CX - Notfn.30/2004 - Markings on jute bags are by compulsion of law only in order that PDS officials may identify & segregate aforesaid jute bags - no 'brand name' involved: SC
By TIOL News Service
NEW DELHI, FEB 14, 2018: THE CESTAT has denied exemption under excise notification 30/2004-CE as amended by notification 12/2011-CX dated 1.3.2011 in respect of jute bags manufactured by the appellants and supplied to the Food Corporation of India (FCI), various State Governments and Governmental agencies for use in packing of food grains sold through the Public Distribution System (PDS).
The said exemption has been denied for a period of two years by holding that affixing the name, logo and particulars of buyers like the FCI and State Governments amounts to affixing on the jute bags a "brand name".
The appellant submitted that using the name of the buyer/procurer of food grains is obviously not a brand name that results in indicating a connection in the course of trade between the jute bag and the said buyer.
Background:
The notification 30/2004-CE was amended by Notfn. 12/2011-CX and in terms of which in the TABLE, for S.No.16 and the entries relating thereto, the following S.No. and entries were substituted -
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1
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2
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3
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"16.
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61,62 and 63 (except 6309 00 00 and
6310)
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All goods, other than those bearing a brand name or sold under a brand name "
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Brand name, for the purpose of Chapter 63, is defined in Chapter Note 3(b)(iv) as follows:
"(iv). In relation to products of this Chapter, "brand name" means a brand name, whether registered or not, that is to say, a name or a mark, such as a symbol, monogram, label, signature or invented words or any writing which is used in relation to a product, 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 with or without any indication of the identity of that person."
By notification 11/2013-CX, dated 01.03.2013, the notification 30/2004-CX was amended further, thus -
| In the said notification, in the Table, against serial number 16, for the existing entry in column (3), the entry "All goods" shall be substituted. |
Incidentally, 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 goods.
A letter dated 18.3.2011 was then written, by the Jute Commissioner to the Commissioner (Central Excise), in which it was inter alia stated:
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"5. 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 products.
6. 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."
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This was followed by a Circular 947/8/2011-CXdated 21.6.2011 issued by the Ministry of Finance which concluded that -
| "…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". |
Given the aforesaid two documents, the Superintendent (Central Excise) did not go ahead with the notice dated 7.3.2011.
However, long after the issuance of amending notification dated 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 duty.
By an order dated 07.03.2014, the CCE confirmed the demand even for the period beyond 01.03.2013.
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 on the judgment in Kohinoor Elastics - 2005-TIOL-120-SC-CX, the CESTAT 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. The Board Circular dated 21.06.2011 was also brushed aside by stating that the same is in the conext of excise duty on garments and is not binding.
And this is how the matter came in appeal(s) before the Supreme Court.
The apex court noted the above facts and after relying upon its decision in CCE v. Stangen Immuno Diagnostics - 2015-TIOL-133-SC-CX, observed -
"18. …, 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."
The Apex Court also noted that it is well settled proposition that circulars that are issued by the Ministry of Finance are binding on the department of Central Excise, there being no judgment by the Supreme Court laying down the law contrary to such circulars. [CIT v. Trans Asian Shipping Services (P) Ltd. - 2016-TIOL-97-SC-IT-LB refers.]
The apex court decision in Kohinoor Elastics (supra) was distinguished thus -
"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."
The appeals were allowed by setting aside the judgment of the CESTAT.
(See 2018-TIOL-59-SC-CX)
