Important point
Criteria for determining the eligibility of an entrepreneur for becoming entitled to have benefit of exemption notification must be construed strictly.

Headnote:Central Excise—Central Excise Act, 1944—Section 35L(b)—Respondent manufacturer of cement was a small scale industry—Exemption from payment of excise duty in terms of notification dated 28.2.1993 was claimed—Exemption was denied on ground that benefit did not apply to specified goods bearing brand name of another person in view that Respondent had been using brand name of another concern—On appeal, Commissioner dropped proceedings relying on decision of Tribunal in Emkay Investment Pvt. Ltd. case—Tribunal upheld the order—Appeal—Criteria for determining eligibility of an entrepreneur for becoming entitled to have benefit of exemption notification must be construed strictly—Commissioner or Tribunal did not have to occasion to consider question in light of decisions of Supreme Court—Judgment in Emkay Investment stood overruled by Supreme Court—Impugned judgment was liable to be set aside and matter remitted to Tribunal.
Held : The purport and object of grant of exemption to a SSI unit is clear and unambiguous. It can be availed of, provided that they satisfy the conditions precedent therefor. The criteria for determining the eligibility of an entrepreneur for becoming entitled to have the benefit of exemption notification, it is well-settled, must be construed strictly. [See Tata Iron and Steel Co. Ltd. v. State of Jharkhand and Others, (2005) 4 SCC 272 and Government of India & Ors. v. Indian Tobacco Association, 2005(6) SCALE 683]. (Para 18)
The ratio of the decisions referred to hereinbefore shortly stated is that if the manufacturer uses some brand of its own, it would be entitled to, but it would not be, for one reason or the other, it had been using the brand of another. The learned Commissioner or the learned Tribunal, as noticed supra, did not have the occasion to consider the question in the light of the aforementioned decisions of this Court. Emkay Investment (supra) which was the basis for the decision of the Commissioner has expressly been overruled by this Court. The cross-objections filed by the Respondent, herein before the Tribunal also had not specifically been adverted to as the matter relating to maintainability of the appeal preferred by the Appellant, herein before the Tribunal does not appear to have been discussed nor any reference thereto has been made in the concluding paragraph of the judgment. (Paras 20 and 21)

Judgment

S.B. Sinha, J.—This appeal under Section 35L(b) of the Central Excise Act, 1944 (for short “the Act”) is directed against a final judgment and order dated 22.1.2004 passed by the Customs, Excise & Service Tax Appellate Tribunal, New Delhi in Appeal No. 145/2004-B whereby and whereunder the appeal preferred by the Appellant herein was dismissed.

2. The basic fact of the matter is not in dispute. The assessee is one M/s. Hira Cement. It carries on business of manufacture of cement in the town of Raipur. It is a small-scale industry (SSI) being a proprietory concern of one Shri Suresh Agrawal. Another industry, known as M/s. Hira Industries Limited, is also a manufacturer of cement having a factory in the town of Jagdalpur which is situated at a distance of about 300 kms. from Raipur. Hira Industries Limited was incorporated and registered under the Companies Act on or about 20th October, 1983 whereas the Respondent herein was set up in the year 1988. Hira Industries Limited is not a SSI unit. The unit of the Respondent was earlier known as Bajrang Bali Cement whereas that of Hira Industries Limited was known as Jai Bajrang Cement Ltd. The capacity of production of the Respondent’s cement industry is about 60 tonnes per day whereas that of Hira Industries Limited is 150 tonnes per day.

3. As a SSI unit, the Respondent herein claimed exemption from payment of excise duty in terms of a notification dated 28.2.1993. The said notification was issued under Section 5A of the Act; paragraph 4 whereof reads as under:

“4. 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 another person who is not eligible for the grant of exemption under this notification:

Provided that nothing contained in this paragraph shall be applicable to the specified goods which are component parts of any machinery or equipment or appliances and cleared from a factory for use as original equipment in the manufacture of the said machinery or equipment or appliances and the procedure set up out in Chapter X of the said Rules is followed :

Provided further that nothing contained in this paragraph shall be applicable to be specified goods where a manufacturer affixes the specified goods with a brand name or trade name (registered or not) of the Khadi and Village Industries Commission or of the State Khadi and Village Industries Board.”

4. “Brand name” or “trade name” has been defined in Explanation IX of the said notification in the following terms :

“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 identify of that person.”

5. The Respondent herein states :

“Hira Industries Ltd. is thus a Limited company run by Shri B.L. Agrawal and other Directors whereas Hira Cement is a proprietorship concern owned by Shri Suresh Agrawal. Shri Suresh is the nephew of Shri B.L. Agrawal and that was the main reason for which both the units were held to be related parties. However, there is no other nexus or relation between Hira Industries Ltd. and Hira Cement. Shri B.L. Agrawal and Shri Suresh Agrawal are not even falls within the ambit of definition of Relatives as defined under Section 6 of the companies Act, read with Schedule 1A of the Act.

The Hira Industries Ltd. has hired a portion of premises of Hira Cement for maintaining its Registered Office at Raipur and a small godown for keeping its goods. Hira Industries Ltd. used to purchase Cement from Hira Cement and for catering to the needs of its Raipur customers Hira Industries Ltd. used to keep those goods

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2006 Supreme(SC) 98

Important pointCriteria for determining the eligibility of an entrepreneur for becoming entitled to have benefit of exemption notification must be construed strictly.

Cases Referred (7)

Important point
Criteria for determining the eligibility of an entrepreneur for becoming entitled to have benefit of exemption notification must be construed strictly.