2001 (1) TMI 116 - AT - Central Excise

Summary

Issues Involved:
1. Eligibility for exemption u/s Notification No. 175/86-C.E.
2. Ownership and use of brand names "Shah Trumpelt" and "LMS".
3. Relationship between M/s. Narendra Machine Works Pvt. Ltd. and M/s. LMS Marketing Pvt. Ltd.
4. Invocation of extended period of limitation.
5. Imposition of penalty.

Summary:

1. Eligibility for exemption u/s Notification No. 175/86-C.E.:
The Appellants claimed exemption under Notification No. 175/86-C.E. for goods affixed with the brand name "Shah Trumpelt". The Tribunal held that the mischief of Para 7 of the Notification was not attracted as M/s. Shah Engineering Works (SEW) was a registered SSI unit eligible for the exemption. The Department failed to prove that SEW was only engaged in trading and not manufacturing.

2. Ownership and use of brand names "Shah Trumpelt" and "LMS":
The Tribunal found that "Shah Trumpelt" was affixed on the goods manufactured by the Appellants. The Appellants claimed joint ownership of the brand name with SEW, which was not disputed by the Department. Regarding "LMS", the Tribunal held that it was a brand name as per the definition in the Notification. The Appellants failed to prove that "LMS" was not a brand name or that it was used by an eligible SSI unit. The Tribunal relied on the statement of the Chief Executive, who admitted that "LMS" was owned by M/s. LMS Marketing Pvt. Ltd.

3. Relationship between M/s. Narendra Machine Works Pvt. Ltd. and M/s. LMS Marketing Pvt. Ltd.:
The Tribunal upheld the Commissioner's finding that the two companies were related persons u/s Section 4 of the Central Excise Act. The common directors, interest-free advances, and shared expenses indicated mutuality of interest. The Tribunal applied the principle of lifting the corporate veil as laid down by the Supreme Court in Calcutta Chromotype Ltd.

4. Invocation of extended period of limitation:
The Tribunal held that the extended period of limitation was invokable as the Appellants did not disclose the use of the brand name "LMS" to the Department. The suppression of facts justified the invocation of the extended period.

5. Imposition of penalty:
The Tribunal imposed a penalty on the Appellants for availing the exemption by affixing the brand name of an ineligible person. However, considering the acceptance of the Appellants' plea regarding "Shah Trumpelt", the penalty was reduced from Rs. 1.5 lacs to Rs. 10,000/-.

Conclusion:
The appeal was disposed of with the Tribunal granting partial relief to the Appellants by accepting their claim regarding the brand name "Shah Trumpelt" but denying the exemption for goods affixed with the brand name "LMS" and upholding the related person finding and penalty imposition.