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M/S. Kich Manufacturers v. M/S. Kich Industries
Summary of the Legal Opinion
Factual and Procedural Background
M/s. Kich Industries and M/s. Kich Manufacturers are two manufacturing units producing hardware/furniture fittings and related goods under the brand name "KICH". A Preventive Officer of Central Excise visited the factory premises of M/s. Kich Manufacturers on 13.07.2004 and found finished goods and packing material bearing the brand name "KICH". The goods appeared to have the brand affixed using printing machinery located at the premises of M/s. Kich Industries; corrugated boxes and polyethylene wrapping bore "KICH" and "AISI 316 STAINLESS STEEL HARDWARE PRODUCTS", but did not show the name and address of the manufacturer.
During investigation, statements were recorded from Shri Bharatbhai C. Hapani (authorised signatory) and a dealer (Smt. Chetna Jagdish Mistry), and documentary evidence (including a trade mark application dated 20.09.2000 and ISO certificate details) was produced. Revenue formed the view that M/s. Kich Manufacturers were using the brand name of M/s. Kich Industries and therefore were not entitled to the benefit of certain Small Scale Industry (SSI) notifications (Notification No. 08/2002 and 08/2003 dated 01.03.2002 and 01.03.2003).
Proceedings were initiated against M/s. Kich Manufacturers, resulting in a confirmed demand of duty of Rs. 17,71,232/- for clearances during 2003–04 and 2004–05, confirmation of interest, and imposition of penalty of an identical amount under Section 11AC of the Central Excise Act. Additional penalties of Rs. 10,000/- each were imposed on Shri Bharatbhai C. Hapani and on M/s. Kich Industries. Goods under seizure were confiscated with an option to redeem on payment of Rs. 30,000/-. The order of the Joint Commissioner was upheld by the Commissioner (Appeals), and the present appeals were filed against that upholding. The Tribunal heard the appeals and has issued this common order rejecting the appeals.
Legal Issues Presented
- Whether M/s. Kich Manufacturers were using the brand name that belonged to M/s. Kich Industries.
- Whether M/s. Kich Manufacturers were entitled to the benefit of Notification No. 08/2002 and Notification No. 08/2003 (SSI exemption notifications), given the alleged use of a brand name of another person as contemplated by paragraph 4 and the accompanying explanation to the notification.
Arguments of the Parties
Appellants' Arguments (M/s. Kich Manufacturers)
- They did not seriously dispute the use of the brand name "KICH" by M/s. Kich Manufacturers but contended that such use started only from 01.06.2004, and therefore the SSI benefit could not be denied for the period prior to that date.
- They argued that "KICH" was not a registered trademark of M/s. Kich Industries and therefore use of the same by M/s. Kich Manufacturers could not be held to contravene the explanation to the notification.
Revenue's Arguments
- Revenue relied on the physical evidence found during the visit: finished goods at M/s. Kich Manufacturers bearing the "KICH" mark, similarity of packing materials, and use of printing machinery located at M/s. Kich Industries to affix the brand.
- Revenue pointed to admissions and statements (including that of Shri Bharatbhai C. Hapani) and dealer testimony indicating identical goods and common branding and marketing under the "KICH" name by related group companies.
- Revenue took the view that the appellants were using a brand name of another person and thus were not eligible for the SSI notifications, and accordingly sought denial of exemption, recovery of duty, interest, and imposition of penalties and confiscation.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Commissioner of Central Excise Chandigarh v. Mahaan Dairies — 2004 (166) ELT 23 (SC) | It is settled that to claim benefit under a notification a party must strictly comply with the notification; using the same style of a trade name/mark as another manufacturer amounts to using the brand name of that other manufacturer; minor additions (e.g., extra words) do not avoid the connection in the consumer's mind. | The Tribunal relied on this authority to support the proposition that use of the brand "KICH" in the same distinctive style by M/s. Kich Manufacturers establishes use of the brand name of M/s. Kich Industries and defeats the claim to exemption. |
| Sudhir Gensets Limited — 2010 (255) ELT 295 (TA) | Where two manufacturing units share the same brand, common management and use of the same brand name can disentitle an entity from availing the benefit of small scale exemption notifications. | The Tribunal cited this decision as a supporting authority where common branding and common/group management resulted in denial of exemption; it reinforced the Tribunal's conclusion in the present facts. |
Court's Reasoning and Analysis
The Tribunal's analysis proceeded from the statutory framework of the SSI notifications and their explanation: the definition of "brand name" or "trade name" is concerned with a name, mark or symbol used to indicate a connection between specified goods and a person in the course of trade. The Tribunal noted that the essence of the definition is that the brand should reflect a connection between the goods and the person using the name.
