Vimal Printery Vs. Collector of Central Excise - Court Judgment

Excerpt:
1. in all these three appeals common question of law and facts are involved, hence they are all taken up together for disposal as per law.2. the question that arises for consideration in all these appeals is as to whether the appellants are disentitled to the benefit of exemption notification for small scale industries under notification 175/86, dated 1-3-1986 on the ground that the raw material namely, 'duplex-boards' supplied by m/s. itc ltd. contained their house mark itc on the inner flap? the appellants are manufacturers of printed paper containers falling under chapter sub-heading 4818.12 of cet from duplex-boards falling under chapter sub-heading 4805.30 of cet supplied by m/s. itc ltd. 3. the lower authorities have taken a view that the appellants are not eligible to the benefit of the said notification as they affixed on the printed packing containers that the trade name [or] the [symbol] of m/s. itc ltd. and as m/s. itc ltd. are not eligible for grant of the exemption under the said notification. therefore they fall within the mischief of para 7 of the notification. the department issued show cause notice seeking differential duty of excess on the clearances made by the appellants and further adjudication confirmed the duty as per the show cause notice under rule 9(2) read with proviso to sub-section (1) of the section 11a of the central excise and salt act, 1944. the adjudicating authority has also imposed penalty on the appellants in terms of rule 173q of the central excise rules.4. shri willingdon christian the learned advocate arguing for the appellants submits that the issue is no longer res integra and inasmuch as that the benefit of the notification cannot be denied as they did not print house mark of itc ltd., as the goods were received by them with the emblem printed on the inner flap. it was affixed for the purpose of identification. it is his contention that the card board containers were already printed for mcdowell's for manufacture of liquor. the containers were for packing of liquor bottles. the containers were already printed with the trade mark of liquor and the name of the liquor in the name of company where it was distilled, blended and bottled for mcdowell & co. ltd. it is his contention that this aspect of the matter has been gone into in the case of trimurti weldmesh pvt. ltd. v. collector of central excise, as reported in 1993 (21) etr (tri.), wherein it has been held in an identical case that the benefit cannot be denied. he pointed out from the tribunal's judgment that the facts were identical inasmuch as the appellants therein also received goods for forging which had already been embossed with the trade name "fitwell". it is his contention that the tribunal after examining in great detail held that as the appellants did not embossed the said trade name, the question of denying the benefit in terms of para 7 of the notification does not arise. he pointed out that the judgment of the tribunal has been confirmed by the hon'ble supreme court in terms of the report published in 1996 (82) e.l.t. a168 (court-room highlights). the learned advocate also submits that the hon'ble supreme court in the case of astra pharmaceuticals pvt. ltd. v.collector of central excise, as reported in 1995 (75) e.l.t. 214 has held that the benefit cannot be denied if the house mark of the company is affixed on the goods but the hon'ble supreme court has distinguished between the house mark and the trade mark.5. the learned dr reiterated the departmental contentions and the grounds taken by the lower authorities for confirming the demands.6. we have carefully considered the submissions made by both the sides and have perused the impugned orders and the material on record. as per the facts stated in the present case, the appellants are receiving printed paper containers which already had the emblem of itc printed on the inner flap. the appellants were to only carry out the processes to convert these printed paper containers into boxes for packing purposes.it was also an admitted fact that the appellants were not printing the said [symbol] or the printed name of the itc themselves. it is also the contention of the appellants that this [symbol] of itc is not a trade name or printed name to fall within para 7 of the notification and therefore, it is their contention that the container which is in the form of boxes are meant for packing liquor. the container is already printed with name of the company as well as the trade and brand name of the liquor and that itc is not the trade name and brand name of the liquor, which is packed in this paper containers. the appellants' contention has lot of force and requires acceptance for the reasons that in an identical matter as in the case of trimurti weldmesh pvt.ltd. the tribunal has examined a similar