Holding

The exemption under Notification No. 175/86-CE is unavailable because the notification is goods‑specific and the brand name used belongs to a trader, not an eligible manufacturer of the specified goods.

Summary

The respondents, manufacturers of brass sanitary fittings, used the stylised brand name "ARK" belonging to Mis Arkson Pvt Ltd, a trader, while claiming exemption under Notification No. 175/86-CE for small scale units. The Revenue argued that the exemption was unavailable because the brand name of another person, not eligible for the exemption, was affixed to the specified goods. The CEGAT initially held the brand name was a trade name within the notification but later confirmed duty and penalty, while the Appellate Authority set aside that decision. The Supreme Court held that the notification is goods‑specific; therefore, only a manufacturer eligible for exemption with respect to the specified goods can claim the benefit, and using a trader’s brand name disqualifies the exemption. The Court also noted that the issue of the extended period of limitation had not been decided and remanded the matter to the CEGAT for fresh consideration of that point, allowing the appeals in part and ordering no costs.

Issues considered

Whether exemption under Notification No. 175/86-CE is available when the brand name affixed to the specified goods belongs to a trader who is not the manufacturer of those goods.
Whether the extended period of limitation (time‑bar) is applicable in the present proceedings.

Legislation cited

Central Excise Rules, 1944s. Rule 174
Central Excise Tariff Act, 1985

Subjects

central exciseexemptionsmall scale unitsbrand namegoods specific notificationextended limitation periodCEGATbrass sanitary fittings

Judgment

COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH A
v.
MIS KHANNA INDUSTRIES AND ORS.

NOVEMBER 28, 2006

[ARIJIT PASAYAT AND S.H. KAPADIA, JJ.] B

Central Excise Tariff Act, 1985; Sub-headings 8481.80 and 8481.99;
Notific_ation No. 175186-CE:

Exemption Notification-Applicability of-Assessees manufacturing C
brass sanitary fittings affixing thereon label printing brand name of another
firm and availing exemption under a Notification-Denying the exemption,
Revenue demanded differential amount ofduty-On appeal, CEGA T remanded
the matter to Revenue for de novo decision-Revenue confirmed demand of
duty-Reversed by Appellate Authority-Affirmed by CEGAT-On appeal, D
Held: Notification in question is goods specific-Manufacturer claiming
exemption must be eligible in respect of the specified goods in question in
terms of the Notification-Since emphasis is on specific goods, order of
CEGAT indefensible-Assessees uses brand name of a trader and not that of
a manufacturer of brass sanitary fittings-Intention of legislature is clear as
indicated in the Notification-Hence, assessees cannot claim benefit under E
the Notification-Interpretation of Statutes.

Extended period of limitation-Applicability of-Held: Since the issue
was not considered by CEGAT, the matter remanded for consideration of the
issue afresh by CEGAT.
F
Respondents manufact11re Brass Sanitary Bathroom fittings falling
under Sub-heading 8481.80 and 8481.99 of the Schedule to the Central Excise
Tariff Act, 1985. They were using brand name "ARK" of Mis. Arkson Pvt.
Ltd. on the product. All the respondents were availing exemption under
Notification No.175/86-CE. Proceedings were initiated against them for G
demand of differential amount of duty as brand name of another firm was used
by them. The matter was decided by the Revenue holding that the respondents
were affixing on specified goods the brand name of another firm, thus, not
eligible for grant of exemption under the Notification and also there was

725 H
726 SUPREME COURT REPORTS (2006] SUPP. 9 S.C.[l.

A suppression on the part of the respondents. On appeal filed by the Assessees,
CEGAT remanded the matter for de novo decision after arriving at a finding
in regard to the eligibility to claim exemption under the Notification. The
Tribunal, however, gave specific finding that stylised "ARK" is a trade name
of Mis. Arkson within the meaning ofrele"\'ant para of Notification No.175/
86-CE. On remand, Revenue confirmed the demand of duty and imposed penalty
B on all the respondents/assessees. Revenue gave findings to the effect that the
respondents had started amxing stylised brand name "ARK" w.e.f. September,
1991 and not from April, 1992 as contended and extended period oflimitation
was invokable as the fact regarding manufacture of the goods affixed with
brand name of another firm was never brought to the knowledge of the Revenue.
C Aggrieved, the respondents filed appeals which were allowed by the Appellate
Authority. Revenue preferred appeals before the CEGAT which endorsed the·
view of the Appellate Authority, but did not record any finding on the question
of extended period of limitation. Hence the present appeals.

Revenue contended that the goods were cleared by the respondents who
D are manufacturers and the brand owner is a trader. Even ifthe brand owner
is a manufacturer he is required to be manufacturer of specified goods; that
CEGAT erred in holding that if the brand owner is a manufacturer; he is not
required to be manufacturer of the specified goods; and that the small scale
industry is not manufacturer of specified goods, and as such is not en~itled to
E any exemption.

