2016 (12) TMI 843 - AT - Central Excise

SSI exemption - use of brand name of others - Held that - The claim of small scale industries benefit was originally availed by the appellant by submitting that brand name is owned by M/s. Limca Flavour and Fragrance Ltd., who were entitled to SSI benefit. But the investigation conducted by the department has revealed that the brand name is owned and controlled not by Limca Flavour and Fragrance Ltd., but by M/s. Parle Exports Ltd. who were not entitled to small scale industries exemption benefit. Since the goods have been cleared with the brand name of Citra which is owned by M/s. Parle Exports Ltd. (who are not entitled to SSI benefit), the contravention of conditions specified in para 7 of Notification 175/1986 (para 4 of the succeeding notification No. 1/1993) stand established, disentitling the appellant from SSI benefit. Extended period of limitation - Held that - We find justification in invoking the extended period of time limit inasmuch as the appellant has failed to reveal who is the real owner of Citra brand name. It is only after the investigation undertaken by the department, it has been revealed that the Citra brand is actually owned by M/s. Parle Exports Ltd. who is not entitled to SSI benefit. Consequently, the invocation of extended time limit is fully justified. Coming to the demand for the period June to November, 1993 for which the show cause notice has been issued on 3.1.1994, we are of the view that decision of Hon ble Supreme Court in the case of Nizam Sugar Factory 2006 (4) TMI 127 - SUPREME COURT OF INDIA comes to the help of appellant. In the said decision, the Apex Court has held that once a Show cause notice stand issued, issuance of second show cause notice on the same facts could not be taken as suppression of facts on the part of assessee. In respect of second show cause notice, we find that a portion of demand fall beyond the period of normal time limit as prescribed under section 11A at the relevant time. Consequently, the demand in the second show cause notice beyond the period of six months will be hit by time bar. The original adjudicating authority is directed to requantify the demand by excluding the demand beyond the period of six months time. However, demand covered by the first show cause notice is upheld in toto along with consequential relief. We also set aside the penalty imposed under second show cause notice. Appeal disposed off - decided partly in favor of appellant.

Summary

Issues:
- Classification of aerated water under Chapter 22 of Central Excise Tariff
- Claiming exemption under small scale industries notification
- Ownership of brand name Citra
- Contravention of conditions specified in notification
- Invocation of extended period of limitation
- Applicability of small scale industries exemption benefit
- Bar of limitation in the second show cause notice

Analysis:
1. Classification of Aerated Water: The appellants were engaged in the manufacture of aerated water classified under Chapter 22 of the Central Excise Tariff. They claimed exemption under small scale industries notification No. 175/1986 for clearance of aerated waters bearing the brand Citra.

2. Ownership of Brand Name Citra: Dispute arose regarding the ownership of the brand name Citra used on the aerated water. The investigation revealed that the brand was owned by M/s. Parle Exports Ltd., not by Limca Flavour and Fragrance Ltd., who were entitled to small scale industries exemption benefit. This led to the contravention of conditions specified in the notification, disentitling the appellant from the benefit.

3. Invocation of Extended Period of Limitation: The show cause notices were issued for two periods, invoking the extended period of limitation. The first notice was issued on 16.3.1997, and the second on 3.1.1994. The extended time limit was justified as the appellant failed to disclose the real owner of the Citra brand name, which was only revealed through the department's investigation.

4. Applicability of Small Scale Industries Exemption Benefit: The appellant argued that since Limca Flavour and Fragrance Ltd. were allowed the exemption benefit by the department at Ahmedabad, they should also be entitled to it. However, the investigation showed that the brand ownership did not entitle them to the benefit, leading to the denial of the exemption.

5. Bar of Limitation in the Second Show Cause Notice: The appellant cited the case law of Nizam Sugar Factory vs. CCE and argued that a part of the demand in the second notice was time-barred. The Tribunal held that the demand beyond the normal time limit of six months in the second notice would be hit by the bar of limitation. The penalty imposed under the second notice was set aside.

6. Final Decision: The Tribunal upheld the demand covered by the first show cause notice in its entirety, along with consequential relief. The demand for the second period was directed to be recalculated, excluding the portion beyond the six-month time limit. The appeals were disposed of accordingly.