[font=""trebuchet ms""] Brand Name under Central Excise
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Many products are produced under some brand name for easy marketability. In some cases, the brand name belongs to the manufacturer himself, while, in other cases, brand name belongs to somebody else and the manufacturer puts his brand name on goods produced by him. For example, Bata gets many chappals made from small units under the brand name ΓÇÿBataΓÇÖ and are sold by Bata. Similarly, Bajaj Electricals gets many electrical goods manufactured from small industries under brand name Bajaj, which are then marketed by Bajaj Electricals. There are many such Companies e.g. Philips, Crompton etc. who get the goods manufactured from others. In drug and pharmaceutical industry, system of ΓÇÿloan licensingΓÇÖ is common, where a brand owner gets the drugs manufactured from a small ΓÇÿloan licenseeΓÇÖ unit. In such cases, following are the main provisions of Central excise.
No SSI Exemption to the small manufacturer - If the small scale unit manufactures goods which bears a brand name which does not belong to him, there is no excise exemption and the small scale industry will have to pay duty at full rate. However, the turnover of small unit of such branded products will not be considered for granting exemption for the SSI unit for his other products which may be un-branded or under his own brand name.
Brand name Owner is Not the Manufacturer - It has been held in several cases that the Small Scale Manufacturer is the real ΓÇ£manufacturerΓÇ¥ for the purpose of Central Excise. Thus, in above examples, Bajaj or Bata will not be treated as the manufacturer, but the duty liability will be on the actual manufacturer manufacturing the goods [see case law discussed under ΓÇÿManufactureΓÇÖ].
Manufacturer should not be dummy - However, if the manufacturer is not an independent entity, but is only dummy, the brand name owner will be treated as the manufacturer. The test is that relation between the manufacturer and brand name owner should be on principal to principal basis. The manufacturer should be independent. Even if brand name owner exercises control over quality or supplies his design or specifies sources for procurement of raw material by the manufacturer, the SSI unit will be treated as manufacturer, if the relations between manufacturer and brand name owner are on ΓÇÿprincipal to principalΓÇÖ basis.
Duty on the price of the actual manufacturer - It is obvious that the brand name owner purchases goods from small unit at lower price and sells the same at higher prices. For example he may purchase the goods under his brand name for Rs. 100/- from the manufacturer and sell the same at Rs. 150/-. In such cases, the duty will be payable by the manufacturer on Rs. 100/- and not on Rs. 150/-, if the manufacturer and the brand name owners are independent persons, and the price is the sole criteria for the sale.
However, if the manufacturer and brand name owner are related persons as per the definition u/s 4 or if the manufacturer is dummy or if their relationship is not on principal to principal basis, duty will be payable on Rs. 150/-. Moreover, if the final product is covered u/s 4A (MRP valuation), duty will be payable on the basis of MRP printed on packing and not on basis of section 4. Similarly, if tariff value has been fixed, section 4 is not applicable.
House Mark and Brand Name ΓÇô A ΓÇÿhouse markΓÇÖ indicates the name of person manufacturing the goods while a trade mark indicates the product by which it is identified or sold. For example, ΓÇÿHindustan LeverΓÇÖ has a logo identifying it with the company, while it has various brands like ΓÇÿLuxΓÇÖ to identify various products manufactured by it. Of course, some times, both can be same e.g. ΓÇÿGodrejΓÇÖ is house mark, which is also used as brand name on the steel furniture of the company.
A ΓÇÿhouse markΓÇÖ is an emblem of manufacturer projecting the image of manufacturer generally. Such ΓÇÿhouse markΓÇÖ may be in the form of emblem, word or both. It is used on all the products of manufacturer. On the other hand, a ΓÇÿproduct markΓÇÖ or ΓÇÿbrand nameΓÇÖ is used which is invariably a word or combination of word and letter or numerical by which the product is identified and asked for.
This distinction is vital in case of ΓÇÿpatent and proprietary medicinesΓÇÖ [P&P medicine]. Drugs are basically classified as ΓÇÿdrug with genetic nameΓÇÖ and ΓÇÿpatent and proprietary medicinesΓÇÖ. The drugs with genetic name carry a name specified in ΓÇÿPharmacopoeia FormulatoryΓÇÖ. Patent and Proprietary Medicine is (a) which is not specified in ΓÇÿPharmacopoeiaΓÇÖ or (b) which bears a brand name. Supreme Court has held that if a product is sold with name as specified in ΓÇÿPharmacopoeia FormulatoryΓÇÖ, it will not become a P&P medicine only because it bears a house mark. In a case decided by SC, the manufacturer was making ΓÇÿ20% Dextrose InjectionΓÇÖ (which is a name specified in ΓÇÿPharmacopoeia FormulatoryΓÇÖ) However, the product carried mark ΓÇÿAP-ASTRAΓÇÖ on the carton. It was held that this is a ΓÇÿhouse markΓÇÖ to identify the manufacturer, which is compulsory under the Drug Rules. This is not a ΓÇÿbrand nameΓÇÖ. Brand name should be such that it should establish relationship between the mark and medicine e.g. it would have been a brand name if the product was described as ΓÇÿAstra InjectionsΓÇÖ or ΓÇÿAstra Dextrose InjectionsΓÇÖ, instead of ΓÇÿ20% Dextrose InjectionsΓÇÖ. Thus, putting a ΓÇÿhouse markΓÇÖ side by side with the name contained in Pharmacopoeia will not make it a ΓÇÿP&P MedicineΓÇÖ - Astra Pharmaceuticals (P) Ltd. v. CCE 1995 (75) ELT 214 (SC) = JT 1995 (1) SC 276 = (1995) 2 SCC 84.
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