2015 (2) TMI 704 - AT - Central Excise

SSI exemption in case of use of brand name of others - Cross examination of the dealers - Held that - The allegation of duty evasion against M/s Green Malleables and the linked question of imposition of penalty on M/s Green Marketers is based on the allegation that during period from 01/01/2000 to 23/05/2000 M/s Green Malleables were using the brand name NN belonging to M/s Green Engineering Corporation on pipe fittings manufactured and cleared by them. The main evidence in this regard is the statements of certain dealers. Beside this, the Department also relies upon the fact that during the period of dispute M/s Green Marketers has not purchased any pipe fittings from M/s Green Engineering Corporation and that in January 2000, M/s Green Engineering Corporation had shifted some of their operations casting and annealing to M/s Green Malleables and that the brand name NN is affixed at the casting stage only. In our view merely because during January 2000, the casting and annealing operations were shifted by M/s Green Engineering Corporation to M/s Green Malleables, it cannot be presumed that during that period M/s Green Malleables had also started using the brand name NN on the products manufactured in their factory. In our view the main evidence in support of the Department s allegation is the statement of certain dealers that during the period of dispute they were purchasing the pipe fittings from M/s Green Malleables which were bearing the brand name NN. In our view, while relying upon the statements of these dealers in support of the allegation of duty evasion against M/s Green Malleables, in terms of the provisions of Section 9D (2) readwith Section 9D (1) the cross examination of those persons would be mandatory, for which, in this case, the request had also been made and which has not been allowed. In view of this, we hold that the impugned order is not sustainable. - matter remanded back - Decided in favour of appellant.

Summary

Issues:
Allegation of duty evasion based on the use of brand name NN by M/s Green Malleables prior to ownership, mandatory cross-examination of dealers, reliance on dealer statements, imposition of penalties, shifting of operations by M/s Green Engineering Corporation.

Detailed Analysis:

Allegation of Duty Evasion:
The case involves the allegation that M/s Green Malleables used the brand name NN, owned by M/s Green Engineering Corporation before 24/05/2000, on their products during the period from January 2000 to 23/05/2000. The Department claimed duty evasion by M/s Green Malleables during this time, leading to a demand for duty payment and penalties on both M/s Green Malleables and M/s Green Marketers.

Mandatory Cross-Examination:
The appellant argued that cross-examination of dealers whose statements formed the basis of the duty evasion allegation was crucial. They contended that without the opportunity for cross-examination, as mandated by Section 9D (2) read with Section 9D (1), the duty demand cannot be confirmed. The appellant's request for cross-examination was not granted, raising procedural concerns.

Reliance on Dealer Statements:
The main evidence supporting the Department's claim of duty evasion was the statements of certain dealers who asserted purchasing pipe fittings bearing the brand name NN from M/s Green Malleables during the disputed period. The Tribunal highlighted the necessity of cross-examining these dealers to validate the evidence presented by the Department.

Imposition of Penalties:
Penalties were imposed on M/s Green Malleables and M/s Green Marketers based on the duty evasion allegations. The Tribunal's decision to set aside the impugned order was influenced by the lack of substantiated evidence due to the absence of cross-examination, leading to the conclusion that the penalties were not justified.

Shifting of Operations by M/s Green Engineering Corporation:
The Department relied on the fact that M/s Green Engineering Corporation had shifted some operations to M/s Green Malleables in January 2000, suggesting early usage of the brand name NN by M/s Green Malleables. However, the Tribunal found this reasoning insufficient to establish the alleged duty evasion by M/s Green Malleables during the disputed period.

In conclusion, the Tribunal set aside the impugned order and remanded the matter for fresh adjudication, emphasizing the necessity of permitting cross-examination of the dealers crucial to the case. The decision highlighted the importance of following procedural requirements and ensuring the validity of evidence in cases of duty evasion allegations.