ORDER
V.K Agarwal, Member (T)
1. The brief facts of the case are that the appellants M/s National Appliances is a proprietary concern of Lalit Jani. Mr. Jainarayan Agarwal is a Managing Director to M/s Jaipan Domestic Appliances Ltd. (in short M/s J.D.A.L.). M/s J.D.I.L. were the owner of the trade mark ‘Jaipan’ for goods falling for various goods like Grinder, mixer, blender, juicer mixer grinder etc. These goods were manufactured by them and their turnover was between 10 to 12 crores. However, as per their say there was labour problem in their factory, and to overcame the problem and keeping the brand name in tact in the market they assigned the trade mark Jaipan to M/s National Appliances vide deed of assignment dtd. 14.09.1997 for a sum of Rs. 1,000/- only. However, on the very next day the appellants M/s National Appliances allowed M/s J.D.A.L. to produce the same goods. Thereafter Shri Lalit Jani also allowed M/s Alka Domestic Appliances and M/s V.K. Engineering Co. and M/s Jaipan Appliances Ltd., Daman and Jalaram Pvt. Ltd., Daman to manufacture Jaipan brand mixer and grinder without any consideration though later on he claimed that he was charging a royalty of Rs. 10/- per mixer from the other manufacturers. During the course of interception of a Tempo carrying certain mixer and grinder and subsequent enquiries made thereafter, it was revealed that M/s National Appliances started manufacture of appliances by obtaining parts of the appliances from one M/s Sairaj Industries, who are making plastic parts like upper, bottom and middle plates of the mixies from moulds supplied by M/s J.D.A.L. These parts on their bottom carried a sticker showing that they were manufactured by M/s J.D.A.L./Jaipan Engineering. Goods found in the premises of National Appliances were also found to carry sticker of M/s J.D.A.L./Jaipan Engineering some of which were covered by another sticker showing as manufactured by M/s National Appliances. The quality control number used by M/s National Appliances was that of M/s J.D.A.L. only. The firm Jaipan Engineering whose sticker were affixed on the goods was a non-existent company. The consideration for the assignment deed was paid after two months in December 1997. The appellants were having a bank account which upto December showed a deposit of cash of Rs. 1,001/- only. There were no payment particulars regarding part of mixies, grinders etc. received from M/s J.D.A.L. The entire goods were sold by the appellants to M/s J.D.A.L. The goods manufactured by the other units like Alka Domestic Appliance, V.K. Engineering to whom also the brand name was assigned by the appellants were also sold only to M/s J.D.A.L. It was further ascertained that the trade mark was not registered by the Trade Mark Registration authority till date and that M/s J.D.A.L. have spend Rs. 20 to 25 Lakhs on advertisements and sales promotion of brand Jaipan.
2. In view of above fact, it was concluded by the department that the assignment of brand name by M/s J.D.A.L. to the appellant was fake and not genuine as the consideration was too meager and the entire financial control of the unit of M/s National Appliances was that of Shri Jainarayan Agarwal and that Shri Lalit Jani, a proprietor of M/s National Domestic Appliances had no financial means to carry out the manufacturing activity. Accordingly a show cause notice was issued to M/s N.D.A. seeking to deny them the benefit of small scale exemption 1/93 on the ground that they were selling the goods of Jaipan brand which was not belonging to them and therefore sought to demand duty amounting to Rs. 9,39,591/- on the goods cleared by M/s N.D.A. during the period 02.10.1997 to 13.10.1998 and sought to impose penalty on M/s N.D.A., J.D.A.L., Shri Lalit Jani and Jainarayan Agarwal etc.
3. The show cause notice was confirmed by the Commissioner who held that M/s National Appliance was a dummy unit of M/s J.D.A.L. and that the deed of assignment was an arrangement between both the parties to evade payment of central excise duty and the real manufacturer was J.D.A.L. to whom the entire raw material belonged and who had total financial control over M/s N.D.A. It was further held that since the trade mark registry it has not registered the brand Jaipan in the name of M/s J.D.A.L. and therefore, the trade mark still belongs to M/s J.D.A.L. and since M/s N.D.A. manufactured the goods carrying the brand name of M/s J.D.A.L. which did not belong to them they were required to pay full duty instead of the concessional rate of duty applicable to small scale unit under Notification 1/93 dated 28.2.1993 as amended. The duty was demanded for an extended period on the ground that the appellants have mis-declared that the Jaipan brand belong to them which in fact belong to M/s J.D.A.L. and therefore there was a suppression of fact. Besides confirming duty penalties of various amounts were imposed on the appellant, M/s J.D.A.L. and other persons. This order was upheld by Commissioner (Appeals) who held that since the consideration for assigning the brand name to M/s N.D.A. was too meagre and not sufficient even to cover the expenses of documentation and since M/s N.D.A. allowed other companies such as Alka Domestic Appliances, V.K. Engineering, M/s Jaipan Appliances Ltd., Daman etc. to use the brand Jaipan without any consideration the assignment of deed of Jaipan brand was not genuine. He, therefore, held that based on these facts it was clear that the appellants had manufactured and cleared clandestinely the goods bearing Jaipan brand and therefore they were not entitled to small scale exemption notification No. 1/93.