Assessee submitted that the extended period of limitation is not
applieableand that question has not been decided by CEGAT.

Partly allowing the appeals, the Court
F HELD:l.1. Notification in question is 'goods specific'. What is required
is that a person, who may be a manufacturer, must be eligible for exemption
under the Notification in respect of the specified goods. Any other
interpretation would render the purpose for which the notification has been
issued redundant. The notification is 'goods specific'. The emphasis is on
G 'specified goods'. That being so, the impugned judgment of the CEGAT is
indefensible. (731-G-H; 732-A)

1.2. In the present case, the issue relates to manufacture of brass
sanitary bathroom fittings. Mis Arkson Engg. Co. manufactures C.I. castings
while Mis Arkson Pvt Ltd. are the owners of the stylized brand name "ARK".
H However, the said company is engaged in trading of "brass sanitary fittings".
... COMMNR. OF CENTRAL EXCISE, CHANDIGARH"· KHANNA INDUSTRIES [PASAYAT, l.] 727

Thus, they are traders. Assessees cannot take the benefit of the registration A
certificate of Mis Arkson Engg. Co. as both are separate legal entities.
Therefore, the assesses use the brand name/trade name of "ARK" in the
context of "brass sanitary fittings" the assessees are not entitled to claim
the benefit as the stylized brand name "ARK" belongs to Mis Arkson Pvt.
Ltd. and not to Mis Arkson Engg. Co. [732-B-C-D)
B
1.3. The intention of the legislature is crystal clear that at the relevant
time, the unit should be eligible for exemption under the Notification in respect
of the 'specified goods'. [732-F)

Namtech Systems Ltd v. Commissioner of Central Excise, New Delhi, C
(2000) 115 E.L.T. 238 (Tribunal), referred to.

2. However, as rightly contended by the respondents that the plea
relating to non-applicability of extended period of limitation has not been
considered by the CEGAT. Therefore, the matter is remanded and the said
issue alone will now be considered by the CEGAT. (732-G) D
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 4192-4224 of
2001.·

From the Final Order No. 1363-1397/2000-B dated 13.9.2000 of the Customs,
Excise & Gold (Control) Appellate Tribunal, New Delhi in Appeal No. E/785- E
799/2000-B and Appeal No. E/900-917/2000-B.

K. Radhakrishnan, Vijay Hansaria, Joseph Vellapally, A. Subba Rao, Ms.
Binu Tamta, Ajay Sharma, T.A. Khan, B. Krishna Prasad, A.R. Madhav Rao,
Alok Yadav, V. Balachandran, Vikas Mahajan, Bhaskar Y. Kullarni, Ms. Sneha
Kalita, Sunil Kumar Jain, Nagraj, Ms. Praveen Gauta..'11, Ajay Pal Singh, Pramod p
B. Agarwala, Tarun Gulati, Raghvesh Singh, Jaiveer Shergill and K.R.
Sasiprabhu for the appearing parties.

The Judgment of the Court was delivered by

ARIJIT PASAYAT, J. In these appeals, Revenue questions correctness G
of the judgment rendered by the Customs, Excise & Gold (Control) Appellant
Tribunal, New Delhi, (in short 'CEGAT'). It was held by the impugned judgment
that the respondents were eligible to avail benefit of the exemption notification
No.175/86-CE and para 7 thereof will not be attracted in the present case.
Appeals filed by the Revenue questioning correctness of the decision rendered
by the Commissioner (Appeals), Central Excise & Customs, Chandigarh [in H
~
728 SUPREME COURT REPORTS [2006] SUPP. 9 S.C.R.

A short 'Commissioner (Appeals)], were dismissed.
The background facts in a nutshell are as follows:

Respondents manufacture Brass Sanitary Bathroom fittings falling under
Sub-heading 8481.80 and 8481.99 of the Schedule to the Central Excise Tariff
B Act, 1985 (in short 'Tariff Act'). The goods were packed in cardboard boxes
on which stylised brand name "ARK" was printed and labels affixed on
cardboard boxes also showed the brand name "ARK" in the stylised script;
name and address of Mis. Arkson Pvt. Ltd., Chandigarh was also printed on
the label; in addition "ARK" was put on the Sanitary fittings by pasting
stickers and also by affixing tickli on the body of the fittings. All the
c respondents were availing exemption under Notification No.175186-CE.
Proceedings were started against them for demand of duty as brand name
"ARK" in stylised script was brand name of Mis. Arkson Pvt. Ltd. Initially
the matter was decided by the Collector, Central Excise who denied the
exemption under Notification No.175186-CE holding that the respondents were
affixing specified goods with the brand name of another person not eligible
D
for the grant of exemption and also there was supptession on the part of the
respondents. On appeal filed by the Assessees, the CEGA T remanded the
matter for de novo decision after arriving at a finding in regard to the
eligibility to exemption of Mis. Arkson Pvt. Ltd. under Notification No.175/
86-CE and to arrive at a definite finding in regard to other pleas of use of trade
E mark w.e.f. April, 1992 and other related.1matters concerning time bar. The
CEGAT, however, gave specific finding that stylised "ARK" is a trade name
of Mis. Arkson within the meaning of relevant para of Notification No.1751
86-CE.

