COMNR. OF CENTRAL EXCISE, TRICHY vs. GRASIM INDUSTRIES LTD

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 9 CASE NO.: Appeal (civil) 2348-2349 of 2000 PETITIONER: Commissioner of Central Excise, Trichy RESPONDENT: M/s Grasim Industries Ltd. DATE OF JUDGMENT: 12/04/2005 BENCH: S. N. Variava, Dr. AR. Lakshmanan & S. H. Kapadia JUDGMENT: J U D G M E N T S. N. VARIAVA, J. These Appeals are filed against the Judgment of the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT) dated 14th October, 1999. The Respondents are a subsidiary of one M/s Grasim Industries Ltd. On the bags of cement manufactured by them the Respondents use the following words: "Manufactured by Dharani Cements Ltd. A Subsidiary of Grasim Industries Ltd." the benefit of Notification No. 5/98 CE dated 2nd June, 1998 is not lost by the Respondents because they show on their product the name of the holding company, namely M/s. Grasim Industries Ltd. For a consideration of these Appeals, it is first necessary to set out Notification 5/98 CE dated 2nd June, 1998, which reads as follows: "Notification No. 5/98-C.E., dated 2-6-1998 Effective rate of duty for specified goods of Chapters 13 to 96 In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts excisable goods of the description specified in column (3) of the Table below or column (3) of the said Table read with the relevant List appended hereto, as the case may be, and falling with the Chapter, heading No. or sub-heading No. of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) (hereinafter referred to as the said Schedule), specified in the corresponding entry in column (2) of the said Table, from so much of the duty of excise leviable thereon which is specified in the said Schedule, as is in excess of the amount calculated at the rate specified in the corresponding entry in column (4) of the said Table, subject to the relevant conditions specified in the Annexure

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 9 to this notification, and referred to in the corresponding entry in column (5) of the said Table. Explanation. \026 For the purposes of this notification, the rate specified in column (4), is ad valorem rate, unless otherwise specified. TABLE S.No. Chapter or heading No. or sub- heading No. Description of goods Rate Conditions (1) (2) (3) (4) (5) 1. 13 Lac Nil - 9. 2502.29 All goods manufactured in. \026 Factory using vertical shaft kiln, with installed (I) capacity certified as not exceeding 300 tonnes per day or 99,000 tonnes per annum and the total clearances of cement produced by the factory, in a financial year, shall not exceed

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 9 1,09,500 tonnes; factory using rotary kiln, with installed capacity (II) certified as not exceeding 600 tonnes per day or 1,98,000 tonnes per anum and the total clearances of the cement produced by the factory, in a financial year, shall not exceed 2,20,000 tonnes. Rs. 2 per tonne 2 Condition Conditions No.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 9 or trade name, whether registered or not, that is to say, a name or a mark, such as a symbol, monogram, signature, or invented words or any writing which is used in relation to a product for the purpose of indicating, or so as to indicate, a connection in the course of trade between the product and some person using such name or mark with or without any indication of the identity of that person."

