Case: M/s. RDB Textiles Ltd Vs. Commissioner of Central Excise &amp; Service Tax, Kolkata-IV Commissionerate

9. The facts of Civil Appeal No.8534 of 2015 will now be referred to. On 7.3.2011, pursuant to the amended notification of 1.3.2011, the Superintendent (Central Excise) sent a notice to the appellant that as they were selling goods which bore a brand name, excise duty, at the rate of 10%, would be imposed on the aforesaid goods10. A letter dated 18.3.2011 was then written, by the Jute Commissioner to the Commissioner (Central Excise), in which it was stated:2. It may be mentioned in this connection that jute mills print certain items on jute bags as per the requirements of the buyers and directions of the Jute Commissioner. The items printed on jute bags and the reasons for such printing are stated below:1.Mills NameAs per Notification No. S.O.698(E) dated 04.07.20026.BIS mark with licence No.As per BIS rule3. The jute mills have to print the items on the bags as per the requirements of the buyers and the Notification No. S.O. 698(E) dated 04.07.2002 issued by the Jute Commissioner4. Reasons for printing the bags are given below:The Notification No. S.O. 698(E) dated 04.07.2002 (copy enclosed) issued by the Jute Commissioner is to distinguish between Indian jute products and imported jute products and secure compliance of the stipulation of the order issued under JPM Act, 1987. These orders, inter alia, stipulate that percentage of total production of certain commodities or class or commodities required to be packed in jute packaging material manufactured in India from raw jute produced in India. A copy of the latest order dated 27.08.2010 and JPM Act, 1987 are enclosedItem No.3 to 6These are printed on bags so that buyers can identify their products and the year when food grains or other material is packed. If a buyer prefers jute products as per BIS standard, jute mill has to manufacture bags conforming to BIS standard and it is proved BIS standard only when it is marked BIS with licence number5. Thus jute bags printed with above items by jute mills are part of specifications and so where bearing any brand name of the mill company, may not be treated as branded bags in the context of levies of duties. By printing the items on bags, jute mills are not getting any kind of extra mileage in promoting their products6. In view of the above, it is requested that the Notice dated 08.03.2011 served by the Office of the Superintendents of Central Excise under the Division of Kol-IV to various jute mills for payment of 10% Adv. Duty may be withdrawn.11. This was followed by a circular dated 21.6.2011 issued by the Ministry of Finance which stated:Subject: Clarification on issues pertaining to the levy of excise duty on branded readymade garments and made-up articles of textiles-RegardingBoard has received representations from trade and industry seeking clarification on certain issues pertaining to the levy of excise duty on readymade garments/made-ups that either bear or are sold under a brand name. These issues are:(i) Applicability of the mandatory levy of excise duty on school uniforms, uniforms for private security guards, companies, hotels, airlines etc. and made-ups such as linens, towels etc. bearing the name or logo of a hotel, restaurant or airlines etc; and(ii) Applicability of mandatory levy of excise duty on made-ups such as blankets bearing the name of the manufacturer and supplied to the Ministry of Defence or its organizations2. The matter has been examined. On the issue of applicability of excise duty on uniforms or made-up articles like quilt, blankets, towels, linen etc. bearing the name or logo of a school, security agency, company, hotel or airline etc, it is clarified that such products would not merit treatment as branded products merely because the name of the school, institution or company or their logo is either printed, embroidered or etched on them. This is equally true of made ups such as towels, linen etc. bearing the name of the hotel, restaurant or airlines. In all these cases, there is no nexus between such a name or logo & the product at the time of its sale which is essential ingredient in the definition of the term brand name. Unless such garments/made-ups also bear a brand name in addition to the name or logo of the school, security agency, hotels, airlines and company, such goods would not attract the excise duty. It is also gathered that in some cases, apart from the name or logo of such organizations, the name of the tailor or manufacturer is affixed on such garments. However, mere affixing of name of the tailor or manufacturer would not constitute a brand name. Another related issue is the applicability of the mandatory excise duty to blankets which are supplied to the defence establishment, armed forces, police forces etc. against tenders that stipulate that the name of the manufacturer should be clearly indicated or marked on the product. As pointed out above, affixing the name of the manufacturer on such goods would not, by itself, bring them within the ambit of branded goods.iven the aforesaid two documents, the Superintendent (Central Excise) did not go ahead with the notice dated 7.3.2011.13.A typical requisition order issued by the Directorate of Supplies and Disposals required the emblem of the purchaser and excise duty payable by the purchaser to be printed on the jute bags manufactured by the appellants. Also, what was required by the aforesaid requisition order was the following:Branding: Every bag shall be screen printed in dark navy blue colour (darkest possible) with the emblems as per clause 8 with the following:a) Identification of procurement agency (containing insignia and name or short name or both as advised by the procurement agency)c) Short name of mill in capitals and CM/L Nod) MANUFACTURED IN INDIAA typical supply order placed by the Jute Commissioner also required, as a matter of law, that the purchasers name be put together with the name of the manufacturers mill as well as the BIS certification for purposes of identification of the jute bags to be used in the PDS.14. Long after the exemption notification of 1.3.2013, by which all jute bags were exempt whether branded or not, a show cause notice was issued on 17.12.2013 for the period from 1.3.2011 to 31.7.2013 demanding a sum of Rs. 30,49,72,784/- by way of excise duty15. The learned Commissioner, by its order dated 7.3.2014, confirmed the show cause notice, even for the period beyond 1.3.2013, as follows:4.7 On taking note of such arguments advanced by the said assessee, I find that the said assessee have erred in fundamental aspects of definition of brand name under Chapter Note 5 of Chapter 63. When goods are bought and sold that would constitute a market. In the instant case, the said assessee sold the jute bags to their customers, and such goods, allegedly being branded ones, it cannot be contended that the said branded goods were not sold in the market. Further, as per definition of brand name under Chapter Note 5 