Full Judgment
Pelican were availing of the benefit of Notification No. 175/86-C.E. A show cause notice was issued on 16/23-1-1990 alleging that inasmuch as the container bore the trade name or brand name and logo of M/s.
Killick Nixon who were not eligible for benefit of the aforesaid notification, by virtue of Paragraph 7 of the notification read with Explanation (viii) thereof, Pelican Paints Ltd. were not eligible to the beneift of the aforesaid notification. The show cause notice alleged that duty on goods cleared during the period 1-10-1987 to 28-2-1989 as also from 1-4-1989 to 31-7-1989 was short levied. Rule 9 and proviso to Section 11A was invoked and the allegation was also made that both M/s. Pelican and M/s. Killick Nixon were liable to penalty.
After hearing both respondents, the impugned order was passed where under the Collector confirmed the duty amounting to Rs. 11,62,568/-. He also imposed a penalty of Rs. 1 lakh on M/s. Pelican Paints Ltd. and Rs. 50,000/- on M/s. Killick Nixon Ltd. under Rule 209A of the Central Excise Rules, 1944. The present appeals arise out of this common order.
2. Shri Vikram Nankani, ld. Advocate arguing for M/s. Pelican Paints stated that M/s. Killick Nixon were not manufacturers of paints.
Referring to the statement of Smt. Doshi as also relying upon the certificate by the Registrar of Trade Marks, he stated that the logo of Hanging Lantern inside a circle was registered for goods such as pre-stressing equipment and accessories for pre-stressed concrete glass. Relying upon two judgments of the Tribunal namely Precise Electronics reported in 1993 (65) E.L.T. 69 and Taj Serpent Eggs Factory reported in 1996 (85) E.L.T. 78, he claimed that where the brand name owner does not manufacture those goods which are manufactured by the person availing of this notification, the right of the manufacturer is not hit by the mischief of para 7. As regards the aspect of limitation, he referred to the correspondence between the department and M/s. Pelican Paints subsequent to their filing of the classification list. The letter dated 20-1-1988 from the assessee addressed to the Assistant Collector refers to their discussion with him on the previous date. The letter communicates the details of the brand names as also the fact that M/s. Killick Nixon were their sole selling agents. The reply of the department dated 21-1-1988 requires the assessees to produce the labels both before and after entering into agreement with the sole selling agents. The letter also mentions that the branded tins were bearing the logo both of the manufacturer and of M/s. Killick Nixon. In their reply dated 25-1-1988 the appellants again claimed that the monogram of M/s. Killick Nixon was not a brand name but was only a symbol. Further clarifications were made by the assessee vide their letter dated 1-2-1988. Letter dated 26-12-1988 shows that representative tins were also sent to the Assistant Collector. Letter dated 2-5-1988 from the department shows that the classification No.110/88 effective from 1-3-1988 was duly approved by the jurisdictional officer. It is the claim of Shri Nankani that the correspondence between the assessees and the department shows that the fact that the tins were bearing the logo of M/s. Killick Nixon in addition to the logo of the manufacturers was known to the department at all times and that the department had approved the classification list with this knowledge. It is his claim that in such a situation the allegation as to suppression cannot be made and that the demand is clearly hit by limitation.
3. Shri H.K. Jain, ld. SDR, relied upon the judgment of the Tribunal in the case of Thio Pharma v. CCE reported in 1992 (60) E.L.T. 395 in which it has been held that in identical circumstances the manufacturer was not eligible for the benefit of the subject notification. As regards limitation, it was his claim that the assessees have not given a correct declaration in the classification list.
4. We have carefully considered the rival submissions and have also seen the judgments relied upon by both the sides.
5. The show cause notice is for the extended period and a specific allegation is made that the fact that the assessees were using the logo of M/s. Killick Nixon was not brought to the notice of the department nor was the fact mentioned in the classification lists. It is alleged that the assessees in collusion with M/s. Killick Nixon Ltd. had evaded the duty payable on the subject goods. We have listed and referred to above the correspondence between the manufacturers and the department which clearly brings out the fallacy of the allegation made out in the show cause notice that the fact of the use of logo of Killick Nixon was not brought to the notice of the department. In fact the department had examined the logo on the tins both before the agreement of M/s. Killick Nixon and after the agreement. In such circumstances the allegation that the assessees had evaded the duty by way of suppression cannot stand and the demand concerned is clearly hit by limitation.
6. Since we have decided the issue on limitation, we do not consider it necessary to go into the merits of the case.
7. Shri S.V. Mehta, ld. Counsel arguing for M/s. Killick Nixon Ltd. reiterating the claim made in the appeal memorandum stated that his clients were a distinct corporate identity; that their transactions were at arms length. It was claimed that at all times the department was aware of the precise relationship between his clients and M/s.
Pelican. It was claimed that the department had to discharge the burden of establishing guilt on the part of his clients for action of penalty under Rule 209A.8. We have carefully considered the submissions. The subject rule provides for penalty only where any person dealing or undertaking other actions in relation with manufacture of goods does so with knowledge or belief that these goods were liable for confiscation for any contravention of the provisions of the rule. In the proceedings it has not been established that there was deliberate intent on the part of M/s. Killick Nixon in entering into an agreement with M/s. Pelican and permitting their logo to be imposed on the tins of paint manufactured by M/s. Pelican. In the circumstances, the action of penalty on M/s.
Killick Nixon does not sustain.
9. In the result both the appeals succeed and are allowed.
Consequential relief to the extent permissible is ordered.