4. Heard both parties.
5. The learned advocate for the appellant submitted that the appellate authority has failed to appreciate that the brand name in question ‘Jaipan’ stood assigned in favour of the appellant by M/s J.D.A.L. under a valid assignment deed and that the appellant had applied for the registration thereof in their favour to trade mark registry. It was not for the department to determine whether the consideration was too low or otherwise and once a valid assignment is made it cannot be challenged on this ground. Reliance in this regard was placed, on the Supreme Court decision in the case of Commissioner of Central Excise, Goa v. Primella Sanitary Products 2005 (184) E.L.T. 125 (S.C.). In this case the adjudicating authority has held that the assignment for a consideration of Rs. 100/- was not a bona fide assignment. The Tribunal however took a view that so long as the assignment stand the respondent is entitled to benefit of the Notification No. 175/86 and 1/93 which was upheld by the Apex Court. As regards non-registration of brand till date, it was submitted that they have applied for the registration in the form TM-16 dated 23.09.1997 to the Registrar of the Trade Mark Mumbai with a request to transfer the brand name and have submitted receipt No. 38120 dated 23.09.1997 in support thereof. It is still under the consideration of the registration authorities as per their procedure. Even otherwise they invited attention to the Apex Court decision in the case of Collector of Central Excise, Ahmedabad v. Vikshara Trading & Investment Pvt. Ltd. wherein it was held that once it is a matter of fact that there was an assignment of trade mark in favour of the first respondent and that fact was not in serious dispute, the mere fact that the assignment was not registered could not alter the position. It was further held that it is permissible in law to have same brand name for different classes of goods owned by different persons.
6. It was further submitted that the impugned order passed by the appellate authority is void ab initio and in as much as the allegation made and upheld against the appellants are self defeating and self contradictory. Thus while on the one hand the adjudicating authority has clearly held that the appellant was set up as a mark/front man of M/s J.D.A.L. for effecting clearances of the goods with brand name Jaipan and that the appellants was a dummy unit floated by Shri Jainarayan Agarwal, Managing Director of M/s J.D.A.L., he has still chosen to demand duty from the appellants on the ground that they were manufacturing goods having a brand name not belonging to them. In the eyes of law a dummy unit has no separate and independent existence therefore if M/s N.D.A. was not in existence at all then how they could manufacture the goods bearing the brand name of M/s J.D.A.L. This order is therefore not sustainable in law and should be quashed and set aside.
7. On limitation it was submitted that there was no mis-declaration on the part of the appellants as they were under a bona fide belief that they were a rightful owner of the brand name Jaipan by virtue of the assignment deed dated 14.09.1997 executed between them and M/s J.D.A.L. for which they have applied for registration in their favour to the trade mark registry. Thus they have no intention to evade duty and the extended period cannot be invoked. They have cited some Tribunal’s decision in support thereof.
8. We have considered the submissions. We find that the facts leading to the deed of assignment and the subsequent development do create a grave doubt about the veracity of the transaction. Prima facie a consideration of Rs. 1,000/0 for unconditional transfer of brand name appears to be inadequate. The consideration was also paid belatedly. From the very next day the assignee permitted M/s J.D.A.L and others to use his brand name for nil consideration. All the raw materials belonged to M/s J.D.A.L. and as per his say this was given on credit. The guarantee card was in the name of M/s J.D.A.L. The manufacturer’s name was shown as M/s J.D.A.L. and a non existent company like Jai Engineering. The moulds were supplied free. No particulars of payment for raw materials or finished goods sold to M/s J.D.A.L. is forthcoming. Therefore, it looks like that the appellants were apparently a dummy company. However, curiously the department has still treated the appellants as manufacturer and sought to demand duty from them on the ground that the goods manufactured by them bear a brand name which did not belong to them. There is no finding whether M/s N.D.A. had the necessary machines to manufacture and have workers who were paid by them for carrying out the manufacturing activity. The order is totally silent and it therefore appears that the department has accepted that M/s N.D.A. were a manufacturer and has therefore demanded duty from them. The grounds advanced by Commissioner (Appeals) is also that the assignment deed for brand name is not genuine and therefore the clearances were clandestine and duty at full rate is payable. Once the department has chosen to accept M/s N.D.A. as a manufacturer, we do not find any reason to deny them the benefit of Notification 1/93 solely on the grounds that the transfer of brand name under the deed of assignment was not genuine. Once the assignment is there then we cannot go into the consideration paid for getting assignment as has been held by the Apex Court in the case of Primella Sanitary Products cited supra. Similarly non-registration of brand name is also not relevant as per the Apex Court decision in the case of Vikshara Trading and Invest. P. Ltd. cited supra specially when the appellants have applied for registration vide their letter dated 23.09.1997 to the trade mark registry for which they have a receipt and which is also being not denied by the department. We, therefore, strike down the order demanding duty alongwith confiscation of goods. Penalties imposed on the appellants and Shri Jainarayan Agarwal, Shri Lalit Jani and on the two companies are also set aside.
9. The appeals are allowed in above terms.
(Pronounced in Court on 18.4.06)