2022 (2) TMI 454 - HC - Central Excise

SSI exemption - use of brand name of others - entitlement of area based exemption or not - time limitation - whether demand could have been made at all, particularly in respect of the period more than a year prior to the date of the demand - HELD THAT - The department points out that not every manufacturer in Meghalaya would be entitled to the exemption by way of reimbursement or otherwise. In such context, several notifications published by the Central Excise authorities have been relied upon to demonstrate that the initial scheme was restricted to certain areas of Assam and Tripura and, later, designated places in Meghalaya were also included. According to the department, the manufacturing unit of the appellant is not located within any area designated by the applicable notification for the appellant to claim exemption by way of reimbursement - This aspect of the matter was not taken into consideration, whether in the course of the order-in-original being passed or in the appellate order of the Tribunal. This is a question of fact on which there can be no two opinions and a physical verification is necessary to ascertain whether the manufacturing unit of the appellant falls within the area designated in the applicable notification for the appellant to be entitled to exemption by way of reimbursement. Disqualification of the appellant to be entitled to exemption on the ground that the appellant manufactured the product under the brand name of another - HELD THAT - When a person claims a benefit under any government scheme and the authorities seek to deny the eligibility of such person to obtain such benefit, the onus is on the authorities to demonstrate why the person would not be entitled to the benefit. As noticed above, it has been the consistent stand of the appellant that it did not manufacture the Gulab brand soya chunks prior to December 1, 2006. It was, thus, incumbent on the department to deny the appellant exemption for the period prior to December 1, 2006 only upon cogent material being produced in such regard, whether by way of bills or vouchers or unimpeachable statements or otherwise. Entitlement of exemption - HELD THAT - The wording of the applicable notification exempts a manufacturing unit as an SSI till such time it attains a turnover of ₹ 1 crore. In the present case, the initial turnover in 2003-04 was extremely low and same picked up only in 2004-05. In the event the appellant was entitled to exemption as claimed, it requires to be ascertained when the appellant s manufacturing unit exceeded the turnover of ₹ 1 crore for the excise duty to be claimed only thereafter - the three key aspects of the matter have not been addressed in the order of the Appellate Tribunal dated January 23, 2019 in the appeal arising out of the order-in-original of March 16, 2009. These issues cannot be conveniently addressed in the present proceedings which are conducted on summary basis on affidavit evidence. Further, as to whether a person is entitled to an exemption or not based on the geographical location of the manufacturing unit, is essentially question of fact that has to be ascertained. The matter is remanded to the Appellate Tribunal with a request to render the opinion on the three key aspects indicated herein and on any other issue that may be relevant for the purpose of adjudication - Appeal allowed by way of remand.

Summary

Issues:
1. Dispute regarding the commencement of manufacturing under a specific brand name affecting exemption eligibility.
2. Validity of a subsequent demand raised by excise authorities for duty payable for previous financial years.
3. Entitlement to exemption based on reimbursement of excise duty and geographical location of the manufacturing unit.

Analysis:

*Issue 1: Commencement of Manufacturing under Brand Name*
The appellant manufactures soya chunks under the brand name of Gulab. The dispute arises regarding the commencement date of manufacturing under this brand name. The exemption claimed by the appellant under the Central Excise notification is subject to the condition that the product must be manufactured under a brand name owned by the manufacturer. The appellant started manufacturing the relevant goods in 2002-03 but claimed exemption under the misconception that the product was not liable to excise duty. The excise authorities later discovered the nature of the product and demanded excise duty payment. The appellant's claim of exemption hinges on proving that the product was not manufactured under the Gulab brand name before a specific date.

*Issue 2: Validity of Subsequent Demand*
A subsequent demand was raised by the excise authorities for duty payable for previous financial years, beyond the usual one-year period from the duty becoming payable. The department justifies this demand by alleging an intention to evade duty on the part of the manufacturer. The appellant contests this claim, arguing that they were entitled to reimbursement of excise duty paid, as per the Central Excise notifications. The department highlights that reimbursement was subject to conditions, including the geographical location of the manufacturing unit, which could impact exemption eligibility.

*Issue 3: Entitlement to Exemption*
The appellant's entitlement to exemption is further questioned based on the turnover of the manufacturing unit exceeding a specified threshold. The applicable notification exempts a manufacturing unit as an SSI until it attains a turnover of ?1 crore. The timing of the turnover exceeding this threshold is crucial in determining when the excise duty becomes applicable. The geographical location of the manufacturing unit also plays a role in exemption eligibility, as specific areas are designated for exemption benefits. The lack of consideration of these aspects in previous orders necessitates a detailed examination by the Appellate Tribunal to render a well-reasoned decision.

In conclusion, the High Court remanded the matter to the Appellate Tribunal for a comprehensive analysis of the key issues, including the commencement of manufacturing under the brand name, validity of the subsequent demand, and entitlement to exemption based on turnover and geographical location. The Tribunal was directed to provide a reasoned order within three months, considering the complexities involved in the case related to excise duty for specific financial years.