Commnr. Of Central Excise, Mumbai vs M/S. Kalvert Foods India Pvt. Ltd. & Ors

M/s. Kalvert Foods India Pvt. Ltd. & Ors. ....

Respondents

JUDGMENT

Dr. MUKUNDAKAM SHARMA, J.

1. These appeals arise out of Judgment and Order

passed by the Customs, Excise and Gold (Control)

Appellate Tribunal, New Delhi Bench [for short

"CEGAT"] on 02.08.2002 whereby the Tribunal had

allowed the appeals filed by the respondents holding

that the respondents were not guilty of clandestine

removal of excisable goods and also that the goods of

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the respondent no. 1 were not excisable inasmuch as

they were not packed in containers under a brand

name.

2. Before entering into rival contentions of the parties, it

would be necessary although in a nutshell to look into

the facts of the case leading to filing of the present

appeals.

3. The respondent No. 1, M/s. Kalvert Foods India Pvt.

Ltd. is a company (in short hereinafter referred to as 'the

Company') engaged in the manufacture of P & P Food

Products, such as, assorted jams, pickles, squashes,

cooking sauces, chutneys, syrups, synthetic vinegars etc.

The company is also trading in sugar, salt and pepper by

packing into small packs. The respondent No. 2, Shri

Yunus A. Kalvert is the Managing Director of the Company.

4. On 22.11.2000, on receiving information that

respondents were indulging in clandestine removals of its

finished P & P food products without payment of Central

Excise Duty, the revenue authorities searched the factory

premises of the respondent no. 1. Searches were also

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carried out at the premises of its distributors/wholesale

dealers/traders of respondent no. 1 situated in and around

Mumbai and other connected premises.

5. During the search conducted at the premises of the

respondent no. 1 several incriminating documents, articles

and records were found. A huge quantity of finished goods

were also found lying in the factory premises. Further, it

was also noticed that there was one tempo parked inside

the factory premises loaded with cartons containing the

excisable goods manufactured by the said company and

was about to leave the factory premises. On inquiry from

the driver of the said tempo it was found that the driver

was not in possession of any documents relating to the

goods loaded in the said tempo. On inspection of invoices

at the premises of the respondent no. 1, it was also found

that there were two invoices with the same serial number,

in respect of different products. The officers took stock of

the goods in the factory and it was found that the finished

goods lying in the factory were in excess of the stock shown

and accounted for in the RGI Register.

Page 3 of 22 6. Specific allegation against the respondent is that the

goods found lying excess in the stock than what were

entered into RGI register, valued at Rs. 7,33,668/- and the

same was seized.

7. Thereafter, search was also carried out at the

premises of the dealers/traders, to whom the company

allegedly supplied the finished goods. The goods found

lying in those premises to the value of Rs. 6,22,946/- were

also seized on the ground that they were not duty paid.

8. Similarly, the search was carried out by the officers

on 28-11-2000, at the premises of M/s. Relish Trading

Company (in short 'RTC')/the selling agent of the

respondent-company, M/s. Sai Krupa, a partnership firm

of the Managing Director of the respondent No. 1; and at

the premises of sole proprietor of RTC and records

pertaining to the sale and purchase of the goods lying in

the offices of these companies, were seized. It revealed to

the searching officers that, in fact, the respondent-

company had cleared jams, syrup, sauces, pickles, etc.,

from the factory premises to the above said selling agents

without payment of duty, but had shown those clearances

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as that of the sugar, in the invoices and had also cleared

the branded goods to the dealers/traders.

9. After completion of the entire process a show cause

notice was issued to the Company and its Director. Such

notices were also issued to the proprietor of M/s. RTC, its

partner and M/s. Sai Krupa Corporation. Through notices

issued, duty demand was raised from the company and

penalty was also proposed to be imposed on the company.

Reply was filed by the respondents to the aforesaid show

cause notices.

10. The adjudicating authority, namely, the Commissioner

of Central Excise, Mumbai, passed an order dated

27.02.2002, holding that the respondent no. 1 with the

connivance of the respondents 2 and 3 have deliberately

attempted to pass off excisable goods as non-excisable

goods with an intent to evade payment of excise duty.

