2017 (8) TMI 1267 - AT - Central Excise

Classification of goods - multi media speakers with FM radio - SSI exemption - use of brand name of others by GE in the manufacture of multi media speakers - whether the goods are classified under CETH 85184000 or under CETH 85279990? - Held that - the product basically contains two speakers and a woofer. FM radio is built in, in the woofer. The whole set is a multi media speaker system generally connected to other devices like computers or audio players for sound output. A comparison of the above goods with multi media speakers sub-woofer, without FM radio, indicates that both the products are almost identical except for the fact that in one, there is a an additional built in FM radio, in the sub-woofer - As clearly shown in the sales brochure, the main function of the product is being provided by speaker system with sub-woofer - similar issue of classification of multi media speakers having additional function of USB port and FM radio came up for consideration by the Tribunal in Logic India Trading Company 2016 (3) TMI 5 - CESTAT BANGALORE . The Tribunal held that the impugned goods are speakers with added function and the main role of the item, in question, remains amplifying the sound received from outside source or from inbuilt feature. Applying the interpretative rules and section note 3 of Section XVI, the Tribunal held that the product should be classified as speakers only - The product should continue to be classified as speakers. SSI exemption - use of brand name - manufacture - Held that - mere printing of brand name or packing will not amount to manufacture in case where there is no legal concept of deemed manufacture , specifically provided by any provisions applicable to the said product - The applicability of SSI exemption for the products manufactured by GE has to be re-verified with the details submitted by the GE to arrive at duty liability, if any. They have claimed that the turnover during the impugned periods is well below the threshold limit of ₹ 1.5 crores. This needs reverification and confirmation by the Jurisdictional officer. Penalty - Held that - the appeal against penalty under Rule 26, filed by M/s Kaizen Computech Ltd. is also to be allowed. Appeal allowed in part and part matter on remand.

Summary

Issues:
Classification of multi media speakers with FM radio under Central Excise Tariff
Usage of brand name of others by GE in the manufacture of multi media speakers
Applicability of SSI exemption for products manufactured by GE

Classification of multi media speakers with FM radio:
The case involved the classification of multi media speakers with FM radio under the Central Excise Tariff. The dispute was whether these speakers should be classified under CETH 85279990 as held by the Revenue or under CETH 85184000 as contended by GE. The Tribunal analyzed the product, which included two speakers and a woofer with built-in FM radio. It compared this product with multi media speakers + sub-woofer without FM radio and found them almost identical. The Tribunal disagreed with the lower authority's classification, stating that the FM radio was an additional feature and the main function of the product was amplifying sound, leading to the classification as speakers. It cited a similar case decided by the Tribunal and affirmed by the Supreme Court to support its classification decision.

Usage of brand name of others by GE:
Another issue was the usage of brand names of buyers on multi media speakers purchased from M/s Krishna Technologies and M/s JMD Computers by GE. The Tribunal noted that the show cause notice did not propose a demand on the combined turnover of GE and the other companies. It found that the process of printing brand names and packing undertaken by GE did not amount to manufacture in this case. Referring to relevant legal precedents, the Tribunal determined that mere printing of brand names or packing did not constitute manufacture unless a different commercial commodity came into existence. It concluded that there was no usage of another person's brand name in this situation.

Applicability of SSI exemption for products manufactured by GE:
Regarding the applicability of the SSI exemption for products manufactured by GE, the Tribunal noted that heading 8518 (speakers) was not covered in the Schedule III of the Central Excise Act for "deemed manufacture." It found that printing brand names and packing alone could not be considered as manufacture. The Tribunal observed that GE had manufactured multi media speakers with their brand name "EXCEL" within the exemption limit for small-scale units. It clarified that the presence of another brand name on the speakers marketed by GE did not constitute the usage of another person's brand name.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal of M/s Global Enterprises on the issues of classification of multi media speakers and usage of brand names of others. It directed re-verification of the SSI exemption applicability for the products manufactured by GE and dismissed the appeals by Revenue for penalties on various individuals based on the findings.