On remand the matter has been decided by the Additional Commissioner
F who confirmed the demand of duty and imposed penalty on all the respondents
holding that since Mis. Arkson Pvt. Ltd. was not eligible for the benefit of
Notification No.175186-CE since it was not holding any L-4 licence; the casting
of pig iron manufactured in their proprietary concern Mis. Arkson Engg. Co.
was exempted from payment of duty under Notification No.208183. dated
G 1.8.1983 and no declaration as required to be filed under Rule 174 of the
Central Excise Rules, 1944 (in short the 'Rules'), was filed by it; castings
falling under Sub-heading 7325.10 of the Tariff were specified in the Annexure
to the Notification. In addition the Additional Commissioner, relying upon .
decision in the case of Mentha & Allied Products v. Union of India, (1995)
r
77 ELT A-133 SC, concluded that aggregate sale figure of Mis. Arkson Pvt.
H
COMMNR. OF CENTRAL EXCISE. CHANDIGARH"· KHANNA INDUSTRIES [PASAYA T, J] 729

Ltd. was more than Rs.2 crores during 1990-9 l and 1991-92 and accordingly A
the benefit of Notification was also not available to it. The Additional
Commissioner gave findings to the effect that the respondents had started
affixing stylised brand name "ARK" w.e.f.September, 1991 and not from April,
1992 as contended and extended period of limitation was invokable as the fact
regarding manufacture of the goods affixed with brand name another person
was never brought to the knowledge the Department. B
Respondents questioned correctness of the view expressed by the
adjudicating authority before the Commissioner (Appeals). The said authority
set aside the adjudication orders holding that eligibility of Mis. Arkson Pvt.
Ltd. has to be considered in the light of the fact that Brass sanitary bathroom C
fittings are classified under sub-headings 8481.80 and 8481.99 which are
specified in Annexure to Notification no.175186-CE, Para 3 of Notification
does not stipulate that value of the trading goods is to be taken into
consideration for computing the aggregate value of clearance and Mis. Arkson
Pvt. Ltd. being registered as SSI unit have made substantial compliance of
conditions laid down in Notification no.175186-CE. It was further held that D
non-fulfilment of requirement of Rule I 74 was on account of the fact" ARK"
in simple form was regarded as brand name of Mis. Khanna Industries who
had complied with Rule 174 and it was the Tribunal's decision that separate
identity of" ARK" and stylized "ARK" was established and, therefore, extended
period of limitation was not applicable.
E
Revenue preferred appeals before the CEGA T which endorsed view of
the Commissioner (Appeals), but did not record any finding on the question
of extended period of limitation.

Stand of the appellant is that the goods were cleared by the respondents F
who are manufacturers and the brand owner is a trader. Even if the brand
owner is a manufacturer he is required to be manufacturer of specified goods.
CEGA T erred in holding that if the brand owner is a manufacturer; it is not
required to be manufacturer of the specified goods. The small scale industry
is not manufacturer of specified goods, and as such is not entitled to any
exemption. G
In response, learned counsel for the respondent submitted that CEGA T's
view is correct. In any event it is pleaded that the extended period of limitation
is not applicable and that question has not b~en decided by the CEGA T.

In order to appreciate the rival submissions, the relevant notifications H
730 SUPREME COURT REPORTS [2006] SUPP. 9 S.C.R.

A need to be noted. Notification No.17 5/86-C.E. dated 1.3 .1986 reads as follows:
"EXEMPTION TO SMALL SCALE UNITS

In the exercise of the powers conferred by sub rule (1) of rule 8 of the
Central Excise Rules, 1944 and in supersession of the notification of
B the Government of India, in the Ministry of Finance (Department of
Revenue) No. 85/85-Centra!Excises dated the 17th-March, 1985 the
Central Government hereby exempts the excisable goods of the
description specified in annexure below and falling under the Schedule
to the Central Excise Tariff Act, 1985 (5 of 1986) (hereinafter referred
to as the "specified goods'), an~ cleared for home consumption on
c or after the 1st day of April in any financial year, by a manufacturer
from one or more factories.

xxx xxx-

ANNEXURE
D
xxx xxx

4. All other goods specified in the said Schedule other than the
following, namely :- .

(i) all goods failing under Chapters 9, 24, 31, 51, 52, 53, 54, 55, 56, 57,
E 58, 59, 60, 61, 62, 71, 73 and 74;