Applying the facts, the Tribunal observed:
- It was admitted that the brand name "KICH" belongs to M/s. Kich Industries and that M/s. Kich Manufacturers were using that brand (with M/s. Kich Manufacturers admitting use from 01.06.2004, a date disputed by Revenue).
-
The adjudicating authority's finding rejecting the appellants' contention as to the commencement date of use was supported by multiple items of evidence (enumerated by the adjudicating authority and relied on by the Tribunal). These included:
- Finished excisable goods at M/s. Kich Manufacturers found affixed with the "KICH" brand.
- Admissions that M/s. Kich Manufacturers were using the brand of M/s. Kich Industries.
- Evidence that finished goods of M/s. Kich Manufacturers were brought to M/s. Kich Industries to print the "KICH" brand on mark-printing machinery installed there.
- Packing material used by both units was the same and bore identical markings ("KICH", ISO logo, and "AISI 316 STAINLESS STEEL HARDWARE PRODUCTS"), while the name and address of the manufacturer were not printed on the outer packing.
- M/s. Kich Industries had an ISO 9001:2000 certificate associated with the "KICH" brand, which was also used by M/s. Kich Manufacturers on their products.
- Admissions that the companies were marketed as the "Kich Group of Companies", indicating a common market identity and facilitating shared advertising.
- Chronology showing M/s. Kich Industries established since 1998 while M/s. Kich Manufacturers commenced in July 2003, yet both used the identical brand style.
- The Tribunal found the affidavit produced by Shri Hapani (to support the appellants' claimed date of commencing use) unreliable because it was sworn after the officer's visit and contained contradictions; and correspondence purporting to show permission to use the brand from 01.06.2004 was characterized as an afterthought because the person who signed that correspondence had not disclosed such permission during the investigation despite being present and making statements.
- The statement of a dealer corroborated Revenue's position by stating that goods obtained from both manufacturers were identical, bore the same ISO sticker and packing, and could not be differentiated; dealers had procured goods from both units from July 2003 onward.
- The Tribunal treated the absence of manufacturer identification on packaging as indicative that the appellants intended to capitalize on the established popularity of the "KICH" name belonging to M/s. Kich Industries.
- The Tribunal applied the precedents (Mahaan Dairies and Sudhir Gensets) to the present facts, accepting the principle that identical use of a brand/style and common group identity can preclude claiming exemption under the SSI notifications.
On these bases, and given the admission that the brand belonged to M/s. Kich Industries and was being used by M/s. Kich Manufacturers, the Tribunal concluded there was no merit in the appellants' contentions and found no reason to interfere with the orders of the lower authorities.
Holding and Implications
CORE RULING: The impugned orders of the lower authorities are UPHELD and the appeals are REJECTED.
Direct consequences for the parties (as set out in the adjudicating orders and affirmed by the Tribunal):
- Demand of duty of Rs. 17,71,232/- on clearances effected during 2003–04 and 2004–05 was confirmed.
- Interest on the said duty was confirmed.
- Penalty of an identical amount under Section 11AC of the Central Excise Act was imposed and confirmed.
- Additional penalties of Rs. 10,000/- were imposed on Shri Bharatbhai C. Hapani and Rs. 10,000/- on M/s. Kich Industries (and upheld).
- Goods under seizure were confiscated, with an option for redemption on payment of a redemption fine of Rs. 30,000/- (as provided in the impugned order and upheld).
Broader implications: The Tribunal applied established authorities reinforcing that strict compliance with notification terms is required and that use of another manufacturer's brand/style (especially where common group identity and identical packaging exist) negates entitlement to SSI notification benefits. The opinion does not purport to set a new precedent beyond applying existing law to the facts; the direct effect is the confirmation of the revenue demands, penalties and confiscation in respect of the appellants.
Archana Wadhwa:— All the appeals are being decided by a common order as the issue involved is identical. We have heard Shri P.V Seth, learned advocate appearing for the appellants and Shri S.K Mall, learned SDR appearing for the Revenue.