of Chapter 63, brand name may not be necessarily a name, as wrongly contended by them, but any writing, mark, invented words may constitute brand name under the said definition. Here, the printings/writings on the jute bags satisfy the definition of brand name under Chapter Note 5 of Chapter 63, as rightly alleged in the impugned Show Cause Notice4.8 On perusal of copy of notification no. nil dated 04.07.02 issued by the Jute Commissioner and further clarification given by the said authority vide his letter dated 18.03.11, I find that some of the printings/writings contained in the body of jute bags as per requirement of the said Textile Ministrys Notification, as opined by the Jute Commissioner, and such goods cannot be treated as branded goods as viewed by him. In this context, I find that persuasive value of the Jute Commissioners views in the matter may not be ruled out or brushed aside at one stroke, but as a quasi-judicial revenue authority, I am to go by the settled principles of law that nothing can be imported in the wordings of the statutory provisions, and for that matter, Chapter Notes require to be read in its stricter terms. Since the ingredients of the definition of brand name are present in the impugned jute bags, I am inclined to hold that such goods bear brand name to consider them as branded goods, for the purpose of levy of Central Excise duty for the rest period i.e. March, 2011 to February, 2013 is also sustainable.. The CESTAT, by the impugned order, set aside the penalty that was imposed and stated that the longer period of limitation could not be availed in the facts of these cases. However, relying strongly upon this Courts judgment in Kohinoor Elastics (supra), it came to the conclusion that since the jute bags had a brand name, the exemption contained in the amended notification of 1.3.2011 would not apply to the appellants. In dealing with the Finance Ministry circular dated 21.6.2011, the CESTAT brushed aside the same stating:Further, we find that the circular bearing no. 947/8/2011-CX dated 21.06.2011 referred to by the Appellant in the context of levy of excise duty on garments and also it is not binding on the interpretations advanced by the courts as has been held by the Honble Supreme Court in the case of CCE, Bolpur v. Ratan Melting and Wire Industries, 2008 (231) ELT 22 (SC)  .

Court's reasoning:
12.A reading of the aforesaid letter and circular would show that merely because the name of an institution is printed or embroidered on articles would not mean that they would become branded products. A brand name, in addition to the name or logo, would have to be given in order to attract excise duty. Also, mere affixing of the name of a manufacturer would not constitute a brand name.18. It is obvious that, on the facts of these cases, what is in fact affixed to the jute bags is the name of the procurer agency in question such as the FCI, the State Government of Punjab and so on, the crop year, the name of the jute mill concerned, its BIS certification number and the statement that the food grains are manufactured in India. It is clear that all the aforesaid markings have, on the pain of penalty, to be done by the manufacturers of the jute bags, given the Jute Control Order and the requisition orders made thereunder. Obviously, such markings are made by compulsion of law, which are meant for identification, monitoring and control by Governmental agencies involved in the PDS. Neither do such markings enhance the value of the jute bags in any manner nor is it the intention of the appellants to so enhance the value of jute bags, which is necessary if excise duty is to be imposed. This flows from the expression ...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.... In the present case, the markings on the jute bags are not for the purpose of indicating a connection in the course of trade between the jute bag and some person using such name or mark. The markings are by compulsion of law only in order that Governmental authorities involved in the PDS may identify and segregate the aforesaid jute bags. This being the case, it is obvious that there is no brand name involved in the facts of the present cases.19. Equally, it is clear that circulars that are issued by the Ministry of Finance are binding on the department of Central Excise, there being no judgment by this Court laying down the law contrary to such circulars. This is a well settled proposition as laid down in paragraph 30 of CIT v. Trans Asian Shipping Services (P) Ltd., (2016) 8 SCC 604  at 621.22. The facts of these cases are far from the facts in Kohinoor Elastics (supra). In Kohinoor Elastics (supra), it was found that, as a matter of fact, the customer wanted the brand name affixed on the product because he wanted the consumer to know that there is a connection between the product and him. This is very far from the facts of the present case, in that, as has been held by us above, it is clear that the markings required on the jute bags are compulsory, being required by the Jute Commissioner, and are not for the purpose of enhancing the value of the jute bags by indicating a connection in the course of trade between the aforesaid products and the manufacturer of those products.20. However, since heavy reliance was placed on the judgment of this Court in Kohinoor Elastics (supra) by the CESTAT, it has become necessary for us to deal with the aforesaid judgment.The exemption notification, which was involved on the facts of that case, was a notification dated 28.2.1993.21. The judgment of this Court turned on the fact that the exemption contained in the notification shall not apply to specific goods which bear a brand name of another person. It may first be noticed that there was no argument that the particular brand name concerned, on the facts of that case, could not be said to be a brand name at all, which is what has been argued before us. Further, it was held, on the facts of that case, that:It is an admitted position that the appellants are affixing the brand/trade name of their customers on the elastics. They are being so affixed because the appellants and/or the customer wants to indicate that the goods (elastic) have a connection with that customer. This is clear from the fact that the elastics on which brand/trade name of `A is affixed will not and cannot be used by any person other than the person using that brand/trade name. As set out hereinabove once a brand/trade name is used in the course of trade of the manufacturer, who is indicating a connection between the goods manufactured by him and the person using the brand/trade name, the exemption is lost. In any case it cannot be forgotten that the customer wants his brand/trade name affixed on the product not for his own knowledge or interest. The elastic supplied by the appellants is becoming part and parcel of the undergarment. The customer is getting the brand/trade name affixed because he wants the ultimate customer to know that there is a connection between the product and him.