(ii) all goods falling under heading Nos. 21.06, 25.04, 36.03, 40.11,
40:12, 40.13, 87.01, 87.02, 87.03, 81.04, 81.05, 87.06, 87.11, 91.01, 91.02
and 96.13;

F (iii) all goods falling under sub-heading Nos. 2101.10, 2101.20, 3304.00,
3305.90, 3307.00, 4005.00, 4006.10, 4008.21 and 9505.10 and

(iv) Sandalwood oil strips of plastic intended for weaving of fabric or
sacks, polyurethane foam and articles of polyurethane foam broadcast
television receiver sets refrigerating and air-conditioning appliances
G and machinery, a:nd parts and accessories thereof.

The said notification was amended by Notification No.223/87-C.E. dated
22.9.1987. The amendment re'lds as follows:

"In exercise of the powers conferred by sub-rule (I) of .Rule 8 of
H the Central Excise Rules, 1944, the Central Go~eriunenthereby makes
COMMNR. OF CENTRAL EXCISE, CHANDIGARH v. KHANNA INDUSTRIES [PASAYAT, J.) 731

the following further amendments in the notification of the Government A
of India in the Ministry of Finance (Department of Revenue) No. 175/
86- Central Excise, dated the I st March, 1986, namely: In the said
notification.

(I) after paragraph, 6, the following paragraph shall be inserted,
namely:- B
"7. The exemption contained in this notification shall not apply
to the specified goods with a brand name 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: C
Provided that nothing contained in this paragraph shall be
applicable in respect of the specified goods cleared for home
consumption before the I st day of October, 1987".

(ii) after Explanation VII, the following Explanation shall be inserted, D
namely:-

"Explanation VIII - "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 E
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 o the identity
of that person."

Clause 7 of the notification after amendment deals with exemption of p
specified goods and circumstances where the exemption is not available.
Stand of the respondent is that if manufacturer need not be a manufacturer
of specified goods, and brand name as used is entitled to exemption contained
in the notification, it is really of no consequence whether he is manufacturer
of goods. The stand is clearly untenable. The notification is 'goods specific'.
What is required is that a person, who may be a manufacturer, must be eligible G
for exemption under the notification in respect of the specified goods. Any
_ other interpretation would render the purpose for which the notification has
been issued redundant.

As noted above, the notification is 'goods specific'. The emphasis is
H
732 SUPREME COURT REPORTS (2006] SUPP. 9 S.C.R.

A on 'specified goods'. That being so, the impugned judgment of the CEGAT
is indefensible.

Undisputedly, Mis Arkson Pvt. Ltd. is different from Mis Arkson Engg.
Co. In the present case, the issue relates to manufacture of "brass sanitary
bathroom fittings". Mis Arkson Engg. Co. manufactures C.l. castings while
B Mis Arkson Pvt. Ltd. are the owners of the stylized brand name "ARK".
However, the said company is engaged in trading of"brass sanitary fittings".
Thus, they are traders. Assessees cannot take the benefit of the registration
certificate of Mis Arkson Engg. Co. as both are separate legal entities.
Therefore, when M/s Khanna Industries and others i.e. the assesses use the
brand name/trade name of "ARK" in the context of "brass sanitary fittings"
C the assessees are not entitled to claim the benefit as the stylized brand name
"ARK" belongs to Mis Arkson Pvt. Ltd. and not to Mis Arkson Engg. Co.
However, as noted above, M/s Arkson Pvt. Ltd. is a trader and not the
manufacturer of "sanitary bath fittings". This is clearly accepted by Ms. Aarti
Khanna, Executive Director of Mis Arkson Pvt. Ltd. in her statements on
D 22.1.1993and18.3.1993.

In the case of Namtech Systems Ltd. v. Commissioner of Central Excise,
New Delhi, (2000) 115 E.L.T. 238 (Tribunal), the larger Bench ofCEGAT has
held that affixation of specified good with a brand name of ineligible Indian
manufacturer will entail disqualification from exemption. It is further held that
E the benefit of small scale exemption under Notification No.175/86-CE;.o as
amended, is not available to the specified goods if they ~re affixed with the
brand name or trade name of a trader who is not a manufacturer. The judgment
of the larger Bench in Nam tech Systems Ltd (supra) has not been considered
by the CEGAT in the present case.

F The intention is crystal clear that at the relevant time, the unit should
be eligible for exemption under the Notification in respect of the 'specified
goods'.

However, as rightly contended by learned counsel for the respondents,
the plea relating to non-applicability of extended period of limitation has not
G been considered by the CEGA T. Therefore, the matter is remanded and the
above issue alone will now be considered by the CEGA T.

The appeals are allowed to the aforesaid extent without any order as to
costs.

H S.K.S. Appeals Partly allowed.