2. As per facts on record M/s. Kich Manufacturers are engaged in the manufacture of various type of hardware/furniture fittings falling under Chapter 83 of the Central Excise Tariff Act, 1985. M/s. Kich Industries is also manufacturing identical goods like Knobs, Door handles, C-handles, D-handles etc. falling under chapter heading 82 and are clearing the same under their brand name ‘Kich’
3. The factory premises of Kich Manufacturer was visited by the Preventive Officer of Central Excise on 13.07.2004 Verifications of record and stock lying at the factory premises revealed that they are using the brand name ‘KICH’ on each of their product and packing material. As they were not having any machine for affixing/printing of Kich brand name on their products, the goods after being manufacturing in their factory, was being sent to the factory of Kich Manufacturers for affixing the said brand name. After affixing the same the goods were returned to the said appellant's factory, wrapped in plastic bags bearing Kich marking and subsequently packed in corrugated box having same Kich brand printed on the same. It was further seen that corrugated boxes were also printed with “AISI 316 STAINLESS STEEL HARDWARE PRODUCTS”. The name and address of the manufacturer was nowhere written on the said corrugated boxes.
4. Similarly, M/s. Kich Manufacturers were also manufacturing the same very goods under the brand name Kich. It is seen that an ISO certificate in relation to “Kich” brand architectural hardware items produced by them. The brand name “Kich” was being affixed on each of their final product prior to packing and the goods were being wrapped in polyethylene printed with Kich and subsequently packed in corrugated boxes printed with Kich markings. The said corrugated boxes were also printed with markings “AISI 316 STAINLESS STEEL HARDWARE PRODUCTS”. The name and address of the manufacturer was not being printed on the corrugated boxes or on any of the final product or the packing material.
5. Inasmuch as the brand name Kich was being affixed by M/s. Kich Industries on the goods being manufactured by them and the said goods were being packed in the same manner and the said brand name fixed was also being affixed on the plastic bags and also on the corrugated bags, Revenue entertained a view that M.s, Kich Industries are using the brand name of M/s. Kich Manufacturers. As such, it was viewed that the said appellant is not entitled to the benefit of Small Scale Notification in terms of the explanation annexed to the notification in question. Accordingly, the goods lying in their premises were put under seizure and representative samples lying in the factory of M/s. Kich Industries as also in Kich Manufacturers were drawn.
6. During the course of further investigations, statement of Shri Bharatbhai C. Hapani, authorised signatory of Kich Manufacturers as also of Kich Industries were recorded on 13.07.2004, wherein he deposed that M/s. Kich Industries was engaged in the manufacture of Hardware items since last 8–9 years and he was looking after the entire work relating to the firm; that “Kich” was not registered trademark; that they had applied for registration of the said brand name during July 2000 and again applied recently; that they also emboss “Kich” on each of their product; that company having ISO 9001:2000 Certificate which is valid upto June 2005 for manufacture and supply of Architectural Hardware Products; that he was also looking after marketing of the products manufactured by the Kich Manufacture; that Kich Manufacture was manufacturing hardware items viz ‘Cabinet knobs, D'handles,’ C-Handles of stainless steel and commenced its business from 14.07.2003; that Kich Manufacture was not having registered trade mark or ISO certificate; that Kich Manufacture had also applied for registered trade mark and brand applied for was “Kich”, but the registration is still pending; that the products of Kich Industries and Kich Manufacture were having identical printing of Kich brand name; that they did not mention description of the items on the packing material but were mentioning product code No. on the same; that packing materials was bearing mark as “TM”. “KICH”, “AISI 316 STAINLESS STEEL HARDWARE PRODUCTS”; that he agreed and confessed that they were using common brand name for both the units. In his subsequent statement recorded on 20.07.2004, he inter-alia stated that the brand name Kich on the products of both the firms printed in the of M/s. Kich Industries and neither of the two units mentioned the names of the manufacturer on any of their packing materials or the box; that both the manufacturing units along with M/s. KO, M/s. KMPL and M/s. FTPL are known as Kich Group of Companies, that though they are separate entities they are owned by same group of family members; that in order to establish a common identity in the market and to facilitate effective advertisement at a lower cost, they preferred to emphasize on consumer that the products were a banner known as Kich Group of Companies. He also disclosed the name of various dealers.
