2018 (1) TMI 1008 - AT - Central Excise

SSI Exemption - use of Brand Name - allegation against the respondent is that they have manufactured pharmaceutical products using the brand name of other persons and therefore the benefit of SSI exemption N/N. 8/2002 is not available to them - request for cross-examination rejected - Held that - The request for cross-examination was disallowed by the adjudicating authority stating that the statements given by these persons have already been incorporated in the SCN. This reasoning for denial of cross-examination to be highly unjust and against the provisions of law. Section 9D provides for relevancy of statements under certain circumstances. In cases where the evidence is merely statements, denial of cross-examination causes much prejudice to the assessee and will vitiate the proceedings. Appeal dismissed - decided against Revenue.

Summary

Issues:
1. Denial of SSI exemption to an unregistered unit engaged in manufacturing pharmaceutical products using brand names not owned by them.
2. Validity of statements recorded from buyers as evidence.
3. Right to cross-examination and principles of natural justice.
4. Interpretation of deed of assignment for brand names.

Issue 1: The main issue in this case was whether an unregistered unit manufacturing pharmaceutical products using brand names not owned by them could be denied the benefit of SSI exemption under Notification No. 8/2002. The department alleged that the unit was wrongly availing the exemption, leading to a demand of duty, interest, and penalties. The Tribunal noted that the department's case relied heavily on statements recorded from various buyers claiming ownership of the brand names. The unit contended that the brand names were assigned to them by the buyers, requesting cross-examination of the buyers to prove this. The Tribunal found the denial of cross-examination unjust and against the provisions of law, emphasizing the importance of allowing cross-examination in such cases. The Commissioner (Appeals) correctly analyzed the legal position and upheld the unit's claim of rightful ownership based on deed of assignments entered with the buyers, leading to the dismissal of the department's appeal.

Issue 2: The validity of statements recorded from buyers as evidence was a crucial aspect of the case. The department argued that the buyers' statements confirmed ownership of the brand names, justifying the denial of SSI exemption to the unit. However, the unit contended that the brand names were assigned to them by the buyers, requesting cross-examination to prove this assertion. The Tribunal found the denial of cross-examination to be unjust and against the principles of natural justice. It noted that allowing cross-examination was essential in cases where evidence primarily consisted of statements, as it could significantly impact the proceedings and the rights of the assessee. The Commissioner (Appeals) also highlighted the importance of ensuring fair procedures and adherence to legal principles in such matters.

Issue 3: The right to cross-examination and principles of natural justice played a significant role in the case. The unit requested an opportunity to cross-examine the buyers whose statements formed the basis of the department's case. However, the adjudicating authority denied this request, stating that the statements were already included in the show cause notice. The Tribunal found this reasoning flawed and emphasized the need to allow cross-examination, as per the provisions of Section 9D of the Central Excise Act, 1944. The Commissioner (Appeals) rightly identified the violation of principles of natural justice due to the denial of cross-examination, underscoring the importance of fair procedures and the right to be heard in such proceedings.

Issue 4: The interpretation of the deed of assignment for brand names was another critical aspect of the case. The unit presented deeds of assignment with buyers, asserting their rightful ownership of the product names and the right to sell the products. The department challenged the validity of these assignments, claiming that the deed did not specifically mention the assignment of brand names. The Tribunal, however, found the department's argument lacking factual and legal basis, noting that the deeds clearly established the unit's ownership of the product names. The Commissioner (Appeals) correctly set aside the demand based on the evidence presented through the deeds of assignment, highlighting the unit's legitimate claim to the brand names and the associated SSI exemption.