2012 (10) TMI 191 - AT - Central Excise

Benefit of SSI Exemption Notification No. 9/2003 - The Department was of the view that affixing the name - Maruti of MUL on the transmitter - receivers cleared to the OEM i.e. MUL does not mean that the goods are branded goods for the purpose of exemption Notification No. 9/2003-C.E. as the transmitter - receivers are used by MUL as capital goods by attaching the same to the machinery used in their production line, that in respect of these goods duty at concessional rate should have been paid in respect of the clearances made before crossing the threshold limit of rupees one crore and their value should have been included while calculating the value of clearances eligible for concessional rate of duty, and if this is done, the appellant would reach the threshold limit of exemption much earlier. The intention of the customer whose brand name is affixed on the goods is not relevant for the purpose of this notification and so long as the goods manufactured for a customer bear the brand name of that customer i.e. the brand name of person other than the manufacturer, the SSI exemption would not be available, irrespective of whether the customer sells the goods as such or uses the same as inputs in the manufacture of other goods or uses the same as capital goods or part of capital goods. The value of the goods cleared under brand name of MUL on payment of duty can not be included for the purpose of computation of turnover under SSI exemption benefit.

Issues Involved:

1. Eligibility for SSI exemption under Notification No. 9/2003-C.E.
2. Applicability of normal duty rate vs. concessional duty rate.
3. Alleged short payment of duty and recovery.
4. Invocation of extended period under proviso to Section 11A(1) of the Central Excise Act, 1944.
5. Imposition of penalty under Section 11AC of the Central Excise Act, 1944.

Detailed Analysis:

1. Eligibility for SSI Exemption under Notification No. 9/2003-C.E.:

The appellant manufactures various electronic goods, including transmitter-receivers, under their own brand and the brand name "Maruti" of Maruti Udyog Ltd. (MUL). They claimed SSI exemption under Notification No. 9/2003-C.E., which allows a concessional duty rate of 9.6% for the first clearances up to rupees one crore. However, the exemption does not apply to goods bearing the brand name of another person unless they are components or parts used as original equipment in manufacturing machinery or equipment, following a prescribed procedure. The appellant did not follow this procedure, thus the clearances of "Maruti" branded goods were excluded from the concessional rate.

2. Applicability of Normal Duty Rate vs. Concessional Duty Rate:

The appellant paid a normal duty rate of 16% on "Maruti" branded transmitter-receivers cleared to MUL, which were used as parts of production machinery. The Department argued that these goods should have been included in the value of clearances eligible for the concessional rate, leading to an earlier threshold limit breach and a resultant short payment of duty.

3. Alleged Short Payment of Duty and Recovery:

A show cause notice was issued for the recovery of Rs. 2,29,790/- as allegedly short-paid duty during 2004-2005, along with interest and penalty. The appellant contended that the duty on "Maruti" branded goods was correctly paid at 16%, and their exclusion from the concessional rate was appropriate. They cited the Supreme Court's decision in Kohinoor Elastics Pvt. Ltd. v. CCE, Indore, which held that goods bearing another's brand name are not eligible for SSI exemption, even if used as inputs in manufacturing other goods.

4. Invocation of Extended Period under Proviso to Section 11A(1) of the Central Excise Act, 1944:

The Department invoked the extended period under Section 11A(1) alleging wilful misstatement and suppression of facts by the appellant. The appellant argued that there was no suppression since the Jurisdictional Superintendent had raised the issue in January 2007, and they had clarified their position.

5. Imposition of Penalty under Section 11AC of the Central Excise Act, 1944:

The Deputy Commissioner confirmed the duty demand and imposed an equal penalty under Section 11AC, which was upheld by the CCE (Appeals). The appellant contested this, arguing no duty was recoverable and no penalty was imposable.

Judgment:

The Tribunal held that the transmitter-receivers bearing the "Maruti" brand name, used by MUL as parts of production machinery, were not eligible for SSI exemption. The judgment in Kohinoor Elastics Pvt. Ltd. was deemed applicable, establishing that goods bearing another's brand name do not qualify for SSI exemption, irrespective of their end use. The Tribunal found the Department's interpretation correct, setting aside the impugned order and allowing the appeal.

Conclusion:

The appeal was allowed, and the impugned order was set aside, emphasizing that goods bearing another's brand name are ineligible for SSI exemption under Notification No. 9/2003-C.E., even if used as parts of machinery.

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