Per Shri P.C. Jain :

The appellants herein are manufacturers of soap. They, inter alia, manufacture soap-cakes embossed with the logo and name of their customer (s). The same logo and name are also being printed on the wrappers of the soaps. Their customers are hotels, Indian Airlines, State Government Tourism Development Corporation etc. Soaps so obtained by their customers are used in their own establishments and are not sold further.

2. A question has arisen whether the benefit of Notification No. 175/86-CE can be made applicable to such soaps carrying the brand-names of other persons i.e. of their customers.

3. Revenue in the present appeals has denied the benefit of the said Notification in terms of para 7 thereof, holding that the appellants have embossed the brand-name and trade-name, in terms of the definition of that expression in the said Notification, of another person i.e. of their customer, and therefore, para 7 is clearly attracted.

4. On the other hand, the appellants' contention is that their customers namely hotels, tourist departments and Indian Airlines which buy the soaps with embossed brand-names of their own, do not further sell such soaps. Such soaps are used in their own establishments as aforesaid and therefore, excisable goods namely soaps, are not traded. Consequently, the expression "in the course of trade" occurring in the definition of "brand-name" in Explanation to the said Notification, would come to their rescue and the benefit of the Notification cannot be denied in as much as no trade takes place in such goods.

5. We have carefully considered the submissions of both sides. We agree with the submissions of the learned Advocate, Dr. Samir Chakraborty that since trading in the goods at the end of the customers, does not take place, therefore, the mischief of para 7 is not attracted in the present case and hence the benefit of Notification No. 175/86 cannot be denied to the appellants.

6. In this connection, learned Advocate has also drawn our attention to a Circular issued by the Board (C.B.E.C.) No. 71/71/94-CE dated 27.10.94 printed in "Taxman MODVAT and Credit of Money Scheme" - Edition: 1996, at Annexure: 18.9. In this connection, we reproduce the relevant paras: 5 and 6 of the said Circular as follows, which settles the controversy:-

"5. As explained in paragraph 3 of the letter, to attract the mischief of the provisions relating to brand name, two conditions have to be satisfied.

(1) Such brand name must indicate a connection between the branded goods and some person using such brand name.

2) Such connection should be in the course of trade.

6. Consequently if there is no trade of such goods, the brand name provision would not apply.

7. Coming to the first illustration, castings are manufactured as per the specific requirement of the customers and the brand name which the small scale unit puts off such castings is meant for use of the customer only for further manufacture. Castings having such brand name are not sold in the market as castings as such, because it will be of no use to another person. It is felt that when such castings are not "traded" but only sold to a particular manufacturer for his own use, the embossing of the brand name of the customer on the castings would not amount to using brand name so as to deny the benefit of Notification No. 1/93. Of course, if it is found that such branded castings are traded in the market as such, it will amount to use of such castings in the course of trade and the benefit of exemption notification will not be available. In other words, so long as the branded castings are being supplied to the customer for further manufacture and are not otherwise "traded", the benefit of small scale exemption in such cases should not be denied merely on the ground that it contains brand name of another unit. Whether such supply is in the course of trade or not, of course, will be a matter of fact and has to be ascertained from the nature of transaction between the