2017 (6) TMI 670 - AT - Central Excise

SSI exemption - use of Brand name of others - N/N. 8/2001-CE - case of assessee is that they have not used the brand name/logo of VCNPL on the Ozone Water Purifier, as the packing is done by VCNPL in their premises after quality control checks and the logo/brand name is affixed/embossed on the packing before they are cleared to the customer - Held that - N/N. 8/2001-CE, as existed during the relevant period, provided exemption from duties of excise for SSI units, subject to certain eligibility requirements and other conditionalities. Para-4 of the said Notification categorically denies the exemption contained in the Notification to goods bearing the brand name or trade name, whether registered or not, of another person, except in certain situations, which the appellants certainly does not qualify - the appellants have cleared the impugned Ozone Water Purifiers bearing the brand name/trade name of VCNPL. In consequence, they cannot then be a beneficiary of SSI exemption N/N. 8/2001-CE. In respect of the Ozone Water Purifier as also the magnetic kits, since manufactured bearing the trade name of others, will fall foul of para-4 of the SSI exemption N/N. 8/2001-CE, consequently they cannot avail of the duty exemptions extended in the said Notification. Classification of Magnetic kits - classified under 90.19 or otherwise? - Held that - these Magnetic kits having been cleared with the brand name/trade name of others, will find themselves bereft of SSI duty exemption under Notification No. 8/2001-CE, they will nonetheless to be eligible for clearances under the effective rates thereof, which, is Nil and 4% for the period under dispute - differential duty liability on the impugned goods namely Magnetic kits will have to be calculated on the basis of effective duty rates as applicable to the goods under chapter heading 90.19 of CETA, viz., Nil upto 01.03.2002 and 4% after 01.03.2002 - matter remanded for denovo adjudication to the adjudicating authority to recalculate duty liability only in respect of this item. Penalty u/s 11AC - Held that - penalty under Section 11 AC ibid will also be imposable in respect of Magnetic kits clearances. However, the quantum of penalty will be only be equal to the revised duty liability thereon re-determined by the adjudicating authority in denovo proceedings. Personal penalty imposed on Shri R. Radhakrishnan - Held that - there is a plethora of decisions that once a firm is penalized, separate penalty is not imposable upon the partner of the firm, because partner is not a separate legal entity and cannot be equated with the employee of the firm - penalty imposed on Shri R. Radhakrishnan is set aside. Manufacture - Companion Kit - demand - Held that - It is definitely a new product that evolved after assembling of various components purchased from the market. Before such assembly the product is not marketable and cannot be called a Companion Kit. Discernably the appellants are engaged in the manufacture of new product - duty demand upheld. Appeal allowed - decided partly in favor of appellant and part matter on remand.

Summary

Issues Involved:
1. Eligibility for SSI exemption under Notification No. 8/2001-CE.
2. Use of brand name/trade name of another entity.
3. Classification of Magnetic kits under the Central Excise Tariff.
4. Imposition of penalties under Section 11 AC of the Central Excise Act, 1944.
5. Personal penalty on partners of the firm.

Detailed Analysis:

1. Eligibility for SSI Exemption under Notification No. 8/2001-CE:
The appellants, engaged in the manufacture and clearance of Ozone water purifiers and Magnetic kits, claimed SSI exemption under Notification No. 8/2001-CE. The Department's investigation revealed that the appellants were using the brand name of VCNPL on their products, which disqualified them from availing the SSI exemption as per Para-4 of the said Notification. The Tribunal found substantial evidence, including corroborating statements and physical evidence of branded covers, proving that the appellants cleared goods bearing the VCNPL brand name. Consequently, the appellants were not entitled to the SSI exemption.

2. Use of Brand Name/Trade Name of Another Entity:
The core issue was whether the appellants used the brand name of VCNPL on their products. The Department's evidence, including the Mahazar and statements from VCNPL's Finance Manager, indicated that the appellants embossed the VCNPL brand name on Ozone water purifiers. The Tribunal upheld this finding, rejecting the appellants' contention that the branding was done by VCNPL post-clearance. Therefore, the use of another entity's brand name invalidated their claim for SSI exemption.

3. Classification of Magnetic Kits under the Central Excise Tariff:
The appellants argued that Magnetic kits should be classified under Chapter heading 90.19, which would attract a lower duty rate (Nil before 01.03.2002 and 4% thereafter) compared to the Department's classification under 94.04 with a 16% duty rate. The Tribunal agreed with the appellants, noting that both the Customs and Central Excise Tariff descriptions for heading 90.19 were identical. Therefore, the Magnetic kits should be classified under 90.19, and the duty liability should be recalculated accordingly.

4. Imposition of Penalties under Section 11 AC of the Central Excise Act, 1944:
The Tribunal affirmed the imposition of penalties equal to the differential duty liability for the Ozone water purifiers. For the Magnetic kits, the penalty would be equal to the revised duty liability determined upon reclassification under 90.19. The penalties were upheld as the appellants failed to comply with the exemption notification requirements.

5. Personal Penalty on Partners of the Firm:
The Tribunal set aside the personal penalty imposed on Shri R. Radhakrishnan, citing legal precedents that partners are not separate legal entities from the firm and should not be penalized individually when the firm is penalized. This principle was supported by decisions from the Hon'ble Gujarat High Court and the Tribunal itself.

Separate Judgments Delivered:
- Appeals E/472/2007 and E/477/2007 were dismissed, confirming the duty demands and penalties.
- Appeals E/473/2007 and E/476/2007 were partly allowed by way of remand for recalculating the duty liability on Magnetic kits.
- Appeal E/515/2007 was allowed, setting aside the personal penalty on Shri R. Radhakrishnan.
- Appeal E/474/2007 was dismissed, upholding the duty demand for the manufacture of Companion Kits.
- Appeals E/475/2007 and E/478/2007 were partly allowed by way of remand for recalculating duty liability on Magnetic kits.

Conclusion:
The Tribunal's judgment comprehensively addressed the eligibility for SSI exemption, the use of another entity's brand name, the correct classification of Magnetic kits, and the imposition of penalties. The appeals were decided based on substantial evidence and legal precedents, ensuring a thorough and fair adjudication process.