The Appellants contended that the Respondents were using the name of M/s. Grasim Industries Ltd. with the purpose of indicating a connection between the product i.e. the cement manufactured by them, and M/s Grasim Industries Ltd. which is a well known cement manufacturer. In reply, it has not been denied that M/s. Grasim Industries Ltd. is a well known cement manufacturer. It has also not been denied that the purpose of putting the name "M/s. Grasim Industries Ltd." was to show a connection between the product and M/s. Grasim Industries Ltd. However, what has been contended is that the words "M/s. Grasim Industries Ltd." are neither a brand name nor a trade name. It is contended that mere use of the name of a company does not amount to using a brand name or trade name of some other company. The Commissioner, by his Order dated 19th May, 1999, held that the Respondents were not entitled to the benefit of the Notification. It was held that they were liable to pay a differential duty of Rs. 47,74,961/- and a penalty of Rs. 10,00,000/- under Rule 173Q of the Central Excise Rule, 1944. The Respondents filed an Appeal before the CEGAT which, as stated above, has been allowed on the basis of Judgments referred to earlier. Apart from the Judgments relied upon by the Tribunal, some other Judgments of the Tribunal, taking a similar view, have also been cited before us. It was submitted by Mr. Vellapally, on behalf of the Respondents, that based on the Judgment of this Court in Astra Pharmaceuticals (P) Ltd.’s case (supra) the Tribunal has http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 9 merits. It is not just a legal submission but is based on a factual situation which would require checking. After a full hearing this Court is not going to adjourn this case. As no such contention was taken earlier by filing any Affidavit in Reply we do not propose to dismiss these Appeals on this ground. Even otherwise, we find that in all Judgments, relied upon, the Tribunal has taken a patently erroneous view. It becomes necessary for this Court to clarify the law so that the erroneous Judgments of the Tribunal do not remain binding precedents. The Judgments of the Tribunal appear to be based upon the Judgment of this Court in Astra Pharmaceuticals Ltd.’ case (supra). Even in the impugned Judgment Astra Pharmaceuticals Ltd.’s case has been relied upon. In our view, the Tribunal is misconstruing and misunderstanding the Judgment of this Court in Astra Pharmaceuticals Ltd.’s case. In Astra Pharmaceuticals Ltd.’s case the question was whether the Appellants (therein) were liable to pay duty on Dextrose Injection manufactured by it under Tariff Item 14E. The said Tariff Item read as follows: " Tariff Item No. Description of Goods Rate of duty Basic Special Excise 14E Patent or Proprietary Medicines not containing alcohol, opium, Indian Hemp or other narcotic drugs or other narcotics other than those medicines which are exclusively ayurvedic, unani, sidha or homoeopathic. 12-1/2% Adv. 10% of the basic duty chargeable Explanation : I "Patent or proprietary medicines" means any drug or medicinal preparation, in whatever form, for use in the internal or external treatment of, or for the prevention of ailments in human beings or animals, which bears either on itself or on its container or both, a name which is not specified in a monograph in a Pharmacopoeia Formulary or other publications notified in this behalf by the Central Government in the Official Gazette, or which is a brand name, that is a name or a registered trade mark under the Trade and Merchandise Marks Act, 1958 (43 of 1958) or any other mark such as a symbol, monogram, label, signature or invented words or any writing which is used in relation to that medicine for the purpose of indicating or so as to indicate a connection in the course of trade between the medicine and some person, having the right either as proprietor or otherwise to use the name or mark with or without any indication of the identity of that person.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 9 Explanation : II. ’Alcohol’, ’Opium’, "Indian Hemp", "Narcotic Drugs" and ’Narcotics’ have the meanings respectively assigned to them in Section 2 of the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 (16 of 1955)." To be immediately noted that in Astra Pharmaceuticals Ltd.’s case this Court was considering the phrase "Patent or proprietary medicines". In our case and the other cases earlier dealt with by the Tribunal the phrase under consideration is "brand name or a trade name". The subject matter of Tariff Item 14E and the Notifications being considered are completely different. Whilst interpreting the phrases "brand name or trade name" an interpretation given in respect of "Patent or proprietary medicines" can be of no assistance. Even otherwise, there is a considerable difference between the Explanation to Tariff Item 14E and the Explanation in the concerned Notification. The explanation to Tariff Item 14E provides that the patent or proprietary medicine must, amongst other things, be a brand name i.e. a name or a registered trade mark under the Trade and Merchandise Marks Act. In the Explanation under consideration the "brand name or a trade name" may be registered or unregistered. The registration need not be only under the Trade and Merchandise Marks Act. Undoubtedly, the words "any other mark such as a symbol, monogram, label, signature or invented words or any writing which is used in relation to that medicine for the purpose of indicating or so as to indicate a connection in the course of trade between the medicine and some person" are almost identical. But in the Explanation to Tariff Item 14E they are used in the context of a "Patent and proprietary medicine" which must be a name or a registered trade mark under the Trade and Merchandise Marks Act. In the Explanation to the concerned Notifications these words are used in the context of a "Brand name or a trade name". These words, when used in the context of a "Patent or a proprietary medicine" assume a completely different context from that when they are used in the context of a "Brand name or a trade name" which may be registered or not. Further, the Explanation to Tariff Item 14E nowhere uses the words "trade name". As is commonly known, a trade name can be a name in which or by which a person or body carries on their trade. It would, if the context so permits, include the name of a company. In the context of a "trade name" the words "a name" and "or any writing" would cover the name of a company so long as it is used in relation to the product and is used for the purpose of indicating a connection in the course of a trade between the product and other person. As has been set out hereinabove, in this case there is no denial that M/s. Grasim Industries Ltd. were manufacturer of cement. There is also no denial that the purpose of using the words: "Manufactured by Dharani Cements Ltd. A Subsidiary of Grasim Industries Ltd." was with an intention of indicating a connection between the product i.e. the cement and M/s Grasim Industries Ltd. In such cases, clearly the Respondents were using a trade name of some other company with the purpose of indicating a connection in the course of trade between the product and that person. The Respondents were therefore clearly not entitled to the benefit of the Notification. The decision of the Tribunal is therefore clearly erroneous and requires to be set aside. Reference was made to certain decisions of the Tribunal which are now required to be taken note of. In the case of Nippa Chemicals (Pvt.) Ltd.’s case (supra) the question was whether the Appellants (therein) were entitled to the benefit of Notification No. 175/86-C.E. dated 1st March, 1986. That Notification also contained an explanation (being Explanation VIII) which in terms is identical to the Explanation under consideration by us. The Appellants therein used the following words:

