2007 (4) TMI 494 - AT - Central Excise

Issues Involved:
1. Waiver of pre-deposit of duty and penalties.
2. Denial of SSI exemption.
3. Inclusion of traded items in the value of manufactured items.
4. Use of brand names and its impact on SSI exemption.
5. Limitation and suppression of facts.

Detailed Analysis:

1. Waiver of Pre-Deposit of Duty and Penalties:
The applications sought waiver of pre-deposit of duty amounting to Rs. 1,84,64,188/- and equivalent penalty under Section 11AC of the Central Excise Act, interest under Section 11AB, and additional penalties under Rule 25 and Rule 26 of the Central Excise Rules, 2002. The Tribunal directed a pre-deposit of Rs. 20 lakhs within 8 weeks, with waiver of the balance amount of duty and penalties, and stayed recovery till the disposal of the appeals.

2. Denial of SSI Exemption:
The department denied the SSI exemption to M/s. Lift Systems (India) Pvt. Ltd. on the ground that goods manufactured by them bore the brand names 'Fermator' and 'GMV'. The Tribunal noted that the parts carrying the brand names were only components of the final products and not the final products themselves. The Tribunal referenced the Supreme Court decision in CCE, Jamshedpur v. Superex Industries, which supported the view that the use of branded components does not render the final product branded.

3. Inclusion of Traded Items in the Value of Manufactured Items:
The department argued that the value of traded items essential for installing auto door systems should be included with the value of clearances of manufactured items. The Tribunal noted that the traded items were stored outside the factory and dispatched directly to customers, maintaining separate records. Since these items were not brought into the factory and no manufacturing activity was carried out on them, they were considered as part of the trading activity and not manufacturing.

4. Use of Brand Names and Its Impact on SSI Exemption:
The Tribunal examined whether the use of brand names on components such as 'Fermator' on VVVF Modules and 'GMV' on valve assemblies affected the SSI exemption. It was concluded that merely because one of the components was branded, it did not mean that the final product became branded. The Tribunal emphasized that the final products were sold under the appellants' name, and the brand names on individual components did not alter this fact.

5. Limitation and Suppression of Facts:
The appellants argued that there was no suppression of facts as the unit was audited in 2001 and 2005, and the department was aware of the collaborator agreement and the items manufactured. The Tribunal did not explicitly address the limitation issue in the order, focusing instead on the merits of the case regarding the use of brand names and the nature of the traded items.

Conclusion:
The Tribunal directed a partial pre-deposit and granted a stay on the recovery of the balance amount of duty and penalties. It emphasized that the use of branded components did not make the final products branded and that traded items should not be clubbed with manufactured items for duty calculation. The decision highlighted the importance of distinguishing between manufacturing and trading activities and the impact of brand names on SSI exemptions.

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