2017 (7) TMI 711 - AT - Central Excise

SSI exemption - use of Brand Name of others - The case of the department is that the appellant is using brand name Seal Jet which belongs to foreign company M/s. Economos therefore the appellant is not entitle for the SSI exemption - Held that - the goods manufactured by the appellant i.e. O ring and Seals are sold duly packed in polythene pack which bear the logo Seal Jet in a particular form, therefore it is very clear that goods manufactured and sold by the appellant bears the brand name of Seal Jet Merely because the product itself does not bear the name of Seal Jet does not mean the product is not branded. In case of packaged goods the brand is always affixed on the packages and not on the product. We are of the clear view that goods cleared by the appellant is branded goods under the brand name of Seal Jet . The fact remains that Seal Jet brand was affixed on the machine supplied by Economos, Austria. This is sufficient to establish that the Seal Jet brand belong to Economos, Austria therefore various correspondence through which Economos, Austria denies the ownership of the brand will not make any difference to the fact that brand name Seal Jet belongs to the Economos, Austria. At the most it can be said that Economos, Austria have not registered the name Seal Jet but that does not make any difference, because notification prescribed that in order to avail exemption goods should not bear the brand name of another person whether it is registered or otherwise therefore in the present case appellant have used Seal Jet brand which belongs to Economos, Austria. Time limitation - Held that - matter was contentious and issue was decided by the larger bench - there is no suppression of fact on the part of the appellants - therefore extended period of limitation will not apply. Penalties - Held that - penalties imposed for the normal period shall also not be imposable for the reason that the appellant have entertained bonafide belief that in the fact of the case they are eligible for SSI exemption and accordingly there is no malafide intention - penalties for the demand commensurate to duty for normal period of the limitation set aside. Appeal allowed - decided partly in favor of appellant.

Summary

Issues Involved:

1. Eligibility for SSI exemption.
2. Use of brand name "Seal Jet".
3. Applicability of extended period for demand.
4. Imposition of penalties.

Detailed Analysis:

1. Eligibility for SSI Exemption:
The primary issue revolves around whether the appellants are entitled to Small Scale Industry (SSI) exemption under various notifications (No.1/93-C.E., No.16/97-CE., No.8/2001-C.E., and No.8/2003-C.E.). The department contended that the appellants used the brand name "Seal Jet," which belongs to M/s. Economos, Austria, and thus, they are not eligible for the SSI exemption. The Tribunal noted that the goods manufactured by the appellants were sold in polythene packs bearing the "Seal Jet" logo. It was concluded that the goods are branded and the brand "Seal Jet" belongs to Economos, Austria, disqualifying the appellants from SSI exemption.

2. Use of Brand Name "Seal Jet":
The appellants argued that "Seal Jet" is not a brand name of Economos, Austria, and that the logo was only on the packaging, not on the products themselves. They asserted that this should not disqualify them from SSI exemption. However, the Tribunal found that the machine used by the appellants, purchased from Economos, Austria, also bore the "Seal Jet" logo, establishing that "Seal Jet" is indeed a brand name belonging to Economos, Austria. The Tribunal held that even if the brand name was not registered, the use of "Seal Jet" on the packaging suffices to classify the goods as branded, thereby denying the SSI exemption.

3. Applicability of Extended Period for Demand:
The appellants contended that the issue of using a foreign brand name for SSI exemption was contentious and had conflicting decisions until it was settled by the Larger Bench in Namtech System Ltd Vs. CCE. They argued that due to the conflicting views, no suppression of facts could be attributed to them, and hence, the extended period for demand should not apply. The Tribunal agreed, citing several judgments (Photo Kina Chemicals Pvt Ltd Vs. CCE, Refco & Wessamat Applicances Ltd Vs. CCE, Nandevi Food Care Ltd Vs. CCE, Larsen & Toubro Ltd Vs. CCE, Star Glass Works Vs. CCE) that supported the notion that when an issue is contentious and settled by a larger bench, the extended period cannot be invoked. Consequently, the demand for the extended period was set aside.

4. Imposition of Penalties:
The appellants argued that there was no malafide intention and they had a bona fide belief that they were eligible for SSI exemption. The Tribunal found that given the contentious nature of the issue and the eventual resolution by the Larger Bench, there was no suppression of facts. Therefore, penalties for the extended period were not justified. The penalties corresponding to the demand for the normal period were also set aside, as the appellants had a bona fide belief in their eligibility for SSI exemption. The adjudicating authority was directed to re-quantify the demand excluding the extended period and recover the same.

Conclusion:
The Tribunal concluded that the appellants' goods were branded under "Seal Jet," disqualifying them from SSI exemption. However, the extended period for demand was not applicable due to the contentious nature of the issue. Consequently, the penalties for both the extended and normal periods were set aside. The adjudicating authority was instructed to re-quantify the demand based on the Tribunal's observations. The appeals were partly allowed in these terms.