2015 (4) TMI 313 - AT - Central Excise

SSI Exemption - Use of logo of other company - Held that - The goods in respect of which the duty has been demanded are listed in the Annexure to the show cause notice. On going through the Annexure it is seen that most of the goods are not even the Inj. Moulded plastic articles which are manufactured by the appellant but the duty had been demanded in respect of those goods on the basis that the appellant have sold them by printing the brand name/logo of the customers. Though the appellant had given the break up of the goods purchased from outside and sold from their shop, but this plea had not been considered at all. Even the appellant's plea that they have no facility for printing of the customer's name/logo on the articles and that wherever the printing was done on the customer's request, it was got done from outside has also not been considered. Therefore, in our prima facie view the orders passed by the lower authorities - by the Additional Commissioner as well as by the lower authorities - by the Additional Commissioner as well as by the Commissioner (Appeals), are absurd orders with zero application of mind - the requirement of pre-deposit of duty demand, interest and penalty by the appellant firm and the requirement of pre-deposit of penalty by Shri Pankaj Malik, partner of the appellant firm, is waived for hearing of their appeals and recovery thereof is stayed - Stay granted.

Summary

Issues:
1. Duty demand on goods sold with customer's brand/logo.
2. Capacity of the appellant to manufacture specific items.
3. Time bar on duty demand.
4. Imposition of penalties on the appellant and its partners.
5. Stay application for pre-deposit of duty demand, interest, and penalties.

Analysis:

Issue 1: Duty demand on goods sold with customer's brand/logo
The appellant, engaged in manufacturing plastic articles, faced duty demand for selling goods with customer's brand/logo. The Central Excise officers alleged that items like bottle openers, umbrellas, and clocks, among others, were sold with other persons' brand/logo affixed. The appellant contested, stating they only manufactured plastic items and sold other goods procured from outside. The Tribunal found the duty demand unreasonable as most goods were not manufactured by the appellant, and the brand/logo printing plea was disregarded. The lower authorities' orders lacked proper consideration, leading to the waiver of pre-deposit requirements for the appellant and its partner.

Issue 2: Capacity of the appellant to manufacture specific items
The appellant argued they lacked the capacity to manufacture certain items listed in the duty demand. They emphasized their specialization in Inj. Moulded plastic articles and refuted manufacturing goods like mini bars or stainless steel flasks. Despite this defense, the authorities upheld the duty demand without adequately considering the appellant's manufacturing capabilities. The Tribunal noted the lack of facility for printing customer's brand/logo on goods, further supporting the appellant's claim of incapacity to produce the listed items.

Issue 3: Time bar on duty demand
The appellant raised the issue of the duty demand being time-barred, as the show cause notice was issued long after the officers' visit to the factory. Citing a Supreme Court judgment, they argued that the delayed notice was unjustified, as the facts forming the basis of the demand were known to the Department earlier. Although this argument was presented, the Tribunal did not explicitly address the time bar issue in its decision to waive the pre-deposit requirements.

Issue 4: Imposition of penalties on the appellant and its partners
Penalties were imposed on the appellant firm and its partners under Section 11AC of the Central Excise Act, 1944, and Rule 26 of the Central Excise Rules, 2002. The appellant contended that since the duty demand was unjustified, penalties should not apply. However, the Tribunal's decision to waive the pre-deposit requirements did not explicitly mention the penalties imposed, focusing primarily on the duty demand aspect.

Issue 5: Stay application for pre-deposit of duty demand, interest, and penalties
Both parties presented their arguments regarding the stay application for pre-deposit of duty demand, interest, and penalties. The appellant sought a waiver based on the lack of merit in the duty demand, while the Department opposed, supporting the lower authorities' findings. Ultimately, the Tribunal granted the stay application, allowing the appellant and its partner relief from pre-deposit requirements pending the appeal hearing.

In conclusion, the Tribunal found the duty demand unjustified, considering the appellant's manufacturing scope and the lack of proper assessment by the lower authorities. The decision to waive pre-deposit requirements for the appellant and its partner indicates a prima facie case in favor of the appellant, emphasizing the need for a thorough review of the duty demand issue during the appeal process.