Consequently, the Commissioner confirmed the duty

demand and ordered confiscation of the seized goods and

also imposed penalty equivalent to the amount of duty on

the company and also directed to pay interest on the excise

duty etc.

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11. Being aggrieved by the aforesaid order, respondents

filed appeals before the CEGAT. The said appeals were

heard and Tribunal passed the judgment and order on

02.08.2002, which is impugned herein. The Tribunal by its

order set aside the findings of the Commissioner of Central

Excise, Mumbai holding that the respondents were not

guilty of clandestine removal of excisable goods and also

that the goods of respondent no. 1 were not excisable

inasmuch as they were allegedly not packed in containers

under a brand name and therefore not required to pay any

excise duty.

12. The present appeals are directed and preferred

against the said judgment and order on which we heard

learned counsel appearing for the parties.

13. The learned counsel appearing for the parties have

painstakingly and extensively taken us through the

relevant documents on record to which reference shall be

made during the course of our discussion hereinafter.

However, before we record our findings and the

conclusions on the issues raised, we must also deal with

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the tariff headings and some of the documents which are

relevant for our purpose and material available on record.

14. Admittedly, the years with which we are concerned in

these appeals are 1996-97, 1997-98 and 1998-99. So far

the year of 1996-97 is concerned the relevant entry for our

purpose is 20.01 and sub-heading 2001.00 under Chapter

20 of the Central Excise Tariff of India 1996-97

(incorporating rates of Central Excise & Service Tax).

Chapter 20 relates to preparations of vegetables, fruits,

nuts or other parts of plants and it prescribes "Nil" rate of

duty for the goods mentioned in this sub-heading 2001.00.

Description of goods in the said sub-heading is as under:

"preparations of vegetables, fruit, nuts or other parts of

plants, including jams, fruit jellies, marmalades, fruit or nut

puree and fruit or nut pastes, fruit juices and vegetable

juices, whether or not containing added sugar or other

sweetening matter put up in unit containers and bearing a

brand name"

15. Chapter 20 of the Central Excise Tariff of India 1998-

99 (incorporating rates of Central Excise & Service Tax as

in operation on 2nd June, 1998) prescribes 8% excise duty

for the goods mentioned under sub heading 2001.10.

Page 7 of 22 Description of goods mentioned in sub-heading 2001.10 is

as under:

"preparations of vegetables, fruit, nuts or other parts of

plants, including jams, fruit jellies, marmalades, fruit or nut

puree and fruit or nut pastes, fruit juices and vegetable

juices, whether or not containing added sugar or other

sweetening matter put up in unit containers and bearing a

brand name".

What is brand name is also explained in the notes included

in Chapter 20 to the following effect:

""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".

16. Chapter 21, of the Central Excise Tariff of India 1998-

99 (incorporating rates of Central Excise & Service Tax as

in operation on 2nd June, 1998) relates to "Miscellaneous

Edible Preparations". It also prescribes 8% excise duty for

the goods mentioned under sub heading 2103.10.

Description of goods mentioned in sub-heading 2001.10 is

as under:

Page 8 of 22 "Sauces, ketchup and the like and preparations therefore;

fixed condiments and mixed seasonings; mustard flour and

mead and prepared mustard put up in unit containers and

bearing a brand name"

Sub-heading 2108.20 prescribes 18% excise duty for

"Edible preparations, not elsewhere specified or including

Sharbat" under Chapter 21. Sub-heading 2203.00 also

prescribes 18% excise duty for "Vinegar and substitutes for

vinegar obtained from acetic acid" under Chapter 22.

17. During the search operation carried out by the

appellants several incriminating articles were found with

brand name "Kalvert Anchor" or "Kalvert" in assorted forms

which were manufactured by M/s. Kalvert Foods (I) P. Ltd.

