2017 (5) TMI 690 - AT - Central Excise

SSI exemption - use of brand name of others - Held that - there is sufficient evidence on record to establish that MBL were using Brand name/Trade mark of another person (MVF) on their products. Hence, they will become ineligible for benefit of SSI exemption under the relevant notifications - MBL is not eligible for the SSI exemption. Extended period of limitation - Held that - details of manufacture and clearance of dutiable goods of MBL would not have come to light, but for the investigation conducted by the department - extended period invocable. Penalty - Held that - when equal penalty amounting to ₹ 78,76,135/- has been imposed, the penalty under erstwhile Rule 173Q / Rule 25 of the Rules is not warranted and is therefore set aside. Appeal allowed - decided partly in favor of appellant.

Summary

Issues Involved:
1. Eligibility for SSI exemption due to use of another entity's trademark.
2. Classification of products for duty assessment.
3. Limitation period for issuing the Show Cause Notice.
4. Cum-duty benefit for computing value of clearances.
5. Imposition of multiple penalties and their justification.

Detailed Analysis:

1. Eligibility for SSI Exemption:
The main issue revolved around whether MBL was eligible for Small Scale Industry (SSI) exemption. The tribunal found that MBL used the trademark/logo of MVF, making them ineligible for SSI exemption. The adjudicating authority noted that "MBL were using Brand name/Trade mark of another person (MVF) on their products," and thus, they could not claim SSI exemption under the relevant notifications. Despite MBL's argument that they had a mutual understanding with MVF regarding the use of the brand name, the tribunal upheld the decision that MBL was not entitled to the exemption.

2. Classification of Products:
The classification of MBL's products was another significant issue. The adjudicating authority's classification was upheld except for minor contentions regarding 'Bindex Gel' and 'Commander,' which were not substantiated satisfactorily by MBL. Therefore, the tribunal did not interfere with the classifications as determined in the impugned order.

3. Limitation Period for Issuing the Show Cause Notice:
MBL contended that the issue was barred by limitation since the Show Cause Notice was issued three years after the investigation began. However, the tribunal found that the complexity of the case and the suppression of facts by MBL justified the extended investigation period. The tribunal noted that "the issue in question is complex involving many varieties of branded Aqua Shield substances/fungicides used in aquaculture," and the extended investigation was necessary due to MBL's actions. The tribunal upheld the use of the extended five-year limitation period under Section 11A (1) of the Central Excise Act, 1944.

4. Cum-duty Benefit:
MBL argued that cum-duty benefit should be extended for computing the value of clearances. The tribunal found that the adjudicating authority had already been generous in this regard, treating the transaction value as cum-duty value and allowing due abatement for goods requiring Section 4A valuation. Therefore, this plea by MBL was not upheld.

5. Imposition of Multiple Penalties:
MBL contended that the penalties imposed were excessive. The tribunal agreed in part, noting that while an equal penalty under Section 11AC was justified, the additional penalty under Rule 173Q/Rule 25 was not warranted and thus set it aside. However, the tribunal upheld the penalty imposed on Sh. V. Siva Prasad, the Managing Director of MBL, given his central role in the duty evasion scheme. The tribunal found the penalty of ?5,00,000/- under Rule 209A/Rule 26 to be fair and not disproportionate.

Conclusion:
The tribunal's final decision partially allowed MBL's appeal by setting aside the additional penalty under Rule 173Q/Rule 25 but upheld the main penalty under Section 11AC and the penalties on Sh. V. Siva Prasad. The confiscation of goods and imposition of redemption fines were also upheld. The appeals were disposed of on these terms.