2017 (5) TMI 803 - AT - Central Excise

SSI exemption - brand name/trade name - manufacture of Aqua Products - it emerged that MBL manufactured and cleared dutiable goods with the trade mark/logo of MVF - Held that - exemption contained in SSI notifications issued from time to time shall not apply to specified goods bearing a Brand name or Trade name, whether registered or not, of another person - In the instant case, there is sufficient evidence to establish that MBL were using the Brand name/Trade mark of another person (MVF) on their products and hence they will become ineligible for benefit of SSI exemption under the relevant notifications - demand upheld. Extended period of limitation - Held that - When the assessee resorts to such stonewalling of investigation, it is but consequently that the investigations will get prolonged. The factum of the larger investigations involved is evident from the fact that the Show Cause Notice and it is annexure run into more than 20 pages - extended period of limitation invoked. Penalty u/s 173Q - Held that - equal penalty of Section 11AC of the Act has been imposed - when equal penalty amounting to ₹ 78,76,135/- has been imposed, the penalty under Section 173Q is not warranted and is therefore set aside. Penalty on Sh. V. Siva Prasad Managing Director of MBL - Held that - he was the kingpin of the entire exercise of the aviation and cannot observes responsibilities. He cannot therefore claim to have in appeal with clean hands. It is also observed that the penalty that considering the quantum of duty aviation and has also his entire role in the matter, penalty of ₹ 5,000/- imposed on him u/r 209 CER is not only justified but also proportionate to the Acts an omission - penalty upheld. Appeal dismissed - decided partly in favor of appellant as regards equal penalty.

Summary

Issues Involved:
1. Use of another entity's trademark/logo.
2. Classification of products under Central Excise Tariff Act.
3. Eligibility for Small Scale Industry (SSI) exemption.
4. Demand of Central Excise duty and Education Cess.
5. Imposition of penalties and confiscation of goods.
6. Limitation period for issuing the Show Cause Notice.
7. Cum duty benefit for computing value of clearances.

Detailed Analysis:

1. Use of Another Entity's Trademark/Logo:
The primary issue was whether MBL used the trademark/logo of MVF, making them ineligible for SSI exemption. The adjudication authority concluded that MBL used MVF's trademark/logo without consideration, making them ineligible for SSI exemption under relevant notifications. The tribunal upheld this conclusion, noting sufficient evidence that MBL used the brand name/trade mark of another person (MVF) on their products.

2. Classification of Products:
The adjudicating authority classified the products as follows:
- Dart, Dazzler, and Propel under Chapter Sub-heading No. 3808.10.
- Alert, Stayphor, Rapid-oxy, Commander/Commander Special, and Bindex Gel under Chapter Sub-heading No. 3808.90.
- Sulphaprim under Chapter Sub-heading No. 3003.20.
The tribunal found no infirmity in these classifications.

3. Eligibility for SSI Exemption:
MBL argued that they were eligible for SSI exemption. However, the tribunal upheld the adjudication authority's finding that MBL's use of MVF's trademark/logo disqualified them from SSI exemption. The value of clearances exceeded ?3 crores in 2002-2003 and 2003-2004, confirming MBL's ineligibility for SSI exemption.

4. Demand of Central Excise Duty and Education Cess:
The tribunal upheld the demand of ?78,76,135/- Central Excise duty and ?34,746/- Education Cess on MBL. The adjudicating authority's findings were deemed correct, and the demand was found to be in order.

5. Imposition of Penalties and Confiscation of Goods:
The adjudicating authority imposed penalties under Section 11AC and Rule 173Q/Rule 25 of the Central Excise Rules. The tribunal found the imposition of equal penalty under Section 11AC justified but set aside the additional penalty of ?50,00,000/- under Rule 173Q, considering it unwarranted. The penalty of ?5,000/- on the Managing Director was upheld, recognizing his central role in the evasion.

6. Limitation Period for Issuing the Show Cause Notice:
MBL contended that the issue was barred by limitation, as the Show Cause Notice was issued three years after the officers' visit. The tribunal rejected this argument, noting that the complexity of the case justified the extended investigation period. The Show Cause Notice was issued within the five-year limitation period provided under Section 11A(1) of the Central Excise Act, 1944.

7. Cum Duty Benefit:
MBL requested cum duty benefit for computing the value of clearances. The tribunal acknowledged this plea but did not provide a detailed discussion in the judgment.

Conclusion:
The tribunal upheld the adjudication authority's findings on the use of another entity's trademark/logo, classification of products, and ineligibility for SSI exemption. The demand for Central Excise duty and Education Cess was confirmed. The tribunal set aside the additional penalty under Rule 173Q but upheld the equal penalty under Section 11AC and the penalty on the Managing Director. The issue of limitation was resolved in favor of the department, and the plea for cum duty benefit was acknowledged but not elaborated upon.