UNISON ELECTRONICS PVT. LTD. vs. COMMISSIOINER, CENTRAL EXCISE, NOIDA

REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURI ICTION CIVIL APPEAL NOS 6788-6789 OF 2005 Unison Electronics Pvt. Ltd. and Anr.

….Appellants Versus Commissioner, Central Excise, Noida ….Respondent J U D G M E N T Dr. ARIJIT PASAYAT, J.

Department has treated the words UTS and TSN as brand name belonging to other and has disallowed the benefit of small scale exemption notification. It was submitted that the words UTS and TSN are not brand names but are the abbreviations of the name of the marketing companies which does not amount to use of the brand name. Stand of the department was as follows: It has not been controverted by the appellants that the excisable goods before clearance from their factory premises bear stickers of UTS/TSN and as per definition of the brand name given in SSI Exemption Notification, “brand name” means any name, symbol, monogram, label, signature or invented word or writing which indicates connection in the course of trade between excisable goods and same person using such name and that the words UTS/TSN mentioned on the packaging of the products indicate the connection in the course of trade with UTS and TSN. After considering the rival stands the CESTAT concluded as follows: “A perusal of the sample shown by the learned consultant at the time of hearing revealed that the sticker mentions that it has been put after checking the quality 3

of the product manufactured by the appellants. In fact the sticker reads as under: Tele Shopping Network UTS United Teleshopping Quality at your doorstep Accordingly, the CESTAT upheld the demand of duty and penalty imposed on the appellant-company, but the separate penalty imposed on the Director of the company was set aside.

of specified goods used as inputs shall be deemed to be exempt from the whole of the duty of excise leviable thereon: (d) any clearances of strips of plastics used within the factory of production for weaving of fabrics or for manufacture of sacks or bags made of polymers of ethylene or propylene.

(b) where the specified goods manufactured by a manufacturer bear a brand name or trade name, whether registered or not, of another manufacturer or trader, such specified goods shall not, merely by reason of that fact be denied to have been manufactured by such other manufacturer or trader.”

“5. The Tribunal then proceeds on the basis that the exemption can be denied only if the trade mark or brand name is used in respect of the same goods for which the trade mark is registered. In coming to this conclusion we are afraid that the Tribunal has done something which is not permissible to be done in law. It is settled law that exemption notifications have to be strictly construed. They must be interpreted on their own wording. Wordings of some other notification are of no benefit in construing a particular notification. Clause 4 of this notification and the Explanation (set out hereinabove) make it clear that the exemption will not apply if the specified goods (i.e. scented supari) bear a brand or trade name of another person. Neither in clause 4 of the notification nor in Explanation IX is it provided that the specified goods must be the same or similar to the goods for which the brand name or trade name is registered. The Tribunal has, in adopting the above reasoning, effectively added to the notification words to the effect “brand name or trade name in respect of the same goods”. This is clearly impermissible. It is to be seen that there may be an unregistered brand name or an unregistered trade name. These might not be in respect of any particular goods. Even if an unregistered brand name or trade name is used, the exemption is lost. This makes it very clear that the exemption would be lost so long as the brand name or trade name is used irrespective of whether the use is on same goods as those for which the mark is registered. 7

“6. We have today delivered a judgment in CCE v. Rukmani Pakkwell Traders (2004 (11) SCC 801) wherein we have held in respect of another notification containing identical words that it makes no difference whether the goods on which the trade name or mark is used are the same in respect of which the trade mark is registered. Even if the goods are different, so long as the trade name or brand name of some other company is used the benefit of the notification would not be available. Further, in our view, once a trade name or brand name is used then mere use of additional words would not enable the party to claim the benefit of the notification. 8

“7. The dispute, in the instant case, is as to whether the respondents who are manufacturers of plywood under their own brand name “Pelican” have made themselves disentitled to the benefit of small-scale exemption Notification No. 175/86- CE by using a logo indicating “MERINO” on their products along with their brand name. The next question which arises is as to whether the markings or inscriptions should be considered as the brand name of M/s Merinoply and Chemicals Ltd. and will come within the mischief of clause 7 read with Explanation VIII of the notification, as contended by the department. Clause 7 reads as follows: “The exemption contained in this notification shall not apply to the specified goods where a manufacturer affixes the specified goods with a brand name or trade name (registered or not) of 9

another person who is not eligible for the grant of exemption under this notification.” Explanation VIII of clause 7 reads as follows: ‘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 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 of the identity of that person.’

submitted that the exception or exempting provision in a taxing statute should be construed strictly and it is not open to the court or to the tribunal to ignore conditions prescribed in the exemption notification.

