2015 (10) TMI 964 - AT - Central Excise

Denial of SSi Exemption - Benefit of Notification 175/86 - Use of other s brand name - Held that - Even though M/s. VPL has taken the provisional SSI certificate but manufacturing facility had not come into existence; It was only that the land was purchased and they were in the process of establishing the manufacturing unit. During investigation from the statement of the officials of M/s. VPL it is clear that the appellant was aware of the fact that M/s. VPL has no manufacturing facility. It is not in dispute that during the period in question M/s. VPL was not having manufacturing facility and has not commenced the commercial production. Hence goods manufactured by the appellant in the brand name of M/s. VPL would not be eligible for the benefit of Notification 175/86. - During the intervening period, if a view is taken that the goods produced by such a unit will not be eligible for SSI benefit the same would have caused undue hardship to such SSI unit. In the present case, the goods have not been produced by M/s. VPL but by the appellant. In our considered view, the said clarifications of Circular B-21/15/ 86-TRU, dated 3-4-1987 and Circular No. 46/90-CX.8, dated 11-7-1990 are not relevant. In the present circumstances, what is to be seen is M/s. VPL is a functional SSI unit and eligible for the benefit of Notification 175/86. - Decided against assessee.

Summary

Issues:
Manufacture of medicines under small scale exemption notification, manufacturing on behalf of another company, eligibility for benefit of Notification 175/86, demand of duty and penalty, validity of classification list approval, retrospective effect of Section 11A amendment, brand name issue, extended period of limitation, relevance of provisional SSI registration, penalty imposition.

Analysis:
The case involves the appellants engaged in manufacturing medicines under a small scale exemption notification, including manufacturing P&P medicaments for another company. The issue arose when it was discovered that the company they manufactured for was not a small scale unit as claimed. The Revenue contended that since the company had no manufacturing facility during the relevant period, the benefit of the exemption could not be extended to the appellants for goods manufactured on behalf of that company. A show-cause notice demanding duty and penalty was issued, leading to appeals before the appellate authority and subsequently before the Tribunal.

The main contention of the appellants was that they were eligible for the benefit of the exemption as they had undertaken manufacturing on behalf of the other company, which had provisional SSI registration. They argued that once the classification list was approved, the department could not raise a demand, citing relevant case law. On the other hand, the Revenue argued that the approval of the classification list was not a valid defense post the amendment in Section 11A, and the extended period of limitation could be invoked if the conditions were met.

The Tribunal analyzed the case in light of Notification 175/86, which allows SSI units to avail the exemption if manufacturing branded goods on behalf of other SSI units. However, it was established that the other company did not have a manufacturing facility during the relevant period, rendering the goods manufactured by the appellants ineligible for the exemption. The Tribunal also considered the relevance of provisional SSI registration and clarifications provided by the Board, concluding that the goods were not produced by the other company but by the appellants.

Regarding the argument that the Revenue could not raise a demand post approval of the classification list, the Tribunal upheld the demand, citing the intentional suppression of crucial facts by the appellants. The extended period of limitation was deemed correctly invoked, and the penalty imposed was upheld, with a nominal penalty imposed on the second appellant. Ultimately, both appeals were dismissed by the Tribunal.