand name “Irony” was registered with the authorities in the name of Venky & Co. and from the deed of assignment it could be deduced that the said Brand name was assigned to the appellant ICPL in this case. Nothing is brought on record to show that even after assigning the Brand “Irony”, Venky & Co. were using and clearing the products with the said Brand name. In the absence of any such evidence we have to hold that by virtue of being Brand assigned to them, ICPL is entitled to avail the benefit of small scale exemption.”
We are of the view that case of the appellant is squarely covered by the above decisions and nothing contrary has been produced before us. SSI exemption would be available to the appellant during the entire period of demand.
5. As the very basis of the finding of non-eligibility by the original authority, endorsed in the impugned order, has thus been discarded by the Tribunal and it is not the case of the central excise authorities that the appellant had crossed the exemption threshold, nothing remains of the demand.
6. Accordingly, the impugned order is set aside and appeal allowed.
(Order pronounced in the open court on 11/10/2023)
1 [order-in-appeal no. BPS/47/M-V/2013 dated 18th August 2013]
2 [order-in-original no. 187/1 9/V/2012/Commr/KS dated 21st March 2012]
3 [final order no. 86298/2022 dated 22nd December 2022 in excise appeal no. 963 of 2012]