During the course of investigation statement of Shri Yunus

A. Kalvert, Managing Director of respondent company was

recorded under Section 14 of the Central Excise Act, 1944,

who inter alia deposed that the respondent company was

engaged in the manufacture of P & P food products like

jams; pickles; syrups; vinegars etc. bearing their brand

name "KALVERT ANCHOR" and the other Directors of the

company viz. Shri Akbar Ali Kalvert, his father and Shri

Irshad Y. Kalvert.

Page 9 of 22 18. During the course of arguments learned counsel

appearing for the respondent submitted before us that

although the aforesaid statements of Managing Director of

the Company and other persons were recorded during the

course of judicial proceedings but the same were retracted

statements, and therefore, they cannot be relied upon.

However, the statements were recorded by the Central

Excise Officers and they were not police officers. Therefore,

such statements made by the Managing Director of the

Company and other persons containing all the details

about the functioning of the company which could be made

only with personal knowledge of the respondents and

therefore could not have been obtained through coercion or

duress or through dictation. We see no reason why the

aforesaid statements made in the circumstances of the

case should not be considered, looked into and relied upon.

19. We are of the considered opinion that it is established

from the record that the aforesaid statements were given by

the concerned persons out of their own volition and there is

no allegation of threat, force, coercion, duress or pressure

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being utilized by the officers to extract the statements

which corroborated each other. Besides, the Managing

Director of the Company on his own volition deposited the

amount of Rs. 11 lakhs towards excise duty and

therefore in the facts and circumstance of the present case,

the aforesaid statement of the counsel for the respondents

cannot be accepted. This fact clearly proves the conclusion

that the statements of the concerned persons were of their

volition and not outcome of any duress.

20. During the course of arguments our attention was

also drawn to the statement of Managing Director of the

Company where he had admitted the fact of clandestine

clearance of excisable goods and therefore has voluntarily

come forward to sort out the issue and to pay the Central

Excise duty liability and that he has paid Central Excise

duty voluntarily under TR6 Challans totaling to Rs.

11,00,000/- on various dates. Similarly statement of Miss

Vinita M. Khanolkar - proprietor of RTC was also recorded

under Section 14 of the Central Excise Act, 1944 along

with Shri Shekhar Mogaviera - Production Supervisor of

M/s. Kalvert Foods India Pvt. Ltd. Statements of various

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other persons were also recorded under Section 14 of the

Central Excise Act.

21. Our attention was also drawn by the counsel

appearing for the appellant to the findings recorded by the

adjudicating authority to the fact that there have been

recovery of unaccounted finished excisable goods from 8

different dealers in and around Mumbai and that there

have been creation of firms dealing in similar products

from the same premises by the same persons having no

capital or machinery and also that there have been only

one tempo invariably used for delivery of excisable goods

from factory to the buyers though some invoices were

issued by the firms other than M/s. Kalvert Foods India

Pvt. Ltd. and that there have been use of parallel sets of

invoices of the same serial numbers supported by recovery

of a serially numbering machine and blank invoices

without any printed serial numbers.

22. On the basis of the aforesaid material discussed

hereinbefore the adjudicating authority came to the

conclusion that the respondent no. 1 with the connivance

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of respondent nos. 2 and 3 have been deliberately

clandestinely removing excisable goods as non-excisable

goods with intent to evade payment of excise duty.

However, the aforesaid judgment and order passed by the

adjudicating authority, namely, the Commissioner of

Central Excise, Mumbai, was set aside by the Tribunal

holding that neither the tempo nor the goods loaded

therein could be legally seized and confiscated when the

relevant documents were shown to the officers at the spot.

It was also observed by the Tribunal that it could not be

said that an attempt was being made to clear those goods

in tempo in a clandestine manner, when the company

representative produced the invoices and other relevant

documents in respect thereof. These findings were arrived

at by the Tribunal apparently ignoring the materials which

are considered hereinbefore and referred to.

23. There is no reference about the statement of Miss

Vinita M. Khanolkar - sole proprietor of M/s. RTC, in the

judgment of order passed by the Tribunal, when she was

examined under Section 14 of the Central Excise Act, she

had clearly stated that her company bought large

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quantities of excisable goods from the respondent company

and in turn sold them to its distributors. She also

confirmed the documents seized from her residence which

included correspondence with their customers regarding

promotion of the "Kalvert brand" products.

