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2011 (5) TMI 694 - HC - Central ExciseSSI Exemption - user of brand name - related parties - valuation - extended period of limitation - held that - The Supreme Court (jn 2003 -TMI - 46496 - SUPREME COURT OF INDIA) has passed a speaking order in relation to the question of availing exemption under Notification No. 175/86-C.E. and held that the petitioners were entitled to use the logo as well as to avail all benefits of exemption as an SSI unit. Insofar as the question as regards Messrs Pharma Chem Distributors being a related person is concerned, the Supreme Court has taken note of the fact that earlier show cause notices had been issued in Doctrine of merger - held that - The Supreme Court in exercise of appellate jurisdiction, wherein the order of the Tribunal was subjected to judicial scrutiny, has set aside the entire order of the Tribunal. In the circumstances, the doctrine of merger would be squarely attracted in the facts of the present case and as such it is not permissible for the department to now raise the contention that part of the order of the Tribunal still survives and can be relied upon by the department. This High Court in the case of Satellite Engineering Limited v. Assistant Collector of Central Excise (1991 -TMI - 43178 - HIGH COURT OF GUJARAT) as well as in the case of Ramkrishna Wire Works v. Union of India (1994 -TMI - 44175 - HIGH COURT OF GUJARAT) has held that once a decision is reversed and set aside, it is immaterial on which point the decision was reversed because on reversion of the decision, it ceases to be a good decision in the eye of law. In the circumstances, once the decision of the Tribunal had been reversed, the Commissioner (Appeals) could not have placed reliance upon any part of the said decision as the same ceased to be a good decision in the eye of law.
Issues Involved:
1. Entitlement to small scale industry (SSI) exemption. 2. Determination of related person status. 3. Validity of extended period of limitation for duty demand. 4. Doctrine of merger and its application. Detailed Analysis: 1. Entitlement to Small Scale Industry (SSI) Exemption: The petitioner-company was engaged in manufacturing medicaments and claimed SSI exemption. The Excise Department disputed this claim, arguing that the petitioner was not entitled to use the logo "P/B" as it belonged to another company, Messrs P&B Laboratories Private Limited. The Supreme Court, in its judgment dated 19-2-2003, ruled in favor of the petitioner, allowing the use of the logo and confirming the entitlement to SSI exemption. This decision nullified the basis of the demand raised by the Excise Department under the extended period of limitation. 2. Determination of Related Person Status: The department contended that the petitioner-company was selling goods to a related person, Messrs Pharma Chem Distributors, thereby affecting the assessable value. The Tribunal initially upheld this view, but the Supreme Court set aside the Tribunal's order. The Supreme Court considered the historical stance of the department, which had previously not treated Messrs Pharma Chem Distributors as a related person. The doctrine of merger was applied, indicating that the Supreme Court's decision overrode the Tribunal's findings, thereby nullifying the related person argument. 3. Validity of Extended Period of Limitation for Duty Demand: The Excise Department invoked the extended period of limitation for the demand, covering 1-5-1985 to 31-12-1989. The Supreme Court found no justification for invoking the extended period under Section 11A of the Central Excise Act, 1944, due to the consistent stance of the petitioner regarding the non-related status of Messrs Pharma Chem Distributors. Consequently, the demand for the extended period was invalidated. 4. Doctrine of Merger and Its Application: The Supreme Court's decision led to the doctrine of merger, where the Tribunal's order ceased to exist independently. The Commissioner (Appeals) erroneously relied on the Tribunal's order to uphold the related person status and calculate duty liability. The High Court emphasized that once the Supreme Court set aside the Tribunal's order, it had no legal standing. The High Court cited precedents, including "Pernod Ricard India (P) Ltd. v. Commissioner of Customs," affirming that the doctrine of merger applies irrespective of whether the appellate court modifies, reverses, or confirms the lower court's decree. Conclusion: The High Court quashed the impugned order of the Commissioner (Appeals), which had relied on the invalidated Tribunal's order. The High Court ruled that all issues decided by the Supreme Court had attained finality, and the department could not reopen these issues. The petition was allowed, and the rule was made absolute without any order as to costs.
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