Case: Commnr. of Central Excise, Hyderabad IV Vs. Stangen Immuno Diagnostics

The respondent herein is the manufacturers of composite diagnostics or laboratory regents and pharmaceutical goods. It is registered as a small scale industrial unit (SSI unit). The respondent was using the brand name Stangen on the goods manufactured by it. It is an admitted case that this brand name Stangen was affixed on the packing of the goods and even on the goods manufactured. The respondent started availing the benefit of exemption/concessional rate of duty under Notificationdated 1.3.1986 which grants exemption or concessional rate of excise duty to the SSI units.2. However, in the year 1997 a show cause notice was issued to the respondent by the appellant/Excise Department stating that the respondent is wrongly claiming the benefit of the aforesaid Notification inasmuch as use of the brand name Stangen and also the logo belonged to Dr. K. Anji Reddy, Chairman of Dr. Reddys Laboratories (DRL). It was stated that DRL is the manufacturer of bulk drugs falling under Chapter 30 of the Central Excise Tariff Act, 1985, and the trade mark Stangen and related logo are used on the printed labels foils of the P & P medicine manufactured by DRL and also appear on the classification list filed by the DRL. On this basis in the show cause notice it was mentioned that the respondent was not entitled to the benefit of concessional rate of duty under the aforesaid Notification inasmuch as para 7 of the said Notification denied exemption in those cases where the manufacturer (SSI) affixes the specified goods with a brand name or trade name, registered or not, of another person who is not eligible for grant of exemption under this Notification. Explanation VIII to the said Notification which defines brand name reads asnd 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.The respondent replied to the aforesaid show cause notices in which it was admitted that Dr. K. Angi Reddy is the Chairman of Dr. Reddy Group of Industries which includes the respondent Company as well as DRL. The defence, however, was that Dr. K. Angi Reddy had not assigned the trade mark either to the respondent firm or any other manufacturer. It was also mentioned that the respondent as well as the DRL are Public Limited Companies having separate legal entities of their own with their own independent spheres of activities. In this behalf the contention was that DRL manufactured altogether different products than the products mentioned by the respondent Company. A plea was also raised that Dr. K. Angi Reddy in his individual capacity was not a manufacturer within the meaning of said expression as defined in the Central Excise Act. By raising the aforesaid submissions request was made to drop the proceedings. The aforesaid argument raised by the respondent persuaded the Adjudicating Authority who dropped the proceedings.4. Challenging the said order, the Department filed an appeal before the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT). The contention of the Department was that dropping of the proceedings by the Commissioner only on the ground that the goods manufactured by the respondent are different from the goods manufactured by DRL was untenable as it is not a relevant factor at all. However, this plea of the Department did not even prevail with the CEGAT which has, vide impugned judgment dated 31.12.2003, dismissed the appeal observing that the goods manufactured by the assessee were different from the goods manufactured by DRL and as per the settled law the use of brand of another would attract only when that the Commissioner had reached an erroneous finding with regard to the goods being different. This order of the CEGAT is assailed in the present proceedings.

Court's reasoning:
6. Explanation VIII defines that brand name or trade name. As per this explanation, it would be 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 the trade between such specified goods and some person using such name or mark with or without any indication of the identity of the person. Therefore, what follows from the reading of this Explanation is that if the brand name is used in relation to the specified goods indicating a connection in the course of the trade between such specified goods and some other person using the name, it would fit the description and the matter would be covered by the mischief of Explanation VIII. It is no where stated that brand name which is the name of other person and is being used by the SSI which is claiming benefit has to be in relation to same goods. Therefore, that could not have been reason to drop the proceedings and the CEGAT was not justified in dismissing the appeal of the Department on this ground.7. The aforesaid principle of law is no more res integra and has been decided by this Court authoritatively in couple of judgments. In Commissioner of Central Excise,v. Mahaan Dairies, (2004) 11 SCC 798  this Court while interpreting the similar nature of definition of brand name or trade name, held as underhave today delivered a judgment in CCE v. Rukmani Pakkwell Traders 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.It is clear from the above that the Court was of the view that even if the goods are different, so long as brand name or trade name of some other Company is used, the benefit of Notification would not be available. To the same effect is the judgment of this Court in the case of Commissioner of Central Excise,v. Bhalla Enterprises (2005 (8) SCC 308 ) wherein aforesaid judgment in Mahaan Dairies was followed by reiterating the same principle.We would also like to reproduce the following observation from Commissioner of Central Excise, Chandigarh II v. Bhalla Enterprises, (2005) 8 SCCapprehension of the assessees that they may be denied the exemption merely because some other traders even in a remote area of the country had used the trade mark earlier is unfounded.The notification clearly indicates that the assessee will be debarred only if it is uses on the goods in respect of which exemption is sought, the same/similar brand name with the intention of indicating a connection with the assessees goods and such other person or uses the name in such a manner that it would indicate such connection. Therefore, if the assessee is able to satisfy the assessing authorities that there was no such intention or that the user of the brand name was entirely fortuitous and could not on a fair appraisal of the marks indicate any such connection, it would be entitled to the benefit of exemption. An assessee would also be entitled to the benefit of the exemption if the brand name belongs to the assessee himself although someone else may be equally entitled to suchobservations bring out two significant aspectsAs per the Notification, the assessee would be debarred only if it uses on the goods in respect of which exemption is sought, the same/similar brand name with the intention of indicating a connection with the assessees goods and such other person or uses the name in such a manner that it would indicate such connection. If there is no such intention or that the user of the brand name was entirely fortuitous and could not on a fair appraisal of the marks indicate any such connection, it would be entitled to the benefit of exemption.(2) The assessee would also be entitled to the benefit of exemption if the brand name belongs to the assessee himself although someone else may be equally entitled to such name.We would like to observe that if the aforesaid contention of the respondent is factually correct, viz. The respondent used the brand name as the owner thereof itself, and was not using the brand name as belonging to DRL and authorised by DRL, then the submission of Ms. Tripathi is legally tenable.Having clarified the real position, we find that matter is not examined by the authorities below in the right perspective. The factual aspects can be established only before the adjudicating authority. Therefore, while setting aside the judgment, we remit the case back to the Commissioner, Central Excise to hear the respondent de novo on the show cause notice which was issued by him and decide the matter afresh after taking into consideration the law laid down in the aforesaid judgments. It would be open to the respondent to place on record whatever material it wants to place in consonance with the stand already taken in the reply to show cause notice and opportunity in this behalf shall be given to the respondent. Respondent shall also be given oral hearing by the Commissioner before recording its finding on those issues and deciding the fate of show cause notice. It would be open to the respondent to press the plea of limitation as well.