24. The Tribunal also failed to consider and discuss the

specific allegation of the appellant that respondent no. 1

maintained two sets of computerized commercial invoices,

one for excisable products like jams, sauce, syrup etc and

the other for non-excisable goods such as salt, sugar and

pepper which were marked as L series. It has also come

on evidence that L series sales for the period 1996-1999

was only made to RTC in huge quantities and that in the

guise of selling salt, sugar and pepper, the respondent No.

1 was in fact selling excisable goods to RTC. These facts

have been found and taken note of by the adjudicating

authority but the same were totally ignored by the

Tribunal.

25. Due to the aforesaid reasons and on the basis of the

materials available on record it is clear that the Company

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was guilty of clandestine removal of excisable goods as

non-excisable goods in order to evade excise duty. It is

proved from the fact that the Managing Director voluntarily

came forward to sort out the issue and to pay the Excise

duty and paid Excise duty to the extent of Rs. 11,00,000/-

on different dates. The aforesaid act of the respondent no.

1 was very material and relevant but the same was also

ignored by the Tribunal while arriving at a wrong

conclusion.

26. Therefore, according to us the issue with regard to the

clandestine removal of excisable goods as non-excisable

goods by the respondent from their premises and selling to

its dealers and distributors is clearly proved from the

materials on record.

27. In view of the aforesaid position and since there was

clandestine removal of excisable goods, the period of

limitation in the present case would have to be computed

from the date of their knowledge, arrived at upon raids on

the premises. In the present case therefore the extended

period of limitation would be available as there was

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suppression of facts by the respondents with the intention

to evade the central excise duty inasmuch as they did not

account for the manufactured goods in the prescribed

record.

28. The Tribunal has also recorded a finding that the

respondents never cleared the goods in question under any

brand name and being unbranded they were chargeable to

NIL rate of duty.

29. The aforesaid finding is also unacceptable. The

Managing Director of the respondent company has himself

stated that they have been selling their products under the

brand name "Kalvert" and on the basis of the said

statement and other record found on the articles sold by

the respondent company the aforesaid finding of the

Tribunal is wrong and perverse.

30. The Tribunal has also held that because the brand

name "Kalvert" was not registered in their name therefore it

cannot be held that respondents were using `brand name'.

The Tribunal further held that the name on the goods

manufactured and cleared by the respondent in the market

Page 16 of 22

could at best be termed as "House mark" and not brand

name/trade name.

31. In our considered opinion, the aforesaid findings are

also totally wrong and recorded in violation of the law of

Trade Marks. During the course of arguments, our

attention was drawn to a Judgment of this Court in the

case of TARAI FOOD LTD. V. COMMISSIONER OF

CENTRAL EXCISE, MEERUT-II, reported in 2007(8) S.T.R.

442 (S.C.). While placing reliance on the said Judgment,

the counsel appearing for the respondents submitted that

what is a `Brand name' is as stated in paragraph 4 of the

said Judgment. He relied on the said definition of `Brand

name' and then submitted that the phrase "New Improved

Quick Frozen French Fries" was not held to be a brand

name, and therefore, according to him the brand name of

the respondent company "Kalvert" being a "House Name"

could not be termed as "Brand Name".

32. In our considered opinion, the aforesaid brand name

"New Improved Quick Frozen French Fries" is a descriptive

word and the same could not have been termed and coined

Page 17 of 22

either as a "house name" or a "brand name" under any

circumstances. There can be no dispute therefore with

regard to the proposition of law laid down by this Court in

the aforesaid decision. We may also refer to another

decision of this Court in Astra Pharmaceutical Pvt. Ltd.

V. Collector of Central Excise, Chandigarh, reported in

[1995 (75) E.L.T. 214 (S.C.)]. That was a case of

Pharmaceutical product. In the said decision also the

manner and scope of "Brand name" and distinction

between `House mark' and "Product mark/Brand name"

has been brought out. It was stated therein by this Court

that "House mark" which is usually a device in the form of

an emblem, word or both is an identification of the

manufacturer which is compulsory under the Drug Rules.