issue and has upheld the contention of the appellants. in the said case also the appellants were not putting the trade name on the goods and they are receiving the goods for processing with the brand also affixed. the tribunal after examining para 7 of the notification held that in such a circumstances para 7 of the notification is not attracted and the benefit cannot be denied. this judgment has since been confirmed by the hon'ble supreme court, therefore, the ratio squarely applies. further, we notice from the judgment of the hon'ble supreme court in the case of astra pharmaceuticals pvt. ltd. that the aspect pertaining to the brand name/trade name viz. house mark has been discussed. in the light of the judgments, we have to hold that the [symbol of] itc printed in the inner flap is not a trade name or the brand name of the product in which the goods are packed i.e. liquor. the card board contained the trade mark and brand name of the company which manufactures bottles and packs bottles in these containers. in that view of the matter, we have to hold that the department has failed to appreciate these facts in the correct perspective. we also notice that there is no case made out for confirming duty and imposing penalty on the appellants in view of the fact that they are small scale industries and are not affixing the trade name or brand name on the printed paper containers by themselves.the benefit can be denied in terms of para 7 of the notification only where the 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. as per the admitted fact, the appellants have not affixed the brand name. in view of the law laid down by the tribunal and the hon'ble supreme court, the impugned orders are unsustainable and the same are set aside and the appeals are allowed by following the ratio of the above judgments.7. i observe that in this case the appellants admittedly manufactured printed paper cartons/containers which had been manufactured out of the raw materials, namely, the printed paper sheets is having printed on it, the brand of the goods to be packed in the cartons. in addition to the brand of the goods, they were also printed on the bottom flap the mark of i.t.c. ltd.. the appellants' contention is that they had no facility of affixing the i.t.c. marks on the containers and had not affixed the marks themselves. in the appeal memorandum and otherwise the appellants have not contended that the goods did not carry the brand name/trade name of i.t.c. ltd., but merely contended that the printed paper sheets received by them were already printed with the brand name/trade name of i.t.c. ltd. and since it is they who had not affixed it, therefore the goods were not hit by clause 7 of notification no. 175/86. and in this connection they have cited the case of m/s. tritmurty weldmesh (supra).8. the ld. counsel has emphasised during hearing the use of words 'where a manufacturer affixes the specified goods with a brand name or trade name and stated that since the appellants did not affixed the brand name or trade name, their prayer was justified'.9. in my opinion although at first glance the emphasis appears to be on affixing of the brand name or trade name by a manufacturer on the specified goods, further deliberation would go to show that the real intentions was to disallow the benefit in those cases where the specified goods carry the brand name or trade name of a person who was not eligible for the grant of exemption under the notification.therefore, the word 'affixing' has to be considered. in the sense of 'carrying' and it is immaterial from this point of view whether the embossing, printing or indicating in any other manner, the brand name/trade name is done at the raw material stage or during the course of manufacture or at the finished goods stage, whether by supplier or job worker and the idea is that the products which are sold by persons (other than s.s.i. units) whose brand name/trade name had good-will which fatches high price (and earns more profit) but who were not entitled to the exemption, do not gain undue advantage by getting the goods (or packaging etc.) manufactured from s.s.i. units. this purpose is defeated if we take any other view, and the larger units would gain unintended benefit and the small scale units would suffer in comparison.10. i also observe that this aspect has not engaged the attention of the tribunal in the case of trimurthy weldmesh (supra). however it has been reported that the appeal against the above order of the tribunal has been dismissed by the supreme court and therefore respectfully following the judicial discipline and applying the ratio of the aforesaid tribunal's order in view of supreme court judgment, [as reported in 1996 (82) e.l.t. a-168]. i consider that the appeals have to be allowed. it is ordered accordingly. appeal allowed with consequential relief to the appellants, if any.

