2022 (8) TMI 1249 - AT - Central Excise

SSI Exemption - use of brand name of others - classification of Soya Bari - grant of turnover upto the value of Rs 1 crore, the time when the appellant crossed this turnover limit of one crore needs to be ascertained - extended period of limitation as per proviso to Section 11A (1) of the Central Excise Act, 1944 - N/N. 32/1999-CE (as amended from time to time) - Revenue neutrality. Appellants contention is that they were under the bonafide belief that their goods manufactured by them were classifiable under 23.04, and attracted Nil rate of duty till the issuance of Notification No 3/2006 classifying the said goods under 21061000 and attracting the duty @ 8%. HELD THAT - As per the Section 11 A (1) of Central Excise Act, 1944, the normal period for making the demand in respect of the duties short levied or short paid/ Not levied or not paid is one year. However in case where the short levy/ short payment or non levy/ non-payment is on account of fraud, collusion or any willful misstatement or suppression of facts or contravention of any of the provisions of Act or the rules made thereunder with intent to evade payment of duty, the demand as per proviso to this section can be made within five years. From the N/N. 32/1999-CE it is quite clear that the said exemption notification is conditional exemption notification and also provides for the manner in which it is to be given effect to. The appellants have made the claim to the said notification, to argue that the in terms of this notification they will be entitled to refund of the duty paid by them and hence the issue is completely revenue neutral and hence extended period of limitation cannot be invoked for making the demand from them. The appellants have not been able to show any ground by which they could claim that they entertained a bonafide belief that goods manufactured and cleared by them were not subject to excise duty or attracted nil rate of duty or were exempt from payment of duty. It is settled law that the bonafide belief is not the blind belief and need to be established before that plea can be taken. Without any evidence to show how the appellants claim bonafide belief in the matter to the effect the goods manufactured by them do not attract any excise duty, the argument made in this regard cannot be accepted. Appeal dismissed.

Summary

Issues Involved:
1. Eligibility for SSI Exemption under Notification No. 8/2002-CE and 8/2003-CE.
2. Determination of turnover limit for SSI Exemption.
3. Invocation of extended period of limitation under Section 11A(1) of the Central Excise Act, 1944.

Detailed Analysis:

1. Eligibility for SSI Exemption under Notification No. 8/2002-CE and 8/2003-CE:
The appellants claimed SSI exemption, arguing that they did not use the "Gulab" brand name before December 1, 2006. However, the tribunal found that the brand name "Gulab" was used since March 2003, based on statements from directors and purchasers. The tribunal emphasized that the SSI exemption is not applicable to goods bearing a brand name of another person, as per the notifications. The tribunal upheld the findings of the Commissioner, who had detailed that the brand name was registered to a partnership firm, not the appellant, thus disqualifying them from the SSI exemption.

2. Determination of Turnover Limit for SSI Exemption:
The tribunal noted that the appellant's turnover exceeded Rs. 1 crore in the years 2003-04 and subsequent years, which disqualified them from SSI exemption. The tribunal confirmed that since the appellant was not eligible for SSI exemption due to the use of the "Gulab" brand name, the question of when the turnover limit was crossed became irrelevant. The turnover figures were significantly higher than the exemption threshold, reinforcing the ineligibility for SSI exemption.

3. Invocation of Extended Period of Limitation under Section 11A(1) of the Central Excise Act, 1944:
The appellants argued that they were under a bona fide belief that their products were not dutiable and that any duty paid would be refunded under Notification No. 32/1999-CE, making the issue revenue-neutral. The tribunal rejected this argument, stating that the appellants did not disclose their production and clearance activities to the department until August 23, 2006, indicating suppression of facts. The tribunal found that the appellants' claim of bona fide belief was not substantiated by any legal advice or judicial pronouncements. The tribunal cited Supreme Court precedents emphasizing that bona fide belief must be based on reasonable grounds and not merely on self-opinion.

The tribunal also referred to the larger bench decision in Jay Yushin, which clarified that revenue neutrality must be established based on the facts of each case and cannot be presumed. The tribunal concluded that the extended period of limitation was rightly invoked due to the appellants' willful misstatement and suppression of facts with intent to evade duty.

Conclusion:
The tribunal dismissed the appeal of Appellant 1, confirming the denial of SSI exemption and upholding the demand for duty and penalties. The penalties on Appellants 2 and 3 were reduced from Rs. 2 lakh to Rs. 50,000 each, as previously decided by the tribunal. The tribunal's decision was based on detailed analysis and substantial evidence, affirming the findings of the lower authority.