NEW DELHI, JAN 15, 2013: THE short question of law which arises for consideration in this appeal is, whether the manufacture and sale of specified goods that do not physically bear a brand name, from branded sale outlets, would disentitle an assessee from the benefit of S.S.I. Notification No. 1/93-C.E., dated 28th February, 1993, as amended from time to time.

The assessee was engaged in the manufacture and sale of cookies from branded retail outlets of ‘Cookie Man' . The assessee had acquired this brand name from M/s Cookie Man Pvt. Ltd, Australia (which in turn acquired it from M/s Auto- bake Pvt. Ltd., Australia). The brand name used the words ‘Cookie Man' accompanied with a logo depicting the smiling face of a mustachioed chef. The assessee was selling some of these cookies in plastic pouches/containers on which the brand name described above was printed. No brand name was affixed or inscribed on the cookies. Excise duty was duly paid, on the cookies sold in the said pouches/containers. However, on the cookies sold loosely from the counter of the same retail outlet, with plain plates and tissue paper, duty was not paid.

The retail outlets did not receive any loose cookies nor did they manufacture them. They received all cookies in sealed pouches/containers. Those sold loosely were taken out of the containers and displayed for sale separately. Even though no separate register was maintained to account for the sale of the cookies sold loosely, their numbers were calculated from the number of empty pouches/containers left behind at the end of day.

On scrutiny of the documents recovered from the said outlet and on the basis of the statement of the Executive Director, a notice dated 20th December, 2012 was issued to the assessee by the Commissioner to show cause as to why

(i) the cookies sold by the assessee at its outlets be not classified under Chapter sub-heading 1905.11 as biscuits and

(ii) in view of their use of brand name ‘Cookie Man' on sale of cookies in plastic pouches/containers, S.S.I. exemption should not be disallowed.

Upon consideration of the explanation furnished by the assessee, the Commissioner inter-alia came to the conclusion that unless the specified goods or the packaging in which these are sold, bear the brand name or the logo, prescribed S.S.I. exemption cannot be denied. Thus, the Commissioner held that since there was neither any material evidence nor averment to prove that the brand name was embossed on the cookies, the assessee was eligible to avail of the benefit of small scale exemption in respect of cookies sold loosely from the counter of the retail outlet. Being aggrieved by the order, both the Department and the assessee filed cross appeals before the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench at Chennai.

The decision of the Commissioner having been affirmed by the Tribunal, the revenue is before the Supreme Court in this appeal under Section 35L(b) of the Central Excise Act, 1944.

The Supreme Court noted,

There is no dispute that the specified good is to be classified under sub-heading 1905.11 as Biscuits, manufactured with the aid of power. The controversy revolves around para 4 of S.S.I. notification No. 1/93-C.E. dated 28th February, 1993, which, in its erstwhile form, read as follows:-

"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"

The meaning of a ‘brand name' or ‘trade name' is enunciated in Explanation IX of the said notification which says: -

“Explanation IX- ‘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.”

Para 4 of the said notification that deals with exemption for certain goods - affixed with a brand name was amended vide notification No. 59/94-C.E. dated 1st March, 1994, to read:-

“4. The exemption contained in this notification shall not apply to the specified goods, bearing a brand name or trade name (registered or not) of another person"

Part (iii) of para J of the Budget Changes-1994-95 dealt with “Changes in the SSI schemes” explains the purpose of the amendment in the following words:

“(iii) Brand name provision has been amended so as to provide that SSI concession shall not apply to the goods bearing the brand name or trade name of another person. The effect of this amendment is that if an SSI unit manufactures the branded goods for another person irrespective of whether the brand name owner himself is SSI unit or not, such goods shall not be eligible for the concession. Another implication of this amendment is that the requirement of affixation or brand name by the SSI unit has been changed and now the only condition is that the goods cleared by SSI unit bearing a brand name of another person shall not be eligible for the concession irrespective of the fact whether the brand name was affixed by the SSI unit or that, the input material used by the SSI unit was already affixed with brand name.”

Once it is established that a specified good is a branded good, whether it is sold without any trade name on it, or by another manufacturer, it does not cease to be a branded good of the first manufacturer. Therefore, soft drinks of a certain company do not cease to be manufactured branded goods of that company simply because they are served in plain glasses, without any indication of the company, in a private restaurant. The good will continue to be a branded good of the company that manufactured it. The same principle would apply in the case of potato chips, chocolates, biscuits, wafers, powders and other such goods often sold from various locations.

In case of goods sold from exclusive single brand retail outlets or restaurants or stores, the fact that a good is sold from such a store ought to be a relevant fact in construing if the good is its branded good or not. In the case of such goods, perhaps a rebuttable presumption arises in favour of such goods being branded goods of the specified store. Such a presumption can be rebutted if it is shown that the specified good being sold is in fact a branded good of another manufacturer. Thus, branded potato chips, soft drinks, chocolates etc. though sold from such outlets, will not be considered to be goods of such outlets. However, all other goods, sold without any appearance of a brand or trade name on them, would not be deemed unbranded goods; to the contrary, they may be deemed to be branded goods of that outlet unless a different brand or trade name appears.

So, the Supreme Court held that it is not necessary for goods to be stamped with a trade or brand name to be considered as branded goods under the SSI notification. A scrutiny of the surrounding circumstances is not only permissible, but necessary to decipher the same; the most important of these factors being the specific outlet from which the good is sold. However, such factors would carry different hues in different scenarios. There can be no single formula to determine if a good is branded or not; such determination would vary from case to case.

Applying the said principles on the facts at hand, the Supreme Court failed to see how the same branded cookies, sold in containers, can transform to become unbranded ones, when sold from the same counter, or even from an adjoining counter, without packaging carrying the brand name. Admittedly, on the same cookies, physically bearing brand ‘Cookie Man' sold in containers carrying brand name duty is paid. It is interesting to note that learned counsel appearing on behalf of the assessee first argued that to determine if the cookies sold from the counter are branded or not, scrutiny must be limited to the case of the cookies themselves without looking at the surrounding circumstances; yet went on to argue that the tissues and plates they were served on did not bear the brand of the specified good. Either the environment of the goods can be looked into, or cannot be taken into consideration at all. Once it is established, as in the instant case, that the environment of the goods can be gone into to construe if it is branded or not, there is no reason why the environment of the goods should be limited to the plates and tissues, on which they are served. In the instant case, the cookies were sold from a dedicated outlet of ‘Cookie Man' where no other products but those of the assessee were sold. The invoices carry the name of the company and the cookies were sold from a counter of the store. The store' s decision to sell some cookies without containers that are stamped with its brand or trade name does not change the brand of the cookies. The cookies sold even without inscription of the brand name, indicate a clear connection with the brand name, in the course of assessee's business of manufacture and sale of cookies under the brand name ‘Cookie Man' . They continue to be branded cookies of ‘Cookie Man' and hence cannot claim exemption under the SSI Notification.

Hence, the Supreme Court was of the opinion that the impugned decision of the Tribunal is erroneous and unsustainable.

Consequently, the appeal is allowed and the impugned order is set aside.

(See 2013-TIOL-03-SC-CX)