2003 (2) TMI 301 - Commissioner - Central Excise

Summary

Issues:
1. Denial of duty exemption under Notification No. 8/2000 for S.S.I. Units.
2. Allegation of manufacturing 'Narrow Woven Fabrics-Elastic tape' bearing brand name of other persons.
3. Imposition of Central Excise duty and penalty under Rule 173Q.
4. Applicability of CBEC Circulars 50/50/94-CX, 66/66/94-CX, and 71/71/94-CX.
5. Timeliness of the show cause notice.
6. Submission of evidence supporting the claim for duty exemption.
7. Interpretation of S.S.I. exemption benefit for branded goods not sold in the open market.
8. Pre-deposit waiver for financial hardship.

Analysis:
The case involved the denial of duty exemption under Notification No. 8/2000 for a manufacturer of 'Narrow Woven Fabrics-Elastic tape' due to the brand name issue. The Adjudicating Authority upheld the denial, citing lack of evidence that the branded goods were not traded in the open market and timely issuance of the show cause notice within six months of the RT-12 return submission. The appellant contended that they rightfully availed the exemption as the branded goods were exclusively sold to the brand owner for their own use, supported by CBEC Circulars 71/71/94-CX. The appellant argued that Circulars 50/50/94-CX and 66/66/94-CX were not applicable to their case. They also highlighted the absence of objections from the department in prior years and the untimeliness of the notice.

The consultant for the appellant presented relevant case laws supporting their claim, emphasizing that S.S.I. exemption applies when branded goods are not traded in the open market but used exclusively by the brand owner. The Commissioner, after reviewing the submissions, found merit in the appellant's arguments. The Commissioner noted that the branded goods were manufactured as per the buyer's specifications and used solely by the buyer in a different product. The Commissioner highlighted the lack of evidence supporting the department's allegation and the inconsistency in applying CBEC Circulars. The Commissioner referenced a previous order allowing S.S.I. exemption for similar branded goods, emphasizing the lack of trade connection between the goods and the brand owner in the course of trade.

Ultimately, the Commissioner set aside the impugned order and allowed the appeal, ruling in favor of the appellant based on the interpretation of S.S.I. exemption for branded goods not traded in the open market and used exclusively by the brand owner. The Commissioner also waived the pre-deposit requirement considering the appellant's financial hardship, indicating a balance of convenience in favor of the appellant.