2000 (5) TMI 85 - AT - Central Excise

Summary

Issues:
1. Eligibility for Small Scale exemption under Notification No 175/86
2. Classification of Membrane Disc Filters under CET sub-heading 8421.00
3. Manufacturing process of Membrane Disc Filters
4. Use of brand names 'Pall' and 'Ultipor'
5. Availability of extended period of limitation

Eligibility for Small Scale exemption under Notification No 175/86:
The case involved appeals against the duty demand imposed on Membrane Disc Filters by the Commissioner of Central Excise, alleging ineligibility for Small Scale exemption due to the use of registered brand names 'Pall' and 'Ultipor' of a foreign company. The Collector had also imposed a penalty on the assessees. The Tribunal examined the submissions made by the appellants regarding their manufacturing process and brand name usage. The Tribunal held that the use of brand names, even on the packing of goods, was sufficient to disqualify the assessees from the Small Scale exemption. The distribution agreement allowing the use of brand names did not transfer ownership, rendering the assessees ineligible for the exemption.

Classification of Membrane Disc Filters under CET sub-heading 8421.00:
The Tribunal analyzed the manufacturing process of Membrane Disc Filters, which involved cutting imported filter paper into different sizes and shapes using a hydraulic press. The process resulted in a new product with distinct characteristics and uses, qualifying as a different excisable commodity. The Tribunal compared this process to mere cutting of jumbo roll films, emphasizing the transformation of the imported filter paper into Membrane Disc Filters for specific industrial purposes. Consequently, the Tribunal held that Membrane Disc Filters were manufactured by the appellants and attracted duty under CET sub-heading 8421.00.

Manufacturing process of Membrane Disc Filters:
The Tribunal scrutinized the manufacturing process of Membrane Disc Filters, emphasizing the steps involved in cutting filter paper using a hydraulic press to create a new product with unique properties and applications. The process of cutting and packaging the filters was deemed as manufacturing, distinct from mere assembly or processing. The Tribunal's analysis focused on the transformation of raw materials into a final product suitable for specific industrial uses, supporting the classification of Membrane Disc Filters as excisable goods.

Use of brand names 'Pall' and 'Ultipor':
The Tribunal addressed the contention regarding the use of brand names 'Pall' and 'Ultipor' belonging to a UK company on the Membrane Disc Filters. The assessees argued that the brand names were only on the packing and not on the goods themselves. However, the Tribunal held that the presence of brand names on the packing was sufficient to establish the clearance of branded goods. Additionally, the agreement permitting the use of brand names did not confer ownership, leading to the disqualification of the assessees from the Small Scale exemption.

Availability of extended period of limitation:
The Tribunal considered the applicability of the extended period of limitation due to non-disclosure of the use of brand names belonging to a foreign company, rendering the assessees ineligible for the Small Scale exemption. The Tribunal rejected the assessees' argument regarding the Jurisdictional Inspector's visit to the factory in 1989, emphasizing the lack of knowledge regarding the ownership of the brand names. Consequently, the Tribunal upheld the duty demand but reduced the penalty imposed on the assessees.

Conclusion:
The Tribunal concluded that the goods manufactured by the appellants were not eligible for the Small Scale exemption, upheld the duty demand, and reduced the penalty. The decision highlighted the manufacturing process of Membrane Disc Filters, the use of brand names, and the extended period of limitation in determining the eligibility for exemption and duty liability. Additionally, the Tribunal set aside the Collector(Appeals)'s order regarding the non-excisability of Membrane Disc Filters, affirming the existence of a new excisable product from the appellants' premises.