“8. So far as the views regarding non-eligibility are concerned view expressed by this Court in several cases needs to be noted.

“10. We are of the opinion that while examining the challenge to an exemption notification under the Central Excise Act, the observations in the 12

decisions aforesaid should be kept in mind. It should also be remembered that generally speaking the exemption notification and the terms and conditions prescribed therein represent the policies of the Government evolved to subserve public interest and public revenue. A very heavy burden lies upon the person who challenges them on. the ground of Article 14. Unless otherwise established, the court must presume that the said amendment was found by the Central Government to be necessary for giving effect to its policy (underlying the notification) on the basis of the working of the said notification and that such an amendment was found necessary to prevent persons from taking unfair advantage of the concession. In fact, in this case, the explanatory note appended to amending notification says so in so many words. If necessary, the Court could have called upon the Central Government to establish the reasons behind the amendment. (It did not think it fit to do so.) It is equally necessary to bear in mind, as pointed out repeatedly by this Court, that in economic and taxation sphere, a large latitude should be allowed to the legislature. The courts should bear in mind the following observations made by a Constitution Bench of this Court in R.K. Garg v. Union of India [1981 (4) SCC 675]: (SCC pp. 690-91, para 8) “Another rule of equal importance is that laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion etc. It has been said by no less a person than Holmes, J. that the legislature should be allowed some play in the joints, because it has to deal with complex problems which do not admit of solution through any doctrinaire or strait-jacket formula and this is particularly true in case of legislation dealing with economic 13

matters, where, having regard to the nature of the problems required to be dealt with, greater play in the joints has to be allowed to the legislature. The Court should feel more inclined to give judicial deference to legislative judgment in the field of economic regulation than in other areas where fundamental human rights are involved. Nowhere has this admonition been more felicitously expressed than in Morey v. Doud [354 US 457 (1957)] where Frankfurter, J. said in his inimitable style: ‘In the utilities, tax and economic regulation cases, there are good reasons for judicial self-restraint if not judicial deference to legislative judgment. The legislature after all has the affirmative responsibility. The courts have only the power to destroy not to reconstruct. When these are added to the complexity of economic regulation, the uncertainty, the liability to error, the bewildering a conflict of the experts, and the number of times the Judges have been overruled by events—self-limitation can be seen to be the path of judicial wi om and institutional prestige and stability.’ The court must always remember that ‘legislation is directed to practical problems, that the economic mechanism is highly sensitive and complex, that many problems are singular and contingent, that laws are not abstract propositions and do not relate to abstract units and are not to be measured by abstract symmetry’ that exact wi om and nice adaptation of remedy are not always possible and that judgment is largely a prophecy based on meagre and uninterpreted experience’. Every legislation particularly in economic matters is 14

essentially empiric and it is based on experimentation or what one may call trial and error method and therefore it cannot provide for all possible situations or anticipate all possible abuses. There may be crudities and inequities in complicated experimental economic legislation but on that account alone it cannot be struck down as invalid. The courts cannot, as pointed out by the United States Supreme Court in Secy. of Agriculture v. Central Roig Refining Co. [ 94 L Ed 381 : 338 US 604 (1950)] be converted into tribunals for relief from such crudities and inequities. There may even be possibilities of abuse, but that too cannot of itself be a ground for invalidating the legislation, because it is not possible for any legislature to anticipate as if by some divine prescience, distortions and abuses of its legislation which may be made by those subject to its provisions and to provide against such distortions and abuses. Indeed, howsoever great may be the care bestowed on its e framing, it is difficult to conceive of a legislation which is not capable of being abused by perverted human ingenuity. The Court must therefore adjudge the constitutionality of such legislation by the generality of its provisions and not by its crudities or inequities or by the possibilities of abuse come to light, the legislature can always step in and enact suitable amendatory legislation. That is the essence of pragmatic approach which must guide and inspire the legislature in dealing with complex economic issues.”

(See P.J. Irani V. State of Madras [(1962) 2 SCR 169]”.

appearing on behalf of the assessees relate to decisions involving Trade Mark disputes and are in the circumstances not apposite.”

“9. It was however, urged that the respondents have applied for registration of the Mark “Mahaan Taste Maker”. We clarify that if and when they get their mark registered then they would become entitle to the benefit of the Notification in accordance with Board’s Circular No.88/88, dated 13.12.1988.”

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