Case: Parle Bisleri Pvt. Ltd Vs. Commr.Of Customs &amp; Central Ex.,Ahmedabad

the same. The factors which have weighed with CEGAT like registration of three companies under the sales tax and income tax authorities have to be considered in the background of factual position notedabove. When the corporate veil is lifted what comes into focus is only the shadow and not any substance about the existence of the three companies independently. The circular No. 6/92 dated 29.5.1992 has no relevance because it related to notification No. 175/86-CE dated 1.3.1986 and did not relate to notification No. 1/93. 12. What this Court was emphasizing in the aforesaid decision was not only the fact that Circular 6/92 has no effect uponcommencement of Notification No. 1/93, but also the fact thatthe distinct legal nature of Companies cannot be used aseye-wash to portray its independent nature. Where thecompanies are indeed interdependent and possibly even related through financial control and management, the value ofclearances has to be clubbed together in the interests of justice.The operation of Circular 6/92 admittedly protected entities likethe appellant prior to the commencement of Notification No. 1/93, but certainly not after the same. In this case, this Court has been presented with a preponderance of evidence to suggestthat the companies are related not only in terms of financialcontrol, but also through management personnel. In Modi Alkalies & Chemicals Ltd. & Ors. (supra) this Court has heldthat two basic features which prima facie show interdependenceare pervasive financial control and management control. We, therefore, proceed to apply the said two tests to the facts of this case. 13. R. Chauhan, P. Chauhan, R.N. Mungale and S.K. Motani, whoare the directors of the appellant herein are among those who also serve on the Board of Directors in M/s. PEL Ltd. and M/s. PIL Ltd. It is also a fact on record that that M/s. PEL advanced an interest-free loan of Rs. 1 crore to the appellant, which was used for purchase of raw material by the latter (As evidenced from the balance sheet). Furthermore, the flavours being manufactured by the appellant were developed by M/s. PEL at their R & D Lab at Bombay, whose services were at the disposal of the appellant. They were at one point of time were manufactured by M/s. PEL and admittedly owned by them. Clearly, all this points to the inescapable conclusion that the three companies in question were intertwined in their operationand management. A careful scrutiny of the records thereforeestablish that both the aforesaid two basic features areoverwhelmingly present in this case. Therefore it would likelyseem that the purported fragmentation of the manufacturingprocess was but a mere ploy to avail of the SSI exemption.Piercing the corporate veil, when the notions of beneficialownership and interdependency come into the picture, are nolonger res integra. On this count, therefore, we have no hesitation whatsoever in affirming the order of the Tribunal, which was justified entirely through the precedent set by this Court. Issue II 14. The second issue concerns the question whether the ‘codenames’ used to denote soft drink flavours manufactured by theappellant could in fact be termed as ‘brand names’ and if so,whether they belonged to another entity. The yardstick in this regard is Explanation VIII which is pari materia in bothNotifications No. 175/86 and No. 1/93 and reads as: Explanation VIII—”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. We are not convinced by the argument of the appellant that thisExplanation refers only to ‘brand names’ and cannot be used todetermine whether code names, as used by the appellant in thepresent case, fall within the said category. The mere difference innomenclature cannot take away the import of the Explanationfrom its applicability to the present case. The appellant hereinmanufactures flavours which fall within the ambit of the ‘codenames’ and it is a fact on record that these codes are key toidentifying the flavours which are commercially transferable.15. Furthermore, it is expressly clear that the code names on the flavours indicate a connection in the course of trade between the specified goods and such person using such name or mark.The flavours in question, which were earlier manufactured byM/s. PEL Ltd. and supplied to the franchise holders, weresubsequently allowed to be made by the appellant. Thefranchise holders were in effect buying the very same flavoursfrom the appellant and were placing orders by referring to thesame code name, as is evident from the respective purchaseorders. The users of the flavours, i.e. M/s. PEL Ltd., M/s. PILLtd. and specified bottlers are all interconnected since the lattergroup comprises franchisees of PEL and