On the other hand, product mark or brand name is

invariably a word or a combination of a word and letter or

numeral by which the product is identified and asked for.

In paragraph 6 of the said Judgment, Narayanan's Book

on Trade Marks and Passing-Off was also referred to and

since the same may have a bearing to the facts of the

present case, it is extracted herein below:

Page 18 of 22

"677A. House mark and Product mark (or Brand name).

In the pharmaceutical business a distinction is

made between a House mark and a Product mark. The

former is used on all the products of the manufacturer. It is

usually a device in the form of an emblem, word or both.

For each product a separate mark known as a product mark

or a brand name is used which is invariably a word or a

combination of a word and letter or numeral by which the

product is identified and asked for. In respect of all products

both the Product mark and House mark will appear side by

side on all the labels, cartons etc. Goods are ordered only

by the product mark or Brand name. The House mark

serves as an emblem of the manufacturer projecting the

image of the manufacturer generally."

33. In the book of "Trade Marks" by Sarkar, the

distinction between the expressions "House mark" and

"Product mark" or "Brand name" has been clearly brought

out by way of reference to the decision in Astra

Pharmaceutical Pvt. Ltd. (supra). It is stated therein

that "House mark" is used on all the products of the

manufacturer and that it is usually a device or a form of

emblem of words or both. It was also pointed out that for

each product a separate mark known as a "Product mark"

or "Brand name" is used which is invariably a word or

combination of word and letter or numeral by which the

product is identified and asked for. It was also stated that

in respect of all products both the "Product mark" and

Page 19 of 22

"Brand name" would appear side by side on all the labels,

cartons etc. and that the "House mark" is used generally

as an emblem of the manufacturer projecting the image of

the manufacturer, whereas "Brand name" is a name or

trade mark either unregistered or registered under the Act.

34. Therefore, it is not necessary that "Brand name"

should be compulsorily registered. A person can carry on

his trade by using a "Brand name" which is not even

registered. But in violation/infringement of trade mark,

remedy available would be distinctly different to an

unregistered brand name from that of remedy available to a

registered brand name.

35. Unfortunately, the Tribunal did not consider and

properly appreciate the apparent distinction between the

two distinct expressions i.e. "House mark" and "Brand

name" and thereby proceeded to set aside the well-written

Judgment passed by the Commissioner of Central Excise,

Mumbai who has recorded his reasons giving cogent basis

for his reasoning.

Page 20 of 22 36. In the book of "Law of Trade Marks" by K.C.

Kailasam and Ramu Vedaraman the distinction between

`Product mark' and `House mark' has been beautifully

delineated, which is as under:

"It is possible that the proprietor may use several trade

marks in respect of his goods (known as Product mark),

besides using a common mark in all his products to indicate

the origin of the goods from the enterprise (known as House

mark). This practice is more predominant in the

pharmaceutical trade. Though both are trade marks and

are registrable as such, each has its own distinct function.

While the House mark represents the image of the enterprise

from which the goods emanate, the Product mark is the

means by which goods are identified and purchased in the

market place and it the focal point of presentation and

advertisement."

37. In view of above discussion, it is clear that what was

being used by the respondent under the expression

"Kalvert" was a "Brand name" and not a "House mark" as

sought to be alleged by the respondent and has been

wrongly accepted by the Tribunal. Therefore, the articles of

assorted jams, pickles, squashes, cooking sauces,

chutneys, syrups, synthetic vinegars etc. manufactured

and sold by the respondent company under a brand name

"Kalvert" were liable to be charged for excise duty at the

rate prescribed in the Excise Law.

Page 21 of 22 38. The Tribunal committed manifest error in coming to

its conclusion and therefore the order passed by the

Tribunal is set aside and the order dated 27.02.2002

passed by the Commissioner of Central Excise, Mumbai is

restored.

39. The appeals are allowed to the aforesaid extent but

leaving the parties to bear their own costs.

...............................................J

(Dr. MUKUNDAKAM

SHARMA)

...............................................J

(ANIL R. DAVE)

NEW DELHI,

AUGUST 09, 2011.

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