2018 (11) TMI 741 - HC - Central Excise

Branding - imposition of duty under the Central Excise Act, 1944 treating the jute bags of the appellants as branded jute bags - Held that - The show cause cum-demand notice in substance cannot survive as even proceeding on the basis that the allegations made therein are correct, show cause cum-demand notice to the extent the same seeks to impose the excise duty in respect of jute bags which carry the brand names of the procuring agencies and other particulars is not legal. The writ petitioners were not required to pay duty for the subject period alleged to have been evaded by them in the show cause notice in respect of jute bags which carry on them the brand of the procuring agencies and other particulars - petition allowed.

Summary

Issues:
Imposition of duty under the Central Excise Act, 1944 on jute bags as branded, exemption under Notifications, legality of show cause cum-demand notice, branding of jute bags, compulsion of law for markings on jute bags, distinction from brand names, determination of issue by Supreme Court, distinguishing present case from previous judgment.

Imposition of Duty under Central Excise Act:
The dispute revolved around the imposition of duty under the Central Excise Act, 1944 on jute bags as branded. A show cause notice was issued against the appellant for not paying excise duty while clearing their products. The appellants claimed exemption under specific Notifications, arguing that the markings on the jute bags, including names of procuring agencies, did not constitute branding. The Hon'ble Supreme Court had previously examined a similar issue and concluded that the markings on the jute bags were made by compulsion of law for identification and control by governmental agencies, not for enhancing the value of the bags or indicating a connection in the course of trade.

Legality of Show Cause Cum-Demand Notice:
The appellants had challenged the legality of the show cause cum-demand notice in the Learned First Court, contending that the markings on the jute bags did not amount to branding. The Supreme Court's judgment in a related case was cited, emphasizing that the markings were mandatory under law for identification and control purposes, not for trade connection or value enhancement. The Court held that the show cause cum-demand notice could not survive as it sought to impose excise duty on jute bags carrying brand names of procuring agencies, which was deemed illegal based on the Supreme Court's decision.

Determination by Supreme Court and Distinction from Previous Judgment:
The issue at hand had already been settled by the Supreme Court in favor of jute bag suppliers like the appellants. The Court noted that there were no distinguishing features in the present case to deviate from the Supreme Court's ruling. Consequently, the order of the Learned First Court refusing interim protection was set aside. The show cause cum-demand notice was invalidated to the extent that it sought to impose excise duty on jute bags with brand names of procuring agencies, aligning with the Supreme Court's decision.

Conclusion:
The appeal, stay petition, and writ petition were disposed of in favor of the appellants, who were not required to pay duty for the period alleged in the show cause notice for jute bags carrying brand names of procuring agencies. The Court highlighted that the markings on the bags were not indicative of brand names but were mandatory for governmental identification purposes. No costs were awarded, and urgent copies of the order were to be provided to the parties upon request.