7. During the course of subsequent investigation, statement of one Smt. Chetna Jagdish Mistry, proprietor of M.s, Neki Corporation, Mumbai, one of the appellant's dealer was recorded on 29.07.2004, wherein she stated that her firm was holding the dealership of Kich Group of Companies of i.e M/s. Kich Manufacturers and M/s. Kich Industries; that the business was started with M/s. Kich Industries in the year 1998 and with M/s. Kich Manufacturers from the date of commencement of its existence i.e from July 2003; that they were purchasing various items from both the units and all the goods procured from the two units were bearing the brand name Kich and were packed in the same packing material/corrugated box on which Kich brand was printed. She also clarified that what goods received by them were identical having the same sticker of ISO certificate number affixed on each packing material/corrugated box and there was no name of the manufacturer printed on the goods.
8. The appellants M/s. Kich Industries, subsequently produced a copy of application dated 20.09.2000, submitted for registration of trade mark ‘KICH’ which according to the Revenue carries the same logo of the KICH brand. Inasmuch as the style of the letters KICH being printed on the packing material of both the manufacturing units were the same and as is seen from the application dated 20.09.2000, the same logo of the Kich brand was being used and the name of the manufacturer was not being printed on the goods, the Revenue entertained a view that M/s. Kich Manufacturers have been using the brand name of M/s. Kich Industries since its commencement and since both the units belongs to the same group of companies with the responsible positions by the family members, a common brand name was being used with a view to bifurcate the turn-over to avail un-lawful exemption benefit under the Notification No. 08/2002 dated 01.03.2002 and 08/2003 dated 01.03.2003 Accordingly, the proceedings were initiated against M/s. Kich Manufacturers raising a demand of duty of Rs. 17,71,232/- on the clearances effected during the period from 2003–04 and 2004–05 along with confirmation of interest and proposal to impose penalty.
9. The appellants during the course of adjudication did not seriously disputed the use of brand name Kich by M/s. Kich Manufacturers but submitted that they have started using the same only with effect from 01.06.2004 onwards. The benefit of SSI notification cannot be denied for the period prior to the said allowing of use of the brand name. They also contested that the word ‘Kich’ was not registered brand name of M/s. Kich Industries and as such, use of the same by Kich Manufacturers, cannot be held to be in contravention of the explanation to the notification.
10. The adjudicating authority did not find favour with the above contention of the appellants and confirmed the demand of duty of Rs. 17,71,232/- against M/s. Kich Manufacturers along with confirmation of interest and imposition of penalty of identical amount under Section 11AC of the Central Excise Act. In addition, penalty of Rs. 10,000/- stands imposed on Shri Bharatbhai C. Hapani, authorised signatory and of Rs. 10,000/- on M/s. Kich Industries. He also confiscated the goods under seizure with an option to the appellants to redeem the same on payment of redemption fine of Rs. 30,000/-. The said order of Jt. Commissioner was upheld by Commissioner (Appeals), hence the present appeals.
11. We have heard Shri P.V Seth, learned advocate. The sole issue required to be decided is as to whether the appellants M/s. Kich Manufacturers were using the brand name which belonged to M/s. Kich Industries and/or are entitled to the benefit of Notification No. 08/2002 and 08/2003. In terms of the Para 4 of the said notification, if the manufacturer uses the brand name of another person, the exemption contained in the notification is not available. The term “Brand name” or “Trade Name” has been defined in the explanation attached to serial No. 4 of the notification and refers to a name or a mark, such a symbol, monogram, label, signature or invented words 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. As such, it seen that the essence of the definition of brand name is that the same should be one, which reflects a connection between specified goods and the person using such name, in the course of trade. Admittedly, the brand name in the present case belongs to M/s. Kich Industries. The same is also being admittedly used by Kich Manufacturers. In fact, M.s, Kich Manufacturers has admitted the use of the same from 01.06.2004 Their only contention is that the same was not being used by them prior to the said date. For rejecting the above contention, the adjudicating authority has referred to the following evidences:—
(i) During the visit, finished excisable goods lying in the premises of M/s. Kich Manufacturers was found duly affixed with with brand name “KICH”.
(ii) It is an admitted fact that M/s. Kich Manufacturers were using brand name of M/s. Kich Industries;
(iii) M/s. Kich Manufacturers was bringing the finished goods in the premises of M/s. Kich Industries to print the brand name “KICH” on mark printing machinery installed in the premises of M/s. Kich Industries.