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 9 "MANUFACTURED IN INDIA BY NIPA CHEMICALS LTD., In Collaboration with Nihon Parkerizing Co. Ltd., Japan. 46, Garuda Buildings, Cathedral Road, Chennai-600086. MARKETED IN INDIA BY Goodlass Nerolac Paints Ltd., GANPATRAO KADAM MARG, LOWER PAREL, MUMBAI\026400013." The Tribunal held that the use of these words did not preclude the Appellants (therein) from availing of the benefit of the Notification. To be immediately noted that in that case it was neither admitted nor proved that the words were used to indicate a connection between the product and Nihon Parkerizing Co. Ltd. The Tribunal so notes. Had the Tribunal based its decision on this aspect no fault could have been found. However, the Tribunal then goes on to hold as under:

"

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 9 Writing (r-) n. (esp.) Written document; (piece of) literary work; personal script, handwriting; put in ˜, write down; the Writings, = HAGIOGRAPHA; ˜- case, case holding writing materials; ˜-desk, desk; ˜-master, instructor in penmanship; the yellow-hammer (from marks like scribbling on eggs); ˜-paper, paper for writing on with ink, esp. note-paper; ˜-table, desk.

therefore be understood in the context of the words which follow. The words which follow are of wide amplitude and include any word, mark, symbol, monogram or label. Even a signature of an invented word or any writing would be sufficient if it is used in relation to the product for purpose of indicating a connection between the product and the other person/company. It is thus clear that the Tribunal’s decision in Nippa Chemicals (Pvt.) Ltd.’s case is clearly erroneous and will stand http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 9 whether the use of the word "comfit" with the name "Christine Hoden London, Rome Stockholm" would disentitle the Respondents therein from the benefit of the Notification. It was however found, as a matter of fact, that the word "comfit" was owned by the Respondent. It was on that basis held that the Respondents therein were entitled to the benefit of Notification. To this extent the Tribunal was right. However, the Tribunal has unnecessarily also gone on to comment as follows: "Mere indication of the foreign company’s name does not create any association in the course of trade between the goods and the foreign company." There would be no purpose in indicating the foreign company’s name Notification No. 1/93-C.E., which Notification was identical to the one under consideration by us. The Respondents therein used the words "SARAT" in bold letters following which the words "A quality product from ITL group" and "Technical licencee of ITL" were also printed. The Tribunal, following its earlier decisions, held as follows:

"