COMMISSIONER OF CENTRAL EXCISE, TRICHY vs. M/S. GRASIM INDUSTRIES LTD.

CIVIL APPEAL No. 2348/2000Supreme Court[2005] 3 S.C.R. 46612 April 2005Bench: 3 JudgesAuthor: S.N. VARIAVA, AR. LAKSHMANAN, S.H. KAPADIA14 pages
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What were the facts?

The assessee, a subsidiary of Grasim Industries Ltd., manufactured cement and used the name of the main company on its cement bags. The assessee claimed benefit under Notification No. 5/98 CE, dated June 2, 1998. The Revenue held that the assessee was not entitled to this benefit. The Tribunal had previously allowed the assessee's appeal. The Commissioner of Central Excise, Trichy, filed the present appeal before the Supreme Court. The dispute centers on whether the use of the parent company's name on the product disentitles the assessee from the exemption notification.

What did the Supreme Court hold?

The Supreme Court held that the assessee was not entitled to the benefit of Notification No. 5/98 CE. The Court reasoned that the purpose of using the trade name of the parent company was to indicate a connection between the product and Grasim Industries Ltd. in the course of trade. The Court clarified that it is not necessary for the name or writing on the product to be a brand name or trade name in the conventional sense. The Explanation to the notification makes it clear that any name, mark, or writing, including the name of a company, is sufficient if used to indicate a connection between the product and that company. The Court found the Tribunal's decision erroneous. However, considering the Tribunal's previous interpretations and the possibility of the assessee taking the view they did, the Court deleted the penalty of Rs. 10,00,000 imposed under Rule 173Q of the Central Excise Rules, while setting aside the Tribunal's judgment and restoring the Commissioner's order regarding the denial of the notification's benefit.

What were the issues?

1. Whether the use of the name 'Grasim Industries Ltd.' on cement bags manufactured by its subsidiary, Dharani Cements Ltd., disentitles the assessee from claiming the benefit of Notification No. 5/98 CE, dated June 2, 1998, under Section 5A of the Central Excise Act, 1944, read with the said notification. Assessee's contention: The Tribunal had allowed the appeal, relying on its earlier judgments and a Supreme Court judgment, holding that showing the name of the holding company on the product did not result in losing the benefit of the notification. Revenue's contention: The Revenue contended that the use of the parent company's name indicated a connection in the course of trade, thereby disentitling the assessee from the exemption. The Revenue relied on the interpretation of the notification's conditions and explanation.

Which sections of the Income-tax Act were involved?

Section 5A

AI-generated summary — verify with the full judgment below

~ A COMMISSIONER OF CENTRAL EXCISE, TRICHY v. MIS. GRASIM INDUSTRIES LTD. APRIL 12, 2005 B [S.N. VARIAVA, DR. AR. LAKSHMANAN AND S.H. KAPADIA, JJ.] ~ '

Central Excise Act, 1944; Section 173Q, Notification No. 5198-CE dated -1= 2. 6.1998 issued thereunder : __, c Exemption Notification-Applicability of-Held: Name of a well-known L..;,.._ ~- cement company was written on the product with the intention of showing a I. connection between the product and the company in the course of trade-It is not necessary that the name or the writing on the pro.duct must always be r a brand name or a trade nature in the sense that it is normally understood- 1--- D Hence assessees not entitled to the benefit of the Notification.

Words and Phrases : 'that is to say '-Meaning of in connection with the applicability of ----- \, Notification No. 5198 CE. ___._._ E Respondent/assessee is a subsidiary company of one Mis. Grasim Industries Ltd., the main company. The company using the name of the t main company on the cement bags manufactured by them and claimed .i benefit under Notification No. 5/98 CE. The Revenue held that assessee ...J-- was not entitled to the benefit o

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