(iv) Packing material used by M/s. Kich Manufacturers was the same as used by M/s. Kich Industries.
(v) M/s. Kich Industries had obtained ISO 9001:2000 certificate for their Architectural Hardware Products manufactured under brand “KICH”, which was also used by M/s. Kich Manufacturers on their products along with brand name;
(vi) To maintain belief in the market that the product branded as “KICH” either manufactured by M/s. Kich Manufacturers or M/s. Kich Industries, were the same, none of these units were mentioning details of manufacturer either on the packing material or on their products;
(vii) It was admitted during the investigation that M/s. Kich Manufacturers and M/s. Kich Industries as well as other three firms/companies were known as Kich Group of Companies in order to establish a common identity in the market and to facilitate effective advertisement at lower cost;
(viii) M/s. Kich Industries was established since 1998 and manufacturing excisable goods under brand name “KICH” whereas M/s. Kich Manufacturers had commenced since July 2003 and were also manufacturing excisable goods under brand name “KICH”;
(ix) M/s. Kich Manufacturers and M/s. Kich Industries having being showing description of product on their packing material as “AISI 316 STAINLESS STEEL HARDWARE PRODUCTS” along with their product code under brand name “KICH”.
(x) Same name and style of brand name is used by M/s. Kich Manufacturers and M/s. Kich Industries inasmuch as the same was being printed on single machine installed in the premises of M/s. Kich Industries;
(xi) The brand logo “KICH”, ISO logo and packing material used M/s. Kich Manufacturers and M/s. Kich Industries were same.
12. As regards the appellants contention that they were using the same brand name only from 01.6.2004, the adjudicating authority has held that affidavit of Shri Hapani produced on record does not inspire confidence, inasmuch as the same was admittedly sworn after the visit of the officers and was contradictory in itself. As regards correspondence regarding use of brand name between the two manufacturers, it stands observed that the same is signed by Shri Nitesh Hapani, one of the partner, who was present during the course of investigation before Central Excise officers, never brought this aspect to the notice of the officers. He signed the Panchnama and gave statement but never explained the fact to the officer that use of brand name stands allowed by M/s. Kich Industries with effect from 01.6.2004 As such, he has rightly held the said correspondence to be an after thought.
13. Apart from the above, we also note that Smt. Chetna Jagdish Mistry, Proprietor of M/s. Neki Corporation, one of the dealers in her statement has very clearly stated that the goods obtained from both the manufacturers were identical and could not be differentiated. They were processing goods from either of the two units from July 2003 onwards. Further the fact that the name of manufacturer was not being written on outside of the packing material is itself indicative of the fact that appellants intended to capitalised on the popularity of the name “KICH”, the brand belonging to M/s. Kich Industries, who was already an established unit and M/s. Kich Manufacturers was started with effect from July 2003. Further, the fact that it is family group of companies, also does not stand disputed by the appellant. For all these reasons, we find no merits in the appellant's contention.
14. We also take note of Hon'ble Supreme Court in the case of Commissioner of Central Excise Chandigarh v. Mahaan Dairies - 2004 (166) ELT 23 (SC), observing that it is settled law in order to claim benefit of notification, a party must strictly comply with the provisions of the notification. If on wordings of the notification benefit is not available then by stretching the words of the notification or by adding words to the notification, the benefit cannot be conferred. As such, the use of the trade mark ‘Mahaan’ in the same style as was being used by the other manufacturer on the pouches of pickle, the Hon'ble Supreme Court observed that the same amounts to using the brand name of other manufacturer. The mere addition of the words “Taste Maker” by the manufacturer in addition to use of the brand name does not make any difference, inasmuch as use of brand name in the same distinctive style is sufficient to raise a connection in the minds of the consumers with the goods, bearing the same brand name or trade name.
Similarly, in the case of Sudhir Gensets Limited 2010 (255) ELT 295 (TA), the Tribunal after considering that two manufacturing units were having the same brand common management and using the same brand name, dis-entitles the manufacturer from availing the benefit of the small scale exemption notification.
15. In view of our foregoing discussions, we find no reason to interfere with the impugned order of the lower authorities. The impugned order is accordingly, upheld and appeals are rejected.
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