2014 (6) TMI 679 - AT - Central Excise

SSI exemption - manufacture of medicines - Use of brand name of others - Notification No.8/2001 dated 1.2.2001 - Penalty - Held that - during investigation, Sanjeev Aggarwal, proprietor of the respondent firm was examined under section 14 of Central Excise Act, 1944 wherein he admitted that they are manufacturing goods on behalf of M/s. Soft Pharmaceutical, Chandigarh under their brand name but on 19.3.2004, Shri Sanjeev Agarwal changed his stand and submitted that actually the goods were sold under his brand name and not of M/s Soft pharmaceutical, Chandigarh and they are not paying any royalty to the said firm. The second statement of the respondent appear to be an afterthought, particularly, for the reason that the respondent have not led any evidence which will indicate that the goods, in question, were not sold under the brand of M/s Soft Pharmaceutical or M/s Pharmaceutical were promoter of the said product. In support of his contention, learned Counsel for the respondent had today produced packing box of one of the product Vigor Plus . On perusal of the packing, we find that this bears logo of Soft Pharmaceutical. Therefore, it is apparent that the Respondent were clearing the goods under the brand name of M/s Soft Pharmaceutical. Though the name of M/s Soft Pharmaceutical has been shown as promoter but they cannot be termed as distributor of goods for the reason that the Respondent had been selling the goods under the brand name of another person. - Respondent were clearing the goods under the brand name other person as such, they were not entitled to benefit of SSI exemption of Notification No.8/2001 - However, penalty is reduced to 25% of demand - Decided partly in favour of assesee.

Summary

Issues:
1. Eligibility of SSI exemption for goods cleared under another person's brand name.
2. Applicability of the judgment of Hon'ble Bombay High Court.
3. Limitation period for the show cause notice.
4. Imposition of penalty under section 11AC.

Eligibility of SSI exemption:
The case involved the Respondent, who manufactured medicines for M/s Soft Pharmaceuticals under their brand names. The Respondent availed SSI exemption but the department contended that clearing goods under another brand name made them ineligible for the exemption. The Commissioner (Appeals) set aside the duty demand, but the Revenue appealed. The Respondent argued they used their own brand name, not M/s Soft Pharmaceuticals'. However, evidence showed the goods bore M/s Soft Pharmaceuticals' logo. The Tribunal found the goods were cleared under another's brand, making SSI exemption inapplicable.

Applicability of Bombay High Court judgment:
The Respondent cited a Bombay High Court judgment regarding brand names affixed on goods. However, the Tribunal determined this case differed as the goods were not distributed by another company, unlike the judgment's scenario. The Respondent's admission of selling goods to other parties under M/s Soft Pharmaceuticals' brand name supported the decision against applying the Bombay High Court's judgment.

Limitation period for show cause notice:
Regarding the limitation period, the Respondent argued no fraud as returns were filed regularly. The Commissioner (Appeals) found the notice time-barred. The Tribunal disagreed, noting the Respondent never disclosed clearing goods under another's brand. Thus, the extended period under section 11A (1) applied, justifying the penalty under section 11AC.

Imposition of penalty under section 11AC:
The Tribunal upheld the duty demand but reduced the penalty to 25% of the demand, following the Delhi High Court's judgment in a similar case. As the duty was paid before the notice, the Tribunal modified the penalty to align with the proviso to section 11AC. Consequently, the impugned order was set aside, and the penalty on the Respondent was reduced.