2015 (3) TMI 1085 - AT - Central Excise

Waiver of pre deposit - Denial of SSI Exemption - use of customer s brand name - bonafide belief - Invocation of extended period of limitation - Held that - there was also Board s Circular No.71/71/94-CX dated 27.10.1994 to the same effect. It is only in 2005 the Apex Court in respect of appeal filed by the Revenue against the Tribunal judgment in the case of Kohinoor Elastic P. Ltd. vs. CCE Indore (2001 (9) TMI 1133 - CESTAT NEW DELHI), reversed the Tribunal s judgment holding that in such cases, the SSI exemption would not be available. Thus, during the period of dispute, in view of the Board s Circular and the various judgments of the Tribunal, the appellant had a bonafide belief that they would be eligible for SSI exemption, even if, they cleared the goods to M/s. Hindustan Sanitary Ware and Industries Ltd. after affixing HSWIL brand name Hindware on the goods. Prima-facie the longer limitation period under proviso to section 11 A(1) would not be applicable. According to the appellant s Counsel, the duty demand for the normal limitation period is less than ₹ 5.00 Lakhs, and this fact is not disputed by the ld. DR. In view of this, we hold that the amount of ₹ 5.00 Lakhs already paid by the appellant is sufficient for hearing of the appeal, and the requirement of pre-deposit of the balance amount of duty demand, interest and penalty has to be waived. As regards the stay application of Shri R.S. Somani is concerned, he is an Accountant of HSWIL, the customer of the appellant company, and the impugned order does not discuss as to how the elements required for imposition of penalty under Rule 26 on a person are present in this case. In view of this, prima-facie, we are of the view that imposition of penalty under Rule 26 of the Central Excise Act, 2002 on Shri R.S. Somani is not justified and hence, requirement of pre-deposit of penalty by Sh. RS Somani is waived for hearing of his appeal and recovery thereof is stayed. - Stay granted.

Summary

Issues:
1. Eligibility for SSI exemption on goods cleared by affixing customer's brand name.
2. Applicability of longer limitation period under proviso to section 11A(1).
3. Imposition of penalty under Rule 26 of the Central Excise Rules on the Accountant of the customer company.

Analysis:
1. The case involved the manufacturing of goods by M/s. Jindal Sanitary Works (JSW) for supply to Hindustan Sanitary Ware and Industries Ltd. (HSWIL) with the brand name 'Hindware' affixed, seeking SSI exemption. The Department disputed the eligibility of SSI exemption for these goods. A show cause notice was issued to JSW for duty demand, interest, and penalties. The Additional Commissioner confirmed the duty demand, imposed penalties, and interest. Appeals to the Commissioner (Appeals) were dismissed, leading to the current appeals.

2. The Tribunal considered the Board's Circular and previous judgments, including Kohinoor Elastic P. Ltd. vs. CCE Indore, and held that during the dispute period, the appellant had a genuine belief in eligibility for SSI exemption based on the brand-name affixation practice. The Tribunal found that the longer limitation period under proviso to section 11A(1) might not be applicable, as the duty demand for the normal limitation period was less than the amount already paid by the appellant. Thus, the requirement of pre-deposit of the balance amount of duty demand, interest, and penalty was waived for JSW.

3. Regarding the penalty imposed on Shri R.S. Somani, the Accountant of HSWIL, the Tribunal noted that the order did not justify the penalty under Rule 26 of the Central Excise Act, 2002. The Tribunal found no clear evidence supporting the imposition of the penalty on Shri R.S. Somani. Therefore, the requirement of pre-deposit of the penalty by Shri R.S. Somani was waived, and recovery thereof was stayed for the hearing of his appeal.

In conclusion, the Tribunal allowed the stay application for Shri R.S. Somani and waived the pre-deposit requirement for JSW, as the amount already paid was deemed sufficient for the appeal hearing. Both stay applications were disposed of accordingly.