thus there is morethan an iota of evidence to prove the connection in the course oftrade between the flavours and the entity using the flavoursthrough code names. Furthermore, the ownership of the codenames by M/s. PEL Ltd. is clearly evidenced from the fact thatthese flavours were developed, researched and concocted byM/s. PEL Ltd in its research labs. That M/s. PEL Ltd. havegiven the brand names to the flavours and allowed them to bemanufactured by the appellant, their holding company cannothide the fact that M/s. PEL Ltd were in fact, the owner of thecode/brand names. This conclusion is fortified by the fact that it was M/s. PEL Ltd who transferred the right of the codes whenthey were sold to M/s. Coca Cola Company in November, 1993.Since the appellant was not the owner of the said brand namesin question, the Tribunal was justified in holding that theappellant will not be entitled to the benefit of Notification Nos. 175/86 and 1/93 for the products with code names G-44T, L-33A, T-I IPC, T-IIP, R-66M and K-55T which belonged to M/s.PEL Ltd.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]13. R. Chauhan, P. Chauhan, R.N. Mungale and S.K. Motani, whoare the directors of the appellant herein are among those who also serve on the Board of Directors in M/s. PEL Ltd. and M/s. PIL Ltd. It is also a fact on record that that M/s. PEL advanced an interest-free loan of Rs. 1 crore to the appellant, which was used for purchase of raw material by the latter (As evidenced from the balance sheet). Furthermore, the flavours being manufactured by the appellant were developed by M/s. PEL at their R & D Lab at Bombay, whose services were at the disposal of the appellant. They were at one point of time were manufactured by M/s. PEL and admittedly owned by them. Clearly, all this points to the inescapable conclusion that the three companies in question were intertwined in their operationand management. A careful scrutiny of the records thereforeestablish that both the aforesaid two basic features areoverwhelmingly present in this case. Therefore it would likelyseem that the purported fragmentation of the manufacturingprocess was but a mere ploy to avail of the SSI exemption.Piercing the corporate veil, when the notions of beneficialownership and interdependency come into the picture, are nolonger res integra. On this count, therefore, we have no hesitation whatsoever in affirming the order of the Tribunal, which was justified entirely through the precedent set by thisare not convinced by the argument of the appellant that thisExplanation refers only to ‘brandand cannot be used todetermine whether code names, as used by the appellant in thepresent case, fall within the said category. The mere difference innomenclature cannot take away the import of the Explanationfrom its applicability to the present case. The appellant hereinmanufactures flavours which fall within the ambit of theand it is a fact on record that these codes are key toidentifying the flavours which are commercially transferable.15. Furthermore, it is expressly clear that the code names on the flavours indicate a connection in the course of trade between the specified goods and such person using such name or mark.The flavours in question, which were earlier manufactured byM/s. PEL Ltd. and supplied to the franchise holders, weresubsequently allowed to be made by the appellant. Thefranchise holders were in effect buying the very same flavoursfrom the appellant and were placing orders by referring to thesame code name, as is evident from the respective purchaseorders. The users of the flavours, i.e. M/s. PEL Ltd., M/s. PILLtd. and specified bottlers are all interconnected since the lattergroup comprises franchisees of PEL and thus there is morethan an iota of evidence to prove the connection in the course oftrade between the flavours and the entity using the flavoursthrough code names. Furthermore, the ownership of the codenames by M/s. PEL Ltd. is clearly evidenced from the fact thatthese flavours were developed, researched and concocted byM/s. PEL Ltd in its research labs. That M/s. PEL Ltd. havegiven the brand names to the flavours and allowed them to bemanufactured by the appellant, their holding company cannothide the fact that M/s. PEL Ltd were in fact, the owner of thecode/brand names. This conclusion is fortified by the fact that it was M/s. PEL Ltd who transferred the right of the codes whenthey were sold to M/s. Coca Cola Company in November, 1993.Since the appellant was not the owner of the said brand namesin question, the Tribunal was justified in holding that theappellant will not be entitled to the benefit of Notification Nos. 175/86 and 1/93 for the products with code names G-44T, L-33A, T-IIPC, T-IIP, R-66M and K-55T which belonged to M/s.PEL Ltd.