Judgment:
1. In all these three appeals common question of law and facts are involved, hence they are all taken up together for disposal as per law.

2. The question that arises for consideration in all these appeals is as to whether the appellants are disentitled to the benefit of exemption Notification for small scale industries under Notification 175/86, dated 1-3-1986 on the ground that the raw material namely, 'Duplex-Boards' supplied by M/s. ITC Ltd. contained their house mark ITC on the inner flap? The appellants are manufacturers of printed paper containers falling under Chapter sub-heading 4818.12 of CET from Duplex-Boards falling under Chapter sub-heading 4805.30 of CET supplied by M/s. ITC Ltd. 3. The lower authorities have taken a view that the appellants are not eligible to the benefit of the said Notification as they affixed on the printed packing containers that the trade name [or] the [symbol] of M/s. ITC Ltd. and as M/s. ITC Ltd. are not eligible for grant of the exemption under the said Notification. Therefore they fall within the mischief of para 7 of the Notification. The department issued show cause notice seeking differential duty of excess on the clearances made by the appellants and further adjudication confirmed the duty as per the show cause notice under Rule 9(2) read with proviso to Sub-section (1) of the Section 11A of the Central Excise and Salt Act, 1944. The adjudicating authority has also imposed penalty on the appellants in terms of Rule 173Q of the Central Excise Rules.

4. Shri Willingdon Christian the learned Advocate arguing for the appellants submits that the issue is no longer res Integra and inasmuch as that the benefit of the Notification cannot be denied as they did not print house mark of ITC Ltd., as the goods were received by them with the emblem printed on the inner flap. It was affixed for the purpose of identification. It is his contention that the card board containers were already printed for McDowell's for manufacture of liquor. The containers were for packing of liquor bottles. The containers were already printed with the trade mark of liquor and the name of the liquor in the name of company where it was distilled, blended and bottled for McDowell & Co. Ltd. It is his contention that this aspect of the matter has been gone into in the case of Trimurti Weldmesh Pvt. Ltd. v. Collector of Central Excise, as reported in 1993 (21) ETR (Tri.), wherein it has been held in an identical case that the benefit cannot be denied. He pointed out from the Tribunal's judgment that the facts were identical inasmuch as the appellants therein also received goods for forging which had already been embossed with the trade name "Fitwell". It is his contention that the Tribunal after examining in great detail held that as the appellants did not embossed the said trade name, the question of denying the benefit in terms of para 7 of the Notification does not arise. He pointed out that the judgment of the Tribunal has been confirmed by the Hon'ble Supreme Court in terms of the report published in 1996 (82) E.L.T. A168 (Court-Room Highlights). The learned Advocate also submits that the Hon'ble Supreme Court in the case of Astra Pharmaceuticals Pvt. Ltd. v.Collector of Central Excise, as reported in 1995 (75) E.L.T. 214 has held that the benefit cannot be denied if the house mark of the company is affixed on the goods but the Hon'ble Supreme Court has distinguished between the house mark and the trade mark.

5. The learned DR reiterated the departmental contentions and the grounds taken by the lower authorities for confirming the demands.

6. We have carefully considered the submissions made by both the sides and have perused the impugned orders and the material on record. As per the facts stated in the present case, the appellants are receiving printed paper containers which already had the emblem of ITC printed on the inner flap. The appellants were to only carry out the processes to convert these printed paper containers into boxes for packing purposes.

It was also an admitted fact that the appellants were not printing the said [symbol] or the printed name of the ITC themselves. It is also the contention of the appellants that this [symbol] of ITC is not a trade name or printed name to fall within para 7 of the Notification and therefore, it is their contention that the container which is in the form of boxes are meant for packing liquor. The container is already printed with name of the company as well as the trade and brand name of the liquor and that ITC is not the trade name and brand name of the liquor, which is packed in this paper containers. The appellants' contention has lot of force and requires acceptance for the reasons that in an identical matter as in the case of Trimurti Weldmesh Pvt.

Ltd. the Tribunal has examined a similar issue and has upheld the contention of the appellants. In the said case also the appellants were not putting the trade name on the goods and they are receiving the goods for processing with the brand also affixed. The Tribunal after examining para 7 of the Notification held that in such a circumstances para 7 of the Notification is not attracted and the benefit cannot be denied. This judgment has since been confirmed by the Hon'ble Supreme Court, therefore, the ratio squarely applies. Further, we notice from the judgment of the Hon'ble Supreme Court in the case of Astra Pharmaceuticals Pvt. Ltd. that the aspect pertaining to the brand name/trade name viz. house mark has been discussed. In the light of the judgments, we have to hold that the [symbol of] ITC printed in the inner flap is not a trade name or the brand name of the product in which the goods are packed i.e. liquor. The card board contained the trade mark and brand name of the company which manufactures bottles and packs bottles in these containers. In that view of the matter, we have to hold that the department has failed to appreciate these facts in the correct perspective. We also notice that there is no case made out for confirming duty and imposing penalty on the appellants in view of the fact that they are small scale industries and are not affixing the trade name or brand name on the printed paper containers by themselves.

The benefit can be denied in terms of para 7 of the Notification only where the 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. As per the admitted fact, the appellants have not affixed the brand name. In view of the law laid down by the Tribunal and the Hon'ble Supreme Court, the impugned orders are unsustainable and the same are set aside and the appeals are allowed by following the ratio of the above judgments.

7. I observe that in this case the appellants admittedly manufactured printed paper cartons/containers which had been manufactured out of the raw materials, namely, the printed paper sheets is having printed on it, the brand of the goods to be packed in the cartons. In addition to the brand of the goods, they were also printed on the bottom flap the mark of I.T.C. Ltd.. The appellants' contention is that they had no facility of affixing the I.T.C. marks on the containers and had not affixed the marks themselves. In the appeal memorandum and otherwise the appellants have not contended that the goods did not carry the brand name/trade name of I.T.C. Ltd., but merely contended that the printed paper sheets received by them were already printed with the brand name/trade name of I.T.C. Ltd. and since it is they who had not affixed it, therefore the goods were not hit by Clause 7 of Notification No. 175/86. And in this connection they have cited the case of M/s. Tritmurty Weldmesh (supra).

8. The ld. Counsel has emphasised during hearing the use of words 'where a manufacturer affixes the specified goods with a brand name or trade name and stated that since the appellants did not affixed the brand name or trade name, their prayer was justified'.

9. In my opinion although at first glance the emphasis appears to be on affixing of the brand name or trade name by a manufacturer on the specified goods, further deliberation would go to show that the real intentions was to disallow the benefit in those cases where the specified goods carry the brand name or trade name of a person who was not eligible for the grant of exemption under the notification.

Therefore, the word 'affixing' has to be considered. In the sense of 'carrying' and it is immaterial from this point of view whether the embossing, printing or indicating in any other manner, the brand name/trade name is done at the raw material stage or during the course of manufacture or at the finished goods stage, whether by supplier or job worker and the idea is that the products which are sold by persons (other than S.S.I. Units) whose brand name/trade name had good-will which fatches high price (and earns more profit) but who were not entitled to the exemption, do not gain undue advantage by getting the goods (or packaging etc.) manufactured from S.S.I. Units. This purpose is defeated if we take any other view, and the larger units would gain unintended benefit and the small scale units would suffer in comparison.

10. I also observe that this aspect has not engaged the attention of the Tribunal in the case of Trimurthy Weldmesh (supra). However it has been reported that the appeal against the above Order of the Tribunal has been dismissed by the Supreme Court and therefore respectfully following the judicial discipline and applying the ratio of the aforesaid Tribunal's order in view of Supreme Court Judgment, [as reported in 1996 (82) E.L.T. A-168]. I consider that the appeals have to be allowed. It is ordered accordingly. Appeal allowed with